Category Archives: Economy

Teapublican Lie #10.

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“President Obama’s Jobs Plan is Class Warfare.”

Teapublicans haul this one out every time a Democrat talks about raising taxes on the wealthy. It sounds terrible, doesn’t it? How could anyone be for dividing America into classes based on privilege and wealth?

Oh, wait! Teapublicans have been pursuing policies of class warfare for decades!

Thanks to Teapublican policies, 400 people now control 50 percent of the nation’s wealth, a combined $1.5 trillion. Their average net worth is $3.8 billion – a 12 percent increase from last year! Meanwhile, the bottom 90 percent have an average annual income of just $31,244 per household.

While the wealthy pay a federal tax rate of 15 percent on profits from their investments, middle class families pay a federal income tax rate of 25-33 percent on their salaries. While the corporations’ share of federal tax revenues has dropped from more than 30 percent in the 1950s to less than 10 percent now, individuals’ share has remained at more than 40 percent. At the same time, payroll taxes (for Social Security and Medicare) have gone from 10 percent to more than 40 percent!

But there has been even more bad news for the poor and middle class. In the past 10 years, incomes for the top 20 percent of Americans have increased dramatically while incomes for the bottom 80 percent of Americans have dropped! And while the Great Recession forced millions of American workers into unemployment lines, corporate CEOs and bankers have paid themselves multi-million dollar bonuses.

No, John Boehner, Mitch McConnell, Mitt Romney, Rick Perry and Michelle Bachmann, making those who have benefited the most from our country pay their fair share is not class warfare. Continuing the Teapublican policies from the past 30 years is.

Teapublican Lie #9.

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“Cutting taxes on the wealthy creates jobs.”

This lie could only have been generated by wealthy contributors to political campaigns. But let’s examine it anyway.

Both political parties acknowledge that the vast majority of jobs are created by small businesses and, most especially, by new businesses. Yet, for investors, these businesses often entail a great deal of risk – something the wealthy are generally adverse to. So the wealthiest Americans tend to invest their money, instead, in large corporations which offer greater security.

Moreover, most of the incomes for the wealthy are the result of capital gains (generated by selling stocks for more money than they paid for them). This income is now taxed at the unbelievably low rate of 15 percent. That’s lower than the income tax rate for most of the middle class! It begs the questions, “How much farther can we cut taxes for the wealthy?” and, “How will that create jobs?”

Teapublican Lie #8.

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“Most Americans don’t pay taxes.”

Lately, Teapublicans have been saying that 51% of Americans don’t pay any taxes at all. They say that those Americans should be forced to “have some skin in the game.” They call them the “Freeloader Class.” And they blame them for the nation’s economic woes.

While it is true that 51 percent of Americans did not pay federal income taxes for tax year 2009, it is not true that they did not pay taxes. It’s not even true (as Teapublicans suggest) that they are lazy, welfare recipients content to sponge off society. In fact, many of those who paid no federal income taxes in 2009 were among the wealthy and the upper middle class!

From an article by PolitiFact.com, Bob Williams, a tax policy specialist at the nonpartisan Urban Institute-Brookings Institution Tax Policy Center, said there are lots of popular tax breaks, which are sometimes called tax expenditures. “We estimate they total more than a trillion dollars a year in reduced taxes and, in fact, the bulk of those go to the top end of the income distribution,” said Williams.

As for the rest, they are mostly the elderly living on Social Security and those working at minimum wage jobs that don’t make enough to pay federal income taxes. (According to the 2010 Census, one in six Americans now lives below the poverty line.) Yet these people still pay taxes. Many pay payroll taxes for Social Security and Medicare. All pay sales taxes. Many pay state income taxes and property taxes (even if they rent). And most pay gasoline taxes, beer and liquor taxes, etc. So they do, indeed, “have some skin in the game.”

The real freeloaders are those who are living off the hard work of others – those who have inherited fortunes from their ancestors, Wall Street bankers who are paid enormous bonuses to gamble with others’ money, and those who, by a stroke of luck, have found themselves in a position of power – and taking advantage of a host of tax shelters created by politicians to protect their benefactors.

Teapublican Lie #7.

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“Raising taxes on millionaires will hurt small business.”

After all, most small businesses are owned by millionaires, right? Rrrrright!

This whopper seems to stem from the Teapublican definition of small business. You see, they define small business by ownership rather than brands, offices, employees or income. In other words, since Cargill is a closely held, privately-owned company, Teapublicans define it as a “small” business. Similarly, they define Koch Industries as a “small” business. In case you don’t already know, these are the two largest privately-held corporations in the world! Both measure their profits by the billions. Yet Teapublicans lump them into the same category as the owners of the small clothing store on Main Street or the corner café!

