Tuesday, December 31, 2013

Deficit Reduction: Cleaning Up After the Bush Tax Cuts - Part Two

Deficit Reduction: $400 Bn Annually

[$4-5 Tn in 10 years]

Mechanism: Increased GDP Growth

[Increased Tax Revenue]

The Tax Cuts That Wouldn't Die

Maybe if it were only a few hundred billion, it wouldn't bleed as much.

Bush Tax Cuts - The Undead [image]

For those of you who enjoy zombie movie re-runs, the endless history of the Bush tax cuts should have a special appeal. The law was originally designed to "vaporize itself" in the "sunset" after ten years of economic terror, but every time we seemed to be getting close to finally driving a stake through the thing's heart, Republicans have dug in their heels to breathe life back into it at the last minute.

The series of techniques employed for these stubborn, desperate resuscitations have grown more and more extortive and violent with each episode. The already illegitimate House "majority" has not so much as even blushed as they have attempted to "lock" the debt limit, cancel unemployment insurance benefits and food stamps after they wrecked the economy, default on the national debt, shut down the government and more.

However irritating and destructive these tactics have been, the accompanying incendiary, adolescent rhetoric has, perhaps, been even more painful -- and embarrassing. For the rest of the world it has never been harder to take our country seriously.

Since very little media effort is currently targeting this problem, MeanMesa has selected excerpts from two Economic Policy Institute articles published when the second attempt to "sunset" the Bush tax law was a brief possibility in late 2012. When the rest of the country -- those of us without lobbyists -- caved in to ransom terms demanded by the Owners of the Republican Party, major elements of the extraction scheme survived -- again.

Paralyzd by the Republican Paradigm

How ending the tax cuts helps the economy

The GOP, in all of its many ideological manifestations, continues to have a frail "common theme" which masquerades as "cutting spending." While most of the rhetoric emerging from Republicans in Congress or their skillfully manipulative, ideologically sympathetic media pundits is now a constant complaint about "spending being too high," one subtle, yet obvious, contradiction presents itself almost at once.

The "rate" of federal spending about which these complaints are directed is the percentage of annual GDP which the government is spending. In the short sighted, deceptive darkness of the Republican mind, if this percentage is "too high," it simply means that spending must be reduced. This is the basis of the artificial -- and ineffective -- "austerity" in which we find ourselves mired at the moment.

However, if federal spending is to be calculated in this fashion, there is instantly an alternative vision. Even with spending at its current level, if the GDP were to increase, the rate of spending, as the percentage of GDP, would begin to fall.

http://www.heritage.org/~/media/Images/Reports/2011/01/wm3121_chart1_600.ashx?w=600&h=419&as=1

Facts Mean Nothing - Heritage Fdn's Horror movie

Expiring the lingering Bush tax cuts would, once the oligarchs' screaming tantrums had ceased, also raise the "blue line" representing federal revenue. While this would be equivalent to the unthinkable Republican nightmare, it would make perfect sense for the country.

There would be plenty of time to adjust federal spending once the Bush tax cut "hole in the life boat" had been repaired.

There really, really is a way to get out of these woods, but none of the paths are as short as we'd prefer.

The unsettling contradiction in the Republican paradigm arises from the hide bound GOP's comfortable unwillingness to acknowledge the restorative prospects of a higher GDP. The Party's fixation on cutting spending to accommodate their manufactured austerity has overwhelmed the idea that a successfully functioning economy will generate the federal revenue needed to balance all these, for them, grotesque "economic mysteries."

In simpler terms, this will become exactly the unkind "epitaph" the tombstone of Reagan-era "supply side" economics deserves.

The Economic Policy Institute provides two very interesting articles [Links provided.] which were published just as the 2012 attempt to expire the tax cuts was in progress. They are excerpted here.

the Economic Policy Institute Blog

Let the Bush tax cuts expire, there are better options

Posted December 20, 2012 at 11:30 am by Ethan Pollack

- See more at: http://www.epi.org/blog/bush-tax-cuts-expire-better-options/#sthash.qmcNYtSK.dpuf

Let the Bush tax cuts expire,

there are better options

December 20, 2012

Ethan Pollack

[Transcribed. Read the entire EPI article here.]

One of the unfortunate side effects of the political dysfunction that has increasingly gripped the nation’s capital is a habit of lurching from one crisis to the next rather than taking time to do a bottom-up assessment of the effectiveness of current policy.
The Bush tax cuts are a great example of this. Republicans want to extend all of the Bush tax cuts, while Democrats generally support extending the tax cuts for only the bottom 98 percent of households. But few end up debating whether these tax cuts are actually optimal policy, and if perhaps a better replacement exists.
This is unfortunate, because the Bush tax cuts are pretty poor policy; in a decade of existence, they have accomplished none of the goals they were intended to achieve. In fact, judging the Bush tax cuts based on their economic impact, distributional impact, and cost, they have been an outright disaster.

