Robert Reich
A sign for Wall Street is displayed on the side of building near the New York Stock Exchange. Democrats who are now rolling back Dodd-Frank don’t seem to appreciate the extent to which Wall Street has harmed, and continues to harm, America, Reich writes. (Mark Lennihan/AP/File)
Who needs Republicans when Wall Street has Democrats?
Who needs Republicans when Wall Street has the Democrats? With the help of congressional Democrats, the Street is rolling back financial reforms enacted after its near meltdown.
According to the New York Times, a bill that’s already moved through the House Financial Services Committee, allowing more of the very kind of derivatives trading (bets on bets) that got the Street into trouble, was drafted by Citigroup — whose recommended language was copied nearly word for word in 70 lines of the 85-line bill.
Where were House Democrats? Right behind it. Rep. Sean Patrick Maloney, Democrat of New York, a major recipient of the Street’s political largesse, co-sponsored it. Most of the Democrats on the Committee, also receiving generous donations from the big banks, voted for it. Rep. Jim Himes, another proponent of the bill and a former banker at Goldman Sachs, now leads the Democrat’s fund-raising effort in the House.
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Bob Rubin – co-chair of Goldman before he joined the Clinton White House, and chair of Citigroup’s management committee after he left it – is still influential in the Party, and his protégés are all over the Obama administration. I like Bob personally but I battled his Street-centric views the whole time I served, and soon after I left the administration he persuaded Clinton to support a repeal of the Glass-Steagall Act. ( Continue… )
An office block at Central St Giles in London where Google has offices. Google is under investigation for manipulating its British sales to pay almost no taxes by using its low-tax Ireland subsidiary, Reich writes. (Luke Macgregor/Reuters/File)
How corporations pressure government into tax breaks and subsidies
As global capital becomes ever more powerful, giant corporations are holding governments and citizens up for ransom — eliciting subsidies and tax breaks from countries concerned about their nation’s “competitiveness” — while sheltering their profits in the lowest-tax jurisdictions they can find. Major advanced countries — and their citizens — need a comprehensive tax agreement that won’t allow global corporations to get away with this.
Google, Amazon, Starbucks, every other major corporation, and every big Wall Street bank, are sheltering as much of their U.S. profits abroad as they can, while telling Washington that lower corporate taxes are necessary in order to keep the U.S. “competitive.”
Baloney. The fact is, global corporations have no allegiance to any country; their only objective is to make as much money as possible — and play off one country against another to keep their taxes down and subsidies up, thereby shifting more of the tax burden to ordinary people whose wages are already shrinking because companies are playing workers off against each other.
I’m in London for a few days, and all the talk here is about how Goldman Sachs just negotiated a sweetheart deal to settle a tax dispute with the British government; Google is manipulating its British sales to pay almost no taxes here by using its low-tax Ireland subsidiary (the chair of the Parliamentary committee investigating this has just called the do-no-evil firm “devious, calculating, and unethical”); Amazon has been found to route its British sales through a subsidiary in low-tax Luxembourg, and now receives more in subsidies from the British government than it pays here in taxes; Starbucks’ tax-avoidance strategy was so blatant British consumers began boycotting the firm until it reversed course. ( Continue… )
Ousted IRS chief Steven Miller, right, and J. Russell George, the Treasury inspector general for tax administration, testify on Capitol Hill in Washington, Friday. Indignation over the IRS’s alleged 'targeting' of conservative groups is a distraction from the main event, Reich writes. (J. Scott Applewhite/AP)
The real IRS scandal
“This systematic abuse cannot be fixed with just one resignation, or two,” said David Camp, the Republican chairman of the House tax-writing committee, at an oversight hearing Friday morning dealing with the IRS. “This is not a personnel problem. This is a problem of the IRS being too large, too intrusive, too abusive.”
David Camp has it wrong. There has been a “systematic” abuse of power, but it’s not what Camp has in mind. The real scandal is that:
The IRS has interpreted our tax laws to allow big corporations and wealthy individuals to make unlimited secret campaign donations through sham political fronts called “social welfare organizations,” like Karl Rove’s “Crossroads,” the U.S. Chamber of Commerce, and “Priorites USA.”
