Thank you masaccio.

The corporate greedmeisters say Heads I win, Tails you lose… So what else is new?

O/T:

Between over one hundred years of French colonialism and imperialism in Haiti (see 150,000,000 French francs extorted from Haiti in 1825 to “allow” their independence (not paid off until 1947; by 1900, the Haitian gov’t was giving 80% of its revenues to the French gov’t) and 107 years of US imperial intervention (US support of Haiti dictators, greedy Haitian ruling class and allowing US corporations to do whatever they pleased in their exploitation of the Haiti people), the Haitian people have not had much of a chance to enjoy the natural fruits of life. Read your history books and read Common Dreams articles. We and the French owe the Haitians about twenty billion dollars to make up for our long-term thefts.

SEE BELOW

My only Q is why did the developed world collude to depress Haiti. My guess is “because they could.”

Hopefully the voters in Mass. are reading this report.

On topic. The influence of medical benefits costs on wages is all about the relative cost of labor vs. capital. With capital costs stagnant (zero interest rates) or declining (computer prices), and rise, no matter how small, in labor, i.e. benefits costs, will reduce employment and wages. So where Gruber’s assertion fails, amoung many places, is to not assess the relative costs of capital v. labor. The latter is screwed, no matter how much medical care inflation slows. Just a Q of how much and how quickly labor is screwed.

…the revenue offset would be similar, as the corporate tax rate is similar to the average individual’s income tax plus payroll tax rates.

…if “similar” is not “less than”, then the workers will lose

Yep. For instance we just did an energy deal at work. It works out to save us about $500 per employee this year and $500 next.

We’re putting that money to the bottom line, not toward increasing wages. Anybody surprised?

Thought not.

George Will had a column today about a “bipartisan” commission being constructed to come up with ways to chop back government spending in order to rescue us all from The Abominable Deficit.

Here is what is going on now inside the ruling class:

It has been decided that, in a world where increasingly more money has to be set aside for the DOD, intelligence agencies and all other tentacles of the national security police state [by way of Wall Street and the military industrial complex], a corresponding decrease in all other government spending must be the order of the day.

That is what we are seeing unfold now.

It is not excessive government spending per se that bothers the ruling class, of course. It is what that money is being allotted to purchase. Guns, bombs, armies and all the other accuterments of the war economy, sure. But the stuff distributed for health, education, urban decay, poverty and the like? No, not so much.

The mainstream media is now in the process of framing the intellectual, moral and political justifications of this shift.

Obama and DLC Democrats of his ilk will help lead the way down this reactionary path.

Or maybe not.

What do you think?

Not.

Ding. Amazing how difficult that is for VSPs to see. Well informed little people recognize that right away.

Which part of Walton’s post does your not apply to? Do you observe that Obama is cutting back on the sacred cow of military spending?

Obama and DLC Democrats of his ilk will help lead the way down this reactionary path.

This.

Economic savings, whoever in the firm worked hard to achieve them, are considered management’s property.

Higher wages mean higher costs, the opposite of what management strives for, both generally and quite specifically when it comes to labor.

Consequently, economic savings go to the bottom line, because when the bottom line looks better, management’s bonuses go up. Those are the only higher wages today’s American managers ever contemplate.

Excellent point. Also many corporations don’t pay taxes. As Kelly points out, savings from healthcare can be just steered somewhere else in the company or used to take on more debt.

so.. what we get is employers dropping health insurance and paying higher wages(sure right) so we pay more taxes to fund the rising costs of the insurance plans our federal, state, municipal, county people and their families have.

Obama and DLC Democrats of his ilk will help lead are leading the way down this reactionary path

Saw the problem and fixed it for you.

In what way is Obama NOT reactionary? If you consider that the govt subsidies for medical care at 3X poverty level are likely to be captured by insurance corps owing to their market power, what is the evidence that O is not reactionary?

Actually, it’s on the table, and frankly, only the Democrats can do it.

