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Last Sunday, 60 Minutes had an explosive piece about what appears to be insider trading conducted by members of Congress. It looked at various examples of when elected representatives used non-public information to buy or sell stocks accordingly, thus profiting from their privileged status.
Washington took notice of the story in a major way. It was the subject of several floor speeches this week, and bills were introduced in both the House and Senate—including one sponsored by Republican Senator Scott Brown—to bar such deals, which are currently well within legal limits and probably even within Congressional ethics rules.
The thrust of the story is that when members of Congress are allowed to have vast stock portfolios while also working behind the scenes on legislation that could affect various industries, and this might motivate members to act not in the public interest, but for their own enrichment.
It’s an important story, in some ways more ominous than 60 Minutes suggested, and in some ways much less so. There have been charges of unfairness, particularly by some liberal blogs, in relation to the accusations towards House Minority Leader Nancy Pelosi. So let’s have a look.
Where the piece falls short
The piece, reported by Steve Kroft, named a few specific examples of potential insider trading. Kroft confronts both Pelosi and House Speaker John Boehner about shaky seeming transactions. He asks Pelosi about her participation in an IPO of Visa stock, just as the House was debating a credit card reform bill that would hurt companies like Visa:
And former House Speaker Nancy Pelosi and her husband have participated in at least eight IPOs. One of those came in 2008, from Visa, just as a troublesome piece of legislation that would have hurt credit card companies, began making its way through the House. Undisturbed by a potential conflict of interest the Pelosis purchased 5,000 shares of Visa at the initial price of $44 dollars. Two days later it was trading at $64. The credit card legislation never made it to the floor of the House.[…]
Congresswoman Pelosi pointed out that the tough credit card legislation eventually passed, but it was two years later and was initiated in the Senate.
That sounds awful, and footage of Pelosi stuttering and struggling to respond to Kroft’s questions at a press conference make it seem worse. But this version of events leaves out a lot of key facts: that bill did pass through a House committee, on the very last day of votes before the House adjourned for the November elections. Kroft is heavily suggesting that Pelosi didn’t bring the bill to the floor so that she might profit on her newly acquired stock, but doesn’t mention that there was no time left to do so and that a new Congress was soon to arrive in Washington that January anyhow. Kroft also doesn’t mention that the new Congress, with Pelosi leading the House, passed the Dodd-Frank financial reforms which were deeply opposed by credit card companies, and that before she bought her stock, she helped pass the Credit Cardholders’ Bill of Rights, which was also opposed by the industry.
For anyone that knows Pelosi’s tenure as a Congressional leader, it’s near laughable to believe that she was helping Visa so that she could profit on a relatively small stock purchase—it just doesn’t fit with the reality of her legislative record. And as many liberal blogs were quick to point out, Kroft admits he based his story on a book by Peter Schweizer, a conservative think tank staffer who has worked for George W. Bush, Glenn Beck and Sarah Palin, and who has lobbed completely baseless charges at Pelosi before. (Media Matters has more on Schweizer here).
But the hit on Boehner is just as shaky, too. Kroft notes that in 2009, Boehner bought a bunch of health insurance company stocks only days before the public option was killed. Kroft notes that Boehner “led the opposition against the so-called public option,” and implies he was trying to enrich himself.
This is off for several reasons. One, there’s a wide constellation of political and philosophical reasons Boehner opposed the public option, many of them much more compelling than a few stock purchases. Two, Boehner didn’t really have any inside track on finally killing it off—that happened in the Senate, where Joe Lieberman threatened to join a Republican filibuster if the public option wasn’t removed from the bill. There’s an ongoing debate over whether the White House and moderate Democrats were going to kill it anyway due to a secret deal, but in any case, Boehner didn’t really play a role. And the debate was heavily covered—anyone following blogs or news reports in those final days could read the writing on the wall. (I remember agonizing over it myself, presumably along with many other liberals). Kroft doesn’t prove that Boehner had any information that nobody else did.
Finally, critics of the story point to data that Congressional stock portfolios actually underperform the market, at least in recent years—meaning the problem of insider trading can’t be that widespread. Kroft should have mentioned this.
