Wednesday, February 29, 2012

The Republican's War on the Poor

Americans have learned during the Great Recession that "trickle-down economics" has been nothing but a cruel 30-year hoax. Americans have been made well aware that Republican polices have only driven widening economic disparity and greater income inequity, and as a result, created a second "gilded age".

Now today half the U.S. population is poor, or almost poor (with almost 30 million unemployed) - - and there are a growing number of people who can't even afford that most basic of

More Americans said they struggled to buy food in 2011 than in any year since the financial crisis, according to a recent report from the Food Research and Action Center, a nonprofit research group. About 18.6 percent of people -- almost one out of every five -- told Gallup pollsters that they couldn't always afford to feed everyone in their family in 2011.

One might assume that number got smaller wrapped up with the national unemployment rate falling for several consecutive months. In actuality, the reverse proved true: the number of people who said they couldn't afford food just kept rising and rising.

The findings from FRAC highlight what many people already know: The economic recovery, in theory now more than two years old, has done little to keep millions of Americans out of poverty and deprivation. Incomes for many haven't kept pace with the cost of living, and for a large swath of the country, things today are as bad as ever, or worse.

Forty-six million people lived below the poverty line as of 2010, a record number, according to the Census Bureau, and one that's not even as high as some other estimates would have it. Take a further step back and the situation appears even more dire. About 45 percent of people in the U.S. have reported not being able to cover their basic living expenses, including food, shelter and transportation, according to the group Wider Opportunities for Women.

The official poverty rate is about 15 percent, but over two-fifths of Americans have so little saved that one financial emergency is all it would take to put them in poverty, according to the Corporation for Enterprise Development.

These high rates of financial insecurity -- a consequence of the weak job market, and the prevalence of jobs that don't pay very well -- are making themselves felt at the level of everyday spending.

Recently, for example, in another study the Center for Housing Policy found that a growing number of middle-income owners and renters are paying more than half their earnings just to keep a roof over their heads.

And according to a recently published study by the Employee Benefit Research Institute, as of 2009, almost one in five Americans over 50 years old were skipping on doctor visits, switching to cheaper medications or forgoing some medicines entirely out of financial necessity.

As for widespread hunger of the kind recorded by FRAC, research shows that the entire country ends up paying one way or another. While the people who can't afford food are obviously suffering the worst, the social costs incurred -- from the money spent to keep food pantries open to the lifelong diminished earning power of impoverished children -- come to about $167 billion a year, or $542 for every man, woman and child in the country.

Almost half of all working Americans earn less than $27,000 a year - - when the poverty line for a family of four is $22,314. If any of those families could have afforded their own healthcare insurance, they would have paid an average of $414 per month last year. Millions of unemployed Americans might have once been eligible for COBRA too, but most couldn't afford those high insurance rates either.

The Republicans want to repeal the Affordable Care Act (aka ObamaCare), something poor people need, claiming a mandate is "unconstitutional". But we already have a healthcare mandate, it's called Medicare (we pay Medicare taxes in our paychecks). But just like Social Security, Medicare is also something the Republican leadership (representing the wealthy) wants to end...because the wealthy don't NEED Medicare and Social Security for themselves, and therefore, don't want to contribute on behalf of everyone else.

Just like with the Republicans wanting to de-fund Planned Parenthood and opposing birth control insurance for Catholic organizations who hire non-Catholic employees (something poor people need), because a small portion of tax dollars fund abortions. If I opposed the war in Afghanistan, would I have a right to refuse paying federal income taxes because I didn't agree? But the GOP is using a false argument based on "religious freedom", rather than admit they are only trying to de-fund programs that primarily benefit the poor, or almost poor, and unemployed.

And besides Social Security and Medicare, the GOP also wants to cut the food stamps, Medicaid, and TANF - - something else that the poor, or almost poor, and unemployed need.

The poor, almost poor, and unemployed are the people that the Republicans chastise and falsely accuse of not paying any federal income taxes, and then saying "they need to put more skin in the game" (as if they haven't already been skinned by Republican policies).

The Heritage Foundation, a right-wing think tank, boldly claims: Nearly Half of All Americans Don’t Pay Income Taxes. But these figures also include children, the retired, and others who do not participate in the labor force. In one sentence the Heritage Foundation explains: "That means 151.7 million Americans paid nothing in 2009. By comparison, 34.8 million tax filers paid no taxes in 1984."

Yes, while it's true that almost half of the total U.S. population (151.7 million) do not pay any federal income taxes, keep in mind that the other half of the U.S. population equals about 100% of our total work force (153.8 million. (The U.S. Census Bureau currently reports the total U.S. population as 313.1 million.)

The labor force participation rate is the ratio between the labor force and the overall size of the national population between the ages of 16 and 65. The Bureau of Labor Statistic reports that the U.S. has a civilian labor force participation rate of 63.7 percent -- and the Department of Labor reports (PDF) that last year in 2011 the U.S. had a labor force of 153.8 million.

So essentially the Heritage Foundation is claiming that most people who work (98.6%) don't pay any federal taxes, because the 151.7 million that they report as tax dodgers is 98.6% of the total U.S. work force (153.8 million).

So it's a myth that half of all working Americans don't pay federal income taxes (typical GOP propaganda for America's "dumbed down".) In truth 86% of all working-age Americans pay federal income taxes, even including the unemployed (almost 30 million under and unemployed). Here is the full quote from the Tax Policy Center,

"The fraction of tax units paying no income tax varies widely by filing status and type of unit. About 47 percent of single filers will owe no tax, compared with 38 percent of joint filers and 72 percent of heads of household. More than half of elderly tax units and tax units with children will pay no income tax this year."

I've been unemployed over 3 years. In 2010 this blogger earned $9,000 in unemployment benefits before they had expired in June of that year, and I owed federal income taxes. Then last year, only after becoming totally indigent, did I finally qualify for food stamps in 2011. (Read more: Obama's 'Welfare State')

Yet the Republicans such as Mitt Romney and Rick Santorum are proposing tax plans to mostly benefit large corporations (over small businesses) and the very wealthy, primarily at the cost and expense to programs that the poor, almost poor, and the unemployed vitally need for their very survival. (In Mitt Romney's new proposed tax plan, his low tax rate on his carried interest and capital gains stays at the same tax rate.)

Why would a poor, almost poor, or unemployed voter ever vote for a Republican candidate when it's common knowledge that the Republican leadership has always used psychology and propaganda to promote fear-mongering to get votes, only to turn around and represent the interests of big oil, large corporations, and the wealthy?

*Excerpted and edited from an article at the HuffPo by Alexander Eichler and expanded on from my earlier posts.

Monday, February 27, 2012

Job Creators: The Root of Most Evil

It appears as though the more money one has, the more they want...almost like an addiction. And the more money evil people can acquire, the more evil it enables them to do.

And the more money they have, the more inclined they are to also evade paying taxes.

Money may not be the root of all evil, but it certainly seems to be at the root of most evil. From the bankers to the CEOs, from the hedge fund mangers to the doctors...the top 1%.

Yes, I know, and there are also a few drug kingpins, politicians, dictators, and gang members too - - but I just wanted to focus on the "pillars of our society" and the "captains of our industry" and our "job creators" for the sake of this post.

The TV show American Greed explores the darker side of the American Dream, and I've used their list of episodes, along with a few other additions of my own, to show you who the Republicans such as Mitt Romney, Rick Santorum, Newt Gingrich and Ron Paul think should all pay less in federal income taxes.

Obviously the list below isn't complete, and many more are presently engaged in these ongoing activities, and may or may never be caught...but you'll get the idea.

NOTE: I didn't include heiresses such as Kim Kardashian and Paris Hilton on this list because they were never arrested or convicted of any major crimes.

