Saving Rates in the US

This graph from the "Calculated Risk" web page, shows the saving rate starting in 1959 through November of this year. (Right click on it to see a larger version.)

There are several interesting things to note in it. The first one is that our savings was on a more or less steady rise from the 50s to the 80s. It peaked a couple of times in the 70 and early 80s, but then went on a steady decline (with a few up and down blips) to about 2006. Then it went steadily upward.

The second thing is that 2006 date. That hints to me is that the "people" began seeing the crisis coming earlier than the "experts," who were still denying that we had any problem until the major banks on Wall Street (Lehmann, Merrill, and Bear Stearns) began to collapse.  

Third, there is a hint that the savings surge might be beginning to taper off. It hit a peak in January 2010, and has gone down and is projected to stabilize after that.

That may mean that most of the "adjustment," as they call it, has already happened and consumption will go up with income growth next year. That may be a good thing for the over all economy because it will mean that people are spending more and generating more sales and hirings. Instead of socking money away every week, people are spending it in the market place, which moves money around in the economy, and that creates jobs. Hopefully it is a sign that we are beginning to (slightly) trust the market not to crash on us if we go out and buy a few things for the family.

On the other hand, I don't want us to go back to the place we were before, when we were spending more than we were making and going increasingly into debt. No only would that be a return to some of the unhealthy behaviors of the last generation, but it also says something about our inability to either recognize or deal with the larger political and economic forces that brought us here.

Part of the reason we slid so far into debt was that, for most of us, our incomes were either declining or stagnating, so we borrowed to make it up. Our personal pride prevented us from accepting we weren't growing and our collective blindness kept us from understanding the market decisions that caused it. There were intentional policy decisions made in Congress and the global financial centers that sucked money out of the economy and upward from the poor and middle class and then blamed it on evil taxes and a bloated government. In one way or another, we were all participants in a spiritual ethos that said that human beings must continually be getting better and better (read "wealthier and wealthier"). When that stopped happening, we either took it inward and blamed our personal shortcomings and inadequacies, or we projected it outward and blamed the socialist government that took our taxes and redistributed them to undeserving welfare cheats.

The thought that we were not going to be richer than our parents (or as rich as we thought we deserved) was an assault on our collective self-concept. But instead of blaming a market system that was stacked and organized against us, we blamed ourselves or a wasteful government. And instead of changing the system and forcing some of that money back downward from "the rich" to "the rest," or on the other hand instead of learning to believe that goodness and joy could be found in a non-growing income (both positive at different levels), we decided to borrow, and borrow, and borrow. And then when the crash came, we paid for it big time. While much of the blame for the housing crisis was the result of a demented financial system that demanded more and more borrowers to fund Wall Street's gambling addiction, some of it was our desire to own a home, or own a bigger home, to prove to ourselves that we were not as insignificant as our incomes told us we were.

So, while on the one hand, I'm pleased that we started saving again instead of incessantly borrowing. And I'm a little bit pleased that we may be slightly spending again in ways that may help bring the economy back up a little. On the other hand, I'm nervous that we may not have learned the right lessons. Certainly the Wall Street survivors only learned that if you are clever you won't be punished for your sins. If the Tea Party movement is the public voice of this blame-ourselves-or-blame-the-socialist mentality in America, then Main Street may not have learned anything at all. 

Two important things to do during your Thanksgiving holiday to help fight world hunger

From David Kane, at the Maryknoll Office for Global Concerns, reprinted in the Tikkun DAILY blog by Dave Belden, posted there on November 26th, 2010

Two urgent situations require quick action from those who are concerned about world hunger. Your action can help counteract the massive presence of banking lobbyists in Washington. At a time when we give thanks for food on our plates, let’s help make sure that is a reality for people across the U.S. and around the world.

In 2008, price bubbles in food and energy prices led to $4 gasoline in the U.S. and, according to the UN, forced over 130 million people around the world to go hungry. A significant factor behind those price bubbles was excessive speculation in food and energy commodity markets. For more information about excessive commodity speculation, go to www.stopgamblingonhunger.com.

While the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act includes good steps to rein in speculation and bring common sense rules back to the commodity markets, important details were left to be defined by regulatory agencies. Wall Street is working feverishly to undermine and weaken the law during this process. You can help show regulators that big bankers are not the only ones interested in financial reform.

Please do these two things during the Thanksgiving holiday

First, contact your Senator and ask him/her to vote to remove Section 201 from HR 4337/S 3948, the Bill to Amend the Internal Revenue Code of 1986
The issue: Current rules require that 90 percent of investment gains realized by mutual funds must come from securities, and only 10 percent may be realized through alternative investments, such as commodity investments. Section 201 of HR 4337 would modify this restriction and allow commodity investments to be realized as part of the 90 percent. This could open a new floodgate to speculative dollars in essential commodities, such as food and energy, without thorough Congressional hearings or public debate on the potential harms of such a move.
This bill already passed the House by voice vote and is now being rushed through the Senate. Please call your Senator’s office before November 30 as the vote on the Bill to Amend the Internal Revenue Code of 1986 (HR 4337/S 3948) could happen next week. Call the Capitol switchboard at (202) 224-3121 and ask for your Senators’ offices (make sure to call both), or call their local office.

Second, go to Maryknoll’s ‘Stop Gambling on Hunger’ website to send a letter to the Commodity Futures Trading Commission (CFTC)
The issue: The CFTC is in the process of defining the details of how the Dodd-Frank bill will be enforced. Wall Street has thousands of lobbyists in D.C. working to water down the bill. Over 90 percent of the lobby visits to the CFTC have been from Wall Street banks, hedge funds and other financial players trying to get exemptions for their profiting. The letter you can send to the CFTC points out five key areas where the CFTC needs to stay strong.
The CFTC is accepting public comments until November 30, so please write to them now and encourage your friends and family to do the same during the Thanksgiving holiday.
Here are a few links that provide further context:-

• UN Report on Food Commodities Speculation and Food Price Crises
• Faith based organization on Institutional investors urged to think twice about commodity investments.

David Kane, a Maryknoll lay missioner, served for nine years in Joao Pessoa, Brazil, and currently works in Maryknoll’s Office for Global Concerns in Washington, D.C., covering Latin American and economic issues. In “Latin America’s Rising Left” in the current Tikkun he reviewed Oliver Stone’s movie South of the Border.

Tax the Rich: It’s Actually Pretty Good For Them Too

Stan Duncan

A number of economists of both the right and the left have said that we can no longer sustain the Bush-era tax cuts and allowing them to expire is the only way to cut into the budget deficit. The biggest difference between conservatives and the liberals on this (when there actually is one) is that the conservatives--who include Alan Greenspan and David Stockman, architect of the huge Reagan tax cuts of the 1980s--say that we should let all of the tax cuts expire and the liberals say we should cancel just those of the top two percent. And many liberals actually agree on that too. Some conservatives, like David Brooks agree that the tax cuts have to go, but think we should phase them out over two years. I think they should go now, but I could live with that as a compromise.

