Working Life Jonathan Tasini's Ruminations on Work, The Economy, and Politics Tue, 25 Nov 2014 16:15:57 +0000 en-US hourly 1 You Earned $265 Million In 2010 Tue, 25 Nov 2014 16:15:57 +0000 Well, of course, you didn’t–and this is no Nigerian prince scam. Rather, it’s the average income for the top 400 earners in the U.S. This isn’t the top 1 percent. This is the ubber top percenters, the .001 percent.

Per The Wall Street Journal:

The 400 individuals and couples reporting the highest adjusted gross income for 2010 – the latest data available – earned an average of $265 million per return, according to new statistics from the Internal Revenue Service. The agency has tracked such data since 1992.The total income for the group of 400 taxpayers was $106 billion. Although the 2010 total was far higher than the $81 billion earned by the group in 2009 during the financial crisis, it was still well below the $138 billion reported for 2007, the record high.

The 2010 figure came to 1.3% of total income reported by all U.S. taxpayers. In 1992, by comparison, the top 400 claimed 0.5% of total income.

To make the list, taxpayers had to have at least $99 million of income, well below the 2007 cutoff of $138.8 million. In 1992, the threshold was $24.4 million.

In 2010, the top 400 returns reported an average of $150 million in net capital-gains income. On average, these taxpayers received 57% of their income from capital gains, as opposed to other sources of income such as wages. About 80% of the capital gains qualified for lower rates, according to the IRS data. The group reported dividends averaging $34 million each.[emphasis added]

Note the part about capital gains not wages. These people mostly don’t work for a living wage. They sit back and collect money from investments.In fact, more than likely, a large part of their wealth comes precisely from the poverty of everyone else. You see, the entire economy thrives on poverty–low wages, way below the productivity gains of the past 30 years, fatten up the profits of corporations like Wal-Mart and most major companies.

And those top 400 earners are going to be the very owners of those companies and/or largest shareholders-investors.

So, they thank you very much for your hard work because without your hard work–actually, your slave-like wages, no real health care, no pensions–they could not live in the style they have become greatly accustomed to.

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They Don’t Flee Mon, 24 Nov 2014 21:44:47 +0000 Block the borders!!! Those rich people are fleeing state high taxes. Yeah, right–it’s a myth.

I always have argued this is a myth. Here’s another bit:

Proponents of the tax flight myth argue that people intentionally flee states like New York and California for states like Texas and Florida due to a conscious desire to pay lower state and local taxes. They draw the conclusion that states can promote in-migration and economic growth by cutting income taxes for the wealthy or at the very least stopping tax increases. Mazerov’s research shows that these arguments are dead wrong. In a paper he wrote in May, Mazerov found that taxes have a negligible effect on interstate moves; most people (75 percent) cited new jobs or family obligations as the main reason for leaving their state in a 2013 Census Bureau Survey. Furthermore, the rate of interstate relocation has declined over the past few decades; only 1.5 percent of the US population moved between states in 2013. 69 percent of US citizens still live in the state where they were born, and there is no relationship between a state’s income tax rate and the proportion of native born residents.


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NY Fed Chair: Senate Confirmation Needed? Wed, 19 Nov 2014 18:08:34 +0000 The Federal Reserve Bank of New York is first among equals when it comes to the other 11 regional Fed Banks. That person has a big say on interests rates because s/he sits permanently on the Fed’s Board of Governors. So, should the head of the NY Fed have to be confirmed by the Senate? Senator Jack Reed thinks so.

Per The Wall Street Journal, under Reed’s proposal, the president would nominate the head of the NY Fed and the Senate would, then, have to vote to confirm:

“Simply put, this legislation is about holding the New York Fed accountable. It plays a pivotal role in implementing our nation’s monetary policy and enforcing our banking laws, and it’s just too powerful to be left unchecked,” Mr. Reed said.

The bill is the latest attempt by lawmakers to rein in the New York Fed, which has faced criticism that it isn’t properly policing Wall Street.


Mr. Reed’s bill also would require the New York Fed president to testify before the Senate Banking Committee and the House Financial Services Committee at least once a year.

Mr. Reed and his staff have been discussing the legislation with offices on both sides of the aisle, and the senator expects it to garner bipartisan support, a spokesman said. Its prospects could be good. Sen. Richard Shelby (R., Ala.), who is widely expected to become the next chairman of the banking panel next year, is a fierce critic of the Fed and its handling of supervision ahead of the financial crisis. In general, Fed issues—especially in the regulatory arena—attract a lot of interest from members of both parties.

A similar provision was part of the Senate-passed version of the 2010 Dodd-Frank financial-overhaul law, but the language was stripped out during the House-Senate negotiations on the final bill.

I’m not entirely sure that this would end up creating tougher oversight. For that, you need a White House and a Congress really willing to go after the miscreants…which hasn’t been the case.

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Warren/Manchin: “The Fed Needs Governors Who Aren’t Wall Street Insiders” But They Miss Key Point Tue, 18 Nov 2014 15:19:20 +0000

Well, duh…

It’s good to see this demand by both Elizabeth Warren and Joe Manchin. But, there’s an important point missing.

hey co-write an opinion piece where it actually might be noticed (as opposed to The Nation, for example): The Wall Street Journal.