From last year, before the Inauguration:

I asked the president-elect, “At the end of the day, are you really talking about over the course of your campaign some kind of grand bargain? That you have tax reform, healthcare reform, entitlement reform including Social Security and Medicare, where everybody in the country is going to have to sacrifice something, accept change for the greater good?”

“Yes,” Obama said.

“And when will that get done?” I asked.

“Well, right now, I’m focused on a pretty heavy lift, which is making sure we get that reinvestment and recovery package in place. But what you described is exactly what we’re going to have to do. What we have to do is to take a look at our structural deficit, how are we paying for government? What are we getting for it? And how do we make the system more efficient?”

“And eventually sacrifice from everyone?” I asked.

“Everybody’s going to have give. Everybody’s going to have to have some skin the game,” Obama said.

http://blogs.abcnews.com/george/2009/01/obama-calls-for.html

It’s coming.

Wage increases are inherently inflationary and must be fought by tightening the money supply. Much better to steer this money to investors who can make more worthwhile use of it by creating bubbles.

Yep. I think the stats are that over 90% of corps don’t pay taxes, but I could have been brainwashed on that, so don’t take my word. What I do know is that the right always asserts that U.S. statutory tax rates are HIGH!!!!

I think the answer is more mixed. Some of the money will go to higher wages.
Some will fall to the bottom line.

Gruber is correctly noting that whether it goes to wages or the bottom line, the excise provision will provide money to assist in providing health carecoverage for an additional 30-plus million Americans.

Yes, that meme occurred after I retired. It took me quite awhile to catch on that the PTB really seriously believed that.

Do you have any sources other than Gruber?

What we have to do is to take a look at our structural deficit, how are we paying for government? What are we getting for it? And how do we make the system more efficient?”

“And eventually sacrifice from everyone?” I asked.

“Everybody’s going to have give. Everybody’s going to have to have some skin the game,” Obama said

What a great quote. I especially like the total lack of comprehension of what having a fiat currency means.

Yes. Me. I am well versed on tax law.

There’s only going to be so much excise tax collected; not very much at all.

Let me explain. Once those plans have a higher cost, my company won’t choose them. We’ll choose the lower cost ones, where there’s less covered. Read that again; less coverage.

So all the employee’s plans will change, whether they like it or not.

This is the only, and very weak, cost control that’s in the bill.

There will be a negligible difference in the company’s bottom line, but the coverage will be lower, and won’t offer any excise payments to subsidize those 30 million.

Is the money going to be disappear?

Here’s Digbyb’s post about it from last year:

http://digbysblog.blogspot.com/2009/01/fiscal-madness-by-digby-i-cant-believe.html

So raising the taxes on your workers’ medical benefits is going to cause you to raise their wages?

No. Say for instance my company’s delta in the premiums was $20 million. I’m going to do one of 2 things, or maybe even split the baby, and that’s pay on a credit facility, or invest in my network.

It’s going to be overall tax neutral because I’ll still hit the expense side.

Once again, it’s the weakest form of cost control, and a measely revenue generator, all at the expense, both in insurance coverage and tax generated, of the middle class.

According to KC’s description (detail if you disagree with it), the $$ will go out of the employer’s pocket to the expense of the employee who is not taxed on his new expenses. Thus there will be no excise tax collected. I don’t understand why you think that is inaccurate.

dude. no reason to be mean about it. it was you not too long ago saying similar stuff. unfortunately, a lot of people haven’t read mosler or wray or mitchell or auerback or parenteau, etc etc.

for anyone who’s interested, i can’t recommend more highly mosler’s, 7 deadly innocent frauds (fascinating and fun read — with amusing stories involving al gore and larry summers)

There’s a diff about being worried about the deficit before the economy slides into oblivion and being worried about it after the fed govt is the great last hope of the economy sliding into oblivion. Which do you claim that Hugh was “saying similar stuff?”