  Taken together, this is a fairly strong consensus, with the differences being nuances over timing and degree, not over principle. It makes one wonder how the Republican/Fox/talkshow/pundits were able to say with a straight face that ALL of the logic was on the side of keeping the tax cuts. Or it causes one to ask how it was that the Democrats so seriously failed to make the case for an alternative to the story.

  At the risk of sounding like simple Econ 101, here is the basic outline of why higher taxes for the wealthy make sense for everyone, including the wealthy. Why everyone, including the rich, benefit in an economy when wealthy people and corporations are taxed at a higher percentage rate than the rest of us.

   First, a very brief word on where we are. When President Bush came into office in 2001, we had an historic budget surplus. Not all of that was due to President Clinton’s policies, though he would probably say it was. But for what ever reason, we had a huge surplus. When George Bush left office, we had a huge deficit. As much as the Rep/Fox/pundits would love to make you believe it is so, the collapse of the historic surplus is not because of Barak Obama who came into office after the rise of the deficit.
The three biggest causes of the huge deficit were these:

1. President Bush fought two wars without any plans for paying for them. The cost of the Iraq war alone is in the neighborhood of one trillion dollars and counting. By the end of the next decade, with hundreds of billions of dollars being paid out in disability payments to soldiers, it will probably top off at three trillion dollars.
2. He cut taxes three times (2001, 2, and 8) in the middle of those wars for a total of about two trillion dollars without any plans to pay for them (actually, he claimed that the wealthy would have more to invest and that eventually it would help everyone, but that didn’t happen),
3. He passed a major drug plan without any plans for paying for it.
4. In 2008, for reasons that were not totally his fault, we fell into a deep recession and suddenly tax revenue dried up. The federal out-go increased with things like unemployment and food stamps, and its income went down with literally millions of people losing their jobs.   

Again, in spite of what Mitch McConnell, John Boenher and the Rep/Fox/pundit chorus, all of these things happened before Barak Obama came into office. There also were, at the end of Bush's term and the beginning of Obama's, a large bank bailout and a stimulus package, but even taken together these never came close to the magnitude of the cuts in income and increases in spending of the Bush era.   


   So, that’s where we are. In his first months in office, Barak Obama put together a bi-partisan stimulus package that was basically in three parts.

1. One part “shovel-ready” payouts that are still being paid out,
2. One part tax cuts which are notoriously ineffective for stimulus but designed to win over Republicans to vote for it (and that worked out well, didn’t it),
3. And one part to take up the slack in states that had to cut spending because of their ill-advised balanced budget requirements.

   The “Stimulus” did help, but not overwhelmingly, and because of that it unfortunately allowed the Rep/Fox/pundits to claim dishonestly that it not only did not help but actually caused harm (harm? Yes, that’s what they said).

   So, here’s why increasing the taxes on the wealthy makes sense, and it’s really not all that complicated. Let’s call it the Henry Ford Theory of Tax increases because he was an early proponent of the theory. Ford, as you may recall was a leader in paying his workers a decent wage because he had so many of them that if they were poor and couldn't buy his cars, he would feel it. It would keep down his car sales. So, he paid them living wages so that they could purchase his product and help him grow rich. Pay your workers more so that they can buy your stuff and everybody gets happy.

   When applied to taxes, the idea is that wealthy individuals and corporations make things and they want to sell them because they want to make a profit. (In today’s economy they often make them in Mexico or China, but they still want someone to buy them.) If the people on the very bottom of the society are kept dirt poor all the time, it keeps them from buying the stuff that the rich produce or invest in. If you keep the minimum wage low, and keep their incomes low, it may be easier for you to hire them to clean your house for a song, but it also makes it harder for them to buy your refrigerators, microwaves and autos. So, to help this situation and to help people in the long run, the government has to spread some of that wealth down to the bottom so that the people there can have a (slightly) higher standard of living and thus buy the products made or invested in by the wealthy.

   Ways to do that include earned income tax credits (a Reagan idea, by the way, but opposed as too liberal today by Republicans), or extended unemployment insurance, or just lower taxes. Ironically, tax cuts for the poor and middle class usually have much more bang for the buck in terms of stimulus in a recession than do tax cuts for the wealthy. The reason is that the wealthy don’t see and feel their tax cuts and they seldom change their consumption patterns with it. But the poor use their tax cuts to buy groceries, or make car payments. They push their new money out the door fast and it benefits the economy more quickly.

   So, by taxing the rich and giving it to the poor in an old fashioned “FDR” way (because FDR did this), the rich eventually---five or six years down the pike---will get the money back again because the poor are now able to buy things, lift the economy, and that generates more income for the rich. In the long run everyone benefits and the rich don’t have to be stuck with looking like bad guys for not wanting to share with the poor. It’s a logical way to help the economy, easy to see, easy to understand, but one that is never even acknowledged to be on the planet by the Rep/Fox/pundit voting block.

The World Liberal Opportunists Made

by Chris Hedges

The lunatic fringe of the Republican Party, which looks set to make sweeping gains in the midterm elections, is the direct result of a collapse of liberalism. It is the product of bankrupt liberal institutions, including the press, the church, universities, labor unions, the arts and the Democratic Party. The legitimate rage being expressed by disenfranchised workers toward the college-educated liberal elite, who abetted or did nothing to halt the corporate assault on the poor and the working class of the last 30 years, is not misplaced. The liberal class is guilty. The liberal class, which continues to speak in the prim and obsolete language of policies and issues, refused to act. It failed to defend traditional liberal values during the long night of corporate assault in exchange for its position of privilege and comfort in the corporate state. The virulent right-wing backlash we now experience is an expression of the liberal class’ flagrant betrayal of the citizenry. 

The liberal class, which once made piecemeal and incremental reform possible, functioned traditionally as a safety valve. During the Great Depression, with the collapse of capitalism, it made possible the New Deal. During the turmoil of the 1960s, it provided legitimate channels within the system to express the discontent of African-Americans and the anti-war movement. But the liberal class, in our age of neo-feudalism, is now powerless. It offers nothing but empty rhetoric. It refuses to concede that power has been wrested so efficiently from the hands of citizens by corporations that the Constitution and its guarantees of personal liberty are irrelevant. It does not act to mitigate the suffering of tens of millions of Americans who now make up a growing and desperate permanent underclass. And the disparity between the rhetoric of liberal values and the rapacious system of inverted totalitarianism the liberal class serves makes liberal elites, including Barack Obama, a legitimate source of public ridicule. The liberal class, whether in universities, the press or the Democratic Party, insists on clinging to its privileges and comforts even if this forces it to serve as an apologist for the expanding cruelty and exploitation carried out by the corporate state.

