As the second wave of fallout unfolded, however, a number of commentators pivoted from questioning the “insufficient oversight” of line workers in Cincinnati to condemning the IRS’s systemic failure to provide oversight of free spending, purely political groups that abuse the tax code by claiming non-profit status.

These observers are right to argue that the biggest threat to our democracy is that the scandal, by shifting outrage from the groups breaking the law to the agency that is supposed to enforce it, will eliminate any hope of neutral, non-partisan enforcement of the tax and election laws, opening the door to even more flagrant violations than we see now.

Read more at the Brennan Center.

Google, Amazon, Starbucks, every other major corporation, and every big Wall Street bank, are sheltering as much of their U.S. profits abroad as they can, while telling Washington that lower corporate taxes are necessary in order to keep the U.S. “competitive.”

Baloney. The fact is, global corporations have no allegiance to any country; their only objective is to make as much money as possible — and play off one country against another to keep their taxes down and subsidies up, thereby shifting more of the tax burden to ordinary people whose wages are already shrinking because companies are playing workers off against each other.

I’m in London for a few days, and all the talk here is about how Goldman Sachs just negotiated a sweetheart deal to settle a tax dispute with the British government; Google is manipulating its British sales to pay almost no taxes here by using its low-tax Ireland subsidiary (the chair of the Parliamentary committee investigating this has just called the do-no-evil firm “devious, calculating, and unethical”); Amazon has been found to route its British sales through a subsidiary in low-tax Luxembourg, and now receives more in subsidies from the British government than it pays here in taxes; Starbucks’ tax-avoidance strategy was so blatant British consumers began boycotting the firm until it reversed course.

Meanwhile, at a time when you’d expect nations to band together to gain bargaining power against global capital, the opposite is occurring: Xenophobia is breaking out all over.

Read more at Huffington Post

Why, for example, has the IRS been so indulgent of far bigger, flagrantly partisan tax-exempt groups like Karl Rove’s Crossroads GPS and Charles and David Koch’s Americans for Prosperity?  Such groups spent hundreds of millions of tax-exempt dollars to influence the last two elections, in clear violation of IRS rules.

If the IRS is supposedly so zealous about tax enforcement, why has it left on the table hundreds of billions of dollars in offshore tax evasion by the wealthiest — money owed to the Treasury that could reduce the budget deficit?

As Republicans mount hearings to pillory the IRS, beginning Friday when the House Ways and Means Committee officially reviews the Treasury Inspector General’s Report on the Tea Party affair, these crucial issues will likely be sidelined. And the Republicans don’t have entirely clean hands.

For decades, dating back at least to former House Speaker Newt Gingrich’s “Contract with America” in 1994, th­­e Republicans have demonized the IRS, cut its enforcement budget and created procedural obstacles to tax collection in the name of taxpayer rights. Under President George W. Bush, the IRS even shifted scarce audit resources from investigations of tax dodges used by the wealthy to alleged fraud on the part of working families relying on the Earned Income Tax Credit.

When agencies are chronically understaffed, they tend to target the small fry and resort to short cuts. It is far easier to go after a taxpayer who depends on EITC than to challenge a complex offshore trust or hedge fund whose artful tax fraud could consume thousands of investigative hours to unearth.

Read more at Reuters

But now the Wall Street behemoths are bigger than ever and President Obama is looking to cut the Social Security benefits of retirees. That will teach the Wall Street boys to be more responsible in the future.

Most people are now familiar with President’s Obama’s proposal to cut Social Security by reducing the annual cost-of-living adjustment (COLA). While the final formula is somewhat convoluted, the net effect is to reduce benefits by an average of roughly 3.0 percent.

Since Social Security benefits account for more than 70 percent of the income of a typical retiree, this cut is more than a 2.0 percent reduction in income. By comparison, a wealthy couple earning $500,000 a year would see a hit to their after-tax income of just 0.6 percent from the tax increase that President Obama put in place last year.

While President Obama is willing to make seniors pay a price for the economic crisis, his administration is unwilling to impose any burdens on Wall Street. Specifically, it has consistently opposed a Wall Street speculation tax: effectively a sales tax on trades of stock and derivatives. The Obama administration has even used its power to try to block efforts by European countries to impose their own taxes on financial speculation.

If the idea of taxing stock trades sounds strange, it shouldn’t. The United States used to impose a tax of 0.04 percent until Wall Street lobbied to eliminate it in the mid-1960s. Many countries, including the United Kingdom, Switzerland, China, and India already impose taxes on stock trades.

The tax in the UK is 0.5 percent on stock trades (0.25 percent for both the buyer and the seller). It dates back more than three centuries. The country raises more than 0.2 percent of GDP ($32 billion in the United States) from the tax each year. The tax has not prevented the London stock exchange from being one of the largest in the world.

Read more at Huffington Post

Republicans, especially House Republicans, have been using the national debt ceiling as a kind of cudgel to gain advantage in the budget wars. This game of chicken got a bit scary in August 2011 when the country came within a hair’s breadth of defaulting on the national debt. The hard-fought New Year’s Day agreement between the two parties postponed the next day of reckoning to May 18, which is now almost upon us. But a combination of lower-than-anticipated spending and higher-than-anticipated revenue—hence smaller deficits—has pushed debt-ceiling D-Day back to sometime in September or October. What a relief.

