An Economy on the Rebound

When President Barack Obama took the oath of office on January 20, 2009, the U.S. economy was in free fall. During the preceding year and half, some of the nation’s largest and most important financial institutions went bankrupt, including Bear Stearns, Countrywide, and Lehman Brothers, as risky loans and other investments failed. Many other large banks were on the verge of collapse. The downfall of the financial sector had been preceded by a spectacular end to a massive speculative housing bubble that almost instantly wiped out trillions of dollars of Americans’ net worth. When Lehman Brothers and AIG went into bankruptcy during the same weekend in September 2008, panic ensued all across the economy. It felt like 1929 all over again. The Troubled Asset Relief Program (TARP), which was signed into law by President George W. Bush and was implemented by President Obama, stopped the bleeding in the financial sector, but the damage to the broader economy had already been done as other sectors of the economy continued to rapidly deteriorate. The stock markets plummeted, losing more than half of their peak market capitalization just six weeks after Obama took office. Many retirees and workers nearing retirement saw their investment portfolio lose much of its value. Millions of people lost their jobs due to no fault of their own after the U.S. entered a recession in December 2007. Over 1.2 million Americans were laid off between the election and Obama’s inauguration. All told, the Bureau of Labor Statistics estimates that 8.7 million jobs were lost due to the Great Recession. No president since Franklin D. Roosevelt has begun their tenure in the White House under such dire circumstances. An evaluation of each segment of the economy around the time Obama took office compared to now shows that we are definitely better off four years later.

The Case Against Mitt Romney

Mitt Romney’s nomination as the 2012 Republican candidate for President is an important and historical moment for me and many other members of the Church of Jesus Christ of Latter-day Saints across the U.S. and the world. A thick glass ceiling was shattered when Romney, a prominent member of my faith, overcame anti-Mormon bigotry prevalent in parts of the Republican primary electorate to clinch the GOP nomination. During the past twelve years we have been witnesses to a triumph over a wide array of social prejudices in American politics with the nomination of Senator Joseph Lieberman, who is Jewish, as the Democratic Party’s vice presidential candidate in 2000, Hillary Rodham Clinton’s historic run as the first serious female contender for the White House in 2008, and Barack Obama’s election as the county’s first African-American president. We may very well have a Mormon as our President starting next January. While I admire Romney’s dedicated unpaid service in my church as a bishop and stake president, believe that he is a good family man who also cares deeply about our country, and am thrilled by Romney’s ascension to the GOP nomination in this Mormon moment, I am confident that he is the wrong person for the job of President of the United States.

Thank Romney for Underscoring Need for "Buffet Rule"

After losing the South Carolina Primary to Newt Gingrich, possibly in part due to his waffling at the pre-Primary debates about releasing his tax returns, Mitt Romney released his tax returns for the past two years, which show that he paid about 14% in federal taxes on income of nearly $43 million. The timing of Romney's tax return release was impeccable- for Democrats. For months, President Obama and Democrats have been attacking Republicans for wanting to maintain tax breaks and loopholes for the super-wealthy. Last August, Warren Buffet pointed out in an op-ed that he paid a lower federal tax rate than his secretary in 2010. He paid about 17.4%, whereas his office staff paid an average of 36%. Buffet rightly pointed out that this simply isn't fair. He added, "it’s time for our government to get serious about shared sacrifice."

Last October, the non-partisan Congressional Research Service released a report that indicated 25% of all households earning at least $1 million annually are paying a smaller share of their income than a large segment of the middle class. The report adds that 94,500 millionaires pay a lower tax rate than most of the middle class and that 7,000 millionaires pay no income taxes at all.

The reason for this is because of the payroll tax (Social Security tax), which doesn't tax income above $107,000, and the capital gains tax rate, which is 15%. Investment income is usually taxed at this rate, which is much lower than earned income tax rates. Many of the super-wealthy make their money via investment income rather than earned income.

