Progressive Breakfast for July 22

Morning Message

Corporate Tax Deferral, Inversions And The Destructive Result

This destruction of the economic infrastructure is the result of anti-government, anti-tax sentiment that leads to a revenue shortfall, which leads to deferred maintenance, which leads to bad schools, which leads to economic destruction. It costs us all – except the few gazillionaires driving these policies for their own benefit ... A lot of the loss of revenue to We the People comes as a result of corporate tax scams. Two of these are “deferrals” and “inversions.”...

Perry Pulls National Guard Stunt

TX Gov. Rick Perry sends National Guard to border. Bloomberg: “The 1,000 Texas National Guard troops Governor Rick Perry will send to the Mexican border will augment almost 10,000 federal agents already there, part of an unprecedented buildup guarding a line with more physical obstacles than ever … Omar Lucio, the Democratic sheriff of Cameron County, at the southern tip of Texas, said the governor is misguided. ‘We’re not at war with Mexico,’ he said. ‘We’re their neighbor. These kids coming across are not criminals.’ … It’s not clear what role the Texas guard will play … They won’t be part of any humanitarian mission…”

“We should be sending the Red Cross to the border not the National Guard” says Rep. Joaquín Castro to Politico.

“White House says number of children crossing the border is dropping” reports The Hill: “While an average of 355 unaccompanied children crossed the Rio Grande every day in June, an average of 150 migrant children per day were apprehended crossing the border over the first two weeks of July, White House press secretary Josh Earnest said.”

“Time runs short for border bill.” The Hill: “Both the House and Senate are set to recess for their five-week August break on July 31, and Democrats and Republicans remain far apart on the content and price tag of President Obama’s $3.7 billion request … some Republicans have said they would take the political fall if Congress can’t agree on a measure. ‘If we do that, then we’re going to get blamed for perpetuating the problem,’ Sen. Lindsey Graham (R-S.C.) said earlier this month.”

Hedge Fund Tax Evasion Exposed

Senate committee report exposes hedge fund tax dodge. Bloomberg: “A Renaissance Technologies LLC hedge fund’s investors probably avoided more than $6 billion in U.S. income taxes over 14 years through transactions with Barclays Plc and Deutsche Bank AG, a Senate committee said. The hedge fund used contracts with the banks to establish the ‘fiction’ that it wasn’t the owner of thousands of stocks traded each day … The maneuver sought to transform profits from rapid trading into long-term capital gains taxed at a lower rate … The panel urged the Internal Revenue Service to collect taxes from the fund’s investors at the higher rate that Americans pay on wages and salaries. It said Congress should remove legal obstacles to audits of hedge funds and other large partnerships…”

Congress fights over Dodd-Frank impact. The Hill: “Republicans on the House Financial Services Committee commemorated the anniversary of the financial overhaul by releasing a nearly 100-page report detailing what they said are its shortcomings. Committee Democrats fired back with a report of their own, highlighting the work regulators have done and their impact on the marketplace … many of the largest pieces of the landmark law have fallen into place. Regulators have completed work on several of the law’s most significant, and most contentious pieces, such as the ‘Volcker Rule’ … But plenty of work remains. The law firm Davis Polk determined that as of the law’s four-year anniversary, just over half of all 398 of the required rulemakings have been finalized, with nearly a quarter not yet proposed.”

“Credit Suisse Posts Largest Loss Since 2008 After U.S. Fine” reports NYT.

Fed Hopeful On Long-Term Jobless

Fed optimistic on reducing long-term unemployment. Bloomberg: “The Fed board economists, in a post on the central bank’s website, cited a shrinking proportion of people unemployed for more than six months, greater stability in the labor-force participation rate and an increase in the ratio of employment to population … Fed researchers said the drop in long-term jobless since December accounts for almost the entire decline in the unemployment rate during the period.”

Fed chair Yellen working to pop bubbles, notes Dean Baker: “Federal Reserve Board Chair Janet Yellen made waves in her Congressional testimony last week when she argued that social media and biotech stocks were over-valued. She also said that the price of junk bonds was out of line with historic experience. By making these assertions in a highly visible public forum, Yellen was using the power of the Fed’s megaphone to stem the growth of incipient bubbles. This is an approach that some of us have advocated for close to twenty years.”

Big Support For Carbon Tax

“60% back carbon tax if used for renewables” reports USA Today: “Only a third, or 34%, say they support taxing fuels such as oil, coal and natural gas that emit heat-trapping carbon dioxide when burned … Yet a different picture emerges when survey participants are asked about three possible uses of the tax revenue. If used to fund programs for renewable power like solar and wind, 60% back the tax overall, including 51% of Republicans, 54% of Independents and 70% of Democrats. A smaller majority supports a tax if the revenue is returned to them via a rebate check. While 56% overall favor this idea, support ranges from 43% for Republicans to 52% for Independents and 65% for Democrats. The third option — using the tax revenue to reduce the massive U.S. fiscal deficit — is not popular with any political group.”

Bloomberg’s Christopher Flavelle analyses: “…the challenge remains convincing voters why a carbon tax is worthwhile even though energy costs increase. Optimists will say that’s just a marketing problem; maybe they’re right. But this latest survey suggests that, at a minimum, the policy most likely to gain support, even in the face of opposition to higher energy costs, isn’t necessarily the one that puts money back in people’s pockets. And maybe Republicans aren’t as averse to government spending as everyone thought.”

Saskatchewan plant poised to advance carbon capture technology. NYT: “…this fall, a gleaming new maze of pipes and tanks — topped with what looks like the Tin Man’s hat — will suck up 90 percent of the carbon dioxide from one of the boilers so it can be shipped out for burial, deep underground … If all goes as planned, the effort in Saskatchewan will be the first major one of its kind at a power plant, the equivalent of taking about 250,000 cars off the road.”