Quick background: the president has two vacancies to fill on the Federal Reserve Board of Governors. The Fed has been basically been run in the interests of banks, and has not lifted a finger to investigate banks–certainly not at the regional bank level where none other than Jamie Dimon, who runs a “one bank crime spree”, continued to sit on the NY Fed Board even after the financial crisis in which he played a central role, as Bernie Sanders pointed out.

Warren and Manchin want this to stop:

We joined the Senate Banking Committee to try to make the banking system work better for American families. That’s why we’re concerned that the Federal Reserve—our first line of defense against another financial crisis—seems more worried about protecting Wall Street than protecting Main Street. Fortunately, this is one problem the Obama administration can start fixing today by nominating the right people to fill the two vacancies on the Fed’s Board of Governors.[emphasis added]


Two recent reports highlight that the Fed isn’t very good at supervising certain banks. In September, Carmen Segarra, a former bank examiner at the Federal Reserve Bank of New York, released secret recordings she had made of meetings at the New York Fed in 2012. The recordings revealed that New York Fed employees had identified concerns with a proposed Goldman Sachs deal with Banco Santander , calling it “legal but shady.” The New York Fed didn’t attempt to make Goldman address these concerns. The recordings also showed Ms. Segarra’s superiors pressuring her to soften her finding that Goldman did not comply with federal regulations on conflicts of interest. While the recordings offered important new insights, they ultimately confirmed the old suspicion that the Fed is too cozy with big banks to provide the kind of tough oversight that’s needed.An October report from the Fed’s Office of Inspector General provided additional confirmation that the Fed is failing to oversee the big banks. The report found that the New York Fed had failed to examine J.P. Morgan Chase ’s Chief Investment Office—the office that incurred over $6 billion in losses in the infamous 2012 “London Whale” incident—despite a recommendation to do so in 2009 from another Federal Reserve System team. The report concluded that the New York Fed needed to improve its supervision of the biggest, most complex banks.


The five sitting governors have a variety of academic and industry experience, but not one came to the Fed with a meaningful background in overseeing or investigating big banks or any experience distinguishing between the greater risks posed by the biggest banks relative to community banks. By nominating people who have a strong track record in these areas and who have a demonstrated commitment to not backing down when they find problems, the administration can show that it is taking the Fed’s supervision problem seriously. Nominating Wall Street insiders for the Board of Governors would send the opposite message.[emphasis]

Putting aside for a moment the important question whether this president, or his attorney general, had any interest in holding the banks accountable for the financial crisis, Warren and Manchin missed an important point:

The Fed has had a long recent history of ignoring an important part of its mandate: ENSURING MAXIMUM EMPLOYMENT.

Here, from its actual mandate:

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.[emphasis added]

“Maximum” has always been viewed as “Full employment.”

But, when was the last time you heard a Federal Reserve Board Governor use the words “full employment”…or any politician for that matter–with the regular exception of Bernie Sanders. When the Fed, the president, and most politicians elites, including Democrats, talk about “full employment” today, they mean 5.5 percent or so–which, back in the day, would be seen as unconscionably high; full employment, at worse, was pegged at 4 percent (and could probably go a bit lower). But, there is an acceptance of a certain level of desperation now and exploitation that would have been seen as immoral say 30-40 years ago.

So, my point is this. It’s great that Warren and Manchin are making a demand for a different kind of appointment. And there is no question that, if there is real oversight of the banks, there is a higher likelihood that we might avert another financial crisis (count me as skeptical but that’s another story).

What tens of millions of Americans need, however, is a Federal Reserve Board of Governors that actually follows its legal mandate and, for fuck’s sake, makes jobs, jobs, jobs and real full employment the priority–which none of them seem to be focused on.

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There Has Never Been Wage Stagnation. It’s A Lie. Mon, 17 Nov 2014 21:52:48 +0000

Because what has happened is robbery. Pure and simple. “Stagnation” is too passive. It makes it sound like a natural phenomena, like a sunset.

It makes it sound like there were never active players in the daily robbery of workers–either by outright breaking of the law or by using the so-called “free market” system to take from people the fruits of their labor.

I raise this because of two elite views expressed in the past couple of days that are pretty common repetitions of the myth of “gee, isn’t it terrible this thing just happened”.

The first, not surprising, comes courtesy of The Washington Post in its editorial entitled “Middle-class income stagnation is a threat to the nation’s health”. After complaining about the recent election, The Post editorial tells us:

Our second point, though, is that honest political dialogue, as opposed to populistic rhetoric, begins by acknowledging how difficult it will be to reverse middle-class income stagnation. It is, after all, a trend which afflicts all industrialized democracies.

And it ends with:

Nothing in the last four decades refutes the basic case for flexible, innovative, American-style capitalism or points to a better alternative; to the contrary. Even so, government and the private sector must find new ways to manage that model — to stimulate growth, equitable distribution and work effort — because if the system doesn’t work for the middle class, it really isn’t working at all.

I do admit to bursting out laughing when reading this. No, it is not difficult to “reverse” middle-class “stagnation”–if you abandon virtually every economic policy supporting the so-called “free market that the Post has endorsed for decades and call it robbery.

Example: the Post has been a long cheerleader for so-called “free trade” going back to NAFTA. You want to reverse middle-income robbery? Dump so-called “free trade” which pits worker against worker and cuts wages. The Post can start by stopping its cheerleading for the Trans-Pacific Partnership.

