Naked Capitalism Link of the Day

Today's link: Companies Push for Tax Break On Foreign Cash, at the NYT:

Corporations and their lobbyists say the tax break could resuscitate the gasping recovery by inducing multinational corporations to inject $1 trillion or more into the economy, and they promoted the proposal as “the next stimulus” at a conference last Wednesday in Washington.
“For every billion dollars that we invest, that creates 15,000 to 20,000 jobs either directly or indirectly,” Jim Rogers, the chief of Duke Energy, said at the conference. Duke has $1.3 billion in profits overseas.
But that’s not how it worked last time. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment, and 800 took advantage.
Though the tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research.
This money comes from overseas operations and in some cases accounting maneuvers that shift domestic profits to low-tax countries. The study concluded that the program “did not increase domestic investment, employment or research and development.”

This is such a horrifically bad idea for citizens.  The companies get a huge tax break, then continue to route their money through low-tax countries like Ireland and the Caribbean Islands, pile more money up, then ask for another tax holiday.  Lather, Rinse, Repeat.  This idea has been kicking around for a while, and you always hear the same thing, we'll create jobs.  Instead, most of the money went toward dividends and stock buybacks.  Obviously, tech companies have a lot of cash overseas, but so do pharmaceutical companies.  This is just a very bad deal for regular citizens, and a giant giveaway for multinational corporations.

Bruce Bartlett: Pawlenty, You Are Full of Crap

Here:

Republicans claim to be deeply concerned about the budget deficit and the national debt, yet repeatedly demand additional large tax cuts. For example, former Minnesota Gov. Tim Pawlenty, a candidate for the Republican presidential nomination, supports a balanced budget amendment to the Constitution but also wants an $8 trillion tax cut. He rationalizes this contradiction by asserting that his tax cut will not actually lose any revenue. As Pawlenty told Slate reporter Dave Weigel on June 13:

“When Ronald Reagan cut taxes in a significant way, revenues actually increased by almost 100 percent during his eight years as president. So this idea that significant, big tax cuts necessarily result in lower revenues – history does not [bear] that out.”

In point of fact, this assertion is completely untrue. Federal revenues were $599.3 billion in fiscal year 1981 and were $991.1 billion in fiscal year 1989. That’s an increase of just 65 percent. But of course a lot of that represented inflation. If 1981 revenues had only risen by the rate of inflation, they would have been $798 billion by 1989. Thus the real revenue increase was just 24 percent. However, the population also grew. Looking at real revenues per capita, we see that they rose from $3,470 in 1981 to $4,006 in 1989, an increase of just 15 percent. Finally, it is important to remember that Ronald Reagan raised taxes 11 times, increasing revenues by $133 billion per year as of 1988 – about a third of the nominal revenue increase during Reagan’s presidency.

The fact is that the only metric that really matters is revenues as a share of the gross domestic product. By this measure, total federal revenues fell from 19.6 percent of GDP in 1981 to 18.4 percent of GDP by 1989. This suggests that revenues were $66 billion lower in 1989 as a result of Reagan’s policies.

This is not surprising given that no one in the Reagan administration ever claimed that his 1981 tax cut would pay for itself or that it did.

Wow, tax cuts don't pay for themselves, so Republicans should quit saying that they do.  Unfortunately, the Republican Bible was written by God, and it says: Tax Cuts Always Pay for Themselves.  Don't let those old Earth-believing numbers people fool you, God likes tax cuts and they work.  There were no taxes or regulations in Eden before Eve listened to the snake, who told her to install progressive taxation and a welfare state, then man was kicked out of Paradise.

It would be nice if Republicans dealt in the reality-based world where facts and numbers trumped religious beliefs and magic ponies, but they don't.

