Flannel Shirt

Interesting Infographics on tax havens

If you want to know where Mitt and his constituency hide their money, check this out.

Painted themselves into a corner

The Republicans have painted themselves into a corner with their simpleton rhetoric and refusal to negotiate. It's pathetic. 

Let me be the first to say that Republicans in Congress have perfectly good reasons for not wanting to return to “regular order” budgeting, just like Democrats had good reasons for not wanting to pass a budget the past four years and Republicans had good reason during that time to pressure Democrats to return to the “regular order” budgeting they now oppose.

But they’re not reasons anyone’s admitting to, and they’re definitely not evidence one party has a greater commitment to the rules and norms of budgeting than the other. It really all comes down to the fact that Republicans can’t negotiate budget policy without the threat of a debt default looming over the whole process.

They’re not even doing a great job of hiding it.

As Ted Cruz, and later Mitch McConnell, explained in front of the cameras this week, Republicans won’t agree to move ahead with budget negotiations unless Democrats agree in advance that a budget bill won’t raise taxes or the debt limit.

“The main point here is we don’t feel that we ought to enable the Democrats to produce an outcome that raises the debt ceiling without doing anything about the debt or raises taxes,” McConnell said yesterday.

As I noted before that’s a lot like saying “first surrender, then we’ll fight.” It’s also a peculiar admission that Republicans have no mettle, since any budget deal will have to be bipartisan — even one that raises taxes and the debt limit. Moving to a conference committee doesn’t “enable” Democrats to do anything Republicans won’t agree to. (It’s also funny and revealing to hear McConnell sound the alarm about the debt then block off the revenue channel.)

What’s left after you strip away all that obfuscation is that Republicans don’t want to go to conference unconditionally because they’re concerned their position won’t hold politically and they’ll ultimately be forced to swallow a compromise that includes tax increases — unless the whole process gets swallowed by another debt limit fight.

That’s mainly because the Republicans’ position in budget negotiations is as brittle as it is uncompromising and they don’t want to expose it to the wages of politics. They don’t want to repeat a losing election year debate about taxes and social spending in an open legislative context.

The rules open the House floor to a flood of privileged measures when budget negotiators gridlock, and, as Paul Ryan rightly noted at the Pete Peterson fiscal summit yesterday, that means Democrats will try to shorten their leashes, by, for instance, proposing to make entitlement cuts off limits. (Bernie Sanders showed how it’s done in the Senate already.) That means if Republicans truly want those entitlement cuts, they’ll have to whip votes and own them. It also means their commitment to sequestration over higher taxes on rich people will be tested.

The whole problem from the GOP perspective is that returning to “regular order” makes budgeting much more small-d democratic and thus much more likely to result in the sort of “balanced” plan President Obama has proposed.

Unless, that is, the whole process runs up against the debt limit.

In a threatening climate like that they might be able to wrest back some control over the process. If Obama’s “charm offensive” pays dividends, they might even be able to direct the threat of default back on their own members when rank and file Republicans once again find themselves isolated from the rest of Congress. But what they definitely can not do is prevail in a traditional budget fight, without the specter of economic calamity hanging over Congress.

That’s why Ryan’s telling the Washington Post, “The debt limit is the backstop…. I’d like to go through regular order and get something done sooner rather than later. But we need to get a down payment on the debt. We need entitlement reform.”

That’s why Jeff Sessions, the top Republican budget guy, is saying, “We need to realize this debt ceiling is out there. It’s inevitable. It’s coming… sometimes we don’t want to act until a gun is at our heads.”

That’s why Sens. Cruz and Mike Lee are saying inscrutable things like describing a formal, bipartisan budget negotiation — recorded votes and all — as a “backroom deal” that might take the debt limit off the table.

And that’s why we can’t have nice things.

When economics bend to politics and personal pride

Here.

Am I (and others on my side of the issue) that much smarter than everyone else? No. The key to understanding this is that the anti-Keynesian position is, in essence, political. It’s driven by hostility to active government policy and, in many cases, hostility to any intellectual approach that might make room for government policy. Too many influential people just don’t want to believe that we’re facing the kind of economic crisis we are actually facing.

