Romney's Taxes

Romney's release of 2011 taxes and an accountants' statement don't do him many favors.  They do show that he paid taxes in all previous years, contrary to Sen. Reid's claim.  Otherwise, he does not do much to support America.  He paid very low taxes.  Andrea Mitchell noted that the summary of 20 years of prior taxes look higher because the tax rates were higher in previous years.  I was surprised to find the best listing of prior year tax rates in Forbes. 

For much of that 20 year period the top tax rate for salaried income was over 40% and the maximum capital gains tax rate was over 20%.  For 2011 the rates were 37% and 15%.  The table shows how much taxes on rich taxpayers have gone down.  When you look at Federal payroll taxes (for Social Security and Medicare) and state income taxes, sales taxes, and property taxes, the formerly "progressive" tax rates where rich pay higher taxes than the poor, have become "regressive" taxes that fall more heavily on the poor.  Romney's claim that 47% of potential taxpayers pay no taxes, ignores all taxes except federal income taxes. 

If Romney were a loyal, patriotic American earning as much as he does, he should pay something on the order of 30% of his income in federal taxes, not less than 15%. 

Romney and other Republican tax bashers say capital gains taxes have to be low, because they experience double taxation.  Their companies pay tax, and they get their investment income only after the companies are taxed.  But if the companies paid no taxes, workers salaries could be higher, too.  Why don't salaried workers get a double taxation break?  In addition, capital gains taxes are paid only after an asset is sold.  Therefore, many wealthy individuals have the earnings tax free for years. 

For example, if you buy some stock for $100, and it goes up $50 the first year.  You have made $50, but you pay no tax on it, because you don't sell it.  The next year, if the stock goes up another 50%, you make $75, but you pay no tax on that $75, plus you have made money on ALL of the profit you made the first year, because that profit was not taxed.  A salaried worker pays taxes on all of his income in the year he makes it; there is no benefit from compound interest, i.e., interest on the prior years' interest.  On the other hand, a rich person can hold a profitable asset for many years without paying any taxes on it, earning profit on the earlier profit that was not taxed.  Then when he sells it, he pays much lower taxes than someone who works for a living.  Basically the government gives him an interest free loan of the taxes due each year until he sells the asset.  Who's the "welfare queen" in this picture? 

It doesn't seem fair to me.  It's a good deal, but it's not fair. 

Year	Top Regular Rates			Max. Capital Gains Rate	Capital Gains Taxation Notes
	Wages & Other Earned Income	Unearned Income Except Cap Gains	Above Joint Taxable Income of
1916	15%	15%	$2,000,000	15%	Realized gains taxed same as other income
1917	67%	67%	$2,000,000	67%
1918	77%	77%	$1,000,000	77%
1919-21	73%	73%	$1,000,000	73%
1922	58%	58%	$200,000	12.50%	Maximum rate
1923	43.50%	43.50%	$200,000	12.50%
1924	46%	46%	$500,000	12.50%
1925-28	25%	25%	$100,000	12.50%
1929	24%	24%	$100,000	12.50%
1930-31	25%	25%	$100,000	12.50%
1932-33	63%	63%	$1,000,000	12.50%
1934-35	63%	63%	$1,000,000	31.50%	Sliding exclusion of 70%>10yrs 0% <1 small="small" yr.="yr.">
1936-37	78%	78%	$2,000,000	39%
1938-40	78%	78%	$2,000,000	30%	Excl. 50%>2yrs; 67% 18-24mo; 0%<18mo 30="30" ax="ax" small="small">
1941	80%	80%	$2,000,000	30%
1942-43	88%	88%	$200,000	25%	Exclusion 50% > 6 months; 25% maximum
1944-45	94%	94%	$200,000	25%
1946-47	86.50%	86.50%	$200,000	25%
1948-49	82.10%	82.10%	$200,000	25%
1950	84.40%	84.40%	$200,000	25%
51-64	91%	91%	$200,000	25%
64-67	70%	70%	$200,000	25%
1968	75.30%	75.30%	$200,000	26.90%	Transition
1969	77%	77%	$200,000	27.50%
1970	50%	70%	$200,000	32.30%
1971	50%	70%	$200,000	34.30%
1972-75	50%	70%	$200,000	36.50%	50% exclusion - minimum tax effects
1976-77	50%	70%	$203,200	39.90%
1978	50%	70%	$203,200	39%
1979-80	50%	70%	$215,400	28%	60% exclusion
1981	50%	70%	$215,400	23.70%	50% or 60% exclusion
1982-86	50%	50%	$215,400	20%	60% exclusion
1987	38.50%	38.50%	$192,930	28%	Maximum rate
1988-90*	28%/33%	28%/33%	*	28%/33%	Realized gains taxed same as other income
1991-92	31.90%	31.90%	$82,150	28.90%	Maximum rate
1993-96	43.70%	40.80%	$250,000	29.20%
1997-2000	43.70%	40.80%	$275,000	21.20%
2001	43.20%	40.30%	$297,350	21.20%
2002	42.70%	39.80%	$307,050	21.20%	18% top capital gains rate in rare cases
2003-05	39.00%	36.10%	$311,950	16.10%	Reduced maximum rate which also applied to dividends
2006-07	38.60%	35.70%	$336,550	15.70%
2008-09	38.30%	35.40%	$357,700	15.40%
2010-12	37.90%	35.00%	$373,650	15%
2013-on	44.60%	44.60%	$396,100	25%	21.2% income tax plus 3.8% Medicare tax; also on dividends

