Category Archives: Economy

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.

What If FDR, Truman Or Eisenhower Faced This Congress?

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Despite the fact that our economy was in freefall when President Obama entered office, people are fond of blaming him for our current misery.  Instead of supporting Obama’s attempts to right our sinking ship, Teapublicans have chosen to fight him every step of the way. 

No matter that the record number of Senate filibusters paralyzed our government.  No matter that the cries of “Socialist” have further divided our nation.  Teapublicans seem only to care about ensuring that Obama is a one-term president.

And just when it appeared that the economy was growing again, Teapublicans chose to turn the debt ceiling into a “crisis” resulting in a downgrade of US Treasury Securities and further despair.

All this got me wondering: What if today’s Teapublicans had been around following the Great Depression? Would they have been willing to fund Social Security? Would they have opened the US Treasury to build our infrastructure? Would our nation’s most iconic structures have ever been funded? Would there be a Hoover Dam? Would the Tennessee Valley Authority exist?

What if Teapublicans had been around following WWII? Would they have approved the post WWII-era top tax rate of 91 perecent? Would they have approved of the billions spent to expand our Universities? Would they have supported the GI Bill? Would they have approved of Eisenhower’s interstate highway system?

Looking at more recent history, would they have approved of raising the debt ceiling as Reagan was tripling the national debt? Would they have approved of his tax increases?

I think you know the answers. 

Now ask yourself this: What would have become of the US if today’s Teapublicans had been around during the founding of our nation? Would they even have been willing to spend their money to fund the Revolution?

It Is Now Clear That S&P’s Downgrade Was Political.

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Now that the Fitch rating service has confirmed the AAA rating for US Treasury bonds, it raises questions about the real motives for the downgrade by S&P. Of the three rating agencies, both Moody’s and Fitch have maintained the AAA rating. Fitch even called the outlook for US Treasury bonds positive.

Why the different outlooks?

It is possible that it merely represents a difference of opinion. It’s also possible that S&P wanted to flex its political muscle. When you read the full analysis by S&P, two statements stand out:

1 – “The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge, and, as we see it, the resulting agreement fell well short of the comprehensive fiscal consolidation program that some proponents had envisaged until quite recently.”

2 – “Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.”

Certainly, each party has rushed to blame the other for S&P’s downgrade. However, since only one party (The Democratic Party) was publicly willing to compromise, and since the other party (The Republican Party) chose to create a crisis in order to get its way, it’s abundantly clear which party is truly to blame for the US Treasury bonds being downgraded for the first time in history. It’s also clear that the Republican position of maintaining the Bush tax cuts is fiscally irresponsible.

A Question of Compromise.

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When Democrats and Teapublicans named their members of the so-called Super Congress, the media immediately asked, “Will Senators Patty Murray, John Kerry and Max Baucus be willing to compromise with their Teapublican counterparts? What about Representatives James Clyburn, Xavier Becerra and Chris Van Hollen?”

Say what?

During the last three and a half years, Democrats have amply demonstrated a willingness to compromise.  During the negotiations for health reform, they caved on the most important component – the public option. Last Fall, they gave in to Teapublicans by extending the Bush-era tax cuts despite the growing deficit. And in the recent negotiations to raise the debt ceiling, Democrats gave up on increased revenue from closing tax loopholes and raising taxes on the wealthy. 

What compomises have Teapublicans been willing to make?

One can’t help but wonder why the media failed to ask if the Teapublican representatives on the Super Congress committee will be willing to compromise. After all, Mitch McConnell said he would not appoint anyone to the committee who would vote for increased tax revenue. Could it be that the so-called “mainstream, liberal-biased” media are now biased toward Teapublicans?

The Democrats can’t afford to negotiate away their principles again. If they do, Democratic support for the administration and Congress will likely collapse. Of course, that’s what Teapublicans are counting on.