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Last night, the House of Representatives declined to take up Speaker John Boehner’s “Plan B”—a measure that would have simply extended the Bush tax cuts on everyone who earns under $1 million annually, and put off the rest of the fiscal cliff issues off until a later date.
Up until, Boehner had been negotiating a deal with Obama, and doing a pretty decent job, from his point of view. He got Obama off the $250,000 benchmark for extending the Bush tax cuts, and up to $400,000. He got Obama to scrap his demand for a permanent debt-ceiling fix. He got Obama to propose a Social Security benefit cut, which has enraged progressives.
But in a replay of 2011’s debt ceiling negotiations, it became clear to Boehner he probably didn’t have enough votes to pass this “grand bargain” with a majority of his caucus behind him. So on Monday evening, Boehner phoned President Obama and said the House would take up the bare-minimum “Plan B”—which was meant to be a mattress on the ground for Republicans if no deal could be reached by January 1. They could say they still protected the tax cuts for most Americans, with a small concession to Obama’s position by not protecting them for people earning over $1 million.
House Republicans, however, proved unwilling to make even this tiny concession. While Grover Norquist endorsed it, many others—the Club for Growth, Redstate.com, the Heritage Action Fund—actively pushed for “no” votes because it still raised taxes. And in a contentious, closed-door meeting last night, Boehner’s members made it clear to him that he didn’t have enough votes to pass it. So he didn’t even put it up for a vote. (During the meeting one Boehner ally stood and asked recalcitrant conservatives “how the hell can you do this?”)
This was already probably obvious, but after last night we now know it’s true: no deal can pass the House without significant Democratic support. The House Republicans will not agree en masse to anything remotely acceptable to the Senate and White House. The GOP line today, dutifully repeated as always by Politico’s Playbook, is that “Senator Reid and President Obama now have what they sought to avoid: responsibility for putting forward a plan of their own that can pass.” Ignore that—it just means that Democrats should put together a plan that the House GOP will accept, which is simply not going to happen. Obama will not cave to the Republican demand of no tax rate increases whatsoever.
So now Boehner has a choice. He can restart his talks with President Obama and fashion a deal that at least some of his party can swallow, and pass it with most of the Democrats and some of the Republicans. It’s not clear that deal will be any better than what Obama’s already proposed: the chained-CPI has inflamed progressive fury and probably represents the outer limit of what Congressional Democrats will agree to, if they even will at all. Pelosi says she can get Democrats behind that plan, though I’m not sure about that—Boehner was saying at this time yesterday that he had the votes for Plan B. The leaders always want the members to think they’ll be on the losing side if they don’t go the way leadership wants. Plenty of Democrats in both chambers have said they won’t support the Obama proposal, and MoveOn.org and the Progressive Change Campaign Committee are threatening to primary any Democrat who does.
But maybe Boehner can squeeze one more concession out of Obama, though it would have to be pretty symbolic to retain Democratic votes, and pass it out of the House. This is very risky territory for Boehner, however—if he openly bucks his base and negotiates a deal that more Democrats than Republicans agree to, he could be ousted as Speaker in January when the new Congress selects its leaders.
If he takes the other route, and stands by the will of his base, we’re going off the cliff. That then weakens the Republican position even further, because polls overwhelmingly show the public will blame the GOP for going over—a position no doubt enhanced by last night’s disaster in the House. Also, all taxes go up on January 1, meaning that Obama’s proposal to extend them above $400,000 is actually a massive tax cut.
No choice looks particularly good for Boehner right now. He closed this morning’s press conference with a brusque “Merry Christmas, everyone,” but it won’t be one for him.
But progressives shouldn’t necessarily celebrate. Having Boehner negotiate from a weaker position is good—though we likely can’t get back the concessions Obama already put on the table (which he definitely did too soon, by the way). And if Social Security cuts pass with majority Democratic votes, that’s both a moral and political disaster, as Digby notes. What’s also not good is if Boehner gets dumped in favor of a true hardliner. In that case, we might look back on the gridlock of the past two years rather fondly.
For more on John Boehner’s failed plan, check out John Nichols’s latest.
President Obama made a strong opening push on actually advancing gun control legislation yesterday, calling for policy recommendations within a month, which he will then highlight in his State of the Union address and subsequently push for in Congress. While Obama has been painfully absent from the gun debate, failing to even mention the assault weapons ban for most of his first term, this is now about as proactive as he could possibly be.
At a White House press conference, he first invoked the slaughter at Sandy Hook Elementary, but then crucially expanded his scope: he spoke of “what we might do not only to deter mass shootings in the future, but to reduce the epidemic of gun violence that plagues this country every single day.” He closed by once again reminding people it’s not just Newtown:
Since Friday morning, a police officer was gunned down in Memphis, leaving four children without their mother. Two officers were killed outside a grocery store in Topeka. A woman was shot and killed inside a Las Vegas casino. Three people were shot inside an Alabama hospital. A 4-year-old was caught in a drive-by in Missouri and taken off life support just yesterday.
Each one of these Americans was a victim of the everyday gun violence that takes the lives of more than 10,000 Americans every year—violence that we cannot accept as routine.
So I will use all the powers of this office to help advance efforts aimed the at preventing more tragedies like this. We won’t prevent them all, but that can’t be an excuse not to try. It won’t be easy, but that can’t be an excuse not to try.
Obama tasked Vice President Biden with heading the task force that will come up with the legislative recommendations, which is also encouraging: the National Rifle Association gave Biden an “F” rating as a Senator and has called him “the most anti-gun vice president in American history.”
In the House, Minority Leader Nancy Pelosi announced a push for both new gun laws and increased mental health services. She tapped Representative Mike Thompson of California to lead the effort. At first blush it could be a troubling choice—Thompson is a gun-owner that served as head of the Sportsmen’s Caucus, and has previously co-sponsored legislation that would ban trigger locks and gun registration in the District of Columbia.
But a House source told me Thompson gave an eloquent speech in Tuesday’s caucus meeting, describing a change of heart on guns and a new desire to push for stronger safety measures. He echoed this in a statement yesterday, saying “I understand guns, their purpose and how they are used. Military-type assault weapons and assault magazines have no place on our streets or in our communities.” If Thompson can work on changing the minds of fellow moderates and gun owners, it could perhaps be a wise selection.
It’s possible, though unlikely, that low-bar measures to ban high-capacity clips and strengthen background checks could pass a Republican House, which will exist for at least the next two years. But even if the effort fails it starts potentially crucial momentum on the issue: if Republicans vote against common-sense gun control measures, and then find that to be a potent attack against them during the 2014 midterms, the gun control dynamics in Washington start to change.
Meanwhile, there’s movement at the state level too. The Buffalo News reported late yesterday that the New York state legislature might enter an unscheduled special session before Christmas to consider new gun control measures. Governor Andrew Cuomo, a likely 2016 contender, is reportedly eager to be the first in the nation to tackle this issue—he wants the state to pass an assault weapons ban and a ban on high-capacity magazines.
It’s encouraging that a potential presidential nominee wants to use gun control in his favor. And New York State will be an interesting test case—though gun control may popular in New York City and Buffalo, there are very large, rural areas of the state where hunting is popular and gun-owners abound. If Cuomo can get real reforms passed by the legislature, it would be a promising sign of things to come.
Gun control advocates will have to battle “The Unbearable Elasticity of Gun Logic,” writes Todd Gitlin.
In this week’s issue, we describe how Walmart has expanded gun sales—including military-style assault weapons—to half of its stores nationwide, and is the country’s biggest retailer of guns and ammunition in the country.
As our story was about to be published, Walmart removed a Bushmaster AR-15 style assault rifle, the same gun Adam Lanza used to carry out his attack on the Sandy Hook Elementary School, from its website. All of the other assault weapons remain. (See other examples here).
This is one of the most transparent public relations moves in relation to a dangerous product that I can recall—it was literally the least Walmart could do. To be clear, the store never actually sold the guns online. Rather, you can peruse Walmart’s gun inventory on its website, read customer reviews and product specifications and then find a Walmart near you that carries the item.
All Walmart did was remove that one gun, the one most likely to create a public relations problem, from a website where you couldn’t buy it anyway. But the Bushmaster remains on Walmart shelves—something the retail giant confirmed to MSNBC this afternoon, saying there is “no change” to its firearm sales.
Other retail chains, however, are making changes—though only slightly more substantial than Walmart’s URL adjustment. Dick’s Sporting Goods is “suspending” sales of some rifles in stores nationwide during “this time of national mourning,” and taking all guns out of stores located near Newtown, Connecticut. Cabela’s will stop selling AR-15s in Connecticut only.
If Walmart were to curtail weapons sales, however, it wouldn’t just hurt their bottom line. Freedom Group, one of the largest gun manufacturers in the country with $237.9 million in annual sales, said in its most recent financial statement that Walmart accounts for 13 percent of those sales alone, and warned investors of trouble should Walmart ever change its policy:
Our sales to Wal-Mart are generally not governed by a written long-term contract between the parties. In the event that Wal-Mart were to significantly reduce or terminate its purchases of firearms, ammunition and/or other products from us, our financial condition or results of operations and cash flows could be adversely affected.
Freedom Group was dumped today by its private equity owner, Cerberus Capital, following investor pressure. They’re in for more trouble if Walmart stops selling guns—but don’t look for that to happen anytime soon, based on how the retail giant has responded so far.
Don’t miss George Zornick’s piece on “How Walmart Helped Make Newton Shooter’s AR-15 the Most Popular Assault Weapon in America”.
President Barack Obama wipes his eye as he talks about the Connecticut elementary school shooting, Friday, December 14, 2012, in the White House briefing room in Washington. (AP Photo/Carolyn Kaster)
Today’s nearly indescribable tragedy in Newtown, Connecticut, where twenty-seven people, including eighteen children, were shot to death inside an elementary school, is at least the sixteenth mass shooting to take place in America this year. The death toll is now at eighty-four.
Here is a list of every fatal mass shooting that’s taken place since January 1—defined as multi-victim shootings where those killed were chosen indiscriminately. The tragedies took place at perfectly random places—at churches, movie theatres, soccer tournaments, spas, courthouses and, now, an elementary school. But given the frequency of these awful events, perhaps in the long view their occurrence isn’t so random after all—it’s predictable.
February 22, 2012—Five people were killed in at a Korean health spa in Norcross, Georgia, when a man opened fire inside the facility in an act suspected to be related to domestic violence.
February 26, 2012—Multiple gunmen began firing into a nightclub crown in Jackson, Tennessee, killing one person and injuring 20 others.
February 27, 2012—Three students at Chardon High School in rural Ohio were killed when a classmate opened fire.
March 8, 2012—Two people were killed and seven wounded at a psychiatric hospital in Pittsburgh, Pennsylvania, when a gunman entered the hospital with two semiautomatic handguns and began firing.
March 31, 2012—A gunman opened fire on a crowd of mourners at a North Miami, Florida, funeral home, killing two people and injuring 12 others.
April 2, 2012—A 43-year-old former student at Oikos University in Oakland, California, walked into his former school and killed seven people, “execution-style.” Three people were wounded.
April 6, 2012—Two men went on a deadly shooting spree in Tulsa, Oklahoma, shooting black men at random in an apparently racially motivated attack. Three men died and two were wounded.
May 29, 2012—A man in Seattle, Washington, opened fire in a coffee shop and killed five people and then himself.
July 9, 2012—At a soccer tournament in Wilmington, Delaware, three people were killed, including a 16-year-old player and the event organizer, when multiple gunmen began firing shots, apparently targeting the organizer.
July 20, 2012—James Holmes enters a midnight screening of The Dark Knight Rises and opens fire with a semi-automatic weapon; twelve people are killed and fifty-eight are wounded.
August 5, 2012—A white supremacist and former Army veteran shot six people to death inside a Sikh temple in suburban Milwaukee, Wisconsin, before killing himself.
August 14, 2012—Three people were killed at Texas A&M University when a 35-year-old man went on a shooting rampage; one of the dead was a police officer.
September 27, 2012—A 36-year-old man who had just been laid off from Accent Signage Systems in Minneapolis, Minnesota, entered his former workplace and shot five people to death, and wounded three others before killing himself.
October 21, 2012—45-year-old Radcliffe Frankin Haughton shot three women to death, including his wife, Zina Haughton, and injured four others at a spa in Brookfield, Wisconsin, before killing himself.
December 11, 2012—A 22-year-old began shooting at random at a mall near Portland, Oregon, killing two people and then himself.
December 14, 2012—One man, and possibly more, murders a reported twenty-six people at an elementary school in Newtown, Connecticut, including twenty children, before killing himself.
Nick Myers contributed to research for this post.
Editor's Note: An earlier version of this post omitted the October 21 shooting in Brookfield, Wisconsin. The post, including its title, has been updated.
Now's the time to talk about gun control. Here are three common-sense bills that should, but still can't pass Congress.
Ed. Note: In the light of today's tragic mass shooting in Newtown, Connecticut, many people are calling for an immediate discussion on gun control. Here are three places where Congress can get started--a list we published in the wake of the Aurora theater shooting that is, alas, still just as relevant. No action has been taken on any of these measures.
America’s gun laws are truly outrageous: in Colorado they allowed James Holmes to stockpile several weapons in a short period of time, including an AR-15 assault rifle with a high-capacity magazine, without ever registering the purchases with authorities. On the federal level, as we described yesterday, there are efforts underway to put guns into the hands of veterans with mental incapabilities, people on terror watch lists, and to weaken the federal bureau that enforces many gun laws.
President Obama has repeatedly relayed that he is only interested in enforcing “existing” gun laws. Even right-wing pundit Bill Kristol thinks this is misguided: he said on Fox News this weekend that “I actually think the Democrats are being foolish as they are being cowardly. I think there is more support for some moderate forms of gun control.”
So what are some moderate reforms that President Obama could get behind? Here are three bills introduced recently in Congress that would easily fall into the category of “common sense”—yet cannot seem to be passed.
Reinstating the Assault Weapons Ban. In 1994, gun-control advocates vanquished the NRA and passed a federal ban on assault weapons, but during Congressional negotiations they had to compromise: the ban would affect only weapons manufactured after the date of enactment, and the bill would have a ten-year sunset. Bill Clinton signed the law in September of that year.
Alas, ten years later, the Congress and the White House were both controlled by pro-gun Republicans, and it was an election year—so the ban expired. Today, you can for example walk into most big-box sporting goods stores and buy an AR-15 assault rifle. (This is what Holmes, the Colorado shooter, did).
