We CANNOT Permit Trump To Get Away With Blaming A Recession On Jay Powell!

That Trump is a feral rat is well known. That he is also a coward who will not hesitate to muddy any waters he can to escape blame may be less well known - especially among his 40 percent.  Look, it's no secret that for the past week the Turd -in -Chief has been pounding on Fed  Chair Jay Powell even more maliciously than usual.  I already noted in my Aug. 13 post the spectacle of this swine using his tariffs to try to strong arm the Fed into lowering interest rates.

At the same time,Dotard has denied his trade war with China has had ever more dire consequences for the markets, and the larger economy.    Let's back track a bit to note the DOW tanked  800 odd points after the Trump announcement of new China tariffs.   Seeing the curtains closing on their scam game, the Trump Bozos then gave themselves a 'mulligan',   delaying some of the higher tariffs until Dec. 15 this year..  Their excuse?  They want to give Americans a break before the Xmas holiday to shop their gym shoes, electronics etc. without getting clobbered by higher prices.  Never mind the lump of coal they will get after the holiday.

The move, for anyone observing with an IQ over room temperature digits, amounted to a stark open admission their trade war wasn't working, nor will it ever.   Apart from that, the appearance of the inverted yield curve  last Wednesday spiked further hysteria amongst the gangster Trumpites.  They knew - and we know -  that this is one of the most prescient signs of a recession.   Of course, in response, the markets dove again.  How could they not?

More concerning for Trump and his cabal is that they know the only leg he has to stand on for re-election is the economy. If that goes, as NY Times columnist Ross Douthat has noted, Trump  is a goner.  As Mr. Douthat so colorfully puts it:  "There is no way a president so widely disliked survives the evaporation of his boom."

So what's a no -count bum, con man, coward and criminal like Trump to do about it?  Well, as one writer (Aaron Blake) in Sunday's Denver Post Perspective section put it, he will be to try to"make Fed Chairman Jay Powell the fall guy." 

And why, pray tell, do that?  Well because "Amid all his controversies and unpopularity the economy is what has bouyed Trump".   So, were it to vanish, it is "difficult to see how his already difficult election math would add up".    Little wonder now Trump is  working fast and furious to discredit Powell and the Fed.   For example,  this 2-legged,  orange hued maggot   said Monday on Twitter, "Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed."

 This from a lying imp who isn't fit to spit shine Powell's wingtips.  But as yesterday's front page Wall Street Journal piece ('Fed Caught Between Slowing Economy, Angry President') lets us know, Trump's "unyielding criticism of the Fed"  is now challenging its political independence.

But does Trump care? Hell no! He's already contaminated numerous other agencies and institutions to bend to his will, from the DOJ, to the EPA and even the Supreme Court.   So why not try to bring the Fed and Jay Powell into his orbit as well?  He's doing it by expressing regret for appointing Powell in the first place, as well as highlighting his mistakes.  No mention of Trump's own ginormous unforced errors such as starting a trade war with the 2nd largest economy on the planet.

As the writer (Aaron Blake)  goes on to paint the Trump strategy to undermine the Fed Chair:

"Trump's strategy in blaming Powell for whatever lies ahead would seem to be twofold: 1) He can lean on Powell to give in to what he wants for fear of getting the blame for anything bad."

Of course Trump, inbred rat  fungus that he is, would likely blame Powell in any case. That's his nature. He accepts responsibility for nothing, but will take credit for anything if it boosts his ego or emoluments.  Stock market soars, Trump takes credit.  Stock market tanks, Trump blames Jay Powell and the Fed.  As John Harwood put in on 'All In',  Trump is devoid of any economics or historical knowledge,  hence "the only standard Trump uses is himself and his own satisfaction."

And the other strategy move?

"And (2) if and when that bad economy does happen he can simply do what he always does and say: "It's not my fault this guy wouldn't listen to me."

So forget "the buck stops here"  as FDR, Harry Truman, JFK and any president with a residue of spine and moral fiber would agree. With Trump the grifter and con-man, the 'buck' of blame always goes to anyone other than his wretched, loathsome self.

The sad part as Blake points out, is that his cynical and sordid gimmick could actually work.  First, we already have 40 percent of our people dumb clucks to begin with.  They already believe anything Trump spouts on his Twitter feed or on FOX news.  Then there is another sliver, maybe 10 -15 %, who lack the critical thinking to get over the hump of doubt. And so they will be among those "who don't know whom to believe."

Here's a thought for Jay Powell when he attends the Jackson Hole, WY, annual central bank  conference this Friday - and especially after  having read the WSJ headline I cited

Just remember to tell your  Federal Reserve colleagues to replace the words 'angry president' with 'deranged resident'.   This will instantly put the mentally unbalanced buffoon's bluster in its proper perspective.  I.e. rhetorical excrement not worth dignifying with a Fed response - well,  other than to ignore the asswipe.

Also,  be prepared to defend and protect Fed independence from this 45th "president" who is more a poseur with no clue (or inclination) to govern a nation.

Lastly, the level of desperation to try to rescue Trump's economy has now grown to such magnitude that the Trump cabal is considering cutting payroll taxes to juice it.   (The payroll tax discussion was first reported Monday by The  Washington Post.)   Many lazy thinkers, or non-thinkers, might regard this as a terrific idea but it's actually god awful. The reason?

Doing so is effectively a raid on the solvency of Social Security!

Since payroll taxes fund current Social Security then cutting them amounts to cutting Social Security funding leaving it in a more parlous financial position.  This in turn will leave it more vulnerable to the privatizers and other predators licking their lips to savage it. Namely those austerity hawks who'd like nothing better than to subject it to budget cuts every year, now that the protection of payroll tax funding has been sliced.

Fortunately, such a payroll tax cut requires congressional approval and can't be done by fiat.  The  House Democrats would have to be blithering idiots to agree.  This is given how an even stronger economy would boost Trump's re-election chances.  It would also be the epitome of irony that the party that created Social Security would now act as a willing accessory to its destruction while also helping to re-elect the worst president in history.

See also:

 https://www.nytimes.com/2019/08/20/opinion/trump-recession.html?

Want to Prevent a Recession, Mr. Trump? Stop Hurting the Economy

And:

Alex Henderson

Trump and the Culture Wars: Here Are the Divisive Themes the President Will Focus on as His Economic Policies Crumble

by Alex Henderson | August 20, 2019 - 6:43am | 

Excerpt:

 "Donald Trump, in recent weeks, has been stressing both economic themes and culture war themes. The economic themes were evident during a rally in Manchester, New Hampshire on August 15, when Trump tried to frighten 401(k) owners into reelecting him and insisted, “You have no choice but to vote for me because your 401(k), everything is going to be down the tubes (under a Democratic president). So whether you love me or hate me, you’ve got to vote for me.” But if the U.S. does go into a recession in the months ahead, Trump will have a harder time selling himself as the salvation of the American economy — in which case, he would likely become even more aggressive in pushing divisive culture war themes."

Talking Sense About The Tax Code - And Why Cutting Government Is Idiotic

The Wall Street Journal Review section of two weekends ago featured a lot of ideas about revamping the income tax code, very few of which made any sense.  All one beheld was the smell of desperation to find excuses to escape the nation's fiscal responsibilities, usually by making the tax code simpler, say by replacing the multi-layered progressive income tax with a VAT (value added tax) . This, we are informed, is just a "consumption tax on goods and services that is used by almost all of the world's richest market democracies". Well, yeah, and if you visit those market democracies you will quickly see why most of their citizens are not enamored of it.

The one thing the first author (Reihan Salam) at least got right, is that the population has grown too much to talk of shrinking or cutting government. In fact, the current U.S. population is nearly THREE times the size of the population when the income tax arrived (under the 16th amendment) in 1913. At that time a mere 338,000 returns were filed compared to over 145 million today.

As populations grow, it ought to be obvious that their needs also grow, including demands for supporting infarstructure - whether for schools, highways, health care (including vaccinations for TB, smallpox etc.), or federal assistance in case of disasters. While it is very easy (and stupid) for some - like hardcore Libertarians- to take individualism to preposterous heights, say after a major hurricane hits, the truth is they'd also be begging for gov't help if their lives, homes were in ruins. This is especially so where whole cities have lost critical services, including water and electricity, as New Orleans did in the wake of Hurricane Katrina in 2005.

Thus, "the federal government spends far more today than it did in Woodrow Wilson's day.... so we have little choice but to raise more revenue than we did back then."

