Posts Tagged ‘United States’

Latest article by our upcoming (and regular) guest this Wednesday Nicholas Davies:

Why the Showdown with Islamic Extremists Is the War the Pentagon Was Hoping For | Alternet.

PRESS RELEASE: Budget Agreement is a Missed Opportunity That Should Have Closed Tax Loopholes

Posted by Brook Hines 594pc on December 11, 2013

Community Business Association, state partner of Americans for Tax Fairness, joins a coalition of Florida consumer and faith-based organizations to deliver a letter to Senator Bill Nelson Thursday voicing disappointment in the proposed budget deal, and advocating for further consideration of the Stop Tax Haven Abuse Act. Florida Consumer Action Network, American Federation of State, City and Municipal Employees, Florida AFL-CIO, Florida Council of Churches, and PICO are delivering similar messages throughout Florida.

“Once again, this Congress has prioritized Wall Street at the expense of Main Street,” said Brook Hines, Director for Community Business Association.

“This deal protects corporate abuse of offshore tax havens while penalizing federal employees’ wages and pensions. Worse, Wall Street hedge fund managers will continue to enjoy special tax breaks while we’re canceling unemployment insurance for the millions of Americans losing benefits a week after Christmas. As these actions hurt the pocketbooks of consumers this is a bad deal for small business and the consumer demand they depend on,” said Hines.

Fifteen local businesses signed-on to the letter which urges Sen. Nelson to sign-on to the Stop Tax Haven Abuse Act (S. 1533). A similar bill in the House, called Sequester Delay and Stop Tax Haven Abuse Act (HR. 3666) has also been filed. Both bills would raise up to $220 billion over 10 years – enough to fully replace the automatic spending cuts scheduled for the next two-and-a-half years.

Local small business leader Fred Barr is disappointed that Congress failed to close even one wasteful corporate tax loophole. “Many politicians like to say they want to run government like a business. Let me tell you, if you’re not raising revenue, you’re not running a business for long,” said the owner of Barr Creative Services. “Small business owners like myself know we must raise revenue toinvest for growth. We know the tradeoffs here. It’s madness to just give away money in the form of tax breaks while so many necessary investments have gone un-done for so long.”

Recent polling by Hart Research Associates demonstrates that the public would have been in favor of including such tax measures in the budget agreement. By 50% to 34%, voters want to “cancel the [$110 billion in] spending cuts and replace them with new tax revenue from the wealthy and corporations,” rather than “Allow the full spending cuts to take effect.”

According to a report released by the Economic Policy Institute and AFSCME, closing tax loopholes would create 12,915 jobs in Florida through 2016. With revenues relative to historical levels, these loopholes send the wrong message while presenting opportunities for tax evasion, and creating perverse incentives for overleveraging, offshoring of corporate profits.

“Is this budget deal a step in the right direction?” said Hines, “Yes, it’s better than nothing. It scales back the automatic cuts that would have been painful for Floridians, and protects Social Security. But the agreement would be far better if it closed tax loopholes for corporations and the wealthy. The American people strongly support such measures and Congress needs to act.”



Jacobin is a leading voice of the American left, offering socialist perspectives on politics, economics, and culture.

The Backroom Deal That Could’ve Given Us Single-Payer


It’s not so much that Obama “sold us out” to a powerful constituency as that he picked the wrong powerful constituency. A quick look at the financial details reveals that health insurance nationalization was always the real “path of least resistance.”

Back in March 2009, leaks from the White House made it clear that a single-payer health insurance system was “off the table” as an option for health care reform. By doing so, the President had ruled out the simplest and most obvious reform of the disaster that is US healthcare. Instituting single-payer would have meant putting US health insurance companies out of business and extending the existing Medicare or Medicaid to the entire population. Instead, over the following weeks the outlines of the bloated monstrosity known as Obamacare emerged; an impossibly complicated Rube Goldberg contraption, badly designed, incompetently executed, and whose intended beneficiaries increasingly seem to hate.

The decision to abandon the nationalization of perhaps the most unpopular companies in the US is correctly attributed to the fundamental conservatism of the Obama White House, and its unwillingness to take on the health insurers, pharmaceutical companies, or any interest group willing and able to spend millions lobbying, hiring former politicians, and donating to campaigns. Obama’s “wimpiness,” his need to always take the path of least resistance, became common tropes among the American left. Obamacare, liberals claim, is the best possible reform that could’ve been wrangled out of the health insurance industry.

