waiting for prosperity
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Waiting for Prosperity. Federal budget decisions and local communities. Investment bankers are back on their feet, but many Wisconsin workers are not so lucky. Wisconsin job growth has been the slowest in the U.S. Feds say Wisconsin leads nation in job loss Fox News April 25, 2012. - PowerPoint PPT PresentationTRANSCRIPT
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Waiting for Prosperity
Federal budget decisions and local communities
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Investment bankers are back on their feet,but many Wisconsin workers are not so lucky
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Wisconsin job growth has been the slowest in the U.S.
Feds say Wisconsin leads nation in job lossFox News April 25, 2012
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Wisconsin budget cuts have left communities struggling to maintain services needed for growth
Transportation
Highway maintenance
Jobtraining
Education
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Why the state cut so much fundingWisconsin hasa structural debt –more money going outthan coming in.1. WI cut taxes for 20 years, losing billions of dollars
2. The 2008 recession tanked the state economy which decimated public income (sales tax, property tax & income tax declined due to more unemployed)
3. Federal aid to the states has not been adequate to meet depth of needs created by Great Recession
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Tax cuts reduced the state revenue base
“We cut taxes in the very first budget and haven’t stopped since. We cut taxes 91 times totaling $16.7 billion”. Governor Tommy Thompson: State of the State Address Jan 31, 2001
“Over $2 billion in tax cuts are either funded in the budget or phased-in over the next four years.” Governor Jim Doyle: Address to the State Senate on October 26, 2007
“In his first month, Walker focused on spending money through tax cuts adding about $117 million to the state's budget problem over the next two years” Associated Press Feb. 1, 2011
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Why isn’t the federal government doing more?
Conflict in the Capitol:Fundamental differences on the role of government
InvestmentProblem: During a downturn, private spending falls due to unemployment and low wages. As the demand for goods slows, business stops investing. Vicious circle. Solution: Public investments in needed infrastructure to create employment and demand (multiplier effects) until private sector starts investing again.Social safety net is good for economy; should borrow in bad times when money is cheap; pay down as private sector recovers.
AusterityProblem: When government spends too much, public sector crowds out the private sector, pushing up the price of capital. So private investors fail to invest, number of jobs shrinks. Vicious circle.
Solution: Cut public spending to lower public debt. Then business will have confidence to invest in private sector and growth will return.Social safety net is a drag on private sector, slows recovery by keeping people out of the labor force. Most important goal is to cut taxes to get private money flowing
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ARRA invested $787 billion into the economy$288 billion in tax breaks to:
-- individuals ($237 billion)-- businesses ($51 billion)
$499 billion in Investments:– $144 billion in state aid ( mainly education and Medicaid)
– $111 billion infrastructure and science
– $81 billion for low-income households
– $59 billion for healthcare modernization
– $51 billion for education and training
– $43 billion for energy
– $ 8 billion in miscellaneous expendituresSource: Economic Policy Institute, Good Jobs First, recovery.gov
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The Recovery Act helped Wisconsin families
Gave almost every employee a $500 tax break in 2009 and 2010
Saved 59,000 jobs
Provided $153 million in support for laid off workers
Supported health care for 1.3 million elderly, disabled and low-income families
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The Recovery Act saved or created over 3 million jobs – but the funding spent by March 2012
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Treasury and the Federal Reserve rescued the big banks & continue to provide them
with cheap money Treasury (TARP +)
Liquidity Loans for Banks and Financial Firms $292.4 BToxic Asset Purchases 98.0 B
Support for GSEs (Fannie Mae, Freddie Mac, FHA) 533.9 BIMF Expansion 100.0 B
