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Hello readers.  Do you all remember this post from March of last year about how the richest of the rich in our country were taking the lion’s share of all the country’s income?  That post includes charts that shows just how much of the country’s growth in incomes from 2002 through 2006 the top earners kept for themselves.  You might want to go back and take a look at those charts, but be warned – they’re not pretty.

And 2007 wasn’t any prettier.  Some new IRS data was released this week for 2007, and guess what?  The rich got even richer!  From BusinessWeek:

Feb. 17 (Bloomberg) — The average income reported by the 400 highest-earning U.S. households grew to almost $345 million in 2007, up 31 percent from a year earlier, Internal Revenue Service statistics show.

The figures for 2007, the last year of an economic expansion, show that average income reported by the top 400 earners more than doubled from $131.1 million in 2001. That year, Congress adopted tax cuts urged by then-President George W. Bush that Democrats say disproportionately benefits the wealthy.

Each household in the top 400 of earners paid an average tax rate of 16.6 percent, the lowest since the agency began tracking the data in 1992, the statistics show. Their average effective tax rate was about half the 29.4 percent in 1993, the first year of President Bill Clinton’s administration, when taxes were increased.

The statistics underscore “two long-term trends: that income at the very top has exploded and their taxes have been cut dramatically,” said Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, a Washington research group that supports increasing taxes on high-income individuals.

So next time you hear a Teabagger going all crazy about huge deficits and high taxes, you might want to recite a few facts from this article and some more from last year’s post about how the wealthy are grossly undertaxed.  Had they not received trillions in tax cuts from the Bush Republicans, we might even have collected enough to pay for the two wars that are still going on. 

For more about how today’s deficit problems are the result of the tax-law changes enacted under the Bush Administration, read this article on the Center on Budget and Policy Priorities website:

Some of President Obama’s critics and political opponents have launched a line of argument that Obama is mostly to blame for the large federal budget deficits projected for the coming decade and that his Administration’s role in swelling deficits and debt dwarfs that of the previous administration. [1] The critics cite what they present as proof: the fact that the deficit this year and in the years ahead will be much larger than the average deficits under President George W. Bush and that the increase in the national debt thus will be much larger under Obama than Bush.

But asserting that the deficits that lie ahead are primarily the result of policies enacted since President Obama took office is Orwellian. It stands truth on its head.

Republicans have never had any regard for the truth.  They’ve always twisted things upside down, inside out, and backwards; and they’ve almost always gotten away with it.  They get away with it because they own all the mainstream media outlets, or because the American people are uninformed and very gullible.  Or both.  This time, don’t let them get away with it. Spread some truth around.

Paul Krugman writes about the politicizing of federal budget deficits in today’s column:

To me — and I’m not alone in this — the sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war.  Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt.  Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn’t been any new information to justify this sudden urgency.  Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized.

And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction.

This is the year that the Bush tax cuts expire, so the Republicans will use their scare tactics to convince people that raising taxes on the rich is the wrong thing to do, and they’ll probably even argue that we should lower the tax rates to stimulate economic growth, because everybody knows that more money in the pockets of billionaires creates jobs, right?  WRONG!

Obama has been making a point of placing blame for the deficit spending where it belongs – with the Republicans – and he has been pretty vocal about how their tax-cutting schemes have not worked in the past.  He has pointed out that they are the party that reduced federal revenue by trillions of dollars by cutting taxes for the super rich, and they are the party that handed a blank check to Bush for the funding two very long wars.  Obama should keep hammering on the Republicans about the deficit they created and he should be very firm with Reid and Pelosi about not extending the Bush tax cuts for the rich.

The Democrats in Congress should not be pressured by the deficit hysteria Krugman writes about.  Now is not the time to cut funding for government programs that are essential to stimulating the economy and getting us out of this recession.

Via Paul Krugman’s blog, via Frank Rich’s column, I came upon a study of income gaps titled Striking it Richer.  The report includes several graphs of income disparity, including this one that shows what percentage of total income the top o.o1% took from 1913 through 2007:

The top .01% (top 14,988 US families, making at least $11.5m in 2007) share increased from 5.46% in 2006 to 6.04% in 2007 leaving well behind the 1928 peak of 5.04 percent (Figure 3). This shows that 2007 was an incredibly good year for the super rich.

2007 wasn’t too bad for the rest of us either, but not near as good as it was for our overlords.

Everything changed in 2008, but the data is not available yet, so no graphs.  The report does make a prediction though.