What the story gets right
The shakiness of these examples aside, most would agree that it’s still not good to have Congressional leaders buying health insurance and credit card stocks while dramatic legislation affecting those industries is being debated. Boehner and Pelosi don’t appear to have done anything wrong, but in a broad sense they probably shouldn’t have been involved in those stock purchases.
The story also squarely nails Representative Spencer Bachus, now chair of the House Financial Services Committee, for an obvious case of using inside knowledge on the stock market. Bachus was in a closed-door meeting in 2008 with Treasury Secretary Hank Paulson and Federal Reserve chairman Ben Bernanke—this is the infamous meeting where the duo told Congressional leaders there could be a second Great Depression.
Within a day, Bachus was buying stock options that would yield high returns if the market tanked—which it did. These meetings were so sensitive and secret that Blackberries were confiscated beforehand, but Bachus was apparently able to use that information to make sure his stock portfolio was protected.
Kroft also commendably looks at other examples of what he terms “honest graft”—where members of Congress take perfectly legal advantage of the system to enrich themselves. And these, too, are real problems. He notes that former House Speaker Dennis Hastert entered Congress worth a few hundred thousand dollars, and left a multi-millionaire. Primarily, Hastert achieved this buy purchasing a lot of land, and then using federal earmarks to enhance nearby infrastructure, thus boosting the land values. My colleague Lee Fang has uncovered very similar enrichment schemes by Representative Darrell Issa. This type of two-bit self-enhancement needs to be strongly addressed.
The potential for insider trading in DC surely serious reform, too, even given the paucity of Kroft’s evidence of abuse. Members of Congress should not be able to ply inside information in stock trades—Wall Street and the Congress are far, far too intertwined as it is, and public servants should only be motivated by the public good.
Of course, many are not so motivated, and this is one final area where Kroft’s piece falls a little short—missing, in a way, the forest for a few trees. John Boehner didn’t oppose the public option because he could swing a quick buck on the stock market; he opposed it largely because of the dump trucks of money his party has accepted from the for-profit healthcare industry over the years. The violation of the public interest is the same, and to a much greater degree—but this type of corruption is a lot harder to explain in a ten-minute broadcast piece.
Yesterday we posted a MoveOn.org-produced video of former Labor Secretary Robert Reich explaining how the supercommittee might reduce the deficit without imposing crushing austerity measures, nor damaging the social safety net relied upon by millions of Americans. It’s really excellent, and you ought to check it out.
On the eve of some decision by the supercommittee—or no decision and painful automatic cuts—this is a time to remember the other ideas out there for balancing the budget. There are plenty of credible and thoughtful plans out there. Granted, they are not politically viable at the moment, given the Republican Party’s control of the House of Representatives, and its ability to stop virtually anything in the Senate—not to mention the six votes it controls on the supercommittee.
But to listen to most media coverage of the deficit debates—and too often, the rhetoric thrown about by Republicans and some Democrats—one comes away thinking the only way to get the fiscal house in order is via “entitlement reform” and deep domestic spending cuts, along with higher taxes and fewer loopholes.
But this just isn’t so. For example, the Congressional Progressive Caucus crafted a “People’s Budget,” which eliminates the deficit within ten years while creating a $31 billion surplus—all while protecting valuable programs like Medicare, Medicaid and Social Security. You can read the entire budget here (PDF), a one-page summary here (PDF), and an outside analysis by the Economic Policy Institute here (PDF).
Here are some of the plan’s features. On taxes:
Ends the recently passed upper-income tax cuts and lets Bush-era tax cuts expire at the end of 2012
Extends tax credits for the middle class, families and students
Creates new tax brackets that range from 45 percent starting at $1 million to 49 percent for $1 billion or more
Implements a progressive estate tax
Eliminates corporate welfare for oil, gas and coal companies; closes loopholes for multinational corporations
Enacts a financial crisis responsibility fee and a financial speculation tax on derivatives and foreign exchange
Enacts a healthcare public option and negotiates prescription payments with pharmaceutical companies
Prevents any cuts to Medicare physician payments for a decade
Responsibly ends our wars in Iraq and Afghanistan to leave America more secure both home and abroad
Cuts defense spending by reducing conventional forces, procurement and costly R&D programs
The key theme of this plan is to put investment and job creation up front, while protecting the programs that many Americans rely upon for their economic well-being during a recession. Even Bill Clinton, no flaming liberal, called the plan “the most comprehensive alternative to the budgets passed by the House Republicans and recommended by the Simpson-Bowles Commission.”
