Zero Sum Game
The phrase ‘zero sum game’ is bandied about a good deal these days. In game theory, a zero sum game is one where all the winnings and all the losses add up to zero.
If there was ever a perfect example, it is the relationship between ‘free trade’ and American jobs. All the winnings accrue to large corporations and all the losses are absorbed by the American job market.
Any duck hunter will confirm it’s hard to count a flock until at least some of them settle onto the water, and yet the daily (and hourly) fluctuations in stock price make it near impossible to value a company, let alone a conglomerate. The flock is in the air constantly, everything essentially owned by something else that is owned by something else, hidden deep within the bowels of a holding company and often as not offshore in a tax-free environment. That’s not only lawful, it’s been supported by congressional legislation over a number of decades.
Lots of feathers and quacking, all the targets moving.
The Sum Went South with the Ducks
Paul Abrams makes some interesting points in a recent column.1 Apparently, something upward of 40,000 Americans own secret foreign bank accounts that shelter their income from taxes. The cost of that to the treasury is estimated to be $100 billion a year, but who knows? Pretty hard and probably futile to estimate something kept so secret. But what was once difficult is now no further away than a mouse-click on a Google-search of tax havens. That, of course, covers only private accounts and is still merely a best-guess.
What corporations actually do is anyone’s hypothesis. Paul goes on to speculate about how many and where Bernie Madoff may have stashed secret accounts. Interesting conjecture. Over the 50 year conspiracy of Bernard L. Madoff Investment Securities LLC, we find that there were never any real investments. Bernie never bought or sold a single share. It was, instead, a Ponzi scheme and all we are left with is the current probable losses by investors (is an investor really an investor if there are no investments?), which may approach $50 billion.
That’s fifty-thousand million dollars gone somewhere. Undiscovered Ponzi schemes are very profitable and Bernie flew successfully under the radar for five decades, which eclipsed the original Ponzi by four and a half decades. Where are those secret accounts? Madoff has apparently decided going to jail is better than ‘fessing up to where he stashed the cash.
Ducks That Once Paid Taxes Migrate as Well
Dodging taxes is not a new game. Christ was born where the Virgin Mary and her husband went to pay their taxes. The establishment of Vatican City in 756 is cited as an early example. Those wending their way through the overwhelming richness of the Vatican’s public rooms, come away dizzy from the splendor. Michelangelo was beneficiary of the Pope’s religious tax exemptions in the 16th century.
We Americans just came a bit late to come to the party, corporate tax avoidance being mostly a post WWII maneuver that significantly aids and abets the decline of America under the flag of free trade. Tax avoidance follows tax legislation like ants show up at picnics and corporate tax dodging is unlikely to be eliminated by a well paid off Congress. Not only because Congress is paid by lobbyists, but also because corporations have the money and patience and doggedness to find and slip through loopholes buried deep within tax legislation.
The tax code entails some 67,000 pages (and more with every Congress), within which well paid accountants graze like fat cattle, looking for an unattended, contradictory or purposely planted wisp of forage.
Carol Leonnig writes in the Washington Post that a recently released GAO report shines a light on the abuses.2 Apparently, the huge group of firms practicing perfectly legal tax avoidance includes bailout recipients Bank of America ($45 billion), Citigroup ($45 billion), Goldman Sachs ($10 billion) and American Express (a mere $3.4 billion). Pepsi and Exxon are named, along with Dell, Dow Chemical, Caterpillar, Bearing Point, Boeing, Merck and Kraft. Bearing Point, one of Fortune Magazine’s Most Admired Companies in 2009, filed for bankruptcy almost simultaneously with that honor.
Sometimes justice comes too quickly for the nominations to close and even stashing the dough isn’t enough to keep the boat afloat. Is the General Accounting Office (GAO) the best invention of American government? Possibly.
Rearing their heads in righteous indignation, a bunch of the named companies howl that they are engaged in world-wide business enterprises and legitimately protect their foreign earnings. Maybe so, and they have complicatedly compelling arguments, yet in 2011, General Electric (GE) earned $14.2 billion in profits and paid zero taxes.3 But it’s interesting that Germany recently failed to support German automaker Opel, because for decades Opel had been essentially off-shoring its profits to parent GM, as licensing agreements. Result; no German tax revenue from Opel, which is built in German factories and sold everywhere except America.
The GAO report estimates the U.S. treasury loses $100 billion annually from off-shoring. But again, who the hell knows? A hundred billion over ten years is the $1 trillion estimated cost of Obama’s universal health-care plan that we are told we cannot afford.
If tax avoidance follows tax assessment and loopholes follow legislation, there is no clear route to closing those gaps and tossing aside the 67,000 pages of contradiction, except to do away with taxes entirely—both corporate and personal.
I’ve twice in my life wrangled with the Internal Revenue Service and both times went to court and once I won and once lost. Batting .500, which I guess is pretty good, but the tax system is busted and Griff Witte and Bob O’Harrow Jr. point that out eloquently in Thousands of Non-Defense Contractors Owe Taxes.4
The General Accounting Office reports that 33,000 contractors, currently working for the government, are tax scofflaws, to the tune of $3 billion. Part of why the Tax Code’s broken is the fact that they twice pursued little ol’ me all the way through the court system for amounts under ten thousand bucks and haven’t laid a finger on a guy (a health-care services provider) who used $18 million in unpaid payroll taxes to buy luxury properties and vehicles.
Another joker, who provided security guards to Homeland Security, transferred his company payroll taxes to a foreign bank account and built a home overseas with the dough. Both are still doing business with the government, along with their 32,998 additional partners in crime. This GAO report mirrors another from 16 months ago that identified 27,000 Pentagon contractors who owed another $3 billion. Nothing’s been done on that list either.
Oh, I’m sorry . . . that’s not exactly true. The government boasts that collections are on the rise. This year, the government is on pace to save more than $17 million in money withheld from Pentagon contractors. That’s a pretty frantic pace, $17 million is almost one half of one percent of what is (or was) owed. We have made tax payment refusal a three billion dollar profit-center for more than 99 out of every 100 military contractors.
Eisenhower’s military-industrial complex warning never even contemplated including tax avoidance as yet another thing to beware. The clock is still running on current delinquencies, but the inescapable fact is that if we didn’t have payroll deductions, Grover Norquist would have his way and government would shrink to a size where he actually could ‘drown it in the bathtub.’ There are some dark spirits who feel that is the actual goal.
Although I am a long way from Eisenhower (the first president for whom I voted), I would include another warning: beware the corporate-congressional complex. It dwarfs that of the military-industrial boys.
Bad law breeds contempt for that law and leads to widespread abuses. The old 55mph limit on Interstates was bad law and everyone broke it until it was finally repealed. Tax Law is bad law for lots and lots of reasons. One of its failures is that compliance is voluntary, even though penalties are mandatory. Some of us comply and some of us don’t. The IRS is so totally and chronically unable to keep up with that anomaly that they badger some and ignore others, without any real system. It’s no accident that the IRS only picks the low-hanging fruit, those cases where the defendant lacks the legal resources to mount a lengthy defense and nearly endless appeals. GE? Never. The small businessman, frequently. That prioritizing breeds contempt, followed by elevated non-compliance.
The ordinary American citizen is exposed, day after day after day, to yet another fat-cat or politically protected company getting away with economic murder in the non-payment of taxes. Every single instance reinforces the public impression that the rich and powerful get away with anything and the rest of us are made fools by our sheep-like voluntary compliance. Government collapses without the support of its citizens. It’s that simple. We are really, really close to that in tax non-compliance.
The thrust of O’Harrow’s Washington Post article seemed to be a GAO recommendation that would cross-reference abusers and deduct tax delinquencies before government agencies paid the bill. That’s wrong-headed and merely serves to spoon on another layer of unaccountable bureaucracy. Additionally, it drives a further wedge between voluntary compliance and the well founded and universal belief that the connected are getting away with diddling the tax-man.
But it’s interesting that corporations deduct taxes from you and me, yet the government fails to deduct taxes before paying corporations. Guess they have the potent lobbyists, while we have none, at least in the sense of someone to pay-off congress for our needs.
Corporations are people, with the same rights as individuals. The Supreme Court has said it is so. Free speech is allowed corporations, as it is individuals. The Supreme Court has said it is so. Political contribution is merely another form of free speech; no matter that corporations speak with billions while individuals are gagged by mere thousands or hundreds. The Supreme Court has said it is so. But free speech is no longer the ability to be heard equally and The Supreme Court has made it so.
Off-shore tax sheltering and the previous administration’s persistence in the face of runaway deficits to grant the wealthy further tax relief are just two of the factors undermining compliance. The third leg of non-compliance rests with lawyers and accountants. Essentially, you don’t poke a hornet’s nest with a stick, at least not more than once in your life. You and I face our day in court, but those who can afford it sic the dogs of law on the taxman and by so doing either make themselves an unappealing target or negotiate steep compromises. Either way, it’s another dagger thrust in the back of an already staggering body of compliance.
Former (now deceased) Senator Norm Coleman, a Republican from Minnesota and then Chairman of the Senate Governmental Affairs’ Committee, issued a statement that contractors failing to pay taxes
“cheated not only the American people, but their own employees as well.”
Nice sentiment, Norm, but the cheating underlies flaws at the IRS far more than it does governmental contracting procedures. The IRS is prohibited by law from disclosing tax information, even to other government agencies. That probably makes good sense for many reasons, but it confirms the IRS as a closed loop. The fix is not in opening the loop, but correcting IRS internal anomalies. Or shutting the damned place down as an irreparably damaged and special-interest infected bureau no longer worthy of life-support.
Replacement by an even-handed value-added tax structure is decades overdue.
The myth is that taxes support government’s ability to provide essential services. Further, the myth would have us believe that tax burdens are distributed equitably, everyone doing their share. The fact is that taxes are Congress’ tool with which to reward and punish. Our Senators and Representatives use their constitutionally appointed ability to write tax law the same way bees use flowers. To make honey.