Economic stagnation

Under practically any measure, the economy performed exceedingly poorly in the years following the Bush tax cuts. Of the 10 economic expansions since 1949, the economic expansion from 2001 to 2007 ranks last in GDP growth, investment, job creation, and employee compensation. Economic growth was actually 50 percent faster during the 1990s—a time of higher tax rates—than during the 2000s.
The Bush tax cuts are particularly poorly-designed for the current economic situation. Effective job creation policies are those that address the demand shortfall that continues to hold back full recovery. Yet the Bush tax cuts disproportionately go to taxpayers who simply save the money, trading public savings for private savings but doing little for the economy itself. This is why the Bush tax cuts for the rich cost about five times as much as extending the low-income tax credits, yet the job impact is about the same.
- See more at: http://www.epi.org/blog/bush-tax-cuts-expire-better-options/#sthash.qmcNYtSK.dpuf

Economic stagnation

"One of the unfortunate side effects of the political dysfunction that has increasingly gripped the nation's capital is a habit of lurching from one crisis to the next rather than taking time to do a bottom-up assessment of the effectiveness of current policy.

This is unfortunate, because the Bush tax cuts are pretty poor policy [EPI: Tenth Anniversary of Bush-era Tax Cuts]; in a decade of existence, they have accomplished none of the goals they were intended to achieve. In fact, judging the Bush tax cuts based on their economic impact, distributional impact, and cost, they have been an outright disaster.

Economic Stagnation

Under practically any measure, the economy performed exceedingly poorly in the years following the Bush tax cuts. Of the 10 economic expansions since 1949, the economic expansion from 2001 to 2007 ranks last in GDP growth, job creation and employee compensation. Economic growth was actually 50 percent faster during the 1990's -- a time of higher tax rates -- than during the 2000's."

The Bush Tax Cuts Are Here To Stay

[transcribed from Economic Policy Institute article ]

January 7, 2013

REBECCA THEIS

The most recent extension of these cuts has allowed conservative members of Congress (and others like Grover Norquist) to claim victory on these tax cuts, which briefly expired on Dec. 31, 2012, only to be reinstated almost in full. Conservative representative Dave Camp (R – Mich) summed up the situation by saying “After more than a decade of criticizing these tax cuts, Democrats are finally joining Republicans in making them permanent.” Indeed, in many ways these are now Democrats' tax cuts as much (if not more so) as they are Republicans.” In the House of Representatives, the bill was passed by a majority of Democratic votes.

With this agreement, Democratic members of the Congress and President Obama have permanently set tax rates – in the sense that they don't expire, not that future Congresses can't change them – at extraordinarily low levels by historical standards. [Tax Policy Center - spreadsheet of historical tax rates] Short of major revenue increases, projected general revenue consequently will grossly underfund government services and investments; relative to a current law baseline (in which the current tax cuts would have expired), passing the income tax rate cuts will lead to $3.2 Tn in lost revenue over a decade, according to Citizens for Tax Justice [Citizens for Tax Justice]. President Obama's initial negotiating proposal to Republicans would have cost about $800 Bn less, notably by raising taxes above a lower $200,000 ($250,000 for joint filers) threshold, taxing dividends as ordinary income and limiting tax savings on itemized deductions to 2 percent. In short, the policy choice made on the Bush tax cuts is expensive. As the Center on Budget and Policy Priorities demonstrated in this 2010 chart [Center on Budget and Policy Priorities], the Bush tax cuts have been projected to remain a large component of deficits in the coming years; they have also been responsible for much of the disparity between current law and current policy baselines submitted by the Congressional Budget Office with each budget update.

The projected costliness of the Bush tax cuts should not come as a surprise; they have been expensive since enacted. They played a major role in the huge swing from surpluses to deficits we experienced over 2001 – 2011. Remember, in Jan. 2001, CBO has projected cumulative surpluses of $5.6 Tn over the 2001 – 2011 period. What we saw instead was cumulative deficits of $6.1 Tn – an $11.7 Tn swing from surplus to deficits. While a number of factors contributed to this swing, including the Great Recession, stimulus efforts, supplemental war and other supplemental appropriations, as well as increased security spending, a huge part of the swing – about 16 percent – was due to the Bush tax cuts. The figure below indicates the roles these tax cuts played.

Surplus to Deficit Causes [EPI]

While the Bush tax cuts were designed as overwhelmingly regressive, the most recent deal does add some progressivity to the tax code, by allowing the cuts to expire for the top 0.7 percent of tax payers remember that even if taxes go up on someone earning $500,000, that person still enjoys lower rates on income below the $400,000/$450,000 threshold. And while there is something to be said for letting these cuts expire for the wealthiest 0.7 percent, remember polling [Huffington cited: Public Opinion Polling] has shown that Americans support raising taxes on the rich by an overwhelming margin. There is a reason why Americans support this; in the last decade, the tax cuts contributed to a widening income inequality [Atlantic cited: Wealth Inequality] by a) providing greater percentage increases in after-tax incomes for high income households than they did for low-income households, and b) providing greater increases in pre-tax income for high-income households than low-income households through preferential treatment of capital income.