Concern about Military is about Contractors

With the approach to the "fiscal cliff," there is a lot of talk about the desire to avoid cutting the Defense budget.  On its face, this appears to be concern about the fighting men and women in Afghanistan and other dangerous places, but it's really concern about defense contractors.  I don't think the Republicans really care about the people serving in the military.  Very few Republicans (or Democrats) in the House or Senate served in the military.  But they do care about their contributions from defense contractors, and about jobs in plants in their home districts.  Because of their concern about their home districts, the government had to change the whole procedure it uses to close military bases, because if handled the normal way, no base would ever be closed.  It's almost the same thing with defense contractors; every congressman wants to funnel money home to his defense contractor.  Hence, the frequent congressional mandates to build weapons systems that the Pentagon doesn't want. 

So, I am not too concerned about all the furor about saving the Defense Department budget; it's really about saving elections for incumbent congressmen and senators.  The bottom line on jobs is serious, but why should we be more concerned about keeping jobs at defense plants than anywhere else?  We need more jobs in computer companies, too, in airlines, everywhere.  Why should defense contractors get special consideration?  Because they give lots of money to the reelection campaigns of people in Congress.  It's all about the money, not about patriotism. 

Sleaze on Wall Street

I was struck reading Michael Lewis' book Boomerang about how sleazy Wall Street salesmen are.  Basically they are worse than used car salesmen, but are selling stuff worth billions.  Lewis says one of the main problems the Germans ran into during the 2008 economic crisis was that they believed the salesmen.  He says reports a conversation with Dirk Rothig, a German banker, talking about the German Landesbanks:

"The people in these banks were never spoiled by any Wall Street salesmen.  Now there is someone with a platinum American Express credit card who can take them to the Grand Prix in Monaco....  He has no limit....  All of a sudden a very smart guy from Merrill Lynch shows up and starts to pay a lot of attention to you.  They thought, 'Oh he just like me!'"

At bottom, he [Rothig]  says, the Germans were blind to the possibility that the Americans were playing the game by something other than official rules.  The Germans took the rules at their face value; they looked into the history of triple-A-rated bonds and accepted the official story that triple-A-rated bonds were completely risk-free. 

It's a shame that America has become such a corrupt country, while the Germans seemed to have maintained their moral standards.  Perhaps their terrible failings during World War II have made them more moral today, while our relatively easy course through WW II made us less concerned about our morals.  In particular Wall Street appears to have become a snake pit that has attracted some of the lowest types of humanity. 

 

The Rewards of Military Service

I've decided there are relatively few rewards for military service beyond those of any other job.  If the pay is good and you are not getting shot, then it's as good as any other government job.  But any idea of patriotism or idealism is out the window.  There is a lot of talk about the importance of those serving in the military, but I don't think most Americans believe it, or even if they claim to believe it, they don't act on it.  Companies tout giving jobs to veterans, but it's not because they really care about veterans; it's because it's good publicity for the company. 

If there is any psychic benefit to military service, it is only for the person who serves.  He or she can be personally proud of serving and protecting the nation but don't expect anybody else to share in that feeling.  With the rise in income inequality in the US, soldiers are not protecting their own homes and families so much as they are being paid to protect the enormous wealth of the few at the top of the pyramid.  Neither Romney, nor any of his five sons served in the military, but they are willing to pay some poor, dumb redneck to go shoot some Afghans for them. 

