Tag Archives: congress

How is Foreign Tax Repatriation Different than Immigration Amnesty?

As politicians in DC lurch toward some sort of bipartisan approach to immigration, conservatives remain adamant that immigrants currently in the country illegally be given no path to citizenship. These conservatives see no reason to reward lawbreakers with citizenship, and worry about the message that will send to future immigrants: if you come here illegally and stay long enough, you will get away with it. I understand this perspective; amnesty reeks of moral hazard. I think that realistically, we need to find a path anyway – we can’t just deport 11million people, many of them employed and embedded in society. But I do very much appreciate the concerns of conservatives on this issue.

However, at the same time, the same conservatives are calling for a tax holiday that will let US companies repatriate their offshore cash at reduced tax rates. Under current law, companies can keep their overseas profits in low tax countries, but if they try to bring that cash back home, they have to pay higher US taxes. In 2004 companies were granted a one-time holiday, with tax rates reduced to 5 percent, and they took advantage by bringing a ton of dough back into the US. But of course, all this tax amnesty did was encourage companies to keep driving their revenue through offshore tax havens, and then use their lobbyists to push for another tax holiday.

If amnesty creates moral hazard, by encouraging people to do the wrong thing and then be forgiven, why would multinational companies be different than illegal immigrants? Storing your cash offshore is not illegal, while immigrating illegally obviously is, but the motivation component is the exact same: if you believe that amnesty encourages behavior, then you need to apply that theory equally across your policies.

By the way, among the leading rationales advanced for the tax holiday is that companies will invest the repatriated cash in jobs and growth. However, studies of the last holiday showed that companies mostly returned the cash to shareholders. Even the Wall Street Journal says so! Here is a story about how companies play the cash repatriation game, and here is one about how hard corporate lobbyists are pushing for a holiday.

Can Congress Change Its Culture?

Cultural change is the recent theme here at Thoughtbasket; I discussed how a company might change its culture, and then how America might change some aspects of its culture. Today I want to look at a particular part of America: Congress. The U.S. Congress seems unable to solve any of the problems facing our country, and consequently has an approval rating of only 11 percent, which is the lowest ever. If a group is unable to complete the sole task it is given (governing, in this case) and thus is held in contempt by its bosses (voters, in this case), then that group probably has a culture problem.

The congressional cultural problem is that the entire institution values reelection instead of service (which is why incumbents are reelected more than 80% of the time). Power is more important than policy. Much like the corporation in my first post on this topic had a culture where everyone thought it was OK to be late for meetings, congress has a culture where everyone thinks that it’s OK to prioritize staying in office over doing the job you were elected to do, which is govern.

We can blame each individual congressman – and believe me, I do – but really, it is the institution and its culture that is truly to blame. Expecting some moronic ex-exterminator who only gets a two-year term to swim against a cultural tide of reelection is probably naïve. So, much like in my efforts to change cultural components in the US as a whole, we need a team approach. John Boehner + Nancy Pelosi = change?

I wrote last year about how John Boehner could be a hero by teaming up with democrats to pass substantive policy that would address the nation’s fiscal problems. Here is another opportunity for heroic action: he could rally all of congress, teaming with his arch enemies, to promote a culture of service instead selfishness.

Is Corporate Culture The Same As Country Culture?

I recently posted about corporate cultures, and how the only way a corporation can change its culture is from the top. Based on some of the feedback I received I’ve decided to expand my scope and explore a larger cultural change: how the United States might change some parts of its culture. For example, one aspect of America’s current culture that seems problematic is that we want all kinds of services (Medicare, Social Security, strong defense, good roads, etc.) but we want the lowest taxes possible. Those two desires are incompatible; a culture that emphasizes taking without giving will prove challenging in the long run.

In my prior post, I discussed that a change in corporate culture requires a CEO who is willing to push that change. In the case of a country, who might play that role? You would naturally think the president, but we know that won’t work. Plenty of recent presidents have talked about changing the culture, but none have succeeded. Hell, none of them could change the culture of a few hundred people in Congress, let alone a whole country. And that’s not really surprising; a country is not a hierarchical structure the way a company is, so people have no reason to necessarily follow what the leader says.

The president could try to lead by example, or by using the bully pulpit, but I can only imagine the furor  that would erupt  if a president (or governor, or senator, or mayor) announced that “OK people, your constant desire to get lots while paying little is complete crap; going forward we are all going to be more realistic.” No, that wouldn’t work at all.

What if all our leaders teamed up? Suppose a whole slew of politicians – national and local, democrat and republican, male and female – got together to announce an initiative aimed at realism. This could be risky, since taking a stand isn’t really what politicians do; they hate being out on limbs by themselves. But that is why they would team up with members of the other party. After all, as I noted in my prior post, cultural change requires leaders to actually lead. Then they could get business leaders on board; everyone from Warren Buffett to Charles Koch. Throw in some celebrities – nothing happens in America without celebrities – and then maybe we’d have something.

It’s possible that this is nothing but a pipe dream. Can we really expect politicians to team up in order to lecture voters? Probably it will never happen. But maybe we should expect more from our leaders.

John Boehner Can Be A Hero

John Boehner has a choice: he can lead the Republicans, or he can save the country. He can’t do both.

The vote on the recent budget deal showed that compromises won’t get votes from tea party Republicans. Fifty-nine Republicans voted no on the agreement, and Boehner had to team up with Democrats to get something passed. Pundits are discussing whether Boehner will move right to get a unified Republican caucus. He’ll have to if a unified Republican caucus is his goal.

But Boehner’s goal should not be keeping his party together; it should be fixing the country. Instead, of moving right to pass “Republican” bills that will get vetoed by the President, what he should do is move left and pass meaningful reform with strong bipartisan support. Boehner can team regular (non-tea party) Republicans with conservative Democrats to come up with a common sense approach to solving our fiscal problems. America is a centrist country and Boehner has a chance to create a centrist solution.

The reality is that everybody knows the logical way to solve our debt problem. We need cuts in all spending: discretionary, military and entitlements, coupled with revenue increases. The debt is too big for either spending cuts or tax increases alone to solve the problem. We also need to control health care costs, which are driving Medicare and Medicaid to such extreme levels.

So stop jerking around with politics and start solving the problem. Boehner can lead the charge, and be a hero, if he is willing to walk away from his extreme fringe. He just needs to be less of a Republican and more of an American.

By the way, there is a similar situation in the Senate, with Tom Coburn in the bipartisan gang of six fighting with legendary douchebag Grover Norquist over tax increases.

Grover Norquist: Pompous Douche

Joe Stiglitz on Income Inequality

He’s a Nobel Prize winner, so he must be smart.

Read his article here.

Deficit Reduction: Suck it up, People!

The bipartisan deficit panel has come out with its first set of recommendations, and everyone is hopping mad. Lefties say the cuts in spending are unacceptable, and conservatives are adamant that tax revenues never go up again. Good! I have no opinion about the specific recommendations made by the panel chairmen, but I know that if both sides are pissed off then the panel must be doing something right.

Listen people…this deficit is serious business. It will bite us in the ass if we don’t fix it, and fixing it is going to require some pain on everyone’s part. We’ve been living for too long with this fantasy that government could increase spending while cutting taxes. Now the party is over, and the hung over cleanup has to begin. Headaches? Nausea? Yes, exactly.

So liberals, accept the fact that spending will be cut, and not just military spending. I hate it too, but Social Security has to be on the table. Increasing the retirement age by two years over the next 65 years? That’s really not so bad. Tying other benefits to inflation? Also not unreasonable. We need a safety net, of course, but we need to be smart about it.

And conservatives, you too are in for some pain. Face facts: spending cuts alone won’t balance the budget. We need to increase taxes. You like to claim that any tax increase will kill the economy, but the facts don’t bear that out. This chart shows that in Germany tax revenues are 40% of GDP, far more than America’s 28%. And yet Germany’s economy is doing fine, kicking our ass in exports, despite having to absorb East Germany. This chart shows that marginal tax rates for individuals are lower than ever. In fact, during America’s economic heyday, in the 50s and 60s, top marginal rates were in the 70%-90% range, far higher than today’s 35%, and yet there was still plenty of investment, of people working hard, of entrepreneurs starting businesses. All the arguments the right uses against raising taxes are belied by that glorious period of American business. Speaking of that great Happy Days era, the chart below shows that the share of taxes paid by the wealthiest citizens back then was significantly higher than it is now. Again, showing that higher taxes do not necessarily stifle economic growth.

There will be plenty of unpleasantness to go around; Democrats and Republicans will each get their share. Our legislators need to get off their high horses, stay away from the cameras and microphones and acknowledge that their pet causes are secondary to the national cause. But as either Mark Shields or David Brooks (I still can’t tell their voices apart on radio) said on the PBS NewsHour, our politicians won’t make this happen until the public forces them to. Our culture needs to accept the need for hard choices, and then push our politicians to make them.

Why Americans Hate Congress

This is just one example, but of course there are zillions. Richard Shelby, Senator from Alabama, has put a blanket hold on 70 Obama nominees. Not because he has any concerns about those nominees, but because he is pouting that funds haven’t been released to build an FBI explosives center in Alabama and because he thinks the Air Force tanker procurement system isn’t fair to Northrup Grumman, which has facilities in Alabama. So let’s be clear: despite the massive deficit, Senator Shelby wants pork for his district, and he is willing to let all sorts of government agencies go unmanned until he gets his way.

And let me remind you that Alabama has 4.7 million people, or 1.7% of the US population. So one guy, representing 2% of the population, can put big chunks of government on hold until he gets his share of wasteful spending. And then he will give speeches about the importance of fiscal discipline. This is why polls show that Americans no longer respect Congress.

Read the story here, complain on his website here.