Remember the American middle class?

[Azazello1313]

US manufacturing

[bpwallace49]

what was that about germany?

 

Sooo . . . trickle down tax cuts for the upper strata dont work in germany either?

 

Thank you for the article Az. . . .

 

The reasons are well known: The Social Democratic Party-Green Party government of Gerhard Schröder (SPD) and Joschka Fischer (Greens) was responsible for a massive redistribution in wealth and incomes after 1998. The SPD-Green government lowered the top rate for income tax from 53 to 42 percent; gave tax breaks to big business and the owners of capital, and with the introduction of the Hartz welfare and labour “reforms,” created the conditions for a massive low-wage sector, in which almost 7 million people are now working.

 

The grand coalition of the Christian Democratic Union (CDU) and SPD under Chancellor Merkel (CDU) continued this course from 2005.

 

The trade unions have contributed to this development by supporting government policy for years, agreeing to only small wage increases, which mean real wages are falling. Real wages are now back at the level they were 25 years ago in the mid-1980s.

 

The current federal government of the Christian Democratic Union/Christian Social Union and Free Democratic Party has adopted austerity measures that will speed up this development. While the rich and the employers remain unscathed, billions are to be recouped from the unemployed, poor families, workers and pensioners. For this reason, DIW economist Jan Goebel criticised the government’s proposed austerity measures: “The specific proposals only affect those on lower incomes. But the share of the rich is growing steadily, and the rich earn more and more. This raises the question of whether this group should also make a contribution to [government] savings.”

It is clear that the DIW researchers regard their study mainly as a warning to the government. They see the growing polarisation of society as “deeply worrying”. They fear that the developments uncovered in their report will unsettle the middle layers. “A strong middle class is important for maintaining social stability”, they note. Their study specifically refers to the stabilising effect of the middle-income layers on German society since World War II: “Securing the middle is regarded as an important condition for the stability of democratic governance.”

[bpwallace49]

US manufacturing

 

The US still mnaufactures things. But your article doesnt say anything about the actual jobs available in manufacturing.

 

Az, it is safe to say that US manufacturing becomes more automated and efficient every year which allows for much, much fewer jobs? The output is the same, just done with a lot less workers. which is great for the stockholders, but not so great for the employees that actually make the stuff.

[Azazello1313]

Sooo . . . trickle down tax cuts for the upper strata dont work in germany either?

 

Thank you for the article Az. . . .

 

I was linking the article on a socialist website for a little extra irony. and then you go gulping down their socialist conclusions uncritically. I would venture to guess that in every country everywhere, there are people who envision a more socialistic society who are bemoaning income inequality. if only we just taxed the rich more! if it's 35%, it needs to be 40%. if it's 40%, it needs to be 50%. if it's 50% it needs to be 75%. second verse, same as the first.

Edited May 9, 2011 by DMD

[Azazello1313]

real median household income 1967-2006

[Azazello1313]

The US still mnaufactures things. But your article doesnt say anything about the actual jobs available in manufacturing.

 

usually, we view increased productivity as a good thing

[Boilerduff]

What are these onerous regulations? Anti-pollution standards? Making it a requirement to have safety guards on equipment? Not putting 5 year olds up chimneys? What exactly are these regulations that ruin it for business here?

 

Why do some people assume that if you have a business you are inherently evil, Wanting to pay $3.00 a month for a 6 year old to lick knives to test their sharpness? Most businesses don't work that way, no matter how much you think they do.

 

As for your question,

 

How about a use tax. I just got a tax bill for the ability to use my computers and office furniture. I owe a percentage of my business's cash flow for the right to use my desk and computer, which I paid for! No negatives here with getting business running.

 

Apply that to your life. Pay 6 percent a year of the cost of your bed, to be able to sleep in it. See how well that makes you sleep.

 

On the flip side, name a regulation that helps small businesses create jobs?