But were the many backroom deals that make up Obamacare really an easieralternative to nationalization? A look at the financial details reveals the opposite conclusion. In strictly financial terms, nationalization would have been the easiest way forward, costing relatively little and delivering immediate savings while making access to health care truly universal. Politically, Obama could have counted on the support of a unlikely ally of progressive causes: health insurance shareholders, the theoretical owners of those very companies who would have been relieved of their then-dubious investments with a huge payout.

As of the end of 2008, the private insurance market covered 60 percent of the US population. For-profit insurers accounted for a large and growing share. The top five insurers accounted for 60 percent of the market — all but one of them for-profit companies. Absent a Bolshevik revolution, implementing a single-payer system would have required proper compensation for the owners of these institutions for their loss of future income — shareholders in the case of the for-profit insurers and, allegedly, the supposed policyholders in the case of most non-profits.

How much compensation? Well, in mid-2009, the total market capitalization of four out of the five top health insurers (the fifth is a nonprofit) amounted to about $60 billion. By then, the stock market had already rebounded nicely from the lows of the crisis, and the uncertainty over Obamacare had largely dissipated, so these were not particularly depressed valuations. Extrapolating this valuation to the rest of the health insurers would have a put a price tag of about $120 billion on the whole racket.

This means that buying out the entire health insurance industry at an enormously generous premium of, say, 100 percent, would have cost the Treasury $240 billion – about 2 percent of 2009 gross domestic product. And this figure is highly inflated —premiums for buying out well-established companies rarely exceed 50 percent and are usually closer to 20 percent. Also, I am valuing the dubious claims of non-profit policyholders on par with the more vigorously-enforced property rights of for-profit shareholders.

Other than the big smiles on the faces of health insurer shareholders across the country, what would have been the US Treasury’s payoff for writing a $240 billion check? Once again, the numbers are simple, and startling. US private insurance, whether for-profit or otherwise, may well be the most wasteful bureaucracy in human history, making the old Gosplan office look like a scrappy startup by comparison. Estimates of pure administrative waste range anywhere from 0.75 percent to 2.6 percentof total US economic output.

Extrapolating again from the biggest four for-profit insurers, in 2008, the industry as a whole claimed to spend 18.5 percent of the premiums it collected on things other than payments to providers. (The other 81.5% that is spent paying for actual care is known as medical loss ratio. Keeping this ratio down is a health insurer CEO’s top priority.) Medicare, by contrast, spendsjust 2 percent. The difference amounts to $130 billion, to which we must add the compliance costs the private insurers impose on health care providers — $28 billion, according to Health Affairs. The costs incurred by consumers are difficult to measure, although very real to anyone who’s spent an afternoon on the phone with a health insurance rep.

So, to recap, nationalization of the health insurance industry in 2009 would have cost no more (and almost certainly a lot less) than $240 billion. The savings in waste resulting from replacing the health insurance racket with an extension of Medicare would have resulted in no less than $158 billion a year. That’s an annualized return on investment of 66 percent. The entire operation would have paid for itself in less than 18 months, and after that, an eternity of administrative efficiency for free. And, of course, happy shareholders.

There would have been nothing exceptional about the arrangement, either. Examples abound of states buying out private shareholders on mutually agreeable terms. The British takeover of the “commanding heights” of the economy after World War II is perhaps the best known, but there have also been potash miners in Canada, New Zealand’s railroads, and Swedish ore producers among others. None of these cases were precursors to the Gulag.

In fact, in most of those cases it was the taxpayer who ended up getting fleeced, buying lemons at inflated prices. That would not have been an issue in this case – we’d have been going in knowing that we’re buying lemons.[MU2]  After the deal closed, there would have been very little to do beyond shutting down operations, selling the buildings, and auctioning off the furniture. Everybody wins.

So what would make a self-described market-lover like Obama take such an obvious solution off the table before the discussions even began? As it turns out, Obama is a fan of a very specific kind of market – the kind of complicated, opaque market full of rules, moving parts, variables, exceptions, and complexities that generate lots of opportunities for rent extraction.

