Biden’s Tax Plan Aims to Raise $2.5 Trillion and End Profit-Shifting
"Bidenomics Is as American as Apple Pie "Corporate America tears down Biden's infrastructure plan "Jeff Bezos says Amazon supports a corporate-tax hike, arguing that Biden's plan will..."""
The plan detailed by the Treasury Department would make it harder for companies to avoid paying taxes on both U.S. income and profits stashed abroad.
President Biden said on Wednesday that tax increases were necessary to pay for the infrastructure investments that the United States needs. Amr Alfiky/The New York Times
By Jim Tankersley and Alan Rappeport April 7, 2021
President Biden sees ending that practice as central to his $2 trillion infrastructure package, pushing changes to the tax code that his administration says will ensure American companies are contributing tax dollars to help invest in the country’s roads, bridges, water pipes and in other parts of his economic agenda.
On Wednesday, the Treasury Department released the details of Mr. Biden’s tax plan, which aims to raise as much as $2.5 trillion over 15 years to help finance the infrastructure proposal. That includes bumping the corporate tax rate to 28 percent from 21 percent, imposing a strict new minimum tax on global profits and cracking down on companies that try to move profits offshore.
The plan also aims to stop big companies that are profitable but have no federal income tax liability from paying no taxes to the Treasury Department by imposing a 15 percent tax on the profits they report to investors. Such a change would affect about 45 corporations, according to the Biden administration’s estimates, because it would be limited to companies earning $2 billion or more per year.
--- [INSERT: The Stockholder Myth [...] Investors, on the other hand, may never set foot inside "their" companies, may not even know where they're located or what they produce. Corporations exist to enrich investors alone. In the corporate society, only those who own stock can vote. This recalls America before the mid-1800s, when only those who owned land could vote. P - We think of this as the natural law of the free market, but it is more accurately the result of a corporate governance structure that violates free market principles. In a free market, everyone scrambles to get what he or she can, and they keep what they earn. In the construct of the corporation, one group gets what another earns. [...] Corporations are believed to exist for one purpose alone: to maximize returns to shareholders. This principle is reinforced by CEOs, the Wall Street Journal, business schools, and the courts. It is the law of the land - much as the divine right of kings was once the law of the land. Indeed, "maximizing returns to shareholders" is almost universally accepted as a kind of divine, unchallengeable mandate. It is not in the least controversial. Though it should be. P - What do shareholders contribute to justify the extraordinary allegiance they receive? They take risks, we're told. They put their money on the line, so that corporations might grow and prosper. Let's test the truth of this with a little quiz: P - "Stockholders fund major public corporations." - True or false? P - or the most part, massively false. P - Equity "investments" reach a public corporation only when new common stock is sold, which for major corporations is a rare event. Among the Dow Jones industrials, only a few have sold any new common stock in 30 years. Many have sold little or none in 50 years. Mar. 2011 - https://investorshub.advfn.com/boards/read_msg.aspx?message_id=61036223] ---
“Companies aren’t going to be able to hide their income in places like the Cayman Islands and Bermuda in tax havens,” Mr. Biden said on Wednesday during remarks at the White House. He defended the tax increases as necessary to pay for infrastructure investments that America needs and to help reduce the federal deficit over the long term.
Still, his 15 percent tax is a narrower version of the one he proposed in the 2020 campaign that would have applied to companies with $100 million or more in profits per year.
Mr. Biden’s proposals are a repudiation of Washington’s last big tax overhaul — President Donald J. Trump’s 2017 tax cuts .. https://www.nytimes.com/2017/12/20/us/politics/tax-bill-republicans.html . Biden administration officials say that law increased the incentives for companies to shift profits to lower-tax countries, while reducing corporate tax receipts in the United States to match their lowest levels as a share of the economy since World War II.
Treasury Secretary Janet L. Yellen, in rolling out the plan, said it would end a global “race to the bottom” of corporate taxation that has been destructive for the American economy and its workers.
“Our tax revenues are already at their lowest level in generations,” Ms. Yellen said. “If they continue to drop lower, we will have less money to invest in roads, bridges, broadband and R&D.”
The plan, while ambitious, will not be easy to enact.
Some of the proposals, like certain changes to how a global minimum tax is applied to corporate income, could possibly be put in place by the Treasury Department via regulation. But most will need the approval of Congress, including increasing the corporate tax rate. Given Democrats’ narrow majorities in the Senate and the House, that proposed rate could drop. Already, Senator Joe Manchin III of West Virginia, a crucial swing vote, has said he would prefer a 25 percent corporate rate.
At the core of the tax proposal is an attempt to rewrite decades of tax-code provisions that have encouraged and rewarded companies who stash profits overseas.
It would increase the rate of what is essentially a minimum tax on money American companies earn abroad, and it would apply that tax to a much broader selection of income. It would also eliminate lucrative tax deductions for foreign-owned companies that are based in low-tax countries — like Bermuda or Ireland — but have operations in the United States.
