For a hint of what austerity can do to an economy, one needs to look no further than Europe. And the U.S. is in for a dose of austerity of its own due to spending cuts under the so-called “sequester” that are scheduled to take place in March.

Honeywell CEO David Cote — who is part of an organization called Fix the Debt that is pushing for steep cuts in social spending as part of a “grand bargain” on the budget — acknowledged in an interview that the sequester’s spending cuts will harm the economy. But he thinks they need to happen anyway:

“While there could be some economic impact, to me it looks like $100 billion on a $3.5 trillion government spend,” Cote told reporters after addressing the Boston College Chief Executives’ Club.

“So, yeah, there’s some impact but at some point we have to start working to get our debt under control and if this is the only rational step they could seem to take to do it, then they ought to do it.”

Cote is one of the highest-paid CEOs in the country, making $37 million in 2011. Honeywell, meanwhile, paid just a 2 percent tax rate between 2008 and 2011, according to Citizens for Tax Justice, while receiving $1.7 billion in tax subsidies. Cote himself has said that the corporate tax rate should be zero.

The latest projections from the Congressional Budget Office show that the deficit has been reduced substantially over the last two years, the debt is stabilizing, but unemployment and slow economic growth remain huge problems. The sequester, according to the Bipartisan Policy Center, will cause the loss of more than one million jobs.

As the New York Times editorialized, the sequester is “a mindless government austerity program,” saying “With the economy teetering on a knife edge, it is clear that this is the worst moment to initiate an indiscriminate budget cut.” Indiscriminately slashing government spending may help achieve the goals of Fix the Debt and some rich CEOs, but it won’t help the economy at all.

Connecticut’s paid sick days law — which requires businesses in the service sector with more than 50 employees to allow their workers to accrue at least one hour of paid sick leave for every 40 hours they work — went into effect in January 2012. This week, the Employment Policies Institute released new “research” on the implementation of the law, arguing that it’s hurt the state.

But it is difficult to refer to this as “research” with a straight face, since the group is a shell corporation for big business interests and the report repeatedly asserts that the data is “not representative.” The Employment Policies Institute has released similarly dubious reports arguing against raising the minimum wage, and against the Affordable Care Act. Its founder Rick Berman, was a lobbyist for the food, alcoholic beverage and tobacco industries, and has been publically accused of using his non-profit shell organizations to benefit the for-profit clients for which he lobbies.

Amongst the report’s problems, data collection began in April 2012, four months after the implementation of the law and, due to the requirements of the legislation, before most full-time workers could have used any of the sick days earned. The initial survey was sent to businesses identified as “most likely to be impacted by the law” but nearly half (45 percent) of respondents did not have to change their policies in order to comply with the law — yet they still were included in the results saying negative things about the effects of the legislation.

The report claims that businesses are laying off workers and limiting expansion, but rigorously collected data from the Connecticut Department of Labor shows employment growth in the Leisure and Hospitality and Education and Health Services sectors since the law went into effect — two sectors that had the largest numbers of workers without paid sick days prior to passage of the law.

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Our guest blogger is Sarah Jane Glynn, an economic policy analyst at the Center for American Progress Action Fund.

Even without the spending cuts included in the so-called “sequester,” America’s domestic spending levels are scheduled to hit historic lows in the coming years. That’s because the Budget Control Act, signed into law as part of the plan to raise the debt ceiling in August 2011, capped future spending levels.

Those caps will ultimately reduce spending to its lowest level as a percent of the economy since the 1970s, according to a report from Democrats on the House Appropriations Committee:

Already, many programs on which Americans depend have faced significant cuts. Here are eight examples from the report:

Education: 44 federal education programs have been totally eliminated, saving $1.1 billion, since 2010. Title I, which funds schools in low-income areas, has not faced cuts, but it has not received scheduled funding increases. As a result, it has absorbed 1.2 million more students with no additional funds, meaning districts now have $140 less per student in those schools. The capped spending levels will also result in a significant shortfall in the Pell Grants program.

