Job Creators vs Lucky Ducks

In the last few years two terms have come to creep into discussions about taxation in the US.  These ideas are definitely being driven by the right wing echo chamber.  So today we are going to examine what they are, how they are used, and the reality of people at different income levels.

Lucky ducks–these are the folks that file income tax returns, but whose income after deductions and credits owe no income tax.  The Wall Street Journal editorial pages started this term, and have been using it since 2002.

Job creators–in the past few years this term has been thrown around to describe the wealthy, and defend the lower tax rates that they deserve.  You may have heard something like this, “you don’t raise taxes on job creators during a down economy.”

Why are these terms being used, basically to convince people that the Republican’s economic agenda isn’t class warfare, but fairness.

So let’s breakdown the myth of the Lucky Ducks, these folks don’t make enough to pay federal income tax.  Sadly in the down economy, the percentage of the population that falls into this category has been rising.  As average employees wages have stayed stagnant, this is an inevitable result.

However, when Lucky Ducks is talked about, it is a not used to point out the stagnant wages for the majority of Americans.  It is used to make tax payers think that there are a bunch of freeloaders that aren’t paying taxes.  That those who aren’t Lucky Ducks have been supporting those lazy freeloaders.

But are they lazy freeloaders?  While the statistic that is used is the number of people who file federal income taxes (those with an income) who don’t owe federal income taxes.  People who have no income don’t have to file taxes, so this is measuring people with income, generally workers, who aren’t generally lazy or freeloaders.

In the US working people have to pay payroll taxes, 6.2% to Social Security and 1.45% to Medicare (or 7.65%) and double that if you are self employed as you are paying employee and employer shares.  While these Lucky Ducks are not paying income tax, they are still paying payroll taxes on their income.  Not as Lucky as they want you to think, and be angry about!  That doesn’t get into state income, property or sales tax that these folks likely are paying too (double taxation!!!).

What about the myth of the job creators?  For a few years, I have been hearing this statement, “no poor person employed me!”  In the last few years as the Bush tax cuts were set to expire, and Democrats were looking to let the tax rates go up on the wealthiest Americans the job creators became the endangered species of the Republicans.  To paraphrase a familiar line, “Won’t somebody please think of the  Job Creators?”

But I want to think about this for a moment?  They are trying to say that wealthy American tax payers, individuals or couples, are job creators.  Now I believe that wealthy people do hire other people directly, maybe a housemaid, butler, driver, nanny, exercise coach, dietitian, publicist and so on.  But how many people do they hire?  Does a change in 3% marginal tax rate mean they go from hiring 3 people to 4?  To that 4th person, that is huge, but I don’t call these people Job Creators.

I think we need to start asking Republicans, do you consider yourself wealthy (Mitt Romney), if yes, how many people do you employ.  And when I say employ, you pay the employer share of payroll taxes!  If you hire a service who employs a person who provides a service for you, the service is the employer, not you.  If you create a company and that later employees people, than I will agree you are a job creator, but that isn’t a ton of the wealthy.

I have been thinking about this a for a long time, because we are all job creators if we are actively involved with the economy.  When I go shop at Target or the grocery store I am buy products, along with the other customers.  Our demand for those products are creating jobs for the people extracting the resources that are manufactured (more jobs), then transported (jobs) to a store (jobs).  My demand along with my fellow consumers are creating that demand and those jobs.

Not only that, but the average consumer probably creates more jobs than the super wealthy in most sectors (not Lear Jets).  Think about this, you have a wealthy family that makes $5,000,000.  Maybe they have a principal residence and two vacation properties, a housemaid and a driver.  Then you have 100 families who make $50,000 (same as that $5,000,000 wealthy family) who don’t directly hire anyone and just have one home.  Now those 100 families are going to buy more toilet paper, more toothpaste, food, etc… than the multi millionaire with their 3 homes and 2 employees.  For the people who make toilet paper or toothpaste, those employee’s jobs are based on the demand (job creation) of all them, but it is the demand of the average family collectively that is creating more jobs than the multi millionaires.

It is time for us to think past the language that is being used to support tax policies that benefit the ultra wealthy.  Average Americans are struggling enough in the current economic climate.  We need jobs, not class warfare, but we have been getting attacked for years and usually don’t even realize the Black Ops/Psy Ops that have been waged against us workers.

Lucky Ducks who may not pay any federal income tax definitely pay taxes, and usually are pretty hard workers.  All of us that are buying things are job creators.  The ultra wealthy may create jobs in the luxury industries, but they are not the only job creators and for a large part of society create less jobs (collectively) than the average American, including those who are not working, but still consuming.

-Josh

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Sanctity of employees contracts

As focus has shifted from protests in the Middle East to protests in Madison, we need to think about one of the underlying issues of this debate, employee contracts.

For those of you that think this is all about the state budget crisis and that alone, you are very mistaken.  This is about destroying the last institution, the last guardian for middle class and poor Americans from the ruling elites.  This is about destroying unions, so there is a weakened support organization for the Democratic party.  Not that the Democratic party has been the best friend of unions, I often think that many Democratic politicians play them lip service, but it is better than the outright hostility that they face from Republican politicians.

Remember in the spring of 2009 and 2010 when we heard about the on-going obscene bonuses going to folks on Wall Street?  We had funded the bailout of their industry, keeping them employed.  But that wasn’t enough, they had their contracts and we had to pay them bonuses.  But when the outrage over the bonuses came out, I didn’t hear from Republicans asking to make them re-adjust their contracts because of the bailout.  No, they said it was dumb for Wall Street to give huge bonuses, tried to lay blame on Democrats (many which are as beholden to Wall Street as Republicans), but never once pushed for a clawback on bonuses.

Yet, when it comes to bailing out a union industry like big auto, they ask for union members to take a cut.  When they are facing state government deficits, they ask public government unions to alter their contracts and take a cut.

It is not because unionized employees have more income in which to give, no that is what you find on Wall Street.  Wall Street can give more, but are not asked to because they are special, they represent the wealthy class that has an exaggerated importance in our country.  They demonstrate the lie that is supposed one person one vote democracy with their lack of sacrifice and exaggerated importance.

Republican hatred of unions is very clear to those who are willing to listen.  Their willingness to violate contracts in some circumstances and say they are inviolate in other cases shows that they have a political agenda, destroying unions.  As Rahm Emanuel has said, and Governor Walker and his fellow Republican state politicians are taking to heart, “don’t let a crisis go to waste.”

-Josh

The impossible world of Republican Jeopardy

Do you know why there will never be Republican Jeopardy? It isn’t because the may not have the IQ to provide questions to the answers. The problem is every answer is “tax cut” and they never know which question that answer applies to.

Moderator: the answer is tax cuts.
Moderator: Yes, Grover Norquist.
Grover Norquist: what to do when the economy has slow growth?
Moderator: that is not the answer we are looking for this time. Moderator: Yes, Newt Gingrich.
Newt Gingrich: what is the best way to share sacrifice during a war? Moderator: also not the answer we were looking for.
Moderator: Yes, Samuel…I mean Joe the Plumber
Joe the Plubmer: what I need to have the tax lien removed from my house?
Moderator: No, that is not the answer we are looking for, but if you
happen to win you might be able to pay off that lien.
Moderator: Yes, Sarah Palin.
Sarah Palin: what will make me able to see Russia from my house?
Moderator: not the answer. How the heck would you be able to see Russia from your house because of a tax cut?

-Josh

Is our president really that fragile?

I think it was David Brooks, or it was Mike Murphy, this morning who said you shouldn’t put the president out there unless you know the results.  This is a reference the supposed humilation he suffered, and by extension that America suffered since he went out an advocated for the 2016 Summer Olympic bid and didn’t get it.

Basically what is being said is that the only way that our president can show strength is by winning every time.  That losing makes him look smaller, and by extension America.  I think this is a load of crap.  If you really wanted to extend that to its logical conclusion, then if he loses the debate on health care or stimulus funding, then he is showing the weakness of America.  You could even say this is being done by traitors, you know those Republicans in Congress, because at least the IOC was by international voters who probably hate America.  Except for those times when Obama is perceived to be more popular abroad than at home, but maybe not on the IOC.

I would rather have a president that advocates for an American city to host the Olympics.  I would rather have a president strong enough to handle a setback that really doesn’t impact our standing in the world.  I believe we have that president, now if he would get a bit bolder and stronger and kick some ass on this lame attempt at bi-partisanship and just go it alone on health care reform.

-Josh

What will FEMA do?

With hurricane Gustav bearing down on New Orleans, are we going to see a repeat of the response lack of response to Katrina?  Or are we going to see a response like the hurricanes that landed in Florida in 2004?

Remember 2004, we had hurricanes Charley, Frances and Jeanne wreak havoc on Florida.  But the relief effort was strong.  Personally I think two things factored into the proper response we saw in 2004, one Florida was critical to Bush getting re-elected, and two his brother was governor of the state.

Yet in 2005, with no election looming, Bush was no where to be seen with New Orleans going under water.  Now McCain has criticized the Bush Administrations response to Katrina, yet on the day that Katrina was wreaking havoc on New Orleans, they were together celebrating John McCain’s 69th birthday, you could read about that (and see photos) at Huffington Post.

So when you think of the response we will see this week to hurricane Gustav, it isn’t an example of learning from your mistakes.  But instead the reality that these Republicans only decide to practice effective government when it will impact their election chances.

-Josh

Endangered Species: Moderate Republican Politicians

Last year Minnesota saw Congressman Ramstad announce that he will not run again in 2008 and that has been unfortunate.  I don’t agree with him on a number of issues, but I do respect him, and a number of key issues we do agree.

Today State Representative Kathy Tingelstad announced she will not seek re-election.  This is really unfortunate, she was one of the six House Republicans that voted to override Gov. Pawlenty’s veto of the transportation bill.  She also understands adoption and foster care, and has been a great ally on these issues in Minnesota.

So Kathy, thank you for your service and good luck!

-Josh

Entitlement spending gone wild or the Social Security bogeyman

Social Security must be fixed now, you will hear this over and over again. But is that where the urgency lies? No, the urgency should focus on the runaway costs of health care which we see in entitlement programs in the form Medicaid and Medicare.

Apparently the GAO presented a nice powerpoint presentation to AARP board of directors on Valentine’s Day. Here is the PDF of the powerpoint.

I think page 3 is good place to start.

page 3

On this page you will find three pie charts representing where federal money is allocated in the years 1966, 1986, and 2006. Medicaid and Medicare are rolled together and shown in red. Now keep in mind that these two programs started in 1965, so the 1% amount in 1966 is probably attributable to the newness of the program and the time it took to implement it. Now if you look at 1986 and 2006, these programs went from 10% to 19% of federal spending. Over the same period, Social Security, show in yellow, went from 20% to 21% of federal spending.

Now on to page 12, we see four bar graphs.

page 12

This page scares me, but not because of Social Security or Medicaid and Medicare, but because of the ballooning net interest. It looks like it is 10% of GDP in 2040. There is also the assumption that expiring tax provisions are extended. Does that mean Bush’s tax cuts??

Now page 14 is a better look at the growth of Social Security, Medicaid and Medicare over time as a percent of GDP.

page 14

I see a gradual bump to about 5% from now through 2030, my assumption baby boomers, for Social Security. But look at the growing monster that is Medicare, and to a lesser extent the growing Medicaid. So what is the pressing problem? Oh yeah, it is Social Security, but only if you are blind.

Now page 25 gets to when different aspects of Social Security will change financially.

page 25

I am going to focus on the third column, OASDI, as it combines the first two columns. The first row is the year in which the amount of money added to the trust starts to decline, and oh no it is 2009, just next year. But wait, what does this really mean? This actually about calculus, the whole rate of change concept, which is more scary than the misleading description.Looking at the 2007 Social Security Trustees report. It isn’t that scary, the OASI adds $183 billion in 2007, $204 billion in 2008 (a $21 billion increase from 2007), $223 billion in 2009 ($19 billion increase from 2008), $237 billion in 2010 ($14 billion from 2009). So while the amount added to Social Security Trust Fund is slowing, it is still increasing from year to year, and over the four years I mention above, it adds $847 billion dollars in 4 years.

Now on to the second row, this is the year that the revenue no longer covers the expenditures. However, since the federal government has borrowed against the Social Security surplus, then they can cover the gap in the amount with the interest on what the federal government has borrowed. On to the third row, this is the year in which revenue plus interest (paid by federal government) no longer cover the expenditures. It is at this point the Social Security Trust Fund will start cashing in its bonds. The fourth row is when the bonds are all cashed out, and either revenue must be increased via taxes, or expenditures must be reduced via benefit reductions.

This is serious stuff, but if you go back to the earlier charts I mentioned the scariest explosion in entitlement obligations is in Medicaid and Medicare, not Social Security. As a society we need to focus our efforts in that area. The battle will not be easy because it will probably need a total restructuring of our fragmented and grossly inefficient private health insurance system.

Now you may wonder why I titled this the Social Security bogeyman. My belief, my prediction, is that Republicans and their masters in the investor class, the folks that fund the right wing think tanks, are aware that when the Social Security Trust Fund stops having a surplus, that the tax man will come, and it will come for a bigger share of the investor classes income than we have seen since Reagan come to power. The only thing that might scare the investor class more is the need for protection from relatives in the year the estate tax is 0%. The way to put off this day of reckoning is trot out the Social Security bogeyman. Hopefully the mainstream press will figure out this is right wing crying wolf, and it is getting old.

UPDATE: Looking at page 9, the implicit exposure in 2007, shows that Medicare Part D $8.4 trillion, that new prescription drug program, is greater than Social Security $6.8 trillion. Or 16.67% of the implicit exposure, the other 83.33% is all from Medicare Parts A, B, and D.

page 9

-Josh