Politics

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More Fog

We still don’t have much clue what the Republicans want to do with their tax plan. It isn’t that we can’t understand the details, it is that there are no details to understand.

Take the corporate tax rate.

The big argument being put forward for a change in the corporate tax rate is that, at 35%, the US has one of the highest rates in the industrial world. But if you look at multinational corporations the facts tell a slightly different story. US multinationals pay about 28% of their worldwide profits in tax, whereas their competitors in the G-7 nations pay about 29%. In other words American businesses are not being hurt at all by the notionally higher rate.

Why not?

Because the US tax code is riddled with loopholes that any self-respecting tax lawyer or accountant can exploit. Many of those loopholes are highly specific to a particular industry. One or two are so specific that a single company benefits.

How did it get this way?

Money. Lots of it. Big corporations are the biggest source of corruption in the American political system. Only it’s not called corruption, its called lobbying. Lobbyists are very often the only people who really know what the tax code contains, especially for their clients. Politicians rarely, if ever, read the details of what they legislate, so there is plenty of opportunity for a well-connected lobbyist to sneak a paragraph or two in during the legislative process to pad the coffers of a client corporation.

As long as the American political system remains as corrupt as it is, the tax code will be a bear to reform. We are already witnessing how difficult: even though Congress has not released any detail about its big upcoming tax reform, the lobbyists along K Street in Washington are gearing up for a battle royal.

This implies, naturally, that getting anything meaningful done will be tough. Probably tougher than healthcare reform because in healthcare there are few lobbyists working on behalf of the public. So the business lobby gets to dominate it and the ideologues are more immune to money fueled attacks next election time.

This is not true of tax reform. The stakes are huge. And since the beneficiaries of the loopholes tend to be the wealthy and big corporations, these are same people who fund the corruption of our money sickened elections, the battle has big players on all sides. Someone is going to lose. That makes for a frenzied legislative process.

It is precisely because all this is known to Congress that we have no details. The minute, no, the second that any details emerge, the lobbyists will go to work. The more detail is available, the more intense the fighting becomes. Members of Congress who might want to produce a genuinely simpler tax code will be swamped by threats and/or inducements. It will take a level of political courage that hasn’t recently existed in Washington to get anything significant done.

So, much of our contorted tax code will likely survive.

Which gets us back to the easy stuff: tax cuts.

Despite all the smoke being blown by the lying cadre in charge of the White House, if the little we know is correct, then the rich will be getting a major tax cut whilst the rest of us will be getting what crumbs fall from the table.

And that, as we all know, is how America is run nowadays. That is the way a plutocracy is run: two Americas, one for the rich and one for the rest.

But plutocracies don’t last forever. They decay. Infighting enfeebles them. Contradictions emerge. And collapse ensues.

America is becoming weakened by its own system of government and the ease with which is can be controlled by a determined minority. This will worsen as the old system, designed to preserve the power of the rural heartland [and slavery along with it back in the day] is undermined by the great demographic shift into our cities. We already saw the future in the last election. Clinton won more votes than Trump by dint of her victory in the highly populous coastal states and biggest cities. She lost according to the ancient rules. How many more losses like that will it take to upend the bias in the system?

Meanwhile at the tax reform coal front a different schism also points to the future. The battle within the plutocracy to protect the rents, cheats, dodges, and sleights of hand that enable the spigot of cash to flow ever upwards will rend the wealthy into factions. How long can such greed driven and egregious plunder last? How many more Trumps do we have to endure before the system crashes to the ground?

Time will tell. But watch then tax reform fight, it will give us insight into how long the plutocracy has left.

Then again they couch it all in the name of markets and freedom. So the economists must be happy. That’s their gig.

Though quite what freedom they are talking about, I have no idea.

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Puerto Rico

America doesn’t treat its territories very well. The relative responses to the hurricane that devastated Puerto Rico and those that followed the hurricanes that blew through Texas and Florida gives us a sharp and distasteful look into the Trump led American mentality.