Food safety: The Food and Drug Administration nearly doubled its inspection of food imports between 2007 and 2011, but such inspections would be reduced by 24 percent under scheduled spending caps. Food imports are skyrocketing, but the FDA inspects only 2.3 percent of them. In addition, budget cuts have jeopardized implementation of major food safety reforms.

Women, Infants, and Children programs: The WIC program helps low-income women who are pregnant or have infant children up to age five. “If the same rate of growth that the discretionary budget caps permit through 2022 had been used to determine WIC funding over the last eight years, some 970,000 women, infants, and children would not have been able to receive much-needed supplemental foods this year,” according to the report.

Housing: A program to help house low-income seniors was cut in half from 2010 to 2012, resulting in the construction of no new housing, even as there are 10 seniors on waiting lists for each existing unit. Another program to build low-income housing was cut from $1.8 billion in 2010 to just $1 billion in 2012, resulting in the construction of fewer homes and the creation of 8,000 fewer jobs. And a program that helps heat low-income homes in the winter was cut by a third, resulting in assistance for a million fewer homes last year and cuts for those who still receive assistance, even as energy prices have risen by 31 percent in that time.

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A new issue brief from the Center for American Progress is calling on lawmakers to help boost the American economy by investing in universal preschool and child care programs for children under the age of five. Such investments, the brief says, benefit working families and their children while strengthening human capital and addressing increasing rates of income inequality.

The CAP proposal would match preschool expenditures up to $10,000 per child per year through federal and state government grants. It would make pre-school free for children in families that make up to 200 percent of the poverty line while providing grants to families above that threshold based on a sliding scale that would cover between 30 and 95 percent of the cost.

Such a program would build on successful pilot programs in states like Oklahoma and Georgia, as well as federal programs like Head Start that have improved access to early childhood education for low-income children. It would also close the gap in preschool attendance that has opened between high-income children and those in low- and middle-income families:

But although nationwide preschool enrollment has increased to 74 percent among 4-year-old children and 51 percent among 3-year-old children, the lowest-income and most disadvantaged children are the least likely to participate in preschool programs. And children from middle-class families are only slightly more likely to participate—or sometimes less likely when gradations of family income are compared. Preschool opportunities for 3-year-olds appear to be a particular challenge for some middle-income families. Among 3-year-olds, 34 percent of children in families earning $50,000 to $60,000 participate in preschool programs, compared to 42 percent of children in families earning less than $10,000.

At a cost of $98 billion over 10 years, universal preschool would be somewhat expensive. But its economic benefits would be substantial. At-risk children without early childhood education are more likely to drop out of school, become teen parents, or get arrested for violent crime, and they are less likely to attend college. Investing in those children early, then, would reduce societal and economic costs later in their lives, while also increasing economic mobility.

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Rep. Raúl Labrador (R-ID), a key player in the ongoing House negotiations to advance comprehensive immigration reform, has come out against providing a pathway to citizenship for the nation’s 11 million undocumented immigrants, echoing a growing consensus among conservative members. The position is in stark contrast to the framework put forward by a bipartisan group of Senators and President Obama — which would allow the unauthorized to earn citizenship.

“The people that came here illegally knowingly – I don’t think they should have a path to citizenship,” Labrador said during an interview with NPR on Thursday morning. “If you knowingly violated our law, you violated our sovereignty, I think we should normalize your status but we should not give you a pathway to citizenship.”

During Tuesday’s hearing before the House Judiciary Committee, multiple House Republicans panned citizenship as “extreme” and advanced a so-called “compromise” between inaction and permanent legalization: providing individuals and families who entered the country unlawfully with visas that allow them to live and work in the country but bar them from attaining citizenship. “I think we should treat them with dignity, but we should also be fair to millions of people that are waiting in line, that are trying to do it the right way,” Labrador added.

Comprehensive immigration reform, however, can respect the immigrants who are currently awaiting their green cards while also advancing policies that are in the best economic and social interests of the nation as a whole.