Since one person’s waste is another’s income, it is useful to look at the $130 billion (closer to $150 billion today) not so much as waste but as rent extraction. Rent extraction by whom? A look at private insurers’ financial statements sheds some light.

In 2007, the adjusted net profit margin of the average health policy amounted to just 0.6 percent (adjusted to account for the fact that many large employers self-insure, and simply pay an insurer to handle the administration of the plan; the insurer then reports only the fee paid by the employer as revenue, which skews their published profit margins upwards). Out of every $100 paid in premiums to a private insurer, the net profit extracted by its putative owner was just sixty cents. This may not be the appropriate venue to shed a tear for the poor anonymous shareholder, but it is clear that she did not exactly have a privileged place at the trough. Of all the loot extracted by the health insurance companies she invested in, just 4 percent ended up in her pocket.

Where does the rest go? Mostly, salaries for the industry’s nearly half a million employees, who get paid on average 46 percent more than the typical American worker. Health care CEO pay is the highest among all sectors of the economy, and insurance executives are the highest paid of all. United HealthCare’s CEO extracted for himself a very nice package of $42 million in 2011, and the average among the Big Four for-profit insurers was $14.1 million. By contrast, poor old Lloyd Blankfein of Goldman Sachs took home a mere $9 million.

The picture that emerges of health insurance rent extraction is that of college-educated managers in the middle; at the top, a miasma of the impeccably credentialed and connected executives, consultants, lobbyists and PR hacks that make up the backbone of post-industrial America’s upper echelon. Instead of an Andrew Carnegie, we get a hundred Tom Daschles. Except this time, no libraries, just ten thousand MBAs droning on in front of a Powerpoint slideshow – forever. Not exactly an improvement.

So what would be the costs if we had a president willing to nationalize health care now that Obamacare is the law of the land? Since 2009, when single-payer was taken off the table, the stock market has been lifted by the Federal Reserve’s desperate attempts to compensate for fiscal austerity and public and private disinvestment. The Treasury check would have to be bigger today, perhaps on the order of $500 billion – much less if the payoff to shareholders went from colossal to merely enormous, for instance. The public’s return on investment would still be over 30 percent.

The current system is mind-bogglingly wasteful. Its elimination would free up so many resources that a huge payoff for shareholders can be considered almost as an afterthought. However, the half-million people who currently work in the industry would have to seek gainful employment. That would include thousands of seven-figure executives, lobbyists, consultants and PR hacks. Such a tragedy will not unfold on Obama’s watch.

The US does not have a health insurance problem. It has a health care cost problem – the uninsured are a symptom, not the illness itself. The parasitism of the actual health insurance companies is just more obvious than others. But from overpaid doctors, to usurious hospitals that charge $500 for a stitch, to snake oil-peddling pharmaceutical companies charging thousands a year for dubious treatments, there are simply too many people collecting too much money just because they can.

Unfortunately for the rest of us, they all seem to have a very good friend in the White House.

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Taxing the 1%: Why the top tax rate could be over 80% | vox.

Taxing the 1%: Why the top tax rate could be over 80%

Thomas Piketty, Emmanuel Saez, Stefanie Stantcheva, 8 December 2011

The top 1% of US earners now command a far higher share of the country’s income than they did 40 years ago. This column looks at 18 OECD countries and disputes the claim that low taxes on the rich raise productivity and economic growth. It says the optimal top tax rate could be over 80% and no one but the mega rich would lose out.

In the United States, the share of total pre-tax income accruing to the top 1% has more than doubled from less than 10% in the 1970s to over 20% today (CBO 2011 and Piketty and Saez 2003). A similar pattern is true of other English-speaking countries. Contrary to the widely held view, however, globalisation and new technologies are not to blame. Other OECD countries such as those in continental Europe or Japan have seen far less concentration of income among the mega rich (World Top Incomes Database 2011).

At the same time, top income tax rates on upper income earners have declined significantly since the 1970s in many OECD countries, again particularly in English-speaking ones. For example, top marginal income tax rates in the United States or the United Kingdom were above 70% in the 1970s before the Reagan and Thatcher revolutions drastically cut them by 40 percentage points within a decade.

