What Dave Camp’s Tax Reform Proposal Tells Us About Our Political System

Most people, until a few days ago, hadn’t heard of Dave Camp, the Republican chairman in charge of the House Committee on Ways and Means. That powerful committee has, among other things, jurisdiction over Social Security, Medicare, unemployment bennies, food stamps (TANF), and federal tax policies.

And regarding those tax policies, the committee chairman has been working on tax reform for a long time. This week, to the chagrin of many Republicans in the House and elsewhere, Dave Camp, who will soon be term-limited out of his continuing chairmanship of the committee, released his work product, the Tax Reform Act of 2014. And, somewhat surprisingly, some on the left are taking it seriously, even if it is revenue neutral and has other flaws. But not so surprisingly, partly because some on the left can take the proposal seriously, is that the usual money-holding suspects on the right are pooh-poohing it.

You can see the details of the proposal all over the place (here is a relatively thoughtful conservative critique), but liberal commentator Jonathan Chait began his short analysis of the plan by saying that Camp’s tax-reform proposal,

does something remarkable: It actually reforms the tax code. It doesn’t use the pretense of reform to shift the tax burden off the rich, as Republican “tax reform” plans usually do, and it does not use hand-waving to gesture in the direction of reform without following through. Camp has actually plunged his hands into the guts of the tax code and pulled out item after item. It may be the most impressive and ambitious domestic policy proposal crafted by a major Republican in a generation.

Chait notes how folks like the writers of The Wall Street Journal editorial page have “spent decades building a shrine to the spectacular wrongness of supply-side economics,” and then he gives Camp credit for not championing that spectacular wrongness:

The evidence suggests that cutting tax rates, financed by deficits, does little or nothing to spur economic growth. But Camp’s plan doesn’t do that. It instead reduces tax rates by eliminating preferences in the tax code. Subsidies for home mortgage debt and employer-sponsored insurance, among others, would be radically scaled back. And eliminating these kinds of favoritism encourages workers and businesses to instead follow market signals, and likely to make more market-friendly decisions.

Of course, Chait, as a liberal, notices all kinds of things wrong with Camp’s plan. Camp, after all, is a Republican, so it is no surprise that no new revenues will be raised if his plan were to become law, or that “oil drillers” are taken care of while “green energy” suffers. But Chait also points out something in Camp’s plan that has pissed off Wall Street banksters:

His plan would impose a new fee on large banks (which enjoy an implicit subsidy by virtue of being so large they’re apt to receive a bailout if they fail) and caps the value of tax deductions, both goals embraced by Obama. It eliminates the carried interest loophole. It sets the top tax rate at 35 percent, not the fantastical 25 percent rate proposed by Mitt Romney, Paul Ryan, and other Republicans. Camp is actually committed to the goal of reforming the tax code in a way that maintains (rather than reduces) revenue levels, and holds the relative burden on the rich and poor constant.

The reaction to this part of Camp’s legislation is at once predictable and disturbing. Just look at this headline from Politico yesterday:

Wall Street threatens GOP on bank tax

First line: “Wall Street is warning Washington Republicans: The money spigot is turning off.”

Then: “Rep. Dave Camp’s tax proposal — which jacked up taxes on banks and threatens the bottom line of big bankerssome major private equity players in New York — has infuriated donors in high finance.”

As I say, that reaction is not surprising. But it ought to disturb all Americans, including Tea Party Republicans, whose 2009 movement began, at least ostensibly, as a populist reaction to the bailout of the financial industry, a group of greedy folks who helped wreck the economy. None of us should put up with the kind of extortion suggested by that Politico headline. None of us should tolerate the idea that people with lots of money can buy our politicians like they were buying shares in a widget company. None of us. This is our democracy we are talking about, for God’s sake.

The Politico article continues:

Lobbyists for Bank of America, Goldman Sachs and JPMorgan and others are meeting privately with lawmakers to explain what the bank tax would cost and how it would function.

Big banks want to turn Republicans against the bank tax. The situation puts the party at risk of seeing a reliable source of campaign cash dry up right in the middle of a critical election year.

And:

Without Wall Street, Republicans risk their coffers emptying. The securities and investment industry is the largest contributor — besides candidate committees — to the National Republican Congressional Committee this cycle, directing $3.5 million to the party committee, according to the Center for Responsive Politics. In the 2012 election cycle, the financial services industry ponied up nearly $9.9 million.

Let’s be clear: Democrats, most of whom favor campaign finance reform, also take money from rich people. They have to, if they are to survive in this money-driven, anti-democratic system. But all of us, even the most rabid Tea Party “patriot” out there, ought to get angry over what money has done and is doing to our political system. An earnest Republican comes along with some ideas that are not completely based on phony trickle-down economics, and he, or rather his proposal, is shot dead on the spot by people whose guns don’t shoot bullets but big bucks.

Let me leave you to contemplate what Roll Call’s David Hawkings said about what the new reform proposal, not even considering its policy ideas, will do:

The Camp bill may be properly cited as The Tax Lobbyists’ Full Employment and Economic Stimulus Act of 2014.

Even though the measure is highly unlikely to make it onto the House floor — and will struggle to get a majority from the roster of 23 Republicans and 16 Democrats during its not-going-to-be-scheduled-anytime-soon markup at Ways and Means — law firms and K Street shops will generate countless billable hours just by parsing the bill’s language and coming up with strategies for preserving all the niche deductions, exclusions and exemptions that have only theoretically been placed in jeopardy.

If those lobbyists didn’t have connections to moneyed interests who give tons of dough to our politicians, and if our politicians worked in a system where they didn’t depend on rich people giving them tons of dough to get elected, then our politicians perhaps would properly weigh the input of those lobbyists, rather than give them all the influence that money can buy.

And shame on us—all of us—for putting up with it.

Obama’s Real Waterloo?

Much anger has been directed toward TARP—colloquially known as the bank bailout—and some of it is totally justified. 

In yesterday’s New York Times, Neil Barofsky, on his last day as special inspector general of the Troubled Asset Relief Program, wrote that the program,

failed to meet some of its most important goals.

Those goals, he argues, involved “protecting home values and preserving homeownership.”  He wrote:

These Main Street-oriented goals were not, as the Treasury Department is now suggesting, mere window dressing that needed only to be taken “into account.” Rather, they were a central part of the compromise with reluctant members of Congress to cast a vote that in many cases proved to be political suicide.

The act’s emphasis on preserving homeownership was particularly vital to passage. Congress was told that TARP would be used to purchase up to $700 billion of mortgages, and, to obtain the necessary votes, Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the act expressly directs the department to do just that.

Obviously, judging by the condition of the economy—significantly hamstrung by the home mortgage nightmare—not much was done in terms of purchasing mortgages and helping homeowners.  Instead,

Treasury’s plan for TARP shifted from the purchase of mortgages to the infusion of hundreds of billions of dollars into the nation’s largest financial institutions, a shift that came with the express promise that it would restore lending.

Naturally, the promise to restore lending wasn’t backed up with an “effective policy or effort to compel the extension of credit“:

There were no strings attached: no requirement or even incentive to increase lending to home buyers, and against our strong recommendation, not even a request that banks report how they used TARP funds.

Despite a feeble and mostly failed attempt in 2009 to help distressed homeowners, “foreclosures continue to mount, with 8 million to 13 million filings forecast over the program’s lifetime.”  And according to Barofsky, Tim Geithner and Treasury have no plans to change things.

On top of all that, Barofsky makes the sad claim that it appears the too-big-to-fail banks—who “no matter how reckless” “reasonably assume” taxpayers will bail them out again—are still too big to fail, the Treasury Department failing to “support real efforts at reform,” including efforts “to simplify or shrink the most complex financial institutions.”

As Barofsky notes,

The biggest banks are 20 percent larger than they were before the crisis and control a larger part of our economy than ever.

That statement is supported by the Wall Street Journal, which reported that all of the gains leading to record-setting fourth-quarter corporate profits were “in the financial sector“:

After rising like the Phoenix, the financial industry now accounts for about 30% of all operating profits. That’s an amazing share given that the sector accounts for less than 10% of the value added in the economy.

Here’s the dramatic swing, from the Journal article:

Look at that chart and remember the Journal‘s point:

That’s an amazing share given that the sector accounts for less than 10% of the value added in the economy.”  Less than 10%.

TARP was necessary to avoid a complete collapse of the financial system, Barofsky says, but its most lasting legacy may be that,

Treasury’s mismanagement of TARP and its disregard for TARP’s Main Street goals — whether born of incompetence, timidity in the face of a crisis or a mindset too closely aligned with the banks it was supposed to rein in — may have so damaged the credibility of the government as a whole that future policy makers may be politically unable to take the necessary steps to save the system the next time a crisis arises.

If so, this may be Obama’s Waterloo.

Remarks And Asides

Here’s what wrong with Washington:  Harry Reid was told by nine Republicans that they would support his efforts to get the omnibus budget bill—which would have funded the government through next September—to the floor for debate, which meant it would have eventually passed the Senate. 

But because of a fear of the Tea Party—in the person of Jim DeMint, who demanded the 1900-page bill be read by the Senate clerk, a 50-hour endeavor—Republicans who gave their word to Harry Reid stabbed him squarely in the back at the last minute Thursday night, while he was on the floor.  He was forced to pull the bill and make yet another deal with Mitch McConnell over a continuing resolution.

Now, backstabbing Republicans are a problem, no doubt.  But why can’t the guys on our side at least name names when deceit like this happens?  Reid said on the floor that he would not call out the names of those senators—liars, all—who pulled back their support.  He said they knew who they were.  Yes, they do.  But the rest of us don’t. 

UPDATE: At noon today, I heard Andrea Mitchell, on her show on the “liberal” network MSNBC, say that Reid was “outfoxed.”  Outfoxed? The definition of that word is, “to surpass in guile or cunning.”  In other words, both sides were using guile and Reid simply got out-guiled by a better guiler.  That’s what happens when Democrats refuse to name names and put a face on the deception of the other side. 

At least Missouri’s own Claire McCaskill, who was going to vote against the omnibus bill anyway, did call them out. She specifically mentioned that the Republican Minority Leader had his own earmarks in the bill and fiercely criticized Republicans for their hypocrisy. 

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Last night, the headline on CNN was: House passes Obama tax plan.  Get that?  It’s Obama‘s tax plan.

On CNN’s Anderson Cooper last night, I watched the first ten-minute segment, which was about all the “game playing” in the Congress.  Except, that if one were just a casual observer of American politics and didn’t know the truth, the impression left by Cooper and cast was that “both sides” were engaging in the game playing. 

This is Anderson Cooper and CNN at their split-the-difference best.  In order to solidify their self-described standing as the anti-Fox and anti-MSNBC network, they distort the truth to make it appear they are being neutral.  That’s not journalism, people.  Both sides are not equally guilty as regards the mess that is Washington, D.C.

______________________________

A new poll found what we all know:  Republicans believe certain facts about the world that are not in fact facts.  But so do Democrats.  The study also found that “those who had greater levels of exposure to news sources had lower levels of misinformation.”  Of course, that makes sense. 

But then there’s this:

There were, however, a number of cases where greater exposure to a particular news source increased misinformation on some issues.

Those who watched Fox News almost daily were significantly more likely than those who never watched it to believe that most economists estimate the stimulus caused job losses (12 points more likely), most economists have estimated the health care law will worsen the deficit (31 points), the economy is getting worse (26 points), most scientists do not agree that climate change is occurring (30 points), the stimulus legislation did not include any tax cuts (14 points), their own income taxes have gone up (14 points), the auto bailout only occurred under Obama (13 points), when TARP came up for a vote most Republicans opposed it (12 points) and that it is not clear that Obama was born in the United States (31 points). The effect was also not simply a function of partisan bias, as people who voted Democratic and watched Fox News were also more likely to have such misinformation than those who did not watch it–though by a lesser margin than those who voted Republican.

Surprise!

To be fair, there was one case in which MSNBC and NPR were allegedly the guilty party:

Daily consumers of MSNBC and public broadcasting (NPR and PBS) were higher (34 points and 25 points respectively) in believing that it was proven that the US Chamber of Commerce was spending money raised from foreign sources to support Republican candidates.

Given the fact that the Chamber of Commerce won’t—and doesn’t legally have to—release donor lists or reveal just how it keeps foreign money separate in its accounting, it’s understandable how folks could jump to that conclusion.  But, again, to be fair, it is conclusion jumping, since apparently there isn’t a way to prove it.

So, in the Misinformation Olympics, Fox “News” has nine gold medals, and MSNBC and NPR have one bronze.  In other words, Fox is the East German swim team of propaganda.  Congratulations!

A Thanksgiving To Remember For Business

Yet again, I heard another Washington “insider” arguing this morning on TV that Obama sorely needs to repair his relationship with the business community.  They think he is an enemy of business, don’t you know.  But mostly, they just think he talks mean about them.

This time it was the Washington Post‘s Steven Pearlstein, who repeated the Obama-needs-to-suck-up-even-more-to-business nonsense, but it has been a recurring theme for quite some time on the cable shows.  Apparently, chronic whining from people who are taking a disproportionate share of the economy pays off in more ways than one.

Not only do these people want all the bleeping money in America, they want good press on top of it. And, generally, they get it courtesy of the so-called liberal media.

But the truth is that the era of Obama has been berry, berry good to business.  And here’s why:

The New York Times reported yesterday that,

American businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago, at least in nominal or noninflation-adjusted terms.

It’s fair to ask, just what have those increased profits brought to the rest of America?  Not much. From The Atlantic:

From the Wall Street Journal this summer:

The Federal Reserve reported Thursday that nonfinancial companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March, up 26% from a year earlier and the largest-ever increase in records going back to 1952.

 

But wait, there’s more!

TARP, which began under Bush and continued big time under Obama, saved the financial industry and the economy, by most accounts.  Does Obama hate business?

The GM/Chrysler rescue not only saved the American auto industry, but businesses big and small that are dependent on the success of the American car companies.  Does Obama hate business?

The Recovery Act, the economic stimulus bill so hated by Republicans, resurrected economic growth:

And the growth for the 3rd quarter of this year was revised upward to 2.5%.  That’s five straight months of growth.

Again, does Obama hate business?  Or is it just that business hates Obama?

A Word Of Praise For George W. Bush

I have listened to the talking heads for a couple of days now, as President Bush and his understandably faithful former employees try to rehabilitate his (mostly) deservedly dismal image by way of his new book. 

And I have heard nearly everything covered.  But until someone sent me this article from the Detroit News, I missed Bush’s defense of his decision to first begin the auto bailout:

Former President George W. Bush defended his decision to rescue General Motors and Chrysler in the waning days of his term, saying he “had to safeguard American workers and families from a widespread collapse.” In his new book, an advanced text of which was obtained by The Detroit News, Bush discloses he decided in early November 2008 to save GM and Chrysler — far earlier than was publicly known — and privately told his successor he would save the automakers in an Oval Office meeting.

Bush’s $17.4 billion bailout—which he took from TARP funds—was essential in keeping GM and Chrysler afloat until more substantial help via the Democrats would come:

“I told Barack Obama that I wouldn’t let the automakers fail,” Bush writes. “I won’t dump this mess on him.”  [...] Bush said he “believed strongly that government should stay out of the auto business. Yet the economy was extremely fragile and my economic advisers had warned that the immediate bankruptcy of the Big Three could cost more than a million jobs, decrease tax revenues by $150 billion and set back America’s GDP by hundreds of billions of dollars.”

It’s somewhat refreshing to know that despite philosophical objections, Mr. Bush did the right thing, despite opposition from more philosophically committed and less adaptive Republicans in the Senate.  Mr. Bush, it seems, ran into the first wave of Republican recalcitrance—which would later haunt Barack Obama—when he proposed “a $25 billion retooling program to fund the auto bailout—that passed the House but was blocked by Senate Republicans“:

“I had hoped we could convince Congress to release those loans immediately, so the companies could survive long enough to give the new president and his team time to address the situation,” Bush wrote. But “the Senate wouldn’t budge.”

He said the decision to tap the $700 billion Wall Street rescue fund — the Troubled Asset Relief Program — was frustrating – but became “the only option.”

“Nobody was more frustrated than I was. While the restrictive short-terms were better than an outright bailout, it was frustrating to have the automakers’ rescue be my last major economic decision.”

But in the end, Bush said, he had little choice.

“With the market not yet functioning, I had to safeguard American workers and families from widespread collapse. I also had my successor in mind. I decided to treat him the way I would like to have been treated if I were in his position.”

I will confess something here.  If more Republicans displayed the kind of I-don’t-care-if-it-violates-my-philosophy-people-will-suffer attitude that a retiring George W. Bush displayed, we wouldn’t have much to fear as Americans going forward. 

But they typically don’t display such wisdom.  In fact, if W. Bush had shown more of that kind of attitude in 2001, perhaps he wouldn’t have needed to bailout anyone in 2008.

Globe Confirms Blunt’s Bacon-Bringing Bona Fides

Now, get this: in its Sunday editorial about Billy Long and Scott Eckersley, the Globe, inadvertently I’m sure, made Robin Carnahan’s point about Roy Blunt’s insider’s ability to bring home the federal bacon to supposedly bacon-hating Republican voters in Southwest Missouri:

But part of the reason Southwest Missouri received federal funding is because Rep. Roy Blunt was an experienced politician. We pay federal taxes, so it’s only fair that we get some of those back.

Notwithstanding the Joplin Globe‘s relentless focus on government spending since President Obama’s election, the paper nevertheless praises Blunt’s “experience” in getting our “fair” share of federal dollars.

Well, I suppose that’s one way of looking at it. But here is another, in the form of Carnahan’s latest ad on Blunt’s role as the point man on the Bush administration’s federal bailout of Wall Street banks:

The Naked Middle Class

Between the dueling “job summits,” Ben Bernanke’s fight to keep his job at the Fed, the CBO’s estimate of up to 1.6 million jobs so far either saved or created by the stimulus package, the economy justifiably is back as the topic of the week.

But a really disturbing message is coming from Elizabeth Warren, Professor of Law at Harvard Law School and currently serving as the chair of the Congressional Oversight Panel, which was established under the TARP legislation last year as a legislative branch watchdog over the markets, the regulatory system, and Treasury’s management of TARP money. 

On today’s HuffPo, Warren posted an article titled, “America Without a Middle Class,” in which she begins by asking if America would still be America without a strong middle class, then assaults us with this paragraph:

Today, one in five Americans is unemployed, underemployed or just plain out of work. One in nine families can’t make the minimum payment on their credit cards. One in eight mortgages is in default or foreclosure. One in eight Americans is on food stamps. More than 120,000 families are filing for bankruptcy every month. The economic crisis has wiped more than $5 trillion from pensions and savings, has left family balance sheets upside down, and threatens to put ten million homeowners out on the street.

She points out that the so-called “boom” of the 2000s only produced an increase in median family income of 1.6%, compared with 11% in the 1990s, 10% in the 1980s and a whopping 33% in the 1960s.

Essentially, Warren claims, the Bush years only exacerbated a trend that began in the 1970s: America’s middle class is dissipating because wages have not kept up with the cost of living:

To cope, millions of families put a second parent into the workforce. But higher housing and medical costs combined with new expenses for child care, the costs of a second car to get to work and higher taxes combined to squeeze families even harder . Even with two incomes, they tightened their belts. Families today spend less than they did a generation ago on food, clothing, furniture, appliances, and other flexible purchases — but it hasn’t been enough to save them. Today’s families have spent all their income, have spent all their savings, and have gone into debt to pay for college, to cover serious medical problems, and just to stay afloat a little while longer.

Ms. Warren contrasts this situation with the enormously successful financial industry, which prospered largely on the backs of the middle class:

Consumer banking — selling debt to middle class families — has been a gold mine. Boring banking has given way to creative banking, and the industry has generated tens of billions of dollars annually in fees made possible by deceptive and dangerous terms buried in the fine print of opaque, incomprehensible, and largely unregulated contracts.

Obviously, the “creative” banking thing went awry and the government had to bail out the Wall Street gamblers to save the entire system. But what would normally be a humbling situation for normal folks, only strengthened the resolve of the big-time players to keep the status quo in place, and they now are fighting hard to “preserve the rules” that will allow Wall Street high-rollers to continue fleecing the very people whose tax money saved them from bankruptcy.

Warren has been a strong advocate of consumer rights, and she hopes that the Obama administration’s proposal to reign in some of the more egregious banking practices, through a new Consumer Financial Protection Agency, will succeed, although, she says, the big banks “are pulling out all the stops to kill the agency before its born.”

Let’s hope that both parties can at least come together on this one, and protect the interests of what’s left of a beleaguered American middle class.

[Photo by Mark Wilson/Getty Images North America]
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