Personally, I would list the bank bailouts as the biggest financial fraud ever in the history of the U.S. - - but check out this list of "job creators" from our past (excluding AL Capone and other notable mobsters):

  • Bernie Madoff holds the world-record for biggest Ponzi scheme in history. Madoff stole billions while chairing the Nasdaq and maintaining cushy relationships at the SEC. He received the maximum sentence of 150 years in prison.
  • Joseph P. Nacchio - The CEO of Qwest Communications International. He was convicted of 19 counts of insider trading in Qwest stock and was sentenced to six years in federal prison
  • Kenneth Lay and Jeffery Skilling -- Enron -- Total Scammed: $74 Billion.
  • Thomas Joseph Petters - The former CEO and chairman of Petters Group Worldwide and convicted for turning his company into a $3.65 billion Ponzi scheme. He received a 50 year federal prison sentence.
  • Raffaello Follieri was accused of misappropriating a $50 million investment from billionaire Ronald Burkle meant to buy up Roman Catholic churches. Bishop Joseph Anthony Galante was implicated in the scandal.
  • Dr. Gerald Barnbaum - Medicaid fraud, mail fraud, identity theft, sexual battery, medical malpractice and second-degree murder.
  • Eugene Plotkin and David Pajcin, both formerly of Goldman Sachs, were the masterminds behind a complex Wall Street con and a scam using strippers to solicit information from Wall Street bankers.
  • Richard Scrushy - He was once the superstar CEO of HealthSouth, a huge provider of outpatient rehab services until federal prosecutors accused him of masterminding a $2.7 billion fraud.
  • Samuel Israel III turns his wall street hedge fund, "Bayou Investments", into a Ponzi scheme after poor management, then attempts a fake suicide to flee prosecution.
  • Dennis Kozlowski - He was once described as "The Most Aggressive CEO in America," now sits behind bars. A poster boy of excess, the former CEO of Tyco stole millions from his company, using the money for a lavish party, a gilded shower curtain and expensive art.
  • Dr. Jorge Martinez - Expensive, painful and unnecessary shots, all part of a multi-million dollar billing scheme.
  • Anthony Elgindy - "The Mad Max of Wall Street" - The founder of Pacific Equity Investigations was a short seller who made millions in a trading scam using government secrets.
  • Lou Pearlman - The manager of bands like *NSYNC and The Backstreet Boys and masterminded scams of $500 million from investors in the longest running Ponzi scheme.
  • Al Parish - An economics professor and a trusted financial advisor was sentenced to federal prison after pleading guilty to financial fraud. Nearly 600 people lost up to $90 million invested in Parish Economic's private investment "pools."
  • Dr. Ronald Mikos - The story of a another murderous Chicago doctor who bilked Medicare.
  • Sholam Weiss - He helps fix the National Heritage Life Insurance's gaping $35 million accounting hole, and ends up partnering up with them - and bilking customers out of $500 million. He was sentenced to 845 years in prison.
  • Robert W. McLean - An investment manager and arts patron who traveled by limousine and ran a Ponzi scheme that had siphoned tens of millions of dollars from close friends and business associates. He eventually killed himself.
  • Stephen Trantel was once a Wall Street insider, a broker making hundreds of thousands of dollars in the Manhattan trading pits. After becoming unemployed, he started robbing banks.
  • Nancy Kissel murders her husband Robert Kissel, who had been a vice president in Goldman Sachs' Asian special situations group. His brother, Andrew Kissel, who had been accused of defrauding a New York co-op board of millions of dollars, was found murdered at his rented Greenwich, Connecticut estate.
  • Troy Titus - A disbarred and disgraced attorney who was sentenced to 30 years in federal prison for defrauding clients and friends out of more than $8 million in Ponzi scheme.
  • Alberto Vilar - An investor who was known as "a patron of opera". He was tried and convicted in November 2008 on charges of money laundering, investment advisor fraud, securities fraud, wire fraud and mail fraud, and was sentenced in February 2010 to nine years in prison.
  • Dr. Vilas Likhite - An elaborate sting operation exposes a doctor and former Harvard Medical School professor who was stripped of his medical license and began a new career as a con man selling fake art treasures.
  • Danny Pang - He was the CEO of Private Equity Management Group who ran a Ponzi scheme and made millions betting on when people will die. His wife, ex-stripper Janie Louise Pang, was murdered in the Villa Park house, possibly by a contract killer, after she took steps toward a divorce. He has also since died. Wall Street Journal
  • Marc Harris promised financial freedom to people with off-shore bank accounts as a way to keep assets out of the reach of government. But the "guru" was running a Ponzi scheme and bilking clients out of millions of dollars.
  • Greater Ministries International - A story of religious fraud and a $500 million dollar pyramid scheme.
  • Robert Allen Stanford - He was the chairman of the now defunct Stanford Financial Group and was a sponsor of professional sports - - now accused of a massive Ponzi scheme.
  • Larry Salander - One of the biggest names in New York’s art world (Salander-O’Reilly Galleries), but collectors see red when he swipes more than $100 million from their pockets.
  • Sholom Mordechai Rubashkin - The former CEO of Agriprocessors, now-bankrupt slaughterhouse and meat packing plant. He was convicted of 86 counts of financial fraud, including bank fraud, mail and wire fraud and money laundering. In June 2010, he was sentenced to 27 years in prison.
  • William “Boots” Del Biaggio III - A venture capitalist and former co-owner of the hockey team San Jose Sharks. He was sentenced to eight years in prison and more than $67.4 million in restitution for misappropriating funds from individual investors he advised.
  • Scott W. Rothstein - A disbarred lawyer and the former managing shareholder, chairman, and chief executive officer of the now-defunct Rothstein Rosenfeldt Adler law firm. He was accused of funding a massive 1.2 billion dollar Ponzi scheme.
  • The Baptist Foundation of Arizona - Their fraud led to the largest collapse of a religious financial institution in U.S. history.
  • John Bennett - His Foundation for New Era Philanthropy operated a notorious Ponzi scheme. After having raised over $500 million from 1100 donors, he embezzled $135 million.
  • Martin Frankel - A financier and con-man who vanished with $200 million dollars. A story of money laundering, prostitution, bizarre sex and drug abuse.
  • Eric Stein - Masterminded one of the largest Ponzi schemes in Nevada history, cost his victims nearly $34 million.
  • Reverend Abraham Kennard - As many as 1600 churches nationwide are swindled out of $10 million.
  • Reed Eliot Slatkin - An ordained Scientology minister and co-founder of EarthLink was the perpetrator of one of the largest Ponzi schemes in the United States since Charles Ponzi himself.
  • Robert Ray Courtney - A former pharmacist who owned and operated Research Medical Tower Pharmacy. He was convicted of pharmaceutical fraud and sentenced to federal prison.
  • Bernard Ebbers - The CEO of WorldCom becomes the poster child for everything that went wrong on Wall Street in the 1990s. WorldCom's eventual downfall shakes the financial community and the lives of thousands of investors.
  • Stefan Wilson - Operated a fraudulent investment fund. His Ponzi scheme took almost $13 million from over 50 investors and landed him 20 years in prison.
  • Marc Dreier is a high-powered lawyer with celebrity clients. But Dreier is a conman and steals more than $700 million from hedge funds.
  • Dr. Michael Rosin - Convicted of telling patients they had cancer and performing unneeded operations, now sentenced to 22 years for fraud.
  • Arthur Nadel - Manages the hedge fund Scoop Management Co, a $350 million fund. In the blink of an eye, he disappears and leaves clients without their life savings.
  • Joseph Medawar - A television producer runs a scam to rob investors out of millions of dollars.
  • Barton Harry Watson - One the chairman of Cybernet, a wildly successful global technology company, he stood accused of stealing millions in an elaborate fraud.
  • Dr. Mark Weinberger – A self-proclaimed “nose doctor” – has it all and isn’t afraid to flaunt it. But inside The Weinberger Sinus Clinic, all is not what it seems. Malpractice and fatalities are now on his resume.
  • Dana Giacchetto - Advised Hollywood's hottest stars (from Leonardo diCaprio to Ben Affleck) But his star-power faded when nearly $10 million goes missing, for which he spent 5 years in prison.
  • Alfred Taubman - A wealthy art collector and the former chairman of Sotheby's who is now a convicted felon for the price-fixing scandal at Christie's and Sotheby's.
  • Matt Cox and Rebecca Hauck team up to make millions in the real estate fraud.
  • Nevin Shapiro - A University of Miami football booster who is currently imprisoned for orchestrating a $930 million Ponzi scheme. He even purchased a yacht on which sex parties with prostitutes were held.
  • Kenneth Starr - An accountant to stars like Sylvester Stallone, Diane Sawyer, and Wesley Snipes, but mismanages his clients’ money, pockets millions, and then he marries an exotic dancer. But then later he gets more than seven years behind bars for a multimillion-dollar investment scheme.