At a time when most OECD countries face large deficits and debt burdens, a crucial public policy question is whether governments should tax high earners more. The potential tax revenue at stake is now very large. For example, doubling the average US individual income tax rate on the top 1% income earners from the current 22.5% level to 45% would increase tax revenue by 2.7% of GDP per year,1 as much as letting all of the Bush tax cuts expire. But, of course, this simple calculation is static and such a large increase in taxes may well affect the economic behaviour of the rich and the income they report pre-tax, the broader economy, and ultimately the tax revenue generated. In recent research (Piketty et al 2011), we analyse this issue both conceptually and empirically using international evidence on top incomes and top tax rates since the 1970s.

Figure 1 shows that there is indeed a strong correlation between the reductions in top tax rates and the increases in top 1% pre-tax income shares from 1975–79 to 2004–08 across 18 OECD countries for which top income share information is available. For example, the United States experienced a 35 percentage point reduction in its top income tax rate and a very large ten percentage point increase in its top 1% pre-tax income share. By contrast, France or Germany saw very little change in their top tax rates and their top 1% income shares during the same period. Hence, the evolution of top tax rates is a good predictor of changes in pre-tax income concentration. There are three scenarios to explain the strong response of top pre-tax incomes to top tax rates. They have very different policy implications and can be tested in the data.

First, higher top tax rates may discourage work effort and business creation among the most talented – the so-called supply-side effect. In this scenario, lower top tax rates would lead to more economic activity by the rich and hence more economic growth. If all the correlation of top income shares and top tax rates documented on Figure 1 were due to such supply-side effects, the revenue-maximising top tax rate would be 57%. This would still imply that the United States still has some leeway to increase taxes on the rich, but that the upper limit has already been reached in many European countries.

Second, higher top tax rates can increase tax avoidance. In that scenario, increasing top rates in a tax system riddled with loopholes and tax avoidance opportunities is not productive either. However, a better policy would be to first close loopholes so as to eliminate most tax avoidance opportunities and only then increase top tax rates. With sufficient political will and international cooperation to enforce taxes, it is possible to eliminate most tax avoidance opportunities, which are well known and documented. With a broad tax base offering no significant avoidance opportunities, only real supply-side responses would limit how high top tax rate can be set before becoming counter-productive.

Third, while standard economic models assume that pay reflects productivity, there are strong reasons to be sceptical, especially at the top of the income distribution where the actual economic contribution of managers working in complex organisations is particularly difficult to measure. In this scenario, top earners might be able to partly set their own pay by bargaining harder or influencing compensation committees. Naturally, the incentives for such ‘rent-seeking’ are much stronger when top tax rates are low. In this scenario, cuts in top tax rates can still increase top income shares – consistent with the observed trend in Figure 1 – but the increases in top 1% incomes now come at the expense of the remaining 99%. In other words, top rate cuts stimulate rent-seeking at the top but not overall economic growth – the key difference with the first, supply-side, scenario.

To tell these various scenarios apart, we need to analyse to what extent top tax rate cuts lead to higher economic growth. Figure 2 shows that there is no correlation between cuts in top tax rates and average annual real GDP-per-capita growth since the 1970s. For example, countries that made large cuts in top tax rates such as the United Kingdom or the United States have not grown significantly faster than countries that did not, such as Germany or Denmark. Hence, a substantial fraction of the response of pre-tax top incomes to top tax rates documented in Figure 1 may be due to increased rent-seeking at the top rather than increased productive effort.

Naturally, cross-country comparisons are bound to be fragile, and the exact results vary with the specification, years, and countries. But by and large, the bottom line is that rich countries have all grown at roughly the same rate over the past 30 years – in spite of huge variations in tax policies. Using our model and mid-range parameter values where the response of top earners to top tax rate cuts is due in part to increased rent-seeking behaviour and in part to increased productive work, we find that the top tax rate could potentially be set as high as 83% – as opposed to 57% in the pure supply-side model.