Populations will endure repression from tyrants as long as these rulers continue to effectively manage and wield power. But human history has amply demonstrated that once those in positions of power become redundant and impotent, yet retain the trappings and privileges of power, they are swiftly and brutally discarded. Tocqueville observed that the French, on the eve of their revolution, hated the aristocrats about to lose their power far more than they had ever hated them before. The increased hatred directed at the aristocratic class occurred because as the aristocracy lost real power there was no decline in their fortunes. As long as the liberal class had even limited influence, whether through the press or the legislative process, liberals were tolerated and even respected. But once the liberal class lost all influence it became a class of parasites. The liberal class, like the déclassé French aristocracy, has no real function within the power elite. And the rising right-wing populists, correctly, ask why liberals should be tolerated when their rhetoric bears no relation to reality and their presence has no influence on power. 

The death of the liberal class, however, is catastrophic for our democracy. It means there is no longer any check to a corporate apparatus designed to further enrich the power elite. It means we cannot halt the plundering of the nation by Wall Street speculators and corporations. An ineffectual liberal class, in short, means there is no hope, however remote, of a correction or a reversal through the political system and electoral politics. The liberals’ disintegration ensures that the frustration and anger among the working and the middle class will find expression in a rejection of traditional liberal institutions and the civilities of a liberal democracy. The very forces that co-opted the liberal class and are responsible for the impoverishment of the state will, ironically, reap benefits from the collapse. These corporate manipulators are busy channeling rage away from the corporate and military forces hollowing out the nation from the inside and are turning that anger toward the weak remnants of liberalism. It does not help our cause that liberals indeed turned their backs on the working and middle class.

The corporate state has failed to grasp the vital role the liberal class traditionally plays in sustaining a stable power system. The corporate state, by emasculating the liberal class, has opted for a closed system of polarization, gridlock and political theater in the name of governance. It has ensured a further destruction of state institutions so that government becomes even more ineffectual and despised. The collapse of the constitutional state, presaged by the death of the liberal class, has created a power vacuum that a new class of speculators, war profiteers, gangsters and killers, historically led by charismatic demagogues, will enthusiastically fill. It opens the door to overtly authoritarian and fascist movements. These movements rise to prominence by ridiculing and taunting the liberal class for its weakness, hypocrisy and uselessness. The promises of these proto-fascist movements are fantastic and unrealistic, but their critiques of the liberal class are grounded in truth. 

The liberal class, despite becoming an object of public scorn, still prefers the choreographed charade. Liberals decry, for example, the refusal of the Democratic Party to restore habeas corpus or halt the looting of the U.S. Treasury on behalf of Wall Street speculators, but continue to support a president who cravenly serves the interests of the corporate state. As long as the charade of democratic participation is played, the liberal class does not have to act. It can maintain its privileged status. It can continue to live in a fictional world where democratic reform and responsible government exist. It can pretend it has a voice and influence in the corridors of power. But the uselessness of the liberal class is not lost on the tens of millions of Americans who suffer the awful indignities of the corporate state.

The death of the liberal class cuts citizens off from the mechanisms of power. Liberal institutions such as the church, the press, the university, the Democratic Party, the arts and labor unions once set the parameters for limited self-criticism and small, incremental reforms and offered hope for piecemeal justice and change. The liberal class could decry the excesses of the state, work to mitigate them and champion basic human rights. It posited itself as the conscience of the nation. It permitted the nation, through its appeal to public virtues and the public good, to define itself as being composed of a virtuous and even noble people. The liberal class was permitted a place within a capitalist democracy because it also vigorously discredited radicals within American society who openly defied the excesses of corporate capitalism and who denounced a political system run by and on behalf of corporations. The real enemy of the liberal class has never been Glenn Beck, but Noam Chomsky.

The purging and silencing of independent and radical thinkers as well as iconoclasts have robbed the liberal class of vitality. The liberal class has cut itself off from the roots of creative and bold thought, from those forces and thinkers who could have prevented the liberal class from merging completely with the power elite. Liberals exude a tepid idealism utterly divorced from daily life. And this is why every television clip of Barack Obama is so palpably pathetic.

Unions, organizations formerly steeped in the doctrine of class warfare and filled with those who sought broad social and political rights for the working class, have been transformed into domesticated junior partners of the capitalist class. Cars rolling out of the Ford and GM plants in Michigan were said to have been made by Ford-UAW. And where unions still exist, they have been reduced to simple bartering tools, if that. The social demands of unions early in the 20th century that gave the working class weekends off, the right to strike, the eight-hour workday and Social Security have been abandoned. Universities, especially in political science and economics departments, parrot the discredited ideology of unregulated capitalism and globalization. They have no new ideas. Artistic expression, along with most religious worship, is largely self-absorbed narcissism meant to entertain without offense. The Democratic Party and the press have become courtiers to the power elite and corporate servants.

Once the liberal class can no longer moderate the savage and greedy inclinations of the capitalist class, once, for example, labor unions are reduced to the role of bartering away wage increases and benefits, once public education is gutted and the press no longer gives a voice to the poor and the working class, liberals become as despised as the power elite they serve. The collapse of liberal institutions means those outside the circles of power are trapped, with no recourse, and this is why many Americans are turning in desperation toward idiotic right-wing populists who at least understand the power of hatred as a mobilizing force.

The liberal class no longer holds within its ranks those who have the moral autonomy or physical courage to defy the power elite. The rebels, from Chomsky to Sheldon Wolin to Ralph Nader, have been marginalized, shut out of the national debate and expelled from liberal institutions. The liberal class lacks members with the vision and fortitude to challenge dominant free market ideologies. It offers no ideological alternatives. It remains bound to a Democratic Party that has betrayed every basic liberal principle including universal healthcare, an end to our permanent war economy, a robust system of public education, a vigorous defense of civil liberties, job creation, the right to unionize and welfare for the poor.

“The left once dismissed the market as exploitative,” Russell Jacoby writes. “It now honors the market as rational and humane. The left once disdained mass culture as exploitative; now it celebrates it as rebellious. The left once honored independent intellectuals as courageous; now it sneers at them as elitist. The left once rejected pluralism as superficial; now it worships it as profound. We are witnessing not simply a defeat of the left, but its conversion and perhaps inversion.”

Capitalism, and especially corporate capitalism, was once viewed as a system to be fought. But capitalism is no longer challenged in public discourse. Capitalist bosses, men such as Warren Buffett, George Soros and Donald Trump, are treated bizarrely as sages and celebrities, as if greed and manipulation had become the highest moral good. As Wall Street steals billions of taxpayer dollars, as it perpetrates massive fraud to throw people out of their homes, as the ecosystem that sustains the planet is polluted and destroyed, we do not know what to do or say. We have been robbed of a vocabulary to describe reality. We decry the excesses of capitalism without demanding a dismantling of the corporate state. Our pathetic response is to be herded to political rallies by skillful publicists to shout inanities like “Yes we can!”

The liberal class is finished. Neither it nor its representatives will provide the leadership or resistance to halt our slide toward despotism. The liberal class prefers comfort and privilege to confrontation. It will not halt the corporate assault or thwart the ascendancy of the corporate state. It will remain intolerant within its ranks of those who do. The liberal class now honors an unwritten quid pro quo, one set in place by Bill Clinton, to cravenly serve corporate interests in exchange for money, access and admittance into the halls of power. The press, the universities, the labor movement, the arts, the church and the Democratic Party, fearful of irrelevance and desperate to retain their positions within the corporate state, will accelerate their purges of those who speak the unspeakable, those who name what cannot be named. It is the gutless and bankrupt liberal class, even more than the bizarre collection of moral and intellectual trolls now running for office, who are our most perfidious opponents.

Copyright © 2010 Truthdig, L.L.C.

http://www.commondreams.org/view/2010/10/25-7
Published on Monday, October 25, 2010 by TruthDig.com

Chris Hedges writes a regular column for Truthdig.com. Hedges graduated from Harvard Divinity School and was for nearly two decades a foreign correspondent for The New York Times. He is the author of many books, including: War Is A Force That Gives Us Meaning, What Every Person Should Know About War, and American Fascists: The Christian Right and the War on America.  His most recent book is Empire of Illusion: The End of Literacy and the Triumph of Spectacle.

Home Forclosures

Inequality and Conservatism?

Two researchers have just released an interesting study finding that the more wealth inequality goes up, the more a population’s “liberalism” goes down. We get more conservative as a nation when our economy gets more unequal. You wouldn’t have thought that would you? But according to their study (which you can find here http://web.utk.edu/~nkelly/papers/inequality/KellyEnns_preprint.pdf), it’s true.

They looked at public moods during rising inequality from 1951 to 2009. Unsurprisingly, inequality grew fastest during the 1980s and the 2000s, two eras that were unusually friendly toward the wealthy. They found that during a rise in inequality, the public mood swings more conservative, and when there is a rise in equality, the mood swings more liberal. For example, when the economy was more unequal, the public’s support for social programs was at its lowest. When the economy was more equal, as during the 1960’s “War on Poverty,” the support for social programs was high.

They also found that the swing to the right during rising inequality was with both the rich and the poor. That was really surprising.

But why does that happen. When I read the report, I wondered if maybe the poor just don’t realize that the world is as unequal as it is. But their research concluded that that wasn’t the case. As it turns out, the poor actually over time are more likely than the wealthy to see and recognize an increase in inequality. That sounds odd too, but wealthy people notoriously don’t think that they are wealthy or that there is much of a significant gap between rich and poor. But even when poor people know that there is a growing gap, they still lean more to the right when the gap grows wider.

One theory is that during good economic times news stories focus on individualism (enhancing opposition to welfare) and during bad economic times stories emphasize people being down on their luck (enhancing support for welfare). And since the media seldom covers poor people, except as tragic figures during a hurricane or flood, the poor perhaps don’t have an easy frame of reference from which to think about the wider span between liberal or conservative. So if the only options presented in the media about the economy are middle and right, they will only respond to pollsters with a center to right opinion. However, while that might explain why America in general has been trending to the right since the beginning of the golden age of globalization (roughly 1982), it doesn’t explain why the trend is more pronounced during swings of high inequality. Why did both rich and poor become more conservative on economic issues during the Bush administration, even though the gap between rich and poor soared to its widest in history?

Another theory says that while during times of big gains for people at the top the media tends to cover rich people (i.e. the 1980s and 2000s) which encourages a turn toward conservatism, during times of social equality it tends to cover government’s role in helping the poor (as in the “War on Poverty” of the 1960s), which may in turn have created a turn in public opinion toward liberalism.

There are two takeaways from this.

First, while may be snarky to say this, one important learning for those who are truly wealthy is that the more unequal they can make our economy, the more the public will support them in doing it. That sounds unfair to say that, but it’s actually a little bit true.

The second is that runaway inequality as we are experiencing right now undermines our ability to thrive as a nation. People lose their enthusiasm for growing, taking risks and playing by the rules if they know that the rich are going to get richer and suck up all of the currency out of the economy for themselves. Why try when you know that you’ll ultimately lose? Very literally, when the rich get richer there is a slight draw on the amount of money in the economy left over for the rest of the people and it creates a downward pressure on wages. One of the reasons why we didn’t feel that very strongly during the 2000s was that huge numbers of us made up for our flat-lined incomes by borrowing against our homes or buying homes we couldn’t afford thinking that the price would continually go up and make us rich. Now that that balloon has busted, we are feeling the very real reality of an economy that staggeringly rewards the top and depresses the poor and middle It’s crippling, discouraging, and damaging to our future as a democracy.

It’s interesting that some in Congress use this argument all the time, that if we don’t reward the wealthiest people at the very top (who they tend to call the “middle class”), that group will get discouraged and not work and not invest. The argument is dubious for those at the top, but it is very real for those at the bottom. It’s not an accident that the polarization of our Congress is occurring at the same time that we have a polarization in our economy. One drives the other. Income inequality has shredded our belief that we are one nation (“under God”?) and it is fast at work shredding our potential for an effective government.

We Didn't Flunk the Religion Test -- 4 Important Truths About Americans and God

By Bruce  Feiler

Published September 29, 2010 

The headlines this week made bold pronouncement: “Americans Don’t Know Much About Religion.” “Atheists Know More About Religion Than Believers.” “Basic Religious Test Stumps Most Americans.”

Really? Did these writers read the survey these articles were based on? The Pew Forum survey on religion in America contained a number of revelations, but few were covered in the initial round of articles. After examining the actual results, here are four important truths about Americans and God:

1. Americans know more about religion than almost any other topic.
To begin, the 3,412 people polled for this study are not exactly students of history. The first substantive question respondents were asked was, “Can you tell me the name of the vice president of the United States?” Only 59% knew the correct answer. The same minimal number knew what antibiotics do, and an even smaller percentage could correctly name the New Deal as the signature program of Franklin Roosevelt. So as a baseline: These people were not very knowledgeable about the world in general.
By contrast, their answers about religion seemed downright worthy of the Nobel Prize. Three-quarters knew the Jewish Sabbath falls on Saturday; 68% knew the Constitution forbids the establishment of religion; 63% knew the first book of the Bible is Genesis; and the same number who knew Joe Biden knew the Koran is the holy book of Islam. Americans are religious savants.

2. The most popular religious figure in America is Moses
In my book, "America’s Prophet: How the Story of Moses Shaped America," I explore how Moses became the defining figure of American history. The pilgrims quoted his story; Benjamin Franklin and Thomas Jefferson proposed he be on the U.S. seal; the Statue of Liberty and Superman were modeled on him; every American president from Washington to Lincoln to Reagan was shaped by his story.
This Pew survey proves that Americans’ love affair with the superhero of the Bible continues. Quizzed about various figures from the Bible – Jesus, Job, Moses, and Abraham – more Americans knew about Moses than any other. And asked about a number of biblical stories, including the Gospels, Americans knew more about the Ten Commandments than these other stories. Moses is the most beloved religious figure in America today.