Maybe if we pass a “War Tax” our wages will go up!

No.

Under current tax law the employer can deduct the cost of the health insurance benefits and the employee does not count it as taxable income.

Because the excise tax is so high, the health insurance benefits for many will be reduced below the threshold level of the excise tax. This will save the employer $X.

Now, if the employer pays part of $X to the employee as additional compensation, it will be subject to the income and FICA taxes. If the employer pays part of $X to themselves or the managers, it will be subject to the income and to some extent the FICA taxes. If the employer is a corporation and some of $X stays in the corporate coffers, the money will be subject to the corporate income tax.

that the fed gov was going to default on the deficit.

I just explained to you how most corporations will hit the expense side, and any X$savings will not remain in corporate coffers.

I wonder if that’s in Gruber’s model; behavior of employers on the expense side?

Because just about all companies have some credit facility that they are servicing, and it’s a natural vacuum for any excess money.

course i could be wrong in being persuaded by mosler et al. hope some more folks will read him (and some of the others i listed above) and argue with me about it.

hopefully bev will be willing and able to arrange a book salon with randall wray. fingers crossed.

oops. edit to add: the above was meant to be a reply to ecahn.

There’s a kinda non-echo here in response to probing queried, but maybe I’m just waiting for a long typing to be posted. Meanwhile, while your comment is completely disjointed, it is nonetheless, completely revelatory. Towit, raising taxes on anything will not cut costs on anything.

If the Cadillac tax works and your company pays less for health insurance doesn’t that suggest that you have less coverage? If you are in your fifties and you have high blood pressure, high cholesterol and maybe diabetes, and you’ve got bad knees from a lifetime of lugging around stuff on your back for your job, and maybe a touch of repetitive stress in your hands, how would cutting medical benefits be good for you?

+++

masaccio, I’m a union guy and it’s reasonable that unions would want to get the best deal for their members. I think where the real flaw is in their thinking is that the Democrats will forever control Congress. Just imagine this current Senate bill passing. Then the Republicans take over. (Remember, Republicans can pass their agenda as a minority party; they don’t need sixty votes!) What do you think is the first thing that they’ll do is? Toss out union exemptions from the Cadillac tax.

Got it. So tax collections go up, not in the narrowly defined excise tax category. Now, next issue, explain how that raises wages, net of the tax effect, and how that holds down medical costs.

KC: There is a limit on the nature and size of 179 deductions. Above that limit, you are going to have to pay tax, even if you plow $X into the enterprise.

Also, if you buy a service or product with $X, it will eventually increase federal revenues.

Yep, I was being snarky. Should have added the /s.

My “war tax” comment is about that structural deficit thing, where Obama is entertaining a “Grand Bargain” from this link:

http://blogs.abcnews.com/george/2009/01/obama-calls-for.html

So if taxes are going to somehow magically raise wages, might as well be a war tax!

Not sure where that is coming from. Like many on the web my understanding of issues evolves over time. I thought Cheney’s deficits don’t matter remark was stupid and a kind of financial truancy but I have favored much larger stimuli and for a much longer time than those currently enviseaged. I was against quantitative easing because I saw it feeding into a liquidity trap. I was against Bush’s deficits because they were misspent on wars and tax cuts for the wealthy. But for where we are now economically the use of a fiat currency is central along with stimulus and debt repudiation to us getting out from under our current crisis.

That is above my pay grade.

Thanks. I can only follow one intellectual step at a time, hard as I try. Which is why I am such a pest for details. Not to mention my own inability to articulate adequately in my initial comment, leading to our initial, but by now gratiously obliterated, contretemps.

Sure, that’s why I’d probably split the baby in my scenario above. I’d take the minimum tax position about putting more investment in my network, where I actually get an ROI, where payroll is a cost center.

I’m still not going to contribute to the excise, so that’s a non-revenue mechanism for HCR right there.

Plus, how are insurance companies going to respond with pricing? I’ll bet you a dollar that they’ll move up premiums on the lower non-cadillac plans and provide the minimum attractive pricing delta from the cadillac plans because there are no cost/pricing controls.

The net premium delta isn’t going to be that huge for me to worry about a corporate tax position.

I likewise am versed in tax law – I started and headed for 5 years the Sun Life of Canada US Tax Department – but I never saw a management decision – in any company – where employee benefit savings where even claimed – much less were for real – reasons for wage pool increases or increased hires or increased bonuses.

I am also MIT’65 – and I respect MIT Prof Grubers ability to make models – I also made models in other roles (I am a retired actuary) and based on what little Gruber has said/released I believe his model to be less than based on best effort/best guess/best analysis work. I would have tossed the model – and Gruber – if he had worked for me and presented such poor work product.

This is the only, and very weak, cost control that’s in the bill.

but i don’t think it controls costs at all — only shifts them.

on second thought, i suppose if people who used to have good coverage no longer do, they may not get all the healthcare they need. so i guess that could be a way of decreasing costs. is that what you meant or am i missing something?

But very relevant for the current discussion, don’t you think? In which case, if it is above your pay grade, expressing opinions might be revelatory?

Not that it would but that it could. It can go by other names, you can say you are inflating it or monetizing it away. Or you can call it default, but that had to do with how to reset and rebalance the debt relationship with countries like China that hold large amounts of US treasuries. It really is different when you are dealing with another sovereign country. You don’t have the same scope of action as you do when you are acting internally where you are talking dollars to dollars and as the sovereign you can control the outcomes.

Right – less use, less cost.

That’s why I mean the very weakest form of a control, and it’s about the only cost control in the bill.

On the specific questions you posed at #42, I have not offered any opinions.

So you think it is informative for u to offer narrow opinion but not to offer broader opinre on the real issue?

if you’ve changed your mind great. last couple of times i recall having this conversation with you, you hadn’t. so i didn’t know that you had (and was still probably a little pissed off at your comments to marshall and scott at naked capitalism).

i’ve certainly changed my mind (in so far as i even had an opinion about these things a year ago) A LOT. and probably will again. maybe even today. still trying to learn even some of the basics.

“if the employer pays part of $X to the employee as additional compensation, it will be subject to the income and FICA taxes. If the employer pays part of $X to themselves or the managers, it will be subject to the income and to some extent the FICA taxes. If the employer is a corporation and some of $X stays in the corporate coffers, the money will be subject to the corporate income tax.”

You were going great until that last comment. Well not great because the first 2 which are at least correct as to math – well they do not happen. On the last point, I was in the business of hiding corporate income – at the Fortune 100 level corporate taxes are paid only if you feel like it – otherwise Section 482 removes all tax and sets you up for refunds from prior years. If 482 is not enough – as with ins. co’s – you do reinsurance deals that are actually described as buying expense deals for use in I-E countries. Most companies chose to pay a small amount – not 35% – indeed it averages single digits in terms of percent of declared income (let’s not get into income hiding) – and if concerned about gov contract appearances perhaps near 20%.

I was floored by your Section 179 comment re: its limits – for those needing help with buzz words this is about capital items purchased that can be depreciated over their useful life or expensed immediately under Internal Revenue Code Section 179 – the limits are not a serious consideration for the vast majority of income that is taxed by the IRS as the benefit is meant to impact small companies – and they are not the source of a lot of tax income for the IRS.

Gee, I haven’t changed my mind much at all. Althout oldgod has definitely forced me to hone in on how medical costs have lowered wages, and how that is likely to play out in the future.

gotcha. thanks.

lol. well, you were not at the bottom of the learning curve (that would be me).

Not at all. Nite all

I work for a school district in california. If the senate bill passess it will not only hurt the teachers, but all district employees. How much more do they think they can take from education. They’ve already screwed it in a big way. I supposed stupid people are a good thing for the leadership of this country.

Not that it would but that it could.

then i misunderstood your comments when we discussed this before.

We are going to end up defaulting on a lot of the paper China is holding. Some at least there are beginning to understand this.

Everytime debt is forgiven to Third World countries or a debt is converted to a grant as happens I believe in our military sales to countries like Israel you have a debt which is unpaid (a default) but is called something less stigmatizing. This is what I think will have to happen with us. The reality will be a default. The atmospherics will term it something else.

do you think the teachers union is specifically being targeted? or maybe that they just don’t care?

nite.

siun is upstairs with a new post: Haiti is Waiting

obama and the dems are “solving” the health care cost problem by making people who dont have any money pay for everything. brilliant! when is guber going to recieve HIS noble prize? even if employers dont just pocket the money from switching to the scummy no-care plans everyone will soon have, (which 99% of the time they wont, why would they??) the “savings” passed on to workers will have to go to increased out of pocket costs. and since health care costs are rising much much much faster than wages (which arent rising much at all) everyone will be paying much much more for health care, and getting much much less. but as gruber points out, obama and your congress people can give a shit less, because they are collecting more taxes and your health care isnt nobel peace prize winning president obamas fucking problem, right?

Unfortunately the district I work in is wingnut heaven. They do not have a union. They have what is called faculty senate. They are not happy with this tax, they think they are being targeted.

I would point you to my #52. Domestic debt and our international obligations are not the same. No, I have not changed my mind. The point is that domestically the government has a much wider scope for its actions and where the flexibility of a fiat currency is at its greatest. Internationally, our situation is helped by the dollar being the world’s chief reserve currency (but also helped/hurt by it since running large balance of payments deficits are needed to pump dollars abroad for other countries to use). But even with the advantage of having the dollar as the world reserve currency, the US is far more constrained in what it can do. So while internally it can pump newly created dollars into the economy for a long time, externally, it is constrained by other countries’ agendas. Default is very much on the table although it will be called a restructuring or conversion of debt, but the overall effect is a default. China and other Treasury holders will never get back the value they currently hold in those Treasuries. This can be done in any number of ways: converting shorter term T-bills into longer term ones, changing the peg on the yuan, introducing currency controls, an outright sell off of some T-bills at less than par, etc.

Workers have to pay for Obama’s war and overall militarism by attacking their healthcare.

In some sense this Senate health care bill is just like the fixes to Social Security that Ronald Reagan, with collusion from the Democratic Congress, and then Bill Clinton effected. They both made Social Security (more) taxable, and perniciously so, by not indexing to inflation the thresholds for taxability. That is to say, if you have some quams about a tax on a $9,000 health care plan, but that’s not where you’re at now, well in 10 years, you, and every one else, will be paying (or suffering the consequences of not paying)that tax; every one will be right where that tax is at.
The Congressional Democrats are arm in arm with the Republicans on this. This stealth universal tax on health care benefits is the underlying long term reality of the Senate health care bill. Indeed, the main purpose of the health care bill may be to tax your health care benefits.

Bobinpacifica, I respect the unions as well; and maybe this will help organizing because the unions will be able to point to this edge they got as a reason to join a union. I do wish they had insisted on the House provisions for taxing the rich; but I’m not sure that would have worked. The Senate is full of rich people who can’t understand why anyone would want them to pay taxes.

your post tickled me so

i’m a scientist-in-training, but i’d like to know more about business economics. and i mean real corporations-actually-only-pay-single-digit-corporate-taxes economics. are there any books or articles you can read for a layman? i’m really just curious to understand how the game works

hey ftc68 — welcome to fdl — if ya click on masaccio’s name at the top of his post, it will take ya to all of his fdl posts. there is a wealth of info in those posts

Many different variables might push health plans into “Cadillac” territory, including geographic location, plan demographics, and other characteristics of the insured population. More at http://www.healthcaretownhall.com/?p=2044