Biden Lands a Solid Counter-Punch

We expected a battle with the gloves off last night as Vice President Joe Biden and challenger Paul Ryan debated, and we got one.

Biden was expected to come out swinging hard after President Barack Obama appeared listless in his first debate with Mitt Romney. Biden did just that. Ryan is trying to establish himself as a strong voice for conservatives, and he banged away at the Obama record trying to highlight what right-wingers consider to be faults in administration policy

I had never heard either man give a speech or participate in a debate, although both had plenty of experience. Biden has been an elected official for most of his life. Ryan has served in Congress for 14 years. Both men have run for election many times, presenting their views and arguing with opponents. Despite their similar backgrounds as professional politicians, they came across as two different people last night.

Biden reminded me of a neighbor citing his experiences as he passionately argued an important issue across your kitchen table over coffee or a beer. Ryan looked like a newly minted MBA giving a lecture about theories he learned from a maverick professor.

When Biden or moderator Martha Raddatz asked Ryan to provide specific actions he and Ronmey would take to further their “five point plan,” the Congressman had none to offer. Biden defended Obama’s actions by describing why the decisions were made, often noting he was present when policy was formulated.

Raddatz, in contrast to the inept Jim Lehrer who moderated the Obama-Romney debate, was crisply professional. She kept control even when Biden got over-enthusiastic and interrupted Ryan, laughed at what the challenger said, or made unnecessary comments about time allotments.

Raddatz asked some tough questions, but they were ones we viewers wanted answered—abortion (Biden thought it was a matter between a women and her doctor; Ryan believes it never should be condoned), how they viewed their Catholic religion (both said it is important in their lives; Biden said he did not believe in foisting his religion on others), and Medicare and Social Security (Biden said neither he nor Obama would support any form of privatization; Ryan favored plans that include privatization).

I thought Biden delivered the sharper blows, citing more facts and giving logical reasons for administration policies. Ryan mostly dealt in generalities, and when asked for specifics he often was unable to produce any.

Raddatz at the end did not challenge viewers with the most important question--one none of us likes to confront. If something happened to the President, which one of these guys would you want leading the nation?

Based on what I saw last night, I’d go with the more experienced and grounded Biden, who it appeared could best be depended on to act responsibly on the world stage and pursue policies at home favoring the majority of Americans.

The Right Mix for the USA

Those Cats are Too Fat 

A Cocktail Party Position on Taxes
  


Now that some of the smoke and hot air has blown away and we are into serious discussions about federal budgets and how to stop the deficit bleeding, it is time to start talking sense about income tax rates. As usual, quite a few statements by politicians on both ends of the political spectrum twist the facts, or simply are not true.


One common assertion is almost true. The most recent Bush-era tax cuts are derided by political opponents as a gift to the wealthy. Actually, all taxpayers got a reduction. However, the very rich did benefit the most because the top dogs saw the maximum rate reduced from 44 percent to 35 percent, a huge advantage for them.


That brings up something often misunderstood about income taxes. Using an example that might apply to some of us mere mortals, let’s compare a couple filing jointly with taxable income of $50,000 and one whose income is $4 million. The tax rate for the little guys is 13.3 percent. The tax rate for the wealthy couple on the first $50,000 of their taxable income also is 13.3 percent—exactly the same. Higher rates for the high earners gradually kick-in at higher levels of income; the fat cat couple does not pay 35 percent on all of their income, only the amount that exceeds $379,150.


Consider President Obama’s income taxes this year. All recent presidents have made their return information public—a good thing. The Obamas filed jointly. Their income totaled $1.73 million. Most of it was the President’s $400,000 salary and royalties from three books he authored that sold millions of copies. The Obamas paid $453,770 in income taxes. That’s a lot of cash, but it is 26 percent and change, not 35 percent.


Knowing their tax records will be made public no doubt inhibits the Obamas from using tax loopholes to reduce their rate to an even lower level. Most wealthy folks have no such constraints. They can hire accountants and attorneys the little guys cannot afford. It is well-documented that the experts guide their clients to numerous legal ways to avoid a whole lot of income taxes. The rich don’t need much help in finding ways to profit from capital gains; these rates are lower than the income tax levels. People at the low end of the income spectrum have little or no ability to earn capital gains.


Some of the wealthy like to point out that they support millions of low-income people who pay no income taxes at all. It is true that nearly half of Americans pay no income taxes through their annual returns to the Internal Revenue Service, but some of those filers are quite well-to-do. And, everyone who works is liable for payroll taxes that finance Social Security and Medicare. These amounts are income taxes, even if we choose to call them something else.


Congress responded to an Obama proposal by using some trickery to give employees a gift throughout 2011. The usual 6.2 percent Social Security tax on wages was reduced to 4.2 percent. The difference, the legislation says, will be made up in transfers of funds from the treasury to the Social Security trust funds. The trouble with that is the treasury is broke, and the gift contributes to the ballooning deficit. The Social Security trust funds were doing just fine, with a multi-trillion dollar surplus, before this ruse went into effect. It is going to be difficult for Congress to take back this unnecessary gift at the end of 2011. If this tax reduction is not rescinded, it will seriously weaken the Social Security system.


Opponents of any income tax increase claim a return to the 44 percent top rate for the wealthy would retard the creation of badly needed jobs, and even contribute to increases in unemployment. That line of thinking is at odds with reality. The top rate peaked at 92 percent in the early 1950s. It was reduced to 77 percent in 1964 and later to 70 percent, where it stayed throughout most of the 1970s. The three decades when very high rates were in effect were among the most prosperous times in American history.


As the top income tax rate was lowered, we experienced a massive redistribution of wealth in the U.S. from the poor and the middle class to the rich. Reports based on Internal Revenue Service statistics show this clearly. One appearing in The Washington Post last summer said the average income for the top one percent of earners rose 281 percent, or about $973,000 per household, in the previous 10 years. The bottom 20 percent of earners saw their incomes rise only 16 percent, or $2,400 per household, during the same period. When inflation is factored in, poor and middle-class workers actually lost money while the fat cats grew much fatter.


The top one percent of Americans now take in nearly 25 percent of the annual income generated in the country. They control 40 percent of the wealth. These figures have risen dramatically recently as unemployment also rose to high levels.


Americans are fascinated by the rich and famous, and most of us admire those who climb up the economic ladder through their hard work, often coupled with risk-taking. We think they deserve to be well-rewarded. But we know instinctively that the current vast and growing gap between the rich and poor in the U.S. is unhealthy. Respect for the rich is turning to anger over huge Wall Street bonuses and outlandish salaries for corporate officers and a government that seems unable or unwilling to make adjustments to compensate for the excesses.

What we feel in our guts is bad for America has a scientific basis. A 2009 best-seller, The Spirit Level: Why Greater Equality Makes Societies Stronger, describes links between wide income gaps in nations and social problems. The problems including obesity, mental illness, drug and alcohol abuse, homicides, imprisonment rates, lowered life expectancies, over consumption of resources, teen pregnancy, and lack of upward mobility.


Surprisingly, the scientists state that many of the problems are experienced by the rich as well as the poor when wealth is very unequally distributed. And the connections to wealth inequality prevail in rich as well as poor nations. The scientists once again confirm the link between income gaps and poverty, which has been described many times.


Error rates can be high in studies involving the human condition and interpretations of data always are somewhat subjective in the social sciences. But if the authors of The Spirit Level are correct about only a few of the links they describe, we have compelling evidence that huge gaps in income and wealth within nations contribute to vexing problems that have high costs for all citizens. The ultimate solution when the gaps become too wide is revolution. No thinking American wants that.


The Cocktail Party endorses three actions to reduce the gap between the haves and have-nots in America to a more reasonable level, help reduce the federal deficit, and preserve Social Security:


1. Restore the top income tax rate to the 44 percent level when the current tax legislation authorizing the 35 percent rate expires.


2. Return the Social Security payroll tax rate for employees to 6.2 percent at the end of 2011.

3. Remove the cap on Social Security payroll taxation, which currently is $106,800, but leave the maximum payout where it is. Currently, the Social Security payout for workers who earned high salaries and retire at age 66 is nearly $26,000 per year. It rises through cost-of-living adjustments as do all payouts. That’s plenty of safety net for any destitute fat cats who manage to lose their millions. Removing the taxation limit coupled with minor changes in the way cost-of-living adjustments are calculated is sufficient to assure Social Security will be solvent for the foreseeable future.


The fat cats can well afford to slim down a little for their own good and the common good.


To review the announcement of the founding of the Great American Cocktail Party visit the August 5, 2010 post titled “Coffee, Tea, or . . .” in the archive on the right-hand column of this Blog.

Economics vs. Common Sense

A Cocktail Party Analysis

One of the least publicized, but most onerous, provisions of the Obama-Republicans compromise on tax legislation is the item that would reduce social security tax withholding by two percent throughout 2011. This sounds like a winner for American workers. It’s a potentially huge loser.

The tax holiday was recommended by economists, according to news reports, as a very effective way to quickly pump money into our struggling economy, thus creating jobs. That could possibly be correct, although it would be easy to find a bevy of economists holding other views. The old adage usually holds true—“If you laid all the economists in the world end-to-end, each would point in a different direction.”

In this case, the Obama economists have only theory in their corner, as economists often do. They have no real proof that this kind of pump priming will create or preserve any jobs. In this case, if those who favor this tax holiday have a sound argument for their position, we have yet to hear it. It would be a quick injection of spending power into the economy, that’s all. It surely would create some profits for businesses. Anything else is conjecture.

What Obama’s advisors and he are ignoring is the bigger picture. They say the $120 billion or so cost of this gift to working people will be repaid to the social security trust fund from “other general revenues.” Truth is, we have no “other general revenues” available to pay much of anything back. Our public treasury is trillions of dollars in the red, and projected to be so for many years into the future.

The social security trust fund at the moment is in the black. It has large reserves invested in special U.S. Treasury bonds. But, the treasury must make good on those bonds not many years from now, when annual social security payments begin to exceed payroll taxes collected to support them. At that point, social security starts going broke, and many years from now would become able to provide only a fraction of today's benefits. That’s just what the guys who negotiated with Obama want. They want to kill social security.

Do you believe that a year from now there will be a rising groundswell of public opinion for the government to take money away from all working people by restoring social security payroll taxes to current levels? Damn right there won’t. It would be political suicide. Once this gift is made, it will be very difficult to take it back.

The fact is that Social Security financing would be much less solid, a welcome development for those who want to destroy the system. They would use that as an excuse to privatize the system; that eventually would kill it. Gambling in the stock market with funds that now go into the social security trust fund offers no safety, and social security was designed to be a safety net.

Common sense says the temporary “gift” to workers should be dropped from the tax settlement. It is bad public policy that would endanger the future of social security, a truly successful insurance program that allows millions of worthy American citizens to live out their lives with a measure of dignity.

The Cocktail Party strongly recommends that this smelly part of the tax compromise be poured down the drain.