Sequestered Saturday – Day 1: thank the Republican House and its leadership

On Friday evening, President Obama issued an order putting sequestration into effect. He was required by law to do so by the end of the day in the absence of a congressional agreement to stop the $85 billion in across-the-board-cuts.

“By the authority vested in me as President by the laws of the United States of America, and in accordance with section 251A of the Balanced Budget and Emergency Deficit Control Act, as amended (the ‘Act’), 2 U.S.C. 901a, I hereby order that budgetary resources in each non-exempt budget account be reduced by the amount calculated by the Office of Management and Budget in its report to the Congress of March 1, 2013,” Obama’s order stated. [...]

In a statement, Boehner said, “For 16 months, President Obama and his party in the Senate knew that unless they acted, the president’s sequester would go into effect on March 1. Still, despite the House doing its part on two separate occasions over 10 months, Democrats have yet to pass a plan of their own. So to my dismay, the sequester — a series of mandatory spending cuts proposed during by the White House during the debt ceiling talks of 2011 — went into place as scheduled. And it will be here to stay until the president and the Democratic-controlled Senate decide to join us in focusing on more responsible spending cuts to replace it.”

Speaker John A. Boehner, the man who spent significant portions of the last Congress shuttling to and from the White House for fiscal talks with President Obama that ultimately failed twice to produce a grand bargain, has come around to the idea that the best negotiations are no negotiations. [...] While the frustrations of Congressional Democrats and Mr. Obama with Mr. Boehner are reaching a fever pitch, House Republicans could not be more pleased with their leader. – NYTimes

The Republican Party’s single, solitary, post-Bush mission: Obama’s first term = make him a one-term president. Obama’s second term = punish America for voting for him again.

U.S. corporate income tax too high? Not quite. Are corporations job creators or extortionists?

“Once upon a time, the corporate income tax generated a significant share of tax revenues; now, it’s bumping along in the 2%-of-GDP range. Yes, the marginal rate of corporate income tax is high, at 35%. But U.S. companies are extremely good at not paying that.”Felix Salmon

Update: Kevin Drum creates the chart I should have led with: corporate taxes as a percentage of pretax profit.

And while you’re at it… this chart, too, showing corporate income tax as a percentage of GDP.

Feds send checks to millionaires for not working

A leading Senate conservative is taking aim at tax breaks that he says amount to welfare for millionaires, a line of critique that usually comes from liberal Democrats. Sen. Tom Coburn (R-Okla.) released a report detailing special tax breaks for wealthy income earners that could give members of the supercommittee common ground for raising tax revenues.

GE Filed 57,000-Page Tax Return, Paid No Taxes on $14 Billion in Profits

General Electric, one of the largest corporations in America, filed a whopping 57,000-page federal tax return earlier this year but didn’t pay taxes on $14 billion in profits. The return, which was filed electronically, would have been 19 feet high if printed out and stacked.

The fact that GE paid no taxes in 2010 was widely reported earlier this year, but the size of its tax return first came to light when House budget committee chairman Paul Ryan (R, Wisc.) made the case for corporate tax reform at a recent townhall meeting. “GE was able to utilize all of these various loopholes, all of these various deductions—it’s legal,” Ryan said. Nine billion dollars of GE’s profits came overseas, outside the jurisdiction of U.S. tax law. GE wasn’t taxed on $5 billion in U.S. profits because it utilized numerous deductions and tax credits, including tax breaks for investments in low-income housing, green energy, research and development, as well as depreciation of property.

“I asked the GE tax officer, ‘How long was your tax form?’” Ryan said. “He said, ‘Well, we file electronically, we don’t measure in pages.’” Ryan asked for an estimate, which came back at a stunning 57,000 pages. When Ryan relayed the story at the townhall meeting in Janesville, there were audible gasps from the crowd.

With all of this profit and constantly decreasing tax obligation for U.S. corporations and the rich, where are the jobs, Republican Teaparty?  Are we looking at job creators or simple political extortionists?

The supercommittee will have 77 days (Nov. 23 deadline) to agree on something

Lawmakers return in September with just 77 days until the Nov. 23 deadline:

As structured, the committee must find $1.5 trillion in deficit reduction over 10 years by Nov. 23 and approve it with a majority vote in order to fast track it through Congress by Christmas. If the panel deadlocks along partisan lines, it would instead trigger across-the-board spending cuts in the orbit of $1.2 trillion with half of those cuts coming from defense, and the rest from discretionary spending. Entitlements would remain largely untouched if the cuts are triggered by inaction.

A third option is that the panel could agree to spending cuts below their $1.5 trillion target, which if approved, would lower the trigger amount for spending cuts. For instance, if they approve $800 billion in spending cuts, it would still trigger sequestration, but lower the total from $1.2 trillion to $400 billion. However, lawmakers on the committee insisted on Wednesday that their goal was to fulfill their obligation. Toomey told reporters that a comprehensive plan was “much, much preferred over the default settings.”

The six Republican men who have been appointed by Boehner and McConnell have signed Norquist’s pledge to not raise taxes on the wealthy. Period. End of story. At all. And maybe that’s why they WERE selected.

The Teaparty stands for spittle-flying, forehead-vein-popping, aggressive stupidity and unfocused anger. For the first time in the history of human interaction and deal-making, there will be NO COMPROMISE! And exactly half of this supercommittee represents that group — or, the male portion of that group — which is a demographic abomination for our supposedly ‘representative’ government.

Heckofajob Teaparty, Illustrated

Just about says it all. (The New Yorker)

This morning’s good news and bad news…

First the good news (for the Teaparty Republicans and the 1% they fight for):

Tax Rates For Millionaires Have Fallen 25 Percent Since 1995 | The Center for American Progress’ Seth Hanlon took a look at new IRS data and found that “as a percentage of their incomes, millionaires are now paying about one-quarter less of their income to federal taxes than they did in the mid-1990s”:

“Millionaires paid an average tax rate of 22.4 percent in 2009, down by a quarter since 1995, when they paid an average of 30.4 percent,” Hanlon noted.

Now the bad news (for the remaining 99% of us):

Average Income Falls To Lowest Level Since 1997 | According to newly released tax data, “U.S. incomes plummeted again in 2009, with total income down 15.2 percent in real terms since 2007.” 2009′s average income of $54,283, which is the latest available data, “was at its lowest level since 1997 when it was $54,265 in 2009 dollars, just $18 less than in 2009.”

Possible solution:

Video: President’s remarks on credit downgrade, honors the troops killed over the weekend

Jed Lewison | Daily Kos:

Obama said that securing a long-term deficit reduction plan would provide “more room” to agree to a set of job creation measures, including extending the payroll tax cut, extending unemployment insurance, and creating an infrastructure bank. He called for Congress to pass those measures immediately, though Republicans have thus far refused.

Obama said he would unveil his proposals for how the “Gang of 12″ supercommittee should further reduce deficits in the coming weeks. He argued that discretionary spending had been reduced as far as it could go and that future deficit reduction efforts should focus on tax reform and “modest adjustments” to Medicare.

President Obama also honored the troops who were killed over the weekend in Afghanistan.

Video:

TIMELINE OF EVENTS: Republican vs Democratic presidents, fiscal irresponsibility, and the deficit

Steve Benen: Let’s take a stroll down memory lane, shall we? (posted in full):

1980: Ronald Reagan runs for president, promising a balanced budget

1981 – 1989: With support from congressional Republicans, Reagan runs enormous deficits, adds $2 trillion to the debt.

1993: Bill Clinton passes economic plan that lowers deficit, gets zero votes from congressional Republicans.

1998: U.S. deficit disappears for the first time in three decades. Debt clock is unplugged.

2000: George W. Bush runs for president, promising to maintain a balanced budget.

2001: CBO shows the United States is on track to pay off the entirety of its national debt within a decade.

2001 – 2009: With support from congressional Republicans, Bush runs enormous deficits, adds nearly $5 trillion to the debt.

2002: Dick Cheney declares, “Deficits don’t matter.” Congressional Republicans agree, approving tax cuts, two wars, and Medicare expansion without even trying to pay for them.

2009: Barack Obama inherits $1.3 trillion deficit from Bush; Republicans immediately condemn Obama’s fiscal irresponsibility.

2009: Congressional Democrats unveil several domestic policy initiatives — including health care reform, cap and trade, DREAM Act — which would lower the deficit. GOP opposes all of them, while continuing to push for deficit reduction.

September 2010: In Obama’s first fiscal year, the deficit shrinks by $122 billion. Republicans again condemn Obama’s fiscal irresponsibility.

October 2010: S&P endorses the nation’s AAA rating with a stable outlook, saying the United States looks to be in solid fiscal shape for the foreseeable future.

November 2010: Republicans win a U.S. House majority, citing the need for fiscal responsibility.

December 2010: Congressional Republicans demand extension of Bush tax cuts, relying entirely on deficit financing. GOP continues to accuse Obama of fiscal irresponsibility.

March 2011: Congressional Republicans declare intention to hold full faith and credit of the United States hostage — a move without precedent in American history — until massive debt-reduction plan is approved.

July 2011: Obama offers Republicans a $4 trillion debt-reduction deal. GOP refuses, pushes debt-ceiling standoff until the last possible day, rattling international markets.

August 2011: S&P downgrades U.S. debt, citing GOP refusal to consider new revenues. Republicans rejoice and blame Obama for fiscal irresponsibility.

There have been several instances since the mid 1990s in which I genuinely believed Republican politics couldn’t possibly get more blisteringly ridiculous. I was wrong; they just keep getting worse.

S&P Downgrade: no question, it happened because of the extreme positions of the Teaparty Republicans

I’ve put off talking about S&P’s credit downgrade all morning, but I can’t hide from it by watching Arrested Development on Netflix download forever. Here we go.

Think Progress points out that S&P, in a press release, repeatedly sites GOP “intransigence” on taxes as their reasoning behind their downgrade. From the press release:

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act. Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade.

What would S&P have to see to raise U.S. credit rating back to AAA?

Our revised upside scenario–which, other things being equal, we view as consistent with the outlook on the ‘AA+’ long-term rating being revised to stable–retains these same macroeconomic assumptions. In addition, it incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating. In this scenario, we project that the net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 77% in 2015 and to 78% by 2021.

In other words, LET BUSH TAX CUTS FOR THE WEALTHY LAPSE! We need new revenue! We have spending problems COMBINED with a revenue problem. Duh.

Thank the teaparty, John Boehner, hostage-taker Mitch McConnell, Eric “I want what I want when I want it” Cantor, and all the members of the Republican-led House for bringing America into this historic milestone of a credit downgrade.

Once upon a time, Osama bin Laden wanted to bring economic collapse to the U.S. Ironically, it’s the Teaparty that seems to be on track to fulfill his wishes.

Senate Majority Leader Harry Reid announces temporary agreement on FAA furlough

“This agreement does not resolve the important differences that still remain. But I believe we should keep Americans working while Congress settles its differences, and this agreement will do exactly that.”Sen. Majority Leader Harry Reid (D-NV)*

*No union rights were harmed in the making of this temporary agreement.

Bonus: the FAA will now be able to collect federal tax revenue again, to the tune of about $30 million per day. When the FAA lost its authority, the airlines began pocketing the extra money — because that’s what business does.

…just f*cking tax the rich already!

Think Progress: The Center for American Progress’ Seth Hanlon took a look at new IRS data and found that “as a percentage of their incomes, millionaires are now paying about one-quarter less of their income to federal taxes than they did in the mid-1990s”:

During FAA shutdown, airlines are pocketing about $30 million a day in lost tax revenue thanks to the Republicans

From earlier:

The FAA’s operating authority expired on July 23, as well as the authority of airlines to collect about $30 million a day in ticket taxes, meaning the government will be unable to collect an estimated $1.2 billion in taxes if the shutdown continues until lawmakers return to work next month.

Because one thing our government doesn’t need is tax revenue — right? Here’s Eric  Cantor’s take on it:

“And what airlines have done is have stepped in and said, well, if we’re not going to pay that money to the federal government, we’re going to keep it towards our own bottom line. And I guess that’s what business does.” -– Eric Cantor, yesterday on Fox “News”

Please note — the FAA is unable to collect federal taxes right now because of Republicans’ insistence on anti-union provisions in the funding bill. The airlines could pass this temporary windfall onto customers — even a little bit, but they’re not doing that. Instead the airlines are pocketing about $30 million a day in profits.Why? Because THAT’S WHAT BUSINESS DOES, according to Republicans.

And you know what Republicans do?  They set up scenarios like this to enrich their corporate benefactors. So for five weeks about 4,000 FAA employees are furloughed and no taxes are collected because of anti-union legislation introduced by the Republicans. During these five weeks, airlines will benefit by about $1.2 billion in uncollected federal tax.

It will be interesting to watch GOP campaign contributions from major airlines. Is the GOP showing gratitude or investing in the future? Follow the money…

Lost tax revenue from FAA shutdown: $30 million a day

Because why would our government need $30 million per day in revenue?

The FAA’s operating authority expired on July 23, as well as the authority of airlines to collect about $30 million a day in ticket taxes, meaning the government will be unable to collect an estimated $1.2 billion in taxes if the shutdown continues until lawmakers return to work next month.

via @Maddow

Related:

Freedom ISN’T free — that’s why we pay taxes.

Via Laura Conaway | Maddow Blog:

In theory, President Obama preserved the possibility of new revenue in the future through raising taxes on the wealthy and closing loopholes. House Majority Leader Eric Cantor is on the Twitters saying Senate Majority Leader Harry Reid’s claim that it could happen “is absolutely false. House Republicans will not agree to tax increases. Period.”

Careful watchers of Congress — and this show — will remember that in March, Republicans on the Joint Economic Committee proposed lowering the deficit with a magic elixir of 85 percent spending cuts and 15 percent new revenue. Steely Democrats countered with an offer of 87 percent spending cuts and 13 percent new revenue. Which is how we got to this deal, with 100 percent spending cuts and the hope (or not) of new revenue.

Related:

Midnight, December 31, 2012

Even though I’m disappointed that the rich aren’t getting their tax cuts revoked now, here’s why I’m not losing my mind over it either. This is only the first phase of an agreed to process. Via liberalsarecool:

We all know increased revenues should have been part of the deal, but keep in mind, Bush tax cuts are set to expire on New Year’s Eve 2012.

Jon Chait, who wants all of the Bush-era rates to expire, had a good item on this earlier.

Obama has one golden ticket out of the revenue dilemma. As I’ve written multiple times, the expiration of the Bush tax cuts gives him enormous leverage over the GOP. Republicans signaled last year they’d rather kill off the entire Bush tax cuts than sacrifice the portion that only benefits the rich. Holding firm on the Bush tax cuts would let Obama maneuver Republicans into the position of killing off all the Bush tax cuts. That would provide all the revenue he needs — some $4 trillion over a decade, as opposed to the $800 billion he’d raise merely by ending tax cuts for the rich.

What’s more, going to the mat over the Bush tax cuts would provide Obama with a strong political message for 2012. He can’t run on the economy. He needs a contrast election. Republicans will try to pass some version of the Paul Ryan budget, cutting taxes for the most affluent and laying waste to Medicare and Medicaid. Obama can run as the candidate insisting on shared sacrifice — and having already agreed to $3 trillion in spending cuts would give him credible to draw that line.

Obama knows he can get revenue by simply watching Bush-era tax cuts expire on schedule.

If all the tax cuts expire at midnight on 12/31/12, will the teaparty base be okay with their taxes increasing along with the wealthy, to be ‘fair’? It’ll be interesting to find out.

Ezra Klein explains the budget ceiling deal: the deal that doesn’t require making a deal

This is less of a deal and more of an agreement to a process and ‘triggers.’ Some highlights (emphasis mine):

The deficit-reduction side includes $1 trillion in cuts now, $1.5 trillion (or more) in deficit reduction later, and a vote on a balanced budget amendment. Meanwhile, it raises the debt ceiling by $900 billion immediately, and either $1.5 trillion (if the second deficit reduction package or a balanced budget amendment passes) or $1.2 trillion (if neither pass) later. Either way, the Treasury should have plenty of borrowing authority to get us to 2013.

Behind the deal is a creative way out of the impasse that’s held up the negotiations: how do you get “balanced approach” if Republicans refused to consider revenues? The solution that both sides seem to have settled on is to substitute defense cuts where taxes would otherwise have gone.

[...] If Congress doesn’t pass a second round of deficit reduction, the trigger cuts $1.2 trillion over 10 years. Fully half of that comes from defense spending. And note that I didn’t say “security spending.” The Pentagon takes the full hit if the trigger goes off.

The other half of the trigger comes from domestic spending. But Social Security, Medicaid and a few other programs for the poor are exempted. So the trigger is effectively treating defense spending like it comprises more than half of all federal spending. If it goes off, the cuts to that sector will be tremendous — particularly given that they will come on top of the initial round of cuts….

[...] Those cuts are meant to be so brutal that neither party will risk refusing a deal. But a deal means taxes, or at least is supposed to mean taxes. And Speaker John Boehner is already promising that taxes are off the table.

[...] Boehner is misleading his members to make them think taxes are impossible under this deal. But make no mistake: The Joint Committee could raise taxes in any number of ways. It could close loopholes and cap tax expenditures. It could impose a value-added tax, or even a tax on carbon. The Congressional Budget Office would score all of this as reducing the deficit under a current-law baseline. The only thing that wouldn’t reduce the deficit is going after part of the Bush tax cuts. That means they’re likely to go untouched in this deal.

That’s actually good news for…people who want to raise taxes. The Bush tax cuts will still be set to expire in 2012, which means that if Democrats get some revenue as part of this deal, they’ll be able to get more revenue if Congress gridlocks over the Bush tax cuts in 2012.

But that’s really a technicality. Boehner is promising that he’ll oppose any deal that includes revenue, and unless he decides to break his promise next year, that means the House is unlikely to pass any deal that includes revenue. So that leaves us with three options: 1) there’s no deal and the trigger goes off, 2) the Democrats agree to $1.5 trillion in further spending cuts alongside zero dollars in tax increases, or 3) Republicans agree to revenues.

[...] And that gets to the truth of this deal, and perhaps of Washington in this age: it’s all about lowest-common denominator lawmaking. There are no taxes. No entitlement cuts. No stimulus. No infrastructure. Less in actual, specific deficit reduction than there was in the Simpson-Bowles, Ryan, or Obama plans, and even than there was in the Biden/Cantor or Obama/Boehner talks. The two sides didn’t concede more in order to get more. They conceded almost nothing in order to get a trigger and a process, not to mention avoid a financial catastrophe.

[...] Perhaps this deal signals the end of the need to actually reach an agreement, however. If the Joint Committee fails, the trigger begins cutting spending. If negotiations over taxes fail, the Bush tax cuts expire and revenues rise by $3.6 trillion. Neither scenario is anyone’s first choice on policy grounds. But you can get to both scenarios without Republicans explicitly conceding to higher taxes or Democrats explicitly conceding to entitlement cuts in the absence of higher taxes.

Of course, the worst thing about this deal is that the teaparty Republicans get their way in spending cuts in an already faltering economy. And I haven’t yet heard a good explanation from them as to how that’s supposed to help the economy or create any jobs… anyone? But at least there might not be a default and, most of all, the rich and powerful are in a safe place right now.