Dayton Makes the New York Times

Not in a good way (h/t Mark Thoma):

Among the largest metropolitan regions that will have a long road to recovery are manufacturing centers in Ohio and Michigan, where huge waves of layoffs at car plants and other factories affected thousands of workers.
“The type of jobs lost are not easily replaced,” said Lucious Plant, work force development manager in Montgomery County, which includes Dayton and surrounding communities. The region was overwhelmed by thousands of job losses at plants operated by General Motors and the parts supplier Delphi Automotive.
Mr. Plant said that old-line factory workers did not necessarily have the skills for the jobs that are now being added by advanced manufacturers. Dayton, which lost 42,500 jobs — or more than 10 percent of its labor force — during the recession, has had some luck attracting new employers recently, landing a Caterpillar Logistics distribution center that is expected to eventually bring on 600 people. Also, the back-office operations of a law firm added about 200 jobs. (emphasis mine)
Since losing a job at Delphi in 2008, Josh Hamer has been taking odd jobs repairing computers and is attending community college on government grants to earn an associate’s degree in network management. In the meantime, he has filed hundreds of job applications.
“I want anything that will pay the bills,” said Mr. Hamer, 32. “But they see Delphi and they see me applying for an office job, and they say, ‘You can’t do this job because you’re not qualified for it.’ They see grunt work, and they see a grunt.”

Wow, 42,500 jobs lost, but 2 new area employers are hiring 800.  Some people have found work, and those who held on to their jobs are working overtime, but the overall picture isn't good.

Illinois Collar County Farmers Take Advantage of Housing Bust

Chicago Tribune (h/t the sister):

Brothers Bob and Ed Baltz are two who have capitalized on the dramatic turn of events. More than five years ago, they had all the hard-charging, prominent local and national builders, including Neumann Homes, Del Webb, Centex Homes and Pasquinelli Homes, knocking on the doors of their family farm.
"We had everybody coming in and making offers," Ed Baltz said.
The last offer they received, in 2008, never closed, because of the housing industry's crash, but a developer wanted to purchase 600 of their acres in Will County for $72,000 an acre, or more than $43 million.
The two had already sold slightly more than 300 acres outside Chicago, at an average of $25,000 per acre.
They took those proceeds and bought 4,000 acres, in 17 downstate counties, that they rented to other farmers. That left them 1,800 acres to farm corn and soybeans in Chicago's exurbs, including fewer than 1,000 acres they owned.
That's when fate smiled on them.
During the past year, corn prices have doubled on increased demand for use as livestock feed and biofuels, and soybean prices have risen by more than 50 percent.
As those prices rose, the Baltz brothers began selling their fertile land downstate that they paid $2,500 to $4,000 an acre for and which is valued at as much as $8,000 an acre. During the past 12 months alone they've sold more 2,000 acres. Now they are more active farmers in their own backyards.
During the past three months, they've purchased from lenders almost 1,000 acres of farmland in Will and Kendall counties that were once scheduled for homes, paying a fraction of what developers paid years ago.
"A lot of (banks) just want it off their books," Ed Baltz said. "We got a little more power because we got the cash to spend."

Well that seems to have worked out well for them.  Just imagine where they would be at if that $43 million sale would have gone through. 

Payroll Tax Cut Part of War on Middle Class

LA Times:

Make no mistake: This is a bipartisan effort. It started back in December, when President Obama capitulated to the GOP on a budget deal by cutting the payroll tax, which funds Social Security. Advocates for the program pointed out then the shortcomings of this approach: It was targeted inefficiently and unfairly, skewing to the upper middle class and hurting lower-income families in comparison with the Making Work Pay tax credit it replaced.

Even more troubling, it blew a hole in the financing mechanism for Social Security by reducing payroll tax revenue by roughly $110 billion for the year. It was plain then, as it is now, that once you've cut a tax, it's ever harder to restore it.

Putting Social Security's income stream on the negotiating table for the first time in more than half a century simply provided a new opportunity for attacks on the program's stability from those who would love to see it disappear — to be replaced, no doubt, by a privatized investment program that would profit Wall Street hucksters at the expense of everyone else.

I think these are really good points.  Republicans will fight to keep the tax cuts permanent, paint anybody letting the cut expire as raising taxes, and still argue that we need to cut Social Security because it isn't solvent long-term.  Either the limit on taxable earnings should be removed, or the tax should be applied to all income and not just earned income.  This would allow a lowering of the rate, benefitting those at the lower end of the income spectrum, and it would help make the program more solvent.