Some more robbery has taken place courtesy of the gang of thieves who run together in the “cut the deficit” scam, led by Erskine Bowles and Alan Simpson–two of the worst corporate hacks in politics who the Post had held up, month after month, as the saviors of the Republican–if only the rest of us would embrace the Catfood Commission. As diehard adherents to the “free market”, these two ginned up–to be sure, with foolish Democrats as well–the campaign to privatize Social Security, cut Medicare and overall cut the budget, which has happened.

That is robbery of the people. Robbery that has led to the loss of thousands of good-paying public-sector jobs.

So, “stagnation” doesn’t just lap up on the beach one day. People get robbed by the very leaders who are holding the purse strings.

I mean, the real laugher is the sentence “Nothing in the last four decades refutes the basic case for flexible, innovative, American-style capitalism or points to a better alternative; to the contrary.”

Really? REALLY????

NOTHING REFUTES THAT? You mean, the American-style capitalism that lauds the “job creators” over workers, the system that encouraged millions of people to go without basic health care (because, another health care system, say, in Canada or Denmark, wasn’t as good as “American-style capitalism”), the system that was virtually silent when CEOs, over decades, robbed stock holders value and the wealth of a company by pocketing tens of millions of dollars in pay and benefits (and, today, there is just a whimper of “reform” of that robbery with a pathetic demand that shareholders–who never control a majority of the votes–get a “say on pay” vote on the CEO pay package…what a fucking joke), the system that depends on poverty wages because families like the Waltons rob workers of the productivity gains workers produce, and the system that lets companies kill workers, literally, at work (the indictment of that murderous big Donald L. Blankenship, the CEO  who ran the Massey Energy Company, and ran an operation that killed 29 men in 2010, is just the tip of the iceberg because workers die every year, all the time, because that’s the way the system is built–not on safety but for profitable robbery).

I could go on.

But, over to The New York Times and a columnby, who else, the Times’ favorite cuddly apologist for “American-style capitalism”, Steven Rattner, who at least in his bio acknowledges that he is “a Wall Street executive”.

Rattner goes through the usual data we all can expect from the “liberal” side of the world–you know, how our taxes are actually low by global standards (true), the size of our government (small by global standards), etc. etc…

But, here is where he won’t, because he doesn’t see it, admit that it has been robbery by the very system that has enriched HIM that is the problem:

Helping those in the middle, whose incomes have been battered by globalization, will be harder and take longer. Expanded training programs and better education should be the centerpiece of any strategy to improve the lives of the middle class. A more robust economic recovery will also help the middle class, as will pro-growth policy initiatives like investment in infrastructure.

Ah, yes, there’s another one “globalization”…because that just happens…like “stagnation”…

Back in 2006, I wrote about the phony myth of education because it was being used a cover to ram down the throats of the people a robbery taking place, principally via so-called “Free trade”. I wrote, then, that wages, not skills or education, were the most important issue facing workers throughout the globe. The disparity was, and mostly still is, so huge that American workers, no matter how smart they get, will never be able to compete against workers in other countries–unless, of course, Americans are willing to accept a drastic decline in their standard of living.

Giving us the clap-trap about education means that Rattner and others don’t have to wrestle with the real challenge: corporate power, and the robbery that takes place every day in our system. Offering cheaper education (personally, I advocate a free, four-year education for every person willing to work their first post-graduation year for a non-profit community group) is a whole lot easier than putting an end to so-called “free trade”, imposing some community investment demands on the flows of capital and demanding worldwide minimum standards that end the most ferocious competition based solely on wages.

Education is a cruel lie if it becomes the answer to the challenge of global competition. It’s insulting to workers to feed them the line that they are just too dumb to get a fairly compensated job. It isn’t their fault. And until we are willing to confront corporate power, and call out “robbery” people may hang diplomas on their walls of their homes even if they can’t feed their families.

Call it like it is: ROBBERY.

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“I Surrender”: Trying To Kill Obamacare Shows Supreme Court “politicians in robes” Thu, 13 Nov 2014 17:20:43 +0000

Nobody, in my opinion, knows the Supreme Court better, and writes about its decisions and law in a more user-friendly way, than Linda Greenhouse, former NYTimes Supreme Court reporter who has a regular column on the Times website; I read every one of her columns, even if it’s not a topic I particularly work on or follow.

Today, she blisters the Court in a broadside that essentially says: by agreeing to take up a challenge to the Affordable Care Act, the conservative majority has shown that it is simply a group of “politicians in robes”.

Greenhouse has been critical of the conservative majority for a long time. Generally speaking, a main line of argument she often effectively uses is that, particularly Antonin Scalia, Clarence Thomas, and Samuel A. Alito Jr., with regular assists from Anthony M. Kennedy and Chief Justice John Roberts, ignore legal precedent and make law based on their own partisan political agenda. As an aside, I was told, some years ago, when it mattered to me intensely what the Justices were thinking, that Greenhouse is very close to Ruth Bader Ginsburg so I often read her columns with a thought that she is channeling Ginsburg (this is just my hunch, no evidence).

Usually, Greenhouse is subtle about the criticism–she never quite comes out with a paraphrased Aykroydian, “Clarence, you ignorant slut” but, by the time you read to the end of her columns, you get the message.

