Saturday, January 31, 2015

Editorial: Whose Good Old Days? / Boehner and Bibi’s Common Foe

When Republicans — particularly teabaggers — say they want to go back to the good old days, you have to question what they mean. After all, the greatest period of prosperity in the United States was the approximately 30 years after World War II, when the federal government offered returning GIs low-cost mortgages to buy a home, low-interest loans to start a business and pay their way through college or trade school.

Union membership peaked at 34.8% of the nation’s wage and salary workforce in the mid-1950s and organized labor helped keep wages and benefits rising with productivity through the mid-1970s.

The economy boomed in part because tax rates remained at 91% for millionaires, encouraging corporate executives to plow their profits back into the company rather than inflate their own salary, most of which would end up in the US Treasury.

The postwar boom created the middle class that was the envy of the rest of the world but the plutocrats couldn’t abide workers getting a measure of security. “Economic royalists,” as Franklin Roosevelt called them, had never accepted the New Deal and after Roosevelt died in 1945 the plutocrats dreamed of rolling society back toward the Gilded Age at the turn of the century, when bosses could throw their weight around without pesky government regulations or income taxes and union organizers were hunted with dogs.

The plutocrats knocked the unions back on their heels in 1947, when Republicans regained control of Congress and, with the assistance of anti-labor southern Democrats, passed the Taft-Hartley Act over Harry Truman’s veto. The law limited labor’s ability to organize and strike, and allowed states to pass “Right to Work” laws that prevent unions from requiring fellow workers to join the union. But unions continued to grow, from 14.8 million members (25% of wage-and-hour workforce) after the war, to 21 million, 23.4% of wage and hour workers, in 1979.

Then Ronald Reagan took office in 1981. His administration stopped enforcing anti-trust laws and encouraged corporate executives to maximize shareholder value and dividends. That led, among other things, to the export of manufacturing jobs overseas while Reagan’s National Labor Relations Board was hostile toward union organizers’ complaints. Also, arguing that lower tax rates would stimulate economic activity, Reagan pushed for the top tax rate to drop from 70% in 1981 to 28% in 1988.

By 2014, unions were down to 14.6 million members. That amounted to 11.1% of wage and salary workers, but only 6.6% of private-sector workers were unionized, compared with 35.7% of public-sector workers.

Reagan also led an assault on higher education. When he got to the White House in 1981, his administration, with support from congressional Republicans and conservative Democrats, pushed through a combination of tax- and budget-cutting measures that slashed spending on higher education by 25%. Reagan’s budget director, David Stockman, called students “tax eaters ... [and] a drain and a drag on the American economy.” Student aid “isn’t a proper obligation of the taxpayer,” he said.

Reagan’s Education Secretary Terrel Bell wrote in his memoir that students needing aid were part of the problem, not very different from other “undeserving” Americans, such as the “welfare queen,” the out-of-work father drawing unemployment insurance, the poor families on Medicaid, the elderly in need of Medicare or even farmers relying on subsidies, Devin Fergus noted in the Washington Post (Sept. 2, 2014).

Those attitudes drifted down to the states, where legislators slashed higher education spending, with much of that money diverted to build prisons and cut taxes. States covered 65% of the costs of college in the 1970s. By 2013, states covered 30% of college costs.

Reagan significantly increased spending, primarily the Department of Defense, and he nearly tripled the national debt from $997 billion in 1981 to $2.85 trillion in 1989.

Reaganomics worked for the plutocrats. Since 1973, productivity has continued to grow strongly, especially after 1995, while the typical worker’s compensation has been relatively stagnant. The top 1% of households secured 59.9% of income gains over the last 30 years, the Economic Policy Institute’s Lawrence Mishel noted, while only 8.6% of income gains went to the bottom 90%.

To get back to the “good old days” will require working-class whites to abandon the plutocrats who are financing the teabagger movement. States need to get back to supporting higher education at a level that working families can afford without going into debt. Congress needs to reject “supply-side” economics and restore the ability of workers to organize unions so they can get fair wages and benefits to match productivity growth — or at least provide an incentive for bosses to pay their workers better to head off unionization. And Congress should restore the marginal tax rates for millionaires back to 50% or more (and do away with the lower tax on capital gains). Tax policy should favor working people instead of capital.

Boehner and Bibi’s Common Foe

Congressional Republican leaders have exposed their treachery in their efforts to undermine President Obama as they bypassed the administration in inviting Israel Prime Minister Benjamin Netanyahu to address a joint session of Congress.

Relations between Obama and Netanyahu have been strained since the first year of Obama’s administration, when the new president pressed Netanyahu to stop authorizing Israeli settlements in the West Bank and enter negotiations with the Palestinian state. When Israel announced it would go ahead with construction of 1,600 new homes in a disputed area of east Jerusalem in March 2010, during a visit to Israel by Vice President Joe Biden, it not only scuttled talks with the Palestinians but it was viewed as a calculated poke at Obama and then-Secretary of State Hillary Clinton.

Netanyahu supported Mitt Romney in the 2012 presidential election. But when Netanyahu accepted Boehner’s invitation to speak to Congress on March 3, two weeks before what looks like a close election in Israel, an anonymous White House official told the Israeli newspaper Haaretz, “We thought we’ve seen everything. But Bibi managed to surprise even us. There are things you simply don’t do. He spat in our face publicly and that’s no way to behave. Netanyahu ought to remember that President Obama has a year and a half left to his presidency, and that there will be a price.”

Netanyahu’s move may be backfiring. Josh Marshall noted at (Jan. 25) that former Israeli Ambassador to the US Michael Oren, who was appointed by Netanyahu, has said the speech threatens a rift with the US and should be canceled. And Sen. Dianne Feinstein (D), a steadfast supporter of Israel, gave a statement to Haaretz roundly trashing Netanyahu’s visit — both for the breach of diplomatic protocol and for the substance of what Netanyahu is trying to do: blow up US diplomatic efforts to reach an agreement with Iran. And Chemi Shalev reported in Haaretz that the speech debacle appears to be weakening Democratic support for the bill to put new round of sanctions on Iran — the bill President Obama has promised to veto.

When Iran in November 2013 agreed with six nations, including the US, to freeze portions of Iran’s nuclear program in exchange for decreased economic sanctions, Netanyahu denounced it as a “historic mistake.” But other prominent Israelis, including Shaul Mofaz, leader of the centrist Kadima Party, Labor Party leader Isaac Herzog and Amos Yados, the former head of Israeli military intelligence, voiced some support for the interim agreement.

Netanyahu has been spoiling for a fight with Iran for years, and he has been resisting efforts at reconciliation with the Islamic republic, whose leaders signaled their willingness to cooperate with the US in fighting al Qaeda after the 9/11 attacks, only to be consigned by George W. Bush to the “Axis of Evil” with Iraq and North Korea.

Next time Bibi needs a UN Security Council veto, he can check with Boehner. — JMC

From The Progressive Populist, February 15, 2015

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Selections from the February 15, 2015 issue

Wednesday, January 28, 2015

The American approach to helping middle class always seems to help the rich more

By Marc Jampole

When the Obama Administration announced plans to begin taxing future withdrawals from 529 college savings plans, those in favor played up the fact that 70% of all tax savings benefits from 529 plans go to families with more than $200,000 a year in income. The opponents of taking away this tax benefit to pay for other proposed educational reforms quickly pointed out that 70% of all 529 accounts belong to households with income under $150,000. Those opposed to reducing the tax benefit won the battle.
No one was asking why 529 plans are even necessary. The answer to that question is that the cost of going to college has risen precipitously over the past 25 years to the point that, without some assistance, large numbers of families can’t afford to send their children to college. The overwhelmingly most important reason for this rise in the cost of a college education is the withdrawal of federal and state support of higher education, starting in the Reagan years.
It’s a familiar pattern: A benefit meant to help the middle class address a financial challenge ends up helping the wealthy more. Most IRA money is in the accounts of people with the highest incomes. Remember that IRAs first came into existence under Reagan in 1981 as an alternative to traditional defined benefit pensions plans. In this case, it was the private sector retreating from its support of the middle class and poor—who primarily work for others—that led to the new need.
We see a similar pattern with the mortgage deduction. It used to be that all personal interest was deductible, but when Congress limited the interest deduction to home mortgages in 1986, again under Reagan, our leaders said it was to help keep home-owning more affordable. Again, even though affordability is not an issue to the wealthy, they are the ones to have benefited because they have larger mortgages. Politicians and pundits now associate the mortgage deduction with the middle class, but it’s the wealthy who benefit more.

It’s not just that the wealthy can deduct more from income because of these “middle class” deductions. It’s also the case that every dollar a wealthy person deducts is worth more in real money that isn’t taken away in taxes because the wealthy pay at a higher rate. These deductions may also drive other income below the threshold at which a higher taxation rate takes effect, thereby putting even more money in the pockets of the wealthy.

There are only three ways that government can address the lost revenue from a tax deduction:
  • Increase the deficit
  • Cut programs
  • Increase taxes on someone else
For most of the past 35 years, the federal government has preferred to increase the debt and cut programs. The net effect has been one more way of shifting income from the poor and middle class to the wealthy.

Thus we see time and time again over the past 35 years an institutional propensity to increase inequality of wealth in the United States, similar to the institutional racism that used to exist for decades throughout the country and still exists in the criminal justice system. Take something away from the middle class and poor, then give them a way to finance their new costs that ends up providing even greater benefits to the wealthy, who don’t really need the additional help. It’s a complicated shell game that has made a contribution to the dramatic increase in inequality of wealth and income in the United States over the past 35 years.