Meanwhile, Occupy DC met in downtown Washington to discuss alternate deficit reduction proposals that would protect the 99 percent and attempt to correct rampant income inequality. They drew on advice from a wide array of economists and policy experts during the meeting, which you can watch here. The outline of their plan is here—it’s quite detailed and provides evidence and documentation for many of its claims. They are careful not to say it’s a “demand” of the OccupyDC movement, but the next time someone says the occupiers have no goals, you can send them this.
The plan shares many broad goals of the People’s Budget, like taxing high and corporate incomes more fairly and protecting safety net programs from cuts, while investing in infrastructure spending and other projects that will increase employment while improving the country.
Again, in the near term—as in, within the next six days, when the supercommittee must act—there’s no chance these proposals become reality. But OccupyDC says they offer this plan as a solution once the supercommittee fiasco concludes:
Once again, the people of the United States will see corruption reign supreme. Despite evident solutions to the deficit and the economic collapse, the Congress will show its corruption and dysfunction and be unable to put forward real solutions.
We issue this report to alert everyone—the political system is broken. It is corrupted by the power of concentrated wealth, campaign donations and corporate power. The job of the occupations across the country is to build an independent nonviolent movement that replaces this corrupt system with one in which the people rule. The battle between concentrated wealth and participatory democracy will be heightened by the evident corruption of the Super Committee which will not challenge the unfair policies of the 1 percent while requiring austerity for the 99 percent.
The economic and political elite should expect protests to grow. We are at the beginning of what will be seen as a historic revolt against status quo elites that will transform this economy as well as how the United States is governed.
Finally, in the spirit of Occupy Wall Street’s participatory democracy—perhaps you can come up with your own deficit reduction plan. The Pew Charitable Trusts has an interactive calculator that lets you play with 100 different spending and tax policies to create reduce the debt to sustainable levels, and the New York Times offers something similar here. If you come up with an interesting plan, leave it in the comments.
Today, the Supreme Court agreed to hear constitutional challenges brought on by twenty-six states and a business group to President Obama’s healthcare reform bill. There will likely be arguments in the spring and a ruling by July, right in the heat of the presidential election.
This is a good time to recall that seventy-four members of Congress have signed a letter asking Justice Clarence Thomas to recuse himself from any ruling on the Affordable Care Act because of his wife’s work as a conservative activist and lobbyist, where she specifically agitated for the repeal of “Obamacare.” The recusal effort was spearheaded by Representative Anthony Weiner, and his resignation in June slowed the momentum around this issue on Capitol Hill—but there’s still ample evidence for concern.
In 2009, Ginni Thomas founded Liberty Central, a conservative nonprofit that she said would fight President Obama’s “hard-left agenda.” Thomas said she “felt called to the front lines with you, with my fellow citizens, to preserve what made America great.” The group frequently advocates against “Obamacare,” pushing misinformation that it would be a “disaster” for small businesses and urging lawmakers to repeal it.
This created immediate concern among legal experts, who were worried about the obvious conflict of interest, given that her husband would likely rule on challenges to the law. Moreover, Liberty Central was taking unlimited and secret donations, something aided by Clarence Thomas’s ruling in Citizens United. The liberal group Common Cause complained to the Justice Department at the time, and noted “the complete lack of transparency of Liberty Central’s finances makes it difficult to assess the full scope of the ethics issues raised by Ms. Thomas’s role in founding and leading the group.”
Ginni Thomas resigned from Liberty Central late last year amid controversy over her role, though the decision was also aided by fundraising troubles and a bizarre, ill-considered phone call she placed to Anita Hill, the woman who accused her husband of sexual harassment twenty years prior.
But only a few months later, Ginni returned as head of Liberty Consulting, a new firm that boasted the ability to use Ginni’s “experience and connections” to help clients “with “governmental affairs efforts.” She met with over half of the incoming freshman class of legislators, and e-mailed all of their chiefs of staff, dubbing herself “a self-appointed, ambassador to the freshmen class and an ambassador to the tea party movement.”
When I covered the Faith and Freedom conference earlier this year, I attended a panel held by Ginni Thomas and several national Tea Party leaders about how to recruit and elect deeply conservative candidates to office.
Overall, Ginni Thomas’s activities raise questions “about whether Justice Thomas can be unbiased and appear to be unbiased in cases dealing with the repeal of the health care reform law or corporate political spending when his wife is working to elect members of the tea party and also advocating for their policies,” in the words of Common Cause lawyer Arn Pearson earlier this year.
Clarence Thomas should probably recuse himself, but it’s important to note that Ginni’s activities are much more likely a symptom of her husband’s deep bias and antipathy towards progressive causes, not the cause of them. In an excellent (and very long) profile of Clarence Thomas in The New Yorker, Jeffrey Toobin explained in great detail what motivates the extremely conservative justice:
It is likely to be the most important case for the Justices since Bush v. Gore, and it will certainly be the clearest test yet of Thomas’s ascendancy at the Court. Thomas’s entire career as a judge has been building toward the moment when he would be able to declare that law unconstitutional. It would be not only a victory for his approach to the Constitution but also, it seems, a defeat for the enemies who have pursued him for so long: liberals, law professors, journalists—the group that Thomas refers to collectively as “the élites.” Thomas’s triumph over the health-care law and its supporters is by no means assured, but it is now tantalizingly within reach.
You can read the whole thing here.
Demonstrators gather during a protest against the Keystone XL Pipeline outside the White House on Sunday, Nov. 6, 2011, in Washington. (AP Photo/Evan Vucci)
The Obama administration is on the brink of delaying the environmentally disastrous Keystone XL pipeline, according to Reuters. It will look for alternate routes for the pipeline because of serious environmental concerns in Nebraska, according to the report, and that delay could last twelve or eighteen months.
There are some caveats and warnings to the decision, but to be clear, it is a victory. The civil disobedience outside the White House this summer was the largest of its kind by the environmental movement in decades, and anti-Keystone protesters have followed President Obama virtually everywhere he’s gone in recent weeks. Clearly the administration has heard those calls, and fears a loss of support by the environmental movement—it’s inconceivable they would delay such a major project without that pressure.
Bill McKibben, leader of that civil disobedience movement, stressed today how important loud voices against the pipeline were:
It’s important to understand how unlikely this victory is. Six months ago, almost no one outside the pipeline route even knew about Keystone. One month ago, a secret poll of “energy insiders” by the National Journal found that “virtually all” expected easy approval of the pipeline by year’s end. As late as last week the CBC reported that Transcanada was moving huge quantities of pipe across the border and seizing land by eminent domain, certain that its permit would be granted. A done deal has come spectacularly undone.The American people spoke loudly about climate change and the president responded. There have been few even partial victories about global warming in recent years so that makes this an important day.The president deserves thanks for making this call–it’s not easy in the face of the fossil fuel industry and its endless reserves of cash.
The deepest thanks, however, go to you: to our indigenous peoples who began the fight, to the folks in Nebraska who rallied so fiercely, to the scientists who explained the stakes, to the environmental groups who joined with passionate common purpose, to the campuses that lit up with activity, to the faith leaders that raised a moral cry, to the labor leaders who recognized where our economic future lies, to the Occupy movement that helped galvanize revulsion at insider dealing, and most of all to the people in every state and province who built the movement that made this decision inevitable.
“It’s a huge victory, and it would probably be the biggest environmental gift that President Barack Obama has given us,” said Tony Iallonardo, a spokesman at the National Wildlife Federation. Jane Kleeb, who is leading efforts in Nebraska against the pipeline, said“When Pres. Obama stands up to big oil, we stand with him.”
Senator Bernie Sanders, an outspoken critic of the project, said he “welcomed” the decision and that he “strongly believe[s] that the more the American people learn about this project, the more they will understand that it would be disastrous for our environment and for our economy. They will want the president to keep his promise that the United States will lead the world in combating global warming by rejecting this pipeline.”
There are, of course, reasons to remain wary. As many news accounts note, this delays a decision past a crucial date—November 6, 2012. If this is a gambit by the administration to neutralize environmental opposition until after it can damage the president’s electoral chances, it is a deeply cynical move that will still badly damage the environment.
