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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.

While tens of millions of hard working Americans struggled to keep their jobs and pay their mortgages and ever increasing health insurance premiums, the for-profit health insurance industry increased their profits by billions over the last year.  From today’s Seattle Times:

WASHINGTON — As the nation struggled last year with rising health-care costs and a recession, the five largest health-insurance companies racked up combined profits of $12.2 billion, up 56 percent over 2008, according to a new report.

Based on company financial reports for 2009 filed with the Securities and Exchange Commission, the report said insurers WellPoint, UnitedHealth Group, Cigna, Aetna and Humana covered 2.7 million fewer people than they did the previous year.

The report also said three of the five insurers cut the proportion of premiums they spent on customers’ medical care, committing relatively more to salaries, administrative expenses and profits.

Prepared by Health Care for America Now, a coalition of liberal advocacy groups and labor unions, the report was aimed at bolstering the drive by Democrats to complete work on a health-care overhaul, which insurers have vigorously opposed.

Industry representatives criticized the report’s approach, noting that 2008 was a bad year financially across many industries, skewing the 2009 comparison.

“It is disingenuous to look at the profits at one company today compared to where it was in the depth of a recession,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s Washington, D.C.-based lobbying arm.

While all five companies indeed reported lower profits between 2007 and 2008, a Seattle Times review of financial statements shows that the profits of three of them — WellPoint, Cigna and Humana — were higher in 2009 than in 2007, before the recession.  Outside factors such as the sales of assets can affect those numbers, however.

…

Industry analyst Sheryl Skolnick, a senior vice president at CRT Capital Group, said many of the insurance companies likely would benefit from more customers.

But they are driven to increase prices for their products to satisfy investors, which in turn drives away more and more customers.

“It is a terrible thing to run your business for Wall Street,” Skolnick said. “It creates very bad incentives, and it ultimately prevents you from doing the thing that is in the best long-term interest of your business. … There is no way that as long as these businesses are publicly traded, they can have the best interest of their customers at heart.”

Sounds to me like the greedy corporate health insurance providers could use a little competition from a lower-priced, more efficient, government-run plan.  So why is the Public Option off the table? 

Only answer I can come up with is to make the rich richer.

It’s difficult to describe how disappointed I am with our government right now, especially congress.  We elected a Democratic majority last November, and a “progressive” Democratic president.  We all wanted change.  What we have so far with regard to health-care reform is at best just a tepid shift from the status quo.

Here’s what Howard Dean wrote about the Senate bill in yesterday’s Washington Post:

Any measure that expands private insurers’ monopoly over health care and transfers millions of taxpayer dollars to private corporations is not real health-care reform. Real reform would insert competition into insurance markets, force insurers to cut unnecessary administrative expenses and spend health-care dollars caring for people. Real reform would significantly lower costs, improve the delivery of health care and give all Americans a meaningful choice of coverage. The current Senate bill accomplishes none of these.

Real health-care reform is supposed to eliminate discrimination based on preexisting conditions. But the legislation allows insurance companies to charge older Americans up to three times as much as younger Americans, pricing them out of coverage. The bill was supposed to give Americans choices about what kind of system they wanted to enroll in. Instead, it fines Americans if they do not sign up with an insurance company, which may take up to 30 percent of your premium dollars and spend it on CEO salaries — in the range of $20 million a year — and on return on equity for the company’s shareholders.

He’s right.  We are never going to get an affordable health-care system in this country as long as it remains a monopoly run by greedy insurance companies.  The only way we can make significant cuts in medical expenses is to first do away with the obscene profits, and second have the government negotiate prices for services.  Giving the people the choice of a government-run public option would be a great start in that direction, but that idea is dead in the water.

Today I read Paul Krugman’s column, and he thinks we should push through passage of this bill even though it is very weak.  Here’s what he has to say:

A message to progressives: By all means, hang Senator Joe Lieberman in effigy.  Declare that you’re disappointed in and/or disgusted with President Obama.  Demand a change in Senate rules that, combined with the Republican strategy of total obstructionism, are in the process of making America ungovernable.

But meanwhile, pass the health care bill.