No holding back today:

Nearly a week has gone by since the Supreme Court’s unexpected decision to enlist in the latest effort to destroy the Affordable Care Act, and the shock remains unabated. “This is Bush v. Gore all over again,” one friend said as we struggled to absorb the news last Friday afternoon. “No,” I replied. “It’s worse.”[emphasis added]

She, then explains why, though she disagreed with the 2000 election decision, this is worse:

That’s not the case here. There was no urgency. There was no crisis of governance, not even a potential one. There is, rather, a politically manufactured argument over how to interpret several sections of the Affordable Care Act that admittedly fit awkwardly together in defining how the tax credits are supposed to work for people who buy their health insurance on the exchanges set up under the law.Further, the case the court agreed to decide, King v. Burwell, doesn’t fit the normal criterion for Supreme Court review. There is no conflict among the federal appellate circuits. (Remember that just a month ago, the absence of a circuit conflict led the justices to decline to hear seven same-sex marriage cases?) In the King case, a three-judge panel of the United States Court of Appeals for the Fourth Circuit, in Richmond, Va., unanimously upheld the government’s position that the tax subsidy is available to those who buy insurance on the federally run exchanges that are now in operation in 36 states.

She, then, explains the state of play at the appellate level and says:

So no, this isn’t Bush v. Gore. This is a naked power grab by conservative justices who two years ago just missed killing the Affordable Care Act in its cradle, before it fully took effect. When the court agreed to hear the first case, there actually was a conflict in the circuits on the constitutionality of the individual insurance mandate. So the Supreme Court’s grant of review was not only unexceptional but necessary: a neutral act. The popular belief then that the court’s intervention indicated hostility to the law was, at the least, premature.[emphasis added]

One reason, she says, is that when a statute has some ambiguous language, deference is given to the federal agency implementing the statute:

The 1984 decision that established this deference principle, Chevron U.S.A. v. Natural Resources Defense Council, Inc., is so central to the modern understanding of how the government works that it is among the most often invoked Supreme Court decisions of all time, cited in some 13,000 judicial decisions so far, a number that grows at the rate of about 1,000 a year. The tax provisions of the Affordable Care Act fall so naturally onto the “Chevron deference” landscape that it would take an agenda-driven act of judicial will to keep them out and to conclude that Congress enacted a law that contained the seeds of its own destruction.[emphasis added]

Basically, and not surprisingly, the conservative majority has no interest in living with this principle.She theorizes that the four Justices who voted against the Act two years ago–Kennedy, Scalia, Thomas and Alito–are trying to put pressure on Roberts who “betrayed” them then in voting with the majority.

And, then, comes the final and, in my mind, devastating paragraph:

So this case is rich in almost every possible dimension. Its arrival on the Supreme Court’s docket is also profoundly depressing. In decades of court-watching, I have struggled — sometimes it has seemed against all odds — to maintain the belief that the Supreme Court really is a court and not just a collection of politicians in robes. This past week, I’ve found myself struggling against the impulse to say two words: I surrender.

Of course, this column isn’t going to cause these political justice to resign.But, it is instructive and worth reading the entire column to get terrific insight into how this particular case shines a particular bright line on the abandonment of all pretense by the conservative majority of being guided by the law.

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TPP: Public Citizen Shreds Forbes’ Lies Wed, 12 Nov 2014 21:19:47 +0000 One of the greatest dangers we face from the odious Trans-Pacific Partnership is the investor-state dispute settlement (ISDS). The pro-TPP forces–who advocate for the non-existent so-called “free trade”–want to ignore the reality of the ISDS and, to do so, they actually have to lie about it. Unfortunately for them, Public Citizen is a tiger that won’t let these lies pass.

Forbes tried to foist on the world the elite view via a piece of nonsense entitled “Trade Dispute Settlement: Much Ado About Nothing”, which was riddled with stupid stuff–wrong and, if you believe it was done intentionally, flat out lies.

To its credit, Forbes gave Public Citizen’s Lori Wallach & Ben Beachy space to rebut the garbage. And the response was epic, and quite informative: Defending Foreign Corporations’ Privileges Is Hard, Especially When Looking At The Facts. The explanation first of what ISDS is:

To his credit, it is no easy task to defend a system that empowers foreign corporations to bypass domestic courts and laws to demand taxpayer compensation for domestic policies that apply equally to their local competitors, but that they claim frustrate special privileges granted to them as foreign investors. The cases are heard by extrajudicial tribunals not bound by precedent. Decisions are not subject to substantive appeal.


In his quixotic effort to defend the ISDS system, Brinkley made a real mess of the facts. There’s not space to go through all 17 factual errors, but it’s important to correct his biggest blunders.For instance, Brinkley argued, “What matters is not whether [the foreign corporations] can sue, but whether they can win.” He then proceeded to misstate the win record.

In fact, the United Nations figures on ISDS case outcomes, which Brinkley cited, show that foreign corporations have gained favorable rulings or settlements in 57 percent of the ISDS cases launched to date.

Foreign corporations have “won” against Canada’s ban on hazardous waste exports, the Czech Republic’s decision to not bail out a bank, a Mexican municipality’s decision to not allow the expansion of a contaminated toxic waste facility, and a Canadian requirement for any and all firms obtaining oil concessions to contribute to research and development in the affected province.