In the interest of full disclosure, I’ve been a small business owner since 1987. Moreover, I’ve served hundreds of small businesses as clients. As it happens, I have also completed projects for Cargill and Koch Industries. I can tell you beyond the shadow of a doubt that those companies have absolutely nothing in common with small businesses. And I can tell you that 99 percent of the other clients are not owned by millionaires, let alone billionaires.

So, President Obama and Congress, go ahead, raise taxes on millionaires and billionaires. Most small business owners will thank you for it.

Teapublican Lie #6.

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“President Obama’s economic stimulus failed.”

You’ve heard this over and over again from the mouths of virtually every Teapublican. They all loudly proclaim President Obama’s stimulus plan “a complete and utter failure.” They make it sound as if Democrats wasted $787 billion of taxpayer money. But as you’ll see, it’s just another Teapublican lie. To learn the truth, I turned to the non-partisan Congressional Budget Office (CBO).

In the second quarter of 2010 (one year after it’s passage), CBO estimated that the American Recovery and Reinvestment Act (ARRA) had:

– Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent
– Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points
– Increased the number of people employed by between 1.4 million and 3.3 million
– Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million

Similarly, in the second quarter of 2011, the CBO estimated that ARRA’s policies had the following effects compared with what would have occurred otherwise:

– Raised real (inflation-adjusted) gross domestic product by between 0.8 percent and 2.5 percent
– Lowered the unemployment rate by between 0.5 percentage points and 1.6 percentage points
– Increased the number of people employed by between 1.0 million and 2.9 million
– Increased the number of full-time-equivalent (FTE) jobs by 1.4 million to 4.0 million

And even though CBO has said that the employment effects will wane in 2012, it estimates “ARRA will raise real GDP in 2012 by between 0.3 percent and 0.8 percent and will increase the number of people employed in 2012 by between 0.4 million and 1.1 million.”

Some failure!

The real question about the economic stimulus is, “Where would we now be without it?”

Teapublican Lie #5.

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“Regulations are bad for business.”

Teapublicans have been slinging this bovine excrement around for years. “Businesses face mountains of government red tape that make it impossible for them to operate,” they say. I admit it sounds plausible, but it’s just not true.

Certainly, every industry faces government regulations. But those regulations are not necessarily bad. For example, food growers must meet food safety regulations. They must maintain sanitary conditions and monitor the use of pesticides and chemicals. Not exactly onerous regulations, unless you don’t mind getting food borne illnesses. Similarly, restaurants must pass inspections for cleanliness and food preparation. Hotels must meet standards for safety and cleanliness…the list of such examples is long.

Contrary to the Teapublican talking point, a recent study by McClatchy Newspapers found that small business owners don’t feel that regulations and taxes are strangling their businesses at all. As a matter of fact, many of the business owners surveyed felt that the regulations actually create consumer confidence which is good for business.

So, if small business owners don’t oppose government regulations, who does?

One can conclude that the businesses most harmed by government regulation are those that don’t care about consumer safety. Companies that want to trash our environment without repercussions. Companies that want to cut corners to save money. Companies like BP, which apparently cut corners on a blowout preventer resulting in the worst environmental tragedy in history. Companies that buy toys painted with lead because they’re cheaper. Companies that purchase ingredients for pet food without testing them.

These aren’t small businesses. They’re huge, multi-national conglomerates that are more concerned about their bottom lines than their customers. If they don’t care about us, why on Earth should we care about them?

Teapublican Lie #4.

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“The national debt was created by President Obama.”

I’ve addressed this figment of the Teapublican imagination before. They know it’s a lie, but they’re fond of saying it anyway. Indeed, they’re fond of blaming President Obama for everything bad and taking credit for everything good.

Who created the Great Recession? According to Teapublicans, it wasn’t Bush. It was Obama.

Who’s responsible for the high unemployment rate? Why Obama, of course, even though 8 million jobs were lost on Bush’s watch while the Obama administration has overseen a net increase in jobs.

Who was responsible for tracking down Osama bin Laden? According to Teapublicans it was certainly not Obama. Bin Laden’s death was the direct result of Bush/Cheney policies. You’ve heard all these lies and more.

Now, back to the national debt:

No less an authority than Bruce Bartlett, Ronald Reagan’s former policy adviser, has said that of the more than $14 trillion national debt, more than $7 trillion is a direct result of George W. Bush’s policies – most especially his tax cuts and the wars in Afghanistan and Iraq. Only $1.4 trillion is the result of President Obama’s attempts to get our economy moving in the right direction! The remainder can be credited to all of the presidents prior to Bush.

I’ll finish by quoting David Stockman, Reagan’s Director of the Office of Management and Budget who began a NY Times op-ed by stating, “How my GOP destroyed the US economy.”

Apparently, at least some Republicans are willing to speak the truth.

Teapublican Lie #3.

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“Cutting deficits and the national debt will create jobs.”

This is the most fashionable load of bull excrement being sold by Teapublicans. But nothing could be further from the truth.

Certainly, the debt has a chilling effect on the long-term prospects of our economy. But the debt does not constitute a crisis. In fact, the total debt equals roughly one year of the US GDP. To relate that to a family’s finances (as Teapublicans are so fond of doing), it’s akin to a family earning $100,000 per year holding a $100,000 mortgage.

Now let’s look at what severe cuts to our deficit and debt will do to our economy in the short term.

When the government cuts spending it cuts the budgets of government agencies. That forces those agencies to lay off many of their employees. So, inevitably, there’s a net loss of jobs. Further, the decrease in employees results in less oversight of banks, food and drugs, Medicare payments, etc. – all of which make our economy and taxpayers less safe. 

Moreover, government cuts can have a negative effect on private companies that act as vendors to those agencies. For example, large cuts to the Department of Defense will cause the DOD to suspend weapons acquisition and development. That means defense contractors will have to make dramatic cuts to their payroll.

Part of the reason for our jobless recovery from Bush’s Great Recession is that state and local governments are experiencing a loss of revenue from taxpayers. As a result, those governments have been laying off workers even faster than private companies can hire them.

So, in the short term, what do you expect a $1 trillion cut to our deficit will do to our economy? Obviously, it will cost tens of thousands of people their jobs. Maybe yours!

Teapublican Lie #2.

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“US corporate taxes are the highest in the world.”

You’ve heard it over and over during the past 2-1/2 years. Not only from Teapublicans. But from supposedly authoritative sources such as the US Chamber of Commerce. So let’s examine this myth more closely.

While it is true that the corporate income tax rate for the US is 34.2% (which includes a state tax rate of 6%), that is not significantly higher than the corporate tax rate for many other developed nations, and it’s less than Japan’s. Brazil has a rate of 32.5%; France and Germany have tax rates of more than 31%; Australia 30.8%; Canada 28% and the UK has a rate of 25.4%.

More to the point, this is not the rate that most large US corporations actually pay. In fact, the effective tax rate for large US corporations (after deductions and subsidies) is less than 18%!

For example, 12 major corporations made $171 billion in profits from 2008 to 2010, yet had a negative income tax rate of 1.5 percent! And the most egregious example is GE. Last year the global conglomerate generated $10.3 billion in pretax income, but ended up owing nothing in US federal income taxes. In fact, it recorded a tax benefit of $1.1 billion!

Moreover, employer payroll taxes in the US are just 7.7% – less than Korea, India, Mexico, Poland and most of the developed world. And since the 1940s, the corporate share of all federal income taxes has dropped dramatically. In 1940, corporations paid 43 percent of all the federal income taxes collected in the US. But, in 2010, that percentage was only 8.9 percent! Indeed, the US raises less corporate tax revenue than most developed countries.

So though the US has the world’s 2nd highest corporate income tax rate, the rate actually paid by US corporations is much lower. In fact, our effective tax rate is less than that of even Mexico, India, Vietnam, Korea, China and Russia. And that’s the truth!

Teapublican Lie #1.

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Today begins a series intended to de-bunk the many Teapublican lies that will be repeated over the coming election season. Primary amongst them is this pants-on-fire whopper:  “Cutting taxes creates jobs.”

This whopper has been repeated so often by so many that voters have come to believe it’s true. Yet when you examine the evidence, you find that it defies belief.  For example, if cutting taxes created jobs, then why was there negative job creation during the Bush administration despite the vaunted Bush tax cuts? (And that was even before the economy was driven off a cliff during the last few months of 2008.)

If cutting taxes created jobs, why did the economy flourish under the Clinton administration despite higher taxes?

And if cutting taxes creates jobs, why is our unemployment now so high despite the fact that US citizens are paying the lowest share of their income for taxes – all taxes – since 1958?

Truth is, the only thing cutting taxes on corporations and the rich does for our economy is to increase wealth for those who need it least.