Progressive Breakfast for August 29

Morning Message

Looks Like Burger King’s Subjects Are Royally Pissed Off

Tolstoy wrote in “War and Peace” that “kings are the slaves of history.” And when the “king” in question depends on the patronage of happy customers for his well-being, his monarchy is also a slave to public opinion. Unfortunately for Burger King, which intends to renounce its American status for tax purposes, neither history nor public opinion is on its side. ... The proposed tax-dodging moves has led several groups (including the Campaign for America’s Future and Americans for Tax Fairness) to start a petition drive against Burger King. It has also led to grassroots fury, if the company’s Facebook page in any indication.

The Big Deal About the Burger King Deal

Businesses Are Winning Cat-and-Mouse Tax Game” … and the rest of us lose. New York Times: “By exploiting existing loopholes and devising new ones, some of the country’s best-known companies are making it harder than ever for the federal government to replenish its already depleted coffers. … Business taxes now make up less than 10 percent of federal revenue, and in some years as little as 6.6 percent. That is sharply down from the years after World War II, when about 30 percent of federal revenue came from corporate taxes.”

CEPR’s Eileen Appelbaum cites this danger for why Burger King’s move is a raw deal for U.S. taxpayers. “Like tech or pharmaceutical firms that collect royalties or licensing fees from companies that use their intellectual property, franchise companies collect fees from locally owned establishments that use their brand. A tax inversion makes it easier to assign this fee income to a new ‘parent’ company in Canada or another lower tax jurisdiction. In Burger King’s case, the possibility exists that the company will be able to reassign the fees from its U.S. franchises to Canada and pay no U.S. tax on this income. Other taxpayers here in the U.S. will have to shoulder the burden and make up this shortfall in tax revenue.”

“The Greater Depression?”

This is why it feels like the recession never ended. From The Washington Post Wonkblog, one chart that “shows everything you need to know about why Americans are still so down on the economy. … [From 2007,] for all but the top wage earners, real (inflation-adjusted) earnings are actually down … Let’s put it another way. Say that you’re a median wage earner, right in the 50th percentile. And let’s say that in 2007 you could buy a week’s worth of groceries for $100. Fast forward to today: those exact same groceries cost $115, but you only have $112 dollars in your pocket.”

“Boomer wealth dented by mortgages poses U.S. risk,” reports Bloomberg. “A growing number of homeowners are reaching retirement age still owing money on their houses. The share of Americans 65 and older with mortgage debt rose to 30 percent in 2011 from 22 percent in 2001, according to a May analysis by the Consumer Financial Protection Bureau based on the latest available figures. Loan balances also increased, with the median amount owed climbing to $79,000 from $43,400 after adjusting for inflation, the data showed.”

Brad DeLong asks: When Do We Start Calling This “The Greater Depression”? “We breathed our sigh of relief too soon … Between the start of 2005 and the end of 2007 U.S. real GDP grew at 3.1%/year. The recession trough in 2009 saw the U.S. real GDP level 11% lower than the 2005-2007 trend. Today it stands 16% below. … A year and a half ago, when some of us were expecting a return to whatever the path of potential output was by 2017, our guess was that the Great Recession would wind up costing the North Atlantic in lost production about 80% of one year’s output–call it $13 trillion. Today a five-year return to whatever the new normal might be looks optimistic–and even that scenario carries us to $20 trillion.”

International Monetary Fund says that to fight poverty, U.S. should increase the minimum wage. “Senior IMF economist Deniz Igan argued in a report posted on the IMF website that a combination of a higher minimum wage and an increase in a key tax benefit could go far to help lift people out of poverty. “Unless the economic benefits of an improving economy are felt more widely, this recovery may well prove neither economically nor socially sustainable.”

Continuing struggles for working-class families in California has some turning to gold prospecting. BBC: “Brooklyn-based photographer Sarina Finkelstein learned that people, often in dire economic straights, were moving into the western wilds in an attempt to make their way as gold miners, just like the “Forty-Niners” of the original Gold Rush of 1849.”

MSNBC “Labor Day By the Numbers” chart offers key numbers on the state of working America.

Pennsylvania, White House Agree on Medicaid Privatization

Feds approve Pennsylvania Gov. Corbett’s Medicaid expansion proposal.
Philadelphia Inquirer: “In what was described as a five-year demonstration project, Pennsylvania got the go-ahead to use federal money to pay private insurers to provide health care to uninsured individuals – many in low-wage jobs.”

“Political Animal” Ed Kilgore says don’t make too much of this. ” Yes, it’s becoming the CW that Republicans have shifted their attention away from a monomanical focus on Obamacare lately because it’s no longer a big political winner. But that doesn’t mean they won’t savagely fight efforts—especially from within their own party—to promote Obamacare implementation and expand a Medicaid program many of them would like to gut.”

Obamacare’s latest threat nears a turning point in court. “A disputed provision in the Affordable Care Act suggests that millions of Americans can’t get the tax subsidies created by the law to reduce the cost of health insurance. All sides are now waiting for a federal appeals court in Washington to make a procedural decision that will have outsize implications. The announcement could come any time.”

Obamacare premiums dropping in Arkansas, messing up a GOP attack line. Joan McCarter at Daily Kos: “Perhaps Rep. Tom Cotton would care to revise his statement about how Obamacare “drove up the cost of […] health insurance premiums.” Cotton, running for the Senate in Arkansas, has been trying to justify his opposition to the law and his dozens of votes for repeal. But, guess what has happened to premiums in that state. ‘Insurance companies have proposed a net reduction in premiums of 2 percent next year for the Arkansas Health Insurance Marketplace, the health insurance exchange created by the Affordable Care Act.’”

Breakfast Sides

Conservative extremism making progressive Rep. Maxine Waters look reasonable to business lobbyists, says Politico. “Waters is executing this transformation by seizing on the growing divide between conservative Republicans and Big Business and leveraging her position as the top Democrat on the House Financial Services Committee, where in the coming weeks she will play a role in the battles over extending a terrorism insurance program and the Export-Import Bank. A large part of her strategy has been to seek out opportunities to play the yin to committee Chairman Jeb Hensarling’s yang. When the Texas Republican’s free-market agenda has led him to oppose government programs the business community supports, Waters has been ready to jump in and deal.”

The Nation publishes a special edition on racial justice, focusing on the “new vanguard” of equality activists. From The Nation’s editorial: “Young black organizers are laying the groundwork for a new grassroots movement for racial equality, focused on the critical issues facing African-Americans today: not just police brutality but mass incarceration, unemployment, voting rights, educational disparities and more. As the fiftieth anniversary of many of the civil-rights movement’s proudest accomplishments passes, these activists are registering voters, delivering petitions, drafting legislation—and creating community.”