Brinkley seems unaware that in fact the United States has lost 61 out of 67state-state cases brought against it at the WTO – a 91 percent loss rate.

The rebuttal is more detailed and worth the read.It bears pointing out that, putting aside the climate change deal with China, the president was intent on pushing for the TPP to be completed–which, as I wrote, would, among other things, obliterate legally binding pollution control requirements.

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Volkswagen To Recognize UAW In Tennessee Tue, 11 Nov 2014 18:33:47 +0000 A common myth: the auto industry is dying. The reality: no, it’s increasing employment but largely in NON-UNION assembly plants in the South owned by foreign companies like Mercedes and Nissan, and at independent parts suppliers. Let’s see if this breaks open some new opportunities.

Via The Wall Street Journal:

The United Auto Workers union expects Volkswagen AG to make an announcement this week that would pave the way for the union’s local bargaining unit in Chattanooga to be recognized at the German auto giant’s U.S. manufacturing plant.News of the potential announcement was shared in a letter sent to voluntary members of a UAW unit formed this summer after the union failed to officially organize the Tennessee plant. In that letter, provided to The Wall Street Journal, Local 42 President Mike Cantrell said “we await details from the company…our expectation that Volkswagen will recognize Local 42 is based on discussions that took place in Germany last spring, between representatives of the UAW and Volkswagen.”

In February, as many know, the UAW lost the NLRB-sponsored representation election amid widespread interference by right-wing anti-union organizations and individuals, including Sen. Bob Corker. There was much debate, among pro-union advocates, about how the organizing campaign had unfolded–principally, whether the UAW had done enough to contact workers–but what is not debatable is that the anti-union forces illegally interfered in the election and intimidated workers by threatening the loss of jobs.

Then, in April, the UAW withdrew its challenge, based on the documented illegal interference, which had been filed at the NLRB.

I’m going to guess that there were already contacts between the company and the union about what has now transpired. Indeed, in September, the UAW said it had established a Local there in the wake of the withdrawal of the charges:

Gary Casteel, the UAW’s secretary-treasurer, said roughly 750 Volkswagen workers have joined a recently formed union local in Chattanooga, Tenn. The drive comes just months after the UAW narrowly lost an organizing vote that sought authorization it to represent the site’s 1,500 hourly workers.Mr. Casteel said the labor union is asking VW to accept it as a representative for those workers who joined the UAW local. In July it formed Local 42 with some employees after talks with Volkswagen, UAW officials said, despite originally agreeing not to organize for a year if it lost the February vote.

We will see whether this comes to fruition and whether it helps fuel more organizing among the so-called “transplant” foreign auto companies in the South.

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Not Bad Work: Dodging $200 Million In Taxes Mon, 10 Nov 2014 14:35:22 +0000 I often hear the refrain that billionaires and corporations just use legal tax gimmicks to avoid paying a fare share in taxes, and that if you want to hold someone accountable, point your finger at the politician who votes for the tax loopholes that makes tax dodging legal and possible. I get the politician’s responsibility–but only up to a point. Because there is a morality issue at stake here…uh, oh yeah, morality and business don’t coincide, as John Malone proves.

Malone is the chairman of Liberty Global and, per Citizens for Tax Justice, “a world-class tax dodger”:

Last year Malone’s Liberty Global, the largest international cable company, “moved” from Colorado to London through a merger with Virgin Media. The merger was structured as a corporate inversion, a tax-dodging gambit much in the news lately. Although Liberty gives its London office top billing on its website, the company didn’t actually move its headquarters to London—it’s still run primarily out of the company’s office in Colorado.

Aside from Liberty Global’s current and future tax savings expected from the paper move, Malone is estimated to have personally escaped $200 million in income taxes in the inversion deal which generally subjects the shareholders to income taxes on their capital gain. He did that by transferring $600 million of his stake in the company to a charitable trust the day before his company announced the inversion deal and by twisting Treasury regulations into a pretzel to avoid tax on the remaining $260 million piece.

The greed that says Malone—whose estimated net worth exceeds $7.5 billion—can’t even pay 20 percent in capital gains tax (compared to a 35 percent rate on wages) on his $860 million dollar gain is truly unimaginable to me. And that we have laws that allow tax avoidance on this scale is deplorable.

Deplorable is right.

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Still A Disconnect Fri, 07 Nov 2014 18:06:31 +0000 For many months, I’ve been very skeptical about the regular jobs reports that are fairly upbeat in the way they describe the economy. I still feel that way, though the direction is certainly better than say right during the post-financial crisis months.

Today’s report:

Only days after many voters complained that the economy was getting worse, the latest government report on jobs, released Friday, provided fresh evidence that it was getting better. Employers added an estimated 214,000 jobs in October, the Labor Department found, and the official jobless rate, bolstered by a big rise in the number of people finding jobs, dropped to 5.8 percent, down sharply from 7.2 percent last October.

The increase, combined with a revision that showed 31,000 jobs were added to the numbers previously reported for August and September, puts the average monthly employment gain for the past six months at 235,000 — an indication, analysts said, that the economy’s progress was gaining momentum.

And Dean Baker is more upbeat as well in an emailed “Jobs Flash”:

The other news is the report was overwhelmingly positive. The establishment survey showed a gain of 214,000 jobs, with restaurants (42,000 jobs) and retail (27,000 jobs) leading the way. With upward revisions of 31,000 to the prior two months data bringing average growth over the last three months to 224,000. In addition, average weekly hours edged up to 34.6, the highest level since May of 2008.

