Policy Shop

Policy as if people mattered

Is the Fiscal Deal a Recipe for National Decline?

White House/Pete Souza
Now that the future revenue path is pretty clear for the next decade, I took another look at President Obama's 2013 budget , which projects spending and revenue through 2022 on the assumption—a correct one, it turns out—that taxes will only rise on the affluent. As I noted in an earlier post today, the White House projects serious cuts to domestic spending. These cuts wouldn't be necessary if the Bush tax cuts were fully repealed. So, in effect, President Obama has largely endorsed the fiscal priorities of his predecessor, with tax cuts forcing spending cuts. This may not amount to "starving the beast," but it is putting government on a conservative diet. I've written a lot about this historic capitulation already, so I won't say more. Instead, let me focus on another implication of letting the Bush tax cuts largely live on. The United States will not only cut spending over the next decade, it will also dramatically increase the national debt—adding $6.6 trillion in new debt by 2022...

Is the NRA a Paper Tiger?

Flickr/Ilmo Joe
The Center for Responsive Politics compiles data on the 50 top interest groups giving money to Congress. Near the top of the 2012 list are the usual suspects—finance, insurance, real estate, and Big Oil. Near the bottom are casinos and the building materials industry (along with "Women's Issues.") But guess who's not on the list? Gun rights groups. Not only did such groups not make the list in 2012; they have never made the list. Even if you only look at the 50 interest groups supporting Republicans, the gun rights crowd doesn't make the cut. However, the NRA does make the Center's list of "Heavy Hitters" which tracks the top all-time donors to politics. But it is number 50 on that list—not far below the American Dental Association. Any number of unions, including the Plumbers and Pipefitters Union, rank higher than the NRA on the Heavy Hitters list . Most of the NRA's clout is wielded in the form of outside spending, and it spent over $18 million in this last election cycle—putting...

Big Macs, Big Profits, Low Wages

(Flickr/The Consumerist)
In a properly working economy, a booming business would be good for everyone involved in building that business: shareholders, executives, and workers. In a broken and dysfunctional economy, the shareholders and executives would get richer and richer while the workers lived in poverty. What's happening at McDonald's leaves little doubt about what sort of economy America has today. According to a recent investigation by Bloomberg reporter Leslie Patton, McDonald's saw its profits soar by 135 percent between 2007 and 2011, and found itself with so much cash last year alone that it devoted $6 billion to dividends and stock repurchases and paid its CEO, Don Thompson, $8.8 million. Given this success, and all the money sloshing around, you'd think that workers at McDonald's would see their fortunes rise as well. Well, you'd be wrong. Many McDonald's workers earn just over the federal minimum wage, near-poverty incomes, and have barely seen any pay increases in recent years. The CEO of...

Crossroads GPS in the Crosshairs

(CrossroadsGPS)
Last week, New York Attorney General Eric Schneiderman announced new disclosure requirements for “dark money” nonprofits . The proposed rules would require 501(c)(4) organizations that spend money on politics in New York State to reveal the donors behind their spending. The Los Angeles Times summarized the proposed rule as follows: The regulations would require nonprofits that spend at least $10,000 a year on New York state and local elections to report all their political expenditures, as well as all contributors who give at least $100. The rules would apply to any group engaged in election-related activity within six months of a New York election, whether on television or the Internet, through the mail, or even by a grant to another organization. This is a good thing. Secret spending is a serious threat to accountability and good government . It makes it impossible for Americans to know who their elected officials are indebted to and who is really calling the shots. Earlier Demos...

War At Home

(Associated Press)
Perhaps the most breathtakingly obscene aspect of American society is our absolute and utter refusal to deal with the murderous gun violence that lays its awful blanket of blood and sorrow across the families of thousands upon thousands of victims each and every year. On Friday, even the presumed safe harbor of an elementary school in suburban Newtown, Connecticut, was defiled when the school was invaded by a young man armed with military-style assault weapons. Try to imagine the sudden horror of the six- and seven-year-olds in two first-grade classrooms as the gunman, who had already killed their principal, opened fire on the children themselves. He would kill a total of 26 people, including 20 children, before taking his own life. How many times will we allow these atrocities to occur before we find the courage and the will to intervene? What is the point of having a self-governing society if we can’t—or won’t—protect kindergarten pupils from the flood-tide of killing set loose by a...