Things have changed for the better.  Veterans returning from Vietnam, like me, were reviled as psychotic baby killers.  After 9/11 there was a genuine increase in patriotism and a desire to protect the US from another, similar assault.  The diversion into the war in Iraq, which had nothing to do with 9/11 tended to waste that feeling and discredit the service of those who volunteered after 9/11.  The military is still more respected than it was after Vietnam, but the spirit of 9/11 is mostly dead. 

Keystone Pipeline

The Keystone pipeline is mostly out of the news now, but it's still an important issue.  Romney brings it up occasionally; Obama tries to hide it under the rug.  Obama is wrong on this issue.  The real debate is about use of fossil fuels, not possible pollution from the pipeline. The pipeline itself will have little environmental impact. There are many pipelines crisscrossing America. Most don't leak, and if they do, it's not the end of the world.

The complaints about possible pollution of Nebraska's aquifer is a red herring. Environmentalists just want to break America's dependence on oil.  Because they pipeline makes oil cheap and easy to use, they want to stop it, not because the pipeline itself will pollute.  Environmentalists argue it would be easier and safer to build a pipeline to the Pacific and ship the oil to China.  If the Chinese burn the oil, the world gets the same pollution, but America gets none of the benefits.

It's fine to have a debate about the use of fossil fuels, but it should be a straightforward debate, not one obscured by fake, legalistic arguments about an environmental impact statement for an oil pipeline. 

Congressional Email re Foreign Service

I hope that in the light of the killing of Amb. Christopher Stevens and the attacks on the American diplomatic missions in Libya, Egypt and Yemen, you will stand up for the Foreign Service.  Gov. Romney and the Republicans have been very critical of the Foreign Service, and actually seemed to imply that Foreign Service officers deserve to die because they are wimps.  This attitude was illustrated by former Sen. Norm Coleman, Romney's surrogate on the PBS NewsHour last night, who strongly criticized the statement issued by Embassy Cairo, which PBS said, "appeared aimed at calming tensions in Egypt over an anti-Muslim film made in California."  Fortunately Amb. Nicolas Burns defended the Foreign Service, saying that Romney should not have attacked Embassy Cairo for "the actions of an embassy under siege, under great tension." (See PBS report at - http://www.pbs.org/newshour/rundown/2012/09/candidates-spar-over-foreign-policy-following-attacks-in-libya-egypt.html)

When I was in the Foreign Service many years ago, Republican Sen. Jesse Helms hated it, and would have done almost anything to eliminate it, starting with cutting the State Department budget as deeply as possible.  I worry that this same attitude persists in Washington today. 
I hope that you will stand up for the Foreign Service and not put the lives of Foreign Service officers needlessly at risk.  The Foreign Service was already under great stress because of the burden of the Iraq and Afghanistan wars; now the general increase of tensions in Middle East appears likely to increase that burden and the dangers that FSOs face.  Please support them. 

Sen. Mitch McConnell Is the Problem

One of the biggest problems facing America today is Senate Minority leader Kentucky Senator Mitch McConnell.  Speaker of the House John Boehner is also a problem, but he legitimately has a Republican majority in the House.  McConnell does not have a majority but through misuse of the the filibuster, he has been able to require 60 votes to pass any meaningful legislation, and since the Democrats do not have 60 votes, he has been able to block any meaningful work by the Senate.  McConnell was a draft dodger during the Vietnam War, apparently escaping service because his mentor, Sen. John Sherman Cooper of Kentucky, intervened on his behalf with his draft board or with the Army.  If McConnell loved America he would have answered his country's call during war, and he would be willing to work to salvage his country's dire fiscal situation.

The Republicans' veto power in the Senate has been particularly harmful in dealing with the country's financial crisis, and is a major concern in the run-up to the "fiscal cliff" of automatic budget cuts at the end of the year. On fiscal issues, the Republicans and the Democrats are at loggerheads, and there appears to be no path to a bipartisan solution or to one-party rule.  Meanwhile, the country continues to run up huge budget deficits.  Clinton's balanced budgets were due in large part to pressure from Newt Gingrich and his Republican majority, but today a similar scenario seems impossible.  The Republicans blame Obama, and he deserves some of it, but I think the main responsibility for the deadlock lies with the Republicans.

McConnell famously said in October 2010, "The single most important thing we want to achieve is for Obama to be a one-term president."  It would appear that the Republicans are ready to allow terrible things to happen to the US in order to defeat Obama.  Partisanship trumps patriotism   In that case, the Republicans appear to unlikely to act responsibly when we hit the "fiscal cliff."  Even now, by refusing to compromise on raising taxes along with budget cuts, the deficit and the national debt just get bigger.

A starting point for a solution already exists in the bipartisan Simpson-Bowles report.  Obama is partly responsible for not pushing harder to do something with the report, but the House and the Senate are also responsible.  The most intransigent position is the Republican opposition to any tax increases.  It has made negotiation impossible.

I don't personally know how to handle total intransigence.  I encountered it at the State Department in dealing with Reagan's Defense Department.  Richard Perle and his office were usually opposed to whatever we at State were trying to do regarding stopping missile proliferation.  They wanted an absolute guarantee from other nations on the issue, i.e., the US had to be absolutely sure that other nations would not violate the agreement, but this is impossible when dealing with human beings or other nations.  We have laws against murder, but people still commit murder.  We have laws against speeding, but people still speed.  Refusing to outlaw murder because murder will still happen seems silly to me, but that was the Republican position.  I couldn't figure out how to deal with it.  Although some other people eventually got a Missile Technology Control Regime agreement after I quit working on it because I was assigned to the embassy in Bangkok, Thailand.  I'm guessing they somehow figured out how to cut Richard Perle out of the loop.  But he showed how successful complete intransigence can be in stopping the government from working.

Tour at US Embassy in Rome

My short tour as head of the Science Section at the American Embassy in Rome was not very pleasant.

My previous tour as Science Counselor at the embassy in Warsaw was under a cloud because Washington under the Gingrich Republican Congress had cut off funding for science cooperation that was supposed to go on for several more years.  An unexpected call from Washington offered me the job in Rome.

When I arrived in Rome, the State Department was being sued by several environmental groups upset at how the Italians were fishing for swordfish.  The United Nations had put a limit on how long Italian driftnets could be, and these groups sued the State Department to force it to enforce the UN mandate.  The Justice Department argued the case that the State Department did not need court oversight, but lost.  At the time I was not clear what leverage the environmental groups had on the State Department, but as this court decision shows, the leverage was Italian exports to the US.  The environmental groups would force the Commerce Department to withdraw its certification of Italian exports of fish to the US unless Italy was in compliance with the UN resolution.  As a result, a Federal judge ended up in charge of US fishery policy in Italy.

Who really ended up in charge of American fishery policy toward Italy was Greenpeace Italy.  The environmental groups could decide whether any US agreement with Italy on driftnets warranted allowing the Commerce Department decision to stand.  Any US proposal would be run by the US environmental groups; they would then ask Greenpeace Italy for its recommendation before replying to the court.  The Greenpeace Italy swordfish staff was basically one person who spent full time monitoring swordfish fishing boat, and who always smelled strongly of fish when we met with him.  The court decision cites Greenpeace reports in several places in its decision. 

We had a huge meeting in Rome with many representatives of interested parties in the US and Italy.  They came to a resolution, negotiated mainly by my assistant, who had handled fishery matters during a previous tour in Venezuela, and a staff assistant to the Italian director of the fishery office of the Italian Agriculture Ministry.  Under the agreement, the Italian Agriculture Ministry agreed to toughen up its enforcement practices.  A few months later, however, the Agriculture Minister requested a meeting with the Ambassador on the matter.  He said that because his ministry's enforcement officers had stepped up their efforts against illegal driftnet use, the Italian fishermen in Sicily, where most of them were located, had taken out hit contracts with the Mafia on the ministry's enforcement personnel.  The Minister felt that some of his employees were in genuine danger and requested that the agreement be watered down somewhat.  Meanwhile, other fishermen were demonstrating outside the Agriculture Ministry in downtown Rome and creating huge traffic jams.  My assistant who had negotiated the agreement was sick, and I had to go with the Ambassador to meet with the Minister.  The Ambassador was very upset when I told him that he did not have much negotiating room because any change would have to be approved by a federal judge, which meant essentially that it would have to be approved by Greenpeace Italy.  As a result, my last full day on the job in the Foreign Service was spent on the telephone negotiating some "happy-to-glad" changes in the language of the agreement and getting preliminary approval from Washington . 

I had forgotten the terms of the agreement, but they were summarized in the court opinion as:

First, Italy announced its intention to submit a voluntary rationalization and conversion plan to provide for the cancellation of all driftnet fishing licenses, accompanied by a surrender of the driftnets, between 1997 and 1999.

Second, Italy committed to introduce a ban on the use of Sardinian ports by driftnet vessels from other ports. The Sardinian port ban subsequently passed.

Third, Italy announced its intention to pass a law with an escalation of sanctions for fishing with illegal driftnets.

This appears to be one of the decisions that affected our office's work; however, the date of the decision is well after I had already retired from the Foreign Service.

A 2008 study of the driftnet problem showed that not much had changed over the 10 years following my retirement.

Punishing America for Fareed's Mistake

I saw on the CNN summary for Fareed Zakaria's GPS show last Sunday that he had planned to have Gen. Colin Powell talk about Syria and other international issues.  The NRA and the Republicans succeeded in muffling a reasonable voice on foreign policy by putting Fareed off the air for one paragraph that may have accidentally been plagiarized.  The show was dropped and apparently will be off the air for at least a month.  Cancelling his show is sort of like cutting off your nose to spite your face.  Candy Crowley is not bad, but by focusing on politics, she is caught up in a bunch of nasty people calling each other nasty names, while important stuff is going on overseas -- Syria, Iran, the Euro crisis -- but is not being covered by anybody, now that Fareed is barred from TV.  I hope CNN gets whatever it was they wanted from Karl Rove, maybe $100 million more in campaign ads for the Republicans.  Is Time-Warner's grovelling to the Republican establishment less culpable than Fareed's paragraph? 

Swift Boats Are Back

The Republicans have a new anti-Obama attack group, the Special Operations Opsec Education Fund, according to Reuters and the New York Times.  This is basically the same idea as the Swift Boat campaign waged by George W. Bush against Sen. John Kerry during his Presidential campaign.  The Swift Boat campaign vilified all Vietnam veterans by vilifying Kerry's military service, while the new Opsec campaign is aimed more specifically at Obama as Commander-in-Chief because he managed to kill Osama bin Laden, which the incompetent, cowardly Republicans had failed to do while George W. Bush was Commander-in-Chief. 

If the Republicans wanted to make sure that I, a Vietnam veteran, do not support Romney (or any other Republican) this is the way to do it.  It's probably coincidental, but both groups are primarily Navy veterans, the Swift boat veterans from Vietnam, and now the Navy seals from the bin Laden attack.  It makes me inclined to think that Navy officers are less patriotic than officers from other services, although that is probably not justified on the basis of the political actions of a handful of Navy personnel.  However, Chief of Staff General George C. Marshall set the standard during World War II and the years following it when he served as Secretary of State and Secretary of Defense, when he would not vote for any candidate because it might make it more difficult for him to serve the man he had not supported if he was elected.  Certainly soldiers should be allowed to vote, and retired officers should be allowed to campaign, but I think it is questionable when they attack the leadership of the country for being unpatriotic.  I think that makes them unpatriotic.  It's okay to attack the policies, but not to attack the Commander-in-Chief for disloyalty.  Do they want to try him for treason? 

The Republicans pursued two disastrous wars, Iraq and Afghanistan, during which they failed to capture or kill bin Laden.  Now they try to turn Obama's success in doing what they failed to do, against him.  Go back and look at what George W. Bush said and did when we found Saddam Hussein, who was not nearly as important an enemy of the United States as Osama bin Laden.  Republicans can brag, too.  What about "Mission Accomplished" blazoned across an aircraft carrier when the real Iraq war was just starting.  Was George W. Bush a traitor?  I think not; he was trying his best, but as a cowardly Vietnam draft dodger, he just didn't have it in him to fight a war well. 

Sorry for Fareed

I am so sorry that Fareed Zakaria plagiarized something from the New Yorker, according to Politico, and then got caught by the NRA.  The NRA is an unscrupulous, mean-spirited organization that lords itself over our political establishment.  That they got an intelligent liberal like Fareed will scare the less brave liberals in government.  It's like Parade Magazine's report of Grover Norquist fighting with a good man like George H.W. Bush because he went back on his pledge to not raise taxes. 

I hope that Fareed will continue to fight the good fight against the NRA and for intelligent, liberal policies to be pursued by the US Government. 

After comparing what is supposed to be plagiarized, I'm less concerned about Fareed.  Technically they got him, but in fact he gave credit to the real source of the information, a book by Adam Winkler.  The New York Times has a comparison of the texts.  He pretty much copied Ms. Lepore's summary of Winkler's book, but he didn't really copy any of her original ideas.  He could have read the book and come up with more or less the same summary.  This is sort of like "plagiarism lite," but it will be a stain on Fareed's reputation, and the NRA will be happy about that. 

In any case I will miss him in Time and on CNN.