In the wake of the mass shootings in Tuscon in 2010, Represenative Caroline McCarthy—who’s husband was killed in a mass shooting on the Long Island Railroad in the early ’90s—re-introduced a permanent ban on assault weapons in the House. Senator Frank Lautenberg introduced a similar bill in the Senate. Neither came up for a vote.
Obama campaigned on reinstating the ban, but “won’t even talk” about it today. When he was a Senator and chair of the Judiciary Committee in 2007, Joe Biden tried to get the ban reinstated as part of the Crime Control and Prevention Act. Mitt Romney, for that matter, signed a ban on assault weapons in Massachusetts in 2004.
Banning high-capacity magazines. Reports indicate that at most ninety seconds passed between the first 911 call in Aurora and the apprehension of the suspect. Yet he was still able to shoot seventy-one people—in large part because his AR-15 rifle had a 100-round drum capable of firing fifty to sixty shots per minute.
Just this week, Senator Lautenberg said he plans to introduce legislation banning these high-volume ammunition clips. “No sportsman needs 100 rounds to shoot a duck, but allowing high-capacity magazines in the hands of killers…puts law enforcement at a disadvantage and innocent lives at risk,” Lautenberg said. Other Senate Democrats, like Senator Dianne Feinstein, said they will support the legislation. “We’ve got to really sit down and come to grips with what is sold to the average citizen in America,” she said.
Republican Senator Ron Johnson, however, said the bill will “restrict our freedoms.” It’s extremely unlikely it can muster the sixty votes needed to overcome a Senate filibuster.
Regulate Sniper Rifles. Among the more dangerous weapons currently sold in America are .50-caliber rifles. Some can be outfitted to fire large rounds originally intended for use with Browning Machine Guns, and have been adopted by the military as long-range sniper rifles. According to a Congressional Research Service report, these weapons—freely available at most gun retailers—“could be used to shoot down aircraft, rupture pressurized chemical tanks, or penetrate armored personnel carriers” and “have little sporting, hunting, or recreational purpose.”
In the 110th Congress, Senator Feinstein introduced the Fifty Caliber Sniper Weapons Regulation Act, which had very modest goals: to simply treat those weapons as short-barreled shotguns and silencers are treated, that is, to levy taxes on their manufacture and transfer, and require they be registered with authorities. That bill was defeated.
(AP Photo/Susan Walsh)
The Wall Street Journal has news of some actual developments in the ongoing fiscal cliff negotiations: this morning, it reported that President Obama will add corporate tax reform to his offer to House Republicans, in an effort to bring them along and invite a buy-in from the pesky CEOs crowding up the airwaves during most of this saga.
The Journal says “The White House’s corporate-tax suggestion wasn’t specific” but that “White House officials, in making the suggestion, cited a corporate-tax plan the administration unveiled in February.” The plan the White House outlined earlier this year, if you don’t recall, was to lower the corporate tax rate from 35 percent to 28 percent while closing corporate tax loopholes to a degree that enough revenue is raised to offset the rate reduction.
So you can immediately see the first problem with Obama’s proposal—since it’s revenue-neutral, it asks corporate America to contribute nothing to a final deficit reduction passage.
Citizens for Tax Justice immediately flagged Obama’s revenue-neutral plan as problematic when the White House released it earlier this year. CEOs like to whine that the statutory corporate tax rate in America of 35 percent is the highest in the world, but CTJ studied the Fortune 500 companies that had profits in each of the past three years and found that their average effective tax rate was actually just 18.5 percent, thanks to a variety of loopholes, exemptions, and offshoring. Thirty of those corporations had negative tax rates, meaning they actually got money from the Treasury over that three-year period.
CTJ thus concluded “The first goal of corporate tax reform should be to increase the overall amount of tax revenue collected from U.S. corporations.” But Obama’s plan doesn’t do that.
Worse, his plan would quite likely give the corporations an even lower final tax bill once it’s implemented—or rather, not implemented. Obama’s corporate tax plan suffers from the same problems as Romney’s income tax plan: it lowers rates, which is immediate and likely permanent, but doesn’t actually specify enough loopholes to make up the revenue. CTJ studied Obama’s February proposal and found that is specified only about a fourth of the loopholes that needed to be closed in order to offset the rate reductions and “only gives vague suggestions” about where the other 75 percent of the revenue would come from.
It’s quite likely that corporate America and its allies in Congress would fight mightily and successfully to preserve their special tax benefits, and this same Journal story notes that when Obama released his earlier corporate tax plan, “Many [business groups] were supportive of the proposal to lower rates but worried about which industries might get hurt by an accompanying elimination of tax breaks.”
Note also that Obama’s corporate tax plan proposes some sort of “territorial tax system” in which corporations could bring profits earned overseas back home at some rate lower than the current law requires, which is 35 percent. This is something the CEOs now lobbying Washington on the fiscal cliff badly want—as we outlined earlier this month, it will reap them tens of millions in benefits. Obama’s plan, CTJ notes, says corporations won’t be able to bring the profits back at a zero percent rate—though no country allows that—but notably does not specify what the rate should be. Given that Republicans have been pushing for an essentially insignificant 1.25 percent rate on repatriated profits, Obama’s lack of specificity is troubling.