Higher deficits in the future, thanks to all-but-certain continuing low revenue levels, will give the GOP many opportunities to pressure Democrats into accepting spending cuts. And while there is something to be said for the stability that comes with a more permanent tax code, this permanent solution is not a good one. It will not be too long before Democrats will again be forced to fight for more revenue increases because of this decision – and who knows if they will have the circumstances in their corner to persuade enough Republicans to join them.

This second article [above] is revealing evidence of the soft sell "myth of validation" which surrounded the media effort to protect the tax cuts in 2012. While MeanMesa in no respect considers Ms. Thies' article to be "simply more of the same" type of common propaganda in support for extending the tax cuts, certain statements still stand out as lacking with respect to objectivity.

Stated bluntly, there is no reason to "negotiate" with elements of an illegitimate minority government while seeking relief from legislative policies which have driven the country to such a precarious poverty. Further, there is nothing of a constructive "bi-partisan" or "cooperative" nature in desperately attempting to sustain what is left of the American economy across the table from those who so thoroughly looted it only a few years ago.

Perhaps in January, 2013, this author was still able to "over look" the violent extortion schemes the Republicans were so comfortably using to "break the resistance" holding out even the slimmest possibility of better times in the future.

Conclusions

For the first five or so years of the torturous experience with the tax cuts, Americans assumed that the mess would sunset and rectify the damage it caused over time. Well, those five years are now over. The economic destruction continues, but this time the 2014 mid-term election is coincident with that recovered awareness.

The country needs a Congress filled with Representatives and Senators who are absolutely committed to ending this dinosaur -- and quickly. This means that every American will need to campaign to win those seats -- not only in the anti-democracy, gerrymandered districts which started this thing, but also in the recruitment and selection of candidates who can see this through once in Washington.

Count on it. The lobbyists' checks will be flying like gnats at a late morning bar be que.

during the recession/weak

The Bush tax cuts, passed in 2001 and 2003, were designed to sunset after 2010 so they could pass Congress through the reconciliation process. They were extended by President Obama through 2012 so as to not raise taxes during the recession/weak recovery; additionally, in exchange for extending them two years, Obama was able to negotiate the payroll tax holiday and the extension of Emergency Unemployment Compensation (EUC).
The most recent extension of these cuts has allowed conservative members of Congress (and others, like Grover Norquist) to claim victory on these tax cuts, which briefly expired on Dec. 31, 2012, only to be reinstated almost in full. Conservative representative Dave Camp (R-Mich.) summed up the situation by saying, “After more than a decade of criticizing these tax cuts, Democrats are finally joining Republicans in making them permanent.” Indeed, in many ways these are now Democrats’ tax cuts as much (if not more so) as they are Republicans.’ In the House of Representatives, the bill was passed by majority Democratic votes.
With this new agreement, Democratic members of Congress and President Obama have permanently set tax rates—in the sense that the rates don’t expire, not that future Congresses can’t change them—at extraordinarily low levels by historical standards. Short of major revenue increases, projected general revenue consequently will grossly underfund government services and investments; relative to a current law baseline (in which the tax cuts would have expired), passing the income tax rate cuts will lead to $3.2 trillion in lost revenue over a decade, according to Citizens for Tax Justice. President Obama’s initial negotiating proposal to Republicans would have cost about $800 billion less, notably by raising taxes above a lower $200,000 ($250,000 for joint filers) threshold, taxing dividends as ordinary income, and limiting tax savings on itemized deductions to 28 percent. In short, the policy choice made on the Bush tax cuts is expensive. As the Center on Budget and Policy Priorities demonstrated in this 2010 chart, the Bush tax cuts have been projected to remain a large component of deficits in the coming years; they have also been responsible for much of the disparity between the current law and current policy baselines submitted by the Congressional Budget Office with each budget update.
- See more at: http://www.epi.org/blog/bush-tax-cuts-stay/#sthash.XvDGsfsz.dpuf

Monday, December 30, 2013

Deficit Reduction: Cleaning Up After the Bush Tax Cuts Part One

Time To Set Aside the Hard Feelings

After the "Screw Job"

While we may retrieve some "cold comfort" with our constant lament about the "rich getting richer" while the rest of the country stagnates, we must resist the impulse to simply stop there. Quite aside from all the slow festering resentment and the grumbling, stoic, "lower caste" complacency, there really is another side.

Because this post's topic is deficit reduction, we must set aside all the outrage we have quietly endured for the last ten years since the W. instituted his economy wrecking looting scheme and concentrate on the almost immediate benefits to the national economy which can still be accomplished by simply reversing it.

The now infamous tax cuts have generated their desired results -- cataclysmic wealth redistribution to the highest income bracket Americans. Yet, when we move away from the very reasonable "class outrage" we experience looking at our individual injuries and take a sterile, unemotional look at the economic impact, we see that quite beyond the ideological insult, these tax cuts have mortally wounded the US economy.

By moving huge amounts of money to the 1% class the commerce which ultimately supports the national GDP is straggling along with a "half empty cash register." The Congress can no longer obscure the abundantly clear reality that its highest short sighted priority is the protection of these tax breaks -- at any cost.

