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Economy

ANALYSIS: House GOP ‘Jobs Plan’ Would Give Billions In Budget Busting Tax Breaks To Huge Corporations

Our guest blogger is Ethan Berman, Economic Policy Intern at the Center for American Progress Action Fund.

There is one consensus among all lawmakers as they push to bring back the jobs lost over the last few years and lower the unemployment rate: small businesses are the key. But Republican leaders are manifesting their desire to help small businesses by pushing for an extension of the Bush tax cuts for the rich (which will help less than two percent of small businesses) while simultaneously filibustering a bill providing tax credits to actual small businesses

But House Republicans have also proposed the Economic Freedom Act of 2010, a plan that embodies the same conservative economic policies that failed over the last decade. Introduced by Rep. Jim Jordan (R-OH) and Rep. Jason Chaffetz (R-UT) and supported by the House Republican Study Committee, it seeks to create new jobs through a number of huge tax breaks for wealthy individuals and corporations. Speaking on the House floor on April 22nd, Rep. Tom Rooney (R-FL) boldly stated:

Americans who have been jobless for over a year will continue down that road if new jobs simply do not exist. And I am not talking about temporary government jobs. Congress must work to stop spending and create a favorable environment for businesses to save money and invest by cutting taxes…This is why today I cosponsored the Economic Freedom Act.

How will the Freedom Act create jobs? It won’t. But among other things it will lower the corporate income tax from 35 percent to 12.5 percent, which as a new report from the Center for American Progress Action Fund and Citizens for Tax Justice shows, will give gigantic tax breaks to large corporations such as:

Not only does this plan lower corporate tax revenue in a system already full of loopholes and tax credits, it is also extremely inefficient in creating economic activity. According to Moody’s Economy.com, a corporate tax cut only generates 30 cents of economic activity for every dollar spent. In contrast, the unemployment benefits extension that the Republicans filibustered earlier this year will result in $1.61 of economic activity for every dollar spent.

No one is arguing that this tax cut wouldn’t generate any economic activity or give companies less incentive to hide profits offshore, but rather that the negative consequences outweigh the positive by a vast amount. This tax break is estimated to add $2.7 trillion to the deficit relative to current law.

President Obama’s American Recovery and Reinvestment Act has saved or created about three million jobs since its enactment according to the Congressional Budget Office. In addition, it has provided tax cuts to more than 95 percent of American households. On the other hand, the Economic Freedom Act will not only cost the country trillions of dollars, but will also send the overwhelming majority of its tax breaks to a minority of individuals and large corporations, when we want money flowing into the hands of the people who are most likely to spend or invest it to create jobs.

To read more about the Republican “jobs plan” and its economic consequences, check out Republicans’ $10 Trillion Giveaway.

Politics

Kyl’s Same Old Bag Of Tricks: Accuses Kagan Of Lying, Just Like He Did With Sotomayor

In a desperate, last-minute ploy to scuttle Justice Sotomayor’s nomination to the Supreme Court, Sen. John Kyl (R-AZ) falsely accused her of perjuring herself before the Senate Judicary Committee:

Later in her hearing, Judge Sotomayor gave the following testimony: “I will not use foreign law to interpret the Constitution or American statues. I will use American law, constitutional law to interpret those laws except in the situations where American law directs the court.” While this kind of declarative statement would normally provide some measure of comfort, it is belied by words Judge Sotomayor uttered less than three months ago, that judges were “commanded” to look to “persuasive” sources, including foreign law, in interpreting our own law. [...]

It gives me great pause that Judge Sotomayor could say one thing at a public speech earlier this year and say the opposite while under oath before the Judiciary Committee, especially since she never repudiated her speech.

Now, as Supreme Court nominee Elena Kagan is just as certain to be confirmed, Kyl is apparently just as desperate. In what will likely be his final floor speech on Kagan’s nomination, Kyl once again falsely accused a Supreme Court nominee of lying:

In explaining why I could not vote for now-Justice Sotomayor, I said I thought she was disingenuous with the Judiciary Committee. Obviously reaching such a conclusion precludes support notwithstanding other qualifications for the position. Reluctantly, after analysis of her testimony, weighed with her past writings, statements and actions, I have reached the same conclusion regarding Elena Kagan.

Watch it:

Kyl then proceededd to recite a long list of mythical claims about Kagan, and argue that she must have been lying at her confirmation hearing because her testimony does not square with the right’s mythology. “Exhibit A” of his case against Kagan, for example is that she claims to be in favor of gay rights, but she really has no objections to a anti-gay tenets of “Shariah law.” “Exhibit B” is that she claims to not be a judicial activist, even though she had the audacity to praise legal legend and Supreme Court Justice Thurgood Marshall. And so forth.

This tactic did not work when Sotomayor was up for a vote, and it will not work now. Kyl needs to learn that there is nothing “disingenuous” about refusing to confess to an absurd list of trumped up charges again you.

Climate Progress

Hottest* July in RSS satellite record, record floods swamp Pakistan, U.S. set 1480 temperature records in past two months, and 2010 breaks 2007 record for most nations setting all-time temperature records

Hell and High Water hits hard as Time asks: Will Russia’s deadly heat wave change its stance on climate change?

What’s happening with the planet’s climate right now needs to be a wake-up call to all of us, meaning all heads of state, all heads of social organizations, in order to take a more energetic approach to countering the global changes to the climate.”

That’s Dmitri Medvedev, President of a country that has been mired in even more disinformation about global warming than ours, as Time notes.  On Friday, Medvedev said that in 14 regions of Russia, ”practically everything is burning”:
Russia

And so we have Hell and High Water, with Pakistan’s record flooding displacing millions“The disaster has killed 1,200 people and there are fears that the death toll will rise steeply. There are reports of cholera outbreaks among some victims as doctors treat a number of waterborne diseases”:

Read more

Climate Progress

Stymied By Oil-Fueled Opposition, Reid Abandons Spill Bill

Harry ReidIn response to one of the greatest oil disasters in history, the U.S. Senate will do nothing. Republican opposition to the limited oil industry reform package assembled by Senate Majority Leader Harry Reid (S. 3663) has led him to pull the bill — and the BP-friendly Republican alternative (S. 3643) — from the floor. Pressed for time, Reid chose not to force his opponents to cast a vote on behalf of their oil sponsors. Reid’s package is almost exclusively made of bipartisan pieces of legislation:

Interior Department drilling reform, co-sponsored by Sen. Jeff Bingaman (D-NM) and Sen. Lisa Murkowski (R-AK)

Natural gas trucks retrofitting, co-sponsored by Sen. Robert Menendez (D-NJ) and Sen. Orrin Hatch (R-UT)

– The “cash for caulkers” Homestar energy efficiency program, co-sponsored by Bingaman and Sen. Lindsey Graham (R-SC)

These initiatives would have held BP accountable, created jobs, protected the environment, cleaned the air, and strengthened energy security.

However, Murkowski, Hatch, and Graham joined their Republican colleagues — as well as the oil-fueled Democrats Mary Landrieu (D-LA) and Mark Begich (D-AK) — in opposing Reid’s bill because it lifted the $75 million liability cap for oil companies like BP responsible for a major oil spill.

“It should be an affront to those who are serious about enacting good policy,” bloviated Murkowski, who had singlehandedly blocked a vote on lifting the liability cap in May. “Unlimited liability pretty much puts the big nail in the coffin,” said Murkowski spokesman Robert Dillon.

The Republican counter-proposal would have replaced the liability cap with a complicated formula that essentially kept the cap unchanged, keeping the American taxpayer on the hook for any future big oil bailouts.

Update

Reuters reports:

“We tried jujitsu, we tried yoga, we tried everything we can with Republicans to come along with us and be reasonable …we could not get anyone to come along with us,” Reid told reporters.

Politics

Claiming He Doesn’t Want To ‘Scoop’ Himself, McConnell Refuses To Detail GOP Agenda

After spending months using gimmicks and “flimsywebsites attempting to convince voters they have fresh and substantive policy ideas, Republicans have all but conceded they don’t have any. Last month, Rep. Peter King (R-NY) said that Republicans shouldn’t “lay out a complete agenda” because it could become a “campaign issue.” Just days later, the heads of the Republican congressional campaign committees — Sens. John Cornyn (R-TX) and Pete Sessions (R-TX) — failed to name a single specific policy they support on NBC’s Meet The Press, instead suggesting that Americans intuitively “understand what Republicans stand for.”

This morning, Senate Minority Leader Mitch McConnell (R-KY) appeared on Bloomberg to discuss policy and the GOP agenda. But he didn’t have much to say either:

HOST: Do Republicans need to articulate what you would do in power, as opposed to simply campaigning against what the President’s done?

MCCONNELL: I think we clearly do need to make sure Americans know what we would do and we’re gonna make that announcement in late September so the voters will have an opp…

HOST: But you have an opportunity right here to spell it out.

MCCONNELL: Yeah but I think I won’t scoop myself. We’ll be making that announcement in late September.

Watch it:

It’s unclear why the GOP needs to wait months to announce their policies when it has been working on overcoming its branding as the “Party of No” since last year. In fact, the chairman of the House Republican Policy Committee, Rep. Thaddeus McCotter (R-MI), suggested that his committee be eliminated because other “solutions groups” were duplicating its work. Yet the GOP still has no coherent policy agenda – last month, RedState founder and staunch conservative Erick Erickson even told the party to “stop lying” and admit that it’s the “Party of No.”

But it’s not like the GOP has no ideas whatsoever. Rep. Michelle Bachmann (R-MN) thinks that “all [Republicans] should do is issue subpoenas” if they win the House this fall. And House Minority Leader John Boehner (R-OH), who “doesn’t need to see GDP numbers or talk to economists” to determine policy, instead had lobbyists help him come up with a “new policy agenda.” More recently, the House Republican Study Committee issued a jobs plan that is a “huge doubling down on the Bush agenda” and “won’t effectively create jobs.”

Considering the total lack of smart, new ideas in the Republican party, it’s not a surprise that they need a lot more time to announce their agenda while their members are trying to duck scrutiny.

Charlie Eisenhood

Economy

McConnell Falsely Claims That The Expiring Bush Tax Cuts For The Rich Affect Half Of Small Business Income

In order to justify their blanket opposition to allowing the Bush tax cuts for the richest two percent of Americans to expire on schedule — as President Obama has proposed — Republicans have been trying to claim that they’re looking out for the interests of small business. “To those who are pushing the higher marginal rates, I say the burden is on you to show that you are not harming our primary job creators, small business,” charged Sen. Chuck Grassley (R-IA).

Of course, less than two percent of the small businesses in the country make enough money to file in either of the top two tax brackets, which are the ones in question here, so Republicans have had to find ever more creative statistics to try and prove their small business bona fides. Today, during an interview with Bloomberg News, Senate Minority Leader Mitch McConnell (R-KY) claimed that allowing these tax rates to reset to where they were under President Clinton would affect fifty percent of small business income in the country:

What they propose to do is raise taxes on the top two rates, which would capture about fifty percent of small business income and affect about 25 percent of the American workforce in the middle of a recession. We think it’s a terrible idea.

Watch it:

Now, McConnell doesn’t have the tightest grasp on economic statistics. After all, he said that there’s “no evidence whatsoever” that the Bush tax cuts decreased revenue when there is, in fact, an abundance of evidence showing just that. But still, McConnell either doesn’t understand the data he’s looking at or is willfully distorting it.

This claim, which has also been made by House Minority Leader John Boehner (R-OH), comes from a Joint Committee on Taxation report which states that 50 percent of business income is in the top two tax brackets. But the report in no way shows that this is from small businesses. In fact, it explicitly states “these figures for net positive business income do not imply that all of the income is from entities that might be considered ‘small.’”

That same report actually says that just three percent of people with any business income at all — from a business large or small — will be affected if the top two tax rates increase. That means that 97 percent of people who collect at least some of their income from a business will not see their taxes go up under the President’s plan.

Dylan Matthews dissected the IRS filings of small businesses and found that “the filers reporting small business income who would be affected by letting the tax cuts expire come disproportionately from the ranks of the super-rich.” In fact, the Tax Policy Center has found that the Bush tax cuts actually harmed small business, because they made the tax code friendlier to large corporations and increased the cost of capital (by generating huge deficits). So what cherry-picked stat will Republicans rely on next to try and hide their plan to spend $830 billion on a tax break for the super rich?

Yglesias

Endgame

Kill what you can’t live without:

— John Kasich is “sort of” the American dream.

— For-profit colleges lying to students—for profit!

Return of the tax fairy.

— The alleged Obama spending surge is not actually happening.

— Texas GOP donors versus GOP on immigration.

— Michael Bloomberg is brilliant on the mosque.

Exciting new music blog!

Kathleen Hannah as Julie Ruin, “A Place Called Won’t Be There”

Politics

Cornyn Attacks Activist Judges, Then Attacks Kagan As Insufficently Activist

In a floor speech explaining his opposition to Supreme Court nominee Elena Kagan, Sen. John Cornyn (R-TX) attacked her for refusing the endorse the frivolous argument that unelected judges should strike down the health care law enacted by elected representatives:

I was also troubled by a couple of other areas . . . One has to do with the power of the federal government and I had mentioned a moment ago. Under the commerce clause of the United States Constitution, the Supreme Court has previously basically given the federal government almost limitless powers and we’ve seen that play here in the debate over the individual mandate in the health insurance bill . . . But Solicitor General Kagan did not seem to recognize that the federal government’s powers are one of enumerated powers delegated by — delegated by the states and by the people.

Just a few minutes earlier, however, Cornyn ranted against judges who have the audacity to substitute their views for those of elected Members of Congress:

­If ­we ­don’t ­like ­the ­way ­Congress ­– ­the ­law ­congress ­makes, ­well, congress,­ of ­course, ­is ­free ­to ­change ­it. And ­if ­we ­the ­people still don’t like the way Congress writes the law when they refuse to respond to the will of the people, we have a right to replace Members of Congress. That’s the way a democracy runs, not by a judge dictating to us what he or she thinks is good for us.

Watch it:

This is not the first time Cornyn set the landspeed record for self-contradiction.  During Kagan’s confirmation hearing, Cornyn insisted that precedents he approves of are sacred, while precedents he disagrees with are a blasphemy that must be overruled.  Moreover, Cornyn’s view that the law and the Constitution mean whatever he wants it to mean is all too common among conservatives.  Most famously, Chief Justice Roberts promised “to have the humility to recognize that [judges] operate within a system of precedent” when he was up for confirmation, only to spend his entire time as Chief Justice ignoring precedents that conservatives don’t like.

In other words, Cornyn and Roberts are taking a page out of Henry Ford’s playbook.  The American people can have whatever kind of laws they want — so long as they’re conservative.

Security

START Vote Delayed By McConnell’s Obstructionism And Kyl’s Nuclear Pork

mitch_mcconnell_leaderRemember last year when Republicans were aghast at all the sidedeals on health care? Remember when Republicans railed against pork barrel spending and argued for a laser like focus on deficits? Well hypocrisy knows no bounds. The sunbelt shakedown is now in full effect.

Senator Kerry just announced today that he would delay the Senate Foreign Relations Committee vote on the New START Treaty. The delay is not because the treaty wouldn’t pass out of committee, it is because the White House and Kerry are close to getting more Republicans – Senators Corker and Isakson are basically supportive of the treaty, but were allegedly upset about having a vote as they claimed to have a few outstanding questions that they wanted answered from the Administration before voting. The timeline for the committee was always tight, so a delay is not a real surprise.

But the delay in the vote has really nothing to do with process or rushing. Mitch McConnell yesterday made it abundantly clear what the hold up is about – the GOP (and more specifically Senator Jon Kyl) hasn’t been bought off yet. Corker himself noted last week, he supports the treaty but is following Kyl’s lead and holding out for more pork. McConnell told Reuters in a shocking degree of candor:

The only way this treaty gets in trouble is if it’s rushed… My advice to the president was, don’t try to jam it, answer all the requests, and let’s take our time and do it right.

And by doing “it right,” McConnell explicitly says buy off Kyl with nuclear pork:

All they have to do is find enough money to satisfy Senator Kyl that they are prepared to do what they said they would do… If it’s important to you, you can find a way, in an over a trillion dollar discretionary budget to fund it. In my view they need to do that, because without that I think the chances of ratification are pretty slim.

What does McConnell’s statement tell us:

First, there are no more substantive objections to the treaty. Mitt Romney and Heritage failed to convince GOP Senators that the treaty could be opposed on substantive grounds. Save for Senators DeMint and Inhofe, almost no GOP Senators are opposing the treaty on the merits. McConnell just threatened to cause the treaty “trouble” for no substantive reason. This is no longer a debate about the treaty.

Second, the GOP cares more about the politics of process than about US national security. When Anthony Wiener went ballistic on the floor of the House because House Republicans refused to vote for health care funding for 9-11 workers, it exposed the do nothing obstructionist bent of the GOP even when it comes to 9-11. Similarly, the one thing you would hope the GOP wouldn’t mess with is nuclear stability. Yet without the New START treaty in place the US military is rapidly losing its knowledge of and intelligence about the Russian nuclear arsenal because since the original START treaty expired last December the US no longer has boots on the ground monitoring what Russia is doing with its nuclear weapons. When weapons are on hair trigger alert and in 30 minutes entire cities could be destroyed the last thing you want is to have decreased knowledge and confidence. This is why our military is adamant about the treaty.

With all the complaints about “rushing” the Foreign Relations committee has done little else but talk about START in the last few months, as it has held nearly 20 hearings. The treaty has been so thoroughly covered that nothing new is being said about the treaty. Yet to gum up the process, it seems GOP Senators belatedly submitted questions to the Administration that they could not be expected to deliver in time. These delaying tactics will likely only continue further in September.

Third, it is all about nuclear pork. McConnell’s statement clearly indicates that support for START is all about whether Kyl is satisfied with nuclear modernization funding. Yet even neocon hawk Bob Kagan said that tying START to nuclear modernization funding was ridiculous: “The issue has nothing to do with New START’s intrinsic strengths or weaknesses.” Furthermore, the Administration has already pushed through a massive 15% increase. Yet Kyl and his colleagues are demanding more. Corker’s chief interest, for instance, is the Uranium Processing Facility in Oak Ridge, TN, which Corker seemingly arbitrarily determined needs between $4-$5 billion, well above the projected $1.4-$3.5 billion that the facility’s own contractor projects. He concedes, however, that “certainly, there’s no official estimate” but nevertheless said “it’s very likely” he would support the treaty if he got the funding.

Fourth, it’s a massive slap in the face of Richard Lugar and shows the far-right direction the Senate GOP has taken. McConnell’s interview basically says if Kyl is given what he wants than everyone will fall into line. But there is no mention of Richard Lugar who is a strong supporter of the treaty. This demonstrates where the ideological direction the GOP is headed. McConnell neglects (and seemingly rejects) his party’s foremost authority on nuclear weapons issues in the Senate, in favor of the far right approach of Kyl who advocates building and explosively testing new nuclear weapons. It also shows how impotent Lugar is in influencing his colleagues.

Yglesias

Tax-Subsidies for State Borrowing

Bond, tax-empt bond.

Bond, tax-empt bond.

Josh Barro has an interesting piece on problems with federal tax subsidization of state and local borrowing. I agree that this is an area ripe for reform, and have been trying to emphasize the need for some focus on improving state and local budget practices. Everyone has long known this to be a problem area, but the Great Recession has revealed that excessively pro-cyclical budgeting can be a major macroeconomic problem.

In that light, I think it’s unfortunate that Barro spends so much time criticizing the successful Build America Bonds program which is really neither here nor there in terms of any longer-term issues. He’s correct, however, that there’s something perverse about the way current subsidies scale up as states become less creditworthy:

But even if bond subsidies are a good idea, there is a key flaw in their current structure: the subsidies grow in value when an issuer’s credit profile deteriorates. Because borrowing subsidies are a percentage of interest payments rather than principal, they rise as states are forced by skeptical markets to pay higher yields on new bonds.

This means that instead of simply lowering the level of municipal borrowing costs, we skew the incentives by blunting market signals that should be telling officials to borrow less. Another issue that deserves mention in this vein, however, is simply the fact that attempting to subsidize investment through this kind of tax subsidy is hugely inefficient with the majority of the subsidy simply enriching bond investors rather than spurring new infrastructure creation.

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