This, in short, is a big win for corporate America if enacted. And CEOs that have been meeting with White House officials are quickly getting behind it—The New York Times reported today that many of them are willing to back a plan that raises personal income tax rates as long as they get this corporate tax “reform.” This is rational, especially since many of the country’s wealthiest don’t earn payroll income, but rather are paid through capital gains and dividends and thus wouldn’t be terribly affected by income tax hikes.
But say Obama actually succeeds at pushing through truly revenue-neutral corporate tax reform: given the painful safety net cuts being discussed, some progressives might argue that at least the corporate tax stuff is preferable, considering Obama has to give up something in the negotiations.
Maybe. But not so fast—it’s not necessarily an either/or. More like a “both.” The Journal article notes what has already been widely reported: if Republicans relent on top income tax rates, the White House will move to cut safety net programs deeper than what’s been discussed already:
The administration’s new proposal made no major concessions on entitlements such as Medicare, which it is withholding until Republicans give up ground on tax rates.[…]
Some Democrats regard Republicans’ eventual concession on taxes as a foregone conclusion, and they have begun to talk among themselves about which concessions on entitlement programs they might be asked to make. The three leading proposals floated by Republicans include increasing the eligibility age for Medicare, requiring wealthier people to pay more for Medicare and changing the formula for calculating Consumer Price Index adjustments to slow the growth of Social Security benefits.
This is truly damaging stuff. As we have noted, raising the Medicare eligibility age—which Obama didn’t rule out yesterday in an interview with ABC News—saves the government $5.4 billion but shifts $11.4 billion in costs onto seniors, their employers, and states. A new Center for American Progress study out this week finds that if the Medicare age is raised from 65 to 67, as many as 5.4 million seniors would have to either postpone retirement, buy expensive private insurance, or get on Medicaid.
As for changing the Consumer Price Index formula, that amounts to a deep benefit cut as well, and one that strikes low-income Americans disproportionately. Dylan Matthews has an extensive look at it here, but in short it amounts to a 5 percent benefit cut for people on Social Security which only gets bigger over time. It would also increase tax revenue, but in a very regressive way: it hikes taxes on families making between $30,000 and $40,000 annually at a rate six times higher than it does for millionaires.
So step back and take the long view: Obama could easily end up agreeing to a deal that asks corporate America to contribute nothing—revenue-neutrality is the selling point of his corporate tax plan—and could even end up giving them extra benefits. Meanwhile, Americans who rely on the safety net would have to make substantial sacrifice, and moreso if they’re not wealthy. If this gets put down on paper and put before Congress, expect a nuclear war to start on the left.
Corporate tax rates must be lowered in order to create economic growth: this is a key argument made by CEOs and their political allies while they push for a fiscal cliff deal. That was in the Bowles-Simpson plan, and members of Fix the Debt are pushing for that too, along with a territorial tax system.
But top Republicans and Democrats agree the best thing for the economy in the long term is to simplify the Tax Code, reduce rates and end loopholes—not just for individuals but also for corporations. This is tough, complex stuff, but a consensus is slowly emerging.
Never mind for a moment the obvious problem with lowering tax rates as a means of fixing the long-term debt. Would allowing corporations to pay less taxes really mean more hiring?
Luckily we have some interesting case studies. Several of the CEOs pushing this idea actually run companies that pay extremely low corporate tax rates, well below the statutory 35 percent rate—or pay none at all. So, via the invaluable Institute for Policy Studies, let’s see what kind of job creation these folks did while enjoying very low corporate tax rates:
1. Randall Stephenson, AT&T
Average effective federal corporate income tax rate, 2009-2011: 6.3%
U.S. job layoffs since 2007: 54,000
2. Lowell McAdam, Verizon
Average effective federal corporate income tax rate, 2009-2011: -3.3%
U.S. job layoffs since 2007: 30,000
3. David Cote, Honeywell
Average effective federal corporate income tax rate, 2009-2011: -14.8%
U.S. job layoffs since 2007: 4,000
4. Kenneth Frazier, Merck
Average effective federal corporate income tax rate, 2009-2011: 13.2%
U.S. job layoffs since 2007: 13,000
5. Terry Lundgren, Macy’s
Average effective federal corporate income tax rate, 2009-2011: 20.7%
U.S. job layoffs since 2007: 7,000
Looking at these numbers, there isn’t much of a correlation between low corporate tax rates and hiring, to say the least. And beyond these specific examples, the idea that business aren’t hiring because of burdensome tax rates is belied by the fact there are record-breaking corporate profits at the moment, and yet unemployment remains stubbornly high.
One could actually propose an alternate theory, where corporate greed leads to both a desire to pay less taxes, and a proclivity to reduce headcounts whenever possible. It’s a rational strategy for them, but it doesn’t mean we should help to advance it.
While CEOs fight for lower corporate taxes, Michigan Governor Rick Snyder is crushing union workers. Allison Kilkenny reports on resistance in Lansing.
During the run-up to the election, the monthly jobs reports were relentlessly mined for tidbits that could predict the outcome of the election. These often-esoteric extrapolations got pretty ridiculous—the election wasn’t going to be determined by slight fluctuations in labor force participation.
The Bureau of Labor Statistics report released today, however, carries true political import. As Congress and the White House attempt to hammer out a year-end deal, today’s numbers show that unemployment remains a critical problem, and that recent progress was a little bit too good to be true—so any final deal must provide short-term stimulus and delay any austerity measures.
The top-line looks good: 146,000 jobs added, which exceeded most projections, and a drop in the unemployment rate to 7.7 percent, which is the lowest it’s been since 2007. But a deeper look reveals much more depressing indicators. The labor market shrunk as 350,000 people stopped looking for work, which contributed to the lower unemployment rate. The private sector contributed virtually all of the job growth, and the retail industry was the biggest contributor—good for now, but these are likely retailers amping up for the holiday season, and thus not a reliable hiring engine going forward.
Moreover, the rosy gains of the past couple months were overstated: today’s report revised the prior two months’ report downward by 49,000 jobs. We’re still a long, long way from full employment at this rate. And if done the wrong way, a fiscal cliff deal could retard progress even further.
Also today, the IMF released a study showing that spending cuts during economic downturns in the United States could have a “statistically significant and sizeable impact.” It found that for every dollar in spending cuts enacted, the United States could lose $1.80 in economic activity. (Belying the GOP talking points, it also found that revenue increases would have an impact on growth that is “very small and not statistically significant.”)
The White House, much to its credit, recognized this fact and made a strong opening offer in which it called not only for deferring the coming sequester cuts, but enacting $50 billion in extra stimulus spending for fiscal year 2013 as well as a mass mortgage refinancing program. This is exactly the right move—if anything, more is needed—and the administration should use today’s numbers to highlight the urgency of that position.
Significantly, the White House also called for a $30 billion extension of the unemployment insurance program, which today’s report shows is desperately needed, since, as the National Employment Law Project notes, “long-term unemployment will continue to push Americans into new extremes of poverty and economic insecurity.”
The federal unemployment insurance program for people out of work six weeks or longer will expire at the end of the year absent Congressional action, meaning that between Christmas and New Year’s 2 million Americans will lose their benefits. A million more Americans will lose their unemployment insurance in the first three months of 2013 if nothing is done.
This would be a severe hit to the economy—reducing economic growth by $48 billion, thus costing millions more jobs to be lost and furthering a vicious downward economic spiral. Retailers alone, the biggest jobs engine in this month’s report, would lose $16 billion in sales next year if the unemployment insurance program isn’t extended.
Spending $30 billion to create $48 billion in economic growth while also throwing a lifeline to many desperate Americans would seem like a no-brainer, but that doesn’t mean it will get done. The rumored Republican strategy at this point is to pass the middle-class tax cuts and nothing else—no unemployment insurance, no stimulus spending nor anything else involved in the cliff negotiations. They would come back to the table in January to negotiate all this anew, with what they believe is more leverage.
This strategy would leave many unemployed Americans in full-on panic mode: unlike the tax increases or spending cuts, which can be delayed and if nothing else felt gradually, the loss of unemployment insurance is an actual cliff: people stop getting checks immediately. Today’s jobs report underscores the magnitude of that tragedy.
For more on unemployment leading into the holiday season, check out Greg Kaufmann latest.
Most of what’s happening now in the fiscal cliff saga is just posturing—each side is trying to appear open to compromise while at the same time assuring its base that sacred principles will be respected.
But this morning, Politico reported what could be the early contours of an actual deal that’s taking shape behind the scenes. There’s a huge caveat to this story, written by Mike Allen and Jim VandeHei, because it couldn’t be any more vaguely sourced. Allen and VandeHei refer only to “top officials,” “veterans of this budget fight,” and so on, so it’s impossible to discern who is feeding them this information and why.
But assuming for a moment it’s true, there are some details sure to give progressives indigestion. In exchange for Republicans agreeing to tax increases—including rate hikes—on the top two percent of earners, this is what is allegedly being talked about for entitlement reform:
There is only one way to make the medicine of tax hikes go down easier for Republicans: specific cuts to entitlement spending. Democrats involved in the process said the chest-pounding by liberals is just that — they know they will ultimately cave and trim entitlements to get a deal done. […]
Sen. Dick Durbin (D-Ill.) told “Morning Joe” on Tuesday that he could see $400 billion in entitlement cuts. That’s the floor, according to Democratic aides, and it could go higher in the final give and take. The vast majority of the savings, and perhaps all of it, will come from Medicare, through a combination of means-testing, raising the retirement age and other “efficiencies” to be named later.