NASA Image of the Day

Here:

This glowing emerald nebula seen by NASA's Spitzer Space Telescope is reminiscent of the glowing ring wielded by the superhero Green Lantern. In the comic books, the diminutive Guardians of the Planet "Oa" forged his power ring, but astronomers believe rings like this are actually sculpted by the powerful light of giant "O" stars, the most massive type of star known to exist.

Happy Juneteenth

June 19:

Juneteenth, also known as Freedom Day or Emancipation Day, is a holiday in the United States honoring African American heritage by commemorating the announcement of the abolition of slavery in the U.S. State of Texas in 1865. Celebrated on June 19, the term is a portmanteau of June and nineteenth, and is recognized as a state holiday in 37 states of the United States.

The First Baseball Game

June 19, 1846

Alexander Cartwright was a bookseller and volunteer firefighter in Manhattan. He led the establishment of the Knickerbocker Base Ball Club (after the Knickerbocker Fire Engine Company) in 1842. The Knickerbockers played a brand of stick-and-ball game called town ball on a field at 47th Avenue and 27th Streets.^[1]
In 1845 Cartwright and a committee from his club drew up rules converting this playground game into a more elaborate and interesting sport to be played by adults. The first clearly documented match between two baseball clubs under these rules took place on June 19, 1846, at Elysian Fields in Hoboken, New Jersey. In this match, the Knickerbockers lost to the "New York Nine" by a score of 23 to 1.

Naked Capitalism Link of the Day

Today's link: Paychecks as Big as Tajikistan, by Gretchen Morgenson at the New York Times:

Let’s begin with the view from 30,000 feet. Total executive pay increased by 13.9 percent in 2010 among the 483 companies where data was available for the analysis. The total pay for those companies’ 2,591 named executives, before taxes, was $14.3 billion.
That’s some pile of pay, right? But Mr. Ciesielski puts it into perspective by noting that the total is almost equal to the gross domestic product of Tajikistan, which has a population of more than 7 million.
Warming to his subject, Mr. Ciesielski also determined that 158 companies paid more in cash compensation to their top guys and gals last year than they paid in audit fees to their accounting firms. Thirty-two companies paid their top executives more in 2010 than they paid in cash income taxes.
The report also blows a hole in the argument that stock grants to executives align the interests of managers with those of shareholders. The report calculated that at 179 companies in the study, the average value of stockholders’ stakes fell between 2008 and 2010 while the top executives at those companies received raises. The report really gets meaty when it compares executive pay with items like research and development costs, and earnings per share.

This makes the point that executive pay often doesn't match company performance, or any reasonable assessment of the executive's value.  In conjuction with the previous post on income inequality, I think we ought to consider the question, how much is too much?  There are some other good links today, especially one reviewing a new book about Churchill and the Bengali famine in World War II.

Income Inequality in Numbers

Via Calculated Risk, the Washington Post:

For years, statistics have depicted growing income disparity in the United States, and it has reached levels not seen since the Great Depression. In 2008, the last year for which data are available, for example, the top 0.1 percent of earners took in more than 10 percent of the personal income in the United States, including capital gains, and the top 1 percent took in more than 20 percent. But economists had little idea who these people were. How many were Wall street financiers? Sports stars? Entrepreneurs? Economists could only speculate, and debates over what is fair stalled......
The top 0.1 percent of earners make about $1.7 million or more, including capital gains. Of those, 41 percent were executives, managers and supervisors at non-financial companies, according to the analysis, with nearly half of them deriving most of their income from their ownership in privately-held firms. An additional 18 percent were managers at financial firms or financial professionals at any sort of firm. In all, nearly 60 percent fell into one of those two categories.

The article discusses reasons why the outlook on income inequality has changed so dramatically since the 1970's.  I think part of this is that the society has accepted too readily the idea that the people who make this money have earned it, and that they work harder than anyone else.  There is a moral component to the issue, which people who grew up in the Depression understood, but that later generations don't.  Progressive income taxes helped to balance the scales, but since the Reagan administration, the trend has been to lower progressivity.  One would think that today's economic difficulties would cause people to give the issue more consideration, but so far, that doesn't seem to be the case.