The incredibly bloated K-Street conglomeration of lawyers and lobbyists exists almost entirely for the purpose of buying special-interest tax benefits for their clients. Each self (or industry) interest puts on stage its professional fiddlers and provides funding to individual legislators so they will listen to the music. Not only listen, but dance to the tune.
Music, honey, bees, fiddlers, flowers–all of them are convenient metaphors for graft. But you and I don’t have our own personal-interest fiddler. We’re not supposed to need one. There are those who rant that business and the rich don’t pay their fair share and an opposite bunch, equally sure of themselves, who insist that tax breaks are the growth stimulant for both jobs and economic stability.
Each has an argument, inspiring passion to the point of blows and neither is about what taxes are purported to provide–money to run government. Tax law and tax enforcement has become a weapon with which to reward and punish Americans, depending on their clout. The embarrassing truth is that taxes no longer support government.
The engine of modern American government is debt.
Those Migrating Tax Ducks Are Not Coming Back Any Time Soon
Ah yes, if you want to grin (or choke) your way through your morning coffee, see what Wikipedia5 has to say about flimflamming the tax man.
Tax avoidance is the legal utilization of the tax regime to one’s own advantage, in order to reduce the amount of tax that is payable by means that are within the law. By contrast tax evasion is the general term for efforts to not pay taxes by illegal means. The term tax mitigation is a synonym for tax avoidance. Its original use was by tax advisors as an alternative to the pejorative term tax avoidance. Latterly the term has also been used in the tax regulations of some jurisdictions to distinguish tax avoidance foreseen by the legislators from tax avoidance which exploits loopholes in the law.
Some of those attempting not to pay tax believe that they have discovered interpretations of the law that show that they are not subject to being taxed: these individuals and groups are sometimes called tax protesters. An unsuccessful tax protestor has been attempting openly to evade tax, while a successful one avoids tax. Tax resistance is the declared refusal to pay a tax for conscientious reasons (because the resister does not want to support the government or some of its activities). Tax resistors typically do not take the position that the tax laws are themselves illegal or do not apply to them (as tax protesters do) and they are more concerned with not paying for particular government policies that they oppose.
Oh gosh yes, what a good idea. Let’s have a pick and choose form of government. As has been said, you can pick your friends and you can pick your nose, but you can’t pick your friend’s nose.
Legal utilization of the tax regime is what fills those 67,000 pages of tax code with contradiction, tops off the campaign coffers of legislators and costs you and me (and even GE) a bunch.
The question of just how big a bunch, sent me wandering through tax compliance cost estimates for medium and large business, compiled by the Office of Tax Policy Research, University of Michigan Business School. The report is ten years old (2002) and the numbers configured by many differing parameters, but the conclusion seems to be that business spends $140 billion annually to remit $80 billion in taxes.
Now, I ask you, how does that make sense unless you are an accountant? Do you regularly spend a buck and a half to pay 75 cents? Makes you jump out of your skin, doesn’t it?
That money is being spent for tax avoidance, which is legal.
Robert Kuttner wrote nine years ago in Business Week6 that $200 billion is lost annually to lax enforcement, another $100 billion in fictitious tax ‘havens’ and an IRS loophole that allows U.S. businesses to “defer” indefinitely taxes on income earned overseas. That loophole, he claims, absolutely dwarfs the first two numbers and, of the three, all three are illegal.
A figure that dwarfs, depending upon your definition of dwarfs, could these days range anywhere from $500 billion to one $1 trillion. The IRS believes that just personal income tax avoidance or evasion amounts to an additional $345 billion annually.
The late Senator Everett Dirksen of Illinois famously said “a billion here and a billion there, pretty soon you’re talking about real money.” Dirksen’s been dead for thirty years and today’s billion is merely Ev Dirksen’s hundred million. A quick appraisal and adding of the above numbers amounts to a fingernails-on-blackboard screech, total loss of $1.145 trillion annually. Zeros, pal. Lots of zeros.
A few short years ago, while you and I went about our daily business, a Presidential Advisory Panel was at work. Actually, I doubt there’s been a time in recent memory when there wasn’t one presidential panel or another formed or meeting or in-the-process-of drawing itself up to its full height. It’s classic politics when you haven’t a clue (or wand to cloud a decision already made), to put together an advisory panel. A blue-ribbon committee is another favorite, although I’m not sure if a presidential advisory panel outranks a blue-ribbon committee or not.
This one was called by President Bush ‘to examine large-scale alternatives to the tax code.’ Large-scale was not defined and perhaps should have been.
Expenses paid, nice hotels and damn fine restaurants for the honored participants. Being part of an Advisory Panel is a pretty good gig. This one was bi-partisan, thus ladling the gravy in all directions; a no-obligation panel, whose advice the president is invited to accept or reject or simply sweep under the Oval Office rug. Those are the best kind. Presidents prefer them twenty to one over panels that take public positions presidents actually have to follow.
But this one, suggested as a breakthrough, ‘large-scale-alternative,’ to essentially take an aspirin and call them in the morning. Pretty much the same advice doctors have been giving hypochondriacs for years. Prescribe something, anything to get them home and out of the office. The panel’s Bayer-style advice was to ‘reduce the amount of mortgage debt for which interest is deductible’ and ‘cap the amount of health insurance premiums an employer can deduct at $11,000.’
Well, those are pretty amazing and astounding breakthroughs. Those recommendations surely comprise a couple of truly ‘large scale’ alternatives to the tax code. I’m stunned by the reckless abandon with which these bi-partisans ripped into the heart of the 67,000 page tax code. Rounding up the usual suspects, members further recommended additional tax breaks for charitable donations, removing the alternative minimum tax and on and on and blah and blah.
Fiddling. America isn’t burning yet, but like Rome, it’s getting warmer and they’re fiddling . . . fiddling.
The income tax is a broken leg upon which the country has been hobbling around, hopping from one unfairness to another for ninety-nine years. Long enough. Overlong. Certainly too long to be prescribed another aspirin or treated for hypochondria. There is evidence of serious disease, the near-fatal syndrome of off-shore wealth, millionaires paying no tax, billionaires paying damned little, homeowners siphoning off a public contribution to their home ownership from the pockets of renters, as well as a widespread and increasing perception that it’s all unfair, a crap-game with loaded dice.
77% of the American public agrees with the polling statement that the Tax Code needs major reform or complete overhaul. What nearly eight out of ten angry citizens got from the over-fed and over-wined panel for their concern was a further break for the wealthy, paid for by a reduction in interest and health-care deductions. The last few islands of relief for the little guy–gone.
“The only difference between death and taxes is that death doesn’t get worse every time Congress meets.”
And yet we are overwhelmingly supportive of taxes, as we should be. But you and I and our neighbors didn’t expand and manipulate and mess with the 1913 law that asked for a modest 1% of all net income above $3,000.
Lobbyists amplified that small dose of reality to its present tens of thousands of Alice-In-Wonderland pages.
Special interest groups sprang up overnight like mushrooms on the forest floor, each with their own little axe to grind, until the code became undecipherable.
The Code, as written, endlessly contradicts itself, thus providing a fat revenue source for lawyers and accountants.
NPR’s Connie Rice explains; 7
“To compensate the 1,800 companies that would lose the export tax break, Congress got drunk and decided to compensate 200,000 domestic companies not subject to the export tax to save them $76.5 billion over 10 years, instead of the $5 billion the 1,800 would have required,” Rice says. “Can you imagine Congress wildly expanding Head Start by a factor of 100 to cover thousands of ineligible children?”
The Tax Code is so murky a tool that government no longer has to prove you are at fault; they merely declare it and you are required to prove your innocence. The Internal Revenue Service needs to be abolished. Dump it, burn it, blow it up. Get rid of personal and corporate income taxes, do away with payroll and self-employment taxes, scuttle the capital gains, gift and estate tax, shrug off the alternative minimum tax and earned income tax credit. Drag it out behind the barn and shoot it, before it charges hell-bent into the living room.
That low rumble you may hear in the background on an otherwise quiet night is not distant thunder, but all the attorneys and tax-preparers and accountants contriving among themselves to keep it that way. Many of them would otherwise need to find honest work, tilling the soil or flipping burgers. Junking the Tax Code is one proposal that cannot possibly harm the economy. The American economic system would positively take off, producing jobs and prosperity beyond the wildest of dreams (and we have among us some pretty wild dreamers).
Think about this: A very large proportion of personal income taxes are collected and paid through payroll deduction. But corporations do not pay the income taxes of their employees; they collect them from consumers through prices.
Thus automobiles and refrigerators, books and bras and underwear manufacturers are all charging you and me the cost of employee deductions. Not only that, they charge us the cost of charging us; it costs business (us again) over $500 billion yearly just to collect taxes.
It costs small-business $724 to collect and send off $100 in taxes to Washington. How much sense does that make?
Immediately after the Second World War, corporations paid more than a third of all tax. Now they pay less than 11% because they are voluntary taxpayers. That’s a tricky word. Voluntary doesn’t mean you can decide to pay or not, it means you can take advantage of existing law to not pay. Guess how that happened? Guess who was the shepherd for the sheep of Congress?
Lobbyists for big business made it happen in the United States Congress.
Unlike 1945, today’s business world is largely without borders and big companies, like wealthy individuals, are more and more ‘residents’ of off-shore tax havens. Oh sure, they have corner offices in 50-story glass Manhattan headquarters and eat at Per Se or Gramercy Tavern, but they actually are domiciled (for tax purposes) in a dusty back-alley on Grand Cayman. Yeah!
Getting rid of the income tax would bring $6 trillion back home. Getting rid of the tax code would make us competitive again. There are better ways to do it—flat tax, VAT, take your pick—but the present state of the code is unworkable and unacceptable.
Failing that, the likelihood in this present recessionary period is that companies large and small will increasingly jump offshore to protect profit and avoid taxation. Law, particularly tax law, is viewed as an opportunity rather than a liability to the truly creative avoider.