Added to this, the current grotesque tax code -- which essentially insulates this "profitable largesse" of the top 10% of income earners -- from the more normal revenue gathering of the federal government is sucking away our national capacity to do just about anything -- from repairing bridges to starting job creation policies to feeding the children left hungry by the engineered collapse of the national economy.

We can look at the ugly and appalling details of this "tax cut monster" further along in this post, but "in the big picture," obliterating these crippling Bush tax cuts would make a tremendous positive difference in the finances of the federal government and the finances of the country.

So, with cooler heads and a good dose of our traditional American optimism, let's have a look at the necessary recipe for "making lemons into lemonade."

Fair warning, this post is "stuffed to the gunwales" with some excellent charts and graphs MeanMesa found while sniffing around some Huffington Post and Mother Jones reporting on the subject. Even if you have a psychological aversion to this type of graphic data, steel yourselves to spend a few minutes examining each of these charts. The information they provide has everything to do with your future!

Separating the Myth From the Math

We simply can't afford any more fairy tales.

For a brief moment in the flurry of Bush era propaganda about the tax cuts you might have heard the old JFK phrase "a rising tide lifts all boats." Well, the tax cuts did, actually, at least slightly lift some boats in the finances of middle and lower class Americans, but they didn't lift them very much higher and they didn't lift all that many of them.

At the top end, things were, of course, quite a different story.

[image: Huffington]

This explains the "half empty cash register" crack from above. It fits right in with the "job creators" myth which was also flying around at the time. According to the "inescapable facts" of the day, the "job creators" would use the extra money to create jobs.

We all know how that turned out, but more importantly we also know that there is no possible reason not to undo this mistake as quickly and decisively as possible.

There was an actual "economic expansion" after the tax cuts hit the moneyed class in 2001, but it was historically one of the most feeble and -- also historically -- unquestionably the most expensive. Also notable, the "expansion" had an even more feeble positive impact on employment than it did on GDP growth rates.

[image: Huffington]

The message is clear. If you want to repair the finances of the US government, the only way to accomplish such a task is to repair the US economy, measured here by the percentage of economic growth in the GDP. Sooner or later, you will realize that Reagan era "supply side" voodoo has nothing to do with establishing a sustainable, successful US economy.

The idea of "repairing" the US government's finances doesn't include introducing massive federal debt. During the Bush W. debacle his powerful cronies managed to create the image of a growing economy by borrowing and borrowing. In the short term this seemed to be working, but in the long term the massive top end tax cuts only made this worse.

How much damage did the tax cuts cause to the deficit and national debt levels?

This chart shows a "toad strangling" sea of ochre -- the portion of debt caused by the tax cuts -- as compared to the, more or less, "normal other debt" based on the records from 2009 and estimated ahead to 2019. The vertical axis [on the left hand side of the chart] is measured in $ Tns of dollars worth of "economic downturns," a Bush era phrase which means "how much these debts will vaporize from the GDP."

[image: Huffington]

In 2013 the US had around $415 Bn dollars worth of all sorts of different "borrowing" on which we paid around $38 Bn in interest. [Source: Treasury Direct.gov] We operate at a GDP level of roughly $17 Tn annually, so the $1.1 - 1.5 Tn dollar "debt ding" shown on the chart explains plenty about our current, precarious situation.

Although the snarky comment at the bottom tells us what the deficits would be without all the other stuff, most of this expense is already rolling down the tracks. There is nothing we can do now about the cost to the GDP of the Bush oil wars in Iraq and Afghanistan or the cost to the GDP of the "economic downturn," but the "yellow ochre" part of the debt in this chart is what cost to the GDP could be eliminated with a reversal of the Bush tax cuts.

When we begin to once again collect these taxes, the billionaires will almost certainly threaten to "take their marbles elsewhere," but these plutocrats are over looking the dismal fact that their looting not only wrecked the US economy, but it also left most of the rest of the industrialized world in the shambles of economic mayhem, too.

That's why foreign money is still flowing eagerly into US Treasury bonds which are now paying only around 1% - 2% interest. Also, they probably shouldn't consider Iceland for their next home, either. The bankers who steered that country off the precipice are now in Icelandic prisons.

A New Appetite for Economic Sustainability

Okay, now that we've already tried it the other way...

It may not be intuitively obvious in the short term, but the debt load on our economy is "deep and broad." It isn't something that can be remedied at once by simply changing this or that element of expense. The US economy is a big ship -- a very big ship, and it doesn't "turn easily." Just as importantly, it doesn't turn on tweeks and adjustments.

[image: Huffington]

Two decades ago the American economy -- even with cyclical booms and recessions -- was so robust that it unlikely the concept "sustainable economy" meant very much. Now we've been painfully educated.

We don't need to drop the deficit and debt levels to zero to resuscitate our economy, but we will need to stabilize our federal expenditures to a stable percentage of our GDP and collect reasonable taxes. That is not too great a task, and it is one we can actually accomplish once we set such a target as a goal for our taxing and our spending.