Still, the delay offers renewed hope that the pipeline project can be stopped. Transcanada, the company building the pipeline, said it cannot survive a delay, and some analysts have also said a long delay could kill the project if investors flee or try to find alternative routes for the oil. McKibben's statement makes clear he believe the analysts who say this will kill the project, and Nation writer Naomi Klein tweeted today: "to those saying Keystone will go ahead: TransCanada has said it cannot survive another delay without losing investors. Defeatism is stupid."
The delay also gives more time for the State Department’s inspector general to complete an investigation into improper associations with the oil industry during the approval process.
This morning, the U.S. Senate is taking serious, concerted action to address the jobs crisis in America. Kidding! The first two items on today’s agenda are Republican bills to roll back federal regulations: the first is a resolution of disapproval on the Environmental Protection Agency’s cross-border pollution rules, and the second would kill the Federal Communication Commission’s recent net neutrality guidelines.
You may recall that the FCC approved net neutrality regulations last December that said Internet service providers cannot block rival websites, nor can they prioritize connection speeds to different websites or servers. Proponents of true net neutrality have criticized the rules as being too soft—for one, they don’t apply to mobile devices, meaning that net neutrality may not exist in the ever-expanding world of smartphone and tablet Internet use. And even on the regular Internet, the guidelines are a little soft when it comes to not prioritizing traffic—they just say that ISPs cannot “unreasonably” discriminate web traffic, but doesn’t say what “unreasonable” means. That will be decided on a case-by-case basis, when people start complaining.
Nevertheless, that hasn’t stopped conservatives from, well, totally freaking out over the FCC’s actions. When the new rules were approved a year ago, Senate minority leader Mitch McConnell accused the Obama administration of “mov[ing] forward with what could be the first step in controlling how Americans use the Internet.” Rush Limbaugh crowed about “total government control of the Internet,” and Senator Kay Bailey Hutchison, the sponsor of today’s bill to roll back the rules, said on Fox News that “we’re starting to see the FCC say you have to come to us to get permission to manage your own website.”
Here’s a video compilation of their freak-out last year:
It doesn’t seem likely that today’s vote will succeed, given that most Democrats favor the net neutrality regulations. (Even Senator Scott Brown says he might vote against it, in what we’ll call the “Elizabeth Warren effect.”) Should the Senate pass Hutchison’s bill, President Obama has already said he will veto it anyhow.
But this is an interesting example of where conservative scare-mongering on regulations has actually outpaced the desires of the industry that would benefit from the deregulation. The sad truth is that Internet and phone companies already feel they won this battle with the watered-down rules.
In 2010, as the FCC was writing the net neutrality rules, Verizon spent $13 million on lobbying, AT&T spent $12.5 million and Comcast paid $8.8 billion to influence the process—and when the watered-down rules were passed, it proved their effort was not in vain. In fact, all three companies actively supported the rules after they were written.
As Senator Al Franken pointed out on the Senate floor yesterday, the big ISP and phone companies aren’t even out supporting today’s bill. It’s mostly the work of conservatives who think they have a good talking point on government controlling the Internet, along with groups like the Koch-funded Americans for Prosperity, which launched a website, NoInternetTakeOver.com, to combat the FCC regulations.
These far-right forces will surely get some mileage here with their base of true believers. But in reality, they’re fighting a battle that they’ve already won, if the intent is to prevent real net neutrality from taking hold.
UPDATE: The resolution to nullify the FCC's net neutrality rules failed, 52-46. Every single Democrat opposed it, except Senator Daniel Inouye, who is not present today. Every Republican--including Scott Brown--voted for it, except John McCain, who was also not present.
At a White House staff meeting yesterday, chief of staff Bill Daley made a surprising announcement: his role in the administration going forward will be reduced, and veteran aide Pete Rouse will take over day-to-day management of the West Wing. The Wall Street Journal notes, “It is unusual for a White House chief of staff to relinquish part of the job.”
It’s unusual, but it is good news for progressives. There is no doubt that Daley’s hiring represented a tack to the right, and towards a more corporate-friendly approach, and this demotion could reflect at least a partial retreat by the White House from that approach.