And so you have the spectacle of famous economists retreading 80-year-old fallacies, or misunderstanding basic concepts like Ricardian equivalence; of powerful officials instantly canonizing research papers that turn out to be garbage in, garbage out; and so on down the line.

It's a small world after all

One problem with conspiracy theories is that when there really is a conspiracy the people who are conspiring don't want the general public to know. And if it's an organization that has its tendrils into the media, it will do its best to discourage pursuit of the truth, sometimes by floating other conspiracy theories.

The whole idea of our government doing something as dreadful as somehow being behind the Boston Marathon massacre is pretty hard to swallow. I realize that when politics is involved people on different sides of the fences are willing to believe the worst about the characters on the other side. And that's encouraged by the principals.

As long as people spend their days hating on Obama, or (as I have) the Bushes, you never see the big picture, and the big picture is much different than what people generally see.

 So let's scroll back to right back after the brothers were identified. There was the mother who doesn't believe her sons would do such a thing, although it turns out that she's got an indictment for shoplifting hanging over her head. Then there's the uncle who seems to be the only sane one in the family. 

I mention this because sometimes the most obvious stories that float around immediately after a crime like this bombing is that the story that we got may just be what we were intended to get. After 9/11 there were all sorts of conspiracy theories. There was one that suggested that the Israelis did it, which is very believable for anti-Semites. There was also plenty of evidence pointing to Saudi Arabia. 

What "the tell" about 9/11 was for me was Huffman Aviation. While Mohammed Atta and a friend there were matriculating in how to fly airliners into buildings one of Huffman's jets, the size a businessman would fly, was busted in Orlando with 43 pounds of heroin. But no one was prosecuted. Not the pilot, not the owner. No one. 

Who can get caught moving 43 pounds of heroin into the US and not even get a lousy indictment over it? Well, if you've lived in the US through the last half century and you can't point your finger towards Langley, Virginia, then you aren't trying. So if the drug smugglers have friends in high places, what were the two terrorists doing there?

The tell for the Boston Marathon bombing is Uncle Ruslan, you know, the only good one in that Chechen family. Ruslan, who so vehemently called his nephews losers, I think the term was, is apparently a winner in this game. 

Paul Krugman explains again

Why the austerity of the EU, and for that matter, our own President and (worse) Republican Party, doesn't work. Come on, wake up! Don't be a dope! Let's stimulate the economy. 

OK, probably going on too much about this, but I want to return briefly to the issue of puzzled economists, specifically Allan Meltzer.

Four years ago Meltzer and I effectively had a debate about the effects of the rapidly expanding Fed balance sheet. He (and others) warned of inflation ahead; I (and others) said that we were in a liquidity trap, so that the Fed’s bond purchases would basically just sit there.

So here we are four years later, the huge expansion of the Fed’s balance sheet has not, in fact, led to inflation. And Meltzer is puzzled by the fact that all those bond purchases just sat there:

Since late 2007, the Fed has pumped more than $2 trillion into the U.S. economy by buying bonds. Economist Allan Meltzer asked: “Why is there such a weak response to such an enormous amount of stimulus, especially monetary stimulus?” The answer, he said, is that the obstacles to faster economic growth are not mainly monetary. Instead, they lie mostly with business decisions to invest and hire; these, he argued, are discouraged by the Obama administration’s policies to raise taxes or, through Obamacare’s mandate to buy health insurance for workers, to increase the cost of hiring.

He made a monetary prediction; I made a monetary prediction; his prediction was wrong. Therefore, it must be because of Obamacare!

A report on California

It's actually doing better.

Modern movement conservatism, which transformed the GOP from the moderate party of Dwight Eisenhower into the radical right-wing organization we see today, was largely born in California. The Golden State, even more than the South, created today’s religious conservatism; it elected Ronald Reagan governor; it’s where the tax revolt of the 1970s began. But that was then. In the decades since, the state has grown ever more liberal, thanks in large part to an ever-growing nonwhite share of the electorate.

As a result, the reign of the Governator aside, California has been solidly Democratic since the late 1990s. And ever since the political balance shifted, conservatives have declared the state doomed. Their specifics keep changing, but the moral is always the same: liberal do-gooders are bringing California to its knees.