3. Believers still dominate in America; atheists are still rare.
Despite a decade in which vocal non-believers have driven the national conversation about faith, the number of atheists is still minuscule in America. Only 6% of respondents said they don’t believe in God, with another 1% saying they didn’t know. By contrast, 69% said they were absolutely certain God exists, and another 17% said they were fairly certain.

Yet shooting down another stereotype, these believers are not particularly dogmatic. Only a third said the Bible should be taken literally, and asked how often they attend religious services, by far the largest tally said a few times a year, if at all. Americans are largely casual, non-ideological, benign believers.

4. Americans know as much about other religions as they know about their own.
It was common to read this survey as saying Americans are ignorant about other faiths, and there is evidence to support this argument. Only 38% knew Vishnu and Shiva were central figures in Hinduism. Only 36% knew nirvana is a state of being free from suffering and is an aim of Buddhism. Only 27% knew Indonesia contains mostly Muslims. But since when is the religious makeup of Jakarta the standard for religious literacy?

Consider these rival figures: Two-thirds knew India is predominantly Hindu. Seven in ten knew Pakistan is predominantly Muslim. Half knew the Dalai Lama is Buddhist, and 82% knew Mother Teresa was Catholic. Amazingly, more knew Ramadan is the holy month of Islam than knew who wrote "Moby Dick." All in all, Americans score fairly well on their religious knowledge of the rest of the world.
For decades, studies have shown that Americans lack basic knowledge of math, science, and history. The real headline coming out of this week’s survey on faith in America is that our knowledge of religion is not as bad as other subjects, and is arguably stronger.

Considering that we are engaged in two wars in Muslim countries in the Middle East, as well as an economic transformation that brings us into closer business ties with Hindus, Buddhists, and Confucianists across Asia, it’s safe to say that our awareness of different religious traditions – and ability to coexist with them – may become a key national security advantage in years to come.

Bruce Feiler is the author of five New York Times bestsellers, including "Walking the Bible," "Abraham," and "Where God Was Born.' His book America’s Prophet: How the Story of Moses Shaped America has just been released in paperback. 

For more information, please visit www.brucefeiler.com.

Did the Stimulus Create Jobs?

 

Yes, the stimulus legislation increased employment, despite false Republican claims to the contrary.

September 27, 2010

Summary

The economic stimulus package is a favorite target of Republican candidates and groups, but more than a few ads falsely claim it did not create or save any jobs. Some recent examples:

• Republican House candidate Dan Debicella charges that Democratic Rep. Jim Himes failed Connecticut’s families because he voted for a "stimulus package that has done nothing to reduce unemployment."
• Rick Scott, the Republican candidate for governor in Florida, says Democrat Alex Sink "backed the failed stimulus bill, which created debt, not jobs."
• Similarly, Sink — who never served in Congress and didn’t vote on the bill — is attacked by the Republican Party of Florida in an ad that says the stimulus "gave us big debt and no jobs."
• Americans for Prosperity, a conservative group that does not have to disclose its donors, aired an ad against Democratic congressional candidate Denny Heck of Washington that claimed the "$787 billion stimulus … failed to save and create jobs." The group has launched similar ads against other Democrats.
• Kristi Noem, a Republican House candidate from South Dakota, calls the measure a "jobless stimulus."

The truth is that the stimulus increased employment by between 1.4 million and 3.3 million people, compared with what employment would have been otherwise. That’s according to the nonpartisan Congressional Budget Office.

Analysis

The American Recovery and Reinvestment Act, more commonly known as the stimulus bill, has been featured in more than 130 TV ads this year, according to a database maintained by Kantar Media’s Campaign Media Analysis Group. In many of those ads, Republicans claim the bill has "failed" (a matter of opinion) or state (correctly) that unemployment has gone up since President Barack Obama signed the bill into law on Feb. 17, 2009. The national unemployment rate was 8.2 percent in February 2009, and it now stands at 9.6 percent, having peaked at 10.1 percent in October 2009.
But it’s just false to say that the stimulus created "no jobs" or "failed to save and create jobs" or "has done nothing to reduce unemployment" – or similar claims that the stimulus did not produce any jobs.
As we have written before, the nonpartisan Congressional Budget Office released a report in August that said the stimulus bill has "[l]owered the unemployment rate by between 0.7 percentage points and 1.8 percentage points" and "[i]ncreased the number of people employed by between 1.4 million and 3.3 million."
Simply put, more people would be unemployed if not for the stimulus bill. The exact number of jobs created and saved is difficult to estimate, but nonpartisan economists say there’s no doubt that the number is positive.

Debicella for Congress TV Ad: "Rubber Stamp," aired Sept. 9-10

⬐ Click to expand/collapse the full transcript ⬏

Announcer: By rubber stamping the failed policies of the past two years, Jim Himes has failed Connecticut’s families. A stimulus package that has done nothing to reduce unemployment. A trillion dollar spending binge that leaves your family with more debt. Record new taxes that will hit our families on January first. Fairfield County families cannot afford a congressman who just rubber stamps a failed Washington agenda.
Dan Debicella: I’m Dan Debicella and I approve this message because like you, I believe there’s a better way.

Rick Scott for Governor TV Ad: "Wrong Solutions," aired Sept. 14

⬐ Click to expand/collapse the full transcript ⬏

Announcer: President Obama tricked us. Saying he’s in the mainstream, before becoming our most liberal president ever. And Alex Sink helped him do it.
Alex Sink: Barack Obama has the right message and the right solutions, for, uh, turning our economy around right here in Florida.
Announcer: The right solutions? Sink backed the government health care takeover, cutting 500 billion from Medicare. She backed the failed stimulus bill, which created debt, not jobs.
Alex Sink: Barack Obama has the right message and the right solutions.
Announcer: Wrong Solutions Alex.

Republican Party of Florida TV Ad: "Whatever it Takes," aired Sept. 4-7

⬐ Click to expand/collapse the full transcript ⬏

Announcer: Attention Florida voters - here are your official orders from Washington.
Barack Obama: I need you to raise money. I need you to walk, knock on doors. Whatever it takes to make sure that Alex Sink is the next governor of Florida.
Announcer: Maybe that’s because Sink supported Obama’s government takeover of health care. Or because Sink supported Obama’s trillion dollar stimulus bill - the one that gave us big debt and no jobs. What will Obama do to make sure liberal Alex Sink is the next governor of Florida?
Barack Obama: Whatever it takes.

Americans for Prosperity TV Ad: "The Truth About Heck," aired Aug. 18-22

⬐ Click to expand/collapse the full transcript ⬏

Multiple speakers: Our part of Washington state faces devastating unemployment. But Denny Heck is putting Nancy Pelosi’s agenda ahead of our needs. Heck supported the liberal $787 billion stimulus. That failed to save and create jobs. And Heck refused to oppose new energy taxes that will kill even more jobs here. Denny Heck is a 30-year political insider and a career politician. Heck’s agenda will hurt Washington state. Tell Denny Heck Washington state needs leadership, not more of Nancy Pelosi’s failed policies.

Noem for Congress TV Ad: "Serve," aired Sept. 14-15

⬐ Click to expand/collapse the full transcript ⬏

Announcer: Washington is on a spending spree. A jobless stimulus, expensive health care mandates, trillions in new debt and our children forced to pay it back.

Kristi Noem: The government is here to serve the people and not the other way around.
Announcer: Kristi Noem will go to Washington to rein in spending, balance the budget, help small businesses create jobs, and give South Dakota a voice again.
Kristi Noem: I’m Kristi Noem and I approve this message.

– by Joshua Goldman

Sources

H.R. 1. "American Recovery and Reinvestment Act of 2009." GovTrack.us. accessed 27 Sep 2010.

Labor Force Statistics from the Current Population Survey, Unemployment Rate. Bureau of Labor Statistics. accessed 27 Sep 2010.

"Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output From April 2010 Through June 2010." Congressional Budget Office. Aug 2010.

Posted by FactCheck.org on Monday, September 27, 2010 at 5:42 pm

"In September"

A wonderful music video written and performed by a dear friend. 

A tribute with a conscience to September 11.

Test of downloding

Test of downloading

Elizabeth Warren: An Okie in Washington riles Wall Street Oklahoma native Elizabeth Warren is among the leading candidates to head the newly minted Consumer Financial Protection Bureau. Some financial insiders are not pleased.

BY DON MECOY
Oklahoman   
Published: August 1, 2010

NORMAN — At ease amid noisy young relatives and family photos in her brother's Norman home, Elizabeth Warren doesn't seem like a person at the center of a fierce political battle that stretches from Wall Street to the White House.

But Warren, an Oklahoma native who is a leading candidate to head the Consumer Financial Protection Bureau that she helped create, has been the target of invective from financial insiders who fear her ideas.

Anton Schutz, president of Mendon Capital Advisers, last week said in a Reuters story: "I get disgusted every time I hear her speak." Warren, 61, is baffled by the invective.

"I have never run into anything like what has happened the past few weeks," she said. "I found myself thinking: So what is it I say? I'd really like the content."

Her goal, she said, is what it has been throughout the 20 years that she's been researching financial data, particularly as they relate to American consumers, whom she believes have been victimized by predatory practices.

"I want to make it so regular families can read a credit card agreement in four or five minutes and fully understand what the terms are. No tricks. No traps. No things that you don't figure out what's happening until after it bites you and they charge you the $39 and raise your interest rate to 29 percent," she said.

Financial insiders point to Warren's lack of industry experience as evidence that she doesn't grasp the complexities of their business or the impact regulatory changes would have.

"I do understand," she said. "It's that we disagree. There are some things that I don't think are all right, and people who are making money off of it think it's just fine."

Last week, White House press secretary Robert Gibbs labeled Warren "a terrific candidate" to head the Consumer Financial Protection Bureau. Asked if "Wall Street opposition" to Warren's potential nomination would factor into the president's decision, Gibbs said: "I don't think any criticism in any way by anybody would disqualify her."

Always an Okie

Warren attended grade school in Norman, then skipped sixth grade when her family moved to Oklahoma City. Living on NW 25 Street, she learned to drive the family Studebaker in the parking lot of the brand new Shepherd Mall.

She graduated from Northwest Classen at 16 as a debate champ, which earned her a college scholarship.

She became a teacher to brain-injured children, but felt stifled by the administrative constraints of the New Jersey public school where she worked. During a Christmas visit to Oklahoma City, her former high school debate classmates urged her to attend law school.

After operating a private law practice, Warren returned to her first love of teaching.

"As a teacher at that level, you do research — that's just part of the job," she said. "The area where I was teaching were all the money courses — commercial law, contract law, bankruptcy law. That's where my research was, and that's when I started doing research on families that went broke."

It's a topic she knows something about. Before Warren was born, her parents lost most of their savings when a partner in a planned car dealership in Seminole absconded with their money.

Her father, a self-taught pilot who was a flight instructor in Muskogee during World War II, worked as a traveling salesman and in Oklahoma City, at Montgomery Ward. He was demoted after suffering a heart attack, and later took a job as a maintenance worker at an apartment house. The working-class family couldn't afford to send Warren to kindergarten, which at the time was offered only at private schools.

"Sure it was partly about my family, but it was about millions of other families," the Harvard law professor said of her research. "That was the work I started doing. That's how I ended up where I am today."

Warren has written numerous books and academic articles. Her work uncovered the fact that most American consumer bankruptcies are not filed by financial freeloaders, but by people whose finances have unraveled due to divorce, death or health crises.

Not a politician

Warren's public profile grew through her consumer advocacy, although she was unsuccessful in her attempts to derail the 2005 bankruptcy reform pushed by the financial industry.

In the wake of the financial crisis, Warren was appointed to head the Congressional Oversight Panel charged with reviewing the Treasury Deparment's implementation of the $700 billion Troubled Assets Relief Program, commonly called TARP.

Her Oklahoma upbringing is evident in the blunt, basic questions she asks during hearings, and she recognizes her style differs from the typical Washington way.

"These people aren't used to simple questions. They don't expect to hear them and they somehow, when you do (ask them), act like you're not half-bright or you're somehow asking something nasty," she said.

When asked if TARP has been a successful use of taxpayer dollars, Warren doesn't evoke economic theories or delve into the fallout from overly complex financial instruments.

"It's like having a garage sale and you know what you paid for each thing you're now going to resell and the good stuff is resold at a profit so it looks like you're making good money. Yeah, but how about the stuff that's still left behind? That's where the problem is — AIG, GMAC, GM, Chrysler, Citi," she said. "How fully the American taxpayer gets paid back, we don't have enough information to tell for sure."

While her plainspoken ways may annoy some, Warren is no fan of business as usual in Washington.

"What's begun to hit me is that people have enormous power and yet nobody's ever responsible," she said. "How does that happen? Nobody's ever accountable. Nothing is ever anybody's fault. I hope that the way this new agency works out is not just that it has the tools to get things done — it's accountable for making change."

Warren pushed for agency

For several years, Warren has called for the creation of a government agency charged with protecting American consumers on financial matters. She repeatedly has noted that toasters are more strongly regulated than financial products.

She admits her major role in the creation of such an agency is "pretty cool." While reluctant to discuss her potential nomination as head of the Consumer Financial Protection Bureau, she acknowledges that the choice of who leads the agency is an important one.

"I care about the changes that need to be made for middle-class families," she said. "That's what this new agency is all about. It's what my work has been about for 20 years. ... the lights suddenly come on because we're talking about Washington and some big stir there, but the truth is, for me this is just a logical extension of what I've been working on for more than 20 years."

However the political matters work out, Warren will continue to return to Oklahoma several times a year.

"My brother David is the best storyteller God has put on this earth," she said. "There's nothing I'd rather do than sit on the back porch and listen to him tell the story of the time they put the pig on the motorcycle and ran it down the main hall of Norman High."

"I'll always be an Okie."

---

ELIZABETH WARREN

Age: 61

Occupation: Harvard Law School Leo Gottlieb Professor of Law, currently on leave. Chair of the Congressional Oversight Panel that reviews implementation of the government's $700 billion Troubled Asset Relief Program.

Previous employers: The University of Pennsylvania Law School, 1990-95; The University of Texas School of Law, 1981-87; The University of Houston Law Center, 1978-83. The University of Michigan, 1985. Rutgers School of Law (Newark). 1977-78.

Books written: "All Your Worth: The Ultimate Lifetime Money Plan," 2005 (A New York Times bestseller). "The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke," 2003. "The Fragile Middle Class: Americans In Debt," 2000. "As We Forgive Our Debtors: Consumer Credit and Bankruptcy in America," 1989. Plus about a dozen academic legal books.

Recognition: Named one of Time magazine's "100 Most Influential People in the World" in 2009 and 2010. Named "Bostonian of the Year" in 2009.


Read more: http://newsok.com/elizabeth-warren-an-okie-in-washington-riles-wall-street/article/3481388#ixzz14mqDCByt

2011 Tax Increases

September 3, 2010

Q: Will "the largest tax hikes in the history of America" take effect next year? Will ordinary taxpayers see taxes "skyrocket"?
A: That’s not likely. A scary e-mail lists "Tax hikes in 2011" that probably won’t take effect, or won’t apply to families making under $250,000 a year. One "tax hike" is pure fiction.


FULL QUESTION

Hello, I’m forwarding an e-mail apparently from the conservative bureau of misinformation. My friend who forwarded it isn’t very up on the news and politics and was scared to death that her tax will skyrocket next year… even though she makes way less than $250,000.
Thanks for all the great works you guys and gals do!

Subject:Tax Hikes in 2011
In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:
First Wave: Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the Congress enacted several tax cuts for investors, small business owners, and families.
These will all expire on January 1, 2011:
Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. ⬐ Click to expand/collapse the full text ⬏

The full list of marginal rate hikes is below: - The 10% bracket rises to an expanded 15%
- The 25% bracket rises to 28%
- The 28% bracket rises to 31%
- The 33% bracket rises to 36%
- The 35% bracket rises to 39.6%
Higher taxes on marriage and family. The "marriage penalty" (narrower tax brackets for married couples) will return from the first dollar of income. The child tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to the single level. The dependent care and adoption tax credits will be cut.
The return of the Death Tax. This year, there is no death tax. For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.
Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.
Second Wave: Obamacare
There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:
The "Medicine Cabinet Tax" Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).
The "Special Needs Kids Tax" This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.
The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.
Third Wave: The Alternative Minimum Tax and Employer Tax Hikes
When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise the AMT won’t be held harmless, and many tax relief provisions will have expired. The major items include:
The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families, rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.
Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or depreciate) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be depreciated.
Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the research and experimentation tax credit, but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.
Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.
Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual required minimum distribution. This ability will no longer be there.
PDF Version Read more: http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171#%23ixzz0sY8waPq1
Now your insurance is INCOME on your W2’s……
One of the surprises we’ll find come next year, is what follows - - a little "surprise" that 99% of us had no idea was included in the "new and improved" healthcare legislation . . . the dupes, er, dopes, who backed this administration will be astonished!
Starting in 2011, (next year folks), your W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are given by the company. It does not matter if that’s a private concern or governmental body of some sort. If you’re retired? So what; your gross will go up by the amount of insurance you get.
You will be required to pay taxes on a large sum of money that you have never seen. Take your tax form you just finished and see what $15,000 or $20,000 additional gross does to your tax debt. That’s what you’ll pay next year. For many, it also puts you into a new higher bracket so it’s even worse.
This is how the government is going to buy insurance for the15% that don’t have insurance and it’s only part of the tax increases.
Not believing this??? Here is a research of the summaries…..
On page 25 of 29: TITLE IX REVENUE PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec. 9001, as modified by sec. 10901) Sec.9002 "requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employees gross income."
Joan Pryde is the senior tax editor for the Kiplinger letters. Go to Kiplingers and read about 13 tax changes that could affect you. Number 3 is what is above.
Why am I sending you this? The same reason I hope you forward this to every single person in your address book.
People have the right to know the truth because an election is coming in November.

FULL ANSWER
We’ve been flooded with inquiries about various versions of this chain e-mail, which has been circulating since July. It grafts together a set of misleading claims issued by the conservative Americans for Tax Reform with a fictional claim about taxation on health insurance benefits.

The W-2 Fiction, Again

Let’s dispose of the bogus health insurance claim first. It’s not true that "you will be required to pay taxes" on the value of employer-paid health insurance benefits. This is a falsehood that circulated earlier as a separate chain e-mail. See our May 22 article, "Health Care Law and W-2 Forms," for full details.
It’s true that the new health care law requires employers to report the value of health insurance benefits on W-2 forms starting next year, but that’s for informational purposes only.
The remainder of the chain e-mail message contains misleading claims about what "will" happen next year that were copied and pasted — nearly word for word — from an Americans for Tax Reform document dated July 1. (The garish colors were added by the anonymous author of the e-mail message.) For the most part, these are "hikes" that the president and Democratic leaders in Congress have long said they won’t allow to take effect, except for individuals making more than $200,000 a year, or couples jointly making more than $250,000.

Bush Tax Cuts: Mostly Slated for Extension

Both the e-mail and the ATR document claim that all the tax cuts enacted in 2001 and 2003 and signed by President Bush "will all expire on January 1, 2011." Actually, that’s not what’s expected to happen at all. It’s true that the cuts are scheduled to expire, but they will expire only if Democrats who control the White House and Congress fail to do what they’ve promised.

Particularly misleading are the claims that "[t]he child tax credit will be cut in half from $1000 to $500 per child" and that "marriage penalty" relief will expire. As veteran congressional reporter David Rogers, who writes for Politico, put it back in July: What Democrats are debating is not whether, but "when — and for how long" to extend the Bush tax cuts that apply to lower and middle-income taxpayers.

In fact, some key Democrats now favor extending all the Bush tax cuts for at least one more year — even for upper-income taxpayers. Those lawmakers include Sens. Evan Bayh of Indiana, Ben Nelson of Nebraska and Kent Conrad of North Dakota, as well as some Democratic House members. So unless Congress deadlocks (always a possibility), the most likely outcome now is that Congress will either extend most of the cuts — as President Obama promised again and again during the 2008 campaign and since — or extend all of them, at least for a while longer.

‘Death Tax’: Only on Multimillion-Dollar Estates

The message is also misleading in what it says about the temporary repeal of the federal estate tax — which Republicans like to call the "death tax." Under terms in the Bush tax cuts, the estate tax was phased down over several years and eliminated entirely for those who die in 2010, but it’s set to return in 2011 at levels that prevailed before 2001. So just as the message says, for those dying after Jan. 1 next year, estates of more that $1 million would be subject to taxation at rates as high as 55 percent on amounts over that threshold. But that will happen only if Congress fails to act, and there’s little sentiment in Congress, even among Democrats, for allowing that to happen.

In fact, last December the House passed a bill that would have permanently exempted estates of up to $3.5 million from taxation (effectively, $7 million for couples). The top rate would have been 45 percent. All 225 House members who voted for that were Democrats; Republicans opposed the measure because it would have frozen the estate tax at the 2009 level called for in Bush’s phase-down, and would have canceled Bush’s one-year repeal in 2010.

In the Senate, several Democrats want to bring back the estate tax with an even higher exemption and a lower rate. In April 2009, the Senate adopted an amendment to a budget bill that would have set as a target a $5 million exemption ($10 million for couples) and a top rate of 35 percent. The bipartisan amendment was sponsored by Democratic Sen. Blanche Lincoln of Arkansas and Republican Sen. Jon Kyl of Arizona. It passed with 51 votes in favor — 10 of them from Democrats, even though the Senate’s Democratic leadership (and President Obama) had set $3.5 million as a target. The Senate amendment wasn’t accepted by the House, which insisted on keeping the $3.5 million threshhold in the budget bill. With its Democrats divided, the Senate ultimately failed to act on the estate tax, allowing it to expire entirely for 2010.

So Congress has yet to agree on whether to bring back the estate tax only for estates worth more than $3.5 million, or only for those over $5 million. Few if any voice support for bringing it back for estates of more than $1 million. That could happen if the deadlock on this issue continues (again, always a possibility). But majorities in the House and Senate have voted to impose the so-called "death tax" only on multimillionaires.

A ‘Wave’ of ‘Obamacare’ Taxes?

The e-mail describes a "second wave" of tax increases that it says will take effect Jan. 1 under the new health care law. But this "wave" consists of three relatively minor tax changes that affect relatively few people.

• What the e-mail describes as a "Medicine cabinet tax" simply aligns rules governing health savings accounts (HSAs), Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (HRAs) with the tax rules that apply to deducting medical expenses generally. Under current law, taxpayers in general are not allowed to deduct the cost of non-prescription drugs as a medical expense. The only exception is for insulin. But those with HSAs, FSAs and HRAs were allowed to use pre-tax dollars to buy aspirin, over-the-counter cold and allergy medications, and other drugs available without a doctor’s prescription. The new "tax" simply says HSAs, FSAs and HRAs can’t be used to buy these medications — except for insulin — after December 31. (See pages 69 and 70 of the Joint Committee on Taxation’s "technical explanation" of the revenue measures in the new health care law, which can be downloaded from the committee’s website. This will affect a small proportion of taxpayers. For example, the health insurance industry says 10 million persons were covered by HSAs as of January of this year, roughly 3.2 percent of the population. For that relatively small group, the change does amount to a tax increase. It will bring in a total of $5 billion over the next 10 years, the JCT estimated in its "Estimated Revenue Effects" of the new law.
• The "HSA withdrawal tax hike" refers to a doubling of the current 10 percent penalty that must be paid on any HSA funds spent for something that’s not a qualified medical expenditure. (See pages 71 to 73 of the JCT technical explanation.) The JCT expects that to bring in $1.4 billion over 10 years.
• The "special needs kids tax" refers to a cap of $2,500 that the new law places on spending from FSAs. (See pages 74 to 77 of JCT’s technical explanation.) The argument made in the e-mail is that "many" families with special needs children now use FSAs to pay tuition at private schools catering to special needs children, schools that ATR says "can easily exceed $14,000 per year" in Washington, D.C. Perhaps so. IRS rules do allow use of FSA funds to pay for such expenses with pre-tax dollars. But the e-mail message offers no evidence of how many families might be taking advantage of this tax break currently. The claim is copied from the website of Americans for Tax Reform, but as ATR itself says: "For most people, the $2500 cap won’t be noticed." As ATR concedes, FSAs "tend to be used for things like small deductibles, co-payments, eyeglasses, over-the-counter medicines, and laser eye surgery." The amount deferred in the typical FSA is probably much less than $2500 today, ATR says. The JCT expects the change will bring in $13 billion over 10 years, but says nothing about how much of that is likely to come from the pockets of parents of special needs children.

We don’t argue for or against any of these three tax increases. We simply point out that, even taken together, they amount to less than $2 billion per year and, therefore, don’t constitute anything close to a "wave" of historically large tax increases taking effect next year.

Alternative Minimum Tax

The message flatly claims that the Alternative Minimum Tax will suddenly "ensnare over 28 million families," forcing them all to pay higher taxes. But historically, Congress has repeatedly refused to allow that to happen.

The AMT was originally enacted in 1969 to cover a few very high-income individuals, but it was not indexed for inflation. So it has come to be a headache for several million taxpayers, and would hit even more if Congress had not enacted a series of "patches" each year since 2001.

The Tax Policy Center calculates that next year 28.5 million taxpayers would have to pay higher taxes on their 2010 returns if the usual patch is not extended. But Obama’s stimulus bill extended the patch through 2009, holding down the number of taxpayers affected to just 4 million. And there’s no reason to think that Congress will fail to extend the patch for 2010 taxes. In fact, President Obama’s budget assumes that a permanent fix will be enacted, holding the AMT to levels in place for 2009. That’s something President Bush never proposed.

Tax Extenders

The message goes on to claim that businesses will lose a host of tax benefits, including a research tax credit; that teachers will no longer be allowed to deduct classroom expenses (high-school and grade-school educators can now deduct up to $250 a year); and that persons with Individual Retirement Accounts will no longer be able to use them to make charitable donations. But these are tax provisions that have been routinely renewed in the past, and Congress has strongly signaled that it intends to renew them for 2011 as well.

The fact is that on Dec. 9 last year, the House voted 241 to 181 to approve the "Tax Extenders Act of 2009." That bill called for extending for one more year a long list of expiring tax breaks, including the business research tax credit (Section 111, page 6),  the $250 deduction for teachers buying classroom supplies (Section 104, page 6), and tax-free distributions from individual retirement plans for charitable donations (Section 135, page 14).

The Senate passed the bill on March 10, by a vote of 62 to 36, leaving the extenders intact. The fate of those extenders is still in limbo — but majorities in both houses are clearly on record favoring them.

–Brooks Jackson

SOURCES

Ellis, Ryan. "Six Months to Go Until The Largest Tax Hikes in History." Americans for Tax Reform. 1 Jul 2010.

Rogers, David. "Dems tiptoe around Bush tax cuts." Politico.com. 14 Jul 2010.

Heflin, Jay. "Democrats can’t agree over killing or saving the Bush-era tax cuts." The Hill. 21 Aug 2010.

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