“We are being quite explicit: We don’t think profit-shifting is advantageous from a U.S. perspective,” David Kamin, the deputy director of the National Economic Council, said in an interview. “It is a major problem,” he said, adding that with the proposed changes, “We have the opportunity to lead the world.”
Treasury Secretary Janet L. Yellen said that the plan would end a global “race to the bottom” of corporate taxation that has been destructive for the American economy and its workers. Al Drago for The New York Times
The corporate income tax rate in the United States is currently 21 percent, but many large American companies pay effective tax rates that are much lower than that. Corporations that have operations in multiple countries often shift assets or income — sometimes in physical form, but other times, simply in their accountants’ books — between countries in search of the lowest possible tax bill .. https://www.nytimes.com/2021/04/01/business/bristol-myers-taxes-irs.html .
Companies also shift jobs and investments between countries, but often for different reasons. In many cases, they are following lower labor costs or seeking customers in new markets to expand their businesses. The Biden plan would create tax incentives for companies to invest in production and research in the United States.
Previous administrations have tried to curb the offshoring of jobs and profits. Mr. Trump’s tax cuts reduced the corporate rate to 21 percent from 35 percent in the hopes of encouraging more domestic investment. It established a global minimum tax for corporations based in the United States and a related effort meant to reduce profit-shifting by foreign companies with operations in the country, though both provisions were weakened by subsequent regulations .. https://www.nytimes.com/2019/12/30/business/trump-tax-cuts-beat-gilti.html .. issued by Mr. Trump’s Treasury Department.
Conservative tax experts, including several involved in writing the 2017 law, say they have seen no evidence of the law enticing companies to move jobs overseas. Mr. Biden has assembled a team of tax officials who contend the provisions have given companies new incentives to move investment and profits offshore.
Mr. Biden’s plan would raise the rate of Mr. Trump’s minimum tax and apply it more broadly to income that American companies earn overseas. Those efforts would try to make it less appealing for companies to book profits in lower-tax companies.
Under current law, companies with headquarters in low-tax countries can move some of their profits earned by subsidiaries in the United States and send them back to headquarters as payments for things like the use of intellectual property, then deduct those payments from their American income taxes. The Biden plan would disallow those deductions for companies based in low-tax countries.
Treasury Department officials estimate the proposed changes to offshore taxation would raise about $700 billion over 10 years.
Companies defend their decisions to locate profits and operations offshore, saying they do so for a variety of reasons, including so that they can compete globally.
Business groups blasted the proposal on Wednesday, saying that while they agreed that the United States needed to invest in infrastructure, the tax plan would put American firms at a significant competitive disadvantage.
Neil Bradley, an executive vice president and the chief policy officer of the U.S. Chamber of Commerce, said in a statement on Wednesday that the proposal would “hurt American businesses and cost American jobs” and that it would hinder their ability to compete in a global economy.
And members of the Business Roundtable, which represents corporate chief executives in Washington, said this week that Mr. Biden’s plan for a global minimum tax “threatens to subject the U.S. to a major competitive disadvantage.”
Republican lawmakers also denounced the plan as bad for business, with some on the House Ways and Means Committee saying that “their massive tax hikes will be shouldered by American workers and small businesses.”
Still, some companies expressed an openness to certain tax hikes.
John Zimmer, the president and a founder of Lyft, told CNN on Wednesday that he supported Mr. Biden’s proposed 28 percent corporate tax rate.
“I think it’s important to make investments again in the country and the economy,” Mr. Zimmer said. “And as the economy grows, so too does jobs and so too does people’s needs to get around.”
Mr. Biden’s team hopes the proposals will ultimately spur a worldwide change in how and where companies are taxed, which could resolve some of the global competitiveness concerns.
The administration is supporting an effort through the Organization for Economic Cooperation and Development to broker an agreement on developing a new global minimum tax. Ms. Yellen threw her support behind that effort on Monday, and the Biden plan includes measures meant to force other countries to go along with that new tax. Global negotiators are aiming to come to an agreement by July.
Jim Tankersley is a White House correspondent with a focus on economic policy. He has written for more than a decade in Washington about the decline of opportunity for American workers, and is the author of "The Riches of This Land: The Untold, True Story of America's Middle Class." @jimtankersley
Alan Rappeport is an economic policy reporter, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters. He previously worked for The Financial Times and The Economist. @arappeport
Nobel prize-winning economist Paul Krugman on inflation, Modern Monetary Theory, and why government underspending worries him
"Bidenomics Is as American as Apple Pie Corporate America tears down Biden's infrastructure plan "Jeff Bezos says Amazon supports a corporate-tax hike, arguing that Biden's plan will..."""
Ben Winck May 8, 2021, 12:20 PM
Brendan McDermid/Reuters
* Insider met with Nobel laureate Paul Krugman on Wednesday to discuss the US economy.
* Topics ranged from the Federal Reserve’s rate strategy to the need to pay for Biden’s spending plans.
* Presented below is a lightly edited transcript of the half-hour conversation.
Inflation. Multitrillion-dollar spending proposals. The Federal Reserve’s rate strategy. The economic recovery in general.
There wasn’t a lack of topics to discuss when Insider spoke with Paul Krugman, a Nobel laureate and the author of “Arguing With Zombies: Economics, Politics, and the Fight for a Better Future.” Krugman is among the world’s most prominent economists and has been outspoken in his thoughts on the recovery from the COVID-19 recession.
Presented below is a lightly edited transcript of the Wednesday conversation, in which Krugman addresses his biggest concerns around the rebound, what he’s monitoring for possible inflation shocks, and the mistakes policymakers made over the past year, among other things.
Ben Winck, Economy Reporter at Insider: Great to sit down and chat with you. The first question I’d like to ask is: How would you characterize the current inflation outlook?
In the inflation debate, we have people on one end arguing it’s going to be transitory, and another group saying we risk seeing rampant inflation. Is either side winning yet?
Paul Krugman: Well, no. I’m on the transitory side, although not with high certainty. There’s the cliche about uncharted territory and all that, but it really is. Nothing like this has ever happened in the record.
But if you believe in the transitory thing, you’re very much of the belief that you can expect to see some scary-looking numbers. You expect to see lumber prices soaring and shipping costs soaring for a little while. You expect to see bottlenecks and blips.
Basically, both sides are predicting the stuff that we’re seeing now. Anyone who wasn’t expecting to see some prices of some things rise as the economy came roaring out of the pandemic wasn’t paying attention.
It’s too early to tell, and it’s going to take a while … we don’t know anything right at this point.
Insider: The Fed has said it’s going to look at headline inflation when it shows up, and that it’s not going to look at forecasts or expectations. What are you watching for that first glimpse of broad inflation?
Krugman: I’m going to be tracking this like everyone else. In the past, just the Fed’s core inflation was good enough. I don’t think that that will work this time, because we’re gonna have special bottlenecks that will affect core prices as well.
I’m going to be looking at things like a couple of the Atlanta Fed indices. I’m going to be looking at sticky-price inflation. I’m going to be looking at trimmed-mean inflation, which would purge the bottleneck effects.
And to the extent that we can get information, wage contracts. It’s going to be much harder than it used to be. A long time ago, long before you were born, we could do union contracts. There basically are no unions now, so that doesn’t work anymore. But we’ll be wanting to see if companies are building in the expectation of higher inflation into wage settlements.
[INSERT: "basically are no unions now," You see how successful the anti-worker push over decades has been. With that piece of the seesaw white-anted away no wonder inequality has skyrocketed.]
The whole question is whether prices that are not changing all the time are being set with the expectation of inflation in the future. Whether we get this kind of leapfrogging process, which is what makes inflation – once embedded in the economy – hard to get rid of. Things like sticky-price inflation indices and trimmed-mean inflation indices are probably our best bet.
And, you know, talk to people. I’m going to be forcing myself to read the Beige Book these days, because I think, in some ways, it’s going to be a better guide than the statistics are. - [The Beige Book, more formally called the Summary of Commentary on Current Economic Conditions, is a report published by the United States Federal Reserve Board eight times a year. The report is published in advance of meetings of the Federal Open Market Committee.[1] Each report is a gathering of "anecdotal information on current economic conditions" by each Federal Reserve Bank in its district from "Bank and Branch directors and interviews with key business contacts, economists, market experts, and others." https://en.wikipedia.org/wiki/Beige_Book ] - Insider: As far as the Fed’s updated inflation target, what do you think it means for the future of not just economic policy, but what we consider to be a strong economic recovery?
Krugman: The tricky thing here is, the Fed has basically accepted that they kind of screwed up. That the 2% target ended up being a 2% ceiling, and that was not a good thing. They’re not ready to go ahead and say, “actually 2% is too low.” Although at some, at some level the arguments they’re making would actually suggest that. That we have an economy with a low neutral real interest rate, which means, in order to have room to fight recessions when they happen, you actually want to have more inflation in the system.
The old judgment was that 2% inflation was enough to ensure that you would never hit the zero lower bound. Nobody can believe that now. But I don’t know if they’re ready to go there, and it’s not clear that there’s any contemplation of an inflation target high enough that we can consider ourselves immune to the kinds of crises we’ve had.
[As expected Australia's "Inflation Target The Governor and the Treasurer have agreed that the appropriate target for monetary policy in Australia is to achieve an inflation rate of 2–3 per cent, on average, over time." .. https://www.rba.gov.au/inflation/inflation-target.html .. is roughly the same.]
Insider: This is the question that is on everyone’s mind, but I’d be remiss if I didn’t ask. Do you have any timeline in mind for when tapering would begin or if any rate hikes are going to arrive before 2023?
Krugman: The probability is pretty high, that we’ll hit the wall before then. Not hit the wall, because that’s the wrong way to put it, but that you’ll want to have some lift-off on interest rates.
If we’re going to be growing at 8%, it doesn’t take very long for us to an economy that is running extremely hot. Probably by the end of this year, we’ll have a very hot economy.
Now, the thing that I would be that makes it confusing is that the stimulus is time-limited and we’re getting this big slug of fiscal expansion. But it will be in the rearview mirror by sometime next year.
I think we’re likely to have an economy that’s looking hotter than is sustainable by early next year.
It seems likely that we’ll have an economy that is overheated but in a very mild sense. Not in a scary sense, but nonetheless overheated by early next year. But we’ll also be looking at a looming fiscal contraction because the American Rescue Plan will have done its thing already.
Whether the Fed will actually feel that it needs to raise rates is unclear for that reason. I think we’re going to recover really fast. But the question is, are we going to be in a situation where the Fed feels that it needs to slam on the brakes over and above the deceleration that will come from the fact that the rescue plan is fading into the past.
Insider: Both the Fed’s interest rate plans and Biden’s spending proposals have been referred to as “experiments.” What would you tell everyday Americans if you were to reassure them that the outlook is still positive and there’s no reason to panic?
Krugman: We’ve learned two lessons from the past dozen years. The US economy can in fact run a lot hotter than we thought. It is, in fact, okay to have nice things. We can have full employment and it doesn’t mean that that hyperinflation is around the corner. And the debt doesn’t seem to be a problem at anything near current levels.
So there’s basically not much of a downside to having a very rapid economic recovery. If you’re an ordinary American, you can say, “look, the odds are that by this time next year, jobs will be plentiful, things will be looking pretty good. Inflation might be a bit higher, but your income will be more than keeping up with it.”
And nobody here is being stupid or responsible. They might be making mistakes because policymakers always do. But the whole discussion among policymakers is amazingly reality-based at this point. That’s reassuring.
Insider: I know it’s still early and we’re not out of the woods yet. But we’ve looked back and reflected on a lot of the mistakes that we made in 2008 and 2009. What mistakes, if any, are, do you see emerging from this recovery?
Franck Robichon/Reuters
Krugman: I have a funny concern, which a fair number of people that I’ve talked to have.
We’re getting this big slug of money, a lot of which is still going out. Special props to Biden for ending the tyranny of cute acronyms. Instead of PATRIOT Acts and CARES acts, we now have “American” everything. The first American, well, most of that money has already gone out, and the economic effects will take some time to play out.
With the second two – the infrastructure plan and the family plan – I’m worried that they’re excessively paid for. In principle, they’re supposed to be fully paid for. But take what we knew about the economy in 2019. We were really kind of in secular-stagnation land with low neutral real rates. We had full employment then, it was only thanks to extremely low interest rates and persistent deficit spending.
What the doctor ordered is some sustained moderate deficit spending. So public investment – both in stuff and in people – was paid for in part by issuing debt. I’m a little worried that the Biden team seems to want to do these things with full pay-fors.
That’s what worries me a little bit. That we’re still too worried about fiscal responsibility and not sufficiently worried about persistent weakness of demand.
Insider: So you’d argue, in this case, we should try to have our cake and eat it too?
Krugman: Yeah, that’s one way to put it.
I’m mixing metaphors here. We’ve got a lot of savings all dressed up with nowhere to go. That’s basically the secular stagnation problem.
And when savings are all dressed up with nowhere to go, yes, there is a free lunch. Putting all these savings that businesses don’t actually want to invest, even at very low interest rates, to work is just a win all around.
It’s not reflected in that the numbers that they’re throwing around, although there’s reason to believe that the numbers are over-optimistic on the revenue side. And of course they know about this, no question. One of the weird things about right now is I’m actually talking to these people!
Anyway, being fiscally responsible is way down on the list of things you should be worrying about.
Insider: Are there certain pay-fors that appeal to you more than others?
Krugman: Greater IRS enforcement is a win all around. There seems to be a lot of money there and it’s also a real element of fairness.
The corporate tax is also okay. I think we’ve learned that corporate taxes are not nearly the problem that we thought they are. And if we could actually get a crackdown on tax havens, that would be a really good thing as well.
It’s not clear that we really are getting at the issue of untaxed gains from wealth. The attempts to tighten up taxation of capital gains look a little weak.
If it was up to me, I would say that the case for something like a wealth tax is still there. And it hasn’t gotten any weaker from the facts. It’s just that, with President Joe Manchin having veto power, lots of stuff doesn’t really happen. But that’s still something I’d like to see.
As for the rest, I’m not very concerned about the tax issues in general. I don’t think we have a problem of paying for stuff. I also don’t think the incentive effect of taxes are anything near as big as people imagine that they are. It’s just a very low-passion issue for me.
Insider: I’m not sensing a wholehearted endorsement of Modern Monetary Theory, but I’m catching some hints at that. Do you think the way we’ve handled this recovery is going to at least elevate the debate around MMT?
Kevin Lamarque/Reuters President Joe Biden and Treasury Secretary Janet Yellen.
Krugman: I could do the old academic put down about MMT: There’s much that’s true, and there’s much that’s new, but what’s true isn’t new and what’s new isn’t true.