…

At its core, the bill would do two things. First, it would prohibit discrimination by insurance companies on the basis of medical condition or history: Americans could no longer be denied health insurance because of a pre-existing condition, or have their insurance canceled when they get sick. Second, the bill would provide substantial financial aid to those who don’t get insurance through their employers, as well as tax breaks for small employers that do provide insurance.

…

Look, I understand the anger here: supporting this weakened bill feels like giving in to blackmail — because it is. Or to use an even more accurate metaphor suggested by Ezra Klein of The Washington Post, we’re paying a ransom to hostage-takers. Some of us, including a majority of senators, really, really want to cover the uninsured; but to make that happen we need the votes of a handful of senators who see failure of reform as an acceptable outcome, and demand a steep price for their support.

The question, then, is whether to pay the ransom by giving in to the demands of those senators, accepting a flawed bill, or hang tough and let the hostage — that is, health reform — die.

Okay, I get it, but I don’t like it.  Neither does our fellow contributor Mr. N.J. Barnes who sent me an email this morning:

I actually believe now it’s going to fail. Incredibly, incomprehensively fail. Thanks to Nelson.  Thanks to Liebermann.  Thanks to the Republicans being good at parliamentary stalling and pr even as they are brain-dead in every other way.
 
It’s actually likely to fail.
 
You know, this country and the GOP deserve each other.  They really do.

Yes… the Grand Old Party.  The obstructionist Republicans.  They ruined our country while they were in power, and they continue to ruin it even when they are in what is supposed to be controllable minority.  (Read more about that in Krugman’s column.)

Anyway, the Senate health-care bill leaves a very bad taste in my mouth.  I kind of liken it to buying a very good bottle of Bordeaux a year ago and storing it in the cellar to improve it with some bottle age.  Now it’s time to open it and enjoy it, but it doesn’t pass the sniff test.  The bottle is corked and the wine tastes like shit.  Krugman says drink it anyway.  Dean says select a different bottle.  I have to agree with Dean.

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%.

Well as long as we’ve got Paul Krugman up on the site, let’s talk about today’s column titled “The Joy of Sachs.” Paul’s always been good at puns, but he’s best at clearly describing what’s going on in our economy, how it affects us, and what needs to be changed.

Krugman’s column is about how and why Goldman Sachs is making billions again and is about to reward its employees with huge bonuses.  How can this be?  We haven’t even seen the worst of this recession yet. How can they possibly be making so much money again?  Paul gives you three reasons:

1.  They are really good at what they do – making money out of nothing.

2.  The compensation system for financial “wizards” hasn’t gone away.

3.  Government hasn’t yet done anything to protect us from another crisis.

Krugman writes:

Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls.  They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.

Goldman’s role in the financialization of America was similar to that of other players, except for one thing: Goldman didn’t believe its own hype.  Other banks invested heavily in the same toxic waste they were selling to the public at large.  Goldman, famously, made a lot of money selling securities backed by subprime mortgages — then made a lot more money by selling mortgage-backed securities short, just before their value crashed.  All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers.

And Wall Streeters have every incentive to keep playing that kind of game.

…

Now the last time there was a comparable expansion of the financial safety net, the creation of federal deposit insurance in the 1930s, it was accompanied by much tighter regulation, to ensure that banks didn’t abuse their privileges.  This time, new regulations are still in the drawing-board stage — and the finance lobby is already fighting against even the most basic protections for consumers.

Who do you think will win the battle? I’m betting on the greedheads.  They always win, and everybody else loses.

The only way they don’t win is with tight government regulations that make the “perfectly legal” things they do now – making money off the lies they tell us - a felony, and then the greedy bastards get prosecuted, their assets get forfeited, and they get thrown in jail.

Many of them really believe they should be paying higher taxes, and that they should be doing something with their excess wealth to make the world a better place. 

From Timothy Egan’s NYT blog:

Greed and Need

SEATTLE – There are plenty of rich people to hate these days, starting with Bernie Madoff, who will face a judge Thursday as well as the possibility of spending his remaining years in a cell where he can think about all the lives he ruined.

…

Bill Gates Sr. is 83 years old, six-foot-seven inches tall, with the kind of thin-haired crown that newborn babies and older men have in common. Though he looks like an avuncular conductor of a giant toy train set, he labors daily trying to give away one of the world’s biggest fortunes, that made by his son at Microsoft.

Senior, as he’s known, has a short, big-hearted book coming out next month, “Showing Up for Life,” which should be handed out to all those hedge-fund managers now filing for bankruptcy or otherwise wondering why their lives are so empty. His book is a sort of Last Lecture from the Greatest Generation, similar to the collected musings of Randy Pausch, who died last year of cancer at age 47.

…

Warren Buffett, who until the recent meltdown was the world’s richest man (Bill Gates is tops again), is a fellow far-sighted traveler, who has pledged the bulk of his fortune to senior’s care at the Bill and Melinda Gates Foundation – the world’s largest philanthropy.

Consider one example of how that money changes lives: global deaths from measles have fallen from 750,000 to 197,000 in just seven years, in part because the foundation started focusing on vaccinations for such diseases.

Like all but the most fraudulent – or cautious – investors, Buffett has lost a pile on paper in the last year. He made news this week when he compared the current crisis to an economic Pearl Harbor. But he was more forgiving than many, saying that we may have to look beyond our anger at the crooks, legal and otherwise, who got us into this mess.

“The people who behave well,” he said in a CNBC interview, “are no doubt going to find themselves taking care of the people who didn’t behave so well.”

Read the rest here.

Richard Fuld, head of the now bankrupt Lehman Bros. and this year’s recipient of the Michael Eisner Award, testified for two hours before the House Committee on Oversight and Government Reform. The New York Times reports:

Mr. Fuld said in sworn testimony before a Congressional panel on Monday that while he took full responsibility for the debacle, he believed all his decisions “were both prudent and appropriate” given the information he had at the time.

…

“I wake up every single night wondering what I could have done differently,” he said. “This is a pain that will stay with me the rest of my life.”

Henry A. Waxman, the California Democrat who heads the panel, began the hearing with an assault on Mr. Fuld’s pay, bringing out a chart showing that the Lehman chief executive received nearly $500 million in salary and bonus payments in the last eight years.

“That’s difficult to comprehend for a lot of people,” Mr. Waxman said. “I have a very basic question for you, is that fair?”

Mr. Fuld first took issue with the numbers, saying the accurate figure was probably less than $250 million. “The majority of my compensation came in stock and the vast majority of the stock that I got I still owned at the point of our filing,” referring to the firm’s bankruptcy filing.

Mr. Fuld was once worth close to $1 billion and now has a net worth estimated at about $100 million. He and his wife have been forced to sell some of their renowned art collection.

Booo Hooooo!

We feel so very sorry for you Mr. Fuld. 

If while cleaning out your Wall Street office today (Dow down another 508 points!) you can’t bear the prospect of living another day as a measly hundred millionaire, look down at the street below.  Perhaps you’ll see someone holding this sign:

The choice is yours…

Selected quotes:

They breathe profits; they eat the interest on money. If they don’t get it, they die the way you die without air, without side-meat. [referring to the banks] (Chapter 5)

The bank is something more than men, I tell you. It’s the monster. Men made it, but they can’t control it. (Chapter 5)

And the great owners, who must lose their land in an upheaval, the great owners with access to history, with eyes to read history and to know the great fact: when property accumulates in too few hands it is taken away. And that companion fact: when a majority of the people are hungry and cold they will take by force what they need. And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed.  (Chapter 19)

If only…

George H.W. Bush warned us about “voodoo economics” in 1980, but the ideologues clamped a gag on him and put him on the Gipper’s ticket. For much of the time since then, the madmen of the right have carried the day. They were freed of their remaining few restraints with the ascendance of George W. Bush in 2000.

These were the reckless clowns who led us into the foolish multitrillion-dollar debacle in Iraq and who crafted tax policies that enormously benefited millionaires and billionaires while at the same time ran up staggering amounts of government debt. This is the crowd that contributed mightily to the greatest disparities in wealth in the U.S. since the gilded age.

This was the crowd that cut the cords of corporate and financial regulations and in myriad other ways gleefully hacked away at the best interests of the United States.

Now we’re looking into the abyss.

The rest is here.