Tag Archives: John Boehner

Ortman and Leidiger fudge the facts on the payroll tax increase

The release of Governor Dayton’s budget produced the expected responses from members of Carver County’s legislative delegation, pointing out the sales tax changes (focused on the tax on clothing over $100 and services) as the main enemy in the proposal.

Interestingly enough, though, both State Senator Julianne Ortman and State Representative Ernie Leidiger took another shot at Democrats over taxes — this time at the federal level.

From Ortman’s January 23, 2013 Capitol Report:

In addition to Governor Dayton’s proposed tax increases, President Obama has two major tax increases that will take even more money out of the pockets of hard-working Minnesotans.

This month, wage earners will notice an increase in the amount that they pay for the federal payroll tax. Since the first of the year, most Minnesotans have already seen this happen on their paychecks.

From Leidiger’s January 28, 2013 e-mail to constituents:

Look at it this way: a hardworking middle class family will not only have diminished take-home pay because of higher social security taxes, but they will also have to dig deeper in their pockets for everyday items and services.

Ortman and Leidiger are referring to the expiration of the payroll tax cut on January 1, 2013.  This change increased the Social Security payroll tax rate by 2%, back to its statutory rate of 6.2%.  The rhetoric of the two legislators — particularly Ortman — might lead you to believe that this tax increase was just another way that so-called tax-and-spend Democrats are out to get the middle class.

Well, that just isn’t so.  In fact, when it comes to payroll taxes, Democrats have been the defenders of giving taxpayers a break.  The temporary payroll tax cut was passed in the lame-duck session following the 2010 midterm election and was designed to be a one-year only provision, expiring at the start of 2011.  Over the objections of his caucus, Republican Speaker of the House John Boehner agreed to another one-year extension in the 2011 showdown over the debt ceiling.  And as we approached the fiscal cliff, we should recall that no Republicans were standing up for continuing the extension.  Not Boehner.  Not Mitch McConnell.  Mitt Romney didn’t support extending the payroll tax cut, either.

And while President Barack Obama didn’t make the extension of the payroll tax cut a “must-have” in fiscal cliff negotiations the way he did in 2011, he was forced to scrap plans for an alternative middle- and lower-class tax cut in order to secure the needed Republican votes for passage.

So, let’s recap:  Republicans are blaming Barack Obama for adopting the policy they themselves insisted on.  Ain’t politics grand?

Advertisements

And There’s Nothing To Be Done

Our nation finds itself in the midst of two significant discussions right now.  The first is about how to resolve the so-called “fiscal cliff”, the wholly manufactured end-of-the-year crisis created by the utter inability of our elected officials in Washington to get the basics of their job completed in a reasonably competent manner.  The second is about what to do in response to the spate of mass shootings that have taken place in the second half of this year, culminating in the slaughter of 26 in Newtown, Conn. a couple of weeks ago.

What strikes me about both conversations is that one side of the aisle has shown a tendency to throw out ideas they don’t like solely on the basis that such ideas don’t solve the entire problem.  Take, for instance, Mark Thiessen’s column in today’s Washington Post.  Thiessen argues that since President Obama’s proposed tax increase on high-income Americans won’t close the deficit completely that we shouldn’t do it.  Or, better yet, we should raise taxes on everybody just to teach them a lesson!

Sorry, taxing the rich won’t solve our problems — that’s nothing but fiscal snake oil the president has been selling. He is demanding $1.3 trillion in higher taxes on the wealthy over 10 years. Imagine he got it. We are adding nearly that much to the national debt every single year. Taxing the rich would not put even a minor dent in our debt. It would pay for less than three weeks of federal spending every year. The only way to pay for the current expansion of government is to raise taxes on the middle class.

So let’s do it.

But such arguments have also found a home in the debate about whether or not there should be additional gun control measures should be enacted following Newtown.  Here’s an example of such an argument from the National Review’s Rich Lowry:

How many guns are in the United States? The answer is 280 million. In a country with that many guns, how is gun control possibly going to succeed? If you ban a small subset of new guns for sale, what are you going to do about the rest? Let’s say you succeed beyond anything that is remotely possible. Let’s say you somehow stop the new sale of guns altogether and somehow decommission half of existing guns. What are you going to do with the other 140 million guns?

There are numerous problems with such specious lines of argument.  The first, and most obvious one, is that proponents of such ideas are not and have not suggested that these solutions — be it taxing the rich or banning high-capacity magazines — are complete solutions to the problem.

But these arguments are even more dishonest in another way.  As we’ve discussed before, these sorts of arguments are just other ways of framing the debate to protect entrenched interests at the expense of everyone else.  Thiessen and conservatives may be opposed to Obama’s tax increase on the wealthy, but their proposals are equally (or even more) inadequate in addressing the nation’s fiscal challenges.

For instance, over the last month, Speaker of the House John Boehner has included in his proposals provisions that would change the way inflation benefits are calculated for Social Security recipients and he also proposed increasing the eligibility age for Medicare from 65 to 67.  Combined, these two proposals would reduce the deficit over the next decade by less than Obama’s tax increase on the wealthy.  And, of course, Boehner’s proposals would have very real consequences for the low- and middle-income people impacted by them.  The Social Security change alone would decrease payouts to recipients by 0.3% per year.  After a decade, recipients would have lost 3% of their payouts.  That’s significant, given that 40% of retirees have 90% or more of their income from the program.

Meanwhile, those who oppose any additional gun control measures have thrown nearly anything and everything out to bolster their case.  Just look at the National Rifle Association.  In the 1990s, they called federal law enforcement officers “jack-booted thugs”.  Today, they’re calling for the federal government to fund armed guards in every school in the country.  And, they call for a database of the mentally ill without calling for a database of gun owners to cross-reference it against.  Putting the Second Amendment ahead of the rest, I suppose.

Closer to home, you have state representatives who ignore facts that don’t support their frame of reference.  The notion that the potential presence of an armed individual deters such mass attacks is bogus, even if you ignore the Columbine example.  In recent years, we’ve seen shootings on an Army base and in the state with the least restrictive concealed-carry laws in the nation and on a college campus that had its own police department and SWAT team.  And, just today, inside a police station.

The challenges we face are far too large to be dragged down by reasoning that is so small.  We can have an informed and reasonable debate and talk about a wide variety of solutions without engaging in debate that is intellectually dishonest to its core.  We should expect better of all of our elected representatives.  We may not be able to solve every problem completely, but some progress is better than none.  So let’s get on with it, already.

(Image above is Francisco de Goya’s And There’s Nothing To Be Done, courtesy of The Metropolitan Museum of Art, which depicts scenes from the Spanish War of Independence.)

The Town, Washington Post Director’s Cut edition

Yesterday, Speaker of the House John Boehner had a meeting with his caucus in order to rally support for his plan to resolve the debt ceiling crisis.  As part of the meeting, House Majority Whip Kevin McCarthy showed the group a clip from the movie The Town to fire up the troops.  Here’s how the Washington Post recounted the critical part of the scene:

One character asks his friend: “I need your help. I can’t tell you what it is. You can never ask me about it later.”

“Whose car are we gonna take,” the character says.

And here’s the scene itself from the movie:

Did you catch it?  The Post left out the last line of the dialogue from Ben Affleck’s character:  “And we’re going to hurt some people.”  No ellipsis to indicate a line was left out.  Why would the Post not give the full dialogue?  Is the Post supposed to be in the business of covering up for politicians?

How did the gathered Republicans react to the clip?

After showing the clip, Rep. Allen West (R-Fla.), one of the most outspoken critics of leadership among the 87 freshmen, stood up to speak, according to GOP aides.

“I’m ready to drive the car,” West replied.

Right off the cliff, no doubt.

[h/t MNPublius]

What’s really driving gasoline prices

The sharp rise in gasoline prices is causing a lot of concern for folks right now, and with good reason.  Gas prices are up about 35% from one year ago, and these increases pinch working families directly at the gas pump, and indirectly through higher prices in groceries and other products.

As always happens when gas prices rise, the party not holding the Presidency knows exactly whose fault it is — it’s the President’s fault!  The fact of the matter is that it isn’t true, no matter which party is in charge of the White House.  Democrats have been just as guilty of scapegoating Republican Presidents on this issue.

The President, in fact, has little control over what happens to gas prices, and we should ignore the every-four-year political sideshow that blasts them for not doing something about it.  Let’s first talk about the things that politicians say are increasing gasoline costs, but aren’t.

Myth:  Obama’s lack of activity to increase domestic oil production is increasing gasoline prices.

The reality is much more complicated.  The fact of the matter is that if Barack Obama had unilaterally opened up oil production in the Gulf of Mexico, in the Alaska National Wildlife Refuge, and in the intermountain west on January 20, 2009, we would barely be seeing a drop of that oil in the market today.  It literally takes years just to go through the land sectioning and contracting process to allow private companies to drill in offshore areas and on public lands.  And, that doesn’t count the fact that there are no offshore drilling platforms sitting around idle just waiting to be moved into production.

The link between domestic oil production (which accounts for less than half of our consumption) and gasoline prices is tenuous anyways.  At the height of concerns about domestic oil production — during last year’s Deepwater Horizon explosion and oil leak fiasco — the price of crude oil and gasoline both fell (crude by 9% and gasoline by 5%), and this was as peak driving season shifted into gear (April to July).  Conservative dogma would tell you that the increased demand plus the loss of the Horizon oil plus the restrictions placed on further offshore drilling should have spiked prices, but it didn’t.  There must be other forces at work, and there are.

Myth:  Obama’s military intervention in Libya is the cause of the spikes

Libya represents about 2% of OPEC’s oil output, or about 0.7% of the world’s oil output.  And while unrest there has essentially stopped the flow of oil from Libya, OPEC has filled the gap from its other member countries so there has been no net loss in world supply.

And, the spike in gas prices began long before Obama entered the United States into military action in Libya in mid-March.  The fastest rise in gas prices can be tied to the February peak of the Egypt crisis.

Reality:  Gasoline prices today are heavily linked to the impact of financial speculators in the crude oil market

Since 2000, large financial services firms have adopted crude oil as a commodity to be traded just like any stock, betting on the highs and lows to make a profit.  Before 2000, only about one-third of crude oil future transactions were made by these speculative traders — today, three-fourths of all crude oil future transactions are speculative in nature.   The number of speculation contracts has increased 64% since 2008 alone.  Traders today hold over 260 million barrels of oil under futures contracts, a historically high level.

And, oil speculation has proven to be very profitable for firms like Morgan Stanley and Goldman Sachs.  Goldman, for instance, made $5 billion in profits from oil (and other commodity trading) in 2009.

Goldman Sachs, incidentally, recently advised its oil investors to get out now.  Why?  Record speculation.    Using Goldman estimates and U.S. Commodity Futures Trading Commission numbers, fully $26.75 of the cost of a barrel of crude oil can be tied to speculation.  That’s about one-fourth of the current price of a barrel of oil, and if you take the corresponding increase out of gasoline prices, then there’s not really any significant increase in gas prices.

What’s wrong with speculation?

Some people have the notion that speculation is always bad.  It isn’t.  Speculation has very real and valid purposes, of course.  Our stock market is, in part, built on speculation.  But there’s a very real difference between a speculator and an investor.  An investor is worried about whether or not an investment — in this case, the commodity of crude oil — is fairly priced.  A speculator, though, isn’t worried about the fairness of the price.  They are just betting that the price will go up or betting that the price will go down.  When a market becomes dominated by speculators instead of investors, that’s when bad things start to happen.  Markets are supposed to price commodities appropriately, not act as a casino to support speculation.

We’ve seen this movie before, just a few years ago.  From February to June 2008, crude oil prices spiked 50% under a similar run-up of speculative activity.  Speculators ran up wheat prices by 80% in 2007, causing food riots in some parts of the globe.  (How do we know that speculation drove this rise?  By comparing wheat to other crops that are not widely traded, but grown in the same areas, such as potatoes.  Their prices rose significantly less over the same period of time.)

And there’s another parallel that should send a shiver down your spine.

What is happening in the crude oil market is similar to what happened in the mortgage market in 2008.

Traditional principles of mortgage underwriting were tossed to the wind as banks bundled lousy subprime mortgages into securities and sold them to other banks and investors.  When the house of cards collapsed, the financial institutions got bailed out while the rest of us got left holding the bag — and the bill.  We can’t let this happen to the crude oil market.

The good news is that there’s a simple way to limit the damage that speculators can do in the crude oil market.   We can start to regulate futures trading in crude oil the same we do with other forms of financial speculation.  The Dodd-Frank financial reform bill included provisions that allow the Commodity Futures Trading Commission (CFTC) to set reasonable limits on the numbers of futures contracts that an individual organizations or traders can hold.  This is the appropriate role of government, to make sure markets work as they are designed to work and to protect citizens from those who would game the system.

The bad news is that Republicans are the ones standing in the way of these common-sense reforms.  House Republicans have gone so far as to threaten to cut the CFTC’s funding, making implementation of such limits impossible.  So when you hear folks like Speaker of the House John Boehner blaming Barack Obama for not doing anything about high gas prices, remember who else isn’t lifting a finger to help you the next time you fill up at the pump.


%d bloggers like this: