Saturday, July 7, 2012

If not me, then who?

“If I am not for myself, then who will be for me? And if I am only for myself, what am I? And if not now, when?” (Ethics of the Fathers 1.14)

These last few post have been looking at Marco Rubio's contention that the only out of our (U.S.) current fiscal problems is through growth.  When he says "only" he means only.  Nothing but growth, so any movement by government to generate revenue to reduce the deficit and pay down our debt is off the table if it has any chance of impacting growth.

According to Rubio, we need to leave the money in the economy (keep taxes where they are) so that it will be invested back in the economy creating growth and thereby creating new and better tax payers which will provide the government the revenue it needs.

I contend that this theory, though sound and plausible, will not work because the money that is not taxed and would be received as revenue is not put back into the economy where it creates these new and better tax payers.

Case in point is how Mitt Romney invests his money.

When I asked the question: How many jobs did Mitt Romney's $5.46 million  that he got to keep because he paid 15% and not 39% taxes create, it was not to poke fun at him or paint him in a bad light.  It is simply to point out a fact, that is, investment is predominately designed to increase the wealth of the individual, not to create jobs.  That's the model used.  that's the model Bain Capital uses.  That's the reality in play and the reason Rubio's "growth only" model will not work.

It can't work because guys like Romney invest their money in ways that benefit them.  Heck, for the most part, we all do it.

So if a fiscal policy advocated by Rubio of "growth only" and no taxes - which is pretty much held in lock-step regard by the Republican party - is dependent on investment by "job creators" like Romney, and guys like Romney are not investing in things that create new and better tax payers, how valid is Rubio's idea?

It's not valid.  Not because it's not a sound theory or plausible, but because in reality it is not happening.  Rubio's theory is completely dependent on guys like Mitt Romney investing in things that will create more and better tax payers.  Romney, on the other hand, invests in things that bring in the highest return for him and his family.

Rubio's "growth only" could work but only if we force that revenue they keep be invested in projects that create American jobs.  The reality is this:
The unemployment rate was unchanged at 8.2 percent, the Labor Department said in its report Friday. (1)
Reality shows that since the lower taxes put in places by Bush, as well as an environment under a Republican President and Republican Congress, investment by guys like Romney has not generated the necessary jobs needed by the Rubio model to generate the revenue we need to run our government.

If it seems like I am beating a dead horse with this, I am.  If a model does not produce the results you need then the model is wrong regardless of the theory or soundness behind it.  Reality shows over and over again that the "job creators" are not creating the jobs we need.  They are "job creators" only in the sense that the theory of "growth only" makes them so.

In reality, guys like Romney are nothing more than investors.  If one thinks they create jobs with their wealth then you are fooling yourself.  Their wealth creates jobs only when it benefits them.  In a way, it would be like calling yourself a "philanthropist" because once and a while you drop change in the Salvation Army bucket at Christmas.

So why beat this dead horse?  Because it is the predominant Republican model for how to achieve the revenue to decrease the deficit and pay down our debt.  It is a model that relies on guys like Romney.  And we know how guys like Romney behave.  They do what is in their best interest, and right now, a 15% tax rate is what benefits them.

Which brings us to this question:  Is it Romney and his rich cohorts responsibility to create American jobs with the money they keep because we let them pay lower taxes because we want them to invest?

If it is not Romney's responsibility to take that $5.46 million extra money he got to keep because he is a "job creator" and is taxed at a lower rate than everyone else, to create new and better tax payers, who's job is it?

If the private sector won't do it.  And the guy that wants to be our president isn't doing it, then who will produce the revenue we need to run our government and pay down our debt?  Where will it come from if it is not going to come from new and better tax payers that Rubio stresses will materialize from a "growth only" model?

Growth only will not work because guys like Romney do not spend their money on projects that create new and better tax payers.  It does not work that way even though, in theory, it should.  Romney does not spend his money that way and neither does the rest of the "job creators."

If they won't then Rubio's model will not work and a different approach is needed to bridge the gap between what we need in revenue and what we currently bring in.  Rubio needs to change his tune because he is the rising star within the Republican Party.  As long as he sings the "growth only" song, the others will sing from that same songbook.

If you want "growth only" then guys like Romney need to be punished when their investments do not generate new and better tax payers.  Or, we admit that it is not guys like Romney's responsibility to create jobs for Americans and stop calling them "job creators" and tax them at a rate necessary to bring in the revenue we need to run our government and pay down our debt.

"Now, who is going to bake this bread?" asked the little red hen.

"Not I", said the cat.
"Not I", said the duck.

If not Romney, who?

Next Post:  How smart is a guy who does not see this reality?


Wednesday, July 4, 2012

Does $5.46 million invested in Bain Capital create new tax payers?

Under Marco Rubio's premise that growth is the "only" viable course of action for deficit and debt.  The Rubio model, if I understand it correctly from his interview with Jon Stewart, is based on the idea that keeping money in the hands of the citizen will lead to investment which will lead to more tax payers.
"The government will generate more revenue and that revenue will be used to pay down the deficit."
That, in a nut shell, is his belief.  That, in a nut shell, is the Republican's economic model.  Not $10 in cuts for $1 in tax.  Nothing of the sort other than leave the "job creators" alone and let the money roll in to the government from their investments.

In theory, that seems plausible, but in reality it does not work that way.

Here is why.  Let's look at the reality of the right now.  If lower taxes mean more investment which creates new and better jobs for Americans, then the money that has been taxed at this lower rate should currently be used to create new jobs.  If that is how the Rubio model is supposed to work, then that is indeed what we should be seeing, you know, the reality.

If the Rubio model is valid and will work to pay down our deficit and debt, then the actions by those who are taxed the lowest, the ones who invest - the "job creators" - should be dumping that untaxed money - their lower taxed income they get to keep because they pay 15% and not 36% or 39% - into the economy and a net increase of new tax payers should be the reality we see.

Is it?

Here is, instead, what the reality is that we currently see.  If Mitt Romney, a guy who wants to lead us and will put the Rubio model into play, benefits from a decrease in his tax burden under the guise that he is a "job creator" then shouldn't his actions - the reality - show us the benefits in the form of new tax payers?

I'll get to the question on if it is the responsibility of guys like Mitt Romney to create jobs in a later post. Right now I am trying to see if the Rubio model is valid.

What were the actions - reality - of Mitt Romney?  If he is a job creator and needs to be unhindered with any additional responsibility for our country's current and former bills so that he will invest.  And if that investment is the keystone of the Rubio economic model for creating new tax payers which will "generate more revenue and that revenue will be used to pay down the deficit," do the actions match the rhetoric?

Here is what columnist John Young has to say about Romney's investments and how they relate to job creation.  It is titled "Mitt Romney: Job Killer."   That does not sound to promising if guys like Mitt Romney are needed to make the Rubio model work.  Remember, Rubio states numerous times in the interview that growth is the only way.  When asked by Stewart how that will take care of the deficit and debt, Rubio responds that investment creates new tax payers.  "Tax increases don't generate growth," Rubio states.  "If you leave it in the economy they will use it."

Here is the question I would ask Rubio.  Use it how?  Not theoretical, but in reality.  We are coming to a point where two competing goals are coming into play.  Does Romney's investments need to produce jobs to make the Rubio model work, or does Romney's investments need to generate growth for himself?

This is not an argument on greed, although an argument as to how much we owe our fellow citizens could be made, that's not what I want to look at in terms of the validity of running a government predicated on the idea of needed revenue from "growth only" which is dependent on investment that creates new tax payers which leads to more revenue for their taxed income.

Here is how a guy like Romney invested his money.  According to John Young:
For better (investors) or ill (your neighbors), Romney's company, Bain Capital, was absolutely a huge player in employing the fine people of India.  Now, we all know that outsourcing boosts corporate profits, and lowers prices for services or products. Of course, the same can be said for illegal immigration. It's all part of the "global economy" to which we are all shackled.
This is a reality.  Investing in India was good for Bain Capital but it did not create any new tax payers needed for the missing revenue we need here.  Doonsbury also brings up this issue in today's comic.

This is where the competing interests collide and why the Rubio model of "growth only" will not work.  What is good for the investor is paramount in the current US model.  Here is another problem on why untaxed money is not used for growth that creates new tax payers:
One thing to say about the type of business that made Romney drip with wealth while so many tread water, is that it reflects an economy whose course is increasingly difficult to change.      
Take big-box retailers. Bain Capital is credited with helping office-supply giant Staples, among others, get through rough times. Retailing behemoths are a way of life for Americans today. At the same time, they arguably are the biggest reason why the U.S. economy is so hard to steer anew when things go awry. Our nation has much bigger, and much fewer, retail employers than in previous generations.
What's the problem with that?  How does this void Rubio's "growth only" model?  According to John young:
Two massive factors — outsourcing and oppressive big-ness — tie policymakers' hands when they try to do something about the economy. And both factors have made a lot of money for a few in the moneyed — Romney-ed — set.
If the "lot of money" is going to folks who we will need to depend on to make a growth only model for government tax revenue work, then these folks will need to change their current business model to stop outsourcing and employee more Americans.  And what is the chance of that happening?  It's not greed as much as it is this reality of thinking:  I am willing to do only so much for those around me, after that, you are on your own and my responsibility ends.

So if I am willing to do X and X + 5 is needed, where does the +5 come from?  It's not coming from guys like Romney = guys we call the "job creators."  He is a beneficiary of a system that is stalked in his favor at the expense of others.  Did Romney invest that $5.46 million in activities that helped his country or helped himself?  We know how Bain Capital made its money and we also know Romney put his money into the Cayman Islands.

Now it gets tricky.  If we accept that it is perfectly okay for Romney to do what he wants to with the money he legally made, that what he is required to pay in taxes is all he must do, then the Rubio model will not work because it is dependent on Romney investing what is not taken as a tax into activities that generate new American tax payers.  And that, looking at Bain Capital's business model, is contrary to what generates wealth for their investors.

Rubio and Romney believes that the current tax structure is adequate and that he has done all he is required to do.  Romney's obligations to the US have been met:
“I pay all the taxes that are legally required and not a dollar more. I don’t think you want someone as the candidate for president who pays more taxes than he owes.” (1)
"Legally required" and "not a dollar more" are perfectly fine for the individual, but we have a country where the individual's fellow citizens are not doing well.  We have a country who cannot meets it current obligations - deficit - and keeps piling up more and more debt, whose interest payments go to guys like Romney and China.  Romney and his cohorts pay only X when X+5 is required.  Rubio will accept no other model that may require guys like Romney to pay more than X.  If that - tax increase - is off the table how do we address our problems if the dependent variable - the Mitt Romney "job creators"-  are not investing their money in areas that create American Jobs which creates American tax payers to produce the revenue we need? Phew!  Out of breath on that one...

The question I would ask Rubio is:  What if guys like Ronmey don't - or will not - invest their untaxed money into growth that creates new American tax payers?   Should we force Romeny to only invest in projects that generate new American jobs?

If it is not Romney's responsibility to "pay one dollar more" and it is not the responsibility of Romney to invest in companies that create American tax payers, who's responsibility is it to get the government the +5 it needs?  The reason we have such a problem is because of the business model guys like Romney use to generate their personal wealth and the power they hold to create laws and policies that benefit them personally.  They have no further obligation, as in "not a dollar more."

And yet Rubio believes that these guys are the way out of our mess if we just leave them be and "close the loopholes."  Romney wants to become president and control an economy that he has benefited from and sees no reason to change.  That's like the wolf guarding the hen house:
While the U.S. government tries to balance its books, offshore corporations and people with the means of sheltering their wealth deprive the Treasury of those dollars, though they benefit from the "land of the free" in every way. (2)
Rubio will accept no tax increase on guys like Romney believing them to be the job creators needed for the "only growth" model to succeed.  Yet the deficit grows and the debt grows, and guys like Romney grow richer at the expense of their fellow citizens.

If Romney is not investing in endeavors that generate new American tax payers, why would we expect any of his cohorts to be doing the same?

So who does have the obligation to pay down the deficit and the debt?  If not Romney, who?

Next post: If not me, then who?


Tuesday, July 3, 2012

Does Mitt Romney's income come from investments that help Americans?

In my last two posts I have been exploring Marco Rubios contention that the only way out of our current US fiscal predicament is through growth.  And to get that growth me must not increase taxes on those the Republicans commonly refer to as "job creators" - as in guys like Mitt Romney.

Marco Rubio wants to get the government the revenue it needs through growth that creates new tax payers.  That growth comes from those folks that have the money to invest.  The more money they are allowed to keep from lower taxes, the more investment they will make and the more growth we will have creating more tax payers thereby more income for the government.  Win-win-win-win.  Wins all around!

This theory, a similar type of  "trickle down economics" ideology, is predicated on the actions of those that currently hold the bulk of the available money in our society, those often referred to as the "one precenters."


Out of 117728 households, 1181 have income greater than $250K.  1181/117728 = 0.010 or 1%.  It is important to look only on income and not on wealth:
Income is what people earn from work, but also from dividends, interest, and any rents or royalties that are paid to them on properties they own. In theory, those who own a great deal of wealth may or may not have high incomes, depending on the returns they receive from their wealth, but in reality those at the very top of the wealth distribution usually have the most income. (But it's important to note that for the rich, most of that income does not come from "working."  G. William Domhoff
If the primary means of funding our government is through revenue generated from taxes, does a tax rate of 39% for the "one percenters" help us more than the 15% guys like Romney are paying now?

In my last post I asked:
So if a guy like Romney, one of those "one precenter" types is also going to be called a "job creator" then how will his income - which is investment income - be affected by increasing the cost to the business by adding jobs or increasing the pay?
In order to pay 15% Romney's income had to come from capital gains and not from wages.  According to CNN:
Romney took in $21.7 million in long-term capital gains over the past two years. Of that, $12.9 million was in so-called carried interest.  Carried interest is a share of profits paid to general partners at private equity firms -- such as Bain Capital, which Romney left in 1999. General partners manage the firm's investments. If those investments are sold at a profit, the carried interest represents a portion of those profits above a minimum rate of return.
So Romney makes money from investing his money - income - in firms like Bain Capital.  What else produced capital gains for Romney?  According to CNN:
Brad Malt, a lawyer who serves as trustee of the Romneys' blind trusts, said Romney pays all U.S. taxes on income from the trusts' foreign investments. Further, he said Romney has no role in choosing how the blind trusts invest his money.  "The blind trust investments in the Cayman funds are taxed exactly as if Gov. Romney owned his share of the funds in the United States," Malt said.
Hmmm.  Okay, so Romney takes his money not used to buy gas and food and pay for his standard of living and invests it.  That's exactly what Marco Rubio believes is the right course for the US; allow guys like Romney to keep more of their income so they can invest it by giving them a 15% tax rate on capital gains and not 39%.

So investment is happening, but is it generating growth in the form of new tax payers which is what Marco Rubio's model is predicated on for generating the revenue the government needs to operate and to pay down our debt?  We either cut spending and increase taxes on the 1% - as Jon Stewart contends - or we only focus on growth of our economy.

The devils in the details.  For "growth only" to work - as Rubio believes it will - it must produce new tax payers.  This growth is dependent on guys like Romney - the one precenters with the money to invest - investing in new business that create tax paying employees who are currently paying zero income tax now.

Romney is investing, and growth is happening, but is that investment and growth creating the new tax payers Rubio believes will produce the needed revenue for our government?

If Romney generates income form foreign investments, that money is not directly producing a new american worker who will now pay taxes.  If Romney puts money into the Cayman Islands, that money is not - directly - producing new employers in the US and therefore will not produce new tax payers.  And if Romney, like his fellow one precenters, invests their money in companies like Bain Capital, is that money - that investment Rubio speaks about - the "only way" to generate the revenue needed to pay our bills and debt?

At the 15% tax rate, Romney was allowed to keep $5.46 million dollars.  The government, with its deficit and debt, allowed Romney to do this because of the belief in the Rubio model.  If Romney invests that money in foreign companies, the Cayman Islands, and into Bain Capital, is the Rubio model of "growth only" more myth than plausible?

Once again, let me be clear on this.  The issue is not about Mitt Romney.  I would probably do the same type of investing, though I am a little more keen on keeping it on US soil.  The issue is on "growth only" as a means to fund the government.  Mitt Romney is what "growth only" is dependent on.  Foreign investments and Cayman Island accounts are not going to make Rubio's model work since it does not create new tax payers and only creates income that is taxed at 15%.

Next post: Does $5.46 million invested in Bain Capital create new tax payers?


Monday, July 2, 2012

Mitt Romney's $5.46 million dollars created how many new tax payers?

First off, let me get this out of the way.  If I were in Romney's shoes, I would make the same statement he made:
“You’ll see my income, how much taxes I’ve paid, how much I’ve paid to charity. I pay all the taxes that are legally required and not a dollar more. 
The argument I want to make in this post is not on how much, or how little, Romney pays in Federal taxes, it is simply about whether the money he keeps from not being taxed 39% instead of 15% is used to create jobs that create new tax payers that then provide the revenue for the government.  That's the only way the Marco Rubio's model of "the only solution is growth" will work as a means for funding our current governmental needs and paying down the debt.

If the money Mr. Romney keeps is not used to produce new tax payers than the government will continue to run a deficit and the debt will increase.  Period.

According to CNN:
Romney and his wife, Ann, filed a joint 1040 reporting $21.7 million in 2010 income and $3 million in federal taxes. They also said their 2011 income was $21 million and tax bill was $3.2 million.
That is an effective Federal tax rate of 13.8 percent.  If, as one of those making greater than $250,000 Romney were to be taxed at 39% as proposed, the government would see an increase in its revenue of $5.46 million dollars from the Romney's.

The argument made by Rubio is that the $5.46 million is better left in the Romney's hands than given to the government.  Hard to disagree on that principle, but...the Rubio model of "growth is the only way" to manage the deficit and pay down the debt is predicated on the United States increasing the number of tax payers.

That can be done in one of two way:  1. Employee those who are currently not employed and go from zero income tax to some income tax being paid.  2. Increase the salaries and take home pay of those currently working.

The problem with those two requirements is that they run counter to what the business person has been trained to do for his/her company.  That is, do as much as possible for as little money as possible.  This, along with the common notion that the largest cost to a business is labor, puts the business in a position to drive down wages and employee as few employees as possible.

So if a guy like Romney, one of those "one precenter" types is also going to be called a "job creator" then how will his income - which is investment income - be affected by increasing the cost to the business by adding jobs or increasing the pay?

According to CNN:
The reason Romney's rate is so low -- despite having one of the highest incomes in the country -- is because his income was derived almost entirely from capital gains and dividends from his extensive portfolio of investments. And that form of investment income is typically taxed at just 15%, well below the 35% top tax rate for high earners.
So can guys like Romney be "job creators" when their income is derived from investments that are predicated on keeping costs low?  Theoretically they can, assuming that there is constant growth so that the demand drives the need for more employees and higher wages.  Without that demand, however, we are at the mercy of guys like Romney who control the money needed to invest in new business, education, and infrastructure to get those goods to market.

So back to my question: Did the $5.46 Romney got to keep because he does not have to pay a 39% tax rate create more new jobs and higher wages to make this model - the one Rubio swears by - more effective than what would be done with that money had it gone to the government as additional taxes?

Now it is easy to get lost in the taxes part of the discussion.  No one wants to pay taxes and everyone wants to pay as little taxes as they can.  But the fact of the matter is, if you live in a democracy you must pay for the services that democracy provides.

This is not a debate on what is a fair tax.  Romney says “I’m proud of the fact that I pay a lot of taxes.” And that he does, but is it enough to pay for the government that he, I and you (if you live in the US) benefit from?

At this point in time we have both a deficit and a debt that is dragging our country down.  If Rubio is correct and letting guys like Romney keep that money so they can invest it and create new tax payers, then we need to see some proof that that is indeed what is being done with that money.

Why?  Because we know that the government does create new jobs through job programs as well as investing in new technology and education for the future.  The government does this with tax revenues from guys like Mitt Romney.  Rubio and his cohorts contend that guys like Romney do the same thing, and they do it better.

Do they?

Next post:  Does Mitt Romney's income come from investments that help Americans?


Sunday, July 1, 2012

Marco Rubio's One Trick Pony

Okay...okay, "one trick pony" is not really the right phrase, but "Excalibur sword" was used by Jon Stewart in his interview with the Senator on the June 25th Daily Show.  Nobody gets to the heart of an issue in an interview like Jon Stewart.  The man is great at seeing how the rhetoric doesn't match the reality.

Marco Rubio said over and over "the only way to solve the problem is growth."  Now on the surface this makes sense, but it really no more an "only way" than winning the lottery is the only way for me to become a millionaire.

Somehow this seemingly bright and articulate man drank the kool-aid and actually believes that anything that  hinders growth - regardless of the benefits or soundness - will never be acceptable to Republicans.

"How do you shrink the deficit?" Jon asks.

Grow the economy"  Rubio responds.  "The government will generate more revenue (through jobs produced from that growth producing more tax payers) and that (tax) revenue will be used to pay down the deficit."

This ideological purity is based on an acceptance of the "job creator" concept.  That is, if you let the rich - those with money to invest - keep their money (e.g. 15% instead of 39% tax) they will invest it in growth and a person without a job "paying zero taxes" will become a person making 50 to 80K a year which will then be taxed.

"I would most like to see much rather those people (rich) take that money and invest it," Rubio tells Jon, :to grow their business or start a new one.  And you (Jon) would much rather have them give it to government and the government would spend it on something."

How can an idea that sounds valid - growth producing jobs which produce tax payers - not be the prudent course of action?

"Tax increases don't generate growth," Rubio states.  "If you leave it in the economy they will use it."

Okay, so let's look at this objectively:

Assuming that growth is the only answer, will the government or the individual produce the jobs needed to produce the revenue needed to run the government and pay down the debt?

First, let's get a few "facts" on the table so we can take them off and objectively answer the question:

1) New business require funding to get off the ground.
2) The government wastes money with bureaucratic requirements and inefficiency.
3) The obligations of the government are just that, obligations, and must be paid for regardless of benefit to the individual paying the tax.
4) The purpose of a business is to generate wealth for its stake/stock holders.  How that wealth is defined is irrelevant to that goal.

If you cannot accept all of these, then you drank the kool-aid and my argument will fall flat.  I am wanting to explore the idea that growth is "the only to solve the problem."  If it is the only way, then growth must take place in a way that produces the tax payers needed to fund the government's current needs.  That's Rubio's understanding and, if I take him at face value in this interview, he will not accept anything that can be seen as hindering the potential for that growth.

Right now, the idea of a tax increase - any tax increase - is seen as hindering growth and will never be considered by Rubio and I suspect, the rest of his Republican cohorts.  Okay, so let's accept that any additional tax will hinder growth thereby creating a new tax payer.  For growth to be "the only way to solve the problem" then all money not taxed must be invested in growth that generates more tax payers (from no job paying zero to a new tax payer making $80K).

Well maybe not "all the money" but more of it must be used to create growth and new tax payers than what the government would create if it, instead, received said money through additional taxes on the person.

This is, in my opinion, a fair question to ask.  Let's look at Mr. Romney as an example of "how the only way to solve the problem is growth" plays out in the real world.  First, let's make sure we have the word growth defined.  Rich folks have seen their fortunes rise and they are doing "pretty well" as Jon says, speaking of himself as one of these well off folk.  Growth, as Rubio makes the case, must create new tax payers from those currently not paying taxes (listen to the interview).

So the question now is (and not to pick on Mr. Romney but his tax rate and revenue is known), how many new tax payers - growth - did the untaxed money Romney got to keep create?  If guys like Romney are job creators, do they actually create more jobs than the government would create if it instead taxed them at 39%?

For Rubio's "only solution is growth" model to work to both fund our government and pay down the debt, new tax payers must be made at a rate that exceeds what the government would create and/or do with that money.  If you think guys like Romney are job creators, then we should see all that untaxed money go into creating jobs for our fellow citizens, or else Rubio's model will not work and he is hindering what is best for America by not allowing other models to be considered.

Did Mitt Romney's untaxed money create the necessary new tax payers to make Rubio's model a plausible course of action and not just an ideological myth?

Next Post: Mitt Romney's $5.46 million dollars created how many new tax payers?