Tag Archives: obama

Why Obama’s Tax Plan Matters

Today, Obama will deliver the State of the Union address, which will focus on inequality, which he has previously called, “the defining issue of our time,” and which was recentlyhighlighted by a proposal by Chris Van Hollen. In anticipation of his speech, he has put forward a proposal to increase taxes on the wealthy and cut taxes for the middle class. The proposal is welcome.

Obama’s plan is broadly aimed at wealth inequality and closing tax loopholes that allow the rich to pay less in taxes than many middle class households. His plan includes a hike the capital gains tax rate (to the level prevailing during the Reagan administration), closing the trust fund loophole that allows the wealthy to avoid inheritance taxes and a modest fee on banks (who benefit hugely from too-big-to-fail).

While the right often complains that many Americans don’t pay taxes, symbolized by Romney’s famous 47% comment, these claims are absurd. For one, Romney was only talking about taxes at the federal level, and a recent study from the Institute on Taxation and Economic Policy shows that state and local taxes are heavily regressive. Across all states, the poorest 20% pay 10.9% of their income in state and local taxes compared to 5.4% for the richest 1%.

At the same time, across the developed world, tax rates have become less progressive, as illustrated by Thomas Piketty and Emmanuel Saez. In the US, estate taxes and corporate taxes have declined dramatically, while payroll taxes (which affect the poor) have increased dramatically.

Worse still, the porous federal tax system allows the rich to take home huge tax breaks. A recent CBO finds that the largest 10 tax breaks primarily benefit the rich. Recently, Al Jazeera reported that in 2010 the richest 400 Americans paid only 18% of their income in federal taxes, a dramatic decline from the 29.9% they paid in 1995. Therichest 400 households took home a full 16% of all capital gains in 2010—they make up .00025% of the population.

The rich receive the most in capital gains because they own nearly all the assets, and for this reason, Obama’s choice to target capital gains and large holdings of wealth is smart.

Much of the rise in inequality has come from rent-seeking and inheritance, rather than innovation. By singling out unproductive capital for taxation, he forces those who support inequality to defend an idle wealthy class.

But Obama will struggle to pass any legislation increasing taxes. As Demos showed inStacked Deck, the donor class isn’t interested in higher tax rates. Sadly, there is strong evidence that the donor class has an outsized influence on politics, through both access, agenda-setting and higher voter turnout. A 2013 study in The Journal of Economic Perspectives finds (PDF):

In 1980, the top contributor … gave $1.72 million (in 2012) dollars, nearly six times the amount given by the next largest contributor. In 2012, the two largest donors were Sheldon and Miriam Adelson, who gave $56.8 million and $46.6 million, respectively. Other members of the Forbes 400 accompany the Adelsons; 388 current members are on record as having made political contributions. They account for 40 of the 155 individuals who contributed $1 million or more to state and federal elections during the 2012 election cycle.

The rise in wealth has coincided with an increase in political power – which will make taxing the rich more difficult. However, it is increasingly necessary – 80 people in the entire world have the same wealth as the bottom 50% (some 3 billion people) combined.

The usual suspects will likely be rolled out in defense of low tax rates – conservative commentators frequently claim that low taxes increase economic growth. These arguments are facile and a large literature shows them to specious. In fact, there are reasons to believe that increasing taxes on the rich to fund public investment and middle class growth could actually boost the economy. More importantly, these arguments are being disproven before our eyes: Kansas, which was supposed to be the conservative model, massively cut taxes and the state coffers are hemorrhaging cash. The governor is now proposing new taxes to make up for falling revenues.

Obama’s proposal is bold and necessary. The problem is how to get it passed a government increasingly bought by the 1%.

This piece originally appeared on Policyshop.

America’s white millennial problem: Why the next great generation might not be a liberal one

Nearly anytime Democrats lose an election, there is a pervasive narrative that, just around the bend, there will be an “emerging Democratic majority.” Originally projected to occur between 2004 and 2008, it now appears further away than ever after last month’s midterm blowout. Republicans have a stranglehold on the House, where they control their largest number of seats since 1948. That lead will be incredibly tough to chip away at. Democratic chances of regaining the Senate in 2016, once considered a near certainty, are looking iffy. Republicans control 31 governorships, as well as 68 of 98 state legislative chambers. Democrats still have a strong chance of winning the Presidency, but given the importance of the states for shaping income distribution and policy, even that victory will ring hollow.

Yet again, the Democratic Party faces bleak governing prospects in the short term, with only the nebulous promise of a demographic windfall somewhere off in the future — and even that prospect should be little comfort to progressives. While the “millennial” generation has widely been seen as the key to future of Democratic successes, there are reasons to believe that the liberalism of millennials, at least on certain key issues, has been overstated.

Yes, there is a strong case that younger voters on the whole are more liberal. For instance, a study by the Center for American Progress finds that while the mean American’s ideological position is 209 (with 0 being most conservative and 400 being most progressive), those under 29 score 219.7 (Obama voters scored 244).  But while millennials are more socially liberal across the board, there are stark racial divides on economic issues. Younger voters are more likely than older voters to agree with the statement, “Labor unions are necessary to protect the working person” and “the government should be doing more to solve problems.” These questions, however, are rather vague and positively worded. And other data suggest a large gap between white millenials and millenials of color. For instance, young white men supported Romney in the 2012 election.

White millenials are also significantly less supportive of Obama (54 percent) than black millenials (95 percent) and Hispanic millenials (76 percent). The most recent poll of Obama finds that young whites and older whites have virtually identical approval ratings. A recent Pew survey of millennials finds that on economic issues, there are strong gaps between young whites and young non-white millenials (see chart).

On social issues, however, these gaps are virtually non-existent. This suggests that while social liberalism will continue to be a political winner, economic liberalism may be tougher to sell to white millenials. Additionally, while white millenials say they want to live in a racially equitable society, they are no more likely than their parents to support policies to make that society come about. ”At the same time, whites primed with the reality of growing diversity become are less likely to say they support diversity and more likely to support the Republican party.”

Furthermore, even as minorities make up a larger and larger percentage of the electorate, these racial changes will not inevitably benefit Democrats. While Republicans have never won more than 40 percent of the Latino vote  – the claim that Bush won 44 percent in 2004, as widely reported, now appears to have been incorrect — they could do so in the future. Pew data, for example, show that third generation Hispanics are more socially liberal, but more economically conservative than older Hispanics.

Additionally, a recent Gallup poll shows support for Obama among younger Black Americans is modestly lower than support among their older counterparts. This actually hold strue among millenials as a whole; as there appear to be age gaps that would render the Democratic advantage ephemeral. Harvard’s Institute of Politics finds that there is a distinct difference between the way young millenials (18-to-24) and older millenials (25-to-29) view Obama. Meanwhile, a 2012 American University poll finds that college students in swing states supported Obama by 35 points, while high schoolers (13-to-17) in swing states supported Obama over Romney by only 7 points.

Discussing the future always presents challenges, particularly in the realm of politics. However, when we look at the ideologies that shape the parties, we can see a few general trends from these data. First, the economic liberalism of the millenial generation appears to be driven primarily by people of color, rather than by younger, more liberal whites. (On social issues, the generation appears to be more liberal across the board.) Second, while millenials lean Democratic, they are still effectively up for grabs. White millenials, the data show, may become suspicious of further government programs to advance racial equality, and young people of color may be open to a Republican party that eschews virulent racism. Finally, electoral structures combined with the geographic locations of Democratic voters will bias the system toward Republicans for at least another decade, and possibly longer.

It’s difficult to know what parties will do to remain viable in a shifting American political landscape. However, it’s by no means certain that a new “Democratic majority” will be an economically liberal one. It’s plausible that the new Democratic party will embrace an Andrew Cuomo-esque neoliberalism. The Democratic party that appears to be emerging will be friendlier to finance and economically conservative, but also very socially liberal, particularly on gay marriage and women’s rights. The Democratic party will be committed to reducing greenhouse gas emissions but not at a terrible price to businesses. Public goods will be sold off at bargain basement prices and the safety net will be expanded only slowly, if at all. Both parties will pretend that racial grievances are a thing of the past and present a rosy vision of color-blind America. The ideological distance of both parties on foreign policy will remain where it is today: virtually indistinguishable. This is not inevitable, but what we know about millenials, particularly white ones, suggest this is the most plausible scenario. In the battle for the soul of the Democratic party, millenials might not be on Team Elizabeth Warren.

This piece originally appeared on Salon

Here’s a Quick, Smart Way Obama Could Raise Worker Wages

Hundreds of federal contractors went on strike Tuesdaywalking off the job at Smithsonian museums and other government buildings, and demanding that President Obama issue a “good jobs” executive order to improve their working conditions and pay. The idea is to build on the orders Obama already issued, earlier this year, to raise the minimum wage for contractors and to prohibit discrimination based on sexual orientation. The workers appreciate those measures, for sure, but they want more.

They make a good caseone the Administration should heed.

A new Demos study finds that federally-supported firms, defined as companies that receive 10 percent or more of the yearly revenue from contracting,employ 6.6 million people. Of these workers, 3.5 million of these workers earn wages at or below 150 percent of the poverty line for a family four (disproportionally minorities and women). And they frequently get lousy treatment from their employers.

A 2010 GAO investigation found that the government frequently awards contracts to companies with wage, safety, environmental, immigration and Medicare violations. Meanwhile, according to a Senate Health Education Labor and Pensions Committee report, firms that do federal contracting made up 30 percent of the companies with the largest penalties for health, safety and wage violations between 2007 and 2012.

The federal government is supposed to avoid working with such companies. But, presently, it does so only in the most egregious casesand, frequently, in a half-hearted way. For instance, in 2012 the Obama administration temporarily banned 3,800 companies, including British Petroleum and Booz Allen Hamilton, from contracting with the federal government, following pressure from Congress and the GAO. (BP was banned for “lack of business integrity” during its handling of the oil spill). But these suspensions, all temporary, generally last “fewer than 18 months.”

President Clinton, towards the end of his term, signed an executive order that required the government to contract only with firms that met higher standards for treatment of workers. President George W. Bush rescinded that regulation. Not long after, his administration went on to be marred by contracting scandals, including billions in no-bid contracts to a Halliburton subsidiary.

Obama, upon taking office, considered reinstating a responsible contractor policy. But the Administration never followed through,partially because it was unclear whether to proceed legislatively or via executive actionand whether there was legal authority for the latter. But the authority is there. Legislation from 1984 allows the government to consider, “a satisfactory record of integrity and business ethics” and since the non-partisan Federal Acquisition Regulation (FAR) Council first pushed for a clarification of the rule, it is clear that legal authority is not the question at handit is presidential will.

The question now is whether Obama is willing to use that authority.

The usual argument against a stricter contracting policy is that it would force government to pay more for workor get less work for what it pays. But the Center for American Progress, using GAO research, has found companies with poor records of worker treatment frequently produce cost overruns, long delays and shoddy work. Meanwhile, by giving contracts to companies that don’t provide good pay or safe working conditions, the federal government makes it harder for more responsible employers to survive. That’s another reason to think that high-road contracting would not hurt and might actually help the taxpayers. When Maryland instituted a policy that required contractors to pay a living wage, it started receiving more bids for contracts, presumably from companies that previously could not compete with lower wage firms. Finally, a study by Christopher Witko finds that “companies that contributed more money to federal contracts subsequently received more contracts,” which belies the idea that contracts are currently awarded purely on merit.

There is a long history of using the contracting system to set labor standards and to achieve social aims. Possibly the earliest example was Martin Van Buren’s order in March 31, 1840, established a 10-hour workday for all workers employed on public works, “finding that different rules prevail at different places.

In the 1960s, President Lyndon Johnson signed Executive Oorder 11246, which, “prohibits federal contractors and federally assisted construction contractors and subcontractors, who do over $10,000 in government business in one year from discriminating in employment decisions on the basis of race, color, religion, sex, or national origin.” It further required contractors with 50 or more employees and contracts of $50,000 or more to implement affirmative action plans to increase the participation of minorities and women in the workplace.

What kind of executive order(s) could Obama issue today? The best system would include pre-clearance and preference. A pre-clearance policy should bar the most egregious violators from contracting with the federal government. A preference policy should be established that gives a leg up to responsible contractors. Responsible contractors are those that offer healthcare benefits and paid leave, pay decent wages, respect collective bargaining rights and have a low CEO-to-worker pay disparity.

Obama could also improve enforcement of existing standards. The Obama administration has already worked to reduce employee misclassification, which occurs when employees are classified as classified as “independent contractors,” and deprived of benefits. [But it could put more money and manpower into to enforcement action. Such costs will more than pay for themselves. We estimate that misclassification robs the federal government of $14 billion a year in revenue. Given how widespread the practice is, the number is likely far higher.

A higher minimum wage is welcome, but in the status quo, studies find that as many as a quarter of low-wage workers may be paid under the minimum wage. Wage theft claims, which occurs when workers are denied overtime, paid below the minimum wage or have illegal deductions taken from their paychecks, have increased dramatically over the past decade almost 400 percent between 2000 and 2011. Even when workers win lawsuits, they rarely see their back wages. Enforcement and prosecution would help millions of low-wage workers and responsible contracting can keep bad companies from exploiting workers to keep their bids low.

With Congress gridlocked, President Obama will have to find another way to create good jobs in America. The best way forward is to use the federal contracting footprint.

This piece originally appeared on The New Republic.

Debunking right-wing talking points with charts

Republicans didn’t just respond to the State of the Union, they responded four times. The problem is that a lot of their talking points don’t stack up with reality.

1) Taxes Are Too High on The Rich

In fact, taxes have become less progressive since 1960:

Since 2004 there has been a modest increase in income taxes for the wealthiest one percent, but we are nowhere near the 1960s.

2) The Government is Too Big

In fact, government revenues as a percentage of GDP has remained flat in the U.S. while it has increased in other developed countries.

3) We Need to Worry About Opportunity, not Inequality

Research by Miles Corak shows that countries with high levels of inequality have lower levels of upward mobility. Raj Chetty and his colleagues found a similar trend in census zones within the U.S.

4) We Don’t Need a Higher Minimum Wage

According to John Schmitt f the minimum wage had kept rising with productivity, it would be more than double what it is now.

minimum wage and productivity

5) The Deficit! The Deficit!

The deficit is falling:

It’s awful to have to keep pointing these things out, but the right still relies on the same stale talking points.