Tag Archive: Sweden


Julian Assange (The News Update)

Terrorist, really?

Few people in the past year have sparked debate in the manner that Julian Assange, founder of WikiLeaks, has. His organization has become well-known for publishing material that is leaked by anonymous whistleblowers that often show wrongdoing on the parts of governments and corporations around the world, though a good deal of its notoriety stems from the publication of the Iraq War Logs and its bringing to light actual U.S. military footage of a helicopter crew shooting reporters and civilians in Baghdad, a video that the group entitled “Collateral Murder”.

The release of documents pertaining to the U.S. military and the U.S. Department of State resulted in an outcry by conservatives across the country who claimed that Assange had hurt the national security of the United States and that he had exposed a number of U.S. military informants in Afghanistan, claims that Assange strongly denies. Fox News Correspondents and familiar Republican faces such as Mike Huckabee and Sarah Palin called Julian Assange a traitor, though he is actually Australian and therefore can not commit treason against the U.S., and they even went so far as to call for his assassination within days of the shooting of Gabriel Giffords in Arizona.

While calls for assassination rang out at Fox News, the rest of the American media played up the angle that WikiLeaks had damaged American national interests because it had published diplomatic cables that contained confidential and embarrassing information about foreign dignitaries and diplomats. The cables did certainly create a good deal of awkwardness at the State Department, but rather than focus on any specifics, the general treatment among the major networks was downright tabloid. For example, in this piece, ABC News focused on non-substantive comments in the cables that essentially resort to the level of name calling. And far from being hard hitting, ABC did not make a terribly strong case. From the piece, we find out that Libya’s Ghadafi is considered “wierd”. This could hardly be of any surprise, but we learn nothing of the real nuggets of information found in the documents from the ABC piece – a trend that you will see is quite prominent in American media.

The Administration’s Response – and from Corporate America

The reaction from the Obama Administration was rather strong. Secretary of State Hillary Clinton condemned the release of the diplomatic cables. Their release certainly made her job difficult. But did the release of the cables truly affect the relations between the U.S. and other countries to the degree that she has claimed? For her part, Julian Assange did suggest that Secretarty Clinton should resign, “if it can be shown that she was responsible ordering U.S. diplomatic figures to engage in espionage in the United Nations.” (Go to 2:20 in the video for the quote.) Unfortunately, most of the American press reported that with the headline to the effect: Assange: Clinton Should Resign, ignoring a rather important subjunctive clause, but also skillfully avoiding the reasoning behind Assange’s statement. Mr. Assange made that statement with the revelation from his group that the U.S. State Department had begun a program to try to gain information about foreign dignitaries by the use of biometrics and espionage. If the State Department is trying to spy on other leaders, suddenly the peaceful and “candid discussions” that Secretary Clinton mentioned in the ABC News video would certainly take a very different tone, but once again, there is no information in the ABC report about these potentially unethical clandestine actions by the State Department.

Presidential Candidate Obama discusses open government in 2008 (Glass Booth.org, via YouTube)

President Obama campaigned in part on the notion of openness in the Federal Government. Obama had also signed whistleblower protections early during his presidency. One bill strengthened whistleblower protections for the employees of companies contracting with the Federal Government and he strengthened whistleblower rights in the recently-passed Food Safety Act. Yet, despite this early support for openness in government, President Obama was now in the rather uncomfortable position that he was in charge of the organization losing leaked information.

Despite the discomfort, the White House Press Secretary, Robert Gibbs, challenged Fox News by saying that the White House is not afraid of one guy with a laptop. He also went on to say that those who leaked information are subject to a Department of Justice criminal investigation as well. But while president Obama claimed to be in support of an open, censorship-free internet after the Diplomatic Cables release, it was quite clear that his Justice Department was in fact strongly pursuing an investigation into the the potential for ties between Julian Assange and the alleged leaker, Private Bradley Manning.

President Obama discusses open internet in December, 2010 (Stop the War Coalitino, via YouTube)

It was around that time in early December, 2010, that Swedish allegations of “sex by surprise”, not rape as reported by the American media, forced Assange to remain in place in Britain, even serving some time in solitary confinement until his bond was secured. He remains without charge from Sweden, though he has been fighting his extradition to Sweden out of concern that he would be extradited again to the United States. It was also made public that one of the women who had accused Assange of rape was actually tied to the CIA. WikiLeaks also found it difficult to receive donations because companies like PayPal, Visa and Mastercard cut off services to WikiLeaks, though the latter two do allow donations to the KKK! It is strongly suspected that the Obama Administration was partially responsible for convincing those companies to cut their financial ties to WikiLeaks.

One company, VISA, did hire a firm to investigate WikiLeaks to determine whether it could find any wrongdoing by the group and found none. VISA has yet to allow donations to flow back to WikiLeaks, despite the findings having come out roughly three months ago.

Assange in his own words

So who is this Julian Assange? Is he the terrorist described by Fox News? The guy who is hurting American national security like the U.S. mainstream press argues? Is he a supporter of free speech and open government?

To this point we have heard from virtually everyone but Julian Assange himself. But to fully understand his comments, we can not confine ourselves to the American mass media. First, let us take a look at a speech that he gave to the Oslo Freedom Forum in 2010.

Julian Assange speaks at the Oslo Freedom Forum, April 2010 (Oslo Freedom Forum, via YouTube)

In that speech, Assange describes how his organization tries not to know the names of the whistleblowers in order to protect itself as well as the whistleblowers. WikiLeaks tries to protect whistleblowers as much as possible, while using freedom of speech laws around the world to their maximum extent to ensure that the leaked information remains public and protected from attempts to shut websites down.

The stakes are quite high. After minute 5:15 in the Oslo Speech, Assange mentions the salient point that with today’s electronic media, the information repositories of the West are becoming concentrated in fewer hands. While it was once true that people could see missing pages in book in Soviet Libraries, it is now possible to remove websites without a trace. This is a very well-thought out position on transparency of information in the electronic era. There have already been examples, as Assange continues, in which stories of scandals have slipped into the Orwellian “memory hole”. The protection of information against consolidated control is to make it public and to ensure that thousands of copies of that information can be found across the internet. By making information public, WikiLeaks says that it provides the tools that the public needs in order to hold its leaders accountable for their actions.

Julian Assange speaks at TED, July 2010 (TED, via YouTube)

In another speech at TED, Assange discusses some of the types of documents that WikiLeaks has released to the public, including the release of Collateral Murder (around 5:30). At one point, Assange makes a very intriguing statement, “Capable and generous men do not create victims, they nurture people.” This is hardly a statement by the vindictive radical of Fox News’ imaginings.

Listen to Assange discuss his own reaction to the video in the following video from an interview conducted by Al Jazeera. At not point does Assange attempt to hyperbolize what can be seen on the video screen.

Julian Assange discusses 'Collateral Murder' (Al Jazeera, via YouTube)

The Al Jazeera interview also includes commentary by Ivan Eland, a national security analyst from the Cato Institute (hardly an anti-military institution). Eland describes the actions from the lens of the military while Assange describes the situation from the perspective of the victims. Al Jazeera does a great job of showing similarities and dissonances between the two perspectives to give the viewer a rather impressive perspective of the incident in which American helicopter pilots gunned down a number of innocent bystanders. This is not the type of portrayal of the U.S. military that one sees in the United States. Rather, a better example of American portayal can be seen here:

Wolf Blitzer reports on 'Collateral Murder' (CNN, via YouTube)

CNN did not show the entire video. They did not mention that the “weapons” described by the helicopter pilots were actually cameras, but they did stop just before the helicopter opened fire and just after the letters “RPG” appear on the screen. The net effect of this editing is to give the viewer the impression that the helicopter pilots were in the right by defending themselves against a potential rocket propelled grenade attack. Wolf then cuts to Barbara Starr, CNN’s Pentagon correspondent, who touts the Pentagon’s line without question: That the people had been investigated and that no fault was found. Yet Starr never describes the extent of the investigation, nor does she comment on the rest of the video. She also propagates the lie that other troops were attacked nearby that day. Finally, the journalist Starr rather callously mentions that the deaths of these journalists can simply be added to the death toll of 129 to that point in the Iraq War.

So CNN all but asks the viewer not to worry, nothing to see here people… just journalists dying despite the fact that journalists are given legal protections even in war zones – protections that are never mentioned despite the large number of deaths of journalists by the U.S. military. That is the American mainstream media in a nutshell. When the need for information and transparency is palpable, CNN obscured the facts in order to provide the Pentagon a blanket of plausible deniability. Later, CNN posted an article online entitled “Secretive website WikiLeaks may be posting more U.S. military video”, a clear effort to discredit WikiLeaks without bringing any new information to the fore.

This is not to say that high-ranking officials should necessarily be charged with corruption because of the actions of much lower-ranking pilots. Nor does Assange make that case. However, the incident may certainly warrant a review of the specific ways in which loose rules of engagement may have resulted in the deaths of a number of innocent people that way. Perhaps there is a way to address civilian deaths that will heighten the safety for troops and civilians alike – neither we nor the Pentagon will know unless the matter is investigated and that will not happen unless there is public pressure to do so.

The added benefit for political leaders may be that after having encountered a number of incidents in which mistakes were made, the public may develop a more nuanced view regarding the myriad ways in which such unfortunate instances could happen. That may mean that the public could better differentiate between instances in which an undesirable outcome resulted from good-faith efforts, versus cases of corruption. The public would likely be more forgiving in the former cases, which could give politicians more latitude in their efforts to improve conditions at home as well. That is why there is a need to bring details about events like these to light.

More on the media perception of Assange

After the release of Collateral Murder and the release of Iraq and Afghanistan War documents, the line in the media became the accusation that Julian Assange and WIkiLeaks were attempting to attack U.S. national security. That is a charge that Julian Assange deftly handles here in an interview with CNN’s Anderson Cooper.

Anderson Cooper interviews Julian Assange (CNN, via YouTube)

After the release of the American diplomatic cables, Julian Assange was of course charged with sex crimes in Sweden and the timing is clearly suspicious. The American press wasted no time in ensuring that future interviews with Assange were about him rather than the information that he was attempting to present.

Increasingly, the theme in American media was about Julian Assange himself. For example, an October, 2010 interview with CNN avoided the contents of WikiLeaks releases, but rather focussed on Julian Assange’s personality and the early reports of allegations of rape. This led to Assange walking out of the interview while he was attempting to steer the interview back toward the contents of WikiLeaks’ latest document release.

A short time later, Assange related to Larry King why he had walked out of the interview, namely to ensure that media attention remains on the deaths of innocent victims during a time of war. When Daniel Ellsberg (the leaker of the Pentagon Papers) calls for an investigation over the matters that WikiLeaks released, Larry King called an end to the segment:

Larry King interviews Julian Assange and Daniel Ellsberg (CNN, via YouTube)

In January, CBS’ 60 Minutes did an interview with Assange in Britain at the location of his house arrest. You will find the entire interview is chock full of references to the “mysterious” “strange” or “enigmatic” Assange – but you will hear very few details regarding the actual contents of WikiLeaks releases. Interviewer Steve Kroft asks questions that essentially carry water for the Pentagon throughout the interview. Assange actually instructs Kroft on a number of points regarding the practice of journalism in Part I, as well as reminding Kroft of the importance of America’s First Amendment in his own work. Part II of the interview covers Assange’s past, with descriptions of his “frequently uprooted” childhood and his hacking activities. There are a number of great exchanges where Assange is able to directly respond to Pentagon and State Department accusations and he does it quite well.

60 Part I: Minutes interviews Julian Assange (CBS News)

Part II: 60 Minutes interviews Julian Assange (CBS News)

Unfortunately, 60 Minutes played the “enigmatic” angle heavily during its normal showtime, but Steve Kroft and the production staff do discuss (in rather surprising contrast) how they perceived Assange to be rather genuine in his beliefs and actions during their own reflections on 60 Minutes Overtime. And the disappointing dearth of information regarding WikiLeaks’ revelations is described in detail in an article by David Swanson.

How stark is the American media portrayal of Julian Assange? Thanks to the wonderful world of the internet, it is possible to directly compare American interviews such as those by CBS and CNN with interviews by reporters from the Netherlands and Australia. Viewing the last two sample videos and the Al Jazeera interview earlier shows American just what they have been missing: A press that seeks to inform the public rather than to cover up excesses by the U.S. Government.

Without such transparency as that displayed by international news sources, it is unlikely that citizens of the United states will be able to ensure the safety of their own family members who are sent into harm’s way from the excesses of a national security state that creates an environment in which otherwise well-intentioned soldiers can become excited for the next kill. How much less violence might there have been in Iraq and how many fewer people – Iraqis and Americans alike – if the people in Iraq were not subject to such unfair rules of operation that ‘shoot first and ask questions later’ should be the rule of the day? That is, after all, what WikiLeaks claims to do: To provide the transparency required for citizens to make informed decisions on their own.

Now that you have finally seen the major players give their cases in their own words, you can finally decide for yourself: Is Julian Assange truly an ideological terrorist acting to destroy the United States, or is he facing attacks by the same people who profit from unceasing wars whose current estates are now jeopardized by WikiLeaks, or is there some other combination of factors taking place? How would one even be able to consider all of the possibilities, given American mainstream reporting alone? Now that you have seen actual details and reporting, you have the ability to decide for yourself.

War Room (Clay Bennett, Chattanooga Times Free Press)

This article is Part III in a series of articles regarding government spending. To read the other related pieces, go to my U.S. Federal Debt: Sources and Solutions page.

The Gripes and Wrath

Of all of the portions of the longstanding American dissonance over the U.S. Federal Budget, the king of all disagreements lies in taxation. It should not be a surprise then to understand that it is in taxation where the information regarding the Federal Budget is the most suspect due to all of the myriad political influences involved.

During the 2010 election cycle, the airwaves were filled with Tea Partiers railing against government spending and the need for lower taxes. We often heard of corporate taxes being too high and how they should be lowered. We heard of the economic benefits of reducing taxes. The Tea Party floated on a crimson tide of red ink into Washington D.C. and is now trying to drive the Republican agenda even further toward tax decreases, regardless of what happens with federal spending.

What is the current status of taxes in the United States? Who pays taxes in the U.S.? How do various taxes affect the population and job growth? We will investigate each of these questions in this article. These are rarely addressed in the news, despite the fact that the current budget battles are on the TV all of the time. We will address some of the political motivations of the Media that prevent them from accurately reporting issues of federal finance in a later article.

Tax Rates: The U.S. vs. the World

Considering the invective that can be overheard at any Tea Party rally, one would think that the people in the crowd are being taxed within an inch of their lives. The mere mention of the word ‘tax’ results in a bitter, emotional spew of slogans and booing – a visceral, angry reaction that is fueled by the rhetoric of Republican political candidates. It is one version of their five-minute hate. But is it realistic?

Figure 1 shows the 2006 rate of taxation in the U.S. relative to the world. This includes the total federal, state and local taxes or their equivalents in each case.

Fig. 1: Total Tax Burden by Country (OECD, via Get Rich Slowly)

As you can see, the total tax rate is much lower than that of most other developed countries, and it is roughly half that of nations like Denmark and Sweden.

“Ah, that’s SOCIALISM!”shouts the Tea Partier. Yes, Denmark and Sweden do have socialist economies. But given that information, we should at least see whether there is a benefit. Below are lists of the top 10 nations in terms of Gross Domestic Product (GDP) per capita from the International Monetary Fund (IMF). Other lists can be found as well on Wikipedia.

Rank IMF (2010) GDP per capita ($)
1. Luxembourg 104,390
2. Norway 84,543
3. Qatar 74,422
4. Switzerland 67,074
5. Denmark 55,113
6. Australia 54,869
7. Sweden 47,667
8. United Arab Emirates 47,406
9. United States 47,132
10. Netherlands 46,418

Excepting Qatar and the United Arab Emirates which do not have income taxes due to the fact that those nations are run on revenues from their oil reserves, each of the countries with a higher GDP per capita has higher taxes than the United States.

In addition, as we will find, considering the higher tax rates, each of those countries has a lower Gini Coefficient, a measure of income inequality. World Gini Coeffficients are found in Figure 2.

Fig. 2: Income disparity (dark red =worst, dark blue = best) (Wikipedia)

Economies with higher Gini Coefficients can face instability and corruption in government as lower classes tend to be crowded out of the political process by wealthy and powerful individuals. Considering that the Gini Coefficient of the United States is actually worse than that of nations like Egypt, there should be no surprises that labor demonstrations are taking place in America.

The Purchasing Power Parity (PPP) index is a measure of the relative purchasing power of currencies around the world. This index is dependent on the development in an economy, the strength of the currency and also on the wages of the people. Nations with a higher Purchasing Power Parity are able to more easily afford a similar, pre-described “basket” of everyday goods (food, clothing, etc.) and services in countries with lower PPP indices. In essence, the PPP is one measure of the wealth of a country in slightly different way than GDP per capita. The GDP per capita describes how much money someone earns on average in a country where the PPP indicates how much one could do with that money.

Remember those countries whose citizens earn more than Americans? All of them – and even the Netherlands, which also has far higher tax rates than the U.S. – have higher PPP than the U.S. This can be seen in Figure 3. It essentially means that when someone travels from Norway to the U.S., they consider prices to be cheap in the way Americans find prices to be lower in Mexico.

Fig. 3: 2003 Adjusted Purchasing Power Parity (Wikipedia)

There are several great reasons for this. Well, taxes actually raise incomes. Progressive radio host Thom Hartmann explains:

When I was in Denmark in 2008 doing my radio show for a week from the Danish Radio studios and interviewing many of that nation’s leading politicians, economists, energy experts, and newspaper publishers, one of my guests made a comment that dropped the scales from my eyes.

We’d been discussing taxes on the air and the fact that Denmark has an average 52 percent income-tax rate. I asked him why people didn’t revolt at such high taxes, and he smiled and pointed out to me that the average Dane is very well paid, with a minimum wage that equals roughly $18 per hour. Moreover, what Danes get for their taxes (that we don’t) is a free college education and free health care, not to mention four weeks of paid vacation each year and notoriety as the happiest nation on earth, according to a major study done by the University of Leicester in the United Kingdom.

But it was once we were off the air that he made the comment that I found so enlightening.

“You Americans are such suckers,” he said. “You think that the rules for taxes that apply to rich people also apply to working people, but they don’t. When working peoples’ taxes go up, their pay goes up. When their taxes go down, their pay goes down. It may take a year or two or three to all even out, but it always works this way—look at any country in Europe. And that rule on taxes is the opposite of how it works for rich people!”

My Danish guest was right. So before we get into the larger consequences of tax increases or tax cuts for the nation’s economic health, let’s parse this business about what tax increases or cuts mean for the rich and for the not-so-rich.

Why is this so? It is a matter of an economic phenomenon called tax incidence that essentially describes how the laws of supply and demand work with taxes on wages. If a government introduces a tax on worker salaries, it happens that those workers will need a little more money in order to be able to purchase food and supplies necessary for daily life. In the very short term this can be a slight problem, though after about a year it means that a number of workers who are taking new jobs would have negotiated higher wages than they would have without the tax increase. The increased wages they receive mean a higher demand for jobs, and that increases wages even more. When all is said and done after a year or two, wages more than make up the amount of money lost to the tax increase!

Companies in the United States understand this quite well – why else do you think that the “business-friendly” party, the Republicans continually asks for tax cuts? Not only does this help Republicans pretend they are on the side of workers, but it is one way of forcing labor prices lower for the wealthy while being able to retain more money for themselves.

But taxes are not fun to pay, you say. Well, then one would expect that people who live in countries with high tax burdens would be unhappy. Yet in 2011, Forbes reported a survey conducted by the Legatum Institute in which they asked citizens around the world about their happiness and standards of living and compiled these into a “Prosperity Index”. Their results were interesting. The United States fared alright at #10. But it was beaten by strong social democracies that each have higher taxes! Here is the top ten, with total tax rates listed just for fun:

Rank Legatum Prosperity Index Rank (2011) Total Tax Rate (%)
1. Norway 43
2. Denmark 49
3. Finland 42
4. Australia 31
5. New Zealand 38
6. Sweden 49
7. Canada 32
8. Switzerland 30
9. Netherlands 39
10. United States 28

Sure, the United States did alright, but the odds are very low that every country ranked higher than the U.S. would have higher taxes by coincidence. In fact the U.S. is ranked more highly than it otherwise would be due to the fact that it holds the world’s reserve currency, which offers the U.S. a extra wealth that other countries do not have access to.

A Tea Party person might interject here once again: But the U.S. has FREEDOM! Let us take a look at that idea a little bit more carefully. What does freedom mean? Of course it can mean things like freedom of speech and freedom of assembly, but it can also mean upward mobility. After all, failing other freedoms, being wealthy can often result in a very different perception of a person by the government. How likely is it for a person in the lower classes to rise up to the higher classes? Two Social scientists, Dorling & Henning have done a study on the relative (im)mobility of citizens in a variety of nations, especially the U.S. and other countries that are listed in the lists above. Their results are in Figure 4, where it can be seen that

Fig. 4: Upward immobility (higher numbers = lower mobility) (Views of the World)

the countries that pay higher taxes all have greater ease in moving from the lower classes to the higher ones in economic status and this may be correlated with income disparity. The U.S. does shine here in terms of educational mobility, though this amazing feature of American society is currently under attack.

At this point, the recalcitrant Tea Partier mutters, “Well, you still have not talked very much about taxation.” This is largely true, though so far we have discussed some of the possible results of taxation when it is done right. We will discuss taxation itself and some more of the side-effects in the next section, in which we specifically look at the history of taxation in the United States.

Taxes in the American Economy

Another farce about taxes, yet it is a commonly held belief that taxes in the United States are high right now even when compared to historical rates. In a recent article, Richard Wolff shows a plot that displays the historical income tax rates in the highest and lowest tax brackets in the U.S. (Figure 5).

Fig. 5: Highest and lowest bracket income tax rates in the U.S. (Richard Wolff)

Taxes on the wealthy had been at recent lows just prior to the Great Depression, but one of the policies that the Roosevelt Administration pursued was to raise income taxes on the wealthiest Americans to 90%. “How draconian!” you may say, “How could he do that?” Roosevelt was quite wealthy himself but his relationship with organized money was quite different from that of President Obama’s. For example, on the eve of the 1936 election FDR gave a speech at Madison Square Gardens. Here is a quote:

For twelve years this Nation was afflicted with hear-nothing, see-nothing, do-nothing Government. The Nation looked to Government but the Government looked away. Nine mocking years with the golden calf and three long years of the scourge! Nine crazy years at the ticker and three long years in the breadlines! Nine mad years of mirage and three long years of despair! Powerful influences strive today to restore that kind of government with its doctrine that that Government is best which is most indifferent.

For nearly four years you have had an Administration which instead of twirling its thumbs has rolled up its sleeves. We will keep our sleeves rolled up.

We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.

(This speech is truly worth a listen as the mere words do not quite carry FDR’s oratory. He knew how to give a speech. Here is the link once again.)

Can you imagine President Obama saying something similar? During the week before an election?!! He had the perfect opportunity to do so when he was elected. Instead, he hired Timothy Geithner, one of the people who created the mess as his Secretary of Treasury and kept Ben Bernanke on at the Federal Reserve. The Tea Party may not believe so, but Obama is owned by Wall Street. Goldman-Sachs was one of his largest benefactors during his election.

The 90% tax rates on the wealthy by FDR were intended in part to break the political power of the most wealthy individuals in the country, whose unregulated financial speculation resulted in the Great Depression. (Sound familiar?) In part, the taxes were high in order to fund programs like Social Security and, yes, to redistribute wealth.

But wait a second! Redistributing wealth is bad for the economy, right? Well, let’s take a look. Figure 6 shows annual growth in U.S. GDP since 1929.

Fig. 6: Annual U.S. GDP growth rate, 1929-2009 (Wikipedia)

GDP growth rates in the United states were far higher during the times when the top income tax rates were REALLY high than they are today. In fact, the growth rates tend to be highest when top income tax rates are also highest. This is primarily due to two things.

First, the high tax rate created the Middle Class. With many more people able to purchase products that American companies produced, the economy boomed during the 40’s, 50’s and 60’s.

Second, it turns out that productivity increases during times when the top tax rate is highest. Higher taxes mean higher federal spending and higher spending boosts the economy.

Of course there is that caveat that one can not allow the federal debt to go too high, otherwise it is possible to create stagflation as I mentioned in Part II. Considering this, I was excited to see the correlation between National Debt and the income tax rate that Greg Hollingsworth put on his blog, shown in Figure 7.

Fig. 7: Income Tax Rates and National Debt (CBO data, via Greg Hollingsworth)

Did you notice how as the top income tax rate drops, the U.S. Federal Debt skyrockets? Well, the top tax rate on the wealthy seems rather high, but recall that wealthy people only earn a portion of their money in the form of income. They also earn a lot of money through capital gains. Those taxes are rather low, too. But as you can see lowering taxes has had a profound effect on the American economy. Not only is it running less efficiently than it once had, but the national debt is going through the roof, too.

There is also a growing problem of the income disparity that we mentioned earlier. One problem with having a billionaire is that the billionaire does not invest all of his or her money into the economy. Rather, there is always a sizable portion of those assets that is rather illiquid, meaning that it does not circulate through the economy. This effectively reduces the money supply for everyone else and a BILLION is a very large number, so it represents a rather large loss of capital in the economy. The more billionaires, the greater this problem becomes and this is a motivating factor for the high tax rates on the highest income brackets. The wealthy are, after all, most able to afford the taxes and they have certainly benefitted from having been born and raised in the American economy, so it is a way of paying back to society.

Still, the income disparity is continually growing. In fact, thanks to tax loopholes that are available to the wealthy (but not the Middle Class), the world’s third richest man, Warren Buffet, famously complained that he pays a lower tax rate than his middle-class secretary. He has class, so he asked the Bush Administration and the Obama Administration after that to raise his taxes. He even argued that it would be good for the economy. He is still waiting for that to happen. In fact, the disparity in incomes in the U.S. is at its greatest size ever – bigger than the disparity at the beginning of the Great Depression, as is seen in Figure 8.

Fig. 8: Share of pre-tax household income received by the top 1%, 0.1% and 0.01% incomes, 1917-2005 (Wikipedia)

Right now 1% of the population earns more than 20% of all of the income in the country. Much of that money sits idle when it could be re-invested into the economy.

Figure 9 shows just how bad the situation is. The three bars in the plot show the Real, Estimated and Ideal fractions of income held by each quintile of the population according to a survey of the U.S. population by Michael Norton of Harvard Business School.

Fig. 9: U.S. Income Distribution: Real, Estimated and Ideal (The Atlantic)

The results show that the actual income disparity is far worse than the perceived one, and very very far from the ideal held by the average American. In fact the American ideal has the top 20% of income earners only earning 30% of income! That is even more socialist than Denmark!!

People are beginning to realize this and they are beginning to wake up out of the hypnotized slumber they have felt since Ronald Reagan and they are getting angry about this. Especially when they take a look at the relative growth rates of each income bracket over time (Figure 10) But there is one more thing that REALLY makes people mad.

Fig. 10: Growth in US Wages by Tax Bracket (Discover Magazine)

Something is still missing, though… Hmm…

Corporate Taxes

…and that missing thing is the corporations. Now I know what a Tea Partier would say: “We can’t have high corporate taxes because companies will just move away.” Regulations could prevent that, and corporations should pay their share because they use and abuse our natural resources and national infrastructure all of the time.

If you were to ask the Heritage Foundation, they would show you this diagram (Figure 11):

Fig. 11: Corporate Tax Rates in OECD Countries (Heritage Foundation)

Oh no! America’s corporate tax rates are among the highest in the world! America is doomed!! All the companies will move away!

Not so much… Those are the official tax rates, not the actual ones. There are lots of tax loopholes for companies. Rachel Maddow did a great piece in October, 2010 in which she mentioned that GE, Bank of America and Citigroup (the latter two playing a significant role in starting the Great Recession) paid $0 in corporate taxes. Yes, companies that earn billions of dollars per year pay less than you do in taxes and that is closer to the rule than the exception, though most small businesses do not share in those benefits. And yet, the Republicans keep asking for tax breaks for the rich and for corporations – out of fear that tax loopholes might be closed. It is possible for them to make the argument for lower taxes because the current tax rate is ostensibly so high. That is why the difference between the official tax rate has not been lowered so that it reflects reality.

There is more.

The pre-New York Times FiveThirtyEight blog posted an entry with a plot, Figure 12, that is the coup de grace.

Fig. 12: Taxes as share of GDP by type, 1935-2014 (Tax Policy Center, via FiveThirtyEight)

Look at Figure 12. Look at the Corporate Tax Rate. Look at the Social Security Income & Retirement Tax Rate. The reason that corporations now pay very little in actual taxes now is that since the time of Eisenhower, the decrease in the corporate tax rate has been funded by the increase in taxes on entitlements as a direct result of Republican federal policy.

Corporations extract resources that are owned by the public. They make a profit for themselves from those resources and they do not repay the public. That is where tax policies are today. So when you see that the budget deficit has swelled and that the middle class is doing poorly, it is a direct result in the drop in high-income taxes and corporate taxes. The effect is so profound that wealthy industrialists like the Koch brothers will save money by spending hundreds of millions of dollars to corrupt the political process so that they can buy the policies that they would like. They get a free ride with billions of dollars in the bank, but you get to pay for their exploits with middle class wages. Isn’t it about time that we had a discussion with our Tea Party friends? I thought so.

References and Links

Views of the World: Income Mobility

Wikipedia: Income Disparity

Wikipedia: Legatum Prosperity Index

Wikipedia: GDP per capita

Wikipedia: Purchasing Power Parity

Wikipedia: Tax Incidence

Wikipedia: U.S. Recessions

Space Shuttle Discovery lifts off for the last time (Michael Berigan/Reuters)

Space

The Space Shuttle Discovery launched into orbit for the last time Thursday, carrying a new crew to the International Space Station. There will be two more flights before the end of the Space Shuttle program. The shuttle Endeavour is scheduled to make one more trip to space in April, followed by the last shuttle flight by Atlantis in June. The shuttle program was to be superseded by the Constellation program, a series of manned and unmanned missions that were aimed toward bringing the United States back to low earth orbit, then the Moon and ultimately Mars. Citing current private companies such as SpaceX that are developing manned orbital systems, president Obama cancelled the Constellation program. At the moment, it appears United States will not be the first country to Mars.

Developments in Libya

Mu’ammar Gadhafi blamed al Qaeda today for the uprising spreading through his country, saying that Osama bin Laden had brainwashed young Libyans who had been given hypnotic drugs in their milk. Opposition groups now control most of Libya, but Gadhafi’s stronghold is in the capital, Tripoli, where his forces are exacting a heavy toll, though some troops and pilots are refusing to fire on protesters. The death toll due to the government attacks on civilians is likely higher than 1,000. Opposition groups continue to make gains despite the government’s counterattack and they are massing in the opposition-controlled eastern portion of the country. The United States, after a generation of enmity and containment, has found that it has few options regarding the situation in Libya. It has few contacts with the leadership, no aircraft carriers in the Mediterranean, and is forced to rely on nations such as France and Italy that have had friendlier relations with Libya. Even worse, once the opposition forces take over there may not be such a warm and rosy relationship with the new government because President Bush sold Gadhafi weapons. Yes, once again weapons emblazoned with “Made in U.S.A.” are firing at civilians who are trying to form a new democracy. So much for shoot first and ask questions later.

WikiLeaks

Julian Assange has lost his trial for extradition to Sweden. This was expected as most extraditions within the EU are granted. Assange has promised to appeal the ruling and has seven days to do so or else he will be extradited within 10 days.

Real News Network

The Real News Network discusses how the United States helped Swedish authorities to pass a law that allows the Swedish Government to spy on its own citizens, while helping the US to spy on countries in Asia. The discussion also raises questions regarding Swedish-American cooperation in Swedish efforts to extradite Julian Assange.