David Cay Johnston http://blogs.reuters.com/david-cay-johnston Fri, 14 Sep 2012 15:36:34 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.5 A gamble down on the boardwalk http://blogs.reuters.com/david-cay-johnston/2012/09/14/a-gamble-down-on-the-boardwalk/ http://blogs.reuters.com/david-cay-johnston/2012/09/14/a-gamble-down-on-the-boardwalk/#comments Fri, 14 Sep 2012 15:34:04 +0000 http://blogs.reuters.com/david-cay-johnston/?p=421

ATLANTIC CITY–Americans who think more legalized gambling can ease their state and local tax burdens should take a close look at the travails of this struggling New Jersey seaside resort.

Because betting is now legal in neighboring states, gambling here is way down. The casino hotels have slashed their workforces, cut real wages and, citing falling property values, received huge property tax refunds — with more refunds likely.

The city has sold $103 million of bonds to finance casino property tax refunds, bonds that with interest will cost the average homeowner more than $2,100 over the next two decades, Michael Stinson, the city finance director, said.

The city is about to sell another $35 million in bonds, while the Press of Atlantic City reports that $40 million more may have to be borrowed next year. If all that happens the average homeowner eventually may be out more than $3,600 in added taxes.

That may well understate the added costs to local taxpayers in the next few years as the gambling business is likely to shrink even more, as Mayor Lorenzo Langford told me. Each time another casino opens in nearby states, “the Atlantic City market should expect to see some lost business,” Mayor Langford said, and “one or more of the weaker casinos may close.”

‘IN TROUBLE’

Two temples of chance are gone already. The Sands was swept away in 2006 by the winds of change, while another casino once named the Atlantis sank, like its mythic namesake, beneath a sea of red ink in 1999.

“Atlantic City is in trouble, and I don’t see any way out, even if they get sports betting and Internet” gambling, I. Nelson Rose, the Whittier College of Law gambling expert, told me.

Everyone I spoke to during four visits this summer expects a big casino in the New Jersey Meadowlands in a few years, which I believe would add to pressure to bring casinos to Manhattan. Both are historically big markets for Atlantic City.

Gamblers lost $3.3 billion in Atlantic City last year, down 39 percent from the more than $5.4 billion (in 2011 dollars) that players lost in 1996, according to the Center for Gaming Research at the University of Nevada, Las Vegas.

Because it has a national convention business, Las Vegas has fared better than Atlantic City. Player losses in Las Vegas grew 8 percent in real terms between 1996 and 2011, the center says.

Between 2001 and 2011 the number of Atlantic City casino hotel jobs fell by 30 percent, according to the Bureau of Labor Statistics. Of 27,700 casino hotel jobs lost nationwide during that period, almost half, 13,300, vanished in Atlantic City.

Casino hotel worker wages fell nearly $4,300 in real dollars, a painful 11 percent decline in a one-industry town, the data show.

A FUTURE IN DIVERSITY

Industry and city officials, many of whom I know from the four years I reported on the gambling industry, put a brave face on the future. They said the future lies in diversifying, in relying less on slots and table games than a combination of retail outlets (more than 100 already operate here), fine dining, nightclubs and the beach.

They pointed to a new model for the future: Atlantic City Revel, designed as a spa and resort that includes a casino rather than a gambling hall with hotel rooms. It is the first new casino here in a decade.

With its wavy blue glass exterior, Revel, is the first property to embrace the sea as a theme.

Kevin DeSanctis, a former New Jersey state trooper and an experienced casino executive who runs the joint, said the aim was to draw people to Atlantic City for more than gambling.

What do people do after a night of gambling? Revel’s answer: fancy dining, the beach, a nightclub, a burlesque stage and pop music acts like The Eagles.

Morgan Stanley, one of the too big to fail banks, owned a 90 percent stake in Revel, expanding its own betting beyond credit derivatives to casino games. While derivative bets can sour, with taxpayers forced to cover the bad bets, a casino itself is a sure bet for the owner. The only games legalized come with odds favoring the house, meaning that overall players must be losers.

Two years ago, rather than double down on its $932 million bet, Morgan Stanley folded, losing its stake in Revel. DeSanctis took over, but he had to raise $1.5 billion more just to get the doors open.

So far the Revel resort is not bringing in enough money to pay its mortgage. Since opening April 2 it has lost more than $35 million. DeSanctis is arranging a $100 million credit line to get through the cold months.

Moody’s lowered the credit ratings on Revel debt, suggesting those who bought its bond may also have made a bad bet on this new model for Atlantic City.

All these facts should prompt taxpayers to think carefully about embracing more gambling as a way to ease their tax burdens.

The liberties of the people, and all private wealth, depend on stable government that defines and protects rights and property alike. So why would we roll the dice on financing the foundation of our society?

PHOTO: The boardwalk at Atlantic City, New Jersey, is seen empty of vacationers August 26, 2011. Hurricane Irene is expected to hit the U.S. East Coast over the weekend.     REUTERS/Jason Reed 

]]>
http://blogs.reuters.com/david-cay-johnston/2012/09/14/a-gamble-down-on-the-boardwalk/feed/ 4
A tale of two healthcare plans http://blogs.reuters.com/david-cay-johnston/2012/09/11/a-tale-of-two-healthcare-plans/ http://blogs.reuters.com/david-cay-johnston/2012/09/11/a-tale-of-two-healthcare-plans/#comments Tue, 11 Sep 2012 14:53:35 +0000 http://blogs.reuters.com/david-cay-johnston/?p=415 No issue affecting taxes so clearly divides the two parties in the U.S. election as healthcare. The two parties, in their platforms, describe very different approaches to healthcare economics. Both use political plastic surgery to cover up ugly truths.

The stakes are huge. Americans spend $2.64 per person for healthcare for each purchasing power equivalent dollar spent by the 33 other countries that make up the Organization for Economic Cooperation and Development. The OECD data shows the U.S. spends $8,233 per capita compared with an average of $3,118 in the other 33 countries.

A growing share of federal tax dollars, in direct spending and in tax breaks, is going to U.S. healthcare as the population ages, even though about one in six Americans lacks health insurance.