Clearly territories are a lesser breed. And the people living there are somehow sub-American.

Nowhere is the more clear than in the awful performance of Trump.

The hurricane did not appear from nowhere. We all knew it was heading straight into Puerto Rico. We also knew it was a monster storm capable of doing enormous damage. Add to this foreknowledge the obvious truth that the island is in dire financial straits and has major infrastructure challenges, and anyone with executive responsibility ought to have been busy planning how to respond.

Apparently not. Trump was too busy golfing and complaining about the protests of sports players. His mind was not on Puerto Rico at all.

Nor was it for several days after the stream blew through.

When, finally, the American response was criticized for its inadequacy Trump went on offense. Instead of motivating a faster or better flow of aid, and instead of mobilizing the military to ship in vital supplies, he lashed out at his critics. In particular he singled out the mayor of San Juan who had been vocal in her criticism.

His words were priceless in their ability to encapsulate his bigotry and narcissism in  stark light. The mayor is a woman: Trump cannot stand criticism from a woman. She is Hispanic: Trump cannot stand criticism from minorities. Trump was thus doubly irate. She questioned his focus, so he lambasted her and her employees as being lazy. He said that Puerto Ricans want everything done for them.

His resort to stereotypical characterization of minority workers as indolent even in times of crisis adds to the growing evidence we have that Trump is a nasty bigot. His inability to think or plan ahead is testimony to his executive incompetence.

I am not going to fall into the trap of suggesting the bigotry of his words are aimed at his voter base in order to prop up his popularity. No. I think we all ought simply admit what is increasingly obvious. Trump meant exactly what he said, and our attribution of bigotry to his attitude is an accurate insight into his character.

Trump is simply a nasty person. And his flirtation with white supremacy and other racist far right emotions are a result not of strategy, but are part of his make-up. That they act also as rallying cries to his more extreme followers is neither there nor there. Trump is simply being Trump. And Trump is a bigot.

Puerto Rico is being left to flounder because it is not part of the mainland and is predominantly Hispanic.

That’s another blot on the American character courtesy of Trump.

And so the decline goes on.

Addendum [Oct. 3rd 2017]

Trump showed his cluelessness and his distaste for Puerto Rico today when, during his visit, he bragged about the new aircraft being ordered for the US military — the F-35. This plane has so far cost the US around $1.5 trillion which is what the lower cost estimates for the Iraq war are. This year’s budget included a further $10.5 billion for the F-35 project. 

But this enormous and ongoing cost is, apparently, not a budget buster. Trump appears to think it is normal.

The cost of the aid to Puerto Rico doesn’t get the same warm feeling. On the contrary, Trump complained that Puerto Rico was going to “throw the budget a little out of whack”. Oh: the cost of aid is expected to be right around the same as the F-35 appropriation this year. One is just fine. The other is a budget problem.

Bias?

Yes, bias, made even more obvious by Trump’s claim that the Katrina disaster was a “real catastrophe” whereas the state of Puerto Rico is evidently not.

Bias?

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Tax Fog

Whenever we are told about a Trump plan we have to use the word “plan” very carefully. Thus far Trump’s various plans have been more vague suggestions, hints, clues to what’s inside his head, or varieties of “what a plan were to look like were Trump to have an actual plan, but he doesn’t”.

This week’s ballyhooed tax plan is no exception.

It has been introduced as a framework. A skeleton. A coat hanger upon which Congress will need to hang actual policy in order to legislate. It isn’t a plan, that’s for sure.

So what is it?

Much like Trump’s other initiatives — I use the word lightly — the tax plan is a series of items that now need to be stitched together. In other words the really hard part lies ahead. More importantly it lies ahead in waters teeming with lobbyist sharks waiting to pounce and defend privileges that sundry clients want preserved.

The American tax code needs thorough overhaul. It is riddled with special interest privileges, it is incomprehensible, bloated, and really bad at the one thing it needs to do which is to raise taxes to fund government activity. Let’s not forget why the tax code exists: the government needs cash. And that cash comes from you and me.

Now I don’t want to get into discussions about the interesting idea that the government can fund itself simply by printing money. That’s for another day. Let’s stay focused on the here and now by looking at the latest Trump tax “plan”.

First: it looks more like a tax cut that a thorough tax reform. More to the point it is a tax cut for the wealthy. What a shock. Trump wants the current seven tax rates to be collapsed into three. Guess what? the biggest change comes at the top where the current top rate would drop from 39.6% to 35%. At the other end of the scale the lowest rate would rise from 10% to 12%. The optics of this are hard to sell as a tax cut for the poor: the lowest rate is actually going up, while the highest rate is going down. Initial guesses by tax experts suggest that about 80% of all the tax cuts in the plan will benefit the rich. Some lower income families might even see their taxes rise.

Second: Trump moves on by changing the way in which people can deduct various items from their gross income to arrive at their taxable income. The current code is riven through with dodges and wheezes that allow higher income people to lower their taxable income aggressively, whereas it offers much less to lower income people. Trump says he wants simplify the code and the morass of deductions would be good place to start. Why not get rid of them all? But, no, Trump gets stuck in the middle.

His simplification appears to reduce to doubling the standard deduction which all families can claim. Unfortunately he also gets rid of the personal deduction. So a family of four would get the new deduction of $24,000, but lose their current standard deduction of $12,700 and the four individual deductions of $4,050 they can currently claim. Do the math: that is a reduction from $28,900 to $24,000. There are plenty of middle class families who will be hurt, not helped, by this little piece Trump inspired simplification. Meanwhile another old limitation on the way in which rich people can limit their taxes — the so-called Alternative Minimum Tax [AMT] will be eliminated. AMT cost Trump $31 million in the one and only year we know about his taxes. But, he assures us, he won’t benefit personally at all from his plan. Really?

Perhaps most notable in this decluttering of deductions is the elimination of the deduction people can claim on the Federal tax forms for any State and Local taxes they pay. It has long been a goal of Republicans to eliminate this deduction because the people who benefit most from it live in the higher tax/higher service states that typically vote for Democrats. Taxes may well go up for some upper middle income families in the blue states.

Other favorite deductions, such as that for interest on mortgages, are staying put in the Trump plan. So at least he won’t have to hear cries from the real estate lobby.

Third: the corporate tax is targeted for major changes. The notional rate is reduced: Trump wants it down to 20%, whether it gets there is another matter. And many of the current deductions corporations use to limit their taxes are done away with. One that caught my eye is the deduction for interest on debt. Were this to be part of the final legislation it would dramatically reduce corporate appetite for debt-based investment.

Fourth: we get to a sticky one. Trump wants to reduce change the tax rate charged to people who use what is known as the “pass-through” business structure. In brief this structure allows a taxpayer to pass corporate income through and pay tax at the personal level. It is usually a technique for small businesses. The idea being that income is taxed only once: if income of a business is taxed within the business and then dividends paid to business owners are then taxed again as their personal income this is equivalent to double taxation on the same income. In the context of small business this has long been regarded as unfair.  However, some of the richest people in the country have set themselves up as pass-through businesses too. They would get a windfall were the tax rate on pass-throughs be reduced significantly below the various tax rates applied to straightforward income. And guess what? Trump’s businesses are pass-through corporations. He would benefit from such a windfall. Surprise.

Fifth: Trump finally fulfills another long term goal of the Republicans: he wants to eliminate the estate tax. Taxes on inheritances have irked the GOP for decades. They have managed to whip up a public fury over what they demean as a “death tax”. Getting rid of it is a key promise to their loyal voters. Not that it has any impact on the vast majority of people: the level at which estate tax kicks in reduces its impact only to the wealthy. This aspect of the plan will inevitably exacerbate inequality and entrench the plutocratic class even more than ever.

Sixth: there seems to be no doubt that the Trump plan would vastly increase the deficit. There is no word on what, if anything, Trump proposes doing about that. Business taxes would be reduced sharply which will benefit upper income households who hold a disproportionate amount of corporate shares, and thus far no one has offered any countervailing budget cuts and/or alternative tax increases.

All those deficit hawks who shrilled about Obama and his deficits have, up until now, been remarkably quiet with respect to Trump’s proposed budget busting. Presumably we are back to the old days of Dick Cheney pronouncing that depicts don’t matter.

Oh: one old saw is back.

Many Republicans are rallying behind the idea that all these tax cuts for business and the rich will induce enormous amounts of growth which will, so the story goes, raise income sufficiently that the extra tax on that extra income will offset the deficit created by the tax cuts.

We’ve heard that one before. It didn’t work then. It won’t work now. But the Republicans need a legislative win else they will face the wrath of their more fanatical supporters. So they are now keen to throw the Federal budget to the wolves.

So, in summary:

Trump’s tax plan isn’t really a plan. It is a set of suggestions. It isn’t a reform. It is a tax cut. It doesn’t leave the wealthy untouched. It will benefit the wealthy enormously. It won’t stimulate the economy and/or job creation. It will inflate the deficit and that’s about it.

No it’s not a plan. It’s mainly fog.

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Ugly and Uglier

Is uglier even a word? Anyway: this is not about economics.

One reason I have not been very communicative in the past two months is my disgust at the state of the nation. America is simply not the place I came to live in back in the late 1970’s. It is a tired, aging, and deeply unsettled country grappling with an identity crisis and its steady loss of economic energy.

America as a myth was always built around the notion that it was a “land of opportunity”. That opportunity was open to as many interpretations as there were people thinking about it, but that was, I think part of the point. Most often opportunity meant, or at least implied, that citizens of the US has a better chance of personal success, of achieving financial security, and of being able to pass that along to future generations than people elsewhere. This was, post-war, largely myth: other countries were rapidly catching up and were building their own versions of the myth, such that the American exceptionalism people here are so proud of was deeply diminished if not eradicated by the latter end of the last century.

Freedom and opportunity abounded in the industrial west, it wasn’t just concentrated here.

Not only this but because of the politics of America since 1980 American reality and American myth parted company. The ability of the elite to speak of a “rising tide lifting all boats” began to sound very hollow, if not being an outright lie, as it became more and more obvious that certain parts of our citizenry were being tossed overboard to fend for themselves. Eventually, as we all now know, that part being tossed overboard constituted the majority and America became tightly controlled by and governed on behalf of a privileged few.

Discontent festered and was roused by the clarity that the myth had become a lie. The ability of the American capitalist machinery to act as a conveyor belt providing just enough prosperity to its workers to prevent insurrection broke down. And so we arrived at our populist moment where the seams of unity ripped apart and our citizenry turned upon itself in ragged and unhealthy conflict.

That this was eminently predictable is of no comfort to those of us who have railed against the neoliberal turn a few decades back. Division and the breakdown of solidarity was utterly inevitable as the elite dug ever more deeply into the national income.

The populist moment has produced the ugliest leadership in American history, and has allowed the most base instincts top rise to the surface.

America never faced its racist past and dealt with it. All comprise, of course, try to avoid their own ugly memories. Where those memories are more recent it is easy for them to cause conflict if they are replayed and dragged into the current spotlight.

The discontent that spilled over in the last election threw racism up in its wake. It is now clear that large sections of the population resented, or were willing to be led to resent, the historic presence of a black man in the White House. Everything Obama touched has become a litmus test for his unworthy successor. It is as if Trump is driven simply to undo the entire Obama era regardless of efficacy. There is no other agenda.

So it does not matter that healthcare reform may leave tens of millions of people without a health care plan, all that matters is that the hated word “Obama” is banished from the scene. Millions may have to suffer degradation, economic hardship, illness and even death in order for the current leadership to satisfy its urge. Despite the majority of the public supporting Obamacare, and despite the current Republican alternative being reviled and detested with only a mere 15% support throughout the electorate, the GOP marches onward to fulfill its promise. Obama will be effaced from memory. This single mindedness can only be explained by a deeper more visceral emotion than party politics.

That emotion is racism.

It shows too in the entirely different field of sports.

Trump has engaged in an entirely unpresidential slanging match with sports figures over the last weekend. Not only is it demeaning for a president to engage in social media slanging, it speaks volumes about his personal driving force.

The argument started last year when one American football player refused to stand through the playing of the national anthem that is a prelude to all sports events in America. His reason was simple: he was staging a protest against the apparent brutality of various police authorities against black citizens. He was and is entirely within his rights to stage a protest.

Trump, though, sees it somewhat differently. He sees the protest as an affront to the American flag and hence to the country itself. Others have piled on by arguing that the protest is disrespectful of the military who, those people assert, are single handedly responsible for the protection of American freedoms. It was Trump’s comment that players who don’t stand for the national anthem should be fired. Over the weekend Trump spent far more time slanging sports players and what he perceives as their disrespect than he did talking about the storm created crisis in Puerto Rico. Why? Both are instances of his basic enmity for minorities.

Oh: and it isn’t patriotic to stand and salute the flag. It is patriotic to stand for and further the values that America is supposed to represent. So the military does not have a unique responsibility to protect or further those values. We all do.

And, I think, the players who kneel during the national anthem are doing more for those values than Trump is. They are arguing for equal treatment before the law. Without which America is greatly diminished. The biggest threat to that equality comes from the bigotry that seems to motivate Trump and his ilk so strongly.

Then again, as Trump’s comments show, there is a significant minority of voters who object to and/or fear equality.

These are dangerous times. Economic inequality, financial insecurity, and now social unrest have undermined cohesion. Trump keeps opening up the divide.

His administration is ugly and getting uglier.

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Test Bed For Gridlock?

We all complain about the gridlock in Washington. Nothing, it seems, can get done. Everyone becomes more and more cynical and disenchanted with government. Our belief and faith in our key democratic institutions plummets. And so on. That’s the story repeated relentlessly in the media.

So wouldn’t it be nice if we could examine a microcosm of that gridlock, tease it apart, and expose its inner workings to see what the problem is. We would then have a small laboratory version of the whole to poke and prod under our microscope.

Well, guess what? We have just such a sliver. It’s called the Republican Senate Caucus. Let’s get cracking and take a look.

First, let’s establish the problem we are trying to solve.

Gridlock is our government’s inability to govern. Or, more precisely, to put into law the things that we out here in the hinterland of voter-dom want to see done. Yes, I know that the notion of voter homogeneity is ridiculous. The country is deeply divided on what ought to get done, so, to some extent, the lack of anything actually being done is welcome. It stops one side or the other from getting a raw deal. Gridlock is akin to trench warfare. There’s an awful lot of smoke and fury at election time, after which not much legislative territory has changed hands. Instead we all sit back exhausted and plan, however reluctantly, for the next major battle.

This time is different. Why? Because the Republicans own the entire legislative process from beginning to end. They can, in theory, do whatever they want. Indeed, last November they were jumping for joy at the prospect of unified government. They were energized, enthused, positively giddy, and triumphant. Now, they shouted to all and sundry, is our chance to enact a truly conservative set of policies.

Their first and most iconic target?

Obamacare.

Well here we are mired once more in gridlock. The trenches are filled with exhausted foot soldiers. The casualties are mounting. There are distinct rumblings of discontent in the ranks. The generals are being called buffoons. Their leadership is being visibly called into question. Failure upon failure is sapping morale. Worst of all: not a single yard of territory has been gained. Obamacare is still the law of the land. Its citadel is still untouched. Seven long years of promise produced nothing. Six long months of legislative siege have produced even less.