Or maybe not. House Republicans are now stirring the pot again with H.R. 807, which should really be called the “Partial Faith and Dubious Credit Act.” The bill’s central idea is to assure owners of Treasury debt instruments by giving their principal and interest payments priority over all other payments that the U.S. government is obligated to make. (Though the latest version also prioritizes Social Security checks. Hey, this is politics.) Under H.R. 807, should a binding debt limit preclude meeting all federal obligations, Treasury bills and Social Security checks would be safe. But Medicare bills, wages of soldiers and air-traffic controllers, unemployment benefits and the like might not be.

Does that sound like responsible financial practice to you? It shouldn’t. Suppose you made every mortgage payment in full and on time—and credibly pledged to do so forever. (More on the credibility of such a pledge shortly.) But suppose you also failed to make the minimum required payments on your credit cards and stiffed the automobile dealer entirely. Would your credit rating suffer? Of course. So would the nation’s. If the provisions of H.R. 807 ever came into effect, the law could potentially turn the United States of America into deadbeat nation.

Read more at Wall Street Journal

Currently, the businesses best able to garner generous grants and tax incentives by promising to create jobs within specific political boundaries are large, mobile corporations that can pit communities against one another, demanding ever-higher subsidies.

Greg LeRoy wrote about the problem at length in “The Great American Jobs Scam.” In his 2010 book, “Investment Incentives and the Global Competition for Capital,” Kenneth Thomas estimated the total cost to American taxpayers at about $70 billion a year.

Read more at the New York Times.

When the data are entered correctly, this hugely influential paper can no longer be used to argue that the United States or other wealthy countries need fear a large growth penalty by running deficits now. There is no obvious reason that governments can’t increase spending on infrastructure, research, education and other services that will both directly improve people’s lives and foster future growth.

With the advocates of austerity on the run this is a great time to pursue the attack. The public should understand that the often expressed concerns about long-term growth, the future, and the well-being of our children are simple fig-leafs for inhumane policies that deny people (a.k.a. the parents of our children) work and redistribute income upward.

We can only harm our children by reducing the deficit in the current economy, we are not helping them. The wealthy people who benefit from the policies of austerity may have the power to keep them in place, but the public should realize that the politicians and public figures who promote these policies are not doing it out of a concern for the future.

Once we get past the Reinhart-Rogoff debt disaster story, the only argument left against government deficits is the standard economic argument that it could raise interest rates by crowding out private investment. This argument can easily be shown to be ridiculous; there will almost certainly not be any crowding out in the economy now.

Read more at Aljazeera

Brown-Vitter (BV) exemplifies all three problems. It would fail to achieve its desirable goals even if it became law. It would help the largest fraudulent banks continue to cripple effective examination. The Republicans will kill the well-meaning parts of the bill and try to enact the bad parts of the bill that are so bad that they are criminogenic.

One of the most essential actions we need to take is to eliminate systemically dangerous institutions (SDIs) (the rough dividing line is any bank with > $50B in liabilities). Dodd-Frank did nothing effective to end SDIs. So BV could be a sensible, even vital reform if it were drafted to end SDIs and if it were enacted. It was not drafted to end SDIs and it will be weakened before it is killed.

BV’s harmful provisions, by contrast, will likely be made worse by amendments. Those harmful provisions may become law.
Read more at Naked Capitalism

The central theme is the morality tale around debt. The proponents of austerity insist that the debtors be forced to suffer. This is part because of the obvious moral hazard problem, if people think that debtors can get off easy, then no one will pay their debts. It is also partly appeals to our sense of morality, we want people to work hard and meet their commitments.

As Kuttner points out, there are two big problems with the debt hardliners’ agenda. First, it is often bad economics. The book goes back to the days of debtor prisons in England, pointing out that throwing debtors in jail not only was cruel to debtors and their families, it generally was not good policy from the standpoint of creditors either. Once the debtor was in prison they had little opportunity to earn back any of the money needed to repay their creditors.

Kuttner shows how this desire for punishment has played a central role in shaping attitudes toward the crises countries in the eurozone as well as underwater homeowners in the United States. This attitude has helped to prevent an effective policy response in both places. In Europe the debtor countries have seen their unemployment rates soar even as their debt to GDP ratios continue to increase. Shrinking economies have reduced tax collections and increased demands on the budget. In the United States many homeowners have ended up in foreclosure when it would have been possible to arrange principle write-downs that would have both kept them in their homes and given creditors more money.

Read more at Huffington Post

OSHA and its state partners have a total of 2,200 inspectors charged with ensuring the safety of over more than 8 million workplaces employing 130 million workers. That comes to about one inspector for every 59,000 American workers.

There’s no way it can do its job with so few resources, but OSHA has been systematically hollowed out for the years under Republican administrations and congresses that have despised the agency since its inception.

In effect, much of our nation’s worker safety laws and rules have been quietly repealed because there aren’t enough inspectors to enforce them. That’s been the Republican strategy in general: When they can’t directly repeal laws they don’t like, they repeal them indirectly by hollowing them out — denying funds to fully implement them, and reducing funds to enforce them.

Read more at Huffington Post

The Democrats have been yelling loudly about the damage that these cuts will inflict on specific programs and the economy as a whole – and they do have a case. The cuts will whittle spending in a wide variety of areas, and some, like those to airport security and food inspections, will have an immediate impact. Until Congress passed a hurried law enabling the FAA to shuffle its budget to avoid furloughs, we were seeing longer lines at airports. And we may still be more likely to find ourselves eating contaminated meat.

Other cuts, such as reductions in spending on infrastructure maintenance and medical research, will only be felt over the long term, as the quality of roads, rails and medical programs gradually worsens.

In addition, the reduction in spending at a time when the economy is already weak will further slow down growth and weaken job creation. The March jobs report reminded everyone of this problem (April’s is due later this week): the economy created only 88,000 jobs in March, less the number needed just to keep pace with the growth of the labor force.

Read more at The Guardian

I was only six years old and had no idea what a “debt” was, let alone FDR’s. But I had nightmares about it for weeks.

Yet as the years went by my father stopped talking about “FDR’s debt,” and since I was old enough to know something about economics I never worried about it. My children have never once mentioned FDR’s debt. My four-year-old grandchild hasn’t uttered a single word about it.

By the end of World War II, the national debt was 120 percent of the entire economy. But by the mid-1950s, it was half that.

Why did it shrink? Not because the nation stopped spending. We had a Korean War, a Cold War, we rebuilt Germany and Japan, sent our GI’s to college and helped them buy homes, expanded education at all levels, and began constructing the largest public-works program in the nation’s history — the interstate highway system.

“FDR’s debt” shrank in proportion to the national economy because the national economy grew so fast.

I was reminded of this by the recent commotion over an error in a research paper by Carmen Reinhart and Kenneth Rogoff.

Read more at Huffington Post

In particular, attention has focused on the findings of the Harvard economists Carmen M. Reinhart and Kenneth S. Rogoff, whose 2009 book, “This Time Is Different: Eight Centuries of Financial Folly,” received acclaim for its use of hard-to-find historical data to draw conclusions about the origins and nature of financial crises and how long it takes to recover from them.

Ms. Reinhart and Mr. Rogoff have published several other papers, including a 2010 academic article, “Growth in a Time of Debt.” It found that economic growth was notably lower when a country’s gross public debt equaled or exceeded 90 percent of its gross domestic product.

Read more at the New York Times.

That’s better than the 2 percent growth last year and the slowdown at the end of the year. But it’s still cause for serious concern.

First, consumers won’t keep up the spending. Their savings rate fell sharply — from 4.7% in the last quarter of 2012 to 2.6% from January through March.

Add in March’s dismal employment report, the lowest percentage of working-age adults in jobs since 1979, and January’s hike in payroll taxes, and consumer spending will almost certainly drop.

Median household incomes continues to decline, adjusted for inflation. Another report out today showed consumer confidence fell in April.

Second, the recovery continues to be wildly lopsided. The only thing really keeping it going is the rip-roaring stock market. But the stock market only boosts the wealth of the richest 10 percent of Americans, who own 90 percent of stocks (including 401-K retirement accounts).

But no economy can maintain momentum just on the spending of the richest 10 percent.

Read more here at Huffington Post

Pause for a moment and consider that $153 million is a tiny portion of the federal budget. It is a little more than the value of Bill Gates’ house and a fraction of the price of a B-2 bomber.

People over 62 can buy a $10 lifetime pass to the more than 2000 federal recreational sites. For volunteers, the disabled and young children, it’s free. With the exception of a few other cases, it’s $80 for an annual pass to all the sites.

If the park service doubled the cost of the senior lifetime pass, it would raise $5 million. That’s such a tiny drop in the bucket it’s laughable.

This is not about the $5 million. Raising the lifetime park pass for seniors is not offered up to lower park admission prices for young people.

In other words, there is no fixed pie. If grandma gets more, then baby Charlie gets less. No. Unlike reptiles, human societies do not arrange to eat their young.

There is a sincere but mistaken belief out there that the old are taking advantage of the young. Societies that pay for the old can pay for the young, too. It’s not a zero-sum game.

Read more at CNN

Outside, around a thousand activists called on world leaders to adopt a small tax on trades of stocks, bonds, and derivatives that could raise massive revenue for jobs, climate, global health, and other public investments.

Inside, in a somber basement auditorium, the IMF hosted a debate on the same topic. The uniform on the outside was a green Robin Hood hat. On the inside, it was a charcoal gray suit. In both spaces, however, there was the sense that the financial transaction tax is gaining momentum and credibility.

Read more at Huffington Post.

Read more at the Macroeconomic Policy Institute (IMK) in Dusseldorf, Germany.

View Part two.

View Part three.