These are truly damaging concessions. While means-testing might only reduce benefits of wealthy seniors, it begins a transition where Medicare is less an earned-benefit program and more of a welfare program, which would certainly leave it more vulnerable to political attacks down the line.
But the truly terrible idea here is raising the Medicare eligibility age. It’s something Obama reportedly offered in 2011 during the debt ceiling negotiations, and it was every bit a bad idea then as it is now. Yale political science professor Jacob Hacker has called it “the single worst idea for Medicare reform.”
The key facts to understand about raising the Medicare eligibility age: not only does it shift substantial costs onto seniors, it also doesn’t save the federal government any notable amount of money. It’s a lose-lose proposition.
By kicking seniors aged 65 and 66 off of Medicare, the government would at first seem to save $5.7 billion. Of course, this is nothing more than cost-shifting: those seniors would then have to pay $3.7 billion out of their pockets in 2014, according to the Kaiser Family Foundation. And some would likely be unable to find private insurance at that age if they’ve already retired. For those that are still employed, their employers are projected to spend an additional $4.5 billion to insure those who would otherwise be on Medicare.
So you’ve screwed over seniors and their employers, but at least the federal government saved some money, right? Not so fast. Because 65- and 66-year-olds are among the healthiest of all Medicare beneficiaries, what you’ve done is removed pay-ins from the people least likely to need expensive care. The risk-pool math looks worse, and the Congressional Budget Office has concluded that raising the Medicare eligibility age “would have little effect on the trajectory of Medicare’s long-term spending.”
When the Affordable Care Act goes into effect, that could help seniors excluded from Medicare until 67. It would keep them from getting denied for pre-existing conditions, and offer subsidies for care. But that would also likely drive up premium prices in the health care exchanges, because while 65- and 66-year olds are more healthy than the average Medicare beneficiary, they are decidedly less healthy than your average American. And the federal government will be the one kicking in those extra subsidies.
Some Democrats, like Senators Dick Durbin and Kent Conrad, would be open to raising the Medicare age down the road, once the ACA is fully implemented. But even then, you’re not saving the federal government any real money.
Many other Democrats and progressives have said no to this idea, however. House Minority Leader Nancy Pelosi says she’s not open to it, nor is Budget Committee chair Representative Chris Van Hollen. And outside Congress, powerful progressive groups are willing to throw down the gauntlet to stop it.
Adam Green of the Progressive Change Campaign committee told Salon today that if Democrats agreed to raising the Medicare eligibility age, it “would essentially start a nuclear war on the left.” MoveOn.org said it would support primary challengers to any Democrat that supported it. This could be a very dangerous proposition for the targeted Democrats: raising the Medicare age polls terribly among Americans of all political stripes, and notably Democrats, where it’s about 70-30 against.
Again, thanks to this morning’s very vague report, we don’t know to what extent this is actually on the table, or if it really is at all. Were it to happen though, it’s important to stress that raising the eligibility age is a lose-lose for the federal government and for seniors. The only winners are those with the ideological goals of shrinking the program—and the insurers picking up new customers.
Yesterday, nine CEOs met with Washington lawmakers to discuss their stake in fiscal cliff negotiations. George Zornick reports.
CEOs from several big corporations meet with House Republican leaders on November 28, 2012, in Washington. Photo courtesy of the Office of the Majority Whip.
A merry band of corporate executives is zig-zagging Washington today, meeting with almost every principal player in the “fiscal cliff” negotiations. The CEOs are meeting with administration officials at the White House, with House Speaker John Boehner, and with House Minority Leader Nancy Pelosi.
According to most press accounts, these business titans are “pressing for a solution to the so-called fiscal cliff” (Bloomberg), while “touting the virtue of bipartisanship and shared sacrifice” (The Washington Post).
But what’s important to understand—what every press account of these meetings should note—is that they’re not, in practice, proposing any sacrifice from their companies in particular nor their industries in general.
Key planks of their proposals, explicitly articulated by the Fix the Debt campaign and other industry coalitions pushing for a deal, include a lower corporate tax rate—even though many of these companies pay little or no corporate taxes as it is. Then there’s a territorial tax system, which would allow corporations that have profits parked overseas to bring them back home without paying any taxes. (Right now, they’d be obligated to pay the normal 35 percent corporate tax on those profits if they were repatriated). Some, but not all, of the CEOs also want the Bush tax rates extended for all earners.
That’s not exactly “shared sacrifice.” A report from the Institute for Policy Studies notes that the 63 CEOs behind “Fix the Debt” would reap $134 billion in tax windfalls for their companies just from a territorial tax system alone. That naturally would increase, not decrease, the deficit, so somebody’s got to pay—hence the Very Serious pleas to “reform” Medicare and Social Security.
“These CEOs paint a stark picture of hypocrisy,” said Scott Klinger, co-author of that IPS report, in a statement. “They’re simply taking advantage of the so-called ‘fiscal cliff’ to push the same old agenda of more corporate tax breaks while shifting costs onto the poor and elderly.”
To put a finer point on it, here is what the nine CEOs tooling around Washington today stand to gain in the fiscal cliff negotiations—how much their company would gain from a territorial tax system, and how much the individual CEO would gain if the Bush rates on top earners are extended.
The figures on taxable CEO compensation and unrepatriated offshore earnings are from that excellent IPS report, unless the company was not included. (It detailed only members of “Fix the Debt.”) In that case, I consulted the company’s SEC filings, and linked to it. The effective tax rate figures are either from this Citizens for Tax Justice report, or if it wasn’t included, from other sources which are also linked. (See a more detailed breakdown below the infographic.)
Ken Frazier, CEO, Merck & Co.
Merck’s unrepatriated offshore earnings: $44.3 billion
Estimate windfall from territorial tax system: $15.5 billion
Merck’s effective corporate tax rate from 2008-2010 (standard is 35 percent): 11.5 percent
Frazier’s 2011 taxable compensation: $5.4 million
Frazier’s yearly savings if top Bush rates are extended: $237,352
Muhtar Kent, CEO, Coca-Cola
Coca-Cola’s unrepatriated offshore earnings: $23.5 billion
Estimate windfall from territorial tax system: $8.2 billion
Coca-Cola’s effective corporate tax rate from 2008-2010 (standard is 35 percent): 14.1 percent
Kent’s 2011 taxable compensation: n/a
Kent’s yearly savings if top Bush rates are extended: —
Douglas Oberhelman, CEO, Caterpillar Inc.
Caterpillar’s unrepatriated offshore earnings: $13 billion
Estimate windfall from territorial tax system: $4.55 billion
Caterpillar’s 2011 effective corporate tax rate (standard is 35 percent): 25.6 percent
Oberhelman’s 2011 taxable compensation: $10.2 million
Oberhelman’s yearly savings if top Bush rates are extended: $459.851
Marissa Mayer, CEO, Yahoo! Inc.
Yahoo’s unrepatriated offshore earnings: $3.2 billion
Estimate windfall from territorial tax system: $1.12 billion
Yahoo’s three-year effective corporate tax rate from 2008-2010 (standard is 35 percent): 8.7 percent
Mayer’s 2011 taxable compensation: n/a
Mayer’s yearly savings if top Bush rates are extended: —
Thomas Wilson, CEO, Allstate
Allstate’s unrepatriated offshore earnings: $0
Estimate windfall from territorial tax system: $0
Allstate’s 2011 effective corporate tax rate (standard is 35 percent): 17.9 percent
Wilson’s 2011 taxable compensation: $4.1 million
Wilson’s yearly savings if top Bush rates are extended: $175,793
Lloyd Blankfein, CEO, Goldman Sachs
Goldman Sachs’ unrepatriated offshore earnings: $20.6 billion
Estimate windfall from territorial tax system: $3.3 billion
Goldman Sachs’ effective corporate tax rate 2008-2010 (standard is 35 percent) 20.8 percent
Blankfein’s 2011 taxable compensation: $15.6 million
Blankfein’s yearly savings if top Bush rates are extended: $706,104
David Cote, CEO, Honeywell International
Honeywell’s unrepatriated offshore earnings: $8.1 billion
Estimate windfall from territorial tax system: $2.8 billion
Honeywell’s effective corporate tax rate 2008-2010 (standard is 35 percent) -0.7 percent
Cote’s 2011 taxable compensation: $55.2 million
Cote’s yearly savings if top Bush rates are extended: $2.5 million
Mark Bertolini, CEO, Aetna
Aetna’s unrepatriated offshore earnings: $0
Estimate windfall from territorial tax system: $0
Aetna’s effective corporate tax rate 2008-2010 (standard is 35 percent) 28.8 percent
Bertolini’s 2011 taxable compensation: $9.5 million
Cote’s yearly savings if top Bush rates are extended: $423,208
Frank Blake, CEO, Home Depot
Home Depot’s unrepatriated offshore earnings: $2.4 billion
Estimate windfall from territorial tax system: $8.4 million
Home Depot’s effective corporate tax rate 2008-2010 (standard is 35 percent) 35.6
Blake’s 2011 taxable compensation: n/a
Blake’s yearly savings if top Bush rates are extended: n/a
Notably, none of the corporations represented in Washington today except Home Depot actually paid anything close to the corporate tax rate of 35 percent. Most would benefit handsomely from a territorial tax system, though not all—the interests of these companies don’t always align perfectly. Some, like Honeywell and Yahoo!, wouldn’t gain anything from reductions to Medicare and Social Security—the demands from those CEOs to cut spending on those programs is perhaps nothing more than a cover for their windfalls elsewhere. Others, like Goldman Sachs and Aetna, surely would benefit from a reduction in these programs.
What’s clear, though, is that the sacrifice preached by these CEOs is most certainly one-sided.
CEOs aren’t the only ones with a lot to gain from these negotiations. Lee Fang reports that a congressman heavily involved with the “fiscal cliff” talks has already been hired as a lobbyist.