The current rush to close down tax havens will merely increase the creativity. Other enabling language will add itself to the already swollen and unmanageable code. Unfair and obscure taxation feeds that response and you can’t get much more unfair and obscure than the current Tax Code.
Debt Is the Major Engine of Government
Debt, not taxes, runs the show.
If you’re currently maxed-out on seven or eight credit-cards and have a consolidation loan pinned on to what’s left of your decreasing home equity, join the party that Washington hosts. Just as consumers are enjoined to buy now, pay later, Congress after Congress no longer even pretends to resist the temptation to put it all on the federal credit-card. What the hell, the bill won’t come due during their terms and by then they’ll have a seven-figure job with a lobbying firm.8 They blandly call that the deficit and approve increases in the cap. America is the world’s profligate uncle.
Profligate: (adjective) recklessly wasteful; unrestrained by convention or morality.
Uncle Sam downs credit like a sailor on shore-leave and worries not at all about shoving cash across the bar, reaching for his already over-limit federal credit cards. Four or five trillion, possibly twice that, ‘on the cuff’ during the previous administration, in a country that used to make stuff (including cuffs) and doesn’t any more. Four or five or ten trillion, by an administration that claimed to be conservative Republicans. And the beat goes on, undiminished under Barack Obama.
Conserve: (adjective) keep in safety and protect from harm, decay, loss, or destruction; use cautiously and frugally.
Recklessness and money woes tend to encourage one another and our profligate President Bush is a reformed drunk. Did he fall off the wagon while on the country’s business? Is Obama unable to step on the brakes? Are there brakes anymore?
The prudent man (and America, particularly my old daddy, used to be prudent) earns money, puts some away, invests in equipment, builds a better mousetrap and spends years working his way up through Chevrolets and Buicks until he ventures into a Cadillac. Even then, he tends not to be smug about it.
But we Americans were (and are) both smug and arrogant, while that portion of the world that believed in us shrunk like a Chinese sweater. To a large extent, the Soviet Union kept us honest for half a century, but they’re not an adversary anymore and we’re intoxicated with money these days—other people’s money. Personal debt in America is out of control, with too many of us carrying four or five maxed-out credit cards. Our profligate Uncle raised profligate kids and the financial world outside the United States wasn’t answering the phone as often as they once did. The American dollar, standard of the world, is worth half what it was twenty years ago.
Everything in America is worth half what it was twenty years ago. That’s how a combination of inflation and currency decline creeps up on us. A latte at Starbucks for $3.50 to $4.00. A pound of ground coffee in the supermarket at nine bucks? Ten years ago it was 41 cents.9
Not true? Explain Chrysler unable to find a buyer at any price and prostrating themselves before Fiat. How has GM come to find itself on the ropes? Why are our airlines bankrupt and our bridges falling into the Mississippi, while we’re unable to rebuild, or even save the survivors of an American city hit by a Gulf hurricane?
We used to do those things not only for our own country, but for the nations of the world hit by flood, earthquake or monsoon and we never broke a sweat. How does it happen our schools are gone to hell, prisons full to bursting, 55 million without health insurance? We have a dollar in the toilet, a sinking middle class, a wall to keep Mexicans out and you think the world’s judgment of us is not true?
The last to recognize a society in shambles is the society itself—Americans in America. Harsh? I know that’s a harsh statement, but think about it.
Voters become desensitized as 100 billion dollar deficits morph to trillions and—amazingly—life goes on pretty much as usual. The often-expressed worry that our grandkids will be saddled with paying off this impossible burden is made toothless by the fact that we are not presently paying anything down.10 So why should our kids or grandkids fare any worse? We don’t admit that, but how else to explain never calling the kettle black? Pogo explained it best in a 1970 Earth Day cartoon;
“We have met the enemy and he is us.”
National debt is clouded and vague, wrapped in rhetoric and obscurity, the numbers unknowable in real terms. It took the entire 200 year history of the republic to reach a trillion dollar debt. Two hundred years, yet in the 25 years since the beginning of the Reagan administration, that number has risen fifteen-fold (depending upon the source) and life goes on pretty much as usual. We live in the moment, but we exist into the future and that future is increasingly irrelevant to any moment, much less the one during which you read this sentence.
Your part and my part (and each of the kids playing in the backyard’s part) of this mess is approximately $52,000. They run in the sun, try to out summersault each other, poke and giggle, blissfully unaware that what they owe is an average family’s income for a year. They never think of it, nor do you. No one is likely to walk up your front steps and demand it. We’re currently set to clickety-clack down the track at an additional $1.5 trillion every year, off as far as the horizon, until and unless tax revenues increase.
Yet any increase in revenue is already hampered by the $1.145 trillion we’re currently not collecting. Incredibly (and before your eyes entirely glaze over), “the Government Accountability Office (GAO), Office of Management and Budget (OMB) and the U.S. Treasury are warning that “debt levels will increase dramatically relative to historical levels if entitlement programs are not reformed.”11
Entitlement programs! Their solution is to extort it from the poor.