America‘s healthcare system, more accurately described as a non-system sick care system, totaled 17.6 percent of the economy in 2010, compared to an average of 9.2 percent in the other 33 countries, as the OECD data shows.

In the United States, total public and private cost of healthcare is significantly greater than the total of corporate and individual income taxes, as well as payroll taxes. For each dollar paid in all three of those taxes in 2010, healthcare came to $1.29.

If we just lowered our costs to those of France, which has universal care in what is widely regarded as one of the best systems if not the best, it would save almost as much money as Americans paid in individual income taxes in 2010. The French spend 6 percentage points less of their economy on healthcare. In the United States, the individual income tax in 2010 came to 6.3 percent of the U. S. economy, the lowest since Truman was president.

Take a look at your pay stub to get an idea of the kind of money being spent on a system that fosters bankruptcy, bedevils small business and ranks 31st among the 34 OECD countries in preventing premature death.

REPUBLICAN PLAN

The Republicans say the federal government is “structurally and financially broken” and that “three programs – Medicare, Medicaid, and Social Security – account for over 40 percent of total spending,” which is “harming job creation and growth, (while) projections of future spending growth are nothing short of catastrophic, both economically and socially.”

The Republicans promise to “empower millions of seniors to control their personal healthcare decisions,” a vow immediately followed by a promise to cut federal spending.

The clearest explanation of what that would mean comes from Representative Paul Ryan, the Republican vice presidential nominee. Before he started obfuscating, Ryan laid out his plans in detail. He boasted that by changing Medicare from a plan that provides treatment for every older American into one that gives seniors a fixed sum to buy their own health insurance, taxpayers would save through 2084 the present equivalent of $4.9 trillion.

What Ryan did not mention is that his plan would also mean $8 of increased private spending by seniors and the disabled for each tax dollar saved.

We know how Ryan’s plan would raise total costs because David Rosnick and Dean Baker, economists at the Center for Economic Policy and Research which promotes government policies that it says would benefit workers and the poor, used the same formula that Ryan (or his staff) applied to the same Congressional Budget Office data, but on private medical care spending. Ryan’s spokesman did not respond to requests for comment.

Beyond the fact that it makes no sense to spend $8 to save $1, older people do not have the money. A tenth of Americans age 75 and older live below the official poverty line. Another 24 percent have only saved a tad more.

Every indicator shows that Americans have not enough for their old age and that a shrinking number have pensions while the Republicans now in charge of the party want to cut Social Security benefits, if not kill the program.

So why would any Americans under age 55, whose healthcare benefits Ryan wants to cut when they reach 65, think they can afford to spend $8 to save $1? Recently Ryan has softened his plan to let those who wish stay in traditional Medicare. Since anyone not rich who can count would stick with Medicare, Ryan’s promised taxpayer savings would never materialize.

Alan Grayson, the combative one-term Democratic representative from Florida, got it right when he said on the House floor in 2009: “The Republican plan – don’t get sick and if you do get sick die quickly.”

DEMOCRATS FAVOR UNIVERSAL CARE

The Democratic platform calls for universal healthcare. “We will end the outrage of unaffordable, unavailable healthcare,” they say, though after six decades that party promise remains unfulfilled.

President Barack Obama‘s Patient Protection and Affordable Care Act will enable those with pre-existing conditions and twenty-somethings without work to get health insurance. But the plan does nothing to address the larger economic problem. American healthcare costs too much and needs replacement, not a nip and tuck.

Portugal, with half the income per person as America, provides universal healthcare. Cuba, the CIA tells us, ranks 40th in infant mortality, while the United States is nine steps lower at 49th, an astonishing fact given U.S. spending compared to the poverty induced by Castro’s collectivist economic policies.

Doing worse than Portugal and Cuba is, in my view, not just costly but immoral.

Just as Republicans are trying to limit the franchise, so are they trying to limit who gets healthcare. The Democrats are better only because they recognize that universal care can be cheaper while removing an annoying and costly distraction from business.

Death and taxes will always be with us. What we need is to spend less on taxes while doing the best we can to stave off death.

]]>
http://blogs.reuters.com/david-cay-johnston/2012/09/11/a-tale-of-two-healthcare-plans/feed/ 5
Romney and Ryan’s dangerous tax roadmap http://blogs.reuters.com/david-cay-johnston/2012/09/07/romney-and-ryans-dangerous-tax-roadmap/ http://blogs.reuters.com/david-cay-johnston/2012/09/07/romney-and-ryans-dangerous-tax-roadmap/#comments Fri, 07 Sep 2012 15:41:23 +0000 http://blogs.reuters.com/david-cay-johnston/?p=412 Together Mitt Romney and Paul Ryan have put human faces on how the super-rich game the tax system to pay less, pay later and sometimes not pay at all. Both want to expand tax favors for the already rich, like themselves.

Their approach favors dynastic wealth with largely tax-free (Romney) or completely tax-free (Ryan) lifestyles, encouraging future generations of shiftless inheritors. What we need instead is a tax system that encourages strivers in competitive markets, not a perpetual oligarchy.

Romney and Ryan say that lowering tax rates and reducing or eliminating taxes on capital gains and dividends, while letting huge fortunes pass untaxed to heirs, will boost economic growth and mean prosperity for all.

We already tried parts of that, starting with Ronald Reagan in 1981 and doubling down with George W. Bush in 2001. Empirical result: Flat to falling incomes for the vast majority, weak job growth, but skyrocketing incomes for the top one percent of the top one percent, including Romney.

Romney, shifting the Republican focus away from red ink budgets, wants to slash income tax rates by 20 percent. Ryan has called for a 10 percent rate for married couples on the first $100,000, 25 percent above that. The details of both plans show they primarily benefit the highest paid and already rich, as multiple independent examinations have documented.

Romney also wants to greatly increase dynastic wealth by eliminating the estate tax, which I believe would have a devastating effect on future economic growth, entrepreneurship and social stability.

His plan would retain the gift tax, but it is already so porous that, as Reuters reported in January, the five Romney sons enjoy tax-free income from a $100 million trust fund on which no gift taxes were paid. Only about $2 million could have originally gone into the trust without triggering gift taxes.

