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A few well-written words can convey a wealth of information, particularly when there is no lag time between when they are written and when they are read. The IPS blog gives you an opportunity to hear directly from IPS scholars and staff on ideas large and small and for us to hear back from you.



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Entries since January 2012

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The State of the 99 Percent

January 25, 2012 ·

While we’re still waiting for actions to match his rhetoric, President Barack Obama made three critical points in his big speech about the problem of inequality—a problem that the Occupy movement has pushed into the public consciousness.

President Obama reviews the State of the Union address with his speech writer. Photo by the White House.1. The Rules are Rigged in Favor of the Rich

Early in his address, the president said that “We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”

Despite the popular myth that the rich are rich solely because of their hard work and talent, in reality, much of the explosion of wealth at the top is a result of the rich rigging the rules.

Case in point: rich people, who make most of their income on the stock market, pay a far lower tax rate than ordinary Americans. Warren Buffett pointed this out several years ago when he offered a million dollars to any CEO who could prove he paid a higher tax rate than his secretary. Not one came forward.

In a brilliant stroke of political theater, Obama invited Buffett’s secretary to sit with the First Lady during the speech. This came just hours after Mitt Romney revealed he had paid only a 13.9 percent rate on his 2011 income taxes—thanks to the deep discount rate of 15 percent for financial earnings, compared to the top rate of 35 percent for income from actual work. Obama proposed a minimum tax rate of 30 percent for people who make more than one million dollars a year.

2. We Have Tackled Extreme Inequality Before

A century ago, the rich were enjoying the so-called “Gilded Age” with extreme levels of inequality. Starting in the mid-1930s, in the depths of the Great Depression, our government, pressed hard by a militant labor movement, raised taxes on the rich, protected worker rights, and began a four decade march toward much greater equality. By speaking of “restoring an economy where everyone gets a fair shot,” Obama reminded Americans that our current levels of inequality, which rival those of the Gilded Age, are hurting tens of millions and degrading our democracy, and that we know how to reduce extreme inequality in this country.

3. The Occupy Movement is Not About Envy

The president also effectively rebutted the common conservative argument that all this Occupy ruckus is about nothing more than petty jealousies. “When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. It’s because they understand that when I get tax breaks I don’t need and the country can’t afford, it either adds to the deficit, or somebody else has to make up the difference – like a senior on a fixed income; or a student trying to get through school; or a family trying to make ends meet.”

Obama’s sharp rhetoric is an important contribution to the public discourse about inequality. Yet deeds are stronger than words. And right now, Obama is not expected to include the millionaires tax increase in the budget he delivers to Congress next month. For the millions of young people who joined the Occupy sites last fall because they can’t find jobs nor pay off their student loans, Obama weakly admonished colleges not to raise tuitions. No word of what many of those students demand, namely that they not be required to repay those loans until they have incomes.

No real relief from Obama for the millions of Americans who can’t pay their mortgages. He said he was proposing a small fee on the big banks to help pay for a program to allow homeowners to save on their mortgages by refinancing. This is small compared to what is needed: a reduction in the principle on those mortgages down to what the market says they are worth.

So, the challenge to the American people remains huge. Yes, we now have a President who is talking about the obscene inequality that is ripping this country apart. Yet, it will only be through massive pressure from below that bold measures to tax Wall Street, tax corporations, tax the wealthy, and tax pollution get enacted.

And, while Obama talks of wind farms and other green jobs, he still is not articulating a bold vision to transform this nation’s economy from a war economy still addicted to fossil fuels to a green Main Street economy that creates jobs while advancing ecological balance. The Congressional Progressive Caucus has released an Act for the 99% that included some of this vision, particularly for millions of new jobs paid by a fairer tax system.

We all know that thirty years of deregulating Wall Street and lowering tax rates on the rich won’t be undone quickly. For years, Wall Street has crashed the economy and corrupted our politics. Only bold, transformative vision and action can restore our democracy and improve the lives of our people.

Sarah Anderson and John Cavanagh wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions.

State of the Union's Foreign Policy: Unilateral Triumphalism

January 25, 2012 ·

In his State of the Union address last night, President Barack Obama began with what is widely perceived to be his strong suit: foreign policy. The nation is safer under his watch, he reassured his audience, now that Osama bin Laden is gone, al-Qaeda is broken, and U.S. troops are out of Iraq. It’s too bad that the president couldn’t lead with diplomatic accomplishments to prove that the United States has reestablished a new relationship with the international community and gained a new level of global respect. Instead, President Obama felt the need to emphasize U.S. military power.

Imagine how breathtaking it would have been if the president had begun his speech differently by touting diplomatic breakthroughs with Iran and North Korea. Instead, the United States has edged closer to conflict with the former and has largely ignored the latter. Imagine if the president could point to the closure of the detention facility in Guantanamo, a campaign promise and a pledge from his first day in office, as a signal to the world that the United States had turned its back on the lawless behavior of the previous administration. Imagine if the president could take credit for a responsible drawdown of Pentagon spending and the application of a true peace dividend to job creation at home. Alas, the cuts in military spending the president has proposed have been extraordinarily modest and don’t address either Pentagon waste or pressing human needs at home and abroad.

After his ode to American military strength, the president turned to his central issue: the economy. He gestured in the direction of foreign policy – to praise free-trade agreements, to bash the Chinese for unfair trade practices – but all the messages were subordinate to fixing the U.S. economy. As a practical need and a political necessity, the president was certainly wise to focus on pocketbook issues. But his us-versus-them rhetoric is ultimately unhelpful. The United States has to work with other economic powers not only to get the global economy up and running again but to restructure it so that it no longer disproportionately benefits the wealthiest 1 percent of countries, corporations, and individuals.  

Obama returned to his perceived strong suit in the end to discuss how the United States must operate from a position of strength. Unfortunately, he was talking about the strength of the U.S. military. The United States should indeed set an example: of wise diplomacy, global economic equity, and sensible budget priorities at home. Perhaps the next State of the Union can begin on a note of international cooperation instead of unilateral triumphalism. 

Debate Club: Did the U.S. Withdraw from Iraq Too Soon?

January 24, 2012 ·

Far from being "too soon," the U.S. troop withdrawal from Iraq came more than eight years too late--and still, the war isn't over. This war should never have been launched, so it can't be ended soon enough.

U.S. soldiers killed The war was based on lies--remember the "weapons of mass destruction" that weren't there, the "links to 9/11" that never happened, the "mobile weapons laboratories" that didn't exist? Withdrawing troops now, after eight years of occupation, doesn't mean the U.S. achieved victory. It was a defeat for the U.S. and a disaster for the people of Iraq. A terrible dictator (who had been armed, paid, and backed by the U.S., we should not forget) was indeed overthrown. But Iraqis faced years without security, basic services, electricity--let alone democracy, human rights, or independence.

The U.S. war, following more than a decade of devastating U.S.-imposed economic sanctions, ravaged the infrastructure and social fabric of Iraq, leaving behind a broken country ruled by a corrupt sectarian government. For eight years, with up to 182,600 U.S. and allied troops occupying the country at any one time, Iraq was one of the most dangerous countries in the world, and remains so today. That would still be the case if we had pulled out years ago, or if we waited another one, two, or 25 years.

Of course, it's important that U.S. troops and Pentagon-paid contractors have been withdrawn. Indeed it's a huge victory for the U.S. and global anti-war movements who made it imperative for President Obama to enforce the U.S.-Iraq agreement requiring just that. But the U.S. war is not over. U.S. troops have left Iraq, but thousands are streaming into Kuwait and onto Navy ships cruising just "over the horizon." Maybe just a few hundred uniformed U.S. troops will be left in Iraq, but 15,000 or more State Department-paid mercenaries are pouring in, doing the same things--guarding the biggest-in-the-world U.S. embassy, training Iraqis to use the weapons we're still flooding the country with, "special operations"--that continue the instability. The contractors include some of the same armed men whose Pentagon-paid violence led to such outrage in the past. Americans may have forgotten, but Iraqis certainly remember.

It's already too late, but the whole U.S. war in Iraq, not only the presence of uniformed troops, needs to end completely. That includes ending the related wars--in Afghanistan and Pakistan, the drone wars in Yemen and Somalia and beyond, the threatened wars against Iran. Only then can we really claim we've "withdrawn from Iraq."

This post originally appeared on the U.S. News and World Report's "Debate Club." Vote for this and other posts by clicking here.

Should We All Start Praying for Mitt Romney?

January 23, 2012 ·

Egalitarians seem to be doing a lot of praying since Saturday's GOP primary in South Carolina. If you listen closely, you can almost hear their prayer: Please, Lord, let Mitt Romney win the 2012 Republican Presidential nomination.

Caricature by DonkeyHotey.Why this swelling of affection for one of the richest Americans ever to run for the White House? Over recent weeks, Mitt Romney has put a long-overdue “human face” on American plutocracy at its job-destroying, tax-avoiding worst.

Thanks to Mitt Romney, millions of Americans now understand how private equity kingpins funnel fortunes — to themselves — out of middle class misfortune. And millions more, thanks to Mitt’s on-the-stump candor, now have a window into the world of people so rich that $370,000 — Mitt’s income from speaking fees last year — rates as “not very much.”

Every day seems to bring another “teachable moment” on plutocracy from the Romney campaign: the intricacies of the “carried interest” loophole one moment, the allure of Cayman Islands offshore tax havens the next.

All of this came before Mitt released his tax returns. That release, now expected tomorrow, will only redouble the scrutiny. Mitt has, to be sure, already spilled his basic tax return beans. His overall federal income tax rate last year, Romney has shared, hovered around only 15 percent.

Mitt's campaign as a teachable moment machine does have one other fantastic advantage: Matt had a wealthy father. Even better, Mitt’s wealthy father, American Motors CEO George Romney, released 12 years of his tax returns when he ran for the 1968 GOP Presidential nomination.

These papa Romney tax returns offer a window of their own — into just how amazingly rich people-friendly America’s current tax code has become.

From 1955 through 1966, George Romney reported income of $2.97 million — about $22 million in today’s dollars — and paid 36.9 percent of that in federal income tax.

George in his heyday rated as one of America’s highest income-earners. In 1960, his rewards from American Motors helped bring his total personal income to $661,423, a bit over $5 million today. The IRS only counted 533 taxpayers who made between $500,000 and $750,000 in 1960 — and only 508 taxpayers in the entire country who made more than $750,000.

How did George Romney’s tax rate compare to the tax rate of his fellow rich? George actually paid a smaller share of his income to Uncle Sam than his peers, mainly because he donated almost a quarter of his income to charity and church.

America's 1960 rich in George's $500,000-to-$750,000 cohort — a range that would equal from $3.8 to $5.7 million today — paid an average 45.3 percent of their incomes in federal taxes, after exploiting every tax loophole they could find.

The true millionaires of 1960 — the 306 taxpayers who reported at least $1 million in income, the equivalent of $7.6 million today — paid taxes at a slightly higher rate, 45.8 percent. These millionaires only averaged, in today’s dollars, about a little over $15 million each in income.

How does that $15 million average for America’s richest in 1960 compare to the income of America’s richest today? The 1960 rich, even after adjusting for inflation, only made a tiny fraction of the incomes our rich today are pulling down. Last spring, the hedge fund industry trade journal reported that America’s top 25 hedge fund managers averaged $882.8 million — each — the year before.

signupTheir tax rate? We don’t know that for sure. But hedge fund managers exploit the same “carried interest” loophole that has proved so lucrative to private equity power suits like Mitt Romney.

The top 25 hedge fund manager federal income tax rate most likely floats between 15 percent — the same rate Mitt pays his taxes at — and 18.1 percent, the average federal income tax rate on America’s 400 richest taxpayers in 2008, the most recent year with IRS data available.

So let’s review the bidding here. Today’s top hedge fund managers make 59 times more income than the richest Americans in 1960, after taking inflation into account. Yet the richest Americans of 1960 paid three times more of their income in federal income taxes than today’s top hedge fund managers pay.

Statistics as revealing as these haven’t yet filtered into America’s political consciousness. But just wait. If Mitt Romney gets the Republican nod, the wonderfully illuminating national seminar on inequality that his campaign has become will be running, glory be, straight into November.

This article originally appeared on Sam Pizzigatti's Too Much Newsletter.

The Lineup: Week of Jan. 23-29, 2012

January 23, 2012 ·

In this week's OtherWords editorial package, Donald Kaul explains why it was hard to notice the official end of the Iraq War, and Jim Hightower describes the Drug War's losing battle in Afghanistan. Get all this and more in your inbox by subscribing to our weekly newsletter. If you haven't signed up yet, please do.

We also have a special feature this week: OtherWords contributor Martha Burk posted an interview with Roe v. Wade lawyer Sarah Weddington to our blog. Check it out.

  1. Wealthy Tax Cheats / Sam Pizzigati
  2. Cheering Obama's Wise Tar Sands Choice / Bill McKibben and Michael Brune
  3. Climate Insurance / Julia Olmstead
  4. Dollar Democracy / Tim Butterworth
  5. A Zero on the Home Front's Richter Scale / Donald Kaul
  6. Afghanistan's Poppy War / Jim Hightower
  7. Fukushima Is So Yesterday / William A. Collins
  8. Endless War / Khalil Bendib

Endless War, an OtherWords cartoon by Khalil Bendib.

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