Why Does Obama Want to Spend $8 Trillion on Defense?

United States Air Force
Washington is in a fiscal panic, yet surprisingly few people are asking an obvious question: Why in the world is the Obama administration proposing to spend $8 trillion on security over the next decade? Included in that giant sum is not just Pentagon spending, but also outlays for intelligence, homeland security, foreign aid, and diplomacy abroad. If the administration gets its way, security spending would account for a fifth of all government outlays over the next decade. Such spending would be roughly twice as great as all non-mandatory spending through 2022—a category that includes everything from NASA to Pell Grants and national parks. And—get this—around 40 cents of every dollar collected from individual income taxes over the next decade under the president's plan would go for security spending, according to White House estimates. That's a whole lot of defense for a country that, as of 2014 (when U.S. forces withdraw from Afghanistan), will be officially at peace and faces no...

Why Does the Center for American Progress' Budget Plan Embrace the Bush Tax Cuts?

(Center for American Progress)
The Center for American Progress (CAP) is out with a budget plan that would reduce deficits by $4.1 trillion over the next decade and, at first glance, seems to makes a good deal of sense. Two former Treasury secretaries—Larry Summers and Robert Rubin—are listed as co-authors of the plan, along with Roger Altman, William Daley, John Podesta, Leslie Samuels, Neera Tanden, Antonio Weiss, Michael Ettlinger, Seth Hanlon, and Michael Linden. An impressive brain trust by any measure. The plan would raise about $1.8 trillion in revenue over the next decade, which is about $200 billion more than what President Obama is asking for. It would do this by raising the top tax bracket back to 39.6 percent, where it was under Clinton, and also raising the top rate for capital gains to 28 percent—nearly double what it is today—as well as treating dividends as ordinary income. CAP's plan would also simplify today's labyrinth of tax deductions and exemptions, and limit the value of some deductions for...

Wall Street's Creative Extraction

The financial sector provides a crucial function to society. It accommodates the movement of funds from investors to businesses, governments and individuals who use the capital for productive purposes. If the financial sector does this efficiently, the cost to the users of capital will be close to the price demanded by investors. The financial sector will have extracted amounts for providing the “capital intermediation pipeline” that are commensurate with the service provided. If asked, most people would say that the cost of capital intermediation must have gone down in recent decades. After all, advances in technology and quantitative analysis must have made the process less expensive. But they have not. Capital intermediation is now more costly than it was in the days of James Pierpont Morgan. My new research points out that capital intermediation costs have been rising since 1980, coincident with the beginning of three and a half decades of deregulation. At the same time, the...

One Share, One Vote

(Flickr/Simon Greig)
In response to my short primer on the corporation , Professor Colleen Dunlavy of the University of Wisconsin-Madison sent her interesting article, From Citizens to Plutocrats: Nineteenth-century Shareholder Voting Rights and Theories of the Corporation . Given the explosion in income inequality between America’s managerial class and its average employees , the article a useful corrective to the idea that such outcomes are a natural product of market forces. The historical account she provides goes a long way in contesting the “tendency to treat plutocratic governance as natural,” and it reveals how exceptional the United States has been in authorizing such uniquely in-egalitarian distributions of power within the corporation. In the article, Dunlavy describes how the corporation was transformed, over the course of several decades, from a relatively democratic institution built on a principle of “one shareholder, one vote” into the more plutocratic “one share, one vote” institution we...

ALEC’s Worthless Recommendations for Prosperity in the States

(Good Jobs First & The Iowa Policy Project)
For most of its history ALEC has operated in the background, but its influence recently drew the spotlight when its promotion of “Stand Your Ground” laws came to light in the wake of the killing of Trayvon Martin in Florida. Faced with the potential of consumer boycotts, corporate sponsors such as McDonald’s and Pepsi withdrew their support . Henceforth, the organization announced, it would concentrate on state economic policy. State legislators who might look to the organization for leadership on economic policies should be wary of following ALEC’s lead in this arena. A startlingly candid report, “ Selling Snake Oil to the States ,” just released by the Iowa Policy Project and the Washington-based Good Jobs First, shows that ALEC’s recommendations for producing economic growth in the states are essentially worthless. This is a strong claim, but the researchers support their conclusion neatly by putting under the microscope the implicit predictions in the 2007 edition of Rich States,...