And this gridlock is the product entirely — exclusively — of the internal arguments within the Republican party.

This has nothing to to do Democrats.

It has nothing to do with our convoluted constitutionally belabored legislative process.

It has nothing to do with anything other than the party in power.

Which is a party that cannot muster its fifty-two Senators to stand together on what has been the most important issue ever according to its leadership.

Actually it didn’t even need fifty-two. It could have managed with just fifty and used the Vice-President’s vote as the decider.

So here we are in national legislative gridlock, not because of partisan bickering, not because of cultural or economic divisions on the country, and not because of the novelty of the issue at hand. No. We are in gridlock because fifty-two people cannot agree amongst themselves on a topic they all keep telling us is something they really want to deal with.

Never again should the media refer to partisan gridlock. Those days are over. We have exposed, in our little microcosm experiment, where the nation’s problems lie.

The Republican party has always been a coalition of disparate parts. Its unity has been paper thin for a long time now. The constant drumbeat of “tax cuts for the wealthy” has been the cement that held the rickety structure together. The cultural issue-driven conservatives, the libertarians, the corporate apologists, and even the few remaining old time moderates could all rally behind tax cuts.

What they could not rally behind was slashing healthcare for millions of people in order to deliver yet one more tax cut for the rich.

It was a tax cut too far.

All that time yelling and screaming about Obamacare was a hollow sham. None of the Republican leaders seem to have spent any time working their caucus to build an alternative. This is astonishing. Did they really think “repeal” was viable? Did Ryan or McConnell ever stop to think through what a healthcare bill has to have in it? Why were they not planning carefully for their attack? Did they think they would never be in charge? Are they that defeatist?

They became a party with no substance to back up its rhetoric. They became a party of permanent opposition and thus untethered from having to have alternative policies at the ready. Both Ryan and McConnell readied themselves to be, and prospered in being, naysayers. They never prepared to govern.

Their caucus took their lead. Heaping ridicule on Obama took the place of policy argument. Outright opposition took the stead of thoughtful critique. The radical right wandered even further right in an unmoored exploration of idealist fantasy, solving every world problem by exclaiming the virtues of free markets apparently oblivious to what the workings of a free market might be. The so-called House Freedom Caucus rose to great power because Ryan never reined it in — he’s a closet member anyway — and never thought to water down its ideological extremities as preparation for power.

In the Senate, once McConnell declared war on Obama within minutes of the latter’s victory in 2008, the scene was set for sterile parliamentary maneuvering as a replacement for thought. McConnell is regarded as a master of Senate rules and practice. He is clearly in the shallow end of policy making. He needs to stay in the shallow end. He nearly drowned when he set out to swim in the deep end to draft an alternative to Obamacare.

This exposure of the manifest divisions within the Republican party — recall that we are talking about a mere fifty-two people — gives us a clear source of our national malaise. Gridlock in Washington exists because our two party system is actually many more parties kluged together in an anachronism. They need to be set free.

In times of great change such as ours, when both society at large, and the economy specifically, are undergoing massive re-drawing of institutions, are shaking off tried and true traditions whilst trying on new replacements; while the influence of money and corporate lobbying stifle the expression of voter sentiment and allow the surge of enormous privilege to a very small part of society. And while demographic shifts alter the very nature of the electorate that seeks representation in  Congress, it is not surprising that our old two party alignment no longer fit the political landscape.

We need new political parties.

We just saw why. One of our old ones cannot solve a problem it regarded as iconic. Gridlock reins, not between our political parties, but within them. Yes this is a moment of great partisan division and conflict, but the strife is internal to the parties. The external conflict between them pales into weak skirmishing by comparison.

In short: the Republicans gridlocked themselves.

Now what?

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