Daley was a troubling hire for progressives from the start. Only weeks before taking the job, Daley wrote an op-ed for the Washington Post about Democratic defeats in the midterm elections. His solution: “Either we plot a more moderate, centrist course or risk electoral disaster not just in the upcoming midterms but in many elections to come.”
At his introduction to the press, President Obama noted that Daley would bring valuable business experience to the White House because he’s “led major corporations”—notably, Daley was a vice-chairman at too-big-to-fail bank JPMorgan Chase. The Chamber of Commerce lauded his hiring, while MoveOn and Public Citizen bashed it.
The results were exactly what everyone predicted: under Daley, the White House made deficit reduction a top priority, and infuriated liberals by offering repeated concessions to Republicans in order to achieve it. Democratic leaders in Congress weren’t fond of Daley, either: Senate majority leader Harry Reid was reportedly “livid” with Daley for cutting side deals with Republicans during the debt negotiations, and for telling Politico recently that “both Democrats and Republicans” were to blame for Obama’s governing troubles. That sounds like something straight out of a David Brooks column, but does not even approach the reality of Republican intransigence and Democratic over-compromise—something Daley must have known given his role in those very negotiations.
Daley’s touted affinity for business interests led to some disastrous executive branch decisions. In early September, the White House ordered the Environmental Protection Agency not to enforce stricter standards on smog emissions—even though the EPA itself called the current standards “legally indefensible.” During the deliberation process, Daley got personally involved in meetings with representatives from Business Roundtable, the Chamber of Commerce and other groups. His unique influence in that debate shifted the outcome, according to all involved:
“We saw that as a positive—his level of interest, him sitting in on these meetings, him weighing in on this issue within the administration,” Johanna Schneider, executive director of external relations for the Business Roundtable, told The Hill. “I think it’s emblematic of his role in the administration as part of the outreach to the business community.”
“It moved the issue up to the top of the agenda for the president. That is what happens when you have a White House chief of staff getting involved,” Schneider said. “You have one of the two or three people in government who can control the agenda.”[…]
Rena Steinzor, president of the Center for Progressive Reform, a liberal-leaning regulatory think tank, said it was “astounding” and “really, really unusual” that Daley participated in the OIRA meetings. “You hear rumors of him having meetings like this, but you never see him trundling down to their office in the Old Executive Office Building,” Steinzor said. “I think what this did is elevate this EPA rule to the highest levels of the White House. It shouldn’t go unremarked that the president’s top political guy was sitting in meetings with interest groups about what is essentially [EPA Administrator] Lisa Jackson’s responsibility.” [Emphases added.]
Daley’s new responsibilities haven’t been fully defined, according to the Wall Street Journal. But there’s no question his profile has been lowered. It’s important to remember that the cossacks work for the czar—in other words, Obama is the boss and always has been, and Daley can’t be blamed for every bad White House decision.
But Obama may now want to go in a different direction, as evidenced by his increasingly confrontational approach to Congressional Republicans for blocking the jobs bill, and now by Daley’s apparently reduced influence.
And while few know the true motivations of the White House, it’s not hard to imagine that while facing a mass popular movement against big banks and predatory capitalism, not to mention the increasingly likely possibility it will face a Republican opponent in 2012 best known for starting Bain Capital, it’s not ideal to have the most important non-elected person in the White House be from JPMorgan Chase.
Particularly in recent months, Republicans have gotten a lot of mileage out of the claim that 47 percent of Americans don’t pay taxes. “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax,” Rick Perry said in his presidential announcement speech. “A majority of American households paid no income tax in 2009. Zero. Zip. Nada,” declared Senator John Cornyn of Texas this summer.
The truth behind the truth, of course, is that 47 percent of Americans don’t pay federal income taxes because they don’t earn enough money. For example, a couple with two children earning less than $26,400 isn’t required to pay any income taxes, because they are presumably stretched thin enough already. The elderly, poor and young receive various tax credits that exempt them from having to pay already meager incomes to the federal government.
If Republicans really wanted to go after tax freeloaders, they ought to start talking about big corporations. Today, Citizens for Tax Justice released a damning report detailing how many large corporations paid ridiculously low tax rates on billions in profit—and in some cases, actually got money from the government.
