The Fiscal Cliff and the Holiday Grift Shuffle
(Hey, it’s a little long, but who doesn’t love to read about corruption and corporate welfare? You’ll be sad it’s over when ya finish, I guaran-damn-tee it!)
But wait! Mr. Epstein didn’t seem to have dug deeply enough into the bill to discover what other lovely Holiday Grifts*Gifts Our Dear Leader helped secure for multinationals in the deal. And what Mr. Epstein didn’t realize was that inside the White House, the whole deal was on the order of a teevee game show on the order of Let’s Make a Deal!
Throughout the months of November and December, a steady stream of corporate CEOs flowed in and out of the White House to discuss the impending fiscal cliff. Many of them, such as Lloyd Blankfein of Goldman Sachs, would then publicly come out and talk about how modest increases of tax rates on the wealthy were reasonable in order to deal with the deficit problem.
Imagine those conversations: ‘See guys; I’m a Reagan Democrat, and I’m on your side. But ya gotta help me out a little, and show the American people that you’re on their side, too. Remember, all that’s standing between you and the public’s pitchforks…is me. Capiche?
Matt Stoller was first to dig up the dirt while working at the behest of Yves Smith at Naked Capitalism. He reckons that the ‘extenders’ add up to about $205 billion, while Tim Carney estimates a mere $76 billion. They’re essentially big ol’ gifts to corporations that extend former tax breaks that were set to expire, what we might label regrifting*, a bit akin to ‘regifting Chistmas gifts to others, only these aren’t White Elephants, but Sugar Plums of Corruption. Yes, the cynical among us understand that corporate welfare sunset clauses were just little jokes to fool the masses…or provide cover for Congress Critters who didn’t want to be known as helping redistribute worker income up to the 1%, the new version of the ratchet effect.
Hell, now they don’t even care. It’s all done openly, and almost none of us even notice. A cute smile and some purdy words, or dire warnings about what the other guys would have done…are plenty. Or we pretend to believe that shoving money upward causes jobs and goodies to rain down upon us.
And what did these Corporate Elites get for their small assents to raise the marginal tax rates a little higher?
What wasn’t mentioned is what these leaders wanted, which is what’s known as “tax extenders”, or roughly $205B of tax breaks for corporations. With such a banal name, and boring and difficult to read line items in the bill, few political operatives have bothered to pay attention to this part of the bill. But it is critical to understanding what is going on. …
Most tax credits drop straight to the bottom line – it’s why companies like Enron considered its tax compliance section a “profit center”. … Surely, a modest hike in income taxes for people who make more than $400k in income and stupid enough not to take that money in capital gain would be worth trading off for the few hundred billion dollars in corporate [*CEO-looted] pork.
This is what the fiscal cliff is about – who gets the money.
And from Tim Carney:
In late July, Finance Chairman Max Baucus announced the committee would soon convene to craft a bill extending many expiring tax credits. This attracted lobbyists like a raw steak attracts wolves. …
General Electric and Citigroup, for instance, hired Breaux and Lott to extend a tax provision that allows multinational corporations to defer U.S. taxes by moving profits into offshore financial subsidiaries. This provision — known as the “active financing exception” — is the main tool GE uses to avoid nearly all U.S. corporate income tax.
The Huffington Post even got interested, maybe cuz the ‘active financing’ end user provisions were once again either disgusting or hilarious depending on your mood:
The financial services industry, whose leaders had earlier joined a group of other corporate executives pushing for a “fair” solution to the fiscal crisis, is one of the primary beneficiaries of special-interest tax breaks. The active-financing exception, for example, permits banks like Morgan Stanley to avoid the 35 percent U.S. corporate tax rate on interest income from money lent overseas. A handful of other U.S.-based multinational companies with financing arms, such as Ford Motor Co. and General Electric, also use that exemption to lower their tax bills.
But wait! This President, our Negotiator-in-Chief, was simply ham-strung by those nasty Tea Party Republicans, wasn’t he? This po’ benighted man who just can’t get nothin’ done for The People no matter how hard he tries? Ach; his supporters are so wont to whinge about his not bein’ able to get some massive WPA jobs bill through, no matter how much he feels their pain!
Carney again, and of course he may be lyin’, or the Republican aide he cites may be lyin’:
A Republican Senate aide familiar with the cliff negotiations tells me the White House wanted permanent extensions of a whole slew of corporate tax credits. When Senate Republicans said no, “the White House insisted that the exact language” of the Baucus bill be included in the fiscal cliff deal. “They were absolutely insistent,” another aide tells me. (The White House did not return requests for comment.) Sure enough, Title II of the fiscal cliff legislation is nearly a word-for-word replication of the Family and Business Tax Cut Certainty Act of 2012.
Oopsie, Mistah President. I’d sue the bastard if I wuz you…
In case you’re interested in an opinion on the Fecal Cliff (commenters at NC have dubbed it so), this is Jill Stein at Counterpunch, whom some here considered not ready for prime time…or something (there’s an error in it, but…):
In supporting the bill, President Obama gave away the one bargaining chip – the expiring Bush tax cuts – that he could have used in the upcoming negotiations on spending cuts and the debt ceiling. Not only did Obama get little of substance in return for his only bargaining chip. He actually ceded nearly half the $1 trillion in new revenue that John Boehner agreed to, (getting only $600 billion in tax increases on the wealthy over the next decade).
This lays groundwork for a disaster. Obama has already agreed to 4 trillion in deficit reduction. The revenue side of the deal he just signed generates little more than $600 billion. That means we can expect bipartisan collaboration on more than $3 trillion in cuts going in to the next round of brinksmanship over the debt ceiling. Obama has already indicated his willingness to cut Social Security, Medicare and other health programs. Now, thanks to his early capitulation, the Republicans have all the cards in their hands.
And cuz I love irony to pieces, here’s Andy Kroll’s piece at Mother Jones telling readers that even Mitt Romney and key Republicans swore that Big Oil subsidies would be on the table if corporate rates were lowered. But Kroll says that they weren’t touched.
Ending the costliest tax breaks for oil and gas companies would have raised tens of billions of dollars in revenue. Trimming just a handful of these breaks for the big five companies—BP, Chevron, ConocoPhillips, ExxonMobil, and Shell—would’ve raised $24 billion over the next decade. President Obama’s 2012 budget proposal called for ending 13 breaks benefiting oil and gas companies of all sizes; it would have saved $46 billion over 10 years. [snip]
“We’re certainly not asking for anything on Capitol Hill,” a staffer with the American Petroleum Institute, the oil industry’s top lobbying shop, told the AP in late November. And he wasn’t lying: the industry doesn’t necessarily want anything new from Congress. It just wants to keep what it already has.
Which is exactly what happened in the fiscal cliff drama. The oil and gas industry preserved its bountiful status quo so that the billions in breaks continue to flow. Game, set, match, Big Oil.
In further grifting news for the TBTF Big Banks, the OCC has sent letters to Goldman Sachs, Band of America Corporation, and JP Morgan Chase, to the effect that they’ve scored another two to three years to comply with the weak Dodd-Frank provisions on derivatives. For the ninety-third time, the Commodity Futures Trading Commission is stating that those other ‘final derivatives rules’…really haven’t been quite finalized two years later, and that the banks still need to ‘push out’ their derivatives into ‘other entities’ not covered by FDIC funds (read: taxpayer backed when they fail).
Bloomberg News with this news (my bolds) that they don’t even post as Har-Har worthy:
JPMorgan had 99 percent of its $72 trillion in notional swaps trades in its commercial bank in the third quarter of 2012, according to the OCC’s quarterly derivatives report. Bank of America had 68 percent of its $64 trillion in its commercial bank, according to the report.
Banks including Citigroup Inc. (C) will be given as long as two years beyond the July 16 deadline to move their swaps businesses, the OCC said. They must submit written requests describing how a transition period would reduce harmful effects on mortgage lending, job creation and capital formation. The requests, which must be submitted by Jan. 31, also must weigh how the transition period would affect insured depositors.
Gob-smacking hypocrisy, as if the Big Banks ain’t sittin’ on trillions of bucks waitin’ to make a killing on the next bubble they help create. Supply-side Trickledownics…worked pretty well, eh? Lemon Socialism: they earn the profits, the public owns the risks. Nice job if ya can get it…and still look at yerself in the mirror in the mornin’, eh?
A good friend would want me also to steer you to the fact that Central Bankers who met in Basel recently have watered down the capital requirement ratios (or Liquidity Coverage Ratios) for the Bigs, and given them another four years to comply. Heh. Same excuse, different day: they have our financial health in mind:
The Good News: From Bloomberg:
Bank shares soared after the decision to overhaul the proposed ratio, which top officials such as European Central Bank President Mario Draghi argued would choke interbank lending and make it harder for authorities to implement monetary policies. Lenders have warned that the measure might force them to cut back loans to businesses and households.
Hyuk, hyuk, hyuk! Shares soared! Easier loans! Ya can’t make this shit up!
And last but not least, as Yves Smith at Naked Capitalism says this is the must read piece of current must reads for people who care about how far afield from the Rule of Law the Oligarchs and their minions have come. Reader Luxtexente had stuck a lengthy comment into a recent thread, detailing his experiences as one of those hired by the OCC to independently review foreclosure complaints to see if they qualified for any portion of the $25 billion settlement with banking loan servicers. To say he found that it was all a put up sham of a review system would be low-balling it. Foxes White-Washing Chicken-Eating Foxes After the Fact might be closer:
It wasn’t simply that the consulting firms airbrushed out unflattering findings so as not to ruffle their current and hoped-for future meal tickets. The banks were actively involved in overseeing the project and the results were shameless rejection of any and every possible basis for borrowers getting recompense. He provides numerous examples of unquestionably abusive conduct, such as foreclosing on homeowners in non-judicial states without advertising the notice of sale as required by law, or failing to send a notice of acceleration. Enough of the reviewers understood state law requirements that they would find many, often over a dozen, violations on a single file. So how did the bank and the OCC conspire to solve this problem? They redefined the review process so as to omit matters of law. I am not making this up.
It’s hard for me to imagine anyone can believe that this President isn’t about to undermine our crucial safety nets in two months time. But those more evil Republicans will have made him do it. OTOH, if you’re reminded of fascism, who can blame you?