Total $1,024.3 B
Federal ReservePurchase of Mortgage-backed Securities $1,121.0 BLoans to Banks and Financial Companies 1,847.6 B
Purchase of Toxic Assets 152.6 BForeign Central Bank Currency Liquidity 582.7 B
Total $3.7 trillion
Source: As of Q1 2010; Financial Crisis Tracker www.prwatch.org – updated monthly
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1992-I
1992-III
19
93-I 19
93-III
1994-I
1994-III
19
95-I 19
95-III
1996-I
1996-III
19
97-I 19
97-III
1998-I
1998-III
19
99-I 19
99-III
2000-I
2000-III
20
01-I 20
01-III
2002-I
2002-III
20
03-I 20
03-III
2004-I
2004-III
20
05-I 20
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2006-I
2006-III
20
07-I 20
07-III
2008-I
2008-III
20
09-I 20
09-III
2010-I
50
100
150
200
250
300
350
400
450 Financial Sector Profits
Billi
ons o
f Dol
lars
Source: Bureau of Economic Analysis, National Income and Accounts Table, Corporate Profits by Industry, 2101
Financial sector profits are back to pre-Recession levels
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But employment has been slower to recover
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1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
10%
12%
14%
16%
18%
20%
22%
24%
26%
Federal Spending as a Share of the Economy, 1950-2011
Perc
ent o
f GDP
Source: Office of Management and Budget, 2012
Spending went up in response to the recession
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Federal deficit is now being used to justify cuts and refusal to aid state and local government
• Massive tax cuts in 2001, more in 2006
• Two wars fought on borrowed money
• The worst financial crisis and recession since the Great Depression
Why is the US facing such a serious deficit ?
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Causes of the federal deficit
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Who Benefits Most from the Bush Tax Cuts?
Less than 10
10-20 20-30 30-40 40-50 50-75 75-100
100-200
200-500
500-1,000
More than
1,000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
$121 $310 $700 $900 $940 $1,164 $1,242 $1,895 $4,456
$22,407
$135,489
Distribution of Federal Tax Change by Cash Income Level, 2011
Household Income (Thousands of Dollars)
Dol
lars
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Investment vs Austerity for 2013 budget
Austerity – Cong. Ryan’s budget adopted by House of Reps
1. Requires $4.2 trillion in federal spending cuts over ten years
2. Lowers taxes further on wealthy and corporations
3. Makes long-term cuts in Medicare and other safety net programs
Investment – Pres. Obama’sbudget “grow the economy plan”
1. Invests $750 billion in infrastructure and local
government2. Raises on top 2 percent and
closes loopholes on corporations3. Stabilizes health care and social security for the long term.
A Tale of two budgets:
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House of Rep./Ryan Budget PlanMake all Bush tax cuts permanent
Maintain capital gains tax rate at 15%, no Buffet Rule
Maintains current FICA cap, no increase above $110k
Reduce tax rates for wealthy to 25% - average gain = $175,000
Reduce other tax rates to 10%
Cut the formal corporate tax rate to 25%
Eliminate taxes on overseas profits
Repeal Alternative Minimum Tax and taxes in Affordable Care Act
Estimated Reduction in Revenues over 10 years: $10 trillion
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Impact of Spending Cuts in House/Ryan Budget
• 17 million people lose access to health care
• 21 million low-income Americans lose Medicaid within 7 years.
• 8 million people lose Food Stamps
• 2 million children removed from Head Start
• 1.8 million women, infants, and children lose food and healthcare support (WIC)
• Over 1 million students lose Pell Grant support
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New Investments in Obama FY2012 Budget
President Obama's Investments
Billions of dollars
Transportation Trust Fund $526
Research and Development $141
Education $70
Broadband Internet $10
Clean Energy $2
Climate Monitoring $2
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Estimates are in billions, over ten years
Repeal Bush Tax Cuts for Families Earning over $250,000 $849
Reinstate the 36% and 19.6% top tax rates 442
Tax qualified dividends as ordinary income 206
Reinstate the limitation on itemized deductions 123
Limit itemized deductions to 28 percent 584
Return Estate Tax to 2009 levels ($7 m, 35%) 143
Impose a Financial Responsibility Fee on Banks 71
Total revenue proposed: $1,561 trillion over 10 years
One half of revenue used to pay down the deficit.
New revenue in President’s FY2013 Budget
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19721974
19761978
19801982
19841986
19881990
19921994
19961998
20002002
20042006
20082010
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Average Corporate Tax Rate
The taxes corporations actually pay fell from 42 percent in 1974 to 13 percent in 2011
Source: Bureau of Economic Analysis and Congressional Budget Office
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Source: Citizens for Tax Justice, 2011
Many very profitable corporations paying no federal taxes, despite record profits
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Public Wants Higher Taxes On Corporations
26%
14%
60%
Tax rates on corporations
should be higher
Tax rates on corporations
should be lower
Tax rates on corporations
should be keptat current rate
Tax rates on corporations should be higher
DemocratsIndependentsRepublicans
Weak GOPsMod/lib GOPsGOP women
80%61%38%
49%57%44%
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In the past, both Democratic and Republican administrations taxed the wealthy at higher rates when the country needed revenue for public
investmentsWe asked those who benefited most from the American system to support the country - during wars and economic downturns
Source: Internal Revenue Service, 20091913
19161919
19221925
19281931
19341937
19401943
19461949
19521955
19581961
19641967
19701973
19761979
19821985
19881991
19941997
20002003
20062009
0%
1000%
2000%
3000%
4000%
5000%
6000%
7000%
8000%
9000%
10000% Top Federal Tax Bracket Rates, 1913 to 2008
Fede
ral M
argi
nal T
ax R
ate
Coolidge
Harding
WilsonRoosevelt
Truman
Johnson
Reagan
Bush Sr.
Bush Jr.
Clinton
Eisenhower
WWI Great Depression WWII Korean War Vietnam War Gulf WarAfghanistan /
Iraq
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Investment Austerity
DepressionDams for rural electrificationRoads, bridges, public buildings
World War II GI Bill for College EducationInterstate Highway SystemFHA Home Loans
Crisis
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-25%
-5%
15%
35%
55%
75%
95%
Tax Rate GDP percent change based on constant dollars
Tax
Rate
for t
he H
ighe
st B
rack
et
Grow
th R
ate
over
Tim
e
High tax rates on the wealthy do not slow economic growth
Economic Growth Rates
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The Public Wants Higher Taxes On Corporations
26%
14%
60%
Tax rates on corporations
should be higher
Tax rates on corporations
should be lower
Tax rates on corporations
should be keptat current rate
Tax rates on corporations should be higher
DemocratsIndependentsRepublicans
Weak GOPsMod/lib GOPsGOP women
80%61%38%
49%57%44%
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5%
1. We should raise income taxes on the richest 2% of households
Which one of these statements comes closer to your point of view?
And Supports Taxing The Richest 2%
2. We should not raise income taxes on anyone at this time
Mixed feelings
Strongly agree 56% 63%
32%
Strongly agree 29%
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In Order to Support Public Investments
23%
77%
Increase funds for education, research, and transportation
Favor
Oppose
Strongly favor 40%
Cut funding for education, research, and transportationFavor
Oppose
17%83%
Strongly oppose 49%
75% of voters believe that spending more on transportation, education, and research will strengthen our economy and create jobs.
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Pro-tax voters:Tax the rich/ Need more revenue
Combined View: Taxing Rich/Need for Revenue
Most Voters Are Either “Pro-Tax” Or “Anti-Tax,” One-Third (Independents) Want To Tax The Rich
But See No Need For Revenue
Anti-tax voters: cut spending
34%
35%
29%
Swing voters:Tax the rich/ cut spending
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Austerity story
• Washington has a spending problem.
• We are broke.
• We are shackling our children with debt.
• To create jobs, we need to lower taxes on the wealthy and on corporations, and undo the regulations that handicap business.
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Investment story We need to invest in America – create
jobs, invest in education and transportation – and build a 21st economy for our children.
Those who have done well in America, need to do well by America.
We can’t afford to give tax breaks to profitable corporations and the wealthy.
We can invest in the economy and pay down the deficit if everyone pays their fair share.