Up until the 1970s, policymakers and public opinion probably considered – rightly or wrongly – that at the very top of the income ladder, pay increases reflected mostly greed or other socially wasteful activities rather than productive work effort. This is why they were able to set marginal tax rates as high as 80% in the US and the UK. The Reagan/Thatcher revolution has succeeded in making such top tax rate levels unthinkable since then. But after decades of increasing income concentration that has brought about mediocre growth since the 1970s and a Great Recession triggered by financial sector excesses, a rethinking of the Reagan and Thatcher revolutions is perhaps underway. The United Kingdom has increased its top income tax rate from 40% to 50% in 2010 in part to curb top pay excesses. In the United States, the Occupy Wall Street movement and its famous “We are the 99%” slogan also reflects the view that the top 1% may have gained at the expense of the 99%.

In the end, the future of top tax rates depends on the public’s beliefs of whether top pay fairly reflects productivity or whether top pay, rather unfairly, arises from rent-seeking. With higher income concentration, top earners have more economic resources to influence social beliefs (through think tanks and media) and policies (through lobbying), thereby creating some reverse causality between income inequality, perceptions, and policies. We hope economists can shed light on these beliefs with compelling theoretical and empirical analysis.

Figure 1. Changes in top 1% pre-tax income shares and top marginal tax rates since the 1970s

Note: The Figure depicts the change in top 1% pre-tax income shares against the change in top marginal income tax rates from 1975-9 to 2004-8 for 18 OECD countries (top tax rates include both central and local individual income tax rates, exact years vary slightly by countries depending on data availability in the World Top Income Database). Source: Pikettyet al (2011), Figure 4A.

Figure 2. GDP-per-capita growth rates and top marginal tax rates since the 1970s

Note: The Figure depicts the average real GDP-per-capita annual growth rate from 1975-9 to 2004-8 against the change in top marginal tax rates from 1975-9 to 2004-(exact years are the same as Figure 1 and vary slightly by countries). The correlation is virtually zero and insignificant suggesting that cuts in top tax rates do not lead to higher economic growth.Source: Piketty et al (2011), Figure 4B.


Congressional Budget Office (2011), “Trends in the Distribution of Household Income Between 1979 and 2007”, US government Printing Press: Washington DC. Available online at

Piketty, Thomas and Emmanuel Saez (2003), “Income Inequality in the United States, 1913-1998”,Quarterly Journal of Economics, 118(1):1-39, series updated to 2008 in July 2010, online at

Piketty, Thomas, Emmanuel Saez, and Stefanie Stantcheva (2011), “Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities“, CEPR Discussion Paper 8675, December.

The World Top Incomes Database (F Alvaredo, T Atkinson, T Piketty, and E Saez), online at

1 This calculation assumes that the top 1% income share is 20%. The top 1% income share peaked at 23.5% in 2007, and then fell to 21% in 2008 and 18% in 2009, at the trough of the recession. In 2010 and 2011, the top 1% income share is very likely to increase again to 20%. Total market income reported for tax purposes is about 60% of GDP (on average from 1999 to 2008). Hence, increasing the top 1% average tax rate by 22.5 points raises .6*.225*.2=2.7% of GDP, or $405 billion given the current 2011 GDP of $15 trillion.



Will the real Milton Friedman please crawl out of his grave and eat Rand Paul’s brains (albeit a small snack)
Rand Paul’s Zombie-nomics
versus Janet Yellen

By Greg Palast for Truthout
Thursday, 14 November 2013Will Senator Rand Paul, misunderstanding the voices of the un-dead, block the appointment of Janet Yellen to head the Federal Reserve Board?

No joke.  Tea Party fave Paul told the Wall Street Journal he would have preferred Milton Friedman, the free-market fanatic, to the liberal-ish Yellen.  But, as a stunned Journalreporter informed the Senator, Milton Friedman is, alas, some years dead.Unbowed, Paul contends he is channeling Friedman from beyond the grave, invoking the Nobel Laureate economist to support the Senator’s quest against Yellen’s well-known commitment to easy money policies at the Fed.Paul has written, “One need not be an economist or mathematician to wonder whether printing money out of thin air is a sound way to help the economy.”

You’re more than correct, Senator.  If you don’t know why America is printing more dollar bills, then you definitely are NOT an economist NOR a mathematician.

