Tuesday, February 3, 2015

Is America Still Globally Competitive?

Is the U.S. no longer "exceptional"? Can America no longer compete economically with other countries? Have foreign nations stolen our once-almighty thunder? Are we no longer globally "competitive"? Many shills for America's biggest corporations will have us believe that.

There are those (like Stephen Moore at the Heritage Foundation) who have persistently been saying for years that the U.S. should lower it's corporate tax rate to be more globally "competitive". They have repeatedly said that America has the highest [statutory] corporate tax rate in the entire world — although, in reality, American multi-national corporations usually have a much lower "effective" tax rate, because of all the Congressionally approved "loopholes" in our tax code.

Some corporations pay no tax at all, and/or are subsidized by the U.S. government (aka "crony capitalism" aka "corporate welfare"). Recently Obama and a few Democrats have proposed changing the tax code to lower the statutory corporate tax rate from 35 percent to 28 percent — and 25 percent for manufacturers. Rep. Paul Ryan (R-Wisconsin), the House’s lead tax policy writer, naturally embraced that idea.

To offset revenue losses attributed to a lower corporate tax rate, Obama and the Democrats wanted to close a few  tax loopholes, such as cracking down on corporations that shift profits to tax havens to avoid paying their fair share — or undertake "inversion" deals in which they reincorporate abroad to avoid paying U.S. taxes.

But the Republican are seeking far fewer loophole closings — and the Democrats, knowing full well that, with a Republican- controlled Congress, closing these type of loopholes is akin to raising taxes on the rich — and the GOP would never allow that to happen. (As Speaker of the House John Boehner had once said, "Hell no you can't!")

One of Obama's (pie-in-the-sky) tax proposals was to raise the capital gains tax to 28 percent (which is what it previously was when Bill Clinton first took office). The economic anarchist, Stephen Moore, recently claimed in an op-ed (at a right-wing website) that Obama raised the capital gains tax to 20 percent. That's a big fat lie: Obama didn't raise it, he actually extended the Bush tax cuts in 2010 for two more years before allowing them to finally expire in January 2013. Moore claimed that "the people who have gotten whacked by this tax are wage earners." Another big fat lie: It was mostly the top 0.01%. Moore also claimed that "100 million people in this country own stock and would be affected" [by raising the capital gains tax]. Another big fat lie: Only a fraction of working-class Americans indirectly hold stocks that are invested through their pension fund contributions (which is managed by other people). The vast majority of outstanding stock is directly owned by the top 10% — with the top 1% holding the lion's share.

In his diatribe at that right-wing rag, Stephen Moore also complained about the inheritance tax, saying: "Instead of a $5 million estate tax exemption, many middle-class families would get hit with taxes on inherited wealth." Mister Moore is so out of touch with reality, that he actually uses the term "middle-class" and "$5 million" in the same sentence. (Speaking of which, this is a must read for everyone —> The Tax Loophole Everyone Should Want to Close)

Stephen Moore also claimed, "About two-thirds of the evil rich that Mr. Obama is hell-bent on soaking with higher taxes own, operate or invest in small businesses." That also a big fat lie. It's all that Stephen Moore does — lie, lie, lie. He lies for the Heritage Foundation and he lies for the Wall Street Journal — and he lies every time he appears on Fox News or CNN.

But why do corporate hacks like Stephen Moore (and all the Republicans) always say that lower (or no) corporate taxes can make the U.S. more globally "competitive"? How exactly is America's economy NOT competitive with the rest of the world? Are other countries manufacturing and selling more stuff, and making more money than we are in America — and especially on a per capita basis? And if so, who? And if so, why? And if so, how can America be more competitive with them? Would lowering (or eliminating) the corporate tax rate accomplish this?

Are foreign corporations, because they have a lower tax rate, earning more profits than American companies — and as a result, are these "foreign competitors" paying their employees higher wages and offering better benefits than our own "job creators" do here in the U.S. — all because corporate taxes are too high in the U.S.?  The CEO-Employee pay ratios are much more unequal in the U.S., but is that because we have a higher tax rate? But then again, if that were the case, then why do American CEOs earn far more than their foreign counter-parts?

And just like American companies, have foreign companies also been hoarding trillions of dollars in offshore banks, because they have no place else to invest their cash? Holding cash in offshore banks (in order to avoid taxation) is a global problem that governments everywhere face. In 2012 Forbes reported that one study showed that the world's extremely wealthy have accumulated an incomprehensible $21 trillion in secretive offshore accounts.

To put $21 trillion into perspective: According to Credit Suisse's 2014 Global Wealth Report, for the world as a whole, personal wealth now totals $263 trillion — up 8.3% just from the year before — and was mostly driven by wealth growth in the United States and Europe. (Holy Toledo! Those corporate taxes must be killing them!)