[SEC=UGA]

So, in other words, Germany does NOT fit into your hypothesis that organized labor and regulation are what has killed manufacturing in the US.

 

Nor does China. You know as well as I do that there are cultural and government differences that have led to an overall acceptance of this type of intervention in Germany, that is a topic alone that one could make a doctoral thesis out of.

 

And, BTW, I have not attributed the entire decline to Unionization, it is one piece that has led to the decline.

 

You wanna step up and give your two cents on what has led to outsourcing of jobs to foreign nations and the decline of the US manufacturing sector?

 

Let us be fair, though, manufacturing still makes up about 36% of our GDP. There are very high skilled manufacturing sectors in the US that can not be readily outsourced and we still hold a competitive advantage there. However, that is starting to dwindle, as well. We are not preparuing the next generation to take over these manufacturing jobs (incidentally, Germany is running into the same issue) and we will eventually see a transition in this sector to developing nations in the next 30 to 50 years.

 

And, BP, I posted quite a few articles in another thread that were showing there are about 250,000 to 300,000 manufacturing jobs in the US that are currently trying to be filled.

[SEC=UGA]

Manufacturing jobs go overseas when it becomes cheaper to do so. The lower wages and the lack of regulations alone tip the scales too much in the favor of foreign countries. Add to this the manipulation of the Chinese currency and we simply cannot compete. The trade deficit with China alone is serving to bury our manufacturing jobs.

 

http://www.americanmanufacturing.org/china...s/read-report#0

 

The pressure to lower production costs by America's largest retailer Walmart almost serves to guarantee that manufacturers that want to do business with them produce their goods overseas.

 

"WE" as consumers demand lower prices and no longer give a chit where the products are made, deserve blame as well. Of course a lot of the consumers have crappy paying jobs which means that price is almost always the deciding factor when shopping. That has created a dangerous cycle that I don't know if we can ever get out of.

 

I really like this reply (I'm not being a smartass.)

 

You have basically summarized the entire problem. The issue is driven by price and affordability. We are a consumerist society, the largest in the world. We measure our self worth, in many cases, on the toys we acquire. If we can buy them cheaper, we can buy more of them. In order for companies to satisfy this addiction they look for every advantage they can acquire, they strive to make a marketable item as inexpensively as possible to yield the highest amount of revenue to the company.

 

Inflated wages, benefits, pensions, taxes, regulations, etc... all increase the cost of manufacturing and, therefore, the price of a good. If you raise any of the previous variables the manufacturing company is going to have to raise their price or reduce overhead somewhere in order to make a product affordable while still posting good profit numbers to attract outside investment. Companies look to where they can save. If they offshore manufacturing they can typically save in all of those areas, it's a win-win for them. The US has seemingly forced manufacturing out of the US by increasing taxes and regulation here while not taxing as heavily production processes by US companies overseas. There is no disincentive to moving your production processes to other countries, so why wouldn't they?

[Azazello1313]

You wanna step up and give your two cents on what has led to outsourcing of jobs to foreign nations and the decline of the US manufacturing sector?

 

the answer is productivity.

 

used to be in this country, 65% of the people were employed on farms. now it's something like 3%. worldwide, there are probably more people farming that ever before (simply due to population growth). do we cry about the "outsourcing" of farming jobs to the developing world, where farmers aren't as productive?

[SEC=UGA]

the answer is productivity.

 

used to be in this country, 65% of the people were employed on farms. now it's something like 3%. worldwide, there are probably more people farming that ever before (simply due to population growth). do we cry about the "outsourcing" of farming jobs to the developing world, where farmers aren't as productive?

 

Absolutely technological advances have deteriorated the amount of employment in manufacturing, but that is far from the entirety of the story.

[bpwallace49]

And, BP, I posted quite a few articles in another thread that were showing there are about 250,000 to 300,000 manufacturing jobs in the US that are currently trying to be filled.

 

I remember SEC . . I also remmeber that these are highly specialized skills, where the employers couldnt find people qualified in quite a few cases. Isnt another issue the challenge of where the jobs are versus the workforce that can do the job?

 

The educational issue of tech schools has been done to death here, and is very apt. Not enough tech minded people to so some of the manufacturing jobs or mechanic jobs anymore. With secondary education getting more expensive every year and grants/loans tougher to get, perhaps we will see more young people returning to that sector But then again, considering how many of those jobs have disappeared in the last few years to overseas, it isnt exactly stable like it was in the past. You could work for Harley or Ford back in the day and if you did your job well you were set for employment. Now those assembly jobs are being shipped to Mexico because the wage is ridiculously low in comparison.

 

SEC, you can say that union wages are to blame, and in part I am sure they are. But the US minimum wage is a kings ransom compared to laborers in Mexico and Brazil, and will NEVER compete/ compare with the US.

[SEC=UGA]

I remember SEC . . I also remmeber that these are highly specialized skills, where the employers couldnt find people qualified in quite a few cases. Isnt another issue the challenge of where the jobs are versus the workforce that can do the job?

 

The educational issue of tech schools has been done to death here, and is very apt. Not enough tech minded people to so some of the manufacturing jobs or mechanic jobs anymore. With secondary education getting more expensive every year and grants/loans tougher to get, perhaps we will see more young people returning to that sector But then again, considering how many of those jobs have disappeared in the last few years to overseas, it isnt exactly stable like it was in the past. You could work for Harley or Ford back in the day and if you did your job well you were set for employment. Now those assembly jobs are being shipped to Mexico because the wage is ridiculously low in comparison.

 

SEC, you can say that union wages are to blame, and in part I am sure they are. But the US minimum wage is a kings ransom compared to laborers in Mexico and Brazil, and will NEVER compete/ compare with the US.

 

Highly specialized, 9th grade math and reading level, the willingness to make $12 an hour while apprenticing for a year and then $23 and hour after 2 years...

 

Again, you guys are taking one part of an argument that I made and acting like that is the ONLY reason I gave... It is not, I thought I outlined pretty clearly that there were other contributing factors. For you to believe that inflated wages and benefits (and the unions continuing to push for more) had no impact on the decision to begin looking elsewhere, in concert with other factors (taxes, regulations, qualified labor in other nations, tax avoidance by using foreign subsidiaries, etc...) well, you are mistaken.

 

Hell, Harley Davidson had threatened not too long ago, while negotiations with regard to seasonal employment were going nowhere, to move to the SE if they didn't get some relief from the unions.

[TimC]

SEC, you can say that union wages are to blame, and in part I am sure they are. But the US minimum wage is a kings ransom compared to laborers in Mexico and Brazil, and will NEVER compete/ compare with the US.

 

Our company did it's first outsource ever. We needed some data input done for a conversion. About a month's work of work was all. I figured we'd bring in a temp or two or three. Nope. The company helping us with the conversion paid some Indian company $300 for the whole lot. Unbelievable. We are doomed.

[wiegie]

On the flip side, name a regulation that helps small businesses create jobs?

anti-trust regulation

 

What do I win?

[bpwallace49]

Highly specialized, 9th grade math and reading level, the willingness to make $12 an hour while apprenticing for a year and then $23 and hour after 2 years...

.

 

Oh . . so your jobs are the 200,000 +? Are you just referencing how you advertised for a job that pays as much as McDonalds without saying that you get a 100% raise in one year?

[TimC]

anti-trust regulation

 

What do I win?

 

2008 Detroit Lions Greatest Hits. The pre-season version.

[SEC=UGA]

Oh . . so your jobs are the 200,000 +? Are you just referencing how you advertised for a job that pays as much as McDonalds without saying that you get a 100% raise in one year?

 

Hey, BP, here are the facts with regard to the state of US manufacturing and the inability for them to try and find labor.

 

TRAFFORD, Pennsylvania — Only half of the machines are running at Hamill Manufacturing, a precision parts maker nestled in the Allegheny Mountains just east of Pittsburgh, the city that was once the booming center of the U.S. steel industry.

 

But a shortage of business isn't the problem - indeed, Hamill has more orders than it can fill, despite a slowing U.S. economy. Rather, Hamill, like many U.S. manufacturers, is slowing production because it cannot find enough skilled workers to fill scores of jobs that require precision labor.

 

"I'd hire 10 machinists right now if I could," said John Dalrymple, president of the company, which makes high-end parts for military helicopters and nuclear submarines. "That's 8 to 10 percent of our work force."

 

While millions of American manufacturing jobs have moved to China and other low-cost countries in recent years, precision manufacturing remains a crucial niche in the United States - one that is chronically understaffed and in danger of losing even more momentum as fewer young workers train for these positions.

 

"Our work force is an aging work force," said Jeff Kelly, the chief executive, whose father founded Hamill nearly 60 years ago. "There isn't a queue of people lining up to come into the industry."

 

About 20 percent of small to midsize manufacturers in the United States - those with as many as 2,000 workers - cited retaining or training employees as their No. 1 concern, according to a survey by the National Association of Manufacturers. The survey was carried out last year but has not yet been published.

 

A separate study in 2005, the latest available, said 90 percent of manufacturers were suffering from moderate to severe shortages of qualified workers.

 

"The irony," Kelly said, "is we pay very well, we have good benefits, we have job security - and most of the companies that have survived the manufacturing recession at the early part of this decade can't find enough skilled workers."

 

A typical manufacturing job pays about $60,000 a year, according to manufacturing industry figures, a premium of about 25 percent over service industries.

 

At Hamill, a general machinist will start at $9 an hour, rising to $14.50 an hour after training, and going to $25 or more an hour for senior machinists, who can earn nearly $70,000 a year.

 

But that is not enough to attract younger workers into manufacturing, a sector that has suffered an image problem over the years, with layoffs in well-known companies like the Big Three U.S. automakers.

 

"Too few young people consider manufacturing careers and often are unaware of the skills needed in an advanced environment," the U.S. Labor Department wrote in a study on the issue.

 

Edward Lazear, chairman of President George W. Bush's Council of Economic Advisors, warns that as more and more baby boomers retire, the skills shortage will eventually cut into growth of the U.S. gross domestic product.

 

"You will start to see some decline in our growth rates as a result of these demographic factors," Lazear said during an interview. "As people start to retire, the labor market is going to not grow at the same rate that it did in the past, and it's going to affect our growth."

 

This is clearly the problem in Pennsylvania, which has been suffering from the decline and collapse of its steel giants, like Bethlehem Steel, since the 1980s, but which has openings for skilled workers.

 

"I can tell you on my desk right now, I have over 300 very high-quality job openings that I cannot fill," said Michael Smeltzer, executive director of the Manufactures Association of South-Central Pennsylvania, which coordinates job openings for that part of the state.

 

State officials concede that lower-skilled work will continue to move overseas where the pay is lower. The state has pledged $17 million to develop a skilled work force and keep the high-precision sector.

 

"We're not going to compete on the price of our labor, we're going to compete on the skill of our labor, said Sandi Vito, deputy secretary for work force development in Pennsylvania.

 

But for Smeltzer, that investment may not generate enough skilled workers to cover what he called a crisis of retirements.

 

"Why do I think it's a crisis today?" he said. "In 2010, which is right around the corner, we have this avalanche of skilled labor needs."

 

Smaller businesses, those with 200 employees or fewer, make up the bulk of the U.S. manufacturing sector, and for them the skills shortage is a crucial issue.

 

Nationally, one in four businesses says it has a vacancy it cannot fill, according to a survey by the National Federation of Independent Business, which groups both manufacturing and nonmanufacturing businesses.

 

"We could make more GDP if we could find some hands to do it," said Bill Dunkelberg, the group's chief economist.

 

At Hamill, demand for high-end, U.S.-made military parts is up, as the war in Iraq continues and the value of the dollar has decreased, making these goods less expensive for overseas buyers. But Hamill has not been able to take full advantage of the weaker dollar, and orders have been lost.

 

The company has a staff of 110, up from 85 two years ago, but potential growth has been stifled by the inability to bring new people in, Kelly said.

 

Glenn Skena, who runs Hamill's apprenticeship programs, said it took years to train workers. On average, the company will invest about $120,000 on an apprentice and often will send workers to college for training to use the computers that design the parts and direct the machines.

 

"We have a hard time hiring programmers from the outside, so we have to train them from within," Skena said.

 

Because these highly trained workers are such a commodity, wages are high. "We're quickly ratcheting up our wage scale," said Kelly.

 

But still there are not enough workers.

 

"We have spindles sitting idle because we don't have machinists to run them," Dalrymple said. A "Help Wanted" sign has been a fixture outside the factory for months.

 

 

(CBS) Job openings at businesses fell to 2.54 million in June from 2.6 million in May, meaning there is now five unemployed workers on average for every job opening.

 

There's a brighter spot in manufacturing, where some companies are looking for workers, CBS News Correspondent Cynthia Bowers reports.

 

On a quick tour of her family's factory, Linda Fillingham proudly shows off employees making the metal parts that go into some of America's biggest machines.

 

What's holding her machine shop back isn't a shortage of work. Instead, it's a shortage of workers, whom she's willing to pay $13 to $18 an hour.

 

"Thirty to 40 we could use right now," Fillingham said.

 

And she's not alone. The government says there are 227,000 open manufacturing jobs, more than double the number a year ago. One hundred eighty-three thousand have been created since December, the strongest seven-month streak in a decade.

 

Fillingham said it's hard to fill these jobs because they require people who are good at math, good with their hands and willing to work on a factory floor.

 

She's had to resort to paying people to learn on the job, like 25-year-old Matthew McDannel. The average manufacturing worker is more than twice his age.

 

"Maybe the work's too hard," said McDannel. "Maybe it's too hot. Maybe people just think about it and they're just, like, 'Oh, I don't want to do that.'"

 

By the year 2012 it's estimated this country will be three million skilled workers short, and it's not just in manufacturing sector. A recent survey found 22 percent of American businesses say they are ready to hire if they can find the right people.

Edited May 9, 2011 by SEC=UGA

[Ursa Majoris]

Nor does China. You know as well as I do that there are cultural and government differences that have led to an overall acceptance of this type of intervention in Germany, that is a topic alone that one could make a doctoral thesis out of.

 

And, BTW, I have not attributed the entire decline to Unionization, it is one piece that has led to the decline.

 

You wanna step up and give your two cents on what has led to outsourcing of jobs to foreign nations and the decline of the US manufacturing sector?

 

Let us be fair, though, manufacturing still makes up about 36% of our GDP. There are very high skilled manufacturing sectors in the US that can not be readily outsourced and we still hold a competitive advantage there. However, that is starting to dwindle, as well. We are not preparuing the next generation to take over these manufacturing jobs (incidentally, Germany is running into the same issue) and we will eventually see a transition in this sector to developing nations in the next 30 to 50 years.

 

And, BP, I posted quite a few articles in another thread that were showing there are about 250,000 to 300,000 manufacturing jobs in the US that are currently trying to be filled.

Y'know, it isn't all gloom and doom. An issue of Wired a couple months back examined the phenomenon of insourcing, where small to medium companies have begun bringing their product creation back here due to the atrocious quality control issues they encountered in developing countries. It's OK if you're Apple, with their clout, but Joe Schmoe and his 50 person company were finding that there were so many issues with the product generated, that they had to write off or return a ton of goods, plus the lead time was way too long.

 

This is pretty much my experience too - when we outsourced Oracle coding, the product was utter crap, so we got our own developers - throughput is now ten times what it was.

[Ursa Majoris]

On the flip side, name a regulation that helps small businesses create jobs?

Minnesota's JOBZ zones were supposed to do exactly that but once again have demonstrated that the only driver for jobs is demand. It doesn't matter how you try, there is only demand (and busywork a la Roosevelt) that works. Tax breaks, absent demand, just increase dividends and bonuses.

[Boilerduff]

anti-trust regulation

 

What do I win?

 

That's pretty thin, don't you think?

 

Antitrust law is not about growing jobs. It's about protecting consumers, keeping a market open. Keeping monoplies in check. I will give you that it does make it possible for some small business to exsist, ( and you could argue grow jobs that way) but it does not, in and of itself, in my opinion grow jobs in small business. We have antitrust laws in place, is that keeping business here? Are small manufacturing businesses growing due to anti-trust laws? Not in my opinion. I have to give you credit for your answer (and a digital copy of Rebecca Blacks "Friday" for your victory) , but it's awfully thin.

 

If government is doing such a good job at promoting middle class job growth in this country, what is there to complain about then? We need to help businesses grow, so that they can hire, and help the middle class. Vilifying business doesn't help. Rasing taxes on corporations doesn't help either, we just end up paying for it when we buy from them. If there was an easy answer, I guess we would already have it.

[SayItAintSoJoe]

Our company did it's first outsource ever. We needed some data input done for a conversion. About a month's work of work was all. I figured we'd bring in a temp or two or three. Nope. The company helping us with the conversion paid some Indian company $300 for the whole lot. Unbelievable. We are doomed.

 

 

Y'know, it isn't all gloom and doom. An issue of Wired a couple months back examined the phenomenon of insourcing, where small to medium companies have begun bringing their product creation back here due to the atrocious quality control issues they encountered in developing countries. It's OK if you're Apple, with their clout, but Joe Schmoe and his 50 person company were finding that there were so many issues with the product generated, that they had to write off or return a ton of goods, plus the lead time was way too long.

 

This is pretty much my experience too - when we outsourced Oracle coding, the product was utter crap, so we got our own developers - throughput is now ten times what it was.

 

 

I hope you're right. But if you think back year's ago, Asian products were crap too. Then they started to focus on quality and soon many of their products were as good if not better then their foreign conterparts. I hope the same thing doesn't happen with India in regards to IT work.

Edited May 9, 2011 by SayItAintSoJoe

[Ursa Majoris]

We need to help businesses grow, so that they can hire, and help the middle class. Vilifying business doesn't help. Rasing taxes on corporations doesn't help either, we just end up paying for it when we buy from them. If there was an easy answer, I guess we would already have it.

If one accepts that increased demand is the only driver of growth, how does government increase demand? More to the point, how does business increase demand, given that one of the prime drivers of business across the board is to reduce headcount and wages as far as possible, both of which are antithetical to increasing demand (as both reduce the spending power of the populace as a whole).

 

A paradox, of sorts.

[Ursa Majoris]

A leftist view of the deficit problem.

 

The budget is likely to revert to Topic A in Washington this week, as Vice President Joe Biden’s bipartisan negotiations resume at Blair House and the Senate Gang of Six (maybe) finally releases its report. The key to making sense of this latest round of wrangling is to keep an ear out for the phrase “tax expenditures,” because how that issue is handled will largely determine whether we end up with a serious and equitable solution to our financial problems—or an ideological one that extracts flesh from the targets (poor people, domestic programs) that are running out of flesh to extract.

 

More on tax expenditures in a moment, but first some background. Fixing our long-term budget problems requires work in three basic areas. First, spending cuts. That, you know about. You hear about it ceaselessly from the Tea Party caucus and Republicans generally. You know that $38 billion (it was really only about $25 billion) was wrenched from the 2011 domestic budget, and that conservatives want far, far more than that. Non-defense domestic spending, remember, constitutes just 12 percent of the federal budget.

 

Second come entitlements. You may know that everyone agrees that Social Security and Medicare must be reformed before the baby boomer onslaught hits. Well, in truth, not everyone agrees about Social Security, but these dissenters have trouble attracting attention. Medicare, though, is in legitimate trouble. Costs are rising rapidly, and no one really knows how well or whether the health-care reform bill from last year will contain costs.

 

The third leg of the stool gets far less media attention than the other two. It’s revenue. To put it more plainly, taxes. As in raising them. Yes, this is the part that doesn’t get talked about, for the straightforward reasons that Republicans have sworn a blood oath against doing so, and Democrats would like to do it (most of them) but are terrified of broaching the subject. So it is avoided not only by those who prefer avoiding it, but also by those who’d like to discuss it.

 

And yet we need to discuss it. The tax burden in the United States is at its lowest point since the late 1950s. We are not spending ourselves into oblivion, as you hear some jowly bloviator say on television every day. We are de-taxing ourselves there. Back in those good old days that conservatives love to invoke, we were paying more in taxes. Substantially more. Especially the rich.

 

Putting the squeeze on the deductions is the only way to generate revenue and prevent asphyxiating cuts to the domestic budget.

 

So what do we propose to do about taxes? As you may know, President Obama wants to raise the rates on the top 2 percent of households. That’s all well and good. But even if that effort succeeds—and I doubt it will, which we’ll get to in a future column—it would bring in about $36 billion a year. For the federal government, that’s change that drops out of its shoe.

 

And so: tax expenditures. Basically, they are deductions and loopholes, for both individuals and corporations, that rob the treasury of resources. Many of them exist to encourage a type of behavior—the home-mortgage interest deduction encourages home ownership—while others were just won the old-fashioned way, by lobbyists. They tend to advantage wealthier taxpayers (who are more likely to itemize) and corporations. And in many cases, if the government just appropriated money for the same purpose, it would be fairer and might cost less. See this report (PDF) from the Center on Budget and Policy Priorities for the details.

 

Everyone this year says it is finally time to eliminate these expenditures. The president’s commission, Bowles-Simpson (PDF), wants to do it. That other commission, Rivlin-Domenici (PDF), agrees. Even Paul Ryan agrees (PDF), or so he says. All of their reports contain language along these lines. All of their reports also recommend dramatically lowering personal income-tax rates. The lost revenue will be made up by eliminating these tax expenditures—“broadening the base,” another phrase you’ll want to watch out for.

 

This all sounds nice. Even I wouldn’t mind paying less in taxes. But why does it worry me? Eliminating deductions is really hard. Lowering overall rates is really easy. And politicians tend to do what’s easy, especially when one of the two parties considers the hard work to be a venal sin. Republicans have classified elimination of tax expenditures as tax increases, and they won’t do it. Sen. Tom Coburn (R-OK) might. Two other GOP senators might. Of all 287 elected Republicans in Washington, just those—three—have indicated that they might support elimination of some loopholes. Besides which, powerful lobbies are organized to keep that home-mortgage deduction in place, to say nothing of the corporate ones.

 

This is why tax expenditures are so important. They cost $1.1 trillion a year, and given that we’re not going to increase income taxes much if at all, putting the squeeze on the deductions is the only way to generate revenue and prevent asphyxiating cuts to the domestic budget. And it’s why I fear that when all is said and done, we’re going to come out of this with lower tax rates and very few loopholes closed—the worst of all possible worlds in revenue terms, which is really what the Republicans want. So as the negotiations slouch toward crunch time, watch for the recommendations on tax expenditures. They provide the only chance for a just solution to our problems

[Azazello1313]

interesting data on income inequality