But it is also true to say we wouldn't need as much extra revenue if we kept our noses clean as opposed to butting into other nations' affairs when they don't specifically concern us. For example, Viet Nam was a civil war between North and South Viet Nam that didn't concern us. Most Americans with any sense knew it at the time and that the much ballyhooed "domino theory" of communist takeover was bollocks. LBJ even had to invent a pretext for war by confabulating the Gulf of Tonkin incident as a basis. We ended up with over 50,000 killed and blowing over $269b in tax money that could have been used to fund many other more constructive projects. And what happened at the end? Viet Nam is one of the 19 odd nations that stand to benefit when the Trans Pacific Partnership trade deal is finally approved.

Money wasted!

The same can be said of the $3 trillion pissed into oblivion on account of Gee Dumbya Bush launching the Iraq invasion and war. An even worse aspect is that he didn't even increase taxes to pay for it!  He told people after 9/11 to "go out and shop".

Now, what about replacing the income tax with a VAT?  This is not really a sensible plan. For one thing, this tax strikes at consumption, on which nearly 75% of our GDP depends. Thus, if you tax consumption as hard as Salam suggests (to essentially replace 120 million of today's 145 million income tax returns) the impact will be that people will spend much less than they are now. (Of course, I am all in favor of people spending less, but not that much less that it leads to a recession - affecting job creation).

The second problem is that those "further down the scale" will be clobbered because much less income will remain after  paying the VAT than for the wealthy spenders.  A 10% VAT will leave a billionaire with $9b to spend, while for a $20,000 WalMart store clerk only $18,000 will be left- so he or she is even closer to the margins. Even Salam agrees some kind of "offset" is needed to help those lower down the income scale and that a "truly effective VAT would be highly regressive".

Thus we come to the third problem which is how to implement workable offsets.  Assorted solutions have been offered that are deleterious in the end. One such, from Columbia Law School Prof. Michael J. Graetz (ibid.) is "a large payroll tax break for all workers earning $40,000 or less"

The key problem with this is that it is payroll taxes that support Social Security - which is already being hammered with 10,000 a day enrolling in the system.  Do we really really want to help lower wage workers by cutting payroll taxes- so they can buy more without penalty today - but be left penurious in their old age from S.S. cuts? That seems not to be a solution that makes any rational sense.

Lastly, it may be more a matter of perception than anything else that makes Americans believe they are overtaxed. As Salam himself observes, "most income tax filers don't actually pay that much in income tax".  Why the misperception? Well, because of the endless stream of misinformation and disinformation spouted by the likes of FAUX News and Lush Limbaugh. As Hitler once said: "If you repeat a lie often enough the people will believe it."

The WSJ piece goes on to note (ibid.):'

"The Tax Policy Center estimates that roughly 45.3 percent of tax returns won't actually owe any federal income tax this year. Many will pay a negative tax rate based on their eligibility for various tax credits."

This despite the fact the federal gov't is revenue deprived (for all its assorted commitments) by nearly a trillion dollars.

But make no mistake, while a VAT may indeed impede congress' ability to "micromanage the economy through the tax code", it is still not the answer.

With Social Security Disability Nearly Broke - The One Lesson That Should Have Been Learned

According to The Wall Street Journal ('U.S. Disability Program Nearly Broke', July 23, p. A4) while the long term solvency of Medicare and Social Security "has been improved slightly" (actually Medicare by 13 years, thanks to Obamacare, and S.S. by 1 year to 2035) the Social Security Disability Program is due to "exhaust its reserves next year". That means if nothing is done, a 19 percent cut in benefit payments will be triggered.

Treasury Secretary Lew has proposed a re-allocation of payroll taxes from the retirement trust fund to the disability insurance trust fund to bolster it. This would require congressional approval, but the Republicans - who control both houses of congress - are in no mood to cooperate. According to the Denver Post yesterday they are demanding cuts to Social Security (the retirement part)  to move forward.

In terms of the retirement program proper - which must be distinguished from disability insurance - it ran a $55 billion surplus last year, according to the WSJ, and this "stemmed entirely from interest on reserves". But, excluding interest, the general program ran a $74b deficit last year and a $76b deficit the year before.  As a share of taxable payroll, "the program is projected to run a deficit of 1.3% this year, the largest ever faced by the program".

Interestingly, this would be nearly the re-allocation proportion needed to salvage the disability program in order to prevent those 19% cuts. Adding up those two actual deficits we get $150b, or about $20 b less than the  $170b removed from the system via the "payroll tax holiday" over 2012-13 and passed by congress including insane Demos.

As I complained about at the time (post, Jan. 15, 2013):

"the payroll tax holiday never should have been introduced in the first place! Like the middle class Bush tax cuts, they have only dug us deeper into a hole and made it more possible for ardent, anti-Social Security repukes to hop on their bandwagons to demand S.S. privatization or underhanded benefits' cuts via the dastardly "chained CPI".

This also has to do with the fact that millions more beneficiaries piled into the retirement program as well as millions into the disability insurance program - often people who had lost their unemployment insurance and had no place else to go.

The Democrats, the supposed "party of the people",  are also largely to blame for this payroll tax holiday nonsense since without their votes it couldn't have gone forward.  As Richard Eskow noted in an article at the time of my blog post ( 'The Long Game: Payroll Taxes, Hostage Taking and Social Security' ):

"By proposing to expand and extend this 'holiday,' Democrats have bypassed more efficient ways to help the economy, and have once again endangered Social Security"

Eskow's reference was to the fact the payroll tax holiday removed $170 b from the system and lowered its ability to cover costs of millions of new beneficiaries, many of them seeking Social Security Disability. And it wasn't as if everybody was suddenly surprised by the retiring boomers pouring into the system and the ancillary demands for disability. Most serious financial mavens knew this was coming, as well as the feckless politicos - always ready to posture for temporary support.

Now, of course, the 'chickens' have come home to roost, and the Demos - as per their earlier stupidity of extending the Bush tax cuts (then having to face budget "sequesters")-  must go cap in hand to the Repukes to help them out, hoping that out of the goodness of their hearts they'll approve a rescue without any strings.

Of course, this is a pipe dream. The Reepos will play this for everything they can and demand their pound of benefits flesh while lecturing the Dems on the "unsustainability" of both Social Security and Medicare. No kowtowing to the Reeps would have been necessary if the Dems had just had the foresight to see that with millions opting to apply for disability it was folly to take a payroll tax "holiday" (cutting the 6.2% contribution to 3.1%).

Will the Democrats learn an important lesson on payroll taxes for the future? Doubtful,  so long as they value political posturing above the welfare of citizens.

See also:

http://brane-space.blogspot.com/2011/11/most-loathsome-destructive-tax-cut-so.html

A Retirement Crisis By 2030? It Doesn't Have To Be

In the June 30th  TIME article: '2030 - The Year Retirement Ends' - we are asked to believe the money will have run out for Medicare already (by 2026) and will be three years from doing so for Social Security. "Generation X-ers will begin moving out of work into their Golden Years" - but only to find out they don't have enough money to live on, and will have to return to work - if even as janitors or Walmart greeters.  And as for those Boomers, well they will be getting the last of the good 'pickings' before the Trust Funds run dry.

All of which is nonsense. Indeed, the very thought the richest nation in the world could even allow a "retirement security crisis" to unfold such as TIME described, is absolute balderdash. The only reason it may come to that (since I am not discounting the greed and egos of our politicos) is the willingness to just sit and do nothing. Oh, and by the way, let's eliminate the 'blame the Boomers' bullshit right now. In that case politicos (actually Reagan and the congress) did do something by increasing the FICA taxes specifically to deal with the projected Boomer onslaught. So what happened? The additional money generated was most spent by the Bushies on their wars of choice and tax cuts! But that's not on the Boomers, it's on the Bushies!

The following data shows how much has been raided each year, the data from the Trust Fund administrators and GAO:

Year:  ................Amount raided

2011.................$67.0 billion

2010.................$87.0 billion

2009...............$137.0 billion

2008...............$180.2 billion

2007...............$186.0 billion

2006...............$185.5 billion

2005..............$173.5 billion

2004..............$151.1 billion

2003.............$155.6 billion

2002.............$159.0 billion

2001.............$163.0 billion

2000.............$151.8 billion
----------------------------

TOTAL:  $2.63 TRILLION

Now, any person with a single neuron for a brain would realize that it doesn't matter if you fill a one gallon bucket with a cup every day (equal to 6 oz.) if there are massive holes in the bottom that let out 12 oz. in the same time! 

Thus, the worker-to -beneficiary ratio is a red herring meant to deflect attention from the REAL problem which is the yearly raids on monies received from payroll taxes and intended to go to future beneficiaries! So long as these raids continue unabated, NO solution or "re-tooling" of the program will work, not raising payroll taxes, not making cuts, NOTHING!  The raiding has to stop first.
Despite this, TIME proffers little but the usual, standard "solutions", including:

1) The government should force workers to contribute more to their 401ks

2) The "entitlements" (Social Security and Medicare) need to be "dealt with" and the system changed.

3) People most affected need to work longer.

4) The 401k needs to be re-tooled

Let's take (2) first and why it is wrong. In nearly all cases "entitlement reform" implies cuts (e.g. "chained CPI") not increased benefits, yet is the latter which is needed. First, Social Security and Medicare are NOT "entitlements" because workers have paid into them over 40 years or more. In many cases, the 6.2% payroll tax is the biggest tax hitting most of the working poor. But they do it because down the road, after their backs are nearly broken from toil and their hands can barely grasp a buck from arthritis, they will have some residue of dignity in their old age. Some semblance of financial independence. (TIME also admits that half of all those over 65 today would be poor if Social Security was eliminated.)

Even then, there are no gifts or freebies! The seniors still have to cough up nearly $100 a month for Medicare premiums, which are deducted from their Social Security, making it even less - say if it's the only income they have. Next, we know that Medicare premiums have risen over 136% the past ten years while Social Security cost of living adjustments have increased barely 30% over the same time. In other words, seniors are losing out by having to shell out ever more which one can consider a de facto cut.

Another support aspect the media conveniently forgets, which is dragging us toward a putative crisis, is the $244 billion lost because the payroll taxes were intentionally discontinued for two years. Incredibly, this move was engineered by the Democrats (mostly Neoliberals, to be sure). At the time I wrote several blog posts excoriating them for deliberately undermining Social Security and hence the retirement security of millions, given Boomers were piling into S.S. (According to TIME, by 2012, 13% of all Boomers had signed up for Social Security).

Now let's look at (1). This is a useless solution because in most cases the inability to max out or even contribute to the 401k is because disposable income isn't enough to allow it. After groceries, utilities and mortgage (or rent) all grab their share, workers find there isn't enough left to put aside - given the meager wages too many Americans earn. Hence, having the government force workers to contribute would merely compound the existing outrage of a pathetic national minimum wage. Unless the government -congress increases the minimum wage to a living wage it has no business trying to force workers to save more on any front - whether for health care, or S.S.

As for getting people to work longer (including delaying social security payments until the person turns 70), that's all well and good if they have a comfy job where their aging bodies can withstand more years without excess wear and tear. A writer, for example, will do ok, so will a taste tester, a 'mystery shopper', a librarian, or a food critic.  A heavy laborer (e.g. coal miner), or even a custodian or trash collector, not so much. Hence, it is foolishness to expect any of the latter group to work to 70 or past it. Nor is there a need to ask them if the country infused its social insurance programs with the money needed - or at least stopped the incessant raids!

The last, re-tooling the 401k, is not much of a solution either - given the 401k is in large measure responsible for the whole retirement security problem. As the article notes (p.43):

"The fragility is  in large part due to the massive shifts in the American retirement system since 1980. That's when the 401k plan was invented by a benefits consultant working on a cash bonus scheme for bankers, who had the idea to take advantage of an obscure provision of the tax code - allowing for deferred compensation of individuals to be matched by their company. The result was the 401k, a savings account that lets employees contribute pretax income from their paychecks. But unlike the traditional pension it doesn't promise a specific regular payment on retirement."

The last sentence is most important and what too many Americans fail to grasp. That is, in order to get regular payments per month which would be like the original defined pension - THEY have to create it themselves! That is, they'd have to have saved enough in their 401ks to generate an amount of money to purchase an immediate fixed annuity which in turn will pay them a steady amount monthly.

But let's understand why the 401k was created in the first place: in order to relieve companies of having to shell out defined pensions indefinitely for their employees - thereby cutting into their bottom lines.  Thus, the 401k emerged as a deliberate device to shift risk from corporations to their workers. And hey, if the workers couldn't amass enough - tough luck!

Another factor: most Americans got into trouble with their 401ks by trying to use them as investment vehicles when they were always designed only for conservative savings. Because of this investment meme - pushed also by the companies - workers often lost money when each Bull market came crashing down (as it did in 2008 and as it will again) or when major corrections occurred.

The best expose of this was perhaps by William Wolman and Anne Colamosca in their book 'The Great 401k Hoax', (2002), which offered the best advice on recognizing real returns as opposed to the bubble variety. With their solid arguments they showed, for any given fiscal environment, what a realist investor could expect to make. As they noted, one needed to look carefully at the percentage profits returned by X, Y or Z company. If it is averaging 1.3% a year, then that is the real return you can expect.  The stock hawkers bejabber of 10% annualized returns, or more often, 7 percent, is purely designed to lure the unwary into stock investment.

The authors' arguments were further reinforced about 6 years later in a London Financial Times article (‘A Metaphorical Proposal’, Mar. 13, p. 11A, 2008) by Michael Skapinker. He cited remarks by Joseph Berardino – chief exec of Arthur Andersen- who noted how the existing reporting system “failed to communicate essential information about the real risks facing companies” to the small investor.

Given that most workers already had problems navigating the complex investment choices most companies offered in their 401k plans, it was easily understood how they were set up to lose money.  This suggests that the 401k either needs to be removed, or radically revamped.

If it is removed what will replace it? The best idea yet comes from legislation pushed through by Kevin de Leon of California which would guarantee a living wage to every Californian working in the private sector, on retirement. De Leon's approach, called the CSC or the California Secure Choice Retirement Savings Program, was signed into law in 2012 and combines the best aspects of defined benefit plans with what used to be the 401k.

Another option would be similar to the proposed MyRA of Obama, which would be expanded to let all middle class workers save in a fund administered by the U.S. Treasury. Such a fund would be 'safe' - meaning the risk factors that we now see dogging 401k plans would be eliminated.

Another solution to any future retirement crisis, is to simply raise the income subject to the payroll tax - say from the current $117,000 to $600,000.  This would extend Social security's lifetime to at least 2075 and with a minimum of pain. (Doing the same for the Medicare FICA taxes, as well as increasing their absolute amounts - say to 4.4 percent would do the same.). Keeping the incomes subject to payroll taxes so low is a fool's errand anyway, given that so many of the wealthiest still insist on taking their 'cut' because they "earned it". So why not increase the income level to reflect that? It is pure political chicanery that it hasn't been done up to now!

Lastly, TIME cites experts (e.g. Paul Taylor) who insist communal living of different generations is the answer. Grandma and Gramps can live with their kids, John and Jill (in their 40s) and their own kids- Rudy and Trudy. Well, maybe - maybe not. It depends whether all living under the same roof can get along harmoniously, at least most of the time. But one thing we mustn't do is "force communal living", i.e. by forcing seniors to delay receiving their Social Security until 70 - so they are compelled to live with Junior and wife (and kids) til then.  That draconian solution is so fraught with peril it doesn't need explanation.

What I don't subscribe to is Taylor's glib pronouncement that:

"There's a growing sense, for all the generations, that no one has been spared and everyone has to suffer to some extent".

But it doesn't have to be that way! If the country made the right choices and especially ceased to involve itself in stupid wars and wasteful nation building projects - there'd be enough money to cover the Millennials' student loans, Gramps' medical ills, and John and Jill's mortgage payment.  Also, as I showed above, the less painful solutions are there - but we have to get our cosseted rich folks to sign on to them - in their own interest.

Would these rich folks really want to live in a nation that's being torn apart by revolution similar to what we see in the Ukraine or Iraq? If we aren't prepared to cut back our yen for empire,  or elicit the one percent to contribute to the commonweal, we will see ever more suffering at home....and even....as author David Cay Johnston put it in a recent salon.com interview, civil distress so severe it might even incite a revolution  that will be "the bloodiest the world has ever seen".

(See: http://www.salon.com/2014/05/22/bloodiest_thing_the_world_has_seen_david_cay_johnston_on_inequalitys_looming_disaster/

Instead of bitching about "socialism" and "takers",  the richest need to see their welfare is as much at stake as those deluged by debt and job loss. As John F. Kennedy once put it:

"If a free society cannot help the many who are poor, it cannot save the few who are rich."

See also:
http://www.smirkingchimp.com/thread/richard-eskow/56585/a-secret-plan-to-close-social-securitys-offices-and-outsource-its-work

The Cowardly Backdoor Efforts to Cut Social Security

Incredibly, austerity measures passed by Congress have shut down numerous Social Security Administration field offices in the past year--even though those field offices are funded out of Social Security's trust fund.

Unknown to many older citizens (and younger) the Social Security System has been under covert attack by the “fix the debt’  ghouls and GOP austerity vampires in Congress since 2010. Since they’ve not been able to get their way with the chained CPI (Obama had the good sense to table it) they’re now using a cowardly ‘end around’:  cutting Social Security Admin. budgets in order to shut down access to Social Security offices.

 Make no mistake these are the same dastardly vermin  who held our nation’s credit hostage, threatened to shut down the government, and forced congress through a nauseating series of self-inflicted crises. They have even gutted the IRS to the tune of nearly $8b over the past 4 yrs., thanks to phony attacks and GOP anti-tax hysteria– thereby limiting the agency’s power to go after tax avoiders and other tax scofflaws. They are, in effect, denying revenue to this country when it needs it the most.

When at long last the shrill cries to cut S.S. benefits subsided, the assorted array of GOP congressional and Tea party rats decided to  adopt cowardly, invisible tactics unseen by most Americans. This entailed rejecting fourteen of the last sixteen Social Security administration budget requests, despite the fact that Social Security is not in debt, has not engendered any debt and pays its own freight via the payroll tax!  Thus, the GOOPr congress is acting as if there is no payroll tax at all.

 

Bear in mind, the payroll tax was created explicitly by FDR to ensure the system’s sustainability along with having current workers pay in to support already retired workers. True, in 2011, the Dems suddenly became morons and decided to cut payroll taxes by 2.4%, - but when we on the Left yapped on them, they came back to reality. Despite two years of this nonsense, it wasn’t nearly enough to justify the GOOPs’ current tactics.

The outcome? The S.S.A. has been forced to close dozens of field offices around the country, thereby limiting access to seniors whose only way may be face-to-face appearance with administrators.   Meanwhile, the Senate Special Committee on Aging held a hearing after a bipartisan report showed Social Security has closed 64 field offices since 2010, the highest number of closures in a 5-year period in history. (Denver Post, June 19, ‘Agency closes field offices’, p. 18A)

 

Interestingly, as the article also points out (ibid.):

“The closings came as applications for retirement and disability benefits are soaring”.

 

In other words, these rabid rats and scum balls are adopting the exact same back-handed methods they did with injured vets seeking VA care. In that case, the miserable fuckers declined to approve $24b to expand VA facilities for care – thereby creating the recent crisis we beheld. Now, having succeeded there, they’re going after vulnerable seniors needing Social Security!

According to the Post article, again echoing what’s gone on with vets seeking care in the VA system:

“Seniors seeking information and help from the agency are facing increasingly long waits, in person and on the phone.”

Is this American? No, it is fascist to the core!

Blogger R. J. Eskow wrote on the Huffington Post that:  “many disabled and elderly Social Security recipients depend on field offices, and the workers in them.” And as Michael Hiltzik of the Los Angeles Times said, “They haven’t been able to cut benefits, so they’re doing the next best thing: making it hard for you to know what you’re due, and harder to get it when it comes due.”

The bottom line is, Americans came together to create the Social Security system to provide a basic, reliable foundation for retirement and disability. Closing field offices and making it more difficult to access benefits information is an attempt to dismantle that foundation. It’s time we get going to stop it. Readers interested in signing on can go to this link:

 

https://www.care2.com/news/member/774550352/3780474

 

There are also other links - from assorted organizations -  that can be found via Google!

People Must Stop Whining About Higher Payroll Taxes!

It would seem to be obvious that people who need Social Security in the future - as most of us do - would recognize that payroll taxes help "pay the freight". You remove or even reduce the amount of payroll taxes and you put Social security in an even more precarious position by defunding it. We've seen that in the past two years as the "payroll tax holiday" has amounted to a removal of $170b from the system, even as millions more beneficiaries have piled in.

The payroll tax holiday expires this year, and to hear financial mavens and economists bellyaching you'd think it was the end of the world. But maybe these elites are in such positions that they needn't worry about getting Social Security!

Case in point, this morning, finance advisor Jill Schlesinger bemoaning the loss of money from "consumers" paychecks on account of the expiration of the payroll tax holiday.

Schlesinger whined on CBS' Early Show:

"It could be the difference between you making enough money, $1,000 over the course of the year, to really pay your bills. It also could be the amount that you needed to put into your retirement account. It could be the amount you needed to pay down your credit card debt. This is a very important number for families, especially those living on the edge. I got to remind everyone, you're one of the 160 million people who work, your taxes have gone up this year."

Yes, well, duh! The point is the payroll tax holiday never should have been introduced in the first place! Like the middle class Bush tax cuts, they have only dug us deeper into a hole and made it more possible for ardent, anti-Social Security repukes to hop on their bandwagons to demand S.S. privatization or underhanded benefits' cuts via the dastardly "chained CPI". Also, like the extension of the middle class Bush tax cuts, they amounted to shameless political pandering - essentially using tax cuts as leverage to buy votes. No attention paid to the harm to Social Security and how a less firm footing makes it conceivable the program will be subject to future budget allocations. You want your S.S. benefits determined each year by the Reepo House? I don't!

Richard Eskow in a blog article ( 'The Long Game: Payroll Taxes, Hostage Taking and Social Security' ) noted:

"By proposing to expand and extend this 'holiday,' Democrats have bypassed more efficient ways to help the economy, and have once again endangered Social Security"

Schlesinger goes on:

"As employees, we pay 6.2 percent, your employer pays 6.2 percent, as well. A couple years of years ago when the economy was really fragile, one of the ways to stimulate the economy was to lower the payroll tax for employees, so it went from 6.2 percent of your earnings, down to 4.2 percent. That was awesome. It helped you get a little bit more money in your paycheck, Unfortunately, sadly, now we're back at 6.2 percent. It was not extended as part of the 'fiscal cliff' negotiations."

Sadly? Sadly there was any payroll tax holiday at all! It removed $170 b from the system and lowered its ability to cover costs of millions of new beneficiaires, many of them seeking Social Security Disability. It is not "unfortunate" we are back to 6.2% but FORTUNATE! It means we've postponed the clarion calls from the Right to change or defund the system - even when it's owed over $2.7 trillion in back IOUs!

Schlesinger then mentioned economists critical of the move,  saying it may affect consumer spending.

Yeah, well - maybe a few less Starbucks lattes a week! Cheeze Louise, grow up already! Consumption infantilizes Americans anyway. Nor should consumption be expected to hold up 70% of GDP. As Benjamin Barber ('CONSUMED') observes, the entire consumer infantile ethos is what has cost us in the citizenship ethos. Rather than being wary citizens, attending to how our gov't is cutting our rights by surveillance, etc. we have been infantilized to just consume. Let's get that new computer! Let's get that new HDTV or X-box video game!  We've descended into virtual babies with nappies as we've gotten toy after toy and embraced the "Gimme!" idiom. It's a damned good thing then the payroll tax expiration has tempered this nonsense.

Schlesinger added:

"A lot of the economists I talk to all the time were up in arms about this because they think that this payroll tax cut was a great form of stimulus."

Up in arms? F*ck them! There's  in fact no evidence, not one scintilla that the payroll tax holiday did duck squat into creating any new jobs or increasing growth. American companies continue to sit on over $2 trillion in capital, even as they farm existing jobs out overseas, then repatriate the profits - which aren't taxed at all. Want to REALLY create jobs and growth? Then end this shell game!

Schlesinger again:

 "And now the resumption of that 6.2 percent number means we're probably going shave about a half a percent off our growth rate this year. You think, 'Oh, a half a percent, not a big deal.' We're only growing by two percent a year so it is a big deal."

And again, this is just speculation. The long and short of it is tax cuts don't work, period! This was explored in depth in the book, 'The Tyranny of Bad Ideas'. It was also demonstrated in a Financial Times piece from 9/15/10 that examined the Bush tax cuts. The FT piece found that the era of the Bush tax cuts was "the weakest decade in U.S. postwar history for real, non-residential capital investment. Not only were the 2000s by far the weakest period but the tax cuts did not even curtail the secular slowdown in the growth of business structures. Rather the slowdown accelerated to a full decline”


The belief that tax cuts aid growth is then no more than a persistent myth, but a myth that's been reinforced by the anti-tax nuts. The true fact is that it's HIGHER taxes that generate more growth, more productivity. This only sounds counter-intuitive because too many citizens have allowed themselves to be bamboozled by the low tax narrative.

James Medoff and Andrew Harless, The Indebted Society, 1995, p. 84, 'Let Them Eat Cake', have shown that "high tax rates are associated with higher productivity growth". There is a consistent and strong relationship."   By contrast, they found for the years when supply side dogma held, productivity retreated by more than 30% and debt exploded- exactly the opposite of what we've been sold.

Bottom line: People ought to applaud the reinstatement of the payroll taxes to 6.2% and just hope to hell no more such "holidays" are taken for the sake of political expedience. Your future Social Security benefits will depend on it, and as time discloses they will likely mean more to you than your 401k or other investments! Which monies can be lost with the next DOW nose dive.

'Taxes are Much Higher Than We Think?'- HARDLY!

According to Edward C. Prescott and Lee E. Ohanian ('Taxes are much higher than you think', WSJ, Dec. 12, p. A19) the average American is being taxed senseless.  The authors assert:

"Taking into account all taxes on earnings and consumer spending- including federal, state and local income taxes, Social Security and Medicare payroll taxes, excise taxes, and state and local sales taxes,....the U.S. average marginal effective tax rate is around 40%. This means that if the average worker earns $100 from additional output he will be able to consume only an additional $60."

Well, that's assuming of course that the worker isn't made to work all or most of those extra hours off the clock....as at Walmart. More seriously, the authors throughout their anti-tax rant make no mention of the benefits that accrue from the taxes paid!

Hence, in accounting for said benefits - say Social Security monies - which surely assist and fuel consumer spending (at least of oldsters, as well as many on disability), they are off the mark! In truth then, the 6.2% payroll taxes ought not even be part of the mix because it's more a defined contribution plan paid back to beneficiaries. Contributions paid in (with more than a gov't 'match') and later received as benefits go for groceries, health care (e.g. prescriptions) and other components that drive aggregate demand.

Thus, knocking off that 6.2% defined payroll contribution puts the proper tax rate at less than 34% while eliminating sales taxes takes it down even further (given sales taxes are really optional and imposed only on certain consumption transactions). When I therefore use the term "effective marginal tax rate" I apply it to income taxes exclusively, not optional taxes which one avoids by not undertaking the specific transaction (or undertaking it online). This leaves even lower percentages.

The fact remains that even if such adjustments aren't made, Americans are currently taxed at the lowest percentage of GDP for the past 40 years. This as our domestic needs have expanded, including infrastructure repair and alternative energy investment.

Compared to the marginal tax rates of 91% in the 50s, an era which also saw only one parent having to work, and bank interest rates approaching 4-5%, Americans are getting off Scot free. Indeed, if Americans value their future benefits, such as Social Security and Medicare, they ought to be the first to be standing in line to pay HIGHER taxes, and especially to come out both barrels blazing against any further postponement of full payroll taxes- which pay the freight on those benefits!

Bottom line? We simply cannot afford any further extensions of payroll tax cuts, for "stimulus" or any other absurd reasons! The Social Security Disability funds are already bleeding down to zero and while Social Security can't go bankrupt (it has no external creditors) we don't want future seniors to have to live on only three fourths of what current seniors receive!

The authors also claim (ibid.):

"High tax rates, on both labor income and consumption, reduce the incentive to work by making consumption more expensive relative to leisure, for example. The incentive to produce goods for the market is particularly depressed when tax revenue is returned to households either as government transfers-in -kind, such as public schooling, police and fire protection, food stamps and health care that substitute for private consumption."

But it's important to understand what these guys are saying here: To wit, that it's better for each 'Murican to use more before tax income to buy even more cheesy crap to fill his home or storage unit (and that he likely will never use more than once....like that 20-year old 'Tickle Me Elmo' or  Mark McGwire bobble head collection) than it is to put that money toward the common good!


Thus, these two numbnuts rate the consumption -purchase of cheesy crap over paying for police and fire protection, public schooling or food stamps - which actual stats (e.g. by the Economic Policy Institute) show drives aggregate demand and betters the economy far beyond tax cuts.

To put a finer point on it, there is already TOO MUCH private consumption in the U.S. which is infantilizing all of us (See e.g. 'CONSUMED: How Markets Corrupt Children, Infantilize Adults and Swallow Citizens Whole' ). The book depressingly details how private consumption is feeding the capitalists' coffers while converting us all into selfish infants who gotta have their own toys!

One thing that can't be defended, therefore, is enabling more disposable income to dispose of in junk! Taxes therefore provide the incentive and basis for genuine economic growth and quality jobs - as opposed to generating twenty million Bloomingdales' clerk, sales serfs and burger flippers.

Authors James Medoff and Andrew Harless (The Indebted Society, 1995) indeed show that as tax rates increase, aggregate demand is enhanced and job output grows. This is in direct opposition to the specious claims of the tax cutter fetishists like the two WSJ authors. As EXHIBIT A, one need look no further than the 20 million-plus jobs created over the Clinton years when the marginal tax rates were at 39.6% - which we are told now will bring us over a "fiscal cliff".

The true fact is that if the Bush tax cuts (more and more now the Obama tax cuts) aren't fully repealed soon, rampant inequality will continue to grow across the board. How much has it already grown? An Economic Policy Institute  Study reported in today's New York Times (p. A22)  found that between 1983-2010 three quarters of all new wealth accrued to the wealthiest 5 percent of households. Over that same period the bottom 60% actually become poorer.

If we want this travesty to end, we have to be prepared to cough up more of our paychecks for higher taxes....for the common good, and ultimately our own welfare! This is also exactly why ALL the Bush-Obama tax cuts must be sunset at the end of this year - as they were originally intended to when passed in 2001 (actually after ten years) because of the toll taken on the deficit!

We need NOW to get out of this tax phobic state or reap the consequences very soon!

Be Careful What You Wish for....Fellow Citizens!

In an interesting and intriguing interlude on ABC Evening News two weeks ago, a parade of citizens in Youtube offerings was seen all saying the same thing: "Please, congress! Stop playing games and pass the payroll tax cut! We need that money!" This was during the time a couple weeks ago when Repugs had done their typical end of year grandstanding and threatening to take down a deal to pass these cuts along with a 59-week unemployment benefits extension and a prevention of the proposed 27% cut to Medicare physicians.

In retrospect, one wonders if these people really appreciated and grasped what exactly they were asking for, and that in the end.....they have been pleading for a small increase in their yearly income which over the long term guts their retirement prospects.

This was brought into focus today with a report out of The Washington Post noting that for the first time in history, politicos are using Social Security's funding as a poker chip in their high stakes games. The danger? A mechanism which has assured Social Security's integrity since its inception, is now being gutted which may well pave the way for either the program's collapse or its conversion to a welfare program. This at a time when nearly 1.7 million a year are desperately trying to get Social Security disability after months or years of unemployment, and nearly 40 million seniors over 65 depend on their Social Security benefits for most of their income.

The prospect of lawmakers and politicos continuing to use the payroll taxes and specifically cuts to provide economic stimulus during a quasi-recession has disturbed many experts, especially Social Security's two public trustees. They both worry that if this tactic becomes entrenched Social Security will lose its status as a protected benefit due every American based on what they paid in - via payroll taxes- and instead becomes another welfare program, or a program subject to appropriations approvals.

In the first case, we might see either it being cut outright, or possibly converted into a "work to welfare" format such as transpired with the 1996 Welfare Reform Act. Picture then 88-year old tottering grannies barely managing to stand up as Walmart greeters in return for the $800/month checks. In the second case, we'd see the Congressional Budget Office declare social Security no longer sustainable so that yearly budget appropriations must pass through the House. If its GOP-controlled most able-brained folks can predict how that will work out.

One of the trustees, Charles Blahous, quoted in the article, said:

"It's a grave step for Social Security. It just seems to me the program both financially and politically will be on a lot rocker footing".

Blahous added:

"We've never monkeyed around with Social Security before. Until now it was understood the payroll tax was supposed to do on thing. It wasn't supposed to be a stimulus mechanism. Now the payroll tax is this variable thing that goes up and down according to other economic conditions. That is a real transformation of what the money was supposed to do."


Not only that, but if the payment support is variable then logically it means the whole program is variable and can become welfare, or subject to appropriations bills. Well, I had warned about this in previous blogs, e.g.

http://brane-space.blogspot.com/2011/11/most-loathsome-destructive-tax-cut-so.html

http://brane-space.blogspot.com/2011/12/as-predicted-repukes-play-social.html

Meanwhile, Robert Reischauer, the other trustee, acknowledged that extending this cut during a period of high unemployment could be justified, but "if it continues for a substantial period of time it could undermine one of the foundational arguments that makes the Social Security program inviolate"

Well, that undermining is already underway, as noted in the last of the two blog links above. You can bet your sweet bippy it will swing into high gear if the GOP takes over both legislative houses as well as the Presidency. And as other skeptics have noted, the problem is when one plays this game one can become hostage to it, or maybe addicted is a better word. We've already seen how the Zombie Bush tax cuts - which ought to have been finally expired last year- rose to life again and we're barely two votes away from them becoming permanent zombies - forcing vast cuts to all benefits later.

Nancy Altman, co-Director of Social Security Works, makes a more salient point:

"All of a sudden Social Security will have to compete with every oter program, whereas before it had its own dedicated revenue. It's breaking the kind of firewall that has always existed between the trust fund and the operating fund. The biggest concern is that this was done without any hearings, without any apparent regard for the impact on Social Security."

Which, of course, introduces the question of WHY, especially under a Democratic regime. This year, Social Security is projected to pay out $46 billion more in benefits than it takes in- meanwhile, Social Security disability is projected to be broke by 2017. It is claimed (in the article) that the first shortfall is being made up for by "redeeeming Treasury bonds bought in years when there were cash surpluses". But that isn't the critical factor here. The critical factor is what will the yields of those Treasurys be? One thing we do know, this sort of strategy is unsustainable when the Federal Reserve is already on a bond-buying spree driving down the yields of even 30-year Treasurys to barely above 3.09% (according to a WSJ piece from 4 days ago).

Meanwhile, the chief actuary of the Social Security Trust fund has claimed that the payroll tax cut "will not put a dent in the $2..6 trillion fund". But how long do you supposed that argument will hold up when politicos are still playing both ends against the middle and using Trust Fund monies to pay for things general revenue ought to cover, like the pullout from Iraq (estimated cost $300b) and the Afghanistan supplemental budgets.

The saddest fact in all this is that, bereft of arguments to defend higher taxes in the face of the Repuke tax cutters, Demos caved and "borrowed from the Republican playbook" arguing now that reverting to the old (payroll tax) rate of 6.2% would be a tax hike. Well, they may have outsmarted themselves! Now, their words will commit them to doing this ad infinitum, even as they likely sustain the Bush tax cuts to be consistent. This, despite the fact that actual computations disclose that payroll tax cuts do next to nada for the economy, just as the Bush tax cuts do next to nothing. Again, see The Financial Times' report on those ten years of Bush tax cuts (FT, Sept. 15, 2010).

A much more powerful economic stimulus would be delivered by extending unemployment benefits indefinitely, or at least another 99 weeks. The unemployed will spend that money immediately on food, rent, mortgage, school supplies....whatever. That is what will keep jobs from being sliced.

In the meantime, Sen. Bernie Sanders has rightly warned that Americans should be more cognizant of what they are yearning for here. Is it really worth it to put maybe $900 extra in your pocket then later in your elder years, when you REALLY need money - to have to live on peanuts after Social Security cuts. Or, be forced to work as street sweeper on a "Social welfare to work" program?

Blahous one more time:

"Whether you're on the left or the right you should really dislike this. It has been somewhat mystifying, the determination to do this. I just think it's short sightedness."

Actually, not mystifying at all. Merely reinforcing once more how crass, calculated and cynical political gamesmanship can fool enough of the people enough of the time -when times are somewhat tough - to make them grab for an instant sop while forgetting their long term welfare. No one can say they weren't forewarned when the shit finally hits the fan.

As Predicted: Repukes Play 'Social Security = Welfare' Card!

Well, as I surmised and feared, it didn't take long for a Republican to use the payroll tax cut and newly proposed extension of that holiday to attack Social Security as "welfare". An easy question: What is it that enables Social Security to continue without meeting the same end as welfare, as we saw in the 1996 Welfare Reform Act? Well, because it pays for itself, using the payroll taxes paid in by current beneficiaries to pay for current retirees' benefits. This was why FDR in his wisdom adopted the mechanism to cover Social Security's future payouts. He knew that this would be the optimum way to protect it, especially from the spectacle of yearly congressional budget approvals.

That was the reason I pilloried the decision to even remotely accept payroll tax cuts as a way to benefit the middle and working classes. See, e.g.

http://brane-space.blogspot.com/2011/11/most-loathsome-destructive-tax-cut-so.html

As I noted therein, NONE of these tax cuts work - there's no evidence for any of them helping to fuel the economy, and second, the Dems are giving the Repukes future ammo to use against Social Security and to justify cutting benefits because "it's not paying for itself any more".

Now in today's WSJ ("Calling Obama's Payroll Tax Bluff', p. A19) we see long time Bushie hack Ari Fleischer is proposing just such a ploy. According to Fleischer:

"The whole idea of having a dedicated payroll tax that supports a Social Security "trust fund' rests on the notion that you get what you pay for. A worker suffers payroll tax deductions that the government is supposed to hold onto - separated from the rest of the budget- to fund a large portion of that worker's Social security and Medicare payments upon retirement.

But cutting the payroll tax while holding Social Security payments steady means there really is no trust fund and Social Security is just another redistribution of income program."

The problem is that as much as I detest Fleischer, and always have, his logic is correct. If one is going to reduce payroll taxes, then if there are no offsets to those losses, technically Social Security payments should be reduced to reflect the payroll tax lost inputs. Since this will amount to $200 billion over ten years, then that would likely translate into about $50 a month per beneficiary. Way too high for most.

But this is exactly why I deplored the very idea of the Dems using payroll tax "holidays" to try to win pre-election year kudos from voters. They ought to have instead confronted voters, citizens as adults and laid it out straight:

"Look, we can give you around $1,000 a year extra in your wallet with these payroll tax cuts, but it will mean severe cuts to your Social Security benefits later. Which do you want?"

Instead, the Dems (and Obama) have played a cynical game in which many voters have been led to believe they can have their cake and eat it too. In this sense, blogger Richard Eskow's take is spot on ('The Long Game: Payroll Taxes, Hostage Taking and Social Security')http://www.smirkingchimp.com/thread/richard-eskow/39907/the-long-game-payroll-taxes-hostage-taking-and-social-security

when he writes:

"By proposing to expand and extend this 'holiday,' Democrats have bypassed more efficient ways to help the economy, and have once again endangered Social Security. And by demanding tax breaks for millionaires while blocking them for the middle class, Republicans have once again demonstrated their willingness to blow up the economy for self-serving purposes."

As for Fleischer's piece, make sure you know it will be used as a universal template for action against Social Security if the Repukes take over all of the government next year. They will argue, with plausibility, that S.S. payments need to be cut to reflect the payroll tax cuts. It is then that people will see that they accepted a pig in a poke, accepting small temporary increases to their wage packets for a monstrous cut in future retiree benefits later, meaning most will now probably never retire. While at the same time the Dem pols have essentially exposed their sacred "Trust fund" as an accounting gimmick.

Fleischer has also theorized the payroll tax cut will be made permanent, which would validate his calling it a "welfare" program and we know what happens to those!

We can only hope that if the Dems do succeed in retaking the House next year, and hold on to the Senate, they will rectify the damage they've done. That means NO more extensions of any payroll tax holidays, and moreover, re-instating the tax at a higher level to compensate for the losses (say by increasing it to 7.2%) if other offsets aren't used to pay for them.

One thing we cannot do is allow the perception to spread that Social Security is no longer paying its own way. If that becomes entrenched, and it well might, we could see the horror of yearly budgetary approvals for its payments, before the elderly, sick and disabled receive a dime. This is totally unacceptable and no political gamesmanship can make it right!

The Most Loathsome, Destructive Tax Cut: So WHY Do Dems Support it?

I continue to scratch my head at how the Democrats operate, and wonder what they are really invested in, and especially whether they truly support the Middle Class of this country. Here's one of my head-scratchers: We know some 4,000 Boomers a day are filing into the Social Security system to collect their benefits, so WHY are the Dems proposing to keep this god-forsaken payroll tax cut when the payroll taxes are what support Social Security funding?

Don't they have any sense? Can't they see they are essentially enabling the consumption of their own seed corn in terms of social benefits (mistakenly called "entitlements") to the Middle and working classes? Thus, the news in today's WSJ article ('GOP Set to Back Payroll Tax Cut', p. A4) that the Dems not only wish to extend this payroll tax holiday but reduce it to 3.1% of payroll tax, is both appalling and infuriating.

First, because NONE of these damned tax cuts work - there's no evidence for any of them helping to fuel the economy, and second, because you are giving the Repukes future ammo to use against Social Security and to justify cutting benefits because "it's not paying for itself any more". So hey! No wonder the GOP would back this dimwit plan! They will back any tax cuts...because they know any of them ultimately increase deficits and help starve government....and especially PAYROLL taxes!

So no wonder Mitch McConnell has stated(ibid.):

"I think at the end of the day, there's a lot of sentiment for continuing the payroll tax relief"

But the existing "relief" is costly, to the tune of $170 billion defunded from Social Security each year, at time when the strain on the system is magnifying via Baby Boomer retirements. Add in all those now taking Social Security disability (because they can no longer collect unemployment benefits) and you have the makings of a disaster.

Thus, inquiring minds are led to ask why the party which instituted Social Security is now having a stake in sealing its demise by their cowardly and blatant vote-pandering when what we need now is ADULTS. We need adults to tell the American people that NO tax cuts are affordable, neither for the rich or the Middle Class, given the deficit-austerity environment.

And further, that Americans cannot have their cake and it eat it! If they receive tax cuts, whether via payroll tax cuts or the Bush tax cuts, then their future social benefits are in jeapordy. The reason is that any of these tax cuts effectively raise the deficits to such levels that make extending benefits without draconian cuts impossible.

In this sense, blogger Richard Eskow's take is spot on ('The Long Game: Payroll Taxes, HOstage Taking and Social Security')

http://www.smirkingchimp.com/thread/richard-eskow/39907/the-long-game-payroll-taxes-hostage-taking-and-social-security

when he writes:

"By proposing to expand and extend this 'holiday,' Democrats have bypassed more efficient ways to help the economy, and have once again endangered Social Security. And by demanding tax breaks for millionaires while blocking them for the middle class, Republicans have once again demonstrated their willingness to blow up the economy for self-serving purposes."

But the DEMs are ALSO self-serving! Indeed, they know the payroll tax holiday has already cost big money and will be amped up to well over $250 b next year if the expanded payroll tax cuts (down to 3.1%) and employer cuts go through. So no wonder they are very likely in the process of making a deal for a Social Security COLA reduction, or as Eskow notes:

" a Social Security benefit cut that both the White House and some other Democrats (including Dick Durbin) have been pushing all along. They call it an 'adjustment,' but their proposed method for calculating cost of living (COLA) adjustments is a benefit cut, pure and simple, that would lower an already-inadequate formula and take money out of people's pockets. It will probably be revived in these debates."

In other words, the Dems are guilty of giving you money (payroll tax cuts) with their right hands, and robbing it with their left! (Via proposed COLA adjustments)

How can anyone consider such a political climate as anything other than batshit crazy?

The sanest move now is to halt ANY further tax cuts forthwith. Start with letting all the payroll tax cuts expire, and then all the Bush tax cuts. Better that than tens of millions having to raid dumpsters for the next thirty or forty years!

Oh, one final point in all this: the phony argument that cutting payroll taxes "makes no difference because no special accounts exist" e.g. for Social Security ( including special Trust Fund accounts), and government can "move money any way it wants", is bollocks. To quote from the original (1935) Social Security Act:

"It shall be the duty of the Secretary of the Treasury to invest such portion of the amounts credited to the Account as is not, in his judgment, required to meet current withdrawals. Such investment may be made only in interest -bearing obligations of the United States or in its obligations guaranteeed as to both principal and interest by the United States."

In other words, the matter is not simply one of finding "offset" cuts (as the 'pukes wish to do) to pay for the payroll cuts, but government itself being prepared to pay back what's allowed to be used from those payroll taxes, and with INTEREST! In a high deficit environment it's just a foolish fiscal move, and not one worth the minimal economic gain that the pols promise!

Amy Ridenour's Social Security "Ponzi scheme" Foolishness

The last time I had a run-in with pundit and gasbag Amy Ridenour was nearly 10 years ago in a letter exchange, after which she'd tried to argue for "natural climate change", i.e. based on the Sun. When I dutifully informed her that there was no evidence for solar irradiance levels being as high as she appeared to claim, she became sarcastic and questioned my sources. Since these were all from bona fide climate science journals, I realized that any further discourse would be futile. She was attached to an ideology and her think tank (the conservative 'National Center for Public Policy') would never let her think or write independently.

Now, one of her more recent columns has embedded itself in the long standing canard that Social Security is "unsustainable". This is understandable given that all domestic social programs are under attack by austerity mongers, their lackeys and propaganda puppets. What I will do here, is show how and why Ridenour is wrong on several of her counts, because these will also be applicable to all the other pundits that parrot them.

First, she writes:

"The Securities and Exchange Commission says Ponzi schemes involve 'the payment of purported returns to existing investors from funds contributed by new investors'. Check! Social Security pays benefits from funds contributed by younger workers."

Implying that Social Security makes this crtierion for a Ponzi scheme. But as an Economist editorial counseled barely three weeks ago, this is a false standard to apply to Social Security because first, everyone already knows how it is paid for while actual Ponzi schemes keep hidden the mechanism for current payments, and second, Social Security is not and never has been an investment scheme - it is rather a savings program. Moreover, the way it funds itself is exactly the same as all other social insurance programs around the world! Hence- uncheck!

She goes on:

"The SEC says Ponzi schemes 'require a consistent flow of money from new investors'. Check! Benefits enjoyed by beneficiaries are dependent upon contemporaneous payroll tax revenue, not returns on an investment".

But again, as I noted in the early rejoinder, Social Security was never set up as an investment program but a social insurance program! Hence, this criticism is moot. FDR in fact knew that the only way Social Security could be practically implemented was to use the same system as Germany, Denmark and other social democracies: by withdrawing a certain amount from every paycheck year to year. In this way, the program would automatically fund itself, and never be vulnerable or subject to appropriations deliberations in congress. Imagine what it would be like if every year Social Security checks and benefits were subject to congressional approval - say like the current fiasco surronding yearly approval of AMT or alternative minimum tax adjustments, or Medicare payments to physicians.

This is also exactly why extending the payroll tax cut is a terrible idea, no matter how much politicians (including Obama) pander to it. In effect, it de facto destroys the premise for Social Security' stability while also handing radical austerity hawks more ammo to use to argue that its financing is unsustainable. If this cut is extended, $170 billion will be lost in Social Security funding next year! How will this self-inflicted deficit be made up? More IOUs to make the Reich wing screech monkeys howl for its abolition, or conversion to a privatized plan?

Above all, Democrats ought to be against anything that dilutes or compromises the one thing protecting Social Security from attack or disruption!

Ridenour again:

"The SEC says 'In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier stage investors'. Check! Supporters of the current structure, such as President Obama, seek new Social Security taxes on workers earning over $106, 800."

But the lady here is guilty of false analogy, because in fact, increasing the payroll tax threshold is simply rectifying an existing unfairness and defect in the system! The reason? All workers, no matter their earnings, are entitled to collect Social Security. Nor is there any "means testing" as of now.

So, in effect, the current workers earning over $106,800 are able to collect Social Security without having to pay their fair share into it, like those earning less! And once more, Ridenour's investor analogy doesn't apply because Social Security isn't an investment program!

In fact, Ridenour in her next paragraph illustrates herself exactly WHY Social Security isn't a Ponzi scheme (apart from the fact the SEC isn't investigating it for such as all her SEC-invoked "checks" would imply!). She writes:

"To be sure...there are differences...Social Security is mandatory while Ponzi schemes are not. And when a Ponzi scheme is about to collapse, it can't raise your taxes!"

Bingo, missy! Because Social Security is a SOCIAL INSURANCE scheme predicated on pay-in taxes, extracted from paychecks. THIS is the beauty of it, compared to an investment scheme - liek Bernie Madoff's - where indeed one can lose everything!

Ridenour is correct when she writes that the Social Security And Medicare Board of Trustees has warned that projected long run program costs aren't sustainable under currently scheduled financiing"

But this isn't a result of the system's internal pay defects, but rather:

a) Congress raiding it from year to year, already having taken more than $3.3 trillion out since 2000 (and often using it to fecklessly diguise the size of the deficit)

b) People who are unable to collect further unemployment benefits, and unable to find jobs, applying and getting Social Security Disability. Right now, according to the WSJ (Nov. 20) there exists a backlog of 721,000 cases to approved and already more than 22 million are drawing down on the Social Security funds. This is also why payroll tax cuts are insane at this time, and also any other gimmicks that threaten Social Security funding.