This campaign money has been used to bribe Congress to keep in place tax loopholes like the “carried interest” rule that allows the managers of hedge funds and private equity funds to treat their income as capital gains, subject only to low capital gains taxes rather than ordinary income taxes, and other loopholes that allow CEOs to get special tax treatment on giant compensation packages that now average $10 million a year. ( Continue… )
President Obama speaks on the Internal Revenue Service's targeting of conservative groups for extra tax scrutiny in the East Room of the White House in Washington, Wednesday May 15, 2013. These and other crises are distracting Mr. Obama from defining a core agenda. (Pablo Martinez Monsivais/AP)
The problem with Obama's second term
Six months into a second term and the Obama White House is on the defensive and floundering: Benghazi, the IRS’s investigations of right-wing groups, the Justice Department’s snooping into journalists’ phone records, Obamacare behind schedule, the Administration’s push for gun control ending in failure.
Should the blame fall mainly on congressional Republicans and their allies in the right-wing media, whose vitriolic attacks on Obama are unceasing?
After all, the only thing the GOP stands for – the sole mission that unites its warring factions — is an unwaivering determination to block anything the Administration seeks while distracting public attention from any larger issue.
But surely some of the seeming disarray is due to the President, whose insularity and aloofness make him an easy target, and whose eagerness to compromise and lack of focus continuously blurs his core message. ( Continue… )
Air Force Chief of Staff Gen. Mark A. Welsh III, right, and Secretary of the Air Force Michael B. Donley appear before the Senate Armed Services Committee on Capitol Hill in Washington Tuesday. The Air Force is dealing with controversy over sexual assaults and how the military justice system handles it. (J. Scott Applewhite/AP)
Military woes: sexual assaults – and nuclear weapons
After years of repeated reports of sexual assaults – and years of promises to prevent them, and then years of studies and commissions to find the best way of doing so – a Defense Department study released Tuesday estimates that some 26,000 people in the military were sexually assaulted in the last fiscal year, up from about 19,000 the year before.
Moreover, it turns out the Air Force lieutenant colonel in charge of preventing sexual assault has been arrested for … sexual assault. According to the police report, a drunken Lt. Col. Jeff Krusinski allegedly approached a woman in a parking lot in Arlington, Va. Sunday night, and grabbed her breasts and buttocks.
Why has it been so difficult for the Air Force or the Defense Department to remedy this problem?
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Speaking of which, the Air Force has just removed from duty seventeen launch officers at the Minot nuclear missile base in North Dakota — one of three bases responsible for controlling, and, if necessary, launching, strategic nuclear missiles — for violating weapons safety rules. The base commander characterized their negligence as “rot.” ( Continue… )
The Internal Revenue Service building at the Federal Triangle complex in Washington. Republicans have cut the IRS enforcement budget, Reich writes, after failing to cut taxes on big corporations and the wealthy as much as they'd like. (Manuel Balce Ceneta/AP/File)
How Republicans quietly repeal laws they don't like
The West, Texas chemical and fertilizer plant where at least 15 were killed and more than 200 injured a few weeks ago hadn’t been fully inspected by the Occupational Safety and Health Administration since 1985. (A partial inspection in 2011 had resulted in $5,250 in fines.)
OSHA and its state partners have a total of 2,200 inspectors charged with ensuring the safety of over more than 8 million workplaces employing 130 million workers. That comes to about one inspector for every 59,000 American workers.
There’s no way it can do its job with so few resources, but OSHA has been systematically hollowed out for the years under Republican administrations and congresses that have despised the agency since its inception.
In effect, much of our nation’s worker safety laws and rules have been quietly repealed because there aren’t enough inspectors to enforce them. ( Continue… )
The Federal Reserve building in Washington is pictured. Trickle-down economics is the first cousin of austerity economics, Reich writes. (Larry Downing/Reuters/File)
Cheap Fed money isn't helping the economy
The Fed’s policy of keeping interest rates near zero is another form of trickle-down economics.
For evidence, look no further than Apple’s decision to borrow a whopping $17 billion and turn it over to its investors in the form of dividends and stock buy-backs.
Apple is already sitting on $145 billion. But with interest rates so low, it’s cheaper to borrow. This also lets Apple avoid U.S. taxes on its cash horde socked away overseas where taxes are lower.
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Other big companies are doing much the same on a smaller scale. ( Continue… )
A clock with the current US national debt is displayed inside the House Committee on Financial Services. As we should have learned from what happened to 'FDR’s debt,' growth is the key, Reich writes. (Larry Downin/Reuters/File)
Public debt and economic growth
In the election of 1952 my father voted for Dwight Eisenhower. When I asked him why he explained that “FDR’s debt” was still burdening the economy — and that I and my children and my grandchildren would be paying it down for as long as we lived.
I was only six years old and had no idea what a “debt” was, let alone FDR’s. But I had nightmares about it for weeks.
Yet as the years went by my father stopped talking about “FDR’s debt,” and since I was old enough to know something about economics I never worried about it. My children have never once mentioned FDR’s debt. My four-year-old grandchild hasn’t uttered a single word about it.
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By the end of World War II, the national debt was 120 percent of the entire economy. But by the mid-1950s, it was half that. ( Continue… )
Jobseekers stand in line around the block to attend the Dr. Martin Luther King Jr. career fair held by the New York State department of Labor in New York. No economy can maintain momentum just on the spending of the richest 10 percent, Reich writes. (Lucas Jackson/Reuters/File)
GDP growth slows: why Washington must repeal the sequester
Economic forecasters exist to make astrologers look good. Most had forecast growth of at least 3 percent (on an annualized basis) in the first quarter. But we learned this morning (in the Commerce Department’s report) it grew only 2.5 percent.
That’s better than the 2 percent growth last year and the slowdown at the end of the year. But it’s still cause for serious concern.
First, consumers won’t keep up the spending. Their savings rate fell sharply — from 4.7% in the last quarter of 2012 to 2.6% from January through March.
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Add in March’s dismal employment report, the lowest percentage of working-age adults in jobs since 1979, and January’s hike in payroll taxes, and consumer spending will almost certainly drop. ( Continue… )
Sen. Dianne Feinstein, D-Calif. is seen in an elevator on Capitol Hill in Washington, Wednesday, after speaking on the Senate floor about gun legislation. If you want to explain what’s happening in America on these non-economic issues you have to understand what’s happening to the nation demographically, Reich writes. (Charles Dharapak/AP)
Senate balks on gun control. Reasons for the division.
My first reaction on hearing of the Senate’s failure to get 60 votes for even modest measures to regulate the flow of guns into the hands of people who shouldn’t have them, such as background checks supported by 90 percent of Americans, was to be furious at the spinelessness of the four Senate Democrats who voted against the measure (Mark Begich, Max Baucus, Mark Pryor, and Heidi Heitkamp), as well as the Republicans. And also with Harry Reid, who wouldn’t lead the fight on changing the filibuster rule when he had the chance.
The deeper message here is that rural, older, white America occupies one land; younger, urban, increasingly non-white America lives in another. And the dividing line on social issues (not just guns, but also abortion, equal marriage rights, and immigration reform) runs between the two.
Yes, I know: Plenty of people who are rural, older, and white aren’t regressives on guns, abortion, equal marriage, and immigration. And plenty who are urban, younger, and non-white are. My point is that if you want to explain what’s happening in America on these non-economic issues you have to understand what’s happening to the nation demographically — and why the demographic split is important.
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Begich, Baucus, Pryor, and Heitkamp may be Democrats but they’re also from rural, older, white America. That land has disproportionate political power in the Senate, and a gerrymandered House — which may not bode well for immigration reform over the next few months, and suggests continuing battles over “state’s rights” to determine who can marry and when human life begins.
Over time, though, older, rural, white America is losing ground to a nation becoming ever younger, more urban, and increasingly non-white — a fact that threatens the former so much that it’s in full backlash against the forces of change.
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