As a former student of the late professor Friedman, I’m quite certain that Milty would have been thrilled by Yellen’s push to main-line more greenbacks into the US economy.
If you return to your séance, Senator, and ask Friedman’s ghost about “printing money out of thin air,” you’d find out he all but invented the idea.  Or, throw away the Ouija Board and read Friedman’s A Monetary History of the United States 1867-1960, his Nobel-winning work, in which he argued convincingly that the Federal Reserve could have prevented the Great Depression had it radically pumped up the money supply.

Friedman’s — and Yellen’s — greatest fear is not inflation, but deflation, a disastrous fall in prices due to starving the economy of dollars.

Senator Paul moans that, since the market crash of 2008, the Federal Reserve has printed $3.6 trillion and dumped these dollar bills, ink still wet, into the financial system.  Paul is waiting for the day when the printing of all these dollars will suddenly cause the price of a can of tuna to soar to $7,000.
But despite the Fed’s smoking-hot printing press, the price of tuna is perilously close tofalling. Price inflation today stands at a teeny-weeny 1.2%.

It’s time for Senator Paul and daddy Congressman Ron Paul and their followers in gold-foil hats to admit that adding trillions to the money supply has not caused hyper-inflation.  After a quarter-century of hysterical warnings from the two Pauls, the hyperinflation spaceship never landed and little green dollar men did not eat up the planet.

An Idiot’s Guide to Gold-Buggery
The Pauls have told us horror stories of the German hyper-inflation of the early 1920s when you had to schlep a wheelbarrow full of currency to buy a loaf of bread.  The cure Paul père hawks, is a return to the Gold Standard, raising Zombie economic theories from the grave where Friedman buried them.

As Friedman warned, there’s something far worse than having to pay for a loaf of bread with bags of currency, and that’s having to pay for a loaf of bread with a bag of gold.

Notably, the Tea Party, not the guys in the goofy wigs on Fox TV, but the real one in Boston in 1773, was formed principally to protest King George’s re-imposing the Gold Standard on the colonies.

The colonies faced a crisis.  Bricks of gold don’t have babies; and so, when an economy grows rapidly as did early America, there simply is not enough money to represent that new trade and wealth because the currency is limited by a fixed and arbitrary amount of metal.Here’s why.  When the money stock stays flat as production and workforce grows, each dollar buys more of that production.  Sounds good?  No way.  A monstrous fall in prices and wages means workers and businesses get less for their output and can’t pay off old loans.  To simplify:  When a farmer borrows $100 for land and seed, then sells his corn for $50, the farmer goes bust.

The American colonies faced such ruin when gold-backed currency was insufficient to fund our massive expansion.  A revolutionary leader of the time explained the insurgent solution, “Happy for us that we fell upon the Project of giving a Credit to Paper.”

Happy days ended when the British Parliament counter-attacked with the Currency Act of 1764 that, “renders our Paper Money no legal Tender.”  King George, to shackle the States to the Crown’s metal-based currency, required purchasing a tax-stamp for each case of tea which had to be paid for in His Majesty’s “pounds sterling.”

So the dissidents threw the tea into the ocean.

A century and a half later, after World War I, the British Parliament did it again, re-imposing the gold standard.  The US and most of the world joined Britain in the golden noose.  Economies strangled and dangled.  The Great Depression eased only when FDR, in one of his first acts of office, rescued the US, setting the dollar free of gold and letting fly the “Federal Reserve Note,” created out of thin air — just like America itself.

And while your beloved Friedman did not care for the government caring for people’s welfare via New Deal programs, my professor did praise FDR’s printing press for expanding the money supply.

In today’s hearing, Janet Yellen might remind the Senate of economist J.M. Keynes warning about, “Madmen in authority, who hear voices in the air, distilling their frenzy from some academic scribbler of a few years back.”

Senator Paul, if you are going to listen to the voices of deceased economists, at the least, listen carefully.

Forensic economist Greg Palast, author of the New York Times bestseller, Billionaires & Ballot Bandits, is a Puffin Foundation Fellow for Investigative Reporting.
Greg Palast is also the author of the New York Times bestsellers The Best Democracy Money Can Buy, Armed Madhouse and the highly acclaimed Vultures’ Picnic.HELP US FOLLOW THE MONEY. Visit the Palast Investigative Fund’s store or simply make tax-deductible contribution to keep our work alive!

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