Another one of Obama's tax proposals was a 19 percent minimum tax rate on American corporate profits that are kept overseas — which the GOP opposes. Obama also proposed a one-time 14 percent tax for companies that could bring trillions in profits home from overseas, with much of the proceeds going to fund infrastructure. But Rep. Paul Ryan would want that provision made permanent. He said, "One time doesn’t work."

If the U.S. lowered the corporate tax rate — or eliminated corporate taxes altogether — would the increased corporate revenues "trickle down" into the American workers' paychecks? And would the U.S. government also have enough revenue to maintain its infrastructure and defense spending? And if not, should we still lower the corporate tax rate to make American companies more globally "competitive"?

If the U.S. lowered (or eliminated corporate taxes altogether, including the capital gains tax), would the U.S. economy create — as Rep. Paul Ryan has called it — "bottom up organic economic growth"? He also recently said, “The Obamanomics that we’re practicing now have exacerbated inequality. They’ve exacerbated stagnation. They’re made things worse. The wealthy are doing really well. They’re practicing trickle-down economics now." (Whatever that's supposed to mean.)

If we didn't tax any businesses at all (for anything), would that restore America's global "competitiveness", restore America's "middle-class", and restore America's "exceptionalism"?

But on the other, if American companies also paid American workers (in the U.S.) the same wages as they paid to their foreign workers (in China and elsewhere), wouldn't that also restore America's global "competitiveness" — allowing these same American companies to hoard even MORE profits, while also paying their CEOs greater salaries?

In other words, if American companies didn't have to pay any taxes at all, then instead of offshoring jobs (thanks to horrible trade agreements that Obama wants to perpetuate) and using guestworker visas to displace American workers, would our "job creators" start to hire more American workers? Because the tax savings (theoretically) would allow them to pay their domestic employees much more than the 35-cents an hour that they currently pay their foreign employees in Vietnam and Cambodia.

Or would all the tax savings from a lower corporate tax rate (or no tax at all) just be going into the pockets of the job creators? And if so, wouldn't Paul Ryan's "bottom up organic economic growth" be more similar to old-fashion "trickledown" economics — but only this time, without a rising tide lifting all boats?

Most people who seriously follow this debate, know very well that if Obama and the Democrats were really sincere about tax reform, they would have done so long ago. But everybody knows that Obama (the Emperor) wears no clothes, and his mostly-meaningless tax proposals are only an attempt to prop up their economic populist messaging for getting another Democrat elected to the White House in 2016. And the Republicans, who are only now pretending to feel empathy for the working-class and poor, are also playing the same game — and for the same reason: To get a Republican elected to the White House in 2016.

But we can't be fooled again, can we?

Robert Reich recently asked: "How would you like to live in an economy where robots do everything that can be predictably programmed in advance, and almost all the profits go to the robots’ owners?" Then he says: "Brace yourself. This is the economy we’re now barreling toward."

So, could the elimination of all corporate taxes and the implementation of more robots restore America's "exceptionalism" and make America more globally "competitive"? If so, then we can forget about resurrecting America's one great "middle-class" — because "bottom up organic economic growth" will be nothing more than another cheap politico talking point and another broken promise to the American working-class.

* As an aside: Who has $517,000 to spend on an old cardboard baseball card, and what does it do for our economy? And who has $106.5 million to spend on an old oil painting, and what does it do for our economy? Christie’s and Sotheby’s combined sold roughly $14 billion worth of art last year, in record-setting amounts for both auction houses. The wealthiest Americans have grown wealthier since the Great Recession, and many are investing their wealth in art. As the New York Times reports, "76 percent of art buyers viewed their acquisitions as investments."

FYI: These aren't government acquisitions to preserve the "humanities" (the history of human civilization and understanding); these are private investments made by extremely wealthy individuals who can make a capital gains profit on SWAG investments (Silver, Wine, Art and Gold), which are taxed LESS than regular wages — "wages" meaning, income that is earned the old fashion way (through hard work and talent). Whereas, real wealth is created by the labor of workers who actually create real things — not the resale of past labor that is inflationated for nominal value for a profit by very wealthy individuals — the very people that Stephen Moore, Paul Ryan and the Republicans so feverishly defend.

Every year corporations spend billions of dollars on mergers and acquisitions, but very little (if any) is invested in employees’ wages — because (the CEOs say) raising wages would slow hiring, reduce worker hours, cause layoffs, raise consumer prices, destroy the economy, and end life as we know it on Earth. But what the "job creators" never tell us is, if they did raise workers’ wages, these CEOs might also have to buy one less beachfront mansion, a smaller private jet or a shorter luxury yacht.

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