President Obama has talked about "the Buffet rule" as a way to help fight the budget deficit by implementing a higher minimum tax rate for people in the highest income bracket, to ensure they don't pay a lower percentage of income in taxes than the middle class. As he has stated, millionaires shouldn't be paying lower tax rates than their secretaries. Mitt Romney's revelation that he paid an effective federal tax rate of 14% underscores the notion that it is completely unfair for the super wealthy to pay less in overall taxes than the middle class. And it adds to the powerful narrative that was created by the Occupy Wall Street movement, whose underlying theme deals with the challenges posed by the incredible gap between the top 1% of earners in the U.S. and the rest of the country, and the disproportionate amount of power that the top 1% hold. Romney's tax returns show that we are in dire need of tax reforms that will create a fairer revenue system. If Romney becomes the GOP nominee, which seems pretty likely at this point, you can count on Romney's ridiculously low tax rate as becoming a major campaign issue. It will help show that the GOP's insistence in preserving Bush's tax cuts for the wealthy and Romney's advocacy for even more tax cuts for top earners are entirely out of touch with our federal budget deficit reality and lack any sense of fairness. So I thank Mitt Romney for serving as a poster-child for all that is wrong with the fiscal policies he and his party tirelessly support.

A Pivotal Moment for President Obama and America

President Barack Obama visited Osawatomie, Kansas last week to speak about the danger of the growing economic inequality in America and the threat this currently poses to the middle class and our country as a whole. I thought this was the most important speech of his Presidency thus far because it clearly illustrated the monumental challenges we face in dealing with a weak economy, high unemployment, and an eroding middle class. He emphatically connected the success of the middle class with the success of America and described how investments in education, infrastructure, and science and technology along with tax and financial industry reform are critical to our economic recovery. The speech was 55 minutes long, so I highlighted what I thought were his key points:

Communists Like Thomas Jefferson and Adam Smith

Conservatives often invoke our country's Founding Fathers as well as prominent historical figures like economist Adam Smith, whose ideas about the "invisible hand" of free markets helped form the theoretical foundation of modern capitalism, when they advocate far-right economic policies. Lately, there has been a lot of talk by GOP presidential candidates about creating a flat tax system in the U.S., particularly from Texas Governor Rick Perry and Godfather's Pizza founder Herman Cain. Ironically, you'll never hear a conservative pundit or politician point out that Adam Smith and Thomas Jefferson, among other historical figures, were strongly in favor of progressive taxation.

Taxes and Used Car Dealers

To support their argument against President Obama's calls additional revenue to solve the budget deficit, Republicans have argued that the U.S. has one of the highest corporate tax rates in the world. Democrats, on the other hand, have pointed out that companies and wealthy Americans are paying historically low levels of taxes. Paradoxically, both parties are right. To understand why, you need to think of the U.S. tax code like code like a user car dealership. Sticker prices are usually high at used car dealerships, but hardly anyone ever pays sticker price. The same is true with federal tax rates, especially with corporate taxes. Although the corporate federal tax rate in America is high (too high in my view), most companies take advantage of a plethora of loopholes and deductions that result in a much lower actual corporate tax. The Government Accountability Office released a study in 2008 that revealed 55% of U.S. companies paid no federal income taxes during at least one year in the seven-year period covered by the study. This makes our tax code look like a proverbial block of Swiss cheese, as the wealthiest companies and individuals are able to become savvy at tax avoidance by hiring the best accountants and tax attorneys who can find loopholes. The U.S. corporate tax rate needs to be competitive with the rest of the world. However, most countries do not have the kind of loophole-ridden tax system we have. Simply stated, we can help solve the massive budget deficit by raising revenue while actually lowering the corporate tax rate. This means we need to close the loopholes, end the subsidies (corporate welfare) and make the tax code fairer and the tax environment more predictable for businesses. The current Administration has supported this, but to date, the Tea Party element of the House Republican caucus has opposed anything that would increase the amount of revenue coming into the Treasury. Hopefully saner heads will prevail.

Warren Buffet Paid a Lower Tax Rate Than His Secretary in 2010

In today's New York Times, billionaire investor Warren Buffett pointed out that he pays a lower federal income tax rate than his staff. His effective tax rate last year? 17.4 percent! His is not a unique case. Our tax code is written so that the wealthiest have the best tax breaks. As the President has said, everyone needs to pay their fair share. And since debt reduction is the pressing issue on politicians' minds in Washington, I hope that the new 'Super Congress' takes a balanced approach that includes significant revenue increases when they look for ways to improve our nation's budgetary problems. I plan on writing more about this and the recent debt ceiling debate - there is a lot more to the subject- but I was impressed by Buffett's Op-Ed.

Buffett states, "my friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice."