The economy seems to be heading either into another recession of a lost decade such as Japan experienced. President Barack Obama is about to ask Congress for new stimulus, which involves spending.
The problem is that in 2010, the voters gave the Republicans control of economic policy--they got control of the House and a even stronger veto in the Senate. In 2011, the Republicans repeatedly exercised their power to prevent job creation and cut programs that help ordinary people. By preventing growth, they will almost guarantee winning the presidency in 2012.
Obama needs to remind the voters that the Republicans are now in the driver's seat. If the economy is in trouble, it is because the Republicans blocked positive action.
If the president is to get any new stimulus spending, it will come in return for painful cuts in programs that help ordinary folks. Under the debt ceiling compromise, only 2% more can be cut from Medicare, so look for huge cuts in Medicaid and Social Security.
Obama should be proposing ways to raise revenue by closing tax loopholes and rooting out tax fraud. In 2003, the gap between taxes owed and txes collected was $200 billion--not chump change.
Raising revenue by taxing the rich will not pass. Besides, the so-called "millionaire taxes" in Maryland and New York prompted the rich to leave those states and/or simply go on strike, even though that was contrary to their economic interests. A VAT structured to help exports and reduce the income tax is the long-term option, but the public will require a great deal of preparation. It might not become law without Republican sponsorship plus huge tax benefits for the rich.
Obama's best move is to note that tens of billions--really much more-- are lost through tax fraud carried out by corporations and people at the top of society.
Here are some ideas for rooting out fraud. Even honest Tea Baggers might accept some if they are the populists they claim to be. It could well be that very few of them are honest or open to new ideas.
1. Revise the rules governing charitable trusts to prevent any part of donated assets from reverting to the estates of deceased donors. Don't let charities be partners in fraud.
2. Repeal legislation shielding foreign corporate earnings from U.S. taxation.
3, Repeal legislation enabling U.S. corporations to move intellectual property to foreign subsidiaries.
4. Make it illegal for U.S. entities to deduct as operating expenses payments to their foreign subsidiaries for the use of intellectual property. Likewise, make it illegal to deduct the expense of moving jobs overseas.
5. Make it illegal for those involved in corporate law or accounting to be structured as "limited-liability" partnerships and corporations. Those arrangements encourage people to close their eyes to fraud and law-breaking.
6. Repeal the 1997 law that prohibited the IRS from looking for tax evasion among people whose lifestyles were inconsistent with the income they claimed. Al Capone would never have been nailed if our present procedures existed in his day.
7. Require every company and corporation to annually file in a public document how much each of its executives gets in deferred compensation.
8. Repeal the rule that allows the recipient of a free plane ride to count it as a coach seat on a commercial airliner. Count it as a seat on a commercial Lear jet.
9. Repeal provisions of the Alternative Minimum Tax that are triggered by the number of human tax exemptions someone claims.
10. Rewrite the 1998 law that makes available many techniques to derail an audit by filing charges against the auditor.
11. Require audits of business arrangements in which a company, partnership, or corporation has a tax-exempt parrtner to whom half or more of profits are assigned.
12. Repeal laws preventing the IRS to monitor credit card numbers. Right now, people with money parked in foreign tax havens draw down their accounts through credit cards. It caqnnot be traced.
13. Today, accounting firms and others sell tax dodges to individuals and people. Individuals pay to hear the pitch. If they buy, they sign a confidentiality agreement, and they also get documentation written by accountants and lawyers explaining why their tax dodges might be legal. Require all such documents--"opinion letters"-- be turned over to the IRS for vetting. Prohibit the IRS from forgiving penalties in cases where the tax dodger had this documentation and did not give it to the IRS.
14. Make it impossible for owners of securities to separate ownership from control of such securities. There should be no distinction betwen legal ownership of securities and economic control of them. Couple that reform to legislation requiring all transactions involved in tax situations be matters of reql econ9omic substance and consequence.
15. Phase out legislation that permits companies and individuals from counting foreign taxes as if they were paid the U.S, government. A partial exception might be permitted when foreign taxes were reqlly payments for natural resources.
16. Prohibit the use of the US military, law enforcement agencies, and courts from protecting the assets of corporations who have moved their headquarter from the United States to a foreign land. If a Bermuda-based US corporation gets into trouble, let Bermuda protect it.
17. Repudiate tax treaties with tax shelter nations that can be used by corporations and invididuals to avoid US taxes.
18. Eliminate the tax law provision that permit corporations to push onto shareholders, through recognized capital gains, the tax obligation of the exit tax.
19. Prohibit American subsidiaries of corporations of firms with mail box headquarters abroad from obtaining any US government contracted.
20. Repeal the tax law provisions that permit employers to count future Social SEcurity benefits as though those funds were being paid to the retired employee by the employer as a pension benefit.
21. Restore the number of IRS auditors to the number of auditors per 100,000 citizens in 1988. Earmark half a percent of money recovered from new audits for hiring of new auditors or consultant fees for experts who unearth new tax dodges.
All of this requires thinking beyond simple bumper sticker slogans. These measures deal with how people and coprorations at the top of society shift tax buirdens to ordinary ordinary people. It will take time to get ordinary folks to ponder such matters. But until they do, progressives will usually go down the tubes in elections dominated by misinformation and hot button issues.
This is a matter of simple justice. It makes as much sense as going after the annual $70 billion in Medicare fraud before cutting recipient benefits. Feww talk about this either. Indeed, the voters of Florida elected a governor who was found to be ripping off Medicare. So many voters are pathetic. But we must educate the rest.
Our political system depends on having educated voters. Now we are in a serious crisis, and many voters will believe any claim against an African-American president.
Stamp out the fraud as a means of raising revenue and easing the pain that ordinary folks are going to exeprience as a result of any deal that Congress makes with the president.
If the fraud is not eliminated, it can truly be said that some of the cuts the Republicans want are intended to replace revenue lost to fraud.