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Stimulus plan appears kaput
Daschle won’t permit Senate vote on House-passed bill
MSNBC STAFF AND WIRE REPORTS
Dec. 20 — An economic stimulus measure appeared dead for the year after Senate Democratic leader Tom Daschle refused to allow the House-passed bill to come to a vote. “If I were president, I would call Congress back into session on the second day in January,” House Speaker Dennis Hastert said Thursday. The House passed the GOP legislation — a mix of tax cuts and aid to the unemployed — just before dawn Thursday.

DASCHLE IS USING his power as majority leader to keep the measure from coming to a vote. He opposes the bill’s medical insurance provisions, saying they could erode the nation’s longstanding employer-based medical insurance system.

“I have heard, ‘Let’s postpone this to January or February.’ Well, that’s easy to say if you have a job or you have health insurance, but what about all those Americans who don’t have jobs and don’t have health insurance? What are you going to tell them?” asked Sen. Olympia Snowe, R-Maine.

“There’s a lot of people today in this country who are hurting,” said Sen. George Voinovich, R-Ohio. “There’s a lot of anxiety and fear. And our going home without passing this legislation is certainly not going to help. It’s a terrible thing to do at this time of the year.”

Three Democratic senators, Zell Miller of Georgia, John Breaux of Louisiana and Ben Nelson of Nebraska, support the plan and it would likely pass by a slim margin.


The House stimulus plan would have:
Extended unemployment benefits by 13 weeks for those laid off since March 15.
Provided a 60 percent tax credit to unemployed people so they could purchase medical insurance.
Given people who didn’t get a tax rebate last summer a check of up to $600.
Lowered the 27 percent personal income tax rate to 25 percent on Jan. 1.
Allowed businesses to write off 30 percent of new investment in each of the next three years.
Given corporations $13 billion in relief over 10 years from the alternative minimum tax.

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Grinch.

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"The best defense is not a good offense. The best defense is a terrifyingly accurate and devastatingly powerful offense, with multiply-overlapping kill zones and time-on-target artillery strikes." -- Laurence, Archangel of the Sword

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WASHINGTON - 12.19.01 | Senate Majority Leader Tom Daschle today sharply criticized his Republican colleagues for their refusal to pass a new Farm Bill this year.

"Make no mistake about it, today Senate Republicans voted against farmers, against ranchers, and against rural Americans," Daschle said. "Their vote jeopardizes billions of dollars in assistance to farmers and ranchers, which is available now and which are not likely to be available next year."

The Farm Bill that Senator Daschle supports is the economic stimulus bill for rural America, but in the last three weeks, Republicans have repeatedly blocked attempts to bring closure to debate and vote on the bill. Republicans voted for the third time against ending debate on the bill, effectively killing the bill for this session.

"They chose partisan politics over policy," Daschle said. "We have debated this bill for nearly three weeks, giving every Senator a chance to be heard and offer amendments. Some, however, have turned this debate into a political and partisan endeavor, and that is unfortunate because in so doing they have failed rural America. The real losers today are not Democrats or Republicans, the losers are hard-working family farmers and rural America."

Daschle said passing this bill was vital because while the American economy has been faltering for a number of months, the rural economy has been lagging behind the overall economy for years. Daschle said this is demonstrated by the fact that, last month, the U.S. Department of Agriculture (USDA) announced the largest single-month drop in commodity prices ever in the 91 years since the department has been keeping track.

"When the people who put food on our tables can�t put food on their own tables, something is wrong, and Congress has to deal with it," Daschle said. "But in the face of this crisis, we have received nothing but delay. These delays killed our chances of passing a new and improved farm bill.

Daschle said the Senate Farm Bill he backs supports producers of all commodities to a greater extent thanthe current farm bill, and it reforms the system by providing assistance to the producers who really need it instead of making payments regardless of what farmers do on their land. Daschle said the bill also includes an important income safety net to provide more support in tough years and less support in good years and new-and-improved conservation programs.

Daschle said he hopes to attempt to pass the bill early next session.