The household survey also showed a further decline in involuntary part-time employment, with the number dropping 67,000 from the September level. It is now almost 1 million below the year-ago level.

By contrast, voluntary part-time employment is continuing to rise. It increased by 152,000 and now stands 880,000 above its year-ago level. The rise in voluntary part-time employment is likely in part attributable to the Affordable Care Act as workers are now able to get insurance through Medicaid or the exchanges, whereas previously they needed to work a full-time job.

But, I’m still not convinced. Wages are still anemic and people are in debt. Jobs out there still don’t pay a living wage in too many instances. And there are worrying signs all across the globe, particularly in Europe, that the “recovery” is pretty weak.

It just appears to be a pretty lumbering, barely dynamic economy that would slump with any significant headwinds.

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Global Comps’ Secret Tax Deals Robbing Every Citizen, Why CEOs Don’t Worry Much About Elections Thu, 06 Nov 2014 18:50:08 +0000 While most progressive activists and politically obsessed people were dissecting the elections endlessly yesterday (me, I made chicken and audouille gumbo), some pretty damn interesting stuff dropped courtesy of the International Consortium of Investigative Journalists. Bottom line: we’re being robbed every day and the price tag is huge.

The upshot:

Pepsi, IKEA, FedEx and 340 other international companies have secured secret deals from Luxembourg, allowing many of them to slash their global tax bills while maintaining little presence in the tiny European duchy, leaked documents show.These companies appear to have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes, according to a review of nearly 28,000 pages of confidential documents conducted by the International Consortium of Investigative Journalists and a team of more than 80 journalists from 26 countries.

Big companies can book big tax savings by creating complicated accounting and legal structures that move profits to low-tax Luxembourg from higher-tax countries where they’re headquartered or do lots of business. In some instances, the leaked records indicate, companies have enjoyed effective tax rates of less than 1 percent on the profits they’ve shuffled into Luxembourg.


The leaked documents reviewed by ICIJ involve deals negotiated by PricewaterhouseCoopers, one of the world’s largest accounting firms, on behalf of hundreds of corporate clients. To qualify the companies for tax relief, the records show, PwC tax advisers helped come up with financial strategies that feature loans among sister companies and other moves designed to shift profits from one part of a corporation to another to reduce or eliminate taxable income.The records show, for example, that Memphis-based FedEx Corp. set up two Luxembourg affiliates to shuffle earnings from its Mexican, French and Brazilian operations to FedEx affiliates in Hong Kong. Profits moved from Mexico to Luxembourg largely as tax-free dividends. Luxembourg agreed to tax only one quarter of 1 percent of FedEx’s non-dividend income flowing through this arrangement – leaving the remaining 99.75 percent tax-free.

“A Luxembourg structure is a way of stripping income from whatever country it comes from,’’ said Stephen E. Shay, a professor of international taxation at Harvard Law School and a former tax official in the U.S. Treasury Department. The Grand Duchy, he said, “combines enormous flexibility to set up tax reduction schemes, along with binding tax rulings that are unique. It’s like a magical fairyland.”

Shay, by the way, was the former Treasury Department official who argued, as I wrote here, that corporate tax inversions could be halted by executive action.A couple of examples:

   The Pepsi Bottling Group Inc., a New York-based unit of PepsiCo, used subsidiaries in Luxembourg to arrange a series of loans among sister companies that allowed the bottler to reduce its tax rate on its  $1.4 billion purchase of a controlling interest in JSC Lebedyansky, Russia’s largest juice maker. At least $750 million of the money involved in the Russian deal traveled through a Luxembourg subsidiary named Tanglewood, before landing in a Pepsi subsidiary in Bermuda. Luxembourg acted as a tax-reducing conduit as the profits moved from Russia to Bermuda.    Coach fashion label.Coach Inc. Photo: Ken Wolter / Shutterstock.comNew York-based Coach Inc. set up two Luxembourg entities to move €250 million in Hong Kong earnings in 2011, an amount it expected to approach €1 billion by 2013. One Luxembourg entity acted as an internal corporate bank, allowing much of the luxury goods maker’s Asian operating earnings to glide through a series of foreign entities in the form of interest payments on money the company loaned itself. Filings in Luxembourg showed that in 2012, the company paid €250,000 in taxes on €36.7 million in earnings channeled into Luxembourg – a rate of well under 1 percent.


As in many tax havens, a Luxembourg office can be just a mailbox. Office buildings throughout the city are filled with brand-name corporate nameplates and little else. Some have offices and no visible employees. One building at 5 Rue Guillaume Kroll is home to more than 1,600 companies; another at 2 Avenue Charles de Gaulle houses roughly 1,450; and a building at 46A Avenue J.F. Kennedy is home to at least 1,300, according to an ICIJ analysis of Luxembourg’s corporate registry.These companies can represent big bucks. From the U.S. alone, direct investment into Luxembourg in 2013 was $416 billion, according to the U.S. Bureau of Economic Analysis. Of that, the vast majority, $343 billion, was in the form of holding companies, which are vehicles to hold securities and financial assets rather than to create local jobs. In fact, Luxembourg represents a tiny fraction of 1 percent – 0.13 percent in 2010 – of all overseas jobs with American companies, indicating it is a place that houses money more than it provides employment.

In 2011 Luxembourg passed new rules requiring that Luxembourg-based companies that serve as internal banks for larger corporate structures station a majority of their managers and board members in the Grand Duchy. It’s unclear how these rules are enforced and the Ministry of Finance did not respond to ICIJ’s questions about mailbox companies in Luxembourg.

The whole piece is worth reading. Really great journalistic work.Sure, CEOs care about trade deals, cutting taxes, destroying unions and trashing regulations. But, from election to election, the way in which they can rob the Treasury and hide money just continues unabated, irrelevant to who is elected.

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Poor Households, Dumb Economists and The Perils of Bi-Partisanship Thu, 06 Nov 2014 18:17:19 +0000 You know, maybe some of the political geniuses and economists should stop talking about how great the economy is and actually get beyond the talking points of the White House and look at a tiny fact to get a clue about why people are angry: household wealth. After understanding those numbers, they’d also understand that part of the problem has been, in fact, bi-partisanship.

Wealth of households? It sucks and it’s getting worse, per my friends at the Center for Economic and Policy Research:

Between 1989 and 2013, mean household net worth rose 54 percent—from $342,300 to $528,400. However, these gains are exaggerated by the fact that the population of the United States was older in 2013 than it was in 1989. Further, looking across the distribution of wealth it is clear that the gains were not evenly received; median net worth
fell over the 24-year period—from $85,100 in 1989 to$81,400 in 2013. Finally, these numbers do not include the value of defined-benefit pensions, which were much more common in 1989.Taken together, the wealth numbers present a much more pessimistic view of economic progress in the United States than the simple average suggests.

…In general, wealth grew from 1989 to 2007 and shrank thereafter, as the bubbles in residential and commercial real estate burst, and the stock market fell. Though the stock market had nearly recovered in inflation-adjusted terms to its 2007 peak, house prices had not. Thus, housing equity rates for the highly leveraged households in the bottom three-fifths plummeted while residences represented a much smaller share of assets among those with greater net wealth. This dynamic helped increase the differences in wealth between the top and bottom.[emphasis added]


When compared with the previous Surveys of Consumer Finance, it can generally be said that wealth grew in the United States from 1989 to 2007 and shrank from then on. At the time of the 2013 survey, the stock market had almost recovered to its 2007 peak. House prices had not. With house prices representing a larger share of assets for the bottom three fifths of Americans, this helped increase the differences in wealth between the top and the bottom. All in all, the results of the survey yield a pessimistic picture of economic progress since the end of the recession.

I’ve been amused and appalled (depending on whether I’ve had enough coffee) at the way in which political leaders and economists just can’t get why Americans are not happier and why they don’t share the apparent joy of the “strong economy” with all the “green shoots” of evidence.

Well, the above should tell us a lot: people don’t feel wealthy because they aren’t (yes, it’s true, relative to someone living on a trash heap in Mumbai, people are better off in many ways).

Take the above with the stupidity around the hype on job reports–elites, including Democrats, talk about “full employment”, which they mean 5.5 percent or so–which, back in the day, would be seen as unconscionably high; full employment, at worse, was pegged at 4 percent (and could probably go a bit lower). But, there is an acceptance of a certain level of desperation now and exploitation that would have been seen as immoral say 30-40 years ago.

And that’s where we come to bi-partisanship: the desire for more “bi-partisanship” ignores the fact that there has been a huge amount of bi-partisanship…which has caused the poverty workers find themselves in today. Trade deals, tax cuts, the elimination of Glass-Steagall (which was a significant cause of the financial crisis and the loss in home values–thank you, Bill Clinton) and on, and on.

I’m not for bi-partisanship. More and more, I’m for breaking shit.

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BREAKING…Yawn…Again: JP Morgan Faces Criminal Probe (Though Unlikely Execs End Up In Jail) Tue, 04 Nov 2014 01:39:29 +0000 Have we heard this one before? Uh, huh. Will it mean any of the top bankers lose their jobs or, perish the thought, end up in jail? Well, I’d give a better chance the Waltons of Wal-Mart give away their entire fortune to their workers to pay for health care and higher wages.

This is happening:

JPMorgan Chase & Co. (JPM) said it faces a U.S. criminal probe into the firm’s foreign-exchange business and increased the upper end of its “reasonably possible losses” related to legal matters.The lender is cooperating with a criminal investigation by the Department of Justice as well as inquiries by the Commodity Futures Trading Commission and regulators in Britain and elsewhere, the New York-based company said today in its quarterly regulatory filing. Reasonably possible losses could be as much as $5.9 billion, the bank said, an increase of $1.3 billion since the end of June.

This just a few days after the geniuses at the Justice Department discovered that, surprise, the Wall Street criminal cartel is out breaking laws again.This is no surprise. There has never been an effort to hold the big fish accountable–the Robert Rubins of the world–for the financial crisis, and, in particular, JP Morgan’s Jamie Dimon just skateseven as some understand thatJP Morgan is a one bank crime spree.

And, so, they have rightly concluded: the business of robbing the people must continue.