The CTJ studied tax information from 280 of the country’s largest corporations over a three year period from 2008–10, and found that though the corporate tax rate is 35 percent, on average those companies only paid about half of that. Among the other findings:
Only 25 percent—71 companies—actually paid something close to the federal corporate tax rate of 35 percent. They averaged a 32.3 percent effective tax rate.
An equal number of companies, 67, paid an effective three-year tax rate of less than 10 percent. Their average tax rate was zero.
Most shocking, 30 companies actually paid a negative effective tax rate, meaning that through clever accounting and generous government subsidies, they actually got money from the government. These companies made a profit of $160.4 billion over the same three-year period. Here’s a list of these companies:
In my recent piece for The Nation, “How to Be a 1 Percenter,” I looked at some of the ways that rich corporations and individuals use the legislative process to protect and enrich their fortunes. Fighting for tax breaks and subsidies is a key way to protect that wealth.
The CTJ study found four industries that get 56 percent of federal tax subsidies, and they aren’t likely to elicit much sympathy from actual taxpayers: the largest industry to benefit is financial services, which received $37.5 million in federal subsidies and paid an effective tax rate of 15.5 percent over the past three years. The other three industries receiving a majority of tax subsidies are utilities (like gas and electric companies), telecommunications companies, and oil and gas companies.
Defense contractors also do pretty well—the top ten have enough accountants and lobbyists to keep their average effective tax rate at less than half of the 35 percent corporate rate, despite $67 million in profit over the past three years:
It’s hard to imagine most Americans would actually support paying fewer taxes than defense contractors, oil companies and Wall Street firms—while giving some of what they do pay in the form of subsidies to those same corporations. But that’s the reality of the current tax system.
Republicans, however, uniformly want to cut corporate taxes—while, apparently, seeking to raise them on the 47 percent of Americans that don’t make enough money to pay taxes under the current code.
Unfortunately many Democrats also support cutting corporate taxes, though they at least want to get rid of the subsidies too—President Obama recently proposed lowering the corporate tax rate from 35 percent to somewhere between 26 and 30 percent, but wanted to pay for it by closing the loopholes and exemptions that allow so many companies to get away with not paying taxes.
In any case, it’s hard to look at a tax system where many middle-income people pay taxes at a higher rate than multibillion-dollar corporations and say that it’s fair. The next time a journalist acts confused as to why so many people are taking to the street, protesting unfairness in the economic system, the CTJ report is one of many good examples to bolster the people’s case.
For the austerity class in Washington, yesterday was high theater. The Congressional supercommittee on deficit reduction heard hours of testimony from people who served on other deficit commissions about how best to cut the government’s budget. Both Alan Simpson and Erksine Bowles, of the Bowles-Simpson Commission, testified, as did Alice Rivlin and Pete Domenici, who have their own deficit reduction plan.
A morality play about the evils of national debt unfolded: the scene, as set by Domenici, was a fiscal house in disarray—“We have rats, holes in the roof and grass growing window high,” he said. Bowles—a board member at Wall Street megafirm Morgan Stanley—invoked his grandchildren and told the supercommittee not to “fail the country” by not agreeing on a major deficit reduction plan. Rivlin, who helped Representative Paul Ryan craft his Medicare privatization plan, proclaimed that “this committee can change the course of economic history for the better.”
The villains in this battle were Grover Norquist and the AARP, both of whom were repeatedly invoked as obstacles to a true deficit reduction package. Former Republican Senator Alan Simpson said Republicans should feel free to raise revenue, even if it caused Norquist to “have a stroke over in his shop.” He also blasted AARP for a television campaign to protect Medicare from supercommittee cuts. He called the advertisements “really ugly” and “the most disgusting ad I've ever seen.” (The ad can be seen here; it features a friendly senior citizen asking not to have his benefits reduced.)
No actual specifics were hashed out by supercommittee members—that’s being done behind closed doors, and as we noted last week, the left side of the supercommittee has already proposed a package that’s well to the right of the Bowles-Simpson proposal. Needless to say, the Republican proposal is even worse.
But other developments outside the hearing room yesterday have serious import—and should cause serious concern among progressives.