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Article from the
Environmental News Service

AmeriScan: December 13, 2001

FARM SUBSIDIES PAY FOR HANDFUL OF STATES

WASHINGTON, DC, December 13, 2001 (ENS) - Under the farm bill now being debated in the Senate, a handful of states will receive the majority of farm payments, shows a new economic analysis by Taxpayers for Common Sense (TCS).

"What we are seeing is a massive redistribution of wealth that benefits only a few states at the expense of many," said Cena Swisher, senior director at Taxpayers for Common Sense. "It is the unfortunate result of the Congress rushing to pass this wasteful legislation."

Using government data, "Farm Bill Failures: How Current Farm Proposals Benefit a Few Select States at the Expense of Others," compares state by state taxpayer costs to the estimated farm subsidies that each state would receive. The analysis details how the annual $15.2 billion in farm commodity payments will be divided up on a state by state basis between 2002-2006.

Some of the key findings of the study are:

The 15 states that benefit the most from these farm subsidy formulas would pay only 24 percent of the cost of commodity programs and receive 74 percent of the benefits.
The region stretching from Maine to Virginia has the greatest imbalance between costs and benefits of agriculture subsidies, paying for 30 percent of the costs, but receiving only 2.4 percent of the benefits.
30 states pay more in taxes than state farmers would receive in agriculture subsidies.
The farm legislation that the Senate is considering would replace the 1996 Freedom to Farm Act, which is set to expire in October 2002. The current bill would continue artificial price supports by funding farmers directly and maintain an overall bias towards crops such as wheat, corn, rice and cotton.

Farm state lawmakers are rushing to complete a new farm bill this year so that they can avoid the potential disappearance of a 73.5 billion increase in farm spending agreed to earlier this year.

"These new farm handouts are an attempt by many farm state Senators to bring home the Christmas ham for tough election races," said Swisher. "Everyone is trying to jump on the Capitol Hill gravy train before it leaves the station."

The states that are the biggest beneficiaries of the Senate's Farm Bill are Iowa, Nebraska, Kansas, Minnesota, and Arkansas. The states with the biggest losses are California, New York, Florida, New Jersey and Pennsylvania.

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The administration last week endorsed legislation introduced by Sen. Richard Lugar, the Senate committee's ranking Republican, that would phase out crop subsidies and put the money into programs that would benefit more farms. Now, most federal assistance goes to grain, cotton and soybean farmers.

Lugar's bill would cost $82 billion over five years, a $25 billion increase over planned spending under existing programs. Lugar's aides said that was the most the White House would support, but administration officials have since told farm groups that it isn't their limit.

Corn and soybean growers think the House bill is skewed to cotton interests and fear the Senate may approve something similar if they are in a hurry to pass legislation this fall.

``It's clear to me that during this time of emergency that the Senate needs the breathing room to work on a consensus and develop a good, well-thought-out policy,'' said Bruce Knight, a lobbyist for the National Corn Growers Association.

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Agricultural groups want Farm Bill to be delayed
By Tara Copp
Scripps Howard News Service

WASHINGTON — The nation’s major farming groups have asked Sen. Majority Leader Tom Daschle to set aside the Farm Bill this year, an abrupt turnaround from a push to quickly pass new legislation.

In a letter to Daschle, the groups urged him to finalize the Farm Bill by next spring. Among the associations that signed the letter were those representing cattle ranchers; fruit, vegetable, soybean and sunflower farmers; and chicken, turkey and pork producers. The National Association of Wheat Growers did not sign the letter.

The agriculture groups said addressing farm legislation is inappropriate with Congress and the White House focused on the war against terrorism.

Daschle spokesman Jay Carson said the majority leader still wants the Farm Bill brought to the Senate floor before adjournment later this year.

“But he thinks it’s too early to make predictions because the legislative calendar is so packed with the number of priorities we have to deal with as a result of the Sept. 11 attacks and the ensuing problems,” Carson said.

The farming organizations said they would count on a commitment from the Bush administration to have the same level of funding in 2002. The 2001 House version of the Farm Bill calls for $170 billion over 10 years.

Conservation proponents, who lost a battle to get $19 million in crop subsidies transferred to conservation programs in the Farm Bill, praised the farming organization’s appeal to Daschle.

Kenneth Cook, president of the Environmental Working Group, called the move an “impressive display of persistence and leadership” by Agriculture Secretary Ann Veneman and the Bush administration.

“They have given everyone breathing room to turn a wasteful House Farm Bill into a fairer deal for all farmers and ranchers, taxpayers and the environment,” Cook said.

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"The best defense is not a good offense. The best defense is a terrifyingly accurate and devastatingly powerful offense, with multiply-overlapping kill zones and time-on-target artillery strikes." -- Laurence, Archangel of the Sword

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Tax cuts don't redistribute anything.

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But Mr. Bush, I am most impressed with how you have used those who died on September 11th to justify your lining the pockets of your rich friends and campaign contributors. Your "Economic Stimulus Bill" -- pure genius! You actually got the House of Representatives to pass a bill eliminating the law that said corporations have to pay at least a token minimum tax every year. See, most people forget that back in your daddy's day (when he was VP) thousands of companies were able to lawyer their way out of paying any taxes at all! Then a law was passed to stop that. Now you got the House to agree to give all these corporations back ALL the minimum taxes they have paid since 1986!! That's $140 billion of givebacks ($1.4 billion to IBM, a billion to Ford, $800 million to GM, etc.). And you got this passed, all under the guise of "September 11th!" How do you get away with this without the American public whoopin' your behind? Man, you are THE MAN!

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social spending that helps the poor

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Capital gains are profits from stocks, bonds, real estate investments and other capital assets.

The difference between capital gains and other forms of income is like the difference between Joey's lemonade stand and the lemonade he sells. Suppose government imposes a 15-percent tax on each glass of lemonade sold. (Joey, being a precocious Young Republican, will naturally come to resent this.) Such a tax would be an income tax. Now, suppose he wanted to sell his lemonade stand. The profits from this sale would represent his capital gains, which the government taxes too, just like the sale of any glass of lemonade. Of course, the value of the lemonade stand may be hundreds, even thousands of times greater, because of its ability to keep generating profits. But the value difference between the two items is irrelevant; the point is that it is a sale, just like any other sale. If the lemonade stand is 873 times more valuable than the lemonade it sells, then market forces will engineer the correct sales price.

For this reason, liberals argue that the tax on capital gains should be no different from that on normal income. However, conservatives argue that capital gains should be taxed at preferential, lower rates. They argue that by making lemonade stands more profitable, investors will want to invest in more of them, thus increasing the means of production and spurring economic growth.

This sounds like a nice theory at first, until you start looking into it. The problem is that income is income, no matter where it comes from. To charge a 15-percent income tax on a worker but a 10-percent income tax on an owner is a regressive tax, and a recipe for income inequality. It doesn't matter if the item the owner sells is more valuable, due to the asset's ability to keep generating profits. That is something that will be factored into the sales price anyway, and is irrelevant. The only difference is the size of the price.

There is also no distinction between "human capital" and other forms of capital. Workers can improve their worth through better education and fitness, just as an owner can improve his business through modernization. Both will result in higher productivity and income. Hence, taxing a worker's income at a higher rate than a capital asset's income is as illogical as it is unfair.

Yet another problem is that not all capital assets are "good" forms, like productive lemonade stands. They can be -- at least from a production and job-creation point of view -- very close to meaningless, like investments in art, wine, antiques, classic automobiles, property, junk bonds or paper entrepreneurialism. One of the more notorious examples is the tax shelter. Because the sale of capital assets are taxed only when they are profitable, investors hid much of their income in these shelters. In the late 70s, when capital gains became much lower taxed than income, tens of thousands of useless or empty office spaces were opened up nationwide, designed to "lose" money. Many of these tax shelters were for esoteric assets like collectibles, freight cars and even llama breeding. Between 1979 and 1985, tax shelter "losses" jumped from about $10 billion to $160 billion a year. (1)

Another role of tax shelters is to convert highly taxed income into low-taxed capital gains. This represents a pure revenue loss to the IRS, with neutral or even negative consequences to the economy.

Furthermore, taxing capital gains at a preferential rate is a major inconsistency with free market theory, which conservatives otherwise love. If an owner wishes to increase the value of an asset, he should do so the old-fashioned way: by making it profitable. When the government artificially raises the profitability of an asset, especially through highly specific loopholes, then investors will start making sub-standard investments that the free market would otherwise refuse to make. As Citizens for Tax Justice so aptly put it: "In essence, capital gains tax cut proponents seem to believe that free markets don't work, that the government needs to step in with subsidies designed to override the signals the market sends about the level and allocation of capital. But this idea that the government should be making investment decisions for business is terrible economics." (2) The sudden proliferation of useless tax shelters is a perfect example.

But what about the argument that capital gains tax cuts will spur investment? The supposed economic benefits are so minor as to be insignificant. You can find any number of conservative think tanks spouting all kinds of "evidence" that the capital gains cut will restore America to a Golden Age of Prosperity. However, serious economists dismiss these notions as absurd. In 1980, Lawrence Summers (one of the nation's top economists, and then a conservative) conducted a definitive study that found that eliminating the capital gains tax completely would raise U.S. output by only 1 percent over the next 10 years. (3)

The historical evidence bears out the ineffectualness of these tax cuts as well. In November 1978, the top rate for capital gains was cut from 39 to 28 percent. In the prior 12 months, the economy had grown 5.8 percent; in the next year and a half, it fell one percentage point.

In August 1981, the top rate was again cut, this time from 28 to 20 percent. In the prior 12 months, the economy had grown by 3.5 percent; in the following 12 months, it fell by 2.8 percent. Of course, these tax cuts may have suffered from accidentally bad timing in the business cycle, but many conservatives reject business cycle theory, claiming that tax cuts are more responsible for economic performance. In that case, they have a major refutation to explain.

By contrast, capital gains were raised in 1976, and economic growth jumped up from 3.6 percent in the previous two years to 5.2 percent in the next two years. Capital gains were again raised in 1986, from 20 to 28 percent, and economic growth rose from 2.2% in the previous year to 3.8% over the next two years.

The effect of capital gains tax changes on unemployment is even more striking. The unemployment rate rose sharply after both the 1978 and 1981 capital gains tax cuts. By contrast, the jobless rate fell significantly after the 1976 and 1986 capital gains tax hikes were passed.

Taxes on capital gains were significantly lower in the 80s than in the 70s, but savings and investment did not rise, as conservatives had advertised. In fact, they fell:

Disposable personal savings (4)

1980 7.9%
1984 8.0
1985 6.4
1986 6.0
1987 4.3
1988 4.4
1989 4.0
1990 4.2

National Savings, public plus private (5)

1970 - 1979 7.7%
1988 - 1990 3.0

Private investment (5)

1970 - 1979 18.6%
1980 - 1992 17.4
By the end of the 80s, it had become clear that the rich were not investing their liberated tax dollars on "good" forms of investment, like jobs and productive tools and technology. Instead, the money went towards consumption, the good life, and economically meaningless investments like antiques and sport cars. The lack of investment in the national interest became so obvious that Democrats in congress actually proposed guidelines to encourage it. During the 1992 campaign, Bill Clinton proposed a massive infusion of public investment into the nation's aging infrastructure to compensate for the failure of the private sector to do so.

Proponents of a capital gains tax cut have no historical evidence to point to when trying to prove the benefits of these cuts. Given their track record of failure, any future proposals should be rejected out of hand.

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According to IRS records, 93 percent of all Americans filing tax returns receive no capital gains income in any given year. Of the 7 percent who do, two-thirds of the gains go to those making over $100,000 a year. Here is a more complete breakdown on capital gains income:

Breakdown of Capital-Gains (CG) Earners, 1989 (1)

Number of Percent Total CG Percent
Type taxpayers of all reported of all CG
Taxpayer (millions) Taxpayers (billions) Reported
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Total 112.3 100% $150.2 100%
CG earners:
Over $100,000 1.3 1 108.2 72
Under $100,000 7.2 6 42.0 28
Non-CG earners: 103.8 97 0.0 0
As you can see, 1 percent of all taxpayers collect over two-thirds of all capital gains. A study of tax returns between 1989 and 1991 found that this is even more concentrated than it first appears: one twenty-fifth of 1 percent of working Americans collected 32 percent of all capital gains income.

A person must be careful in this debate, because deception runs rampant among those promoting this tax cut. Listen to Paul G. Merski, an economist on the Senate's Joint Economic Committee:

"Contrary to the Democrat class-warfare party line, the overwhelming majority of taxpayers who would benefit from lower capital gains taxes are not 'rich.' [In 1993], 83.7 percent of returns reporting capital gains -- that's 12 million Americans -- came from families with incomes under $100,000. By comparison, only 16.3 percent of taxpayers reporting capital gains in 1993 had incomes above $100,000." (2)
Of course, if you're familiar with the above chart, the deception here is obvious: his wealthiest 16.3 percent of all capital-gains earners is really only 1 percent of all taxpayers, and they're pulling down over two-thirds of all capital gains.

Many are surprised by how disproportionately the rich deal in capital gains, because most Americans own capital assets, like homes and small businesses. But owning a capital asset is not the same as selling it. It is only when the asset is sold -- and only if it collects a profit -- that it is taxed. Middle class owners usually sell their homes or businesses only a few times in their lives. However, the very rich make most of their annual income in capital gains -- precisely because it is taxed at lower rates than normal salaried income.

Others criticize the above figures because the government does not tax the largest pool of capital in the U.S. economy: namely, employee pension funds. In 1989, pension funds saw a profit of $409 billion, 82 percent of which benefited the middle class. (3) Critics therefore charge that the tax on capital gains is selective taxation of the rich.

But corporations have been raiding pension funds increasingly in the last 15 years, and new laws by Congress make it even easier for them to do so. (4) The tax-free status of these pension plans is actually a boon to corporations, because it makes raiding them all the more profitable. That is why corporate lobbyists (who have been so effective in persuading Congress to raise regressive state and payroll taxes on the middle class) have allowed Congress to keep the pension plans tax free.

Unfortunately, pension funds are approaching a state of crisis in this country, and it looks like a massive taxpayer bailout is on the horizon, much like the Savings and Loan fiasco.

For corporations, recent laws put them in a win-win situation with pension plans. When a pension fund is overfunded -- that is, it has more than enough money to meet its pension obligations -- companies have seized the excess cash with the justification that the company or portfolio manager made it profitable. (This, despite the fact that many employees take pension benefits in lieu of pay raises, and the pool of capital belongs to the employees.) But if a pension fund is underfunded, then companies usually refuse to pitch in to make the plan solvent again. It therefore becomes the problem of the Pension Benefit Guaranty Corporation (PBGC), a quasi-government agency that issues pension checks to retired workers in case the company reneges on its pension commitments.

However, corporate membership in the PBGC has been steadily dropping, frightened off by soaring premiums used to cover the growing number of bankrupt companies and underfunded pensions. In 1988 (the last year for available figures) the share of the workforce enrolled in pension plans covered by the PBGC was only 30 percent, and falling. The vast majority of workers in pension plans are unprotected against failure (and we should not forget that half of all American workers have no pension plans at all). If the PBGC eventually fails (as it is appearing to do), then taxpayers will be called to bail out underfunded pensions.

Meanwhile, corporate lobbyists have convinced Congress to rewrite the pension laws so management can raid pension funds much more effectively. This is a profitable endeavor, since most pension funds are overfunded. The law now allows companies to terminate a pension plan and replace it by buying "annuities" that will pay workers the accrued benefits. What money is left over from the purchase of annuities goes to the company. There's just one catch: annuities are not guaranteed by the PBGC or any other government agency. It leaves the worker wide open to the possibility of pension failure. It leaves taxpayers vulnerable to picking up the bill.

Another victory for corporate lobbyists was a new law allowing companies to raid the pension funds to cover the soaring costs of employee health care insurance. Health care has represented an increasing drain on corporate profits, but rather than pass legislation designed to reign in runaway health care costs, Congress has stuck it to the little guy once again -- companies can now cover their health care costs by robbing pension funds.

The bottom line is that virtually all workers in this country are going to see reduced pensions. The gains from this untaxed capital are going to corporations, not workers.

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Smackdown.

[ December 21, 2001: Message edited by: Malnurtured Snay ]

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