(Pictured below) Kenneth Starr (67) and his stripper wife, Diane Passage (37). New York Magazine says she's one of the greatest hustlers of our time (And all this time I thought Anna Nicole Smith was the ultimate "gold digger".)

The New York Daily News reports that while Diane Passage was not charged with any crime (as of this post), sources said Kenneth Starr secured her love by buying her fabulous baubles - and even a boob job - with other people's money. He bought her all the latest designer fashion and really expensive jewelry, as well as Alexander McQueen dresses, Giuseppe Zanotti shoes and furs. For one of her birthdays, Kenneth Starr rented out a Manhattan club and hired the rock band Everclear. He funded her charity which raised money through pole-dancing competitions.

Besides just young women, see what else these greedy people and those on the Forbes 400 List can buy with their ill-gotten fortunes (scroll half-way down this page).

And the Republicans such as Mitt Romney, Rick Santorum, Newt Gingrich and Ron Paul think all these people need more tax breaks?

Sunday, February 26, 2012

Profits Drive Gasoline Prices, not Obama's Energy Policy

CNN - Newt Gingrich has been promising to get gasoline prices down to $2.50 per gallon (and also to build a colony on the moon). The sad thing is, many Republicans believe him.

"This is absurd," said Paul Bledsoe, a Bipartisan Policy Center scholar who spent more than 20 years working on energy policy in Washington. "Obviously the price of oil is set on a global market. In the immediate term there is almost nothing you can do."

For decades oil companies have always done what any corporation does, maximize its profits. That's no secret, and the fact that they have resorted to almost any measure possible to increase the cost of a barrel of oil is no secret either. To say that Obama's energy policy has something to do with the price of gasoline is just plain ignorant.

America could be the only producer of crude oil in the entire world, and if ExxonMobil can extract it for $11 a barrel with cheap leases on U.S. federal lands, and then sell it to China for $100 a barrel, they would...and we would still pay higher prices at the pump because of the "global economy". Unless of course, you think like me and Oliver Stone, and just blamed Obama for NOT nationalizing the energy industry.

From - "Though demand and supply is responsible for substantial hikes, "free enterprise" is to be blamed at all other occasions. And how? The moment there is speculation that crude will be trading higher, retailers usually increase their prices in an attempt to keep their margins intact for future purchases. Contrarily, when the price of the crude decreases, retailers are not inclined to lower rates as fast as they have raised it in order to maximize profits."

There also have been reports that some oil companies stockpile crude instead of sending it to the refineries when the prices are low. The logic is to make profits when the prices rise further in the global market.

DailyMail, November 2009 - "These tankers have been parked off our shores for months, refusing to unload their oil until prices have risen even higher. The delay makes millions for speculators... and keeps your petrol costs soaring."

Telegraph, February 2010 - "Oil stored at sea could mean bigger problems and prices in the future. "The use of temporary floating tankers has become so popular that even the investment banks had begun to charter ships, leaving the market with a shortage of vessels for transporting other commodities."

Under George W. Bush (on July 17, 2008) the average cost for a gallon of gasoline was at it highest level ever in U.S. history (at $4.11 a gallon). This was after the record peak of $145 for a barrel of West Texas Intermediate crude oil (WTI).. Where was all the Republican outrage then? They weren't crying about the Keystone pipeline in those days.

And then 5 months later on December 23, 2008, the WTI crude oil spot price fell to $30.28 a barrel, and the oil companies were still making profits.

Business Insider now makes the case that simple "supply and demand" drives the price of oil, but not based on the U.S. economy, but because of the global economy. "Demand is booming in Asia and the Former Soviet Union, offsetting mediocre demand in the U.S. and Europe."

Is it different today than during the 1979-1980 period of rapidly increasing prices? Saudi Arabia's oil minister Ahmed Yamani had repeatedly warned other members of OPEC that high prices would lead to a reduction in demand. His warnings fell on deaf ears. Surging prices caused several reactions among consumers: better insulation in new homes, increased insulation in many older homes, more energy efficiency in industrial processes, and automobiles with higher efficiency. These factors along with a global recession caused a reduction in demand which led to lower crude prices.

But it seems that now, no matter how efficient American cars become, or how low we turn our thermostats, or how depressed the demand for home heating oil is in the U.S., the price for oil and gasoline will still rise. Not because of how much we might drill, pump from Canada, or extract in cheap leases on domestic federal land, but the price is determined by how much the market can bear - by how much the oil companies can profit from the global economy.

Despite higher domestic oil production under Obama than under George W. Bush, and the lowest domestic demand for oil in the last 15 years, and one of the warmest winters on record for over 40 years, we still have higher gasoline prices. Why? Profits.

We also have less oil refineries processing the less profitable sweet crude oil (Brent). There's also the increased betting by hedge fund speculators. There was also a rising demand for oil to meet Brazil's and China's growing economies. And there is also Obama's expressed desire to raise taxes on oil companies (and cut their taxpayer subsidies).

Iranian threats is at the bottom of the list because all throughout history the domestic oil companies have always had the benefit of the U.S. military protecting their interests abroad (and the U.S. doesn't import Iranian oil).

Some argue that the Keystone XL pipeline, which would have increased the delivery of oil from Canada and North Dakota's Bakken Shale to Gulf Coast refineries could replace oil from Venezuela. But that would have little to no affect on world market prices, and what would it matter if that oil is sold to China anyway?

But many people will always find criticism for President Obama, "The reality is that most of the increase in U.S. oil and gas production has come despite of the Obama Administration."

Prices are high for no other reason than to keep the margin of oil profits high. Some suggested that a tighter monetary policy is the best choice under the current economic circumstances (the high cost of oil in relation to the value of the dollar), but that has also been dismissed out of hand.

The current run-up in prices comes despite sinking demand in the U.S. - “Petrol demand is as low as it’s been since April 1997,” says Tom Kloza, chief oil analyst for the Oil Price Information Service. “People are properly puzzled by the fact that we’re using less gas than we have in years, yet we’re paying more.”

Kloza believes much of the increase is due to speculative money that’s flowed into gasoline futures contracts since the beginning of the year, mostly from hedge funds and large money managers. “We’ve seen about $11 billion of speculative money come in on the long side of gas futures,” he says. “Each of the last three weeks we’ve seen a record net long position being taken.”

It appears that speculation in oil futures (by those who never actually take delivery) is the biggest driving force of oil prices. Goldman Sach’s alone has huge blocks of stock in oil companies and trades vast quantities of oil futures.

Forbes reported last year: "Rex Tillerson, the boss of ExxonMobil admitted last week that the price of oil (based purely on supply and demand) should be in the $60 to $70 a barrel range. The reason it’s above $100 a barrel, Tillerson explained, is due to the oil majors using futures contracts to lock in current high prices, and speculation that is engineered by the high-frequency trading of quantitative hedge funds."

Forbes also reported that "the average cost of producing 1 barrel of oil was $11...and that "the profits for the big 6 oil companies was $36 billion in the year’s first quarter. A large part of the $36 billion was used to buyback shares or pay dividends to shareholders."

Buying back shares increases share value with less outstanding shares, also increases the value of stock options paid as executive compensation for "performance" to oil executives. CEOs like Rex Tillerson, who are shareholders with stock options, can get paid more when they can sell their oil for more. And Tillerson also pays Mitt Romney's tax rate - - 15% on capital gains made on his stock options.

Refineries have also been getting squeezed by higher crude prices over the past several months, forcing some of them to shut down rather than operate at a loss, says Stevens.

The more likely reason behind the price increase for gasoline is the recent spate of refinery closures in the U.S. Over the past year, refineries have faced a classic margin squeeze. Prices for Brent crude have gone up, but demand for gasoline in the U.S. is at a 15-year low. That means refineries haven’t been able to pass on the higher prices to their customers. As a result, companies have chosen to shut down a handful of large refineries rather than continue to "lose money" on them. (To mean, earn less profit.)

The U.S. refining industry is being split in two. On one hand are the older refineries, mostly on the East and Gulf Coasts, that are set up to handle only the higher quality Brent “sweet” crude—the stuff that comes from the Middle East and the North Sea. Brent is easier to refine, though it’s gotten considerably more expensive recently. (Certainly another reason for higher gas prices.)