SLASHING TAX RATES

Under Romney’s plan your economic future would be determined the same way it was in 18th Century France – primarily by who you picked as your parents, not by hard work, perseverance and that illusive element of luck.

Romney also wants to slash middle class spending programs, but despite issuing a 160-page plan he has not said just what he wants to cut or eliminate, asking voters to buy a pig in a poke.

Slashing tax rates, keeping the share of income taxes paid by the top unchanged and increasing military spending without any additional red ink may win votes from innumerates, but it is a mathematical impossibility. What is a mathematical certainty is that Romney would cut taxes on the rich and that everyone below the top would get a lot less back in services from the government.

The Romney tax plan is Bush II on steroids. The Paul Ryan plan is Romney supersized.

Ryan wants to lower Romney’s own remarkably low 13.9 percent 2010 federal income tax rate to almost nothing – and it would be nothing if Romney passed up lecture fees.

That is because Ryan’s 2010 “Roadmap for America’s Future,” would make capital gains, dividends and some other capital income tax-free. In April, 235 of 241 House Republicans voted for a new Ryan plan called “The Path to Prosperity” that obfuscated on taxes.

Nice deal for the already rich, not so much strivers and the vast majority who will never be able to live large on capital flows, taxed or not.

More than $21 million of Romney’s 2010 income of $21.6 million would be untaxed under Ryan’s 2010 plan.

Ryan now speaks for Romney’s version of reduced taxes on capital, but Ryan’s spokesman confirmed that Ryan’s goal remains making dividends, interest and capital gains tax-free for everyone. If Ryan’s plans become law then what little income Romney earns from speeches and other work could easily be wiped out through leveraged real estate investments and other tax favors Congress already bestows on investors.

Ryan poses as a tax-cutter, but his forthright 2010 plan would raise middle class tax burdens by half, as we shall see…

RICH GET RICHER

Hardly anyone in America knows more about how to avoid taxes than Edward Kleinbard, who spent decades as a tax lawyer finding creative ways for clients to defer or escape their obligations. He has been doing penance by exposing tax perfidies, from 2007 to 2009 as chief of staff for Congress’s Joint Committee on Taxation and since then as a tax law professor at the University of Southern California.

Kleinbard shows Ryan would turn individual and corporate income taxes into the equivalent of two large payroll taxes with the burden falling almost entirely on workers, not owners and executives.

The Roadmap “is a mechanism for redistributing tax burdens down the income scale,” Kleinbard wrote.

“Most ordinary Americans would see their tax burdens increase by around 50 percent,” he concluded, “while the most successful individuals would see reductions in their labor income tax rates, and elimination of all capital tax burdens – including the elimination of the gift and estate tax.”

Every independent and credible tax expert whose reports I have read, as well as my own analysis, reaches the same basic conclusions about the Romney and Ryan vision: lower taxes for the already rich and highly paid; heavier burdens on the middle class along with cuts in government services.

The Romney campaign told me it pays no heed to analyses by the Tax Policy Center, even though Romney cited its work when it favored him in the primaries. The nonpartisan center is led by Donald Marron, a former economic official in the administration of Republican President George W. Bush.

The Romney campaign wrote me that the center’s latest analysis is unfair and incomplete and “it’s written by a former OBAMA staffer (Adam Looney).”

I checked. Turns out Looney, listed last among three authors, was a Federal Reserve economist detailed to the White House Council of Economic Advisers because of his technical expertise. Looney is a technocrat, not a political operative.

Looney told me he has never participated in any political campaign “and I am not sure I am even registered to vote.”

Attacking Looney’s, and the Tax Policy Center’s, integrity is a low blow. It is also a way to divert attention from the merits, or lack thereof, in the Romney and Ryan plans.

And while not intended this way, those plans make the case for fundamental tax reform that honors the time-tested – and therefore profoundly conservative – principle of making those who gain the most from society bear the heaviest burden. Romney and Ryan would shove that burden onto those with less, a radical plan by an oligarch and his partner in promoting tax-free living for the richest Americans.

]]>
http://blogs.reuters.com/david-cay-johnston/2012/09/07/romney-and-ryans-dangerous-tax-roadmap/feed/ 26
Why ZIRP may mean zip http://blogs.reuters.com/david-cay-johnston/2012/08/31/why-zirp-may-mean-zip/ http://blogs.reuters.com/david-cay-johnston/2012/08/31/why-zirp-may-mean-zip/#comments Fri, 31 Aug 2012 16:59:18 +0000 http://blogs.reuters.com/david-cay-johnston/?p=406 How is your pension doing?

Even if you are not one of the 44 million Americans lucky enough to be in a private-sector traditional pension plan, you should care because if enough fail, your tax dollars will be needed to clean up after them.

Defined benefit pensions, properly funded, are the most economically efficient way to finance old age. Congress has failed since it enacted ERISA, the 1974 Employee Retirement Income Security Act, to impose rules to get the most benefit with the least risk out of traditional pensions. Instead, campaign-donation-seeking lawmakers have enabled rules that encourage the private pension system to shrivel and weaken.

In July the 100 largest company pension plans had their worst recorded month and now owe $533 billion (r.reuters.com/syf22t) more than they have assets to pay, the Milliman benefits consultancy says. Other consultancies have issued similarly dire reports.

The core problem has been too little money put into pension plans. Putting in too little money, as noted economist Martin Feldstein pointed out more than three decades ago, inflates stock prices by obscuring corporate liabilities for future pension obligations. This distorts current investment decisions and creates future risks for investors and workers when these pension obligations come due.

Pension funds come from workers, who set aside what would otherwise be current cash wages to provide for their old age. Not putting that money into the pension plan is a subtle, but widespread form of wage theft. Companies argue that they make funding estimates based on what the law allows, which is true. But then it is usually what the law allows, not venality, that is the scandal.

Compounding the thievery are 12 years of abysmal stock market returns. From its 2000 peak, the total market, with dividends reinvested, is down a fourth in real terms, prices of Vanguard’s total stock index fund show.

ZIRP PRESSURE

Further pressing down on pension plans is ZIRP, the Federal Reserve’s Zero Interest Rate Policy. The Fed says its policy is needed to stabilize the economy, but of course there are other stabilizing options like Congress making investments in infrastructure and research that put people to work while making commerce more efficient and profitable.

Artificially reducing interest rates reduces returns on bonds and cash. This, in turn, requires larger cash infusions, which are even harder in these hard times.

The Fed has been holding the interest rates it controls at next to nothing for almost four years and plans to keep doing so for another two.

For a benefit due in three decades, reducing the expected annual interest rate from 7 percent to 2 percent requires more than four times as much cash today. One way to avoid putting in more money is to freeze pension plans, an especially cruel policy for workers with long tenure.

By 2004 just four of the 1,000 largest companies with pensions had frozen, but five years later 310 had, according to the National Institute for Retirement Security and the Watson Wyatt compensation consultancy. More freezes are a certainty.

If you want to know about the health of your pension plan go to pensioninspector.com. Registration is free for individuals. David J. Tananbaum, a veteran pension actuary, has compiled years of Form 5500 annual reports by pension plans, analyzed them and applied a simple A to F grading system.

The most useful part of Pension Inspector is its system, based on federal law, ranking whether a plan has enough to pay three classes of participants: those already retired, “terminees” who have left employment but are not yet eligible to collect and current workers.

A plan may look healthy overall, but if there is not enough money to pay current workers the benefits they have earned so far it tells you two things. One is that your employer probably stole part of your wages, or the wages of those who came before you, by not putting as much as you gave up in cash wages into the plan. The second is that the plan is at a greater risk of being frozen, which is bad news for current workers, especially those older than 50.

PENSION FAILURES

Since 1975 pension failures have been modest, with just 1.5 million people, or 3 percent, in plans taken over by PBGC, the federal Pension Benefit Guaranty Corp, created by ERISA, which protects the pension benefits of the 44 million Americans in insured pension plans.

Pension failures, so far, have not yet cost taxpayers a penny because insurance premiums, assets left in failed plans and – often – reduced benefits for retirees have been enough to keep the checks flowing.

Amazingly, PBGC keeps no record of how much less those 1.5 million people get because they were in plans that failed. This is because Congress does not require it to keep a record. Congress should hold hearings to get at the answer.

Compare this situation, bad as it is, with the bailout two decades ago of the savings-and-loans at $313 billion in today’s dollars and the 2008 bailouts of Bear Stearns at $192 billion, Bank of America at $152 billion and Citigroup at $292 billion, to cite just a few examples.

But that does not mean pensions will never need a taxpayer bailout. Joshua Gotbaum, director of the PBGC, told Congress in February that “if PBGC’s finances aren’t reformed, the agency will eventually run out of money to pay benefits.”

Congress then enacted a sort of patch, over the objections of the ERISA Industry Committee, the main pension group lobbying for Corporate America, which also objects to the Fed’s low-interest rate policy.

The 1974 Employee Retirement Income Security Act does not provide for a taxpayer bailout of pensions, but the economic damage done to plans by artificially low interest rates builds a moral and political case for one in the event of many more plan failures.

If many plans fail, or benefits are slashed because of frozen plans, more older Americans will not have enough to survive. Does anyone think we will force many older Americans to choose between homelessness and suicide?

]]>
http://blogs.reuters.com/david-cay-johnston/2012/08/31/why-zirp-may-mean-zip/feed/ 0
The victims of low-interest locusts http://blogs.reuters.com/david-cay-johnston/2012/08/10/the-victims-of-low-interest-locusts/ http://blogs.reuters.com/david-cay-johnston/2012/08/10/the-victims-of-low-interest-locusts/#comments Fri, 10 Aug 2012 16:00:50 +0000 http://blogs.reuters.com/david-cay-johnston/?p=403 Another financial crisis looms for U.S. taxpayers, a disaster likely to create even worse human misery than the mortgage fiasco that some of us warned about years before the Wall Street meltdown in 2008.

The crisis next time: collapsing investment incomes for older Americans as artificially reduced interest rates force them to use up their savings and drive more pension plans into failure.

Eviscerating the interest income of savers is the undeniable result of a long-running Federal Reserve policy to reduce interest rates, especially since December 2008. The Fed reiterated on Aug. 1 that it plans to keep interest rates low through late 2014. It says this helps to promote stronger economic growth and bring down the jobless rate.

As in the mortgage crisis, you can see this disaster building by examining the official data.

At the broadest level, 53 percent of taxpayers earned interest in 2000. But by 2010 just 39 percent did, my analysis of Internal Revenue Service data shows, while high-interest debt has become ubiquitous.

From 2000 to 2010 total interest earned by savers fell 53 percent in real terms, a decline of $134 billion. Average interest earned per taxpayer, measured in 2010 dollars, plummeted from $1,950 to $825.

A drop of $1,125 per taxpayer may not seem like much, especially since the average income reported on 2010 tax returns was more than $56,000. But look at who relies on interest to make ends meet and the problem comes into focus.

RELIANCE ON INTEREST

Americans overall received just 1.5 percent of their income from interest payments in 2010. But among those with tiny incomes – the 37 million taxpayers making less than $15,000 – interest accounted for 9.3 percent of their money.

More than three-fourths of these low-income Americans reported no interest income. This means that the minority who saved relied heavily on the interest their savings earned. IRS and other government data show that minority consists mostly of older Americans who saved during their working years, prudently spending less than they earned so they could avoid poverty in their golden years.

The low interest rates paid on savings and bonds are not the result of market forces, but official policy. As readers here know, I favor competitive markets to set most prices, including interest rates.

The Fed has been suppressing interest rates for more than a decade – a major factor in the housing bubble that began in the mid-1990s. The bubble was obvious in official data by 2002 as housing prices grew much faster than incomes, a trend that could not be sustained. But those of us who pointed this out were ignored. Alan Greenspan famously claims no one saw it coming, which is true if you suffer willful blindness.

Since December 2008, just three months after the Wall Street meltdown, the Fed has kept the federal funds rate at zero to 0.25 percent. The other interest rate the Fed controls, for money it loans directly to banks, is being maintained at three quarters of one percent. These, in turn, tend to lower other interest rates.

This Fed policy props up the Too Big to Fail Banks, which pay next to nothing to borrow from the Fed and then use that borrowed money to buy federal debt paying 3 percent or so. Any bank with a 3 percent spread should report healthy profits. The built-in mismatch between taxes and spending in Washington guarantees plenty more federal debt, no matter who gets elected to the White House and Congress, for years to come.

CONCENTRATING WEALTH

Cheap interest also benefits credit-worthy individuals and companies, who can use cheap loans to scoop up assets that collapsed in value after the 2008 Wall Street meltdown. This is a subtle mechanism for concentrating wealth among the best off.

For savers, the reverse alchemy of low interest rates turns gold into dross.

As interest income falls, older savers start cutting into their nest eggs. Millions of older Americans relying on interest income will, thanks to the Fed, run out of savings before they run out of time, a prescription for another taxpayer bailout, though this time one with a stronger moral case than rescuing the fortunes of profligate bankers and those who foolishly invested in the companies they run.

Expect more pension plans to fail, too, because their once robust interest income has shriveled thanks to the Fed’s low-interest policy, a subject I’ll examine in my next column. About 44 million Americans have earned a pension, 1.5 million of them in plans that already have failed, according to the U.S. government’s Pension Benefit Guaranty Corp.

One effect of the Fed’s low-interest policies can be seen in all those mid-day television ads encouraging older Americans to take out reverse mortgages on their homes, as people desperate for enough money to put food on the table consume the equity in their homes. I say desperate because only someone desperate to survive would accept the stiff interest charges and fees in these reverse mortgage deals.

In the next few years expect news reports, like those I read as a boy a half century ago, about old ladies buying cat food not for a pet, but to get a little protein for dinner.

Holding down interest rates to prop up banks and the economy and help the already rich buy assets on the cheap, amounts to an official policy to take from the ants who saved for their old age and give to the Wall Street grasshoppers. Given the economic devastation this causes, it is more accurate to say to give to the financial locusts.

]]>
http://blogs.reuters.com/david-cay-johnston/2012/08/10/the-victims-of-low-interest-locusts/feed/ 22
The troubled trade deal with South Korea http://blogs.reuters.com/david-cay-johnston/2012/07/31/the-troubled-trade-deal-with-south-korea/ http://blogs.reuters.com/david-cay-johnston/2012/07/31/the-troubled-trade-deal-with-south-korea/#comments Tue, 31 Jul 2012 18:11:34 +0000 http://blogs.reuters.com/david-cay-johnston/?p=400 SEOUL — In March, the United States and South Korea implemented a Free Trade Agreement that President Barack Obama touts as more significant than the last nine such agreements combined. He also said it was central to his goal of doubling American exports within five years.

I think the president suffers from irrational trade exuberance, a view reinforced by my reporting in this city of 10 million people.

This deal is likely to turn out badly for American taxpayers and workers, especially autoworkers.

The president predicted 70,000 American jobs would be created as U.S. exports to South Korea grow faster than imports.

That would be terrific for generating taxes and reducing demand for government services like food stamps, which have become the sole income for about 6 million Americans.

But — based on previous major trade deals, the details of this one and a host of Korean business and cultural barriers — I think a much more likely scenario is the destruction of more than 150,000 American jobs over the next few years, as projected by the Economic Policy Institute, a Washington research organization that advocates for low- and middle-income workers.

TRADE PROJECTIONS

The president’s optimistic statements, made in December, drew on projections by the U.S. International Trade Commission. It predicted that U.S. exports to South Korea would grow at least 52 percent more than imports, creating tens of thousands of American jobs. A March update predicted that eventually exports of U.S. cars to South Korea will “likely increase significantly.”

This is the same agency that predicted that liberalized trade with China would result in a $1 billion annual trade deficit for the United States. The actual 2011 deficit: $295 billion.

And remember NAFTA? The United States ran a $1.6 billion trade surplus ($2.6 billion in today’s dollars) with Mexico in 1993, the year before NAFTA. Last year, the United States ran a $64.5 billion deficit.

The United States has consistently run trade deficits with South Korea – more than $13 billion last year, according to the U.S. Census Bureau. And, of course, the trade agreement has only been in place a few months. But it is worrisome that the deficit for April and May, after the agreement took effect, soared 63 percent compared with a year earlier.

The U.S.-South Korea trade agreement was reached in 2007, but implementation was held up by objections from some American companies. Notably, Ford Motor Co complained to Congress and in advertisements that South Koreans who bought Fords were hit with tax audits. Ford said the final agreement is much improved, but still not ideal.

In Seoul, local people told me that buying an American-made car risked opprobrium from employers and neighbors.

In three days in Seoul, as the video accompanying this column shows, I found very few American-made cars. Three, on a showroom floor, were Toyotas built in Ohio. On the streets, I counted a half dozen Chrysler vans, a similar number of Ford sedans and one Jeep but not a single American luxury car. I also saw a smattering of cars with Chevrolet nameplates, but they were built locally by the old Daewoo, now called GM Korea.

The foreign cars I spotted most often were Mercedes-Benz, BMWs and Bentleys, brands that seem to resonate more strongly with South Koreans eager to display their affluence.

That fits with the official South Korean data on auto sales. More than nine out of 10 cars sold here are made in South Korea. European luxury cars, sold under a European Union free trade agreement signed last year, far outsell any Detroit cars. Last year, American-made cars sold in the thousands, a fraction of one percent of car sales in South Korea. In June the best-selling American model was the Ford Explorer, with just 109 sold, less than a tenth of one percent of vehicles sold that month.

In the United States, sales of Hyundai Motor Co and Kia Motors Corp, which are owned by the same company, grew 26 percent last year and accounted for every 11th new car sold.

BARRIERS CITED

Sean McAlinden, chief economist for the nonprofit Center for Automotive Research in Ann Arbor, Michigan, which studies how public policy affects the industry, ticked off all sorts of non-trade barriers to American-made cars in South Korea. “There aren’t going to be any more American auto industry jobs because of this trade agreement,” he said.

Indeed, a report by the Congressional Research Service details subtle trade barriers.

Since 2000, the United States has lost almost a third of its manufacturing jobs. Those 5.5 million jobs are the equivalent of eliminating every non-farm job in Michigan and Iowa plus metropolitan Valdosta, Georgia, a serious crisis for blue-collar Americans.

President Obama, the White House told me, continues to believe that his trade policies will mean more American jobs, including manufacturing jobs. That sounds good but lacks factual support.

The opening of Hyundai and Kia assembly plants in the United States may seem like a benefit to the U.S. economy. But taxpayers covered much of the cost. And the value-added work in cars comes less from assembly than from making precision high-strength steel parts, especially in the drive train. To the extent that parts are made in South Korea and shipped to the United States for assembly, the added economic value tends to remain overseas.

One caveat: The way U.S. economic statistics are calculated may miss where value is added in manufacturing cars and other items because of subtle changes in licensing intellectual property, supply chains and other factors, as the Congressional Research Service explained in a report last year.

Jung Jong-yung, America division director at South Korea’s Ministry of Knowledge Economy, told me to expect more jobs in both countries, especially four years from now and beyond.

Maybe. But the evidence so far suggests this deal will be a boon for South Korea and another economic albatross for America.

]]>
http://blogs.reuters.com/david-cay-johnston/2012/07/31/the-troubled-trade-deal-with-south-korea/feed/ 15
Idle corporate cash piles up http://blogs.reuters.com/david-cay-johnston/2012/07/16/idle-corporate-cash-piles-up/ http://blogs.reuters.com/david-cay-johnston/2012/07/16/idle-corporate-cash-piles-up/#comments Mon, 16 Jul 2012 14:45:29 +0000 http://blogs.reuters.com/david-cay-johnston/?p=396 IRS data suggests that, globally, U.S. nonfinancial companies hold at least three times more cash and other liquid assets than the Federal Reserve reports, idle money that could be creating jobs, funding dividends or even paying a stiff federal penalty tax for hoarding corporate cash.

The Fed’s latest Flow of Funds report showed that U.S. nonfinancial companies held $1.7 trillion in liquid assets at the end of March. But newly released IRS figures show that in 2009 these companies held $4.8 trillion in liquid assets, which equals $5.1 trillion in today’s dollars, triple the Fed figure.

Why the huge gap?

The Fed gets its data from the IRS, but only measures the flow of funds in the domestic economy. The IRS reports the worldwide holdings of U.S. companies, which I think is the more revealing measure.

From the companies’ point of view, it makes perfect sense these days to hoard cash.

First, Congress lets overseas profits accumulate untaxed, so long as offshore subsidiaries own the cash. Second, companies have a hard time putting cash to work because fewer jobs and lower wages mean less demand for products and services. Third, a thick pile of cash gives risk-averse CEOs a nice cushion if the economy worsens.

Given the enduring hard times, you might think that corporations have used up their cash since 2009. But real pretax corporate profits have soared, from less than $1.5 trillion in 2009 to $1.9 trillion in 2010 and almost $2 trillion in 2011, data from the federal Bureau of Economic Analysis shows.

That is nearly $1 trillion of increased profits over two years, while actual taxes paid rose less than a tenth as much, BEA reports show. Dividends, wages and capital expenditures all grew less than profits, while undistributed profits rose. The result: more cash.

Bigger profits are good news, but it would have been better news had those increased profits been put to work, not laid off in accounts paying modest interest. Hoarding corporate cash in bank accounts, Treasuries and tax-exempt bonds poses a serious threat to the economy, as Congress recognized when it enacted the corporate income tax in 1909.

Let’s get some perspective on these gigantic figures, all measured in today’s dollars.

The 2009 cash reported to the IRS equaled America’s entire economic output that year from New Year’s Day through May Day.

This cash pool came to $16,700 for every man, woman and child in the United States, a 53 percent real increase from 2004, my calculations from IRS data show.

Looked at yet another way, these companies had 11.3 percent of their assets in cash, or enough to pay their 2009 corporate income tax bills, which amounted to $148 billion, more than 34 times over.

In short, U.S. companies hold vastly more cash than is needed to finance their operations.

For investors, companies holding 11.3 percent of their assets in cash lowers returns. Did you buy shares of American Widget so executives could park profits in savings accounts?

For workers, idle cash means idle hands and minds. With one in five Americans unemployed or underemployed, and real median wages in 2010 back down to the level of 1999, this is no time for capital to go on an extended holiday.

For taxpayers, untaxed profits subtly reduce corporate tax burdens and increase the tax burden on individuals. Because taxes owed on offshore profits are not adjusted for inflation, they depreciate at the rate of inflation. That means a double whammy for taxpayers as government pays interest on money it borrows while its accounts receivable from multinational corporations lose value.

Since the income tax system began, Congress has authorized a tax on excessive accumulated earnings to limit damage to the Treasury — and the economy — when companies hold far more cash than their operations require. Without the accumulated earnings tax, corporations can become bloated tax shelters instead of engines of growth.

A business holding more cash than its operations reasonably require can be hit with a 15 percent levy under Section 531 of the Internal Revenue Code, on top of the 35 percent corporate income tax. The Tax Court even devised a mechanical test in 1965 for how much is too much.

Historically the IRS has levied only privately owned firms or publicly traded companies with few shareholders. But Internal Revenue Code Section 531 applies to all corporations. President Ronald Reagan signed Section 532 (c), which made that explicit, though with an exception for untaxed offshore profits.

After reviewing decades of literature on these code sections, I cannot fathom any rational basis for giving multinational companies an exception to the cash hoarding rules, which discriminates against purely domestic firms.

Some of the multinational corporations say they will bring home what could be more than a trillion dollars ifCongress will give them an 85 percent tax discount. The companies frame this as creating jobs. But as I showed in an earlier column, unless there are strict rules, the money can be used to buy back company stock while destroying jobs.

Want to motivate companies to put some of those trillions of dollars of idle cash to work creating jobs, paying dividends or sharing the burden of taxes? Call 1-202-224-3121 and tell your senator or representative you want Section 531 vigorously enforced – now – and the offshore loophole closed immediately.

]]>
http://blogs.reuters.com/david-cay-johnston/2012/07/16/idle-corporate-cash-piles-up/feed/ 39
America’s long slope down http://blogs.reuters.com/david-cay-johnston/2012/06/20/americas-long-slope-down/ http://blogs.reuters.com/david-cay-johnston/2012/06/20/americas-long-slope-down/#comments Wed, 20 Jun 2012 19:18:04 +0000 http://blogs.reuters.com/david-cay-johnston/?p=391 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.

Social Security and Census data show that the number of people with any work increased just 1.5 percent from 2000 to 2010 while population grew 6.4 times faster. That’s why millions of people cannot find work no matter how hard they try.

In May, nearly 23 million workers, 14.8 percent, were jobless or underemployed, the Bureau of Labor Statistics reported. At shadowstats.com, a website dedicated to exposing and analyzing flaws in government economic data, economist John Williams also counts people who have given up hope of finding work. His figure for May brings the total to almost 30 million people, one in five.

PRESSURE ON WAGES

An economy with many millions more workers than jobs puts downward pressure on wages, especially for those without highly developed skills.

Now let’s look at debt per American since 2000 using Federal Reserve data:

Mortgage debt grew 51 percent through 2010, even though incomes and wages fell, which should result in steady or lower housing prices, not higher prices.

(In 2011, as banks foreclosed on more homes, mortgage debt per capita declined, but was still 42 percent greater than in 2000.)

Consumer debt was virtually unchanged, at nearly $8,300 in 2010, helping explain weak sales of automobiles, furniture and appliances.

Now how about trade? Exporting more than we import creates jobs and riches.

From 2000, the year before China joined the World Trade Organization, to 2011 imports from China grew 62 percent faster than exports to China, Census data show. The annual trade deficit soared to $302 billion from $112 billion.

U.S. exports to China in 2011 ($106 billion) were smaller than US imports from China back in 2000 ($133 billion), showing the lopsided nature of trade with China, where workers lack rights, safety rules are minimal and pollution rampant.

Some 56,000 American factories have closed since 2000, as jobs and the knowledge that goes with those jobs moved to China.

Trade with China has destroyed every 55th job in America, nearly 2.8 million positions, analysis of government data by Robert E. Scott of the Economic Policy Institute shows. That equals wiping out every job in the greater Philadelphia metropolitan area. Nearly two million of those jobs were in manufacturing, Bureau of Labor Statistics and U.S. International Trade Commission data show.

SHRINKING TAX REVENUE

And what of taxes? The 2001 and 2003 tax cuts were promoted as keys to prosperity. Now Mitt Romney, virtually all Republicans and a fair number of Democrats say more tax cuts will make us prosper. President Barack Obama wants to cut corporate tax rates by a third.

Again, measured per capita, the IRS data show a pattern of shrinking numbers, with modest upticks in 2010.

Individual income taxes in 2010 averaged $2,995, down $1,654 or almost 36 percent from 2000. Use 2001 as the base year — because it was both a recession year and the first year of the temporary George W. Bush tax cuts — and in 2010 per capita income tax revenues were down one third.

In 2011, as the economy improved slightly, income tax revenues rose, but were still 26 percent smaller than in 2000.

The bottom line: less income, hardly any more jobs, sharply increased mortgage debt and Washington ledgers awash in red ink as voters are asked to endorse even more tax cuts.

How many years of evidence does it take to establish that a policy worked or failed?

Will continuing our current tax, credit and trade policies produce favorable results in the future? Will they produce higher incomes?

My reading of this and tons more data is that the Bush tax cuts utterly failed, the Fed’s artificially low-interest rate policies under presidents Bush and Obama do far more damage than good (especially to savers), and that the United States is harmed both by the imbalance in the trade relationship with China and scores of trade agreements with South Korea and other low-wage countries that are deeply flawed at best.

We need to recognize that the tax cutters were snake oil salesmen, the Federal Reserve an enabler of damaging debts and that bilateral trade deals are written of, by and for global financiers, not workers.

To paraphrase the Huey Lewis song, we need a new policy.

]]>
http://blogs.reuters.com/david-cay-johnston/2012/06/20/americas-long-slope-down/feed/ 66
JP Morgan’s $2 billion experiment with truthiness http://blogs.reuters.com/david-cay-johnston/2012/06/11/jp-morgans-2-billion-experiment-with-truthiness/ http://blogs.reuters.com/david-cay-johnston/2012/06/11/jp-morgans-2-billion-experiment-with-truthiness/#comments Mon, 11 Jun 2012 19:52:10 +0000 http://blogs.reuters.com/david-cay-johnston/?p=386 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.”

Actually, it isn’t quite as simple as Black says. While JPMorgan did not respond to my questions on its strategy, Reuters and others have reported that the trade began as a standard hedge. Subsequently, the reports say, it morphed into speculation as the bank layered bet on top of bet.

Such doubling down is why Black says JPMorgan indulged in hedginess.

Who is Black to pronounce on such things? As a senior regulator at the Federal Savings and Loan Insurance Corp, he, more than anyone else, was responsible for the more than 3,000 felony convictions in the savings-and-loan crisis. Black now talks his walk as a law and economics professor at the University of Missouri-Kansas City.

WEAPONS OF MASS WEALTH DESTRUCTION

The S&L crisis of the late 1980s was a mere grenade compared to the weapons of mass wealth destruction that went off on Wall Street four years ago and the others that remain primed and ready to explode. But instead of facing indictments, JPMorgan and others face impunity. “It’s clear that JPMorgan has absolutely no fear that this might have consequences,” Black said. “And why should they?”

As Black is quite right to note, there are exactly zero reasons that Wall Street should fear the consequences of its compulsive gambling, be it with the money of shareholders or the deposits of its clients.  Chief Executive Officer Jamie Dimon is scheduled to testify before two congressional panels this week, where I hope he is asked pointed, nuanced questions that break through the veneer of his and the bank’s public remarks to date.

Too Big To Fail banks like JPMorgan enjoy an implicit federal guarantee in the event a manageable $2 billion loss becomes an unmanageable $20 billion loss. These banks have also delayed implementation of the Volcker rule, which bars some speculative trades, and other provisions of the Dodd-Frank law as they work to make it more loophole than law. Most disturbing is Wall Street’s success in blocking any move to restore Glass-Steagall, which required commercial banks to take deposits and make loans, not speculate like JPMorgan did. With Glass-Steagall restored we would not be talking about bailing out banks that speculate.

Headlines blare that the FBI is investigating the JPMorgan trades for evidence of crimes. But down in the fine print the bureau calls this routine. It’s show, not substance, our own Captain Renault rounding up the usual suspects in Casablanca.

Says Black: “There has not been a single investigation by the Justice Department worthy of the word investigation of any of the major entities whose frauds caused the financial crisis.”

STATUTE OF LIMITATIONS

Criminal investigations now hardly matter, because most of the frauds took place before 2008. Under the five-year statute of limitations for most federal frauds, governments let the crooks run out the clock. They keep their riches, their reputations, their jobs and, absent real reform and real regulation, plunder on. Both the George W. Bush and Obama administrations have let the crooks escape. The challenger who wants to replace President Obama would be even worse. Mitt Romney wants to repeal Dodd-Frank. Unless some determined and creative prosecutor finds a way to pursue the wrongdoers, there will be no justice, just more gambling with taxpayers on the hook to pay off the markers. Only Eric Schneiderman, the New York state attorney general, offers any hope, but his staff is tiny and the crimes are mighty. Keep in mind that in 2004 the FBI and the Mortgage Bankers Association in 2004 said there were only two kinds of mortgage fraud, both of them perpetrated by unqualified borrowers who could not repay their loans. The FBI said nothing about banks profiting off huge fees for issuing fraudulent “liar loans,” nor about why banks lacked standards and practices to turn away unqualified borrowers. I’ll call that “investigativeness.”

The Too Big To Fail banks’ triple play of lobbying, campaign donations and lucrative jobs for family and friends of Washington officials, elected and appointed, blocks real regulation.  Budget cuts and rules in fine print have declawed the SEC and the Comptroller while filing the IRS’s audit teeth down to nubs.  Washington regulators are looking for problems in all the wrong places, when they are looking at all.

That’s “regulationiness.” The JPMorgan derivatives debacle reveals how the appearance of banking regulation and reform, rather than actual regulation and reform, threatens the financial health of the entire nation. That’s what comes of “hedginess.”

]]>
http://blogs.reuters.com/david-cay-johnston/2012/06/11/jp-morgans-2-billion-experiment-with-truthiness/feed/ 11
The fortunate 400 http://blogs.reuters.com/david-cay-johnston/2012/06/06/the-fortunate-400/ http://blogs.reuters.com/david-cay-johnston/2012/06/06/the-fortunate-400/#comments Wed, 06 Jun 2012 14:33:51 +0000 http://blogs.reuters.com/david-cay-johnston/?p=378 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.

In addition to the six who paid no tax, another 110 families paid 15 percent or less in federal income taxes. That’s the same federal tax rate as a single worker who made $61,500 in 2009.

Overall, the top 400 paid an average income tax rate of 19.9 percent, the same rate paid by a single worker who made $110,000 in 2009. The top 400 earned five times that much every day.

Just 82 of the top 400 were taxed in accord with the Buffett rule, which proposes a minimum tax of 30 percent on annual incomes greater than $1 million.

Let’s return for a moment to the single worker who made $61,500 in 2009 and paid 15 percent of his salary in federal income taxes. The top 400 made more every three hours than he did in a year, and yet many of them paid the same or a lower tax rate, according to the data in the report.

On top of his $9,225 federal income tax, he also paid $9,409 in payroll taxes, which include Social Security and Medicare taxes. Half of the payroll tax was deducted from his check. His employer paid the other half, which was really hidden wages taxed at a 100 percent tax rate.

His total federal tax burden was 30.3 percent, exactly 50 percent more than the 20.2 percent tax burden, measured the same way, on the 400 at the top.

TWO TAX SYSTEMS

This comparison illustrates how Congress has created two income tax systems, separate and unequal, burdening millions much more heavily than the few, those with gigantic incomes and a propensity to make campaign contributions.

One system is for wage earners and pensioners, whose taxes are withheld from their checks. This rigorous, efficient system taxes them fully.

The other system is for business owners, executives, managers of hedge and private equity funds, name brand athletes and entertainers, and many others with huge incomes. Congress lets them put unlimited amounts of income in sheltered accounts and put off paying taxes for years or even decades.

Deferral does not prevent these super rich Americans from spending their money. Hedge fund managers and others can borrow against their untaxed wealth, currently at interest rates close to zero. So long as their wealth grows faster than their borrowing their net worth continues to increase.

The IRS report covers only the 400 highest incomes reported on tax returns, not the 400 highest actual incomes, which I am certain are much larger on average because of deferrals. That means the report overstates the tax burdens of the richest Americans pay.

The issue we need to debate is not how much you earn — make all you can. The issue is that everyone should pay their taxes now, not in some far-off tomorrow, and as you go up the income ladder so should your tax rate.

By what economic, political or moral standard should working stiffs be forced to pay their taxes immediately, while plutocrats pay their taxes by-and-by? And why should anyone who makes more than $200 million live tax-free?

Those are questions to ask candidates on the hustings, insisting they give specific, focused answers.

To give this a sense of scale, the top 400 are financial giants compared to Mitt Romney. It took Romney a quarter century of smart work to build up a fortune that his campaign says is between $190 and $250 million. The top 400 made about that much in one year.

Romney says that those of us who tell these hard facts about the zero-to-low tax burdens of the richest Americans are promoting class warfare. Income inequality, according to Romney, should be discussed only “in quiet rooms.”

If you agree with Romney then keep quiet. If not, now is the time to spread the word and encourage robust and thoughtful debate, just as the framers of our Constitution intended.

]]>
http://blogs.reuters.com/david-cay-johnston/2012/06/06/the-fortunate-400/feed/ 33