First, the bipartisan immigration principles put forward by the Senate and President Obama envision a long path to citizenship that would require immigrants to learn English, pay taxes, and undergo numerous background checks. As Sen. Marco Rubio (R-FL) explains, immigrants who register with the government and receive probationary status “will not be allowed to apply for a green card for a substantial period of time,” waiting “in line behind everyone who has applied before them.”

They would truly have to earn the status and once they did, the economic benefits of naturalization for the nation will be far more substantial than any work visa Labrador will propose. A naturalized immigrant will earn “between 5.6 percent and 7.2 percent more within two years of becoming a citizen,” boosting consumer spending and overall economic growth. Researchers “found that even if only half of those eligible to become citizens do so, it would add $21 billion to $45 billion to the U.S. economy over 10 years.”
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In the last few years, tech companies have gotten very good at using offshore tax havens to drive down their effective tax rates. And they evidently have some company. The Wall Street Journal noted today that drug companies are also increasingly using offshore tax gimmicks to drive down their tax rates, boosting profits without investing in new medicines:

Bristol-Myers Squibb Co., BMY +0.46% in its recent earnings call, estimated its tax rate would be about 16% this year, excluding special items, down from 23% last year. Then Gilead Sciences Inc. GILD -0.23% said its rate could “decline over time” if a hepatitis C drug it is developing receives approval, because of steps the company has taken to lower taxes on the drug’s sales. Also, Amgen Inc. AMGN +0.16% reported it paid an effective tax rate of 15.9% last year, and predicts an adjusted rate of 14% or 15% this year.

Many drug makers pay effective tax rates of 20% or higher. Firms that are seeking even lower rates don’t specify their strategies, and the details can vary. But the efforts typically involve shifting revenue overseas where it can be taxed at a lower rate than in the U.S., experts say. Some companies also noted the tax benefit they will receive this year from a federal tax credit for research and development.

Reductions in their tax rates could mean hundreds of millions of dollars in extra profit for drug makers, without having to sell more drugs or launch new ones.

Brand name drug prices are also skyrocketing, giving companies more incentive to simply make tons of cash off already created products and then stash it offshore.

Sen. Bernie Sanders (I-VT) is introducing a bill today that would boost revenue by $590 billion via the elimination of huge corporate tax giveaways. Offshore tax dodging alone costs the federal government $150 billion annually.

Corporations offshoring profits costs both the federal government and states billions of dollars per year. One of the more egregious giveaways is known as “deferral,” which allows U.S. corporations to avoid paying taxes on overseas profits until they bring that money back to the U.S., giving them every incentive to leave it overseas permanently.

According to the Congressional Budget Office, “The current tax system provides incentives for U.S. firms to locate their production facilities in countries with low taxes as a way to reduce their tax liability at home,” ultimately resulting in compensation for U.S. workers being lower. Sen. Bernie Sanders (I-VT) is introducing a bill today that would end this practice and close several other corporate tax loopholes:

Under this legislation, corporations would pay U.S. taxes on their offshore profits as they are earned. This legislation takes away the tax incentives for corporations to move jobs offshore or to shift profits offshore because the U.S. would tax their profits no matter where they are generated.

Under the Corporate Tax Fairness Act, U.S. corporations would continue to get a credit against their U.S. taxes for foreign taxes they pay. That means that when an American corporation has profits in a country with lower corporate taxes than the U.S., they would pay the federal government the difference between the foreign rate and the U.S. rate. When an American corporation has profits in a country with higher corporate taxes than the U.S., they would pay nothing to the U.S.

According to the Joint Committee on Taxation, “the provisions in this bill will raise more than $590 billion in revenue over the next decade.”

Due to the proliferation of loopholes, credits, and the use of tax havens, major corporations haven’t paid the full statutory tax rate in 45 years. In 2011, the 12.1 percent effective rate that corporations paid was the lowest in 40 years.