Saturday, March 10, 2012

Now in Power: 1960s Radicals‏

Alumni from radical 1960s groups are now teaching your children, influencing legislation and trying to re-elect Obama

Buildings were bombed, bras burned and raising two fingers in a “V” became a symbol for peace, not a signal for ordering two. Henry Mancini’s “Moon River” won the Grammy in 1961, but the Fifth Dimension’s win for “Aquarius” in 1969 was symbolic of the decade of tumult that birthed Students for a Democratic Society and its offshoot Weathermen.

But unlike tie-dye shirts and platform shoes, the Marxist or Maoist or socialist SDS politics never went dormant. Former leaders of the original SDS and also its splinter Weatherman group—labeled “a domestic terrorist group” by the FBI—are installed in academia, organized labor, advocacy organizations and in the highest levels of the Obama administration.

In fact, the '60s college-campus political phenomenon seeded today’s new Left. Now the “repackaged” people and policies of the original SDS/Weathermen have been quietly injected into the mainstream by academia, labor unions, advocacy organizations and private enterprise, waiting for a political host. Have they found it under the Obama administration?

President Barack Obama may characterize 1960s Weatherman radical Bill Ayres as just a man he knows from Chicago’s Hyde Park. But what about Rev. Jim Wallis, Obama’s spiritual advisor and a SDS alumni? Surely Obama knew Wade Rathke, head of ACORN where Obama was employed, was an SDSer. How about SDS founder Tom Hayden, once married to Vietnam War opponent Jane Fonda? Obama must have known Hayden had been a big SDS name when Hayden founded Progressives for Obama in 2008. Was Obama unaware of Michael Klonsky’s radical SDS allegiance when Klonsky’s education blog was featured on Obama’s 2008 campaign website? Someone eventually did. Klonsky’s posts were later “scrubbed” from the website, as reported on the blog Gateway Pundit. Or take Marilyn Katz, a SDSer who once touted using “guerrilla nails” to attack police and also helped organize a 2002 anti-war rally where she takes credit for Obama “coming out … as a public speaker,” reports In These Times. Katz, a 30-year friend of Obama strategist David Axelrod, was on Obama’s 2008 national finance committee and was a fundraising “bundler,” according to Obama’s campaign website.

And the moneyman for much of the complicated network is George Soros. There’s no evidence that the wealthy financial speculator was himself an SDS member. But Soros’ espoused Marxist, one-world vision fits the SDS theology that’s aged with the 20-something radicals now portrayed as 60-something mainstream figures.

Students for a Democratic Society was born in Michigan, the offspring of the League for Industrial Democracy, a socialist educational organization. In 1960, a handful of University of Michigan students bonded over views of war, the nuclear threat, racial discrimination and economic inequality; they rejected mainstream opposition to communism. In 1962, the group’s Port Huron Statement advocated national defense based on deterrence and arms control rather than “peace through strength.” It demanded the Democratic Party embrace the issues of “disinherited” groups and universities advance social change by inserting social issues into the curriculum. SDS supported North Vietnam, the Palestinians and Colombians. It opposed “male supremacy,” calling for no legal or financial restrictions on abortion and birth control and demanding “day-care centers, public and free laundries, food centers and other facilities necessary to free women from their status as household drudges.”

“You don’t need a weatherman to know which way the wind blows,” lyrics from a song that came to be associated with the Weathermen, signaled that a more radical splinter group was forming out of the SDS with Weather Underground members, Maoists, Marxists, the Worker Student Alliance and some Black Panthers. Mainline SDS faded in the 1970s and the Weathermen went underground as members sought to avoid prosecution for acts of terrorism. But their acceptance of communism or socialism economic redistribution and the use of academia to prime the social, economic and political pumps were nurtured in the intervening decades.

Many names from the golden age of SDS never disappeared. Instead, in the Obama administration, it seems everything old is new again.

Excerpt from March issue of Townhall magazine received by email


American taxes deliver results that Communists would envy

Note: There is no double taxation of company dividends in Australia, which is why Australian companies generally pay substantial dividends twice a year

The communist revolutions in the 20th century sought to nationalize the wealth generated by privately held industries back to the "exploited" workers on whose backs the profits were supposedly derived. America has made the rejection of this idea and its support of free market principles the centerpiece of its economic narrative. However, as a result of our current and proposed tax policies towards corporate shareholders, our government collects a portion of industrial output that would inspire envy in even the most rabid Bolshevik.

The purpose of a corporation is to generate profits for owners (all other functions are secondary to this goal). Public corporations distribute these profits through dividends. But as a result of America's system of double taxation, where income is taxed on the corporate level and then again on the personal level, government receives a much bigger share of corporate income than the owners themselves. I also address this topic in my latest video blog .

Suppose a publicly held U.S. corporation made one million dollars in income over the course of a year. Currently its profits would be taxed at a 35% level (for the purpose of this example I will not factor in the lower rate that is applied to its first $100K of profits), meaning that the company would have to pay $350,000 directly to the government (assuming it earned its income without special tax breaks). Of the $650,000 that remained, the typical dividend-paying corporation might distribute 40 percent to shareholders (this is known as the "payout ratio" and the actual average is slightly below 40%). So in this instance the company would pay $260,000 (40% of $650,000) to shareholders. The remaining $390,000 would typically be held as "retained earnings," and would be used to maintain and replace depreciating equipment, make capital investments, fund research and development, and expand operations. If the company did not make such investments it would be impossible for it to survive and its ability to perpetuate profit distributions would be limited.

These retained earnings still represent assets to shareholders, but their primary purpose is to generate future profits and higher dividends. However, shareholders do not directly benefit from those retained earnings until future distributions are paid. Sure they can sell their shares at a gain, paying a capital gains tax in the process, but this merely transfers those deferred benefits to the new buyer.

When received by shareholders, the $260,000 in dividends are taxed again at a rate of 15 percent (according to current law). As a result, shareholders receive just $221,000 of the million dollar profit. The $39,000 in dividend taxes are added to the $350,000 "off the top" corporate tax to bring the government's total take of the company's profits to just a shade under $390,000. In other words the government gets about 75% more cash flow from the company than the actual owners. Looked at in a slightly different way, the government gets about 65% of the non-retained earnings while shareholders, who put up the money and take all the risk, get 35%. Does this seem fair?

This level of taxation puts American corporations at a noticeable disadvantage vis-a-vis companies in the countries against which we are most keenly competing. In China, the slicing of the pie is much more favorable to owners. There, corporations are taxed at a rate of 25% and dividends at 10%. Using these numbers (and the same payout ratio used for the U.S. corporation), the Chinese government gets 51% of distributed corporate profits and shareholders get 49%. In Hong Kong (which is part of Communist China), the situation is even better. There, the corporate tax rate is 16% and the personal dividend rate is zero. If you do the math there, the government gets 33% and the shareholders get 67%.

This comparison raises an interesting point. If shareholders in communist China are allowed to keep more of their earnings than shareholders in capitalist America, which nation is more communist and which more capitalist?

Late last month the Obama Administration and Mitt Romney offered competing proposals on corporate tax reform that both politicians say would make U.S. corporations more competitive. Romney's plan lowers the corporate tax rate to 25% while maintaining the dividend tax at 15%. This makes things slightly better, sending 54% of distributed earnings to the government and 46% to shareholders (not quite as generous as Communist China). Not surprisingly however the Obama plan will make things much more difficult.

Although the President proposes lowering the corporate tax rate to 28% he also wants to scrap the dividend tax and instead tax the distributions as ordinary income. In practice, the vast majority of individual recipients of dividends fall into the higher end of the income spectrum. Which means a very large chunk of these dividends will be taxed at the highest personal rate of 39%. But Obama also wants to subject these high earners to a surtax to pay for his health care initiative, which means that many of the recipients will be taxed at a rate of 44% (this also accounts for the phase out of personal deductions for higher earners!) So for these high-income earners, using our current example, the new distribution split with the government under Obama's proposals will be about 70/30 in favor of the government. This is actually worse than the status quo.

But it's actually much worse than that. The corporate income tax is just one of the veins that corporations open for government. Think about all the other taxes that corporations pay, such as the payroll taxes and sales taxes. Sure they pass those taxes on to their employees and customers, but the revenue flows 100% to the government with shareholders getting nothing but a bill for the cost of collection.

Then there are all of the taxes paid directly by the employees themselves on their wages and salaries. Sure, this money belongs to employees and not shareholders, but if not for the profit-making activities of corporations, those wages and salaries, and resulting taxes, could not have been paid. And while employees derive benefits from those after tax distributions too, shareholders get nothing. When all of these channels are factored in, think about how much more the government derives in taxes from corporate activity than its owners receive in dividends. Who knows how high this figure is, but I'm sure the government's take is many multiples of what shareholders receive.

Back in the 19th Century, America really was a capitalist country. We had no corporate tax and no personal income tax. Shareholders got 100% of distributed corporate income. As a result of this structure, U.S. corporations grew rapidly and helped spark the fastest economic expansion the world had ever seen. But that was then, this is now.

Given the current numbers, even if our leaders were dyed-in-the-wool Marxists, what would be their motivation to nationalize Fortune 500 companies? If they already receive the lion's share of profit distributions, what would be the point? Such a move risks upsetting the management structures and destroying the remaining profit motive. It would risk killing the goose that lays the golden egg. If government nationalized a company, it would also have to manage it. Does anyone think bureaucrats would make better decisions than private owners? What's worse, if those decisions produced losses rather than profits, the government would have to absorb them. Under the current systems, the government gets the lion's share of the profits, but private shareholders are stuck with 100% of the losses.

There is actually a name for our present system: fascism. While fascism and communism are both forms of socialism, at least the fascists are smart enough to know that if the means of production are nationalized, employees and owners won't work as hard, and the government will lose revenue.

It's a shame that the country that was once the beacon of freedom and economic liberty no longer has the ability to recognize what capitalism actually looks like. Unless corporate owners are appropriately rewarded for their risks, U.S. corporations will not regain their lost dominance, Americans will not regain their lost liberty, and our standard of living will continue to fall. As it stands now, the United States has become a people of the government, by the government and, most importantly, for the government.



Senators Paul, Lee and DeMint Introduce Plan to Balance Budget in 5 Years--Eliminate Departments of Education, Energy, Housing, Commerce

This would be an excellent start in the right direction

Senators Rand Paul (R-Ky.), Mike Lee (R.-Utah) and Jim DeMint (R.-S.C.) introduced a budget plan on Thursday that would balance the budget in five years and pay down $2 trillion of the national debt in 10 years. The plan includes spending cuts, entitlement reforms and tax reforms.

Paul said that the “Platform to Revitalize America” is the only plan consistent with the balanced budget amendment Republican advanced in the U.S. Senate because that amendment requires that Congress balance the budget in five years.

The plan eliminates the Department of Commerce, the Department of Education, Department of Housing and Urban Development and the Department of Energy. “By eliminating departments we don’t have to make as significant of cuts in other areas,” Paul said.

“So entitlement reform could be more gradual because we eliminate some departments that we think should be done by the states and the localities,” he continued.

Other comprehensive steps to scale back the size of the federal government include selling off excess federal properties and land and defunding duplicative agencies.

On the regulatory side, the plan eliminates the president’s health care law and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

On the energy side, besides eliminating the Department of Energy, the plan proposes to open the Arctic National Wildlife Refuge for oil and gas exploration and permits the Keystone XL Pipeline project.

Tax reform includes a 17 percent flat tax for individuals and corporations. “We think if the country would pass a flat tax like this that would eliminate a lot of the loopholes and special interest that lowers the rate for everybody, we think you’d see an economic boom in this country like you’ve never seen before,” Paul said.

Through the Congressional Health Care for Seniors Act, Medicare reform will allow seniors to receive the Congressional Health Care plan. Social Security reform is achieved through increasing the retirement age and means-testing the benefits.

It also allows defense spending to rise at a rate faster than increases under the current sequester and eliminates the fiscal year 2013 sequester cuts.

“So there have been some saying they want to avoid the Budget Control Act and the sequester on military spending,” Paul said. “I have said that is a bad idea unless we find savings elsewhere, but in our budget we find savings elsewhere and still allow spending to rise above the sequester,” he continued.

The bill is co-sponsored by Sen. Mike Lee (R-Utah) and Sen. Jim Demint (R-S.C.).

Paul said that they have been talking to House members about his budget plan and will try to get it introduced in the House. “It’s easier to get a vote in the Senate, so we’ll probably get a vote in the Senate. I don’t know if they will in the House,” Paul said.

DeMint said that they need to emphasize what he thinks a lot of their colleagues are missing: “a genuine and very real sense of urgency that our country is in very deep financial trouble and well on the way to look like Greece in a few years.”

DeMint said that any member of Congress who thinks the debt is unsustainable must look at balancing the budget within 10 years. “What we are going to wait to see is how many members of Congress have the courage of their convictions,” Demint said.




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