It is easy if you are a billionaire to get attention. You spend a ton of money on some idea--even it's sheer lunacy--and you can buy attention. Donald Trump did it--but his "pursuit" of the presidency was just another comical vanity play in his comical life. Pete Peterson is another story--and the outcome of his Donald Trump-like gambit has a far more dangerous outcome: trashing Social Security, cutting Medicare and undoing America's safety net.
Today, Peterson is holding yet another of his vanity-driven national "fiscal summits". And, true to form, he has successfully attracted a whole raft of experts on the debt and deficit "crisis".
The problem? There is no debt or deficit "crisis". It's phony. Made up.
Part of why we believe there is this phony crisis, as I explained in "It's Not Raining, We're Getting Peed On: the Scam of the Deficit Crisis", is that we’ve come to believe that extremely wealthy people know what they are talking about. We assume—or they assume—that just because someone figured out how to make a lot of money, then, he or she is an expert on the economy—rather than an individual whose brain is wired to think in a very narrow-minded way. And, then, they get to use their money to spoil and destroy what is good about America.
Remember, most of these people are the same people—the financial leaders, aided and abetted by the traditional media and political representatives—who told us some of the following whoppers:
• Housing prices would never go down!
• IRA’s are much better than boring company-provided
pensions or, god forbid, the king of all fuddy-duddy
investments, Social Security!
• The Dow would reach 30,000!
• Bernie Madoff was an investing genius!
How did all that work out for you?
Peterson became rich by inflicting misery on countless human beings. That is essentially the history of Blackstone, the private equity firm which, when it went public in 2007, made Peterson a very rich man. Blackstone is a wrecking machine: buying up companies and immediately trying to wring every penny out of the place, mainly by tossing workers on to the unemployment line.
And how do they do it? By piling up massive amounts of debt!
It’s almost impossible to ignore the irony and hypocrisy rolled into one. Pete Peterson robbed companies of their wealth by saddling those companies with crushing levels of DEBT—but he sees debt as the evil.
Peterson wants to destroy what you get--Social Security, Medicare--but he does not want to sacrifice himself. He argues that everyone should share in the "sacrifice" to
restore "fiscal soundness" to the country.
Except for Pete Peterson. And this brings us to a short explanation of "carried interest". Private equity firms get a special tax break—it’s called "carried interest". Rather than being taxed at the top rate of 35 percent, the private equity fund managers like Peterson only pay 15 percent through a loophole called “carried interest.” To understand carried interest, you have to first understand how money managers get paid in the yacht-sailing, mansion-buying world of private equity.
First, they receive a fee, which is a percentage of the funds they invest. This fee is usually in the range of two percent, and is taxed like your run-of-the-mill wage income.
Second, and far more lucratively, money managers get a fee based on the performance of their fund—a fee in the range of 20 percent. It's the second fee that is the so-called "carried interest"—and it’s how the money managers of private equity really rake in the big bucks that pay for their Picassos, yachts and mansions.
In the normal world of taxable income (and let me say that nothing in the tax code is simple when it comes to schemes that allow people like Peterson to shelter their money), carried interest is taxed as investment income—at the capital gains level of 15 percent (much lower than the top wage income rate), even though most of these managers invest very little, if any, of their own money.
So, a private equity big shot honcho hauling down millions of dollars in "incentive" is taxed at a 15 percent rate, while the receptionist who works in his office, or the police officer who guards the equity baron's property, probably earn $50,000 or so if they’re lucky—and those average working people pay a 25 percent tax rate on that income (not to mention payroll taxes), a far larger share of their income than the fellow who
banks "carried interest."
There was a move to right this wrong a few years ago. Peterson’s response? "This is a fairness argument…There are so many other partnerships, why pick on this high-growth sector?"
Oh, I get it. It’s fair for everyone else to pay proper tax rates (putting aside for a moment the absurdly low tax rates of the rich overall) except for YOU, the self-anointed public scold, who wags his finger at everyone else's perceived financial misdeeds.
So, yes, Peterson is a hypocrite--but, using his great wealth, he has played a central role in convincing Americans, and their elected representatives, that there is a debt or deficit "crisis".
It's nonsense.
Yesterday, I posted a blog that I'll revisit here because it's relevant. We should be cutting corporate welfare first because we should always try to use money wisely and more productively--and our tax dollars should be used to subsidize outlandish CEO salaries and benefits. And we can find about TWO TRILLION DOLLARS in corporate welfare before even sniffing around other areas--and even without talking about raising taxes on the rich (which we should do), enacting single-payer health care (which would save hundreds of billions of dollars and be the easiest way to shore up Medicare) and ending immoral wars.
End Big Oil and Big Gas Tax Breaks
2011-2015 savings: $80 billion (Taxpayers for Common Sense).
Big Oil has made almost $855 billion in profits in the past decade. There is no need to give such a profitable industry a tax break.
End Deferral of Taxes on Income of U.S.-Controlled Corporations Abroad
2011-2015 savings: $199 billion (Citizens for Tax Justice estimate).
Encourages off-shoring of work and capital.
End Accelerated Depreciation on Equipment
2011-2015 savings: $141 billion (CTJ estimate).
Accelerated depreciation can result in a very low, or even negative, tax rate on profits from a particular investment.
End Deduction for Domestic Manufacturing
2011-2015 savings: $76.7 billion (CTJ estimate).
Provides virtually no benefit to the economy and is blatant corporate welfare.
End Last-In, First-Out Accounting (LIFO)
2011-2015 savings: $24.2 billion (CTJ estimate).
Corporations use LIFO to hide their true profits.
Cut Subsidies to Big Agribusiness
2011-2020 savings: $52 billion (Taxpayers for Common Sense).
Small farms are disappearing while big agri-business racks up huge profits—with corporate welfare support.
Permit Government to Negotiate Drug Prices for Medicare.
Savings 2012-2021: $157.9 billion. (Congressional Progressive Caucus).
Barring government involvement is an indirect corporate subsidy.
End Tax Breaks For Drug Companies.
2011-2020 savings: $50 billion (estimated based on figures from Rep. Jerrold Nadler).
Stops a $5 billion-a year annual tax break for direct-to-consumer advertising. We should pay for drug companies to market to us?
Enact A Financial Crisis Responsibility Fee.
2012-2021 Savings: $70.9 billion (Congressional Progressive Caucus).
Imposed on largest banks as a repayment of corporate welfare extended via bank bailouts for financial crisis precipitated by banks.
Enact a Derivatives and Speculation Tax.
2012-2022 savings: $650 billion (Congressional Progressive Caucus).
Wall Street receives indirect corporate welfare/subsidies via a regulatory system and infrastructure investment for which it pays virtually nothing. A very tiny transactions tax will end the corporate welfare.
Cut Military Budget
2011-2020 Savings: $550 billion (Sustainable Defense Task Force).
According to the Task Force, weapons research, development, and procurement activities…“now routinely cost taxpayers over $200 billion a year. Procurement costs are up 110% in real terms since 2000. Setting aside war-related expenditures, DoD “peacetime” spending on research, development, and procurement has increased 75% in real terms.” This focuses only on the Task Force’s cuts that reasonably have a “corporate welfare” component, primarily weapons systems that don’t work and/or aren’t needed to fight an enemy that does not exist.