When people ask, “well, isn’t this a vindication of MMT?” Well yeah, but it’s also exactly what IS-LM macro would say. [IS-LM?? SEE BENEATH THIS ARTICLE] - [SilverSurfer, how can you suggest money is theoretical when it is there as a more efficient and accommodating, comfortable? system for the whole society (world) than is the barter system, or the sticks they used way back in England .. money is not there in theory .. you use it to buy things, to pay your taxes .. seems to me it's more practical than theoretical .. another excerpt from The Fiscal Summit Counter-Narrative: Part Three, Are There Spending Constraints On Governments Sovereign in Their Currencies? [...] "So, then Stephanie counterposes the MMT theory of the origins of money, tracing “the nature and origin of money to the early authorities . . . the money does not emerge spontaneously by the will of the people, but it is imposed on them.” [...] ”So, Modern Money Theory stresses the relationship between the government’s ability to make and enforce tax laws on the one hand, and its power to create or destroy money by fiat on the other. I would define as a sovereign government, a government that retains these powers, that they are sovereign in their own currencies. Among others, examples of governments with sovereign currency, the United States, Canada, UK, Japan and Australia, all sovereign in this regard, by this definition." https://investorshub.advfn.com/boards/read_msg.aspx?message_id=76443339] - I haven’t seen people make this point: In the overheating debate, MMTers, at least if they’re consistent with their own doctrine, are substantially to the right of people like me. Because I say, “Look, if the stimulus that comes out of the rescue plan is too big, that’s okay. The Fed can tighten monetary policy and prevent an inflationary problem.”
But the MMTers is don’t seem to believe that monetary policy can ever be used for anything useful. We’ve actually had Stephanie Kelton saying you can’t control inflation by raising interest rates.
I’m not sure I understand their doctrine, but if that’s what you believe, then you should be very worried about excessive stimulus. Because their view is the only way to reign in inflation is to have a fiscal tightening. And since that’s probably not in the cards, you should actually be very worried that the first round of fiscal stuff might be too big.
Whereas if you believe in conventional Keynesian macro, you say “yeah, well, but the fed can contain it by raising interest rates.”
If you take this stuff seriously, MMT is actually something that would make you more cautious and less willing to go wholeheartedly into these progressive policies than if you were a conventional Keynesian.
Insider: In that, you don’t have the Fed to serve as that backstop?
Krugman: That’s right. From my point of view, you want to go big because it’s asymmetric. If you go too small, then you hit the zero-lower-bound and, and the Fed can’t help you if you go too small.
But if you go too big, the Fed can contain any overheating. If you have a doctrine that says monetary policy doesn’t matter, then you don’t have that asymmetry. So you don’t have the argument for going really big. It’s a really weird thing.
The two groups of people that are not all that political who I find the hardest to talk to are supporters of MMT and cryptocurrency.
Insider: And I promise that cryptocurrency isn’t on the docket today. The last question I wanted to ask is, what do you find most encouraging so far about this recovery? And what concerns you the most in the months ahead?
Krugman: The most encouraging thing is there’s no real sign of the scarring that people worried about. We’re getting more than a few stories about businesses that aren’t coming back, but there are new businesses being started and people seem to be eager to go back to work. Not enough to make companies that don’t want to pay higher wages happy. But this whole thing is really looking like a V-shape recovery. That’s a tremendously encouraging thing.
Five years after the fall of Lehman Brothers, we were still a high unemployment, depressed economy. It doesn’t look extremely likely that’s going to be the case five years after the coronavirus hit. So that’s really good news.
Insider: And your top concerns? We mentioned a few, but any others?
Krugman: Well, I’m concerned obviously about a lot of things that are not economic. But, my main concern right now is that the world in 2023 will probably look a lot like the world in 2019.
The world in 2019, although we had full employment, was actually really fragile. Interest rates were close to zero and fiscal policy did not appear to be a useable tool. The virus broke a lot of the rules.
Back in 2019, I was saying to people: “I don’t know where the next shock is coming from, but I think our shock absorbers are completely shot.” What I’m afraid of is that we may find ourselves in that position again just a year or two down the road.
Insider: Quick follow-up then. Does the Fed’s change in language from “full employment” to “maximum employment” – looking at gaps across race, income level, and gender – give you any more hope toward how we pursue a higher labor market?
Krugman: Some. It’s nice to see that the Fed is keeping up. We’re finally getting past the NAIRU. We’re finally realizing we don’t know how hot the economy could run, and the only way to find out is to try it. And the Fed has picked up on that, which is great.
But the Fed can always reign in a boom, but pushing on a string is still a real issue. I would be much happier if there were 16 members in the Senate who talked the way the Fed does. It matters a lot more, whether the legislative branch is willing to think in those terms than whether some people who fundamentally control short-term interest rates believe in those things.
Insider: I think it’s a great place to conclude. Thank you so much. Really appreciate you making the time. It’s been a privilege to chat.
The IS-LM model, which stands for "investment-savings" (IS) and "liquidity preference-money supply" (LM) is a Keynesian macroeconomic model that shows how the market for economic goods (IS) interacts with the loanable funds market (LM) or money market. It is represented as a graph in which the IS and LM curves intersect to show the short-run equilibrium between interest rates and output. Key Takeaways
The IS-LM model describes how aggregate markets for real goods and financial markets interact to balance the rate of interest and total output in the macroeconomy. IS-LM stands for "investment savings-liquidity preference-money supply." The model was devised as a formal graphic representation of a principle of Keynesian economic theory. On the IS-LM graph, "IS" represents one curve while "LM" represents another curve. IS-LM can be used to describe how changes in market preferences alter the equilibrium levels of gross domestic product (GDP) and market interest rates. The IS-LM model lacks the precision and realism to be a useful prescription tool for economic policy.
"Bidenomics Is as American as Apple Pie "Corporate America tears down Biden's infrastructure plan "Jeff Bezos says Amazon supports a corporate-tax hike, arguing that Biden's plan will..."""
In a city of ambitious influencers, a shadow cabinet hopes it can summon a new New Deal.
President Franklin D. Roosevelt's and his Cabinet paired with photos of their descendants, who are working to make Biden more like FDR. | AP, Getty, Provided/POLITICO illustration
By RUBY CRAMER 08/01/2021 07:01 AM EDT Ruby Cramer is a senior staff writer at POLITICO and POLITICO Magazine.
One recent Wednesday evening, a small of group of concerned citizens gathered on a Zoom call to talk about how to get the attention of the president.
At 6 p.m., two rows of elderly faces appeared on screen, staring into the camera: June Hopkins, Henry Scott Wallace, Tomlin Perkins Coggeshall and James Roosevelt Jr. If their names sound vaguely familiar it’s because their relatives—Harry Hopkins, Henry Wallace, Frances Perkins and Franklin Delano Roosevelt—formed the nucleus of one of the most famous and influential Oval Office rosters in American history. Ninety years later, these descendants of the FDR administration have reconstituted his Cabinet. And they have played their roles with a conscientious sense of purpose. This is a meeting, not happy hour. No one drinks, and they begin on time.
“It looks like Harold is having connection issues,” said Stephen Seufert, a volunteer staffer for the group. When he finally turned up, Ickes was in the woods, on vacation someplace remote. The internet was giving him trouble, and he couldn’t get into the Zoom. Seufert tried to troubleshoot the problem from afar, but after a few minutes, they let him be. Ickes is 81 and, as the son of Roosevelt’s interior secretary, is the closest to the actual FDR Cabinet.
“He’s not the most frequent attendant,” said Wallace.
Seufert, one of several self-identified “non-descendants” assisting the group, chimed in helpfully: “If we had better infrastructure, maybe Harold would be here right now.”
In a city of interest groups, “the descendants,” as they refer to themselves in frequent press releases and op-eds, are among the more unusual. They are determined to polish the legacy of America’s 32nd president by pushing the 46th to embrace a legislative agenda as transformational as the New Deal. They want Joe Biden to embrace the idea of an “activist” government. They want him to eliminate the filibuster. They spend hours parsing his words for echoes of the stirring language that helped defeat the Great Depression. And they devote their Wednesday night Zoom meetings, where they have met nearly every week since last June, to plotting ways to keep the comparisons to FDR alive, as if repetition might somehow will Biden’s latent progressivism to life.
IMAGE - FDR's Cabinet and their descendants
In the FDR Zoom, time echoes indistinctly between 1933 and 2021, fixed in a state of looking back in order to look forward. They appear in doubles, representing themselves and their ancestors. Behind him on Zoom, Roosevelt’s face is framed by a bust of his grandfather. Over his right shoulder, Wallace has one of his grandfather. They are, as Roosevelt Jr. put it by accident during their recent meeting, living “here in the 20th Century.” Every moment of connection between past and present is a small revelation. Biden’s broadband push equals FDR’s electricity push—“That is so New Deal!” The recent discussion of Biden’s proposed Civilian Climate Corps (an alliterative match of FDR’s Civilian Conservation Corps jobs program) was an unmistakable data point for the group that Biden, as June Hopkins said, is “looking back.”
“And maybe it’s through our eyes,” she said.
The sudden impulse to compare the two men—or to take issue with the impulse to compare the two men—has become commonplace in Washington. You’ll find the two men’s names side-by-side in headlines — more than 175 already this year. You’ll read about the way both men faced the threat of authoritarianism. You’ll see “New Deal” allusions in the coverage of Biden’s proposed infrastructure package. You’ll forget there was ever a time when the president wasn’t on the cusp of “transformational.” The presidential candidate who ran for office on the promise that “nothing would fundamentally change,” the six-term senator who moved with rather than ahead of his party from one decade to the next — is now, maybe, the next FDR.
Biden wasn’t exactly trying to dissuade people from the comparison. The first images we saw of the new Biden White House revealed that for the focal point of his Oval Office, directly across from the Resolute Desk, he had selected a portrait of FDR. When Biden invited presidential historians to the White House in March, he turned to Doris Kearns Goodwin to say, “I’m no FDR, but…” And, per Axios: “Why it matters: He’d like to be.” The descendants have happily enabled the new president. And while they agree that Biden is no “clone of FDR”—“They had different strengths and skills,” said Roosevelt Jr.—they want him to get as close to a replica as possible.
Which is why in June 2020, one month after Biden at a CNN town hall talked about the challenge of dealing with crises even greater than ones FDR faced, the descendants convened for their first Zoom call and decided to write a full-page letter to Biden in his hometown paper.
“We both support what President Biden is doing and try to provide the encouragement and the underpinning for him to go even farther,” said Roosevelt Jr, an attorney who chairs the Democratic Party’s rules and bylaws committee, “rather than compromise down.”
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“Would now be a good time to talk about our meeting with Secretary Walsh?” Seufert asked.
As he spoke, he shared his computer screen with the rest of the group on Zoom, pulling up Twitter. Next to the sidebar of trending topics—Real Housewives of Beverly Hills, Republicans purged from the Jan. 6 select committee—was a tweet from Marty Walsh, Biden’s secretary of labor. It showed Walsh posing with a painting of his predecessor, FDR’s labor secretary, Frances Perkins, the first female Cabinet member. Earlier this month, Walsh joined the group on their Wednesday night call—their first direct contact with the current administration.
Op-eds and press releases are fine, but getting facetime, of course, is an important distinction between a vanity project and influence. The group hoped that Walsh might carry their message deeper into the White House and help them move the needle on real issues.
Seufert toggled over to a new tab, a headline on truthout.org .. http://truthout.org/ : “84 Democrats Sign Letter Demanding Civilian Climate Corps in Reconciliation Bill.” Wallace spoke up: “That is currently huge for us,” he said. Two op-eds were in the works already, one on the “racist origins” of the filibuster, whose elimination the descendants view as an urgent necessity, and another on the CCC.
Someone said they had heard Sen. Chuck Schumer talking about it the other day. Bernie Sanders, too. And Sen. Ed Markey, they said, has jumped all over it, proposing a CCC that’s 10 times bigger than Biden’s. “So we want to weigh in in favor of as aggressive a CCC as possible,” Wallace said. Everyone nodded, displaying a level of unanimity that FDR’s Cabinet rarely exhibited. Then Democratic presidential nominee Franklin D. Roosevelt and three of his sons wave to friends ashore in July 1932. James Roosevelt, in the top right, is the father of James Roosevelt Jr., who is working to keep the legacy of the New Deal alive.
Then Democratic presidential nominee Franklin D. Roosevelt and three of his sons wave to friends ashore in July 1932. James Roosevelt, in the top right, is the father of James Roosevelt Jr., who is working to keep the legacy of the New Deal alive. | AP Photo
The descendants represent a significant chunk of FDR’s administration: June Hopkins, 80, a history professor who taught about the Roosevelt years, is the granddaughter of Harry Hopkins, FDR’s Works Progress Administration chief and commerce secretary. Henry S. Wallace, 69, a former Democratic congressional candidate in Pennsylvania, is the grandson of Henry A. Wallace, FDR’s vice president and his secretary of agriculture and commerce. Coggeshall, 66, runs the center dedicated to Frances Perkins’ legacy. Ickes, a mercurial figure from the Clinton years, is the son of FDR’s secretary of the interior, his father’s namesake. Roosevelt Jr., 75, remembers his grandmother, Eleanor, but was born too late to meet his grandfather. There is only very light role-play involved: “I don't think we all have our constituencies,” Hopkins said of representing their forebears in the group. “You know, Hopkins and Ickes went head-to-head a lot when they were both vying for money from president. They publicly argued a lot.” She laughed. “I certainly don’t feel any animosity toward Harold.”
Each week, they are joined by two historians, “non-descendants” David Riemer and Christopher Breiseth, as well as a volunteer staffer and representatives from the PR firm Red Horse Strategies, which the group has paid for a few freelance projects. The descendants are not a 501(c)4 or super PAC. But they have pumped out an impressive volume of statements, appearing without introduction in the inboxes of reporters across Washington earlier this year.
“UNDER EMBARGO: FDR Cabinet Descendants Send Letter To POTUS.”
“FDR & Cabinet Created Social Security—Descendants speak out…
“The descendants are available for interviews…”
“It’s the totality of what we’ve seen since we first wrote to him,” Wallace said. “His references to FDR and the New Deal have only multiplied. There’s a maelstrom swirling in the ether here of FDR references. And we are in some way keeping that maelstrom swirling. It has his presence in it, and it has us in it—and we’re just proud to be in it.”
But in the end, the descendants want what any Cabinet member does: time with the boss.
So far, direct contact with Biden has eluded them. They do believe there is evidence he is listening. “Indirect evidence,” Hopkins said. But “he hasn’t called us, if that’s what you want to know.”
“We’ve not been invited to the White House,” Roosevelt Jr. said. “But certainly we see indirectly a lot of evidence that what we’ve advocated is showing up.”
“Another indirect indication,” Roosevelt Jr. said, “is Biden’s speech to the joint session of Congress about the vaccine. He talked about creating an ‘arsenal of vaccine.’ That’s a direct echo of FDR’s ‘arsenal of the free world.’”
“‘Arsenal of democracy,’” one of the historians corrected.
Hopkins cut in: “Which is a very strong indication that he was not a socialist. That he was going to protect democracy and capitalism at any expense.”
“A lot of people thought FDR was going to be different too when he got in office,” the staffer, added. “They thought he would be more pro-business, more conservative in his governing.”
“He ran on a balanced budget!” said FDR’s grandson. “And it turned out that’s not what was called for.” The group laughed.
There is a consensus among the descendants that, not unlike FDR, “this is the real Biden,” Hopkins said.
A couple hours after the group logged off for the night, Biden took the stage at a CNN Town Hall in Cincinnati where he appeared to show the other real Biden, backing away from the possibility of eliminating the filibuster. “There’s no reason to protect it other than you’re going to throw the entire Congress into chaos and nothing will get done,” he said. “Nothing at all will get done."
On this point the descendants feel certain: “The New Deal would have been impossible under today's filibuster regimen,” said Wallace. “In FDR, his first 100 days, he got 15 major pieces of legislation passed, every single one was subject to nothing more than the majority.”
“We’re at a crossroads right now,” Hopkins said, aware that their challenge will be inducing a more temperamentally cautious legislator to take “big and bold experimental” steps. “We have to be incredibly careful, as well as being energetic, in helping our government go onto a correct path.”
The group has plans to gather more descendants and historians at a possible “seminar” in November. First, they are drafting a mission statement. They are hopeful they will hear again from Walsh, Biden’s labor secretary. At the end of their meeting, the descendants said, Walsh had promised the group that he would be sure to “tell the Cabinet” about them.
“It’s like those old Mickey Rooney movies,” said Hopkins. “‘Hey, kids, let’s put on a show.’”
6 Steps to Restore Democracy & Defund the GOP Reagan defunded the Democratic Party in 1981: And, really, it’s just a case of “turnabout is fair play.”
Yesterday I told you how the Republican Party is animated by one single force: greed.
And greed in modern society is all about money. Which is why money is how you take down the Republican Party.
To maintain their greed, the Republican Party has kept all kinds of good things from us, from healthcare to unionization to education to the ability to start a small business for yourself, your family and the future. All that has been eaten alive by their greed.
For Democrats to defund and thus defeat the Republican Party, all they have to do is put into place a few straightforward “good government” steps, all things that should happen in any case:
End Red State welfare. Kentucky gets $2.41 from the federal government for every tax dollar they send to Washington DC, giving Mitch McConnell billions in blue-state tax money to shower on his voters and maintain his power. Most other Red States are similarly “taker” states. So let’s fight for a law limiting states to no more than $1.50 for every dollar they send to DC in tax revenues and they have to pay for everything else by taxing their own in-state wealthy people. Call it Welfare Reform!
End corporate welfare that gets recycled to GOP politicians. This includes $600 billion a year to fossil fuel companies, about a trillion a year we give to Big Pharma (including forbidding Medicare from negotiating drug prices), and government subsidies to massive insurance companies like the “Medicare Advantage” scam that puts individual seniors and the entire Medicare system at risk.
End corporate monopolies that fund the GOP. Break up giant corporations and make America safe again for small businesses, which build local economies. From utilities to tech to banking and retail, giant monopolies rip off working-class Americans to the tune of an average $5000 per-family per-year, and use some of that money to fund Republican politicians. (Breaking up monopolies is actually good for both the nation and the companies themselves: when Nixon & SCOTUS in 1974 initiated the breakup of AT&T into 7 regional companies and Lucent, completed in 1984, it actually increased shareholder value and led to an innovation explosion.)
Bring back Eisenhower’s 91% top tax bracket to restore the middle class that votes Democratic. America’s strongest economy was 1950 to 1980, with a top tax bracket of 91% to 74%. We built highways, schools, hospitals, and put men on the moon. CEOs averaged only 30x the pay their employees took. Democrats ran virtually everything, even in what we now call Red States. Then the Supreme Court changed the rules of the game, money flooded the GOP in 1980, Reagan cut that top bracket to 25%, and the billionaires it produced continue to pour cash into the GOP.
Impose Elizabeth Warren’s 2% tax on great fortunes and use it to fund healthcare and education for working-class voters. Average Americans pay a wealth tax every year: it’s the property tax on their largest store of wealth, their homes. That annual wealth/property tax pays for schools, libraries, police, fire and other essential infrastructure. Billionaires, like average homeowners, should pay their fair share of the cost of the commons through a similar annual tax on their money bins and other investments.
Reverse Citizen’s United to end the GOP’s campaign money from corporations, SuperPACs and billionaires’ ability to skew our politics. We did this in the 1970s after the Nixon bribery scandals, but the Supreme Court blew it up, saying that money was speech. There are multiple ways around that, and the Democratic Party should make this job one. (HR1 is a great start!)
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