A dozen years ago, the state was supposedly doomed by all its environmentalists. You see, the eco-freaks were blocking power plants, and the result was crippling blackouts and soaring power prices. “The country’s showcase state,” gloated The Wall Street Journal, “has come to look like a hapless banana republic.”

But a funny thing happened on the road to collapse: It turned out that the main culprit in the electricity crisis was deregulation, which opened the door for ruthless market manipulation. When the market manipulation went away, so did the blackouts.

Undeterred, a few years later conservatives found another line of attack. This time they said that liberal big spending and overpaid public employees were bringing on collapse.

And the state has indeed spent the past few years facing a severe fiscal crunch. When the national housing bubble burst, California was hit especially hard, and the combined effects of the plunge in home prices and the economic downturn led to sharply reduced revenue. Once more there were gleeful pronouncements of imminent doom: California, declared one pundit after another, is America’s Greece.

Again, however, reports of the state’s demise proved premature. Unemployment in California remains high, but it’s coming down — and there’s a projected budget surplus, in part because the implosion of the state’s Republican Party finally gave Democrats a big enough political advantage to push through some desperately needed tax increases. Far from presiding over a Greek-style crisis, Gov. Jerry Brown is proclaiming a comeback.

Needless to say, the usual suspects are still predicting doom — this time from the very tax hikes that are closing the budget gap, which they say will cause millionaires and businesses to flee the state. Well, maybe — but serious studies have found very little evidence either that tax hikes cause lots of wealthy people to move or that state taxes have any significant impact on growth.

So what do we learn from this history of doom deferred?

I’m not suggesting everything in California is just fine. Unemployment — especially long-term unemployment — remains very high. California’s longer-term economic growth has slowed, too, mainly because the state’s limited supply of buildable land means high housing prices, bringing an era of rapid population growth to an end. (Did you know that metropolitan Los Angeles has a higher population density than metropolitan New York?) Last but not least, decades of political paralysis have degraded the state’s once-superb public education system. So there are plenty of problems.

The point, however, is that these problems bear no resemblance to the death-by-liberalism story line the California-bashers keep peddling. California isn’t a state in which liberals have run wild; it’s a state where a liberal majority has been effectively hamstrung by a fanatical conservative minority that, thanks to supermajority rules, has been able to block effective policymaking.

And that’s where things get really interesting — because the era of hamstrung government seems to be coming to an end. Over the years, California’s Republicans moved right as the state moved left, yet retained political relevance thanks to their blocking power. But at this point the state’s GOP has fallen below critical mass, losing even its power to obstruct — and this has left Brown free to push an agenda of tax hikes and infrastructure spending that sounds remarkably like the kind of thing California used to do before the rise of the radical right.

And if this agenda is successful, it will have national implications. After all, California’s political story — in which a radicalized GOP fell increasingly out of touch with an increasingly diverse and socially liberal electorate, and eventually found itself marginalized — is arguably playing out with a lag on the national scene too.

So is California still the place where the future happens first? Stay tuned.

From the man who brought us "trickle-down"

David Stockman, still a blowhard that doesn't seem to understand economics.

Not much more, I promise. As Mark Thoma points out, the verdict among everyone who knows anything is that Stockman’s piece, mysteriously given star treatment, was pathetic and embarrassing. It’s full of big numbers that are scary because they’re big numbers — we’ve run a current account deficit of $8 trillion. So? We have a $16 trillion a year economy; America’s net international investment position is a debt of about 30 percent of GDP, which isn’t that big; our balance of investment income is still positive. But it’s EIGHT TRILLION DOLLARS!

Anyway, I get especially annoyed when people portray all of US fiscal history since the 50s, or something, as a tale of bipartisan runaway spending. You should always have this picture in mind:

We didn’t have anything you could call a deficit problem until 1980. We then saw rising debt under Reagan-Bush; falling debt under Clinton; rising under Bush II; and a sharp rise in the aftermath of the financial crisis. This is not a bipartisan problem of runaway deficits! Pre-1980, no problem at all; after 1980, deficits were very much a monopartisan issue until the financial crisis, which was a time when running deficits was appropriate. Anyone who says differently hasn’t done his homework.