If we were to manage to reach an stable on-going position of debt as a percentage of GDP [green line on the graph], all sorts of things would gradually emerge as new possibilities. Suffering from the blinding psychological impact of the media's trained "mouth junk" experts, we have inadvertently slipped into a mind set that a successful restructuring of the debt and the economy means a declining spending level in a chillingly austere nether world of frozen revenue -- forever.

As Americans, we really don't have to put up with this at all. Unless you have grown fond of the punitive, imaginary Republican austerity -- imaginary because it isn't actually anything similar to austerity at all -- don't allow yourself to go drifting passively into the dim history of failed economic civilizations of the past.

Although dated, this Mother Jones graph [below] shows the origin of the problem we face now. For decades -- since Reagan began the descent years ago -- we have been missing the obvious.

There is a "price" to be paid by anyone wishing to "do business" in the United States, and that price is paid in taxes.

The History of Tax Rates [Mother Jones: Plutocracy Now]

The Second Part of This Post

MeanMesa is going to "delay" the usual "Deficit Reduction - Mechanism" part of this post until the second part can be published -- just be reassured that the deficit reduction plan will have a great deal to do with that descending "red line" across the bottom of the Mother Jones graph.

The sordid "history" of the Bush tax cuts is just a little too long to be effectively handled in one MeanMesa posting, so we'll revisit the topic to finish up in the next post.

The good news is that all this CAN have a happy ending! Once we Americans get past the crazy notion that we can simply let the coarsely elected and a few media nobodies determine the political and economic destiny of our country all on their own, ritually complaining when things turn South, we are TOTALLY able to make OUR OWN FUTURE.

The 2014 mid-term elections are less than one year from now.

Watch this blog.

Sunday, December 29, 2013

Cutting Deficits: Cleaning Up the Bush W. Bailout

Deficit Reduction: $70 Bn

Mechanism: Collect Past Due Accounts of Bailout Money

2012 Federal Deficit: $1.1 Tn

[$1,100 Bn]

Ryan-Murray Deal Deficit Reduction

$21 Bn

The "Gift That Keeps on Taking"

The George W. Bush "Christmas"

Most Americans with whom MeanMesa visitors might be acquainted need very little "prodding" before expressing the lingering bad taste of the W.'s $1+ Tn dollar emergency bailout to the bankers in 2008. Yes, it turns out that the thing was a scam. The glistening surface of the scheme was dutifully painted with bright sugary icing as a desperate, immediate necessity, but, predictably, when it came to the monster's long term economic damage, "the devil was in the details."

Now, five years later, those "devilish details" have everything to do with paying back the money. Surprisingly, beyond the very reasonable cynicism of the average American who "footed the bill" on the Bush bailout, a remarkable number of the recipients of TARP money [along with some additional funds from other bailout sources] have paid back their loans -- in a good number of cases with "profitable" increases.

One of the most informative sites for those interested in a detailed picture of "who has done what" with respect to the massive bailout can be found at ProPublica. While the graphic at the right, shown here only as an example, is merely a screen shot of the Pro-Publica page, a visitor to the actual site will find a massive, interactive spread sheet which details every dollar of TARP money, its destination during the bailout and the current status of the account.

Pro-Publica Spread Sheet of all TARP Disbursements

and

Pro-Publica Site: Bailout Article

On the actual Pro-Publica page, you can click on the name of one of the bailout recipients, and the site will pop-up the entire account details of the amount provided, amount repaid or still owed, dividends paid and so on.

MeanMesa selected JP Morgan from the list, popped up the account details and took a screen shot [in two pieces -- top and bottom]. When you make any selection from the list of bailout benefactors, you will get roughly the same analysis of that specific account.

The Bank Bailout

What exactly happened?

The banks on the Pro-Publica spread sheet were, at the time the financial system collapsed under its own weight, functioning in a "pre-Dodd-Frank" mode, that is, they were, again at that time, completely free to legally mix their high risk/high return gambles right in with their "regular bank" money which came from deposits, loan payments, mortgages and so on.

However, this post is not about the Dodd-Frank bill or the upcoming [April 2014] Volcker "addenda" which are both intended to rationally limit the damage from banks' irresponsible risk habits. This post is all about what can be done with the lingering financial damage of the Bush W. bailouts.

It may be a suitable moment to review the basic "business model" of a bank.

Generally speaking, when a bank has money, it can make more money, and, quite predictably, most of the banks which received their share of the bailout's billions have, in fact, made money since then. Yet, as we look down the list of bailed out banks, we see an impressive total of un-repaid bailout debt. In fact, the Pro-Publica site spells out the "batting average" for the whole group of benefactors.

936 Recipients of bailout money
$608B Total disbursement
$381B Total returned
$198B Total revenues from dividends, interest, and other fees
$-29.1B Total net to date

Further, the Housing and Economic Recovery Act of 2008 [Pro-Publica Report: Housing and Economic Recovery Act of 2008], designed to pull the federally guaranteed mortgage companies, Fannie May and Freddie Mac, back from their own Wall Street brink, moved another $187 Bn of US Treasury dollars onto the bailout "poker table." When the dust of the 2008 collapse cleared, these two lending institutions remain around $41 Bn in the red.