Win, Win, Win: The Case for a Carbon Tax

(Flickr/sidknee23)
As deficit talks continue to make little progress, we should revisit how a carbon tax would not only help raise badly needed revenue but could also be essential to fighting the climate crisis. A recent Congressional Research Service report found that a tax of $20 per metric ton of carbon dioxide would generate enough revenue to cut the 10-year budget deficit in half. This price is actually less than the carbon tax in British Columbia , which rose to $30 per metric ton of carbon dioxide in July 2012. Not only has BC’s carbon tax resulted in substantial decline of greenhouse gases, it has not negatively impacted economic growth—the province has slightly higher GDP growth than the rest of the country. As I wrote yesterday, a carbon tax is a better approach to emissions reductions than an emissions trading scheme. With emissions trading, carbon credits are often priced too low and/or too many credits are given away. As a result, the market-based emissions trading has not been as...

Fast Food Shouldn't Mean Low Wages

(Flickr/GenBug)
From Burger King to Walmart , the low-wage workers we depend on to staff America’s consumption-driven economy are tired of being overworked and underpaid, and they are letting their bosses know. Early this morning, fast-food workers in New York City went on strike across more than half a dozen chains, including McDonald’s, Burger King, Domino’s, KFC, Taco Bell, Wendy’s and Papa John’s. Backed by community groups like New York Communities for Change , United NY , and the Black Institute , as well as various representatives of religious organizations, fast food workers are asking for a chance to work with dignity in an industry notorious for its fast pace, low wages , and often erratic scheduling. Also notorious for high turnover , fast food workers have historically had a difficult time organizing for better conditions. As reported by Steve Greenhouse at The New York Times : Leaders of the effort said that workers were walking off the job to protest what they said were low wages and...

Limits of a Libertarian First Amendment

I had a few thoughts I wanted to share in response to Glenn Greenwald’s thoughtful reply to Mike Konczal and Jeremey Kessler’s Bloggingheads discussion re Citizens United . 1) I certainly agree that there’s something distinguishable between right-wing libertarianism and the First Amendment views of Mr. Greenwald, the ACLU, and Eliot Spitzer. The support for public financing is an extremely important difference, and I would be very curious to know what types of public matching or leveling, if any, Mr. Greenwald believes would be consistent with the First Amendment. The word “libertarianism” is not entirely out of place though. There was a pretty clear turn toward civil libertarianism in First Amendment doctrine in the 1920s and 30s, led by one of the most liberal justices to ever sit on the Court, Louis Brandeis. And it’s a view that won over many on the Roosevelt Court and Warren Court as they made First Amendment into the highly speech-protective doctrine we currently recognize. In...

Subprime Students: How Wall Street Profits from the College Loan Mess

(rollingjubilee.org)
Five years after Wall Street crashed the economy by irresponsibly securitizing and peddling mortgage debt, the financial industry is coming under growing scrutiny for its shady involvement in student loan debt. For a host of reasons, including a major decline in public dollars for higher education, going to college today means borrowing—and all that borrowing has resulted in a growing and heavy hand for Wall Street in the lending, packaging, buying, servicing, and collection of student loans. Now, with $1 trillion of student loans currently outstanding, it’s becoming increasingly clear that many of the same problems found in the subprime mortgage market—rapacious and predatory lending practices, sloppy and inefficient customer service and aggressive debt collection practices—are also cropping up in the student loan industrial complex. This similarity is especially striking in the market for private student loans—which currently make up $150 billion of the $1 trillion of existing...

Your Retirement For A Thousand Fees

One of the many parts of the financial sector that the crisis exposed as desperately in need of reform was the 401(k) industry. In 2008 alone, the securities industry lost over $2 trillion in workers’ hard-earned 401(k) and IRA savings. This loss was problematic enough for the millions of American families who watched their balances plunge in horror, but the number that really drives home the need for reform is the more than $120 billion that the industry took home in compensation and commissions the same year it lost $2 trillion in savers’ wealth. Clearly, there must be something wrong with the rules and incentives for the securities industry if it's able to pay itself so much while performing so poorly. There are, however, several relatively simple rules that could be implemented to insure that the industry responsible for millions of Americans’ retirement works to help them retire comfortably—as opposed to simply lining its own pockets at their expense. One rule would be to require...

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