As for Ridenour's warning that Social Security won't be able to cover the 76 million Baby Boomers, hardly - not as long as the proper adjsutments are made now, including raising the payroll tax level to at least cover incomes over $250,000, and no more payroll tax cut foolishness - a bad idea if ever there was one.

Maybe Amy would do better to stick with her faux climate change issues!

Herman Cain's '9-9-9' Plan: How to Destroy the Country in 3 Easy Steps

As usual, anytime some pol or candidate shows even a remote hint of any supposed originality or unique idea, the corporo-media press hacks slobber over him like a dog eyeing a freshly seasoned steak ready for the grill. And just like the dog, the hacks' reflexes kick in, albeit not quite Pavlovian.

The latest hot buzz concerns Reeper Herman Cain's '9-9-9' tax plan, which proposes:

9% corporate tax rate across the board

9% flat income tax rate for everyone

9% sales tax for everyone.

To entice the hacks and corporo-pundits to calm down, it behooves us to further assess and analyyze Cain's plan. What we find, when we do, is a hare-brained scheme that will convert this country into another Somalia or Liberia in maybe ten years...if that long. Are sane people really THAT eager to inhabit a failed state of 310 million people?

I thought not.

First, the 9% corporate tax rate. This makes no sense since as David Wallachensky and other commentators have shown, the corps are already escaping with some of the lowest tax rates in ages. The effect of lowering them further will then mean that the slack will have to be picked up by average citizens. You can''t after all, entertain a massive loss in national revenues and still expect to be first in much, including defense.

So, assorted groups (e.g. Tax Policy Center) have calculated that if Cain were elected and he actually managed to get congress to bite on this codswallop, the general income tax would have to be raised nearly 5 pct. points in each category!

But wait! Cain also wants a staight 9% flat tax for everyone!

Well, this'll work fine for the hotshot on Wall Street earning 9 million a year who'll still have around $8.2 million after this tax.

But not so much for a $30,000 a year wage earner at Walmart, who will have about $27,300 left.

But wait again! The guy still has to pay propertty taxes, which across the U.S. average about 6.5% of income, so take away another $1,950. This is something Cain's proposal can't do diddly about.

Then there is the increased sales tax! If our family spends on average $6,000 a year on school supplies, appliances, house materials - paints, etc. then that subtracts another chunk of $540.

Our family is now down to $24, 810.

Note that this is at a time when incomes of Americans have fallen 7% since 2000 and stand to fall another 7% over the next five years. Which means another chunk subtracted via inflation and wage suppression....by who else? The Big corporations!

In the end, as ABC News economists computed and presented last night, the average family earning $50,000 will have to cough up an additional $2,750 in taxes.

The interesting thing here is that current $20k/yr earners who pay no income tax, because of using the Earned Income Tax credit, will now be paying an extra 9% they wouldn't have before, or $1,800. That's $1,800 they won't have to spend on groceries, rent or mortgage, or school lunches!

As one observer phrased it, quoted in today's story on Americans' falling incomes (WSJ, p. A5), Americans face falling quality of life standards at least through 2021! But this is not factoring in Cain's 9-9-9 idiocy. If THAT were to actually get passed, Americans' standard of living would fall to the level of Costa Rica's within 7 years and below Malawi's in ten. (Already our Gini index, an indicator of inequality, is at the level of the Phillippines and Mexico).

Do so many Americans REALLY want to live at the level of peasants? DO they really want to consolidate the Corporate State to the point we all become serfs on Herman Cain's new corporate plantation? Then why even consider this character as anything other than a clown (who actually said the other day, he's the "real deal" ...like Haagen Dasz "Black Walnut" ice cream, not realizing that brand went out two years ago!)

But the best is saved for last.

In addition, Cain plans to abolish the child credit for families to claim as well as the home mortgage credit. No credits, or loopholes allowed if we have this 9% flat tax!

Further, he plans to abolish the 6.2% payroll tax (which he believes will make up for the loss of the above credits). Trouble is, when you subtract the payroll tax you no longer have any allocations or revenue for Social Security or Medicare. That means, both those programs will plausibly face a very big budget axe within a year or so of Cain's 9-9-9 being enacted.

This means that citizens under his crazy plan, wil have to look forward to taking care of their own retirement funding and not expect anything much from the government. Or expect much from Medicare, other than maybe a voucher for $500 a year!

Cain insists his flat 9% tax will be able to pay for the two programs the payroll tax had funded, but this is bare bollocks. There is no way that could happen unless this country massively pared down its military budget, to no more than about $100b a year, from its current $746b a year. The odds of that happening when so many congress critters are in the paws of the military industrial complex? About the same as a horde of aliens landing on Capitol Hill and hauling away Boehner and Cantor to become their sex slaves on the home planet of Zeta Reticuli III.

The funny thing is that even conservatives, mainly from the business community, have attacked Cain's moronic plan. They argue, correctly I believe, that a 9% sales tax would have the effect of dampening consumer spending in an already depressed sales environment. This is true. When aggregate demand is so low, as it is now, people are just looking for more and more ways to shave their spending. Believe me things will be no better next year or the year after, what with the Repukes' massive austerity program coming. So, if a 9% sales tax is also applied, you will see the return of home made clothes, foods, etc. like you never have before. The GDP - by my estimation- will plummet about 20%. And that's my best estimation!

Yes, Herman Cain's 9-9-9 tax plan is just terrific!

If you really want to live in a Banana Republic!

Ouch! Repugs Want to Raise Taxes: On the POOR!

Sometimes following the GOP candidates in their surreal campaign bloviations and spoutings is like trying to parse an equally surreal dream. In some way, it's as if these characters no longer even inhabit the real world, but some abstract parallel phantasm where the fundamental principles of working reality - whether in science, finance or whatever- simply don't apply.

Such was the case in yesterday's stumping when all the Gooper candidates complained there's too big a tax burden on too few and "more Americans need to pay income tax". They wailed like banshees about only 5% of the population paying 60% of the taxes, not bothering to inform their audience that most of these are fairly wealthy people, the "uppercrust" who can easily afford a piddling little 15-25%, which is what most of them end up paying after resorting to their favorite charitable write-offs, trusts, or other gimmicks. For a $5 million earner, he still gets to keep $3.75 million....but wait! Add in a $1 m refund from his Bush tax cut extension and he loses only 250 grand! What's not to like?

Meanwhile, the poor and fixed income seniors - receiving only Social Security- were lambasted as "not paying their fair share"! Excuse me, are you guys nuts! Rick Perry himself gnashed his teeth and wailed that "Fifty percent of Americans pay NO income taxes at all!"

Well, uh...yeah, but what about all the other taxes they pay? Even an American Enterprise Institute wonk, quoted in today's WSJ (A8) warned the GOP candidates ought not get on too high a horse over this, because of all the "stealth taxes" that limit the income of the poor person - say earning only $12,000 a year. Those include sales taxes, gasoline taxes, and others. And if they manage to own a home, there are the property taxes! Lastly, who the hell said that the payroll taxes don't count as real genuine taxes! At a rate of 6.2% that means every $12,000 earner will have to cough up $744. If Perry (as President) were now to add a 10% income tax on top of that, the out flow from the poor person would be $1,944. Which might well be the difference between starvation for their kids, and at least getting by.

Of course, once the news of these miscreants' remarks hit the media airwaves (as they always so, and btw, I'm including Michele Bachman and Mitt Romney in this too) they started backing away. For example, a Perry spokesperson said that the Governor didn't actually mean "raising taxes on the poor" ----oh no, no ...never! What he meant was getting more of them into jobs, or better jobs, so they'd end up paying more taxes.

I am not equally sanguine with the efforts of his campaign to soft soap taxing seniors. We know that in a recently published book, Perry declared all Social Security monies were "illegal" under the Constitution (10th amendment). If he truly believes this, then as President he'd have no qualms doing whatever to at least degrade it, and taxing it might come to mind (or privatizing it - so the oldsters would either have to risk their meager incomes in the stock market or only settle for the bare "floor" minimum monthly payout of $400.

We will see. The fact these numbskulls even raised this tax issue, and the possibility of taxing the poorest in the nation (already suffering with more potential cuts to come) shows they have their heads somewhere other than reality.

Maybe where the Sun don't shine!