The economic landscape has obviously changed dramatically since 2007 which marks the peak of Bush expansion. We know from National Account statistics that real incomes per family will fall in 2008 and 2009. Evidence from past recessions suggests that, in general, the top percentile income share falls during recessions, as business profits, realized capital gains, and stock option exercises fall faster than average income. Therefore, the most likely outcome is that income concentration will fall in 2008 and 2009. 

Based on the US historical record, falls in income concentration due to recessions are temporary unless drastic policy changes, such as financial regulation or significantly more progressive taxation, are implemented and prevent income concentration from bouncing back. Such policy changes took place after the Great Depression during the New Deal and permanently reduced income concentration till the 1970s (Figures 2, 3).

Last week the House passed a financial regulation bill that not one Republican supported.  Apparently everything is okay with the Repugnicans.  They think we don’t need to do anything prevent another financial catastrophe that will require the bottom 90% of us to bail out the billionaires who gamble with our money and lose.

Krugman explains:

Talk to conservatives about the financial crisis and you enter an alternative, bizarro universe in which government bureaucrats, not greedy bankers, caused the meltdown. It’s a universe in which government-sponsored lending agencies triggered the crisis, even though private lenders actually made the vast majority of subprime loans. It’s a universe in which regulators coerced bankers into making loans to unqualified borrowers, even though only one of the top 25 subprime lenders was subject to the regulations in question.

Oh, and conservatives simply ignore the catastrophe in commercial real estate: in their universe the only bad loans were those made to poor people and members of minority groups, because bad loans to developers of shopping malls and office towers don’t fit the narrative.

In part, the prevalence of this narrative reflects the principle enunciated by Upton Sinclair: “It is difficult to get a man to understand something when his salary depends on his not understanding it.” As Democrats have pointed out, three days before the House vote on banking reform Republican leaders met with more than 100 financial-industry lobbyists to coordinate strategies. But it also reflects the extent to which the modern Republican Party is committed to a bankrupt ideology, one that won’t let it face up to the reality of what happened to the U.S. economy.

Come on Democrats!  That includes you Blue Dogs in the Senate.  Start acting like you won something last November.  We voted for change, and we want it.

I’ve been thinking about an article I read yesterday morning while skimming through the newspaper.  The story was about how the House voted to extend popular tax breaks like mortgage interest and sales-tax deductions.  It also mentioned how it was going increase the tax rate on income earned by hedge-fund managers from 15% to 35%. 

I’ve heard that hedge-fund managers made hundreds of millions or even billions of dollars every year, but I wasn’t sure how much, so I searched the internet and found this list.  The highest paid hedge fund manager in 2008 was James Harris Simon, who runs Renaissance Technologies Corporation.  He “earned” $2,500,000,000.  He paid a lesser income tax rate than I did and what I presume is much lesser than many of you readers did.  The next three highest paid managers on the list all earned over a billion dollars. 

Who is this guy and what does he do to make so much money?  He’s a mathematician.  He used to teach at MIT and Harvard, and he also did communicatioins research for the Defense Department.  He probably was compensated fairly well for those services, and his work was what we might call “productive.”  He educated people and he developed new mathematical theorems to improve science, and he probably helped the DOD in some way.

Over twenty years ago he figured out how to use his mathematical genius to develop “computer-based models to predict price changes in easily-traded financial instruments.”  Those models run on computers that buy and sell stocks and commodities all over the world.  His models must work extremely well if he can earn high profits for his investors and pay himself 2.5 billion dollars in one year. 

But what he’s doing is not “productive.”  It’s more like rape.  Instead of using his brilliant mind as a rocket scientist or an engineer of some sort, he’s basically using it to satisfy his lust for money by skimming billions of dollars off assets all around the world. 

And thanks to George W. Bush and his loyal cabal of Republican brown shirts, he has paid a lower tax rate than me since 2001.

What are the Republican congressmen saying about the House Bill?

Republicans called it a tax on investment.

“It is nothing short of a new tax on the various investments needed to start the new business and create economic growth,” said Rep. Dave Camp, the top Republican on the tax-writing House Ways and Means Committee.

Republicans hate taxes.  They love cutting them, and because they had been in power so long since Reagan was elected, they’d cut taxes on obscenely rich people from 90% during the Eisenhower era to just 15% for Mr. Simons and company. 

This whole idea that it’s wrong for the top 1% of earners in our country to be taxed at very high rates is one of the many reasons are country is so far in the hole.  These people are taking all the money and paying much less income tax than if all that money was spread amongst people who paid normal income taxes.

What if Mr. Simons was taxed at a rate of 90% like he would have been during the Eisenhower era?  How much would he have left to live on each year?  $250,000,000.  Oh… that’s too bad.  And could our government use the $2,250,000,000 that it would have collected every year?  I think so.

I’ve said it before and I’ll say it again:  IT’S NOT WRONG TO TAX THE RICH!  Increasing the rate on hedge-fund managers from 15% to 35% is a step in the right direction, but they really ought to be paying well over 50%.

What a fine little recession we’re having.

Click on the image to go to the American Observer website and watch the country grow darker as the colors change from bad to worse from January 2007 through October 2009.

The feature story in today’s Seattle Times is about how Washington Mutual, a 119-year old bank that survived the Great Depression and the Savings & Loan crisis, became the largest bank ever to go bust.  With Kerry Killinger at the helm, the bank abandoned all safeguards and took on a huge portfolio of risky loans.  Why?  The more risk, the more potential for profit.  Big profits make big dogs rich.  It was ultimately the unchecked greed of Killinger that led to the bank’s demise.

You can read all the gory details in the article or you can just skip to the bottom of the sidebar to get the jist of it all:

Postscript: In August, WaMu’s former New York Stock Exchange ticker symbol, WM, was adopted by another company: Houston-based trash hauler Waste Management.

’nuff said.

Yesterday the Senate approved an additional two billion dollars to keep the highly successful ”Cash for Clunkers” program.  Today President Obama signed the bill that will keep the program going through Labor Day.

Conservatives hate this bill.  They tend to hate anything successful that comes out of the Obama Administration.  They also don’t approve of average Joes getting special benefits funded by tax dollars.  Funny… many of them do seem to approve  of five-hundred times the amount spent on the Cash for Clunkers program going to extremely wealthy CEO’s in the form bonuses paid via corporate welfare payments to buoy the companies they ruined with their risky management practices. 

Anyway, a program that helps people afford new cars and rids the roads of gas-guzzling SUV’s and trucks and replaces them with new more fuel efficient and less polluting cars that will save the new-car buyers up to around $1,000 per year in fuel costs is a triple-good thing – the two aforementioned items, plus fewer sight-blocking F-150’s and Ford Excursions for me to get stuck behind.  No wonder people have responded so favorably to the deal.  The program also pumps money into the sagging auto industry.  Seems like a win/win to me, but then I’m not a billionaire conservative who doesn’t care about an extra thousand dollars spent on gasoline and doesn’t believe in global warming.

The story of American education today is one replete with achievement gaps: achievement gaps between different states; between rich and poor, white and black, white and Hispanic; between school districts, individual schools and even between children within individual schools.  In elementary school our children compare well internationally; by high school they have plummeted to the bottom of the international league.  We spend more money overall on education than any other country but we get the least bang for our buck.

These findings are highlighted in a recent report by McKinsey & Company: “The Economic Impact of the Achievement Gap in America’s Schools.”  The report’s recitation of our educational failures will sound all too familiar to anyone who even vaguely follows this issue.  Where the report is particularly useful is in quantifying the economic cost of our national failure to educate our children to world standards.  Among the report’s findings, for example, is that if the United States had in recent years closed the achievement gap with top performing nations such as Finland and Korea, our Gross Domestic Product in 2008 could have been between $1.3 to $2.3 trillion higher (or 9-16% of GDP).  In a further example, if the gap between black and Latino student performance and that of whites had been similarly narrowed, the report finds that US GDP in 2008 would have been between $310 billion and $525 billion higher (or 2-4%).  The gain would likely have been even bigger had the gap between the lowest achieving states and the rest been narrowed to a similar degree.

Why it is that 25 years after a landmark report admonished that American K-12 education was characterized by a “rising tide of mediocrity” our children languish near the bottom of the international achievement league?  The Organization for Economic Co-operation and Development (OECD) found in 2006 that US 15-year-olds ranked 25^th out of 30 nations in math and 24^th in science.

The litany of depressing statistics goes on and on but the key point here is that if we don’t turn things around, we will not be able to maintain our place as the foremost economic power.  And what about the lost employment opportunities in such fields as high technology as Microsoft, Intel and others rely increasingly on foreign graduates of American universities because we don’t produce enough of our own?  These are jobs that pay $77-100,000 a year for a software developer.

K-12 education is principally a state responsibility and the states have failed dismally.  Even President (and former governor) George W. Bush recognized it with what was probably his most useful legislative accomplishment: No Child Left Behind (NCLB).  To his credit Bush took the improvement of US education seriously enough that he was willing to push the federal government more deeply and intrusively into the issue than ever before.  Regrettably, too many of the darts he fired at state backsides to prod them into doing better have missed their mark. 

For example, insisting on annual testing from third grade on has turned out to be overkill, taking up too much of the time of teachers who have a lot to do during the shortest school year in the industrialized world.  A laudable requirement aimed at raising the proficiency of math and other teachers has been largely circumvented by many states.