Reuters reported on the existence of a super-supercommittee—six members of the twelve-member supercommittee are negotiating a compromise amongst themselves. The Democratic members are Representative Chris van Hollen, and Senators Max Baucus and John Kerry.
That means Representatives Xavier Becerra and James Clyburn—the only true progressives on the committee—have been excluded from the negotiations. Becerra is a member of the Congressional Progressive Caucus, and Clyburn has already reportedly opposed the Medicare cuts being discussed and spent most of his time at the hearing yesterday addressing income inequality, using charts that showed explosive growth in post-tax income for the top 1 percent.
But they apparently no longer have a seat at the table with their fellow Democrats. The only other Democrat to be excluded was Senator Patty Murray—and that’s logical because, as a co-chair of the committee, she can’t really be part of the subgroup. (The Republican co-chair, Representative Jeb Hensarling, was left out of the Republican side as well).
Last week, Democrats proposed a package that features deep cuts to both Medicare and Social Security, and now they have sidelined progressive members who might oppose it. I’m not sure there will be a deal—Republicans are still not budging on raising taxes—but Democrats are trying awful hard to make a bad one.
As we’ve been reporting, Democrats on the supercommittee—led by Senator Max Baucus—are pursuing a “grand bargain” on deficit reduction, which would include tax increases, spending cuts, a new round of economic stimulus and steep cuts to both Medicare and Social Security. Republicans have rejected the deal in favor of their own, which basically includes all of the cuts and does not include tax increases nor stimulus spending.
But several Democratic members of the House are increasingly upset with how supercommittee Democrats are carrying out the negotiations, and are threatening to vote against a package that includes deep cuts to the safety net. Some are even planning an attempt to get rid of the supercommittee altogether.
Representative Maxine Waters of California has introduced a bill to repeal the supercommittee, and the $1.2 trillion in cuts it’s mandated to make. She believes the committee is “illegitimate” and “borders on unconstitutional.”
At a breakfast meeting with progressive reporters and bloggers today, Waters said she knows her bill probably doesn’t have the support to pass right now, but she wants it on the table if the supercommittee deadlocks. “Of course its’s a long shot. But right now people are getting more and more agitated, frustrated and concerned about this supercommittee and not happy that there are those who are saying, including the president, they want even bigger cuts,” Waters said. “So it may fall apart. If it falls apart my bill is there to say ‘kill it.’ ” She added that she’s spoken to several Republicans who are equally unhappy with the supercommittee’s power.
Waters’s frustration is shared by many Democrats in the House, who feel not only shut out from the process by colleagues in the Senate—Baucus is reportedly acting with guidance from Senate majority leader Harry Reid, leaving House minority leader Nancy Pelosi on the sidelines—but are also shocked at the level of cuts to Medicare and Social Security being proposed.
Representative Henry Waxman told Politico today that he has “no stake” in the committee and called it an “outrageous process” that is “not open and transparent.” He said the “things put forward by Democrats…I would never vote for.”
Much of the Democratic caucus could bolt from a supercommittee deal that looks like what Baucus has proposed, according to Representative Gerry Connolly in his remarks to Politico. “It’s a mistake to not bring [minority] leader Pelosi into meetings,” said Connolly .“If she’s not a stakeholder in a final product, neither is the Democratic caucus.”
With Republicans refusing to budge on revenues, a deadlock seems likely—meaning steep, across-the-board cuts to defense spending and domestic programs would be triggered. “I’ve always thought it will deadlock. I’ve never been one who believed anything meaningful would come out of it, if you assign six Republicans to it and they’ve all signed a pledge there can be no revenues,” Representative Peter DeFazio told me this morning at the breakfast.
Some Republicans have already publicly pledged to undo the defense cuts if the triggers are activated—and Waters said today some Democrats would likely try to protect domestic spending cuts.
It’s far from clear what the end result will be, but it’s pretty clear that nobody will like it—and many will try to change it.
Today at a meeting with progressive journalists and bloggers, Representative Gwen Moore of Wisconsin—the only person to have beaten Governor Scott Walker in an election—read her original poem called “Job Creators.” It’s a challenge to that vaunted group, which Republicans eagerly claim to promote and protect at all costs. It was really too amazing not to post right away: