Lloyd Blankfein channels Leona Helmsley

here's to the little people

WE don't pay Taxes

As the late hotel-chain-owning billionaire Leona Helmsley famously said in 1983, "We don't pay taxes. Only the little people pay taxes..."   Of course she was later jailed for tax evasion.

Helmsley isn’t the only rich person who was consumed with little people.  We now have Lloyd Blankfein CEO of Goldman Sachs.  Look, I‘m a reasonable guy.  I don’t expect CEOs of companies to publicly campaign to have their taxes raised or to campaign to repeal special interest legislation that favors them.  I expect companies to work in their best interest. 

I am not surprised when companies engage in criminal activities in the pursuit of profit and even less so when they get away with it.  Take Lloyd for example.  Last I saw Lloyd he was testifying in front of Congress in the wake of the 2008 Financial Crises.  

Anyone have a seat cushion?

As a result of that two-year bipartisan investigation Senator Carl Levin, D-Mich., and Senator Tom Coburn M.D., R-Okla. issued a 635-page final report on their inquiry into key causes of the financial crisis.  The report catalogs conflicts of interest, heedless risk-taking and failures of federal oversight that helped push the country into the deepest recession since the Great Depression.

WALL STREET  AND

THE FINANCIAL  CRISIS: Anatomy of a Financial Collapse

I read it (with a healthy portion of skimming) – it is fascinating.

Would look so much better in stripes

Following the release of the report Senator Carl Levin recommended that Goldman executives who testified before his panel, including chairman and chief executive Lloyd Blankfein, be referred to the Justice Department for possible criminal prosecution.

Unfortunately, and for a lot of reasons other than possible guilt, the Justice Department decided not to pursue the case. 

To which Senator Levin said

 “Whether the decision by the Department of Justice is the product of weak laws or weak enforcement, Goldman Sachs” actions were deceptive and immoral,”  

Report TOC - Goldman Sachs references

Keep in mind that Goldman Sachs had already paid $550 million to settle a related civil matter brought by the Securities and Exchange Commission.  When your company comprises half of a 635 page report you are doing something seriously wrong.

So you may be wondering why I am rehashing the past.  Why after all certainly Mr. Blankfein was punished for his actions right?  Wasn’t he?  Well actually, Goldman Sachs paid him a lot of money for getting away with it.

That's right - half of the report was about Goldman Sachs

So in our time of greatest need, Lloyd and a bunch of his fellow CEOs have banded together to save us from Social Security and the rest of the so-called "safety net."

During the past few days, CEOs belonging to what the campaign calls its CEO Fiscal Leadership Council -- most visibly, Goldman Sachs' Lloyd Blankfein and Honeywell's David Cote -- have barnstormed the media, making the case that the only way to cut the deficit is to severely scale back social safety-net programs -- Medicare, Medicaid, and Social Security -- which would disproportionately impact the poor and the elderly.

We are here to save you

The companies represented by executives working with the Campaign to Fix the Debt have received trillions in federal war contracts, subsidies and bailouts, as well as specialized tax breaks and loopholes that virtually eliminate the companies' tax bills.

The CEOs are part of a campaign run by the Peter Peterson-backed Center for a Responsible Federal Budget, which plans to spend at least $30 million pushing for a deficit reduction deal in the lame-duck session and beyond.

http://www.huffingtonpost.com/2012/11/25/deficit-reduction-council-fiscal-cliff_n_2185585.html

Blankfein appearing on CBS News showed his in depth understanding of social security when he said

65 - 18 = 25

“You can look at history of these things, and Social Security wasn't devised to be a system that supported you for a 30-year retirement after a 25-year career. ... So there will be things that, you know, the retirement age has to be changed, maybe some of the benefits have to be affected, maybe some of the inflation adjustments have to be revised. But in general, entitlements have to be slowed down and contained.”

Here’s a guy who is supposed to be good with numbers.  He is responsible for billions of dollars which are a form of numbers.  He can’t figure out that most people work from 18 to 65 which is 47 years not 25.  A lot of people start at 16 and have to now work past 65.  No wonder Goldman Sachs sucks with people’s money.

The people who most need social security the most are people with less means.  And with less means comes along shorter life expectancies.  Life expectancy for poorer US citizens is five years less than that for affluent citizens, say researchers from Rice University and the University of Colorado at Boulder. 

Source - http://news.rice.edu/2012/06/21/poorer-us-citizens-live-five-years-less-than-affluent-countrymen-2/

The 30 year retirement Blankfein is rallying about is really 12 years when you only live to the age of 77.1.

Let me try that again 65-33 = 7

Blankfein instead of being in jail where he belonged is now worried about the great evil social security.  Goldman Sachs and JPMorgan Chase would be out of business if it were not for government bailouts.  Other companies involved in Fix the Debt rely heavily on federal contracts.  Talk about mouth to the teat.  

All the while companies lobby Congress to maintain a bloated defense budget.  Last year we spent 711 billion dollars on our defense.  More than the next 9 highest nations combined. 

What about the abuse of carried interest?  The New York State Attorney General is investigating whether some of the nation’s biggest private equity firms have converted certain management fees (taxed at 35%) collected from their investors into fund investments, which are taxed at a far lower rate (15%) than ordinary income.

Carried Interest - not only is it profitable - it's fun!

Between 2007 and 2011, Apollo Global Management converted more than $131 million in fees into investments in its funds.  KKR & Co. L.P. (formerly known as Kohlberg Kravis Roberts & Co.) converted more than $180 million in fees between 2007 and 2009.  Between those two companies 331 million dollars was taxed at 15% instead of the rightful 35%.  

 

Blackstone Group CEO Stephen Schwarzman compared Obama’s push for the tax change to Hitler’s invasion of Poland. 

I get the analogy

There needs to be a rational discussion on social security.  Given the “expertise” of these CEOs I would to see them get their hand out of my pocket before worrying about my retirement.

Have they suggested cutting defense spending?  Rolling back legislation that allows them to avoid their tax liabilities?  Advocating for laws that protect the consumer?  No, but then to my earlier point.  I didn’t expect them to.

It is also interesting  to note that on the “Who we are” page of “Fix the Debt” website that neither co-chair retired Senator Judd Gregg (now working for Goldman Sachs) or former Pennsylvania Governor Ed Rendell (now working for investment bank Greenhill & Co.) have any mention of their ties to these giant financial institutions.  Apparently they are just devout public servants trying to do their best for the country.  Spare me.  http://www.fixthedebt.org/who-we-are

According to S&P Capital IQ based on as reported total executive compensation:

• JPMorgan Chase CEO James Dimon: $23.1 million

• Wells Fargo CEO John Stumpf: $19.8 million

• Goldman Sachs CEO Lloyd Blankfein: $16.2 million

• Citigroup CEO Vikram Pandit: $14.9 million

• Bank of America CEO Brian Moynihan: $8.1 million

 Source:  http://usatoday30.usatoday.com/money/perfi/columnist/krantz/story/2012-05-29/highly-paid-bank-ceos/55266562/1

So Lloyd has demonstrated that he loves the little people and is very concerned about us.  So much so that he is taking time out of busy schedule to count the number of years I work and to ensure that I don't expect too much.  

If you have anymore interest in what Lloyd has been up to here are some links to stories written by Matt Tabbi.

http://www.rollingstone.com/politics/news/the-people-vs-goldman-sachs-20110511?print=true 

 and

 http://www.rollingstone.com/politics/pictures/how-goldman-execs-screwed-their-clients-and-lied-to-congress-20110511/david-viniar-0798198

Well, there you go again. W's Dad was right 32 years ago.

Well here we go again

If I told you that there was an organization that offers Congress research and analysis on all current and emerging issues of national policy. That it offered timely and confidential assistance limited only by its resources and the requirements for balance, non-partisanship and accuracy.  That its responsibility was to ensure that Members of the House and Senate have available the best possible information and analysis on which to base the policy decisions the American people have elected them to make and that in all its work and their analysts were governed by requirements for confidentiality, timeliness, accuracy, objectivity, balance, and non-partisanship.  

 Then I would be describing the Congressional Research Service (CRS).  The CRS basically serves as Congress's think tank, and is the public policy research arm of the United States Congress.  (There are two other major congressional agencies that support Congress as well; the Congressional Budget Office (CBO) and the Government Accountability Office (GAO).

The CRS recently issued a report “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945” that concludes that tax cuts don’t lead to economic growth.  I assume that if you believe in supply side economics you would disagree with the above conclusion but as the late senator from NY, Daniel Patrick Moynihan once said “Everyone is entitled to his own opinion, but not his own facts.”

So here are the facts.

The report’s starting premise was that long term debt will be the country’s greatest priority.  That debt reduction would require increased tax revenues, reduced government spending, or a combination of the two. If increased tax revenue is part of long-term deficit reduction, expanding the tax base, raising tax rates or a combination of the two would be required.

The arguments are summarized as such “Advocates of lower tax rates argue that reduced rates would increase economic growth, increase saving and investment, and boost productivity. Proponents of higher tax rates argue that higher tax revenues are necessary for debt reduction, that tax rates on the rich are too low (i.e., they violate the Buffett rule), and that higher tax rates on the rich would moderate increasing income inequality”

The report examined “individual income tax rates since 1945 in relation to these arguments and seeks to establish what, if any, relationship exists between the top tax rates and economic growth. The nature of these relationships, if any, is explored using statistical analysis.”

The statutory top marginal tax rate was over 90% (actual average tax rate was 60%) in the 1950s.  That covered the top 0.01% of the population.  It fell to 24.2% by 1990.  The average tax rate for the top 0.1% was 55% in 1945. It also fell to 24.2% by 1990.  Between 1990 and 1995, the average tax rate for both the top 0.1% and top 0.01% increased to about 31%. After 1995, the average tax rate for the top 0.01% was lower than that for the top 0.1%.  

Figure 1 from the CRS report

 The capital gains tax rate has had less variation but has decreased as well.  From 25% to 35% reduced to 20%, increased to 28% and then reduced to its current level of 15%.

So I will provide some of the key findings from the report.  If you are interested in reading it here is the link

 http://graphics8.nytimes.com/news/business/0915taxesandeconomy.pdf

Productivity and Growth – the data suggest that the top marginal tax rate has a slight positive association with productivity growth while the top capital gains tax rate has a slight negative association with productivity growth. The regression analysis, however, does not find either relationship to be statistically significant, suggesting the top tax rates are not necessarily associated with productivity growth.

Real Per Capita GDP Growth- The top marginal tax rate in the 1950s was over 90%, and the real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the top marginal tax rate was 35% while the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%.......the association between GDP growth and the top tax rates is not strong. The statistical analysis using multivariate regression does not find that either top tax rate has a statistically significant association with the real GDP growth rate.

Top Tax Rates and the Distribution of Income - It is recognized that measure of U.S. income disparities have increased over the past 35 years. According to income tax data, average inflation-adjusted or real income increased by 116% (that is, about doubled) since 1945. Average real income increased by 395% for the top 0.1% and by 692% for the top 0.01% over this period. Average real income for the balance of the top 1% in the income distribution (i.e., all but the top 0.1%) increased by about 165%. The share of income going to the top 1% increased from 12.5% in 1945 to 19.8% in 2010. Three-quarters of this increase in income share went to the top 0.1%. 

….there is a strong negative relationship between the top tax rates and the income shares accruing to families at the top of the income distribution. These results suggest that as the top tax rates are reduced, the share of income accruing to the top of the income distribution increases—that is, income disparities increase. The regression analysis results show that these relationships are statistically significant. 

Income disparity figure from the CRS report

Research has shown that changes in capital gains and dividends were the largest contributor to the increase in income inequality since the mid-1990s. Capital gains and dividends have become a larger share of total income over the past decade and a half while earnings have become a smaller share.

Concluding Remarks - The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.

So you may not have heard of the report because under political pressure from the Republicans the CRS withdrew the report.   According to an article in the NY Times http://www.nytimes.com/2012/11/02/business/questions-raised-on-withdrawal-of-congressional-research-services-report-on-tax-rates.html

Withdrawal method

Congressional aides and outside economists said they were not aware of previous efforts to discredit a study from the research service. “A person with knowledge of the deliberations, who requested anonymity, said the Sept. 28 decision to withdraw the report was made against the advice of the research service’s economics division, and that Mr. Hungerford stood by its findings.

I guess the CRS report confirms what George W Bush’s father said 32 years ago.  George Bush Sr. was running for president in 1980 against Ronald Reagan.  Bush called Regan’s economic policies “voodoo economics”.  Reagan won the presidency and the “Father” of “Supply Side”, “Trickle Down” economics introduced America to Reaganomics and as they say the rest is history.  The very history that the CRS analyzed and concluded that doesn’t work.  So it is no surprise that Reagan’s party would try to suppress that report.
Lowering Taxes does not spur the economy.  Taxes have been trending down for 65 years.  Taxes have been historically low for the last 12 years.  The income disparity has greatly widened.  The number of jobs have decreased.  The data is very clear.
The deficit needs to be lowered by cutting entitlements and raising taxes on the rich. 

God loves him some Obama (according to Karl Rove)

Celestial horns blasted from the pearly gates in celebration of Karl Rove’s recent disclose of God’s political leanings.  

  What surely came as a surprise to the evangelical Christians was God’s personal endorsement of Barack Obama.  In a Wall Street Journal op-ed Karl Rove said “This time, the October surprise was not a dirty trick but an act of God. Hurricane Sandy interrupted Mr. Romney's momentum and allowed Mr. Obama to look presidential and bipartisan.”  

Nay, beyond endorsed - God personally sent hurricane “Sandy” to assure his most favored candidate victory.

I hope Obama's victory blessed by God, in fact orchestrated by God will put an end to a lot of rhetoric about Obama’s presidency.  By all means everyone is entitled to their opinion but you cannot question the legitimacy of his presidency.  Obama won with the majority of popular votes in both elections .

 It is difficult to not wonder when in traveling in rural predominantly white areas about the number of anti-Obama signs and their messages.  

 “Obama’s not my president” or  “America vs Obama”.  I don't recall during the Bush years signs indicating that he wasn’t the president or that somehow he wasn’t an American or that he stood alone against 311,591,917 of his fellow citizens.  If you don't believe me about the overwhelming increase in signs then google anti-obama signs (64 million hits) and anti-bush signs (3 million hits).  Numbers don't lie.  The underlying message is different.

When they say Americans are against Obama are they referring to the 69 million people that voted for Obama in 2008?  The Obama who won by 9,549,105 votes in 2008?  Would they be referring to the Obama who just won by the same popular vote margin as W did in 2004.  George won 286 electoral votes in that election.  Obama just won with 332 electoral votes.

I wonder if there isn't a hint of racism behind the anti-American bias to Obama. There discrimination when Bill O'Reilly claims that 50% of the Americans who voted for Obama want something.  I voted for Obama in 2004 and 2012.   I don't want anything.  In fact to the contrary, I'm willing to pay higher taxes to reduce the deficit and provide a safety net for people, improve decaying infrastructure, improve our school systems, finance a Manhattan project for clean energy, combat global warming.  Each and every one of those items directly or indirectly improves my life and that of every other American.  And for those who say fine go ahead and pay more you are the one who wants something for nothing.

Karl Rove - Bush's Brain

The last person on earth I expected to legitimize Obama's victory was "Bush's Brain".  Certainly this should give manna for thought for right wing Christians. Obama's victory was not only blessed by God but apparently orchestrated.  Right-wing Christians must embrace God's own plan or fear eternal damnation.  There only out from that logic would be if Karl Rove was referring to a different God. Perhaps the God Karl was referring to has a name that is very close to being a cool palindrome if not for that needless H.  Manna for thought.