Opinion

David Cay Johnston

America’s long slope down

David Cay Johnston
Jun 20, 2012 19:18 UTC

A broad swath of official economic data shows that America and its people are in much worse shape than when we paid higher taxes, higher interest rates and made more of the manufactured goods we use.

The numbers since the turn of the millennium point to even worse times ahead if we stay the course. Let’s look at the official numbers in today’s dollars and then what can be done to change course.

First, incomes and jobs since 2000 measured per American:

Internal Revenue Service data show that average adjusted gross income fell $2,699 through 2010 or 9 percent, compared to 2000. That’s the equivalent of making it through Thanksgiving weekend and then having no income for the rest of the year.

Had average incomes just stayed at the level in 2000, Americans through 2009 would have earned $3.5 trillion more income, the equivalent of $26,000 per taxpayer over a decade. Preliminary 2010 data show a partial rebound, reducing the shortfall by a fifth to $2.8 trillion or $21,000 per taxpayer.

Wages per capita in 2010 were 4.3 percent less than in 2000, effectively reducing to 50 weeks the pay for 52 weeks of work. The median wage in 2010 fell back to the level of 1999, with half of workers grossing less than $507 a week, half more, Social Security tax data show. The bottom third, 50 million workers, averaged just $116 a week in 2010.

JP Morgan’s $2 billion experiment with truthiness

David Cay Johnston
Jun 11, 2012 19:52 UTC

JPMorgan Chase & Co blames its $2 billion, and maybe much larger, trading loss on mistakes made in hedging the market. Bill Black, a finance criminologist, calls this “hedginess.”

“Hedginess” riffs on “truthiness,” the word the comedian Stephen Colbert invented in 2005. Truthiness means favoring versions of events that one wishes to be true, and acting as if they were true, while ignoring facts to the contrary that are staring you in the face. Fake hedges are to real hedges as “truthiness” is to truth. Hence “hedginess.” JPMorgan’s trades got around the Volcker rule, which tries to prevent banks from speculating in financial derivatives, by labeling as “hedges” bets that were clearly not hedges.

As Black puts it, JPMorgan is now defining as a hedge “something that performs in exactly the opposite fashion of a hedge.” A hedge is supposed to reduce risk, but according to Black, the losses came from deals that “dramatically increased risk by placing a second bet in the same direction, which compounded the risk.”

The fortunate 400

David Cay Johnston
Jun 6, 2012 14:33 UTC

Six American families paid no federal income taxes in 2009 while making something on the order of $200 million each. This is one of many stunning revelations in new IRS data that deserves a thorough airing in this year’s election campaign.

The data, posted on the IRS website last week, brings into sharp focus the debate over whether the rich need more tax cuts (Mitt Romney and congressional Republicans) or should pay higher rates (President Obama and most Democrats).

The annual report, which the IRS typically releases with a two-year delay, covers the 400 tax returns reporting the highest incomes in 2009. These families reported an average income of $202.4 million, down for the second year as the Great Recession slashed their capital gains.

How corporate socialism destroys

David Cay Johnston
Jun 1, 2012 15:37 UTC

IRONDEQUOIT, N.Y. — A proposal to spend $250 million of taxpayer money on a retail project here illustrates the damage state and local subsidies do by taking from the many to benefit the already rich few.

Nationwide state and local subsidies for corporations totaled more than $70 billion in 2010, as calculated by Professor Kenneth Thomasof the University of Missouri-St. Louis

In a country of 311 million, that’s $900 taken on average from each family of four in 2010. There are no official figures, but this one is likely conservative because — as documented by Thomas, this column and Good Jobs First, a nonprofit taxpayer watchdog organization funded by Ford, Surdna and other major foundations — these upward redistributions of wealth keep increasing.

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