Then there are the plants able to refine the heavier, dirtier West Texas Intermediate (WTI), the stuff that comes from Canadian tar sands, the deep water of the Gulf of Mexico, and the newer outposts in North Dakota, which just passed Ecuador in oil production. These refineries tend to be clustered in the Midwest - - places such as Oklahoma, Kansas, and outside Chicago.

While the price of Brent crude has closed at over $120 a barrel in recent days, WTI is trading at closer to $106. That simple differential is the reason older refineries that can handle only Brent are "hemorrhaging cash" and shutting down, while refineries that can handle WTI are on markets (greater profits).

And then there's Obama repeated proposal that "now is the time to raise taxes on oil and gas companies."

America is pumping more oil out of the ground now than it has in years, thanks to a surge in onshore drilling - - and U.S. refineries are producing more gasoline and diesel than ever. But Americans’ gasoline consumption is at an 14-year-low.

So with all that supply and not much demand, why have gasoline prices risen high enough this year to resurface as a national political issue? The short answer, experts say, is that the "global economy and geopolitics", not the U.S. industry or economy, are driving gasoline prices. (profits)

The Wall Street Journal's Tom Fowler tries his best to explain why gas prices balk supply and demand. Download MP3. But between now and Election Day, gasoline prices will be most influenced by the price of oil, traded in global markets, not U.S. supply and demand.

In the past, the price of U.S. oil at a key storage hub in Cushing, Oklahoma, most directly influenced U.S. gasoline prices. But that price of U.S. crude, known as West Texas Intermediate, has strayed far below crude from other parts of the globe that is actually used by many U.S. refineries, particularly along the coasts.

Thus the price of oil from the North Sea, known as Brent, has become the benchmark most tied to U.S. retail gasoline prices. About half of the U.S.'s gasoline is refined from overseas crude oil.

Some argue that an unstable situation in the Middle East, especially the turmoil over Iran tensions, has sent global crude prices surging. "There's a war risk premium that is weighing heavily on the markets," said Amy Myers Jaffe, senior energy adviser at Rice University's Baker Institute.

But for whatever reasons, the oil companies never suffer for inflation or the higher cost of production. Any "perceived threat" in the Middle-East or elsewhere is just used as another reason to raise stuff more profits into the pockets of the oil executives and the investment bankers.

Forbes reports that ExxonMobil's CEO Rex Tillerson has a 5-year compensation plan earning him $40.2 million, while half of all working Americans earn less than $27,000 a year - - when the poverty line for a family of four is $22,314. These are the people that the Republicans chastise and falsely accuse* for not paying federal taxes.

Cheap leases, scant royalties, taxpayers' obligations, and environmental hazards - the burden to American citizens for gas and oil profits that still exist in Obama's energy policy.

The Institute for Policy Studies: Although Obama's Interior Department budget proposal refers to reforms in royalties paid for private companies to use public lands and the collection of $3 billion over 10 years, this does not go far enough. Revenue could be far greater and the costs to the taxpayer far lower if the 1872 mining law, which allows mining companies to stake a claim on public lands for a mere $5 an acre (still!), while mining for highly lucrative oil, gas, gold and other minerals, were brought into the 21st century.

Environmental protections are non-existent in these claims, resulting in the headwaters of roughly 40 percent of Western U.S. watersheds being polluted, according to the EPA, and the taxpayer picking up the bill for cleanup, estimated by Earthworks and others at roughly $32-72 billion. An amendment to this law could generate income on the order of $122 billion for U.S. taxpayers on public lands, discourage wasteful, hazardous and speculative investment on public lands, and ensure that highly profitable mining companies are forced to clean up their own messes.

A new study shows that fracking for natural gas causes 8 percent of the gas to escape into the atmosphere, where it is 105 times more potent than CO2 over its 20-year lifespan.

Chemicals considered "trade secrets" for the gas industry (thanks to an energy policy developed in secret meetings by former Vice President Dick Cheney) have residents living near fracking wells complaining of health problems. In some cases, they can literally light the water coming out of their taps on fire.

In addition, scientists have started to link earthquakes — such as the rare ones that have been shaking Ohio, New York, and Arkansas — with fracking.

* Any "surplus" in the domestic production of oil and gas will be sold at "market value" in the global economy, and won't necessarily reduce energy costs to American businesses and for American citizens. "Energy independence" is a myth so long as oil and and gas corporations are allowed to continue to exploit America's natural resources for personal financial gain.

* The Heritage Foundation, a right-wing think tank, boldly claims: Nearly Half of All Americans Don’t Pay Income Taxes. But these figures also include children, the retired, and others who do not participate in the labor force. In one sentence the Heritage Foundation explains: "That means 151.7 million Americans paid nothing in 2009. By comparison, 34.8 million tax filers paid no taxes in 1984."

How can 151.7 million not pay any taxes when that is about 100% of our work force? It’s a myth that those Americans don't pay taxes. In truth 86% pay federal income taxes. Here is the full quote from the Tax Policy Center,

"The fraction of tax units paying no income tax varies widely by filing status and type of unit. About 47 percent of single filers will owe no tax, compared with 38 percent of joint filers and 72 percent of heads of household. More than half of elderly tax units and tax units with children will pay no income tax this year."

But unlike most of those poor people, CEOs like Rex Tillerson, and politicians like Newt Gingrich and Mitt Romney, don't worry about the price of a gallon of gasoline - - or the cost of home heating oil.

My Other Related Posts

Saturday, February 25, 2012

Americans don't lack skills, they lack jobs.

"We need an economy that matches the needs of the population, not economic elites that ridicule the American population for not fitting into the dystopia that they engineered."

The Engineering of Labor Markets

We hear a lot today about "structural unemployment" in America, the notion being that unemployment in America today is related to workers not having the right set of skills for the available jobs in the economy. There is some truth to this, but the reason for this has nothing to do with any inherent realities of a modern economy, it has to do with how American capitalists have intentionally engineered the global labor markets.

The first thing to acknowledge is that every economy, including the American economy, is engineered and planned. An idea came to prominence in the 1970s among the economic elite in America that the future of the American economy was in "high skill jobs", i.e. research, design, science, analytics, etc., and that "low skill jobs" were to be something outsourced to developing foreign countries, for them to do the work that was "beneath Americans", but also so that those "low skill job" could be done more cheaply by these much more desperate foreign workers.

This idea has dominated the thinking of America's economic engineers (corporate executives, investment bankers, financiers, major investors, wealthy philanthropists, influential professors, private equity moguls, Federal Reserve members, and all of their corresponding enablers and puppets in government, etc.) for the past three or four decades, and has been a major driver in the engineering of the current American "jobs market".

The result of this has been that massive segments of our occupations have been eliminated from the American jobs market by the owners and controllers of capital and transferred to foreign countries, largely Mexico and China, but many more as well of course.

In the absence (or weakness) of labor unions, capitalists dictated the conditions of employment, and the fact is that the parameters of "the game" in America are dictated almost entirely by the owners of the capital. The reality we live in is the reality designed by these people, and their engineering efforts have been effective. They have successfully transferred a large portion of "low skill work" to foreign countries and they have successfully shifted the American occupational portfolio disproportionately toward "higher skill work", but the "low skill work" that was outsourced to foreign countries wasn't actually "low skill", it was medium skill work.

The American "jobs market" has been distorted by the practices of capital owners and government policy (at the request of capital owners), under the guise of so-called "free trade" (which is anything but) and neo-liberal "globalization". So what are the results of this? Well the results are quite obvious, and exactly what would be predicted by market theory.

The result of this is of course a shortage of "high skill workers" in America and a glut of "low and medium skill jobs" in places like China and Mexico, and the result of this is inflated prices for high skill workers in America as well as deflated prices for medium skill workers in America.

So one would ask then, if there is a glut of low and medium skill jobs in places like China and Mexico, then why aren't the wages of low and medium skill workers in those countries rising faster? After all, a glut of jobs should mean a shortage of workers.

Two reasons: The first is obviously developmental and based on population. Places like China, India, and Mexico have been able to adsorb a massive influx of low and medium skill jobs because of their large populations and relatively undeveloped economies which afforded relatively few competing opportunities for workers. Due to the relative wealth of the West, we've been able to pay foreign workers higher for their labor than what they could earn within their own economies, even for lower skilled work than those same workers could perform in their local economies.

In other words, we were able to pay a worker in China, who could have been a Chinese doctor or skilled mason or software engineer, more to put together iPhones on an assembly line than they could have otherwise earned as a doctor, etc. if "we" weren't employing them. As foreign economies develop this "should" become less and less true.

In addition, the relatively small population of the West compared to China and India has meant that the labor forces of those nation's are large compared to the populations of Western consumers they serve. But now we get to the second reason for why labor prices in these foreign countries haven't risen quite so rapidly, and that has to do with the policies of their governments. American capitalists have almost universally moved American production to countries ruled by authoritarian regimes, in places with anti-worker policies that are designed to keep wages low. The ruling class in these countries benefit from Western support and wealth, from American corporations if not from government policy as well, while the workers carry the burden.

But let's get back to America, and how all of this plays into growing income inequality here.

A very interesting debate took place between Alexander Hamilton and Thomas Jefferson. Hamilton argued that economic diversity was key to the development of the American economy, and to this end Hamilton opposed "free trade" practices (then supported by Britain) and supported government subsidies for the development of industry in America -- as well as polices that encouraged the illegal (in their home countries) immigration of skilled manufacturers from Europe and the theft of intellectual property from Europe (sound familiar?). Hamilton was a supporter of corporations and manufacturing.

Jefferson, on the other hand, argued that corporations and manufacturing would result in the concentration of too much property and power in the hands of banks and wealth elites and that democracy could only be maintained by an agricultural economy rooted in widespread ownership of land, with land remaining the most important form for property. Jefferson argued that unless the majority of people owned the majority of the property then the majority would become disenfranchised (this was of course especially true in Jefferson's time when property ownership was a requirement for voting, but his argument was not based solely on that requirement, but rather the power grated by property ownership, regardless of any voting requirements).

Hamilton's counter, of course, was that an agricultural economy was not diverse enough to provide enough opportunities for a diverse population to make the best use of its skills.

"It is a just observation, that minds of the strongest and most active powers for their proper objects fall below mediocrity and labor without effect, if confined to uncongenial pursuits. And it is thence to be inferred, that the results of human exertion may be immensely increased by diversifying its objects. When all the different kinds of industry obtain in a community, each individual can find his proper element, and can call into activity the whole vigor of his nature. And the community is benefited by the services of its respective members, in the manner, in which each can serve it with most effect...The spirit of enterprise, useful and prolific as it is, must necessarily be contracted or expanded in proportion to the simplicity or variety of the occupations and productions, which are to be found in a Society. It must be less in a nation of mere cultivators, than in a nation of cultivators and merchants; less in a nation of cultivators and merchants, than in a nation of cultivators, artificers and merchants." - from Alexander Hamilton's Report on Manufacturers
In the end both were right. But here is where Hamilton's point comes into focus: the economy that has been engineered by America's economic elite is not diverse enough for the American population. Everyone can't be a scientist or a doctor or a engineer, everyone can't even be a college graduate, not everyone has that aptitude, and yet, just because one doesn't have the aptitude to be an engineer doesn't mean that one should be relegated to flipping burgers at a fast food joint, where, as Hamilton put it, their labor is "confined to uncongenial pursuits," but this is exactly what has happened in the American economy.

If we take a global view of the job market, what we see is that the American job market is disproportionately comprised of "high skill jobs", while the jobs markets in "developing" countries are disproportionately comprised of "low and medium skill jobs", yet if we look at the labor force what we find is that the American labor force is not comprised of disproportionately "high skilled workers". America is not "exceptional", we are merely "normal". The problem is that our job market is not "normal". Our job market has been manipulated in a way that has put it our of sync with the needs and skills of the population.

The result is that the demand for "high skill workers" exceeds the supply in America, while the supply of "high skill workers" exceeds the demand in most of the rest of the world. This is why so many highly skilled people immigrate to America, because prices in our labor market for high skilled workers are artificially inflated while prices for high skilled workers in most of the rest of the world are artificially depressed due to a jobs market disproportionately comprised of low and medium skilled jobs.

The result of exporting many medium skilled jobs to foreign economies has been growth in truly low skill jobs in America, and a drop in labor prices for everyone except high skilled workers, because now there is a glut of medium skilled workers in America without many jobs for them to fill.

But the thing to remember is that the lack of medium skill level jobs in America isn't a product of the fact that those skills are no longer needed or valuable - - it's a product of the fact that those jobs have been exported to foreign markets by American capitalists. There is still massive demand for the products of medium skilled labor, we just aren't supplying that demand with American workers.

So this is a driver of American economic inequality, and its something that has been completely engineered by the economic elite in this country. The reality is that every country has a relatively equal distribution of worker capabilities. In any given population, aside from war-torn places like Afghanistan and Somalia perhaps, there is going to be pretty much a normal distribution of aptitudes. You are going to have some really capable people and some really incapable people, and the bulk of the population is going to be of moderate capability.

It's absurd to expect any nation to be able to become a nation of nothing but engineers, scientists, executives and entrepreneurs. That's never going to happen anywhere. As Alexander Hamilton laid out over 200 years ago, a productive economy is a diverse economy, that is able to take advantage of the diverse range of skills, abilities, and aptitudes of its population. What our economic engineers have done is they have engineered a less diverse economy that does not match the diverse needs and capabilities of the American population. The result is artificially inflated prices of "highly skilled labor" and artificiality depressed prices for all other labor (although there are other reasons for declines in labor compensation as well). A true global job market, or a properly functioning global job market, is one in which the distribution of jobs matches the distribution of labor skills in every location.

American policy for the past several decades, however, of both private industry and the government which does its bidding, has been to try and intentionally distort this distribution, to try to skew the occupational skill distribution and "corner the market" on "high skilled jobs". The government has seen this in part as a measure of "national security" and "national prestige", to have a disproportionate number of "intellectual" workers active in the American economy, and the economic elite has perused this goal out of a combination of naiveté and economic interests, in that doing so inflates the prices of high skilled workers (themselves and their peers) and deflates the prices of low and medium skilled workers, those whose work generates the profits they benefit from.

It's a grand experiment that was always doomed to fail from the beginning, especially considering the lack of support for such an agenda through other aspects of American policy and society. America's conservative populace never wanted the education required to have a population of disproportionately highly skilled workers. And furthermore, even if Americans were more accepting of science and intellectualism, the reality is that the average person is only...average, and always will be. The notion that America would ever be an economy with a disproportionately highly skilled work force is founded on a belief that America could be the Lake Wobegon of the world, a place where "everyone is above average".

We need an economy that matches the needs of the population, not economic elites that ridicule the American population for not fitting into the dystopia that they engineered.

And yet the engineers of American economic dysfunction are more strongly in power now than ever. Virtually all elected officials in both parties, as well as the policy "experts" that they appoint and rely on, are beholden to the interests of America's private economic engineers and buy into their vision. The fact is that America's elite are largely divorced from reality and they are pursuing a quasi-Utopian vision for America's future. This includes people like Bill Gates and Warren Buffet, the so-called "good billionaires", as well as political leaders who are pursuing this agenda for ostensibly altruistic reasons. This isn't to mention the engineers of our economy whose agenda is dictated by much more self-serving and/or elitist objectives.

The problem with Utopian visions is that when the goals are set too high and are unachievable then the effects on reality are disastrous. When we engineer an economy where the path to success is only attainable by 2% of the population, and everyone who doesn't make it is discarded and ridiculed, its a recipe for social disaster and collapse, and the important thing to understand is that it doesn't have to be this way - its a product of intentional (and flawed) design.

Basically, what our economy today tells us is, "if you can't be a superstar then you are a worthless piece of shit," but that's not true. Not everyone can start the next global mega-corporation; its not possible, no matter how capable everyone is. We can't have a system where everyone is a general or a ship's admiral. Someone has to man the torpedoes and someone has to be on the front lines, it can't work any other way, and those "front line" positions, the jobs performed by average workers, are a absolutely vital to the productivity of the economy and provide the basis of wealth upon which all of civilization exists and upon which the lifestyles and opportunities of the wealthy elite are afforded.

Ultimately, the root cause of this whole situation is the loss of control over capital by the American public, and so we now come back full circle to debate between Hamilton and Jefferson. Productive opportunities in America no longer reflect to the diversity of capabilities and aptitudes of the population because property ownership has become to concentrated in the hands of banks and corporations, and thus a small wealthy elite who have undermined democracy.

Hamilton and Jefferson were both right.

* I've also touched on this somewhat in an earlier post I did last November about Woodrow Wilson's and Theodore Roosevelt's "Hamiltonian" and "Jeffersonian" philosophies as these ideas had morphed into opposing political views today - - and how the Republicans have used psychology to promote fear to retain or regain their political power.

Posted at

Friday, February 24, 2012

Canada Seizes American Property for Oil Pipeline

Americans are already fully aware of what U.S. multi-national corporations are capable of doing in pursuit of profits, but foreign interests can also impose their will on the American people.

(Pictured on left) The TransCanada Tower, the company head office in Calgary, Alberta, Canada.

Canada's largest bank, the Royal Bank of Canada, owns the most shares in TransCanada (Keystone XL pipeline) and is using eminent domain to confiscate American citizen's private property to build their proposed pipeline.

About TransCanada and the Pipeline

Canada is already America’s biggest supplier of oil and petroleum, and as the tar sands are exploited further its market share should only rise. By 2030, according to IHS CERA, a firm of consultants, the tar sands should supply more than one-third of America’s imported oil.

But the Keystone XL will not lessen U.S. dependence on foreign oil, but only transport Canadian oil to American refineries for export to overseas markets (just as the oil from America's domestic drilling is also sold on the "world market".) Read: Key Facts on Keystone XL and more at Wiki.

The TransCanada Corporation's website says the $7 billion Keystone XL pipeline would create 20,000 jobs for Americans - - 13,000 in construction (until it's built) and 7,000 in manufacturing. But those job estimates listed in their application draws from a 2011 report commissioned by TransCanada and estimates 20,000 “person-years”.

The current TransCanada pipeline network connects with virtually all major gas supply basins in North America. It also owns almost 25% of all the outstanding shares of TC PipeLines LP (a wholly owned subsidiary) and controls the general partner.

TC PipeLines manages and owns natural gas pipelines in the United States including almost 50% of Great Lakes Gas Transmission Limited Partnership, 50% of Northern Border Pipeline Company, and 100% of Tuscarora Gas Transmission Company.

The Financials

The Vanguard Group, a privately owned equity firm, is a large investor in TransCanada. Vanguard Total Intl Stock Index holds 2,539,538 shares and Vanguard Energy holds 1,460,996 shares. By comparison, Morgan Stanley Global Infrastructure holds 619,723 shares in TransCanada.

The Vanguard Group is also one of the largest institutional shareholders of JPMorgan Chase (who in turn, holds shares in  TransCanada) With $1.3 trillion in assets, Vanguard is the nation's largest fund company. Here's what Vanguard owns in JPMorgan Chase:

  • Vanguard Total Stock Market Index 42.6 million shares
  • Vanguard 500 Index Investor 34.8 million shares
  • Vanguard Institutional Index Institutional 31.9 million shares
  • Vanguard Windsor II Investor 23.9 million shares
  • Vanguard Wellington Investor 20 million shares
    * Source: Morningstar

Vangaurd's CEO is F. William McNabb III. How much does he earn? "We don’t disclose the compensation earned by any crew member. We believe that compensation matters deserve the same privacy protections that we provide to shareholders and their account information."

Institutional investors such as BlackRock Inc. also holds 16,068,790 shares of TransCanada Corporation, and BlackRock Institutional Trust Company holds 9,545,282 shares, while BlackRock Investment Management Ltd. holds another 5,022,692 shares. (Source: MorningStar)

One website mentions that CPP Investment Board (Canada Pension Plan) was once the largest shareholder, with more than 35 million shares valued at more than $1.2 billion.

The Owners

Canada's largest bank, the Royal Bank of Canada, is by far the largest investor in TransCanada Corporation, currently holding 56,935,777 shares. And who owns most of the shares in that bank? The bank itself, and investors such as Vanguard and BlackRock. (The list of the Royal Bank of Canada's board of directors)

David P. O'Brien, who is a member of the board of directors of TransCanada, is also the Chairman of the Board of the Royal Bank of Canada (Wiki bio / Forbes profile). The other members of the board of directors of TransCanada are listed below - - as of April 25, 2008, according to TransCanada's Facebook page.

S. Barry Jackson (Chair) Forbes profile
Russ Girling (President and CEO) Wiki bio / Forbes profile
Kevin E. Benson - Forbes profile
Derek Burney - Wiki bio / Forbes profile
Wendy K. Dobson - Forbes profile
E. Linn Draper - Forbes profile
Paule Gauthier - Wiki bio / Forbes profile
Kerry L. Hawkins - Forbes profile
Paul L. Joskow - Forbes profile
John A. MacNaughton - Wiki bio / Forbes profile
W. Thomas Stephens - Forbes profile
D. Michael G. Stewart - Forbes profile

(Pictured below) The Royal Bank of Canada logo is displayed on a sign at their headquarters building in downtown Toronto, Ontario, Canada.

The Royal Bank of Canada > JPMorgan Chase > Morgan Stanley > The Vanguard Group > BlackStone > TransCanada > and all those who are invested in the oil and gas companies. Many members on these board of directors sits as members on the boards of each others inter-connected companies (David P. O'Brien is but one of many examples, but shows how these corporate interests are less separated than once commonly believed).

Other People who Might Benefit from Canada's Tar Sand Oil

The pipeline versus the railroads: How Warren Buffet could benefit or how the Koch brothers could. One of the Koch brothers' businesses handles about 25% of the tar sands imported into the U.S., and the Koch brothers are one of the biggest refiners of Alberta oil sands crude oil. (more articles about this at Koch Brothers Exposed.)

The Canadian Land Grab for a Proposed Pipeline

Evidently TransCanada is threatening to seize the property of American landowners and start construction of its Keystone XL pipeline - even though President Obama last month rejected the permit to build.

The pipeline path includes the 600 acre working farm that Julia Trigg Crawford's grandfather bought in 1948, on the Texas Oklahoma border, where the Red River meets Bois d'Arc Creek, which waters the farm.

Fearing for the safety of her farm and it's water source, Julia Trigg rejected TransCanada's offer to buy an easement on her land.

TransCanada announced it was seizing her land under eminent domain and would begin digging, but according to the Huffington Post, Julia won a temporary restraining order, at least until this Friday when the court will hear the case challenging Transcanada's status as a "common carrier" under Texas law.

It's bad enough that TransCanada expect landowners like Julia Trigg to accept permanent damage to their land and possible oil spills. But it's beyond arrogant for this foreign oil company to trample on private property rights and start construction on a project whose permit has just been denied!

Under eminent domain, the government can force landowners to accept monetary payment for the use of their land for certain public-good projects like highways and railroads.

Of course, TransCanada's massive fuse to the carbon bomb of the tar sands shouldn't qualify as one of these projects — it does great harm and only helps the profits of a foreign corporation. But regardless, the company doesn't even have the permit to build it, because the White House just rejected their application. But that hasn't stopped TransCanada.

According to The New York Times, the company has at least 34 eminent domain actions against landowners in Texas, and 22 in South Dakota. And their threats to landowners in Nebraska helped spark massive public opposition and a special legislative session that were key in the decision to consider a different route.

Many of these landowners are being sued by the company, and told that if they don't take the small monetary offering — sometimes less than $10,000 in exchange for the permanent damage to their land, and huge risk of spills — their land will be condemned and TransCanada will seize the easement.

Julia Trigg and others are fighting back and doing everything they can to oppose TransCanada's land grab.

According to the L.A. Times, everyone from environmentalists to Tea Partiers in Texas are showing their support for Americans' property rights. As these court challenges unfold, we need to build pressure against TransCanada and spread the word about their reprehensible tactics.

More on Big Oil - No Energy Independence and Still High Prices

I was searching for historical data for U.S. oil exports, consumption, prices, and production – - and found this article (which also includes 30 charts) about oil from 1868 to the present:

I was hoping for a brief and less comprehensive (but more comprehensible) synopsis on this article.

The very long-term data and the post World War II data suggests a “normal” price far below the current price for a barrel of oil. However, the rise of OPEC, which replaced the Texas Railroad Commission as the monitor of spare production capacity, together with increased interest in oil futures as an asset class, introduced changes that support prices far higher than the historical “norm.”

It appears that speculation (by those who never actually take delivery) in oil futures is the biggest driving force of oil prices. Goldman Sach’s alone has huge blocks of stock in oil companies and trades vast quantities of oil futures.

Domestic production under Obama has risen (even with the moratoriums) and domestic consumption is down, and supplies have not been disrupted, but prices are still going higher…even before discussions of the Keystone pipeline and Iran’s threats to close the strait (which our military could still keep open if that was ever attempted).

If the Keystone pipeline only adds to the “world supply” at “market prices” that can be sold to other countries, how can it help domestic prices and supply, and give the U.S. “energy independence” (or for that matter, besides just oil, any other energy “asset”, including bio-fuels)?

While I understand that many average Americans benefit from profits made in the oil industry, like day traders, or if our 401ks, pensions, or Roth IRAs are invested in oil companies - - but when WE withdrawal our funds, we’re taxed as ordinary income.

There was recently a petition started: Tell TransCanada: Stop using eminent domain to confiscate private property for the rejected Keystone XL Pipeline.

My Other Related Posts

*** 1 Hour Video - Featuring: Robert Reich, former U.S. Secretary of Labor Heather McGhee, Leo Hindery, businessman and “Patriotic Millionaire” Natalie Foster, Co-Founder of Rebuild the Dream, and Robert Borosage of Campaign for America’s Future - National Teach-In To Take Back The American Dream

Thursday, February 23, 2012

Wall Street Journal Debunked on Obama Tax Plan

A very famous and world renowned economist and winner of the Sveriges Riksbank Prize in Economic Sciences and the Nobel Memorial Prize in Economic Sciences (commonly referred to as the Nobel Prize in Economics) thoroughly debunks right-wing billionaire Rupert Murdoch's Wall Street Journal on President Obama's new tax plan - - NOT!!! - - but a little-known amateur blogger named Bud Meyers sure does make a very compelling case (read through all the links he provided).

(Las Vegas) February 23, 2012 - The Obama administration released its proposal to revamp corporate taxes, partly by cutting loopholes and subsidies that enable so many savvy companies to pay so little. The proposal also adds tax expenditures for manufacturing companies.

Tax expenditures can come in many forms, including deferrals, special tax rates and tax credits, and inhabit both the personal and corporate income tax codes. Tax expenditures usually cost the government a lot more money on the personal income tax side. Some well-known examples include the mortgage interest deduction and exclusions for employer-sponsored health insurance.

The New York Times makes the point that tax expenditures for manufacturing can also deprive the federal government of tax revenue, and must be made up elsewhere, but Obama's plan accomplishes this.

Obama's tax plan is to cut the highest official tax rate for all corporations to 28 percent from 35 percent (25 percent for manufacturing companies) — without reducing federal revenue. A wide range of economists, and policy makers in both parties, say such a change would distribute the burden of taxation more fairly and reduce the warping influence of the tax code on investment decisions.

The government estimates that corporations spend $40 billion each year figuring out how much they owe in taxes, and considerably more figuring out how to reduce that number, such as hiring an army of tax attorneys, hiring lobbyists, and contributing to political campaigns to influence our elections (see the top all-time donors).

Obama's proposed tax plan includes ways to offset new tax breaks for manufacturers by raising taxes on a wide range of other companies. Some of the prospective losers are familiar targets, including oil and gas companies, private equity firms and companies that move jobs overseas.

The Wall Street Journal reports that "the plan faced immediate resistance from BIG CORPORATE LOBBYISTS "business groups" and many Republicans, with critics alleging it favored some industries while penalizing others." They complained that the plan appears designed to force large, multinational, non-manufacturing companies to pay more by requiring them to pay taxes on their foreign income.

Banks and insurance companies would pay more because of new limits on the tax deductibility of interest on debt. Managers of hedge funds and private-equity firms could pay more because much of their income could be taxed at a higher rate. Also read: Tax breaks for billionaires: Loopholes for hedge fund managers by the Economic Policy Institute (a non-profit and non-partisan think tank).

The Obama administration would also raise taxes on the oil and gas industry by eliminating many of its numerous deductions and subsidies. And it would restrict the ability of certain companies to avoid paying corporate income taxes because they are structured as "partnerships" (described below).

At the same time, the plan could lower taxes for renewable-energy producers, retailers, companies that invest heavily in research, domestic manufacturers and many small businesses. For example, besides lowering the top "effective" tax on domestic manufacturers to 25% from around 32%, it would also expand tax incentives for small businesses to expense more of their investments.

What was really reprehensible was, Dean Garfield, president of the Information Technology Industry Council, a lobbying group that includes Apple Inc., Microsoft Corp. and Cisco Systems Inc., had the nerve to say the plan "would punish successful companies and push investments out of the United States." WTF?!?!?! They already do! (Read the article: How Apple Screwed the U.S. Middle-Class)

Catherine Schultz, vice president for tax policy at another lobbying group, the National Foreign Trade Council, whose members include tax dodgers such as Boeing Co., Caterpillar Inc., Pfizer Inc. and Procter & Gamble Co., said, "This is not real tax reform but tinkering around the edges."

Jack Gerard, chief executive lobbyist of the American Petroleum Institute, whose members include other tax dodgers such as Chevron Corp., Dow Chemical Co. and Exxon Mobil Corp., said "this isn't a serious effort for uniform tax reform, if all he's doing is shuffling the deck chairs and picking winners and losers." Read my post Lobbyists on K Street paid like CEOs on Wall Street. (more on big oil at the end of this article below)

No matter what Obama proposes, these big multi-national corporate conglomerates will always complain, as mentioned in another Wall Street Journal article: "Obama's proposals would add new layers of inequity and inefficiency to the tax code. One principle of tax reform is to create neutrality within and across industries—a level playing field. Meanwhile, the plan punishes those the White House doesn't like, such as companies in oil and gas or with operations abroad."

Translated to mean: "Boo-hoo! Our taxes are being lowered by only 7%, but manufacturing gets their taxes lowered by 10%. Not fair!"

That WSJ post also went on to falsely claim that "the oil and gas industry already pays at or near the highest effective federal tax rate of any industry." A blatant lie. Companies like GE, Exxon Mobil, and 10 other major corporations actually paid a negative tax rate. But still they complain. Tax subsidies (corporate welfare) for oil companies is considered OK by the Republicans, but they label investments in green energy as "tax giveaways".

Admittedly, Solyndra may be one glaring example of why that due diligence is needed, but then again, why do we still give the oil companies billion of dollars every year in government subsides? Last year, on a partisan vote, all the Republicans and a few Democrats voted to re-new $35 billion in corporate welfare checks for big oil and gas...pennies compared to Solyndra.

And the author of that same WSJ article made a wild claim that last week Obama created "a 41% tax rate on nearly 30 million businesses that are not corporations, and thus pay taxes on profits as personal income" without providing a source or link to any documentation of that claim. (I Googled it and found nothing). The top marginal income tax rate is currently 35%, and Obama proposed taxing anybody earning over $1 million a year to pay a 30% tax rate.

Corporations want a lower corporate tax rate so they can pay their CEOs more in stock options as "pay for performance", which is only currently taxed at 15% for "capital gains".

Beside personal tax loopholes such as capital gains (which are already historically low), carried interest (Mitt Romney), trust funds, SWAG investments (silver, wine, art, and gold), gifts, trust funds and generation-skipping estates (Kim Kardashian and Paris Hilton), annuities, interest (etc.) all get favorable tax rates for the very wealthy. This should ALL be taxed as "ordinary" personal income. Read: The "SWAG" Economy of the 1% and How the 1% bilks the 99% (The top 1% are taxed LESS than the wages you labor for, yet the top 1% is also more prone to evade income taxes too!)

That very same WSJ article also falsely claims, "What the White House reformers don't like to admit is that corporate profits are taxed twice—first, via the corporate tax, then again at the shareholder level through the dividend or capital gains levies. Mr. Obama wants to cut the top corporate tax rate by 20% but raise the capital gains tax by almost 60% and nearly triple the dividend rate."

This is total fear-mongering and a lie. If the Bush tax cuts were just allowed to expire, the capital gains tax rate would go up from their historical low of 15% back to 20% - - - a 25% increase, not 60%. I personally believe that all capital gains (etc.) should just be taxed as ordinary income, depending on what an individual's tax bracket is. If Obama wants to tax people earning $1 million a year (the "Buffett Rule", which the majority of voters agree with), then essentially capital gains would be taxed at 30%, which is still less than the current top marginal rate of 35%.

Also, "double taxation" is another deliberate lie. All financial transactions are taxed as soon as money changes hands from one person (or entity) to another. As I wrote in another article, if corporations don't want to pay corporate taxes, they can just as easily "un-incorporate". After I get a paycheck, I still gets taxed again if I earn interest from a bank account or buy tires.

By now the general public has been well aware of these businesses that the Republicans favor - - and who they have allowed to run slip-shod over the American consumers - - but sympathizers for these specific corporate tax cheats businesses are far and few between.

And then there is also the matter of "partnerships" (as I mentioned earlier). The government has long allowed businesses to organize as partnerships, which avoid corporate income taxes by “passing through” the profits to the partners. But what began as a shelter for small businesses, the so-called subchapter S partnerships, has increasingly attracted very large ones. About 69 percent of domestic companies were organized as partnerships in 2008, according to the latest Internal Revenue Service data, and they distributed about $1 trillion in income to their partners. (One being Mitt Romney's Bain Capital)

Recent news accounts have highlighted the low "effective tax rates" paid by companies like Google, Boeing and General Electric. The top corporate tax rate of 35 percent is a theoretical marker. Corporations actually paid an average of 26 percent of income in federal taxes in 2007 and 2008, according to the Treasury Department, thanks to a wide range of deductions, subsidies and loopholes. As a result, some large companies pay little or nothing, while some pay more. Also read: 280 Corporations are "Too Big to Tax". For the past 25 years, the average "effective tax rate" was only 18 to 22%.

One financial analysis concluded that 115 of the Fortune 500 companies in the Standard and Poor’s stock index paid a total corporate tax rate — federal and otherwise — of less than 20 percent over a five-year period. And a study by the Government Accountability Office in 2008 found that 55 percent of American companies paid no federal income taxes during at least one year in a seven-year period it studied.

Over the years corporate taxes have been making up an increasingly smaller share of the federal government’s revenue, in part because of tax-avoidance maneuvers by businesses.

Just two popular tax breaks — for accelerated depreciation of businesses’ capital investments and write-offs of research and experimentation costs — account for the bulk of the revenue the government foregoes to benefit corporations. Not only are those two provisions unlikely to be repealed; the Obama administration and both parties in Congress also support making a separate research credit permanent.

For multinational corporations, officials say the administration will oppose any shift to a territorial system of taxing offshore profits, which could exempt most of corporations’ foreign earnings from American income taxes. Representative Dave Camp of Michigan, the chairman of the House Ways and Means Committee, and many other Republicans and corporations, favor such a change and are certain to oppose Mr. Obama’s proposal for a minimum tax on foreign earnings.

Many companies such as GE have made the bulk of their earnings overseas as jobs continue to be outsourced and the middle-class in America continues to shrink (Read China's Greatest Generation and the Chinese Dream.

While the United States is virtually alone in taxing multinational companies’ foreign earnings, it does allow the companies to avoid taxes indefinitely by keeping profits overseas. But that only encourages accounting schemes and offshore investments (Mitt Romney again).

A Republican, Dave Camp agreed: “More than half of all business income is taxed at the individual tax rate rather than the corporate tax rate, and a corporate-only proposal does not address the needs of those job creators, the vast majority of which are small businesses.” But it DOES include more tax expenditures as I noted before.

Mr. Romney’s top economic adviser, Glenn Hubbard (a "Visiting Scholar" at the conservative American Enterprise Institute), accused the Obama administration of a “full-throttle attack on multinationals,” and said Mr. Romney too would propose shifting to a territorial system that would not tax corporate income earned overseas.

But Obama counters, “It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America." The Obama administration proposed a new minimum tax on foreign earnings, though it didn't specify a rate. I would argue this tax rate should be 25 percent, just as it is in China. Then we'll see if it's really cheap labor or "over-taxation" as the REAL reason why American jobs go overseas.

A new paper by the Brookings Institution’s Metropolitan Policy Program lays out the case for manufacturing exceptionalism in detail. The report, by Susan Helper, Timothy Krueger and Howard Wial, puts forward four main arguments.

First, it argues that manufacturing “provides high-wage jobs, especially for workers who would otherwise earn the lowest wages.” To show that, the study controls for workers’ personal characteristics, like their level of education, to compare similar workers in different industries. The researchers find that wages tend to be higher for manufacturing workers than for non-manufacturing workers, perhaps because manufacturers are willing to pay to retain higher-skilled employees. It is a point the administration echoes when it says that manufacturing will be an important source of middle-class jobs.

Second, the paper argues that manufacturing is important for innovation. Manufacturers tend to plow significant funds into research and development, much more so than other businesses in the private sector. Though manufacturing makes up about 11 percent of economic output, the paper says, manufacturing businesses account for 68 percent of the research and development spending by domestic business.

The paper cites studies showing that the “co-location” of research and production are important for improving business practices and generating innovation. It also argues that that manufacturers’ innovation and research can spill over to other workers and firms.

“The interdependence between production and innovation is apparent in many industries, and policy makers ignore this fact at the peril of eroding America’s competitive edge in both current and future industries and in services as well as manufacturing,” the study says.

Finally, the paper argues that manufacturing can help reduce the country’s trade deficit, and that smart manufacturing can promote environmental sustainability.

On the other side, conservative and right-wing economists argue that such claims about manufacturing are overstated, and that most manufacturing jobs will be low-wage and low-end, and therefore will go overwhelmingly to workers overseas. (DAH!!! That's why we need better trade agreements and labor unions.)

One way or another, it is undeniable that manufacturing employment is growing, even if that is just a bounce back from the depths of the recession. The economy has added about 330,000 manufacturing jobs in the last two years, after losing 52,000 factories during the George W. Bush years.

On the flip side...

In Mitt Romney's article in the Wall Street Journal today he says, "I believe we must make the tax code simpler and fairer. We must reduce tax rates for job creators to promote economic growth." I completely debunk his tax plan in my article Obama Tax Plan vs. Mitt Romney's.

Romney also claims, "I will abolish the death tax, whose primary effect today is to foster elaborate schemes for transferring wealth." What in the hell does he mean by that? Isn't it really low taxes and the many loopholes on trust funds, gifts, and generation-skipping estate taxes A.K.A. "inheritance taxes" ("death taxes") that REALLY fosters elaborate schemes for transferring wealth?

What is the most laughable is, Mitt Romney also says in his WSJ article, "One recent study estimated that simply returning policy certainty to pre-Obama levels could create 2.5 million jobs in less than two years." That's LESS than Obama has created in the last two years! The last I heard, Obama created 3.7 million NET new jobs.

The Wall Street Journal, the Republicans, the lobbyists, and Mitt Romney have all been completely debunked, and they all totally failed my Truth- Meter.

More on Big Oil

I was searching for historical data for U.S. oil exports, consumption, prices, and production – - and found this article (which also includes 30 charts) about oil from 1868 to the present:

I was hoping for a brief and less comprehensive (but more comprehensible) synopsis on this article.

The very long-term data and the post World War II data suggests a “normal” price far below the current price for a barrel of oil. However, the rise of OPEC, which replaced the Texas Railroad Commission as the monitor of spare production capacity, together with increased interest in oil futures as an asset class, introduced changes that support prices far higher than the historical “norm.”

It appears that speculation (by those who never actually take delivery) in oil futures is the biggest driving force of oil prices. Goldman Sach’s alone has huge blocks of stock in oil companies and trades vast quantities of oil futures.

Domestic production under Obama has risen (even with the moratoriums) and domestic consumption is down, and supplies have not been disrupted, but prices are still going higher…even before discussions of the Keystone pipeline and Iran’s threats to close the strait (which our military could still keep open if that was ever attempted).

If the Keystone pipeline only adds to the “world supply” at “market prices” that can be sold to other countries, how can it help domestic prices and supply, and give the U.S. “energy independence” (or for that matter, besides just oil, any other energy “asset”, including bio-fuels)?

While I understand that many average Americans benefit from profits made in the oil industry, like day traders, or if our 401ks, pensions, or Roth IRAs are invested in oil companies, when WE withdrawal our funds, we’re taxed as ordinary income.

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