The con

Explained here:

Here is a quick explanation of Trickle Down Economics: The belief that as revenue increases for the wealthy, or big corporations, those excess revenues will then “trickle down” to the rest of us by the way of more jobs, increased pay and better benefits.

Sounds great, right?  In theory, yes it does.

However, it doesn’t take into account the one flaw we’ve faced since the dawn of humanity–basic human nature.  Human nature is often very greedy, and those who have the most, in many cases, tend to be the greediest.

The old saying “absolute power corrupts absolutely” in reality means power of any kind often corrupts.  With our society placing so much emphasis on money, it has made having money equal having power.  Trickle Down Economics puts the health of a nation into the “generous” hands of the rich and powerful.

But you have to ask yourself, who benefits most from this philosophy?  Who stands to gain the most by shaping an entire economic ideology around this belief?  It doesn’t take rocket science to figure that out–the rich and powerful.  Whose power in politics has grown thanks to rulings such as Citizens United, which allows big corporations the freedom to give unheard of sums of money to any political candidate or party?  Yup, you guessed it—the rich and powerful.

Nearly all credible information you can find over the last 30+ years shows that middle class pay has remained pretty much stagnant.  This fact remains indisputable as the income for the top 2% in this country has skyrocketed, and never more so than in the last decade.  Yet even with that indisputable information, you have millions of Americans who accept this economic theory.

It’s a magnificent con.

The rich and powerful have convinced millions to vote against their own interest.  Right now, instead of supporting closing loopholes for individuals and big businesses that make millions (or billions), an entire political party has instead focused on cutting programs that mostly help lower and middle class Americans.  They’ve screamed “class warfare,” yet have not supported a single deficit reduction solution that includes a sacrifice from the top 1%—even opposing the elimination of a tax break for people who own corporate jets.

It seems insane to think that a middle class American would fight to protect the tax rate of someone who makes a hundred times what they make, all while advocating the slashing of programs they themselves benefit from.

And the worse things get, the more tax breaks they want.  Their talking point is near perfection:

“Well, how will raising our taxes create jobs?  We need lower taxes so we can create jobs and boost the economy!”

They’re right, raising taxes won’t help create jobs, but lowering them didn’t help either.  At least with increased tax revenue we wouldn’t need such drastic cuts to public employment like Republicans have pushed for the last 4 years

Republicans ignore the fact that we had historic economic growth, and all-time low unemployment, under President Clinton–with higher taxes.   They’ve also ignored the fact that we faced the worst economic crash in 80 years, and shed millions of jobs, while we had the lowest tax rates in our nation’s history.  These are two simple realities that easily prove the falsity of the Republican rhetoric that “tax cuts are vital for job creation”.

Ask yourself these questions: Over the last 30 years are most jobs gaining or losing benefits?  Are people gaining or losing their pensions?  Are they working less or more?  Are health care plans getting better or worse?

Keep in mind when you answer these, that over the last 30 years executive pay and benefits have hit historic highs and corporate profits have skyrocketed.

It’s a great scam because the terminology in both its application and rebuttal to its opposition make for great talking points:

“The more profits we get to keep, the more jobs we can create.” 

“How will raising our taxes help us create jobs?”

But if taxes were already low, and the economy went into recession, then the tax rates really had nothing to do with job loss or gain.

The choice is really about more tax revenue or less tax revenue—with the same amount of job creation.  Logic says a country should take the tax revenue if the tax breaks didn’t actually create jobs..

And they haven’t.

What Republicans have done is taken this ideology of greed, manipulated the American people by masking it in a cloak of Christian values and then successfully deceived a large portion of the American population to vote against their own best interest.  The astonishing part is— it has actually worked.

It’s one of the greatest cons in human history.  They’ve co-opted the Christian faith and twisted it into a hateful, judgmental, ignorant group of cult-like followers to support an agenda of greed.  They’ve built their economic base upon the idea that our best interests, and economic salvation,  are found by giving those with the most wealth and power  even more.

Now just sit and think about that for a second…

 

The efficacy of trickle-down, and gunned down

Recall the flim-flam of trickle-down way back at the beginning of the Reagan Administration? You know, cut taxes for the rich and all boats rise with the tide. Since then it's been renamed and rebranded over and over, the latest being Paul Ryan's budget and pledges by Boehner and the rest about not raising taxes (on the rich) but rather various plans to simplify and flatten taxes (i.e, cutting taxes for the rich).

This has been the goal of the Republican Party (and to a lesser extent the Democratic Leadership Council and other Blue Dog organizations). Well, has your boat been floated? Depends.

Pulitzer Prize-winner David Cay Johnston has highlighted yet more statistics that illuminate the spike in income inequality in the U.S. in recent decades. Flagging Johnston’s analysis, HuffPo noted Monday, “Incomes for the bottom 90 percent of Americans only grew by $59 on average between 1966 and 2011 (when you adjust those incomes for inflation)… During the same period, the average income for the top 10 percent of Americans rose by $116,071.”

Johnston offered a visual analogy for the disparity in a column for Tax Analysts last month:

The vast majority averaged a mere $59 more in 2011 than in 1966. For the top 10 percent, by the same measures, average income rose by $116,071 to $254,864, an increase of 84 percent over 1966.

Plot those numbers on a chart, with one inch for $59, and the top 10 percent’s line would extend more than 163 feet.

Now compare the vast majority’s $59 with the top 1 percent, and that line extends for 884 feet. The top 1 percent of the top 1 percent, whose 2011 average income of $23.7 million was $18.4 million more per taxpayer than in 1966, would require a line nearly five miles long.

I would also like to point out that this survey basically covers what has happened to America since JFK's assassination. There are reasons for coups; at least we admit that there are reasons for coups in other countries. Generally, who flourishes and who doesn't after a coup is pretty obvious. So how's the class war going for you? 

More on Cyprus

Remember, Cyprus isn't the fault of the common men and women in the street. It's the bankers. So who pays?

What is it about islands around Europe’s periphery? Is there some peculiar psychological thing about proximity plus the illusion of isolation that makes them turn themselves into havens for runaway banks? Inquiring minds want to know.

Anyway, the Cyprus story has obvious parallels with both Iceland and Ireland, with RMML — Russian mobster money laundering — as an extra ingredient. All three island nations had a run of rapid growth as banking havens that left them with banking systems that were too big to save. Iceland, at peak, had banks with assets that were 980 percent of GDP, more than 10 times the US number; Ireland was at 440 percent. Cyprus, at around 800 percent, was closer to Iceland in this respect. For a good summary, read this.

In all three, runaway banking was the source of the crisis — although not everyone seems to get this, even now. Joe Weisenthal finds the most clueless remark so far about Cyprus, and it comes, you guessed it, from George Osborne, who seems to think it has something to do with lack of fiscal discipline. Actually, as the IMF (pdf) points out,

Before the 2008 crisis, Cyprus enjoyed a long period of high growth, low unemployment, and sound public finances.

Oh well. In any case, the question is what to do now.

Iceland got through the crisis with less damage than Ireland, for two reasons. First, it let the banks default on liabilities to overseas creditors, including deposits in offshore accounts. Second, it had the flexibility that comes from having your own currency.

The own-currency advantage helped the real adjustment of the economy; it also allowed some fairly undisruptive financial repression, because the depreciation of the krona (coupled with temporary capital controls) led to a brief burst of inflation that eroded the real value of deposits. Savers were hurt — but with banks having grown to 10 times GDP, that was going to happen one way or another.

Cyprus, unfortunately, seems to be making a hash of it. To be fair, the proposed levy on depositors is actually smaller than the real losses Icelandic depositors took (and they lost on their currency holdings too). But this is just the beginning! Even with the effective default on deposits, Cyprus will need a huge loan from the troika, and the condition for this loan will be harsh austerity. This looks like the beginning of endless, inconceivable pain.

And while it looks as if the terms of the deposit tax are being revised, overseas creditors are still getting a much better deal than in Iceland. I’m still trying to figure out the technical aspects here, but it seems clear that one big problem is that Cyprus, unlike Iceland, isn’t willing to put its banking excesses behind it; they’re still trying to hold on to the RMML business, which means less taxation of the RMs and more taxation of locals.

I am, as I’ve already admitted, somewhat behind the curve here; I should have been tracking Cyprus, but I wasn’t. Still, even on a cursory look it’s really hard to see how any of this is going to work.