So, we can add the Fannie and Freddie remaining bailout debt to the uncollected total bill coming from the "regular" banks on the Pro-Publica list.

$29 Bn + $41 Bn = $70 Bn

[A MeanMesa "calculative" note: The commonly mentioned "damage" from the W.'s bailout is $800 Bn. We see that the amount distributed to "regular" banks was $608 Bn, and when we add the $187 Bn handed over to Fannie and Freddie, we arrive at $795 Bn.]

It's hardly a mystery at this point. MeanMesa thinks the Congress and the Treasury Department should collect -- preferably the entire $70 Bn -- but at least the $29 Bn still on the balance sheet and use it for deficit reduction.

The Congressional Politics of Bailout Debt Collection

Of course, there are plenty of other pressing uses for the money, but the owners of the Republican Party will already be screaming is we just go this far. Freddie and Fannie need to be "repaired" or "replaced" with new institutions which are more stable. A reasonably effective Congress could do this.

The remainder of this debt -- the $29 Bn -- is now -- after five years -- officially "bad debt." The Treasury Department needs to "own" the banks and corporations which still owe money.

The Treasury took our tax money and propped up the reckless businesses who had managed to slit their own throats during the Bush W.'s mad looting festival. It's high time that we were made whole after the gang rape. We of the "less than sparkly" 99% are still daily paying the price for the "missing money" with arcane "punishment tactics" such as phony austerity, management by one crisis after another, hungry children and frothy calls for war with Iran.

We pay that price every time the tea bag losers in the House of Representatives trot out their next horrifying "ogre de la dette colère" ["debt ogre tantrum"] just prior to continuing their toxic attack on every American without a lobbyist. Yes, these were the same fools relentlessly chanting the "jobs, jobs, jobs" mantra while their Party was rigging the House elections in 2010, but now they are wailing forth only with their last, desperate, new tune "debt, debt, debt."

They borrowed and spent every dime that wasn't bolted down during the W.'s looting festival, and now, they find themselves without any idea of how to pay it back. Naturally, we find them now "dans le carnaval," spinning incoherently as tragic "one trick ponies" with only News Corps.' Murdoch pulling the reins.

This, however, is without question the bloody political debris from their own past, and cogent American voters know that. For precisely this reason demands by the surviving electorate that these bailout debts be collected have political traction.

Ideologically, that traction might possibly extend even to the more stable remnant of the Republican base, although the mainstream GOP dinosaurs such as Mitch McConnell and John Boehner will probably, as usual, not see the train coming.

Conclusions

And...the Herald of Coming Good

MeanMesa is just "Chuck Full" of snazzy ideas about ways to lower the deficit, cut spending and generally "straighten things out" with respect to the government and national economy. The media has been spending millions while talking for hours to sell the idea that there is simply nothing to be done.

Pig feathers.

There's plenty that can be done. All we need is a Congress that works for someone else besides the oligarchs.

Watch this blog.

[A special note from MeanMesa: Compliments to ProPublica for the impressive amount of hard work and good journalism in preparing and presenting the bailout facts and figures. All of this would have been admirable under better conditions, but while we are "flying blind" without responsible media, it is sincerely appreciated. Thanks.]

Saturday, December 28, 2013

Cutting Deficits: Limits on Oil Corporation Subsidies & Tax Breaks

Deficit Stop Loss: $4 Bn Annually

Mechanism: Reduce Oil Subsidies

2012 Federal Deficit: $1.1 Tn

[$1,100 Bn]

Ryan-Murray Deal Deficit Reduction

$21 Bn

Investing in Old Energy and Investing in New Energy

To introduce the issues covered in this MeanMesa post, let's start with this 8 minute video of President Obama. He is addressing the country concerning a Democratic Senate proposal designed to cut $24 Bn in tax exemptions from federal subsidies to American oil corporations.

The following introduces the video on the Bloomberg site.

March 29 (Bloomberg) -- President Barack Obama talks about U.S. oil company profits and federal tax subsidies. The U.S. Senate later rejected a Democratic bill to repeal about $24 billion in tax breaks to oil companies and use the money to pay for clean energy development and deficit reduction. The president speaks in the White House Rose Garden.

[Link to the Bloomberg site to see the President speaking video.]

[A Note on Sources: MeanMesa intentionally chose both Bloomberg and Mother Jones for this post. It is, perhaps, too easy to retrieve reporting which is blankly critical of oil corporation subsidies, tax exemptions and tax expenditures, and -- in the interest of fairness -- we can assemble this post quite comfortably with information from this point of view. The Mother Jones article, although a year old, offers an insightful glimpse of the politics involved.]

Although the proposed Senate bill called for $24 Bn in subsidy reductions for the five largest oil companies, the full deficit relief -- accumulated in savings over ten years -- would amount to $41 Bn, so MeanMesa uses this figure in the recap of deficit reductions for this post.

[Follow this link to the original Bloomberg article.]

All links in the content remain enabled.

Bloomberg

Obama Says Oil Profits Justify Ending U.S. Tax Breaks

By Roger Runningen

Mar 29, 2012

March 29 (Bloomberg) -- Bloomberg's Hans Nichols reports that President Barack Obama said oil company profits justify abolishing $4 billion in annual oil and natural gas subsidies and shifting those savings to research on clean-energy fuels. He speaks on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)

President Barack Obama said oil company profits justify abolishing $4 billion in annual oil and natural gas subsidies and shifting those savings to research on clean-energy fuels.

With the Senate scheduled to vote on the matter later today, Obama again urged Congress to repeal the tax breaks. The measure is opposed by Republicans, who have the votes to block the legislation.

“It’s not like these are companies that can’t stand on their own,” Obama said in prepared remarks delivered in the White House Rose Garden. Last year, the three biggest U.S. oil companies took home more than $80 billion in profit, with Exxon Mobil Corp. collecting almost $4.7 million each hour, he said.

“And when the price of oil goes up, prices at the pump go up, and so do these companies’ profits,” he said. “Meanwhile, these companies pay a lower tax rate than most other companies on their investments -- partly because we’re giving them billions in tax giveaways every year.”

Energy company subsidies are a staple of Obama’s re- election campaign rhetoric, meant to highlight the differences between himself and Republican presidential candidates and cast them as defenders of such spending as they propose cuts in health and other social programs to reduce a deficit forecast at $1.3 trillion this year.

In his Feb. 13 budget, Obama said existing tax “loopholes and expenditures” for the oil and natural gas companies amount to an unwarranted “preference” of these industries over others.

Criticism of Republicans

At Ohio State University March 22, Obama ridiculed Republican presidential candidates as the “flat Earth crowd,” who’d “rather give $4 billion in taxpayer subsidies to oil companies this year than to invest in clean energy.”

“We have been subsidizing oil companies for a century. That’s long enough,” he said.

Republicans today cited a March 3 Congressional Research Service report that found repealing $22.8 billion in tax breaks over five years would reduce the tax breaks for independent companies and, on a small scale, “would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence.”

Senate Republican Leader Mitch McConnell of Kentucky, in an e-mailed statement, said Obama’s proposal is a political gambit in an election year and called the plan a “tax hike on American energy manufacturers” that he’d oppose.

Brendan Buck, a spokesman for House Republican Speaker John Boehner, said today in an e-mail that the president is giving a speech “with gas prices at $3.92 per gallon, calling for policy that would make gas more expensive and increase foreign dependence on oil. You wouldn’t believe it, right? Yet this is happening.”

Ending such breaks would reduce the deficit by $41 billion over a decade, according to Obama’s budget for fiscal 2013.

Subsidies were worth $24 billion for the five largest oil companies operating in the U.S., including Irving, Texas’s Exxon Mobil Corp. (XOM) and Chevron Corp. in San Ramon, California, Senate Democrats said.

To contact the reporter on this story: Roger Runningen in Washington at rrunningen@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

The Politics of Cutting Off the Tax Money

We have to remember that some of the largest figures for tax payer support to the oil corporations actually include an expensive collection of other items -- items which are generally more attractive to the subsidy cutting crowd than the cash that makes its way directly from the general fund to oil corporation share holders.

These "attached items" include things such as some energy research projects -- especially concerning automobile mileage and climate change, the popular LIHEAP program for low income home heating assistance, the maintenance and management of the Strategic Petroleum Reserve and a significant effort to regulate the financial part of the otherwise "wild west" free enterprise.

The cost of all these things is painlessly -- but not necessarily reasonably -- "stitched" into calculations which, subsequently, show "Big Oil Subsidies" in the 100's of Bns.

Nonetheless, as the Mother Jones article points out, every dollar of tax payer provided subsidy, whether spent as a legitimate service to Americans or spent at the behest of oil corporation lobbyists and think tanks, has its own clutch of protective "friends" in the US Congress.

It turns out that MeanMesa's choice of around $4 Bn in annual cuts fits pretty well with the "middle ground" approach -- if such a place actually exists with the gigantic oil corporations on the other side of that "middle."

The article, excerpted below, was written at around the time of one of the debt ceiling and credit default episodes during Republican 2012 hostage tantrums. The links from the original article are left enabled in article excerpts in this post. [Read the whole Mother Jones article here. ]

Mother Jones

Will Big Oil Keep Its Subsidies in a Fiscal-Cliff Deal?

One of America's most profitable industries banks billions in subsidies—but there's little talk in Washington of putting these handouts on the chopping block.

By Andy Kroll

Fri Dec. 7, 2012

Democrats and Republicans are duking it out in Washington over a deal to avert the slew of spending cuts and tax increases—the so-called "fiscal cliff" you've heard so much about—that will take start to effect on January 1. Lawmakers on both sides of the aisle have argued that "everything should be on the table" in negotiations toward a deal that trims the nation's debt and avoids the cliff. Yet notably absent from the debate over what to cut and what to spare in a deal are the tens of billions of dollars in subsidies, tax breaks, and other perks for the hugely profitable oil industry.

That silence begs the question: Will Big Oil's subsidies go untouched in the fight over a fiscal-cliff deal?

In news stories and public remarks by leading Democrats and Republicans, there's been scant discussion of oil subsidies as a potential source of revenue. The proposals floated by the White House and by congressional Republicans have not delved into enough detail to know whether subsidies would be included in their proposed changes. And multiple aides to Senate Democrats say that, while they believe the subsidies are on the table, there hasn't been much of a push behind the scenes to include them in a fiscal-cliff deal.

Despite such staggering windfalls, the federal government continues to subsidize oil companies large and small. Taxpayers for Common Sense, a nonpartisan government watchdog that wants to cut all energy subsidies, estimates that oil companies will receive $78 billion in industry-specific and broader business subsidies from 2012 to 2017. President Obama's budget plan for the 2012 fiscal year called for eliminating 13 subsidies or perks for oil companies, which will save taxpayers $4.6 billion a year over the next decade.

Experts of all stripes agree with Taxpayers for Common Sense's demand that Big Oil's "gravy train" come to an end. The libertarian Cato Institute, cofounded by Charles Koch, lauded Obama's plan to slash certain oil subsidies. A Sierra Club official compared subsidizing Big Oil to investing in the future of VCRs or typewriters: "It's a technology that is on its way out. It doesn't make a whole lot of sense." The lefty Center for American Progress think tank says it's time to "turn off the oil subsidy spigot."

In Congress, lawmakers ranging from hardline conservatives like Rep. Paul Ryan (R-Wis.) to dyed-in-the-wool liberals like Sen. Bernie Sanders (I-Vt.), and plenty more in between, have called for eliminating oil subsidies. Even oil executives themselves have said in years past that they don't need the subsidies.

ConocoPhillips CEO Jim Mulva told Congress in 2010 that, "with respect to oil and gas exploration and production, we do not need incentives." And former Shell CEO John Hofmeister once testified, "My point of view is that with high oil prices such subsidies are not necessary."

The American Petroleum Institute, the oil industry's top trade group, has launched an advertising campaign pressuring seven senators in states with ties to oil and gas companies—Senate Democrats Tom Udall of New Mexico, Mark Udall of Colorado, Mary Landrieu of Louisiana, Kay Hagen of North Carolina, Mark Pryor of Arkansas, Mark Warner of Virginia, and Mark Begich of Alaska—to not cut subsidies. In the three weeks after Election Day, API spent $3 million on TV ads, according to a ThinkProgress review of Kantar Media's CMAG data.

[except omitted]

One senior Senate Democratic aide says it's more likely that oil subsidies will be trimmed if Democrats and Republicans agree to a sweeping deal—say, one with spending cuts and new revenues totaling $1 trillion. That way cutting $24 billion in oil subsidies doesn't seem punitive and so is more politically palatable. "But if we do a short-term deal…so it's a hundred-billion-plus [toward reducing the deficit], then $24 billion is an awful big chunk of that, and politically it gets more difficult," the aide says.

Another senior Democratic aide says he thinks it's more likely that Congress will touch oil subsidies in 2013. "We're more likely to see the Senate take up this issue after the new year, maybe as part of comprehensive tax reform," this aide says. "But even then I'm not optimistic."

How We Can Do This

Probably the first requirement will be the most difficult one. Stupid won't work. Neither will the typical approach of sold-out Congressmen "just throw together something we got from the lobbyists and put a ribbon on it."

However, even given the likelihood that the Congress is in no danger of being blessed with any particularly noticeable "constituent interest" any time soon, there remains the last avenue still available for Americans in the 99% -- politics. Deficit reduction -- through rational courses -- has to become the political bully.

Even the tea bag half wits from the "ultra safe" gerrymandered districts are vulnerable to voter demands for rational deficit management. In fact, this is precisely the kind of "political problem" or "political solution" that even the brain dead hill billies in the Republican base will find unavoidably attractive, and that means the concept may have traction even in the elections where voters suffer a deep infestation with raw FOXisms.

So federal fiscal management must become a campaign necessity. This does not mean privatizing Social Security, cutting food stamps, crippling the economy or a final autopsy on the USPS to extract the phony pension fund.

Instead, these campaigns are going to have include a bunch of proposals that are politically saleable because voters will think that they might actually work. It's pretty clear to everyone not in the "Mitt Romney FOX-thrall" that hair-on-fire, racist hate campaigns have ceased working.

We can assume that just about all the GOP political creatures -- and some unusable Democrats, too -- will not be eager to so much as touch this idea with a stick. More than likely, the ridicule will sound something like this:

"Heh, heh, heh. Shore we wanna' fix thu budget, but them "__[fill in the blank]___" ain't gonna' ever dew ennythin' tu hep us."

However, right at this moment some of the voters in that town hall meeting can pull out the list of deficit reducing proposals from these MeanMesa posts and make some suggestions.