It’s perfectly OK for tax cheats, offshore companies and an underfunded (and politically discouraged) IRS to simply not collect (as if they had forgotten to take out the garbage) over a trillion dollars a year. But the cumulative wisdom over at the GAO, OMB and Treasury think the nation’s poorest citizens ought to make up that missing dough from entitlement programs. Food stamps, Medicare, Medicaid, aid to poor kids and Social Security are thus being tagged out at home plate by Senators and Representatives who
don’t need food stamps,
have no poor kids (nor have ever met one) and
laugh at the limited benefits of programs vital to those living on the edge.
“You can judge a nation by the way it treats its most vulnerable citizens.”
(Actually, it´s not Aristotle, but Gandhi, who said: “The measure of a civilization is how it treats its weakest members.”; Also, there were no nations in ancient Greece; TNP Editor´s note)
How many living on the edge? Try 44 million. One in seven and yet
Nearly 150,000 families a month are declaring bankruptcy.
Americans are increasingly at risk of financial ruin due to illness and medical expenses, according to a recent study by the American Journal of Medicine. The researchers found that illness or medical bills contributed to nearly two thirds, or 62 percent, of all bankruptcies in 2007—before the major impact of the housing collapse and current economic downturn. That’s a 50 percent increase over a similar survey in 2001 by the same researchers.12
In the face of the most stimulated fiscal and monetary policies in our history, we have experienced the loss of over 7 million jobs, wiping out every job gained since the year 2000.
Just think: Total payrolls today amount to $131 billion, but this figure is lower than it was at the beginning of the year 2000, even though our population has grown by nearly thirty million. Nonagricultural full-time employment actually fell by 142,000, on top of the 291,000 decline the preceding month. Half of the new jobs created are in temporary help agencies, as firms resist hiring full-time workers.13
Meanwhile, Congress wallows at the trough,14 enjoying comfortable salaries often given by themselves to themselves through legislative sleight-of-hand. Contrary to the arguments of unnamed Washington “insiders,” the cost of living rarely eroded lawmaker pay, which on a constant-dollar basis hovers near its postwar high. It’s yours and mine that’s dropped in real terms by 18% in the same period.
They don’t take the job for the salary anyway. They take it for the power and the ability to pull in the payoffs that power attracts.15
Like pension benefits that are two to three times more generous than those offered in the private sector for similarly-salaried executives. Taxpayers directly cover at least 80 percent of this costly plan and
Congressional pensions are also inflation-protected, a feature that fewer than 1 in 10 private plans offer.
Health and life insurance benefits, approximately 3/4 and 1/3 of whose costs, respectively, are subsidized by taxpayers, 55 million of whom are without any healthcare at all. With such a gold-plated health plan in place, the 55 million are meaningless as the health industry pays Congress to keep it that way.
Limousines are provided for senior members, prized parking spaces on Capitol Hill, and choice spots at Washington’s two major airports so they won’t be inconvenienced while traveling to far-flung destinations as well as to home states and districts.
Despite recent attempts16 to toughen gift and travel rules, “junkets” are still readily available prerogatives for many Members.
A wide range of smaller perks defy reform efforts, from cut-rate health clubs to fine office furnishings. The very nature of public office demands a more comprehensive definition of a “perk” than that applied to corporate America. Members of Congress also wield official powers that allow them to continue to enjoy the personal benefits outlined above, such as: the franking privilege, which gives lawmakers millions in tax dollars to create a favorable public image. Experts across the political spectrum have labeled the frank as an unfair electioneering tool. In past election cycles, Congressional incumbents spent as much on franking alone as challengers spent on their entire campaigns.
Congressional office staffs perform “constituent services” and dole out pork-barrel spending, also known as ‘earmarks,’ providing more opportunities for “favors” that can be returned only at election time. Exemptions and immunities from tax, pension, and other laws that burden private citizens — all crafted by lawmakers themselves.
Does that sound like Al Capone crafting prohibition legislation?
It’s simply not credible to expect those so securely cushioned from life’s realities, to operate on behalf of the nation’s poor and middle class, when they are paid to do otherwise. Ninety percent of the electorate is thus underserved by the very people they put in office. Will Rogers once quipped,
“A lobbyist is a person that is supposed to help a politician to make up his mind, not only help him but pay him.”
To the tune of $14 million in a single Harry Reid election cycle.
For decades we accepted (and complained about and anguished over) shortfalls between what government took in and what it paid out, amounting to $350-$550 billion annually. Currently kissing off a trillion every year, by our inability to control and collect taxes, we not only don’t have the money available, we fail to reap the surplus Congress allowed to slip away. Fifty years of Congressional failure to pay attention resulted in an $11 trillion debt instead of a probable (and quite reasonable) $5.5 trillion surplus. That, my friends (as John McCain would say), without a single penny of additional taxes and no need to dismember entitlements.
We elect these crooks, term after term after term to shove aside our best interests in favor of those who pay them. We constituents (the voters they claim to love and respect) merely pay their salary. The big money, the really great parties, the fantastic golf or duck-hunting vacations, as well as the choice retirement jobs17 are provided for them by Wall Street, the military guys and big business. We’re just the local folks they love to stand up for one day a year on the 4th of July, chests stuck out and a flag in their lapel.
AT&T kicked in over $40 million to political campaigns.18 Do we really think we’re going to get lower phone and internet rates? This is not a complaint or a rant. It’s merely the way things are and we swallow the lie that it’s otherwise.
Those who refuse to swallow are extraordinary patriots, as well as having nothing to lose by their opinion being made public. Such a man is the (now 90 year-old) retired Senator from South Carolina, Ernest Hollings. It’s a gut-wrenching illustration of what has come to pass in a mere forty years and what damage we do to ourselves in the name of free speech. Hollings wrote in 2006;
There is a cancer on the body politic: money.
It started with Maurice Stans in the 1968 presidential race, when Stans was collecting money for his candidate, Richard Nixon. Stans’s approach was direct. He told the textile industry that its “fair share” was $350,000, and 10 textile executives then raised $35,000 apiece. Millions were raised, mostly cash, which couldn’t be traced. The cry went out: “The government is up for sale.” And Congress reacted in 1974 with legislation outlawing cash donations in federal elections and limiting candidates to so much money per registered voter. In South Carolina, Strom Thurmond and I were limited in a Senate race to spending $637,000 each.
Fast-forward 30 years, taking into account inflation and the larger number of voters. Today a South Carolina race for the U.S. Senate would be limited to $3 million — if the spending limits were still in effect. But the limits did not survive a court challenge; they were thrown out in a 1976 Supreme Court decision that has had disastrous consequences. So in 1998 I had to raise $8.5 million to be elected senator. This meant I had to collect $30,000 a week, each and every week, for six years. I could have raised $3 million in South Carolina. But to get $8.5 million I had to travel to New York, Boston, Chicago, Florida, California, Texas and elsewhere. During every break Congress took, I had to be out hustling money. And when I was in Washington, or back home, my mind was still on money.
When I came to the Senate in 1966, we invariably would have a vote scheduled for 9 a.m. Monday to be sure that we started the week at work. And the Senate regularly was voting Friday afternoon. Now you can’t find the Senate until Monday evening, and it’s gone again by Thursday night. We’re off raising money. We use every excuse for a “break” to do so. In February it used to be one day for Washington’s Birthday and one for Lincoln’s. Now we’ve combined them so we can take a week off to raise money.
There’s Easter week, Memorial Day week, Fourth of July week and the whole month of August. There’s Columbus Day week, Thanksgiving week and the year-end holidays. While in town, we hold breakfast fundraisers, lunch fundraisers, and caucuses to raise funds. The late senator Richard Russell of Georgia said a senator was given a six-year term — two years to be a statesman, two to be a politician and two to demagogue. Now we take all six years to raise money. There is no time to rest or take it easy. Chairmen and ranking minority-party members of committees are charged with raising $100,000 for their party campaign committees. Regular members must raise $50,000, and senators are expected to attend each other’s fundraisers, as well as party fundraisers outside Washington. Political parties now raise money for senators, exacerbating the politics and the standoff in the Senate. You don’t feel like talking to a senator when he was at a fundraiser against you the previous evening.
In 2004, my last year in the Senate, we had Thursday policy lunches at which experts on both sides of a hot topic would make short presentations and we would hammer out policy. But from the beginning of the summer of that year until that fall’s elections, policy lunches were canceled so that senators could go to their parties’ headquarters and call all over the country, begging for money.
The result of this nonsense is that almost one-third of a senator’s time is spent fundraising. The Senate schedule calls for morning-long committee hearings (which many times extend into the afternoon). In the afternoon, there is debate on the floor and votes. Little time is left for talking to the staff or to constituents, answering mail, phone calls, etc. Every evening there is an average of three receptions or fundraisers, followed by three breakfasts or fundraisers the next morning. A senator has so many committee assignments that there is no way to attend all the functions he or she should. He’s constantly asking the staff or a colleague, “What happened?”
The Supreme Court ruling that left us with this mess was Buckley v. Valeo. The court held in that decision 30 years ago that the limit on campaign spending constituted a limit on free speech and was thus unconstitutional. On the other hand, limiting the speech of a contributor was deemed constitutional. In this decision, the court frustrated the intent of Congress. We wanted to limit both.
From the beginning, candidates have had to raise money, qualify and run. It was the candidate’s character and policy that attracted contributions — the more contributions the merrier. But people resented the rich buying elections, either as candidates or contributors. What the court did in 1976 was to give the rich, who don’t have to raise money, a big advantage — in effect, a greater degree of freedom of speech than others have. No one can imagine that in drafting the First Amendment to the Constitution, James Madison thought freedom of speech would be measured by wealth. The Supreme Court, which has found constitutional other limits on speech, has rendered Madison’s freedom unequal. Congress must make it equal again.
In efforts to correct the distortions caused by Buckley v. Valeo, Congress and the court have for years engaged in various contortions, without much success. What is needed is a simple one-line amendment to the Constitution. It would authorize Congress to regulate or control spending in federal elections. Since five of the last six amendments to the Constitution deal with elections, this shouldn’t be all that difficult to achieve. I introduced such an amendment with bipartisan support 20 years ago and got a majority vote but not the two-thirds vote needed for a joint resolution. There’s no question as to its favor with the people: The states have demanded that we apply it to their elections as well.
With a limit on election spending, senators could do their jobs again. They could go back to working for the country instead of for their campaigns.
Recently the cancer of money has metastasized. The Jack Abramoff scandal has revealed the poisoning of our democracy. The K Street lobbyists have become a cottage industry. A legislator who seeks money will do well to take onto his or her staff someone a lobbyist recommends. The staffer then arranges the industry fundraisers. And K Street tells you outright that if you don’t have a Republican lobbyist, your legislation is not going anywhere.
The lobbyists don’t bother with the senator; they take the staff to lunch. Legislation is not drafted in the Senate but in the law offices. Staffs are queried to make sure the senator is favorably disposed and once there are enough senators so inclined, the measure moves to the party leadership’s staff. The next thing you know, the measure is a party position and becomes “must” legislation. Sometimes a senator is on the way to the floor to vote on it, asking his staff, “What’s this all about?” and the staff replies, “You’re for this, vote ‘aye,’ or you’re against this, vote ‘nay.’ ”
The money crowd has the money, and representatives and senators need the money. But no one wants to touch the reason for the ethical misconduct. Excise the cancer of money, and most of the misconduct will disappear.
Hollings wrote that six years ago and in the meantime things have merely become worse. No wild-eyed pundit, Hollings walked the halls as Senator from South Carolina for thirty-nine years. Might be he knows something. It’s long and I really wanted to shorten it, but each sentence seemed too important to withhold.
In the current economic crisis, some business tycoons, Wall Street types and hedge-fund managers hire private goons to guard their homes and families from personal harassment and the protesters marching up and down their block. That’s okay I guess. But they are the temporary problem, the problem that can be fixed. Congress is the permanent problem, almost beyond the reach of critics, oversight or change.
Where are the protesters outside Harry Reid’s home in Las Vegas? How is it they’re not there, day and night, asking Harry what the hell he did with the $14 million? It’s illegal and a likely jail term to bribe a cop when he stops your car and you’ve had a bit too much to drink. It’s perfectly legal (because they write the laws) for Congressmen and Senators like Reid to take the money, legislate against the public will and public welfare, all the time raking in millions from the very people they are supposed to regulate.
Legislators, in interview after interview, decry deficit budgets (and the constancy of spending more that we collect) with crocodile tears. It’s the demands of the public, they whine, the growth of entitlements and forces beyond their control. Horse feathers! It’s the failure to collect what we’re owed by those who pay them off not to collect it. Any business that fails to collect its receivables must go to the bank for operating funds, until the bank finally says no. Debt is the engine of American government and our bank has been China and Japan. They are about to say no.
What a great way to run a Banana Republic, a Burmese Dictatorship or a Middle East Monarchy. But this is America, where over the past five decades the reputation of Senators and Congressmen dropped several notches below used car salesmen. It didn’t happen by accident. The neighbors didn’t do it. You and I allowed it and, by our distraction with daily life, encouraged it. We are the enablers of an addicted generation of legislators. A recent New York Times poll found that Congress’ approval rating had fallen to an all-time low of 9%. That rather caught me by surprise.
I had no idea it was anywhere near that high.
1 CNBC Champions Abusive Tax Havens: Dangerous to Your Health, Huffington Post, 4-7-09
2 Bailed-Out Firms Have Tax Havens, GAO Finds, Washington Post, 1-17-09
3 NYTimes, G.E.’s Strategies Let It Avoid Taxes Altogether, March 24, 2011
4 Bob O’Harrow, Jr., Washington Post, 6-15-05
5 Wikipedia, Tax Avoidance and Tax Evasion
6 Business Week, How Corporate Tax Evaders Get Away with Billions, 6-23-03
7 NPR, Connie Rice: Top 10 Outrages of the Corporate Tax Bill, 10-20-04
8 According to a study by Public Citizen in 2005, 43 percent of eligible members of Congress who left office since 1998 have become lobbyists. During that same period, 273 former White House staffers also registered as lobbyists.
9 Wikipedia, Economics of Coffee
10 The last president who both balanced the budget and paid down a portion of the national debt is just a memory. His name is Bill Clinton.
11 Wikipedia, United States public debt
12 Consumer Reports, Health care related bankruptcy is on the rise, study says, Jun 5, 2009
13 USNews, Why the Jobs Situation Is Worse Than It Looks, June 20, 2011
14 Executive summary, National Taxpayers Union
15 Harry Reid, last election cycle, $14,386,612
16 Code for Congress checking up on itself and finding itself without sin
17 Former United States Senator Chris Dodd is now Chairman and Chief Executive Officer of the Motion Picture Association of America
18 OpenSecrets.org, Top All-Time Donors
published: 18. 5. 2014