Most serious of all, whilst NCLB required that states meet student proficiency targets across the board or face consequences, it made the fatal error of leaving both the definition, and the testing of “proficiency” to the states.  This has led to perverse outcomes as some states strive to meet NCLB benchmarks but without actually doing much to improve their children’s performance.  This was highlighted in a recent Time Magazine article by Walter Isaacson advocating national educational standards for US children.  In one particularly egregious example, Mississippi tested its 4th graders in reading and pronounced 89% of them proficient or better, making them the highest achievers in the nation.  When they were tested under the more rigorous (and meaningful) National Assessment of Educational Progress (NAEP), only 18% were actually proficient – putting them dead last.

Not all is bleak since not all states are led by boneheaded governors like Haley Barbour in Mississippi, or Terry Sanford in South Carolina who famously tried to refuse federal stimulus dollars for education, preferring to use it instead (if he really absolutely had to take it) to pay down state debt.  North Carolina and Texas are southern states that, along with Virginia, have made significant strides to improve their children’s education.  We have in Massachusetts a state whose children’s educational level compares favourably with the best performing countries in the world.  If the top five American states were tested separately they would do well when stacked against their international peers.  The problem is there are fifty states not five and the worst performing ones are dragging the nation down.  And even in the better ones there is much room to improve.

I agree with Isaacson that we need national standards and a national test; “national” does not have to mean “federal.”  In fact, we shouldn’t reinvent the wheel again but maybe settle on a curriculum and test regimen with a proven track record: the Massachusetts Comprehensive Assessment System or MCAS. The fact is if all US children performed at the level of those in Massachusetts we would have much less to complain about.  Why not adapt MCAS for the nation as a whole or at least use it as the basis for a national examination? While we’re at it, I suggest we try to learn from that state how they have managed to get a first time pass rate of around 90% of their children for what is a rigorous examination.

We also need to improve the funding mechanism for education in this country.  As most states grapple with the current deep recession, education is being cut almost everywhere. How is this going to improve our ability to educate our children or to compete economically in the future?  They’re not cutting education funding in competitor nations so why are we?  Can we not get our priorities straight and assure education funding regardless of the economic ups and downs?

Why is our spending not cost effective?  Maybe we spend too much money on things like school transportation when we have parents and public transport which should carry the load.  And there doesn’t seem to be any doubt that we spend way too much on educational bureaucracies.  Fifty of them and that doesn’t include the school districts themselves (about13000 of those).  How about states pooling their bureaucratic resources instead of clinging to their very expensive independence?

The school year is too short.  It needs to be increased to at least 200 days a year from 180.  And while we’re at it, let’s make teaching the highly paid profession it should and needs to be to attract the best and brightest.  Yes, both suggestions will take money – see the paragraph above.

Many will say we can’t afford or don’t have the will to take these tough and expensive steps to bring our children up to where they can compete with the best in the world.  I would answer with a question: How can we afford not to?

One reason is that they are making this car…

… again.  That’s Chevrolet’s reincarnation of the 1969 Camaro. 

Mark Morford writes about it in today’s San Francisco Chronicle:

Behold this weird new Camaro. It is, in sum, exactly the wrong car at exactly the wrong time with exactly the wrong attitude attached to exactly the wrong hopeless hope for a return to a rather crude automotive golden era that never really existed in the first place.

Why does this car exist at all? No one seems quite sure. But it is, if you spend a moment in the various car blogs, all flavors of a dumb, guilty pleasure, hotly discussed and awaited like a giant extra-large triple-cheese quadruple-meat pizza, ever since GM introduced it as a crazy concept car back in one of those years Before All Hope Died.

Morford also asks why GM is resurrecting a muscle car from forty years ago instead of making this car:

That is a Pininfarina Bluecar put out by a French-Italian conglomerate named Pininfarina/Bolloré.  Check out their website.  And no, you can’t buy one in the USA yet. 

But Dude!  You can buy a Camaro!

Take some time to read what Michael Moore has to say about Obama firing the CEO of General Motors.

Friends,

Nothing like it has ever happened. The President of the United States, the elected representative of the people, has just told the head of General Motors — a company that’s spent more years at #1 on the Fortune 500 list than anyone else — “You’re fired!”

I simply can’t believe it. This stunning, unprecedented action has left me speechless for the past two days. I keep saying, “Did Obama really fire the chairman of General Motors? The wealthiest and most powerful corporation of the 20th century? Can he do that? Really? Well, damn! What else can he do?!”

The rest of the article about our Superhero in Chief is here.