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Tim Cook Should Stop Hiding Billions In Taxable Profits From The People, Gay & Straight Fri, 31 Oct 2014 17:57:17 +0000

I am of two minds about Tim Cook’s public declaration that he is gay. On the one hand, good for him if he thinks that it emboldens other people to not be afraid of their sexual preference being known publicly. On the other hand, if the message is that, you, too can come out but only once you are the CEO of one of the most powerful corporations in the world–and you can do all that while fleecing the U.S. government of billions of dollars in revenue…well, it’s a moment to pause and consider.

As The New York Times puts it:

Announcements like Mr. Cook’s send a message to gay businesspeople that they too can become a chief executive.

Fair enough.But, what kind of ETHICS are people like Cook sending to these potential future executives? What kind of view about the responsibility corporations have to maintaining a semblance of a functioning society do Cook’s actions in other parts of his role as CEO tell us about those ethics?

On the facts, the answer about Apple, and Cook, is: you can go ahead and stash billions of dollars of taxable profits overseas, far from the reach of the U.S. Treasury–that would be the entity that helps finance services for all people, gay and straight–and, thereby, you cripple the country because it has less money for roads, schools, food safety and a whole host of other services.

The facts, courtesy of Citizens for Tax Justice today:

The media may be abuzz with Apple CEO Tim Cook’s essay in BusinessWeek yesterday, but they also should be paying attention to the company’s Securities and Exchange Commission filing this week. In its annual 10-K report, Apple reveals that, despite congressional hearings on its offshore tax dodging, the company continues to divert profits to tax havens.The 10-K reports that Apple increased its offshore profits by $16 billion last year, which brings its total hoard to $137 billion. The company also discloses that it would pay a U.S. tax rate of 33 percent if it repatriates those earnings, down only slightly from prior years. Because the US tax would be reduced by any foreign tax the company has already paid, that means the company has paid almost no tax on the foreign income despite having substantial sales in countries where the corporate tax rate is in the mid-20s.


How does Apple do that? By shifting profits, through the use of tax haven subsidiaries, to countries that have little or no corporate income tax. Apple Operations International (AOI), the subsidiary which heads up the foreign group, was incorporated in Ireland but the company claims it is not resident in Ireland for tax purposes. In fact, the company claims that AOI isn’t “tax resident” anywhere in the world, so AOI files no corporate tax returns and pays no corporate tax. Apple has also negotiated a super-low tax rate for other subsidiaries in Ireland of only 2 percent—an arrangement that is under investigation by the European Commission as illegal state aid.

And the money closer:

CEO Cook’s very personal essay expresses his wish that he can be an inspiring example to people with similar struggles. We only wish Apple aspired to be an example of a good corporate citizen—one who contributed to the common welfare by paying its share of tax.

So, he’ll get lots of free publicity for his personal essay.But, that should not turn him into a Teflon-CEO, where he deflects very serious criticisms about a darker side Apple plays in undercutting society.

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War Is Good Thu, 30 Oct 2014 17:23:27 +0000 At least if you are in the war-making industrial business sector–or the bean-counting of the economy. Because, really, that’s what accounts for a nice little hunk of this little spurt of allegedly “good” economic news.

As my friend Dean Baker at the Center for Economic and Policy Research points out in his “Data Flash” email:

GDP grew at a higher than expected 3.5 percent annual rate in the third quarter. The biggest factors in this growth were a 16.0 percent increase in defense spending, which added 0.66 percentage points to growth; an 11.0 percent increase in the export of goods, which added 0.99 percentage points to growth; and a 2.4 percent decrease in the import of goods, which added 0.34 percentage points to growth. In other categories, consumption grew at a modest 1.8 percent annual rate, while non-residential investment grew at a 5.5 percent rate.The jump in defense spending is likely an anomaly which will be reversed in future quarters. Defense spending is always erratic and big movements are usually reversed in later quarters. The trade data are encouraging, but may be reversed as the dollar has strengthened in recent weeks, making U.S. goods less competitive.[emphasis added]

So, essentially, a about a fifth of the growth is tied to war-making–which is like cotton candy…Though the country, of course, has always found new ways of making war. So, hey, you never know: the new political slogan, for either party, could be “War Is Good For Your Wallet”. And that would fit perfectly, I reckon, for the presumed Democratic front-runner, and probably any of the Republicans.

So, while wages are still going nowhere, people are in debt and lots of people have given up looking for a decent job, no worries: bombs away!

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Heh, Surprise: They Are At It Again Thu, 30 Oct 2014 01:21:54 +0000 Under the heading of I am not surprised at all…guess what…the bankers are cheating again.

When you don’t put them in jail and they keep their jobs and pay, why would anyone think this is surprising:

It would be the Wall Street equivalent of a parole violation: Just two years after avoiding prosecution for a variety of crimes, some of the world’s biggest banks are suspected of having broken their promises to behave.

A mixture of new issues and lingering problems could violate earlier settlements that imposed new practices and fines on the banks but stopped short of criminal charges, according to lawyers briefed on the cases. Prosecutors are exploring whether to strengthen the earlier deals, the lawyers said, or scrap them altogether and force the banks to plead guilty to a crime.

That effort, unfolding separately from a number of well-known investigations into Wall Street, has ensnared several giant banks and consulting firms that until now were thought to be in the clear.

There was no individual penalty for breaking rules and destroying the economy. They are like children–they will keep misbehaving until punished.

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