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Tag: house budget committee
There’s Plenty of Money. Really.

There’s Plenty of Money. Really.

Don’t think for a second that congressional Republicans sincerely believe draconian cuts in federal spending stimulate the economy.

I know. They uniformly claim that spending cuts spark growth. But consider this.

During the 15-day shutdown of the federal government one and a half years ago, the United States lost some $24 billion in economic activity, according to a 2013 Standard & Poor’s report. Only Texas senator Ted Cruz and the conservative wing wanted the shutdown, while the rest of the Republican Party bore the brunt of cratering public opinion polls.

So when House Budget Committee chair Tom Price, a Georgia Republican, introduced a plan last month to cut more than $5 trillion in spending to balance the budget in nine years, take it for what it is — a purely political ploy to arouse conservatives in preparation for 2016.

The Price plan has no chance of becoming law with a Democrat in the White House, and a slim chance even with a Republican president. In repealing the Affordable Care Act and eviscerating food stamps while allocating tens of billions in defense spending (more than requested), it’s irresponsible. But in calling for the partial privatization of Medicare, it’s politically toxic. Beyond that, a Price plan put into law would be downright destructive. Sucking that much money out of the economy could possibly trigger, at the very least, another painful recession.

Still, congressional Republicans will continue to make believe that spending cuts are good for everyone, because like all make-believe stories, the Price plan has the advantage of sounding plausible. And because it sounds plausible, it feels persuasive to many voters. After all, growth is sluggish. Wages are flat. There isn’t enough money. It’s time to get serious and cut. That’s why Price titled his plan “A Balanced Budget for a Stronger America.”

In fact, there is enough money. Always has been. The trick is looking beyond one class of taxpayer dutifully paying its fair share to another class with the power, and the privilege, of avoiding paying its share.

According to a new report by Citizens for Tax Justice (CTJ), 304 of the 500 top U.S. corporations stashed more than $2 trillion in profits in offshore accounts in 2014, avoiding as much as $600 billion in U.S. taxes.

Among these are the most popular American brands: Apple, Nike, Microsoft, Safeway, and Clorox. These are among just 28 of the top 500 companies to report the tax rate they would pay if they had repatriated profits to the U.S. The rest didn’t bother. They don’t have to report.

But even those reporting to the IRS were probably lowballing their total U.S. tax liability. If they said they earned their enormous profits in tax havens, they probably didn’t, because the countries that shelter the money, like Bermuda or the Cayman Islands, don’t have economies that can produce such enormous profits. Those profits can only be earned in countries with robust economies like the U.S.

Furthermore, the foreign tax rate they paid was far lower than the tax rate they would have paid in the U.S. Indeed, the 28 firms bothering to tell the IRS what they would have paid in U.S. taxes paid a foreign tax rate of about 10 percent on a total of $470 billion. You almost certainly paid a higher percentage on less income.

Ironically, the offshoring trend has grown since the economic collapse of 2008, the very event Republicans cite when calling for more and deeper spending cuts. The CTJ survey found 77 firms increased their caches by at least $500 million while another seven U.S. companies — Apple, General Electric, Microsoft, IBM, Google, Oracle, and Gilead Sciences — piled high their cash hoards with more than $5 billion.

The trend is poised to become permanent. CTJ researchers report an acceleration of what’s known as “corporate inversions,” meaning American firms reincorporate in foreign countries to avoid paying most or all taxes on profits earned in the U.S.

And — no surprise here — the firms with the most money overseas are the first to lobby Congress to avoid paying taxes on that money. To stop this vicious cycle, CTJ researchers recommend putting an end to something called “deferrals,” an SEC rule that incentivizes tax sheltering. Then all profits earned by U.S. corporations anywhere in the world would be subject to U.S. taxes in the year they were earned.

The CTJ report does more than offer advice on creating a more equitable tax code. It reminds us that the frame of our budget debate is much too narrow. It is typically limited to spending, not revenues, much to the benefit of Republicans, while Democrats are left complaining about the unfair treatment of the middle class.

But the CTJ report does something else, something its authors don’t come right out and say. Our very narrow budget debate is as much about patriotism and national character as it is about justice and fiscal responsibility. Or at least it should be.

Billions and billions are hidden overseas while the rest of us are forced to fight over crumbs. That’s degrading and undignified but also unpatriotic. Prosperity is not only for the very few with the power to enjoy it. This isn’t feudal England.

This is America.

Photo: Brook Ward

Expect More Cuts And Less Reality In Paul Ryan’s 2015 Budget

Expect More Cuts And Less Reality In Paul Ryan’s 2015 Budget

House Budget Committee chairman Paul Ryan’s (R-WI) latest budget proposal, which will be released on Tuesday, can be safely expected to follow his history of introducing legislation that includes steep cuts to safety-net programs to pay for increased defense funding and further tax cuts. But this year, his plan may be even more extreme.

In anticipation of Ryan’s upcoming budget – which will surely reflect his recent “War on Poverty” report – the Center on Budget and Policy Priorities offers a helpful preview of the 2012 vice-presidential nominee’s proposal, while examining the most serious flaws likely to plague the plan.

In his 2014 budget proposal, Ryan backed cuts to Medicaid and the Supplemental Nutritional Assistance Program (SNAP) – the program colloquially known as food stamps – and called for a repeal of the Affordable Care Act’s benefits. According to the CBPP, these cuts, which accounted for 72 percent of the budget’s total program cuts, would have “resulted in large increases in poverty and deprived many millions of affordable health insurance.”

And CBPP economists Sharon Parrott and Joel Friedman warn that Ryan’s new budget will be “as extreme as last year’s, if not more so,” even as they predict that the targeted programs might differ a bit from those included in the 2014 budget.

Assuming Ryan’s budget will maintain last year’s goal of balancing within the next decade, reversing sequestration cuts through increased defense funding, and maintaining current revenue levels, massive cuts to assistance programs are the only ways Ryan could partially achieve his goals.

Again: partially achieve. That is because the Congressional Budget Office deficit forecast, as CBPP points out, has worsened by an additional $1 trillion by 2024. If Ryan hopes to achieve any of his goals, he must first ensure that his proposed cuts meet the heightened inflation rates. Even the suggested cuts in his 2014 proposal cannot account for the projected inflation levels of 2024, which means that Ryan’s new budget must include additional hundreds of billions of dollars in cuts that are steeper than those in last year’s budget.

Imagining a budget, even one designed by Ryan, that includes more severe cuts to anti-poverty programs than those in the 2014 GOP-backed proposal is rather difficult. Considering that he avoids cuts to Medicare and Social Security altogether, it almost seems impossible.

That may explain why Ryan’s past budget proposals have been rather light on specifics, and why this year’s budget proposal will be similarly vague. He is going to have a tough time explaining politically palatable ways of actually achieving the cuts he calls for. After all, doing so would force him to address the consequences of the actual reductions.

As the CBPP notes, enacting Ryan’s 2014 budget would have resulted in increased rates of uninsured low- and middle-class Americans, 8 to 9 million more people forced off food stamp rolls, a $163 billion cut to civil service pensions and farm programs, and an additional $660 billion cut to other non-defense discretionary programs – many of which offer assistance to the poor and disabled. Expect more of the same in this week’s plan.

And while ordinary Americans suffer the wrath of Ryan’s budget proposal, wealthy Americans continue to prosper, due in no small part to his “dynamic scoring,” which posits that tax cuts for the wealthy will stimulate economic growth, which will then reduce the deficit. The primary problem with this idea is that no evidence exists to support a direct correlation between massive tax cuts and deficit reduction or economic growth.

If Ryan follows the basic outline of his 2014 plan, then his 2015 budget will surely be more severe. That is, of course, assuming that he accounts for the changing inflation rates. In the case that this budget disregards the CBO’s projections, however, his 2015 budget will represent little more than an outdated and unreasonable approach to maintaining current revenue levels and reversing sequestration cuts in defense funding. In either case, the American people lose.

Photo: Gage Skidmore via Flickr