The Barefoot Accountant on Accounting, QuickBooks, Taxes, Money, and Politics

A couple of weeks ago, Susan Bysiewicz, a Democratic primary candidate for the United States Senate from Connecticut, published a thirty-four (34) page governmental plan to assist the middle class of America and hold Wall Street corporate special interests accountable. She has named the plan, the Susan Bysiewicz Accountability Plan, or more simply, Susan’s Plan.

I read the plan, and I am impressed with some of its key components. Sadly, the plan has not yet received widespread and detailed coverage in the media. Perhaps thirty-four pages of specific proposals, comprehensive in scope, filled with statistics, and supported by countless references to articles by progressive economists and others, is too much for many readers and media editors to wade through. Consequently, I intend to provide an interpretation of her plan herein for those wishing an explique of her plan.

It is important to note that Congressman Chris Murphy has not published a plan of what he intends to promote and accomplish if elected Senator of the United States.  In fact, of the approximately ten (10) senatorial races scheduled for 2012, I know of no other candidates publishing a plan and detailing in one written document what they intend to endorse if elected.  For that alone, Susan Bysiewicz deserves a letter grade of “A”.

At the core of Susan Bysiewicz’s plan is a nominal (as low as .01%) “transaction tax” to be levied on speculative trading on Wall Street.  Although a very modest tax, Susan Bysiewicz, an economics and history major at Yale University prior to her attainment of a law degree from Duke University, projects that the tax would raise at least $150 billion annually in tax revenues.

She justifies the imposition of a transaction tax on the grounds that it would reduce the casino-like, irrationally exuberant, gambling element of trading occurring on Wall Street, producing needless volatility in market prices of stocks and bonds and, as a result, contributing to investment risk.   A transaction tax has been implemented in the United Kingdom and in other G-20 nations, and empirical evidence has shown that it would not impair the financial markets at all.  In fact, the United States previously had imposed such a tax for decades, from 1914 through 1966, while Republicans like Bob Dole and George Bush had previously endorsed a securities trading tax as well, even though they were Republicans.  Since Wall Street was ultimately responsible for the economic tsunami that occurred in 2008 and has been with us ever since, Susan Bysiewicz reasons that it should help pay back some of the costs borne by the middle class of America as well as be penalized for its knowing sale of “shit-backed” [my wording] mortgage securities, considering the fact that not one Wall Streeter has ever been indicted nor imprisoned for its fraudulent acts.

The funds from the transaction tax would finance two of the plan’s key economic components designed to return our country from the “depression” in which we currently find ourselves:  (1) a homeownship refinancing program to assist owners of mortgages “under water”; and (2) a clean energy program mandating that public utilities are forced to purchase renewable energy at contractually set prices.

I recall a similar homeownership refinancing plan being promoted at the end of 2008 and in early 2009, predicated on the government buying salvageable mortgages (that is, those in which the homeowner had the likelihood of servicing the mortgage if it were simply restructured), issuing 10 year treasury bills to finance the purchases, and then charging the homeowner an increased rate of a fraction of a percent higher than the treasury rate for the term of the mortgage.  The proposal’s appeal was multifold:

1. It would not result in a permanent increase to the National Debt since the treasury bills would be serviced by the payments received from the homeowners;
2. It would attack the principal cause of the economic tsunami, the subprime mortgages;
3. It would stop the spiraling decline in housing prices;
4. It would rejuvenate the housing industry and create more jobs;
5. It would increase the liquidity of the banks in order to spur more commercial lending, and thereby aid the recovery.

Susan Bysiewicz’s plan is similar but different in one respect.  Rather than focusing on lower interest rates, it would focus on lowering the principal balance remaining on these troubled mortgages to levels just below the current market values of the homes.  This, of course, would lower the mortgage payments of the homeowners and help keep them in their homes.  However, instead of issuing treasury bills to buy the mortgages, the government would pay for a refinancing of the mortgage and subsidize the excess of the mortgage balance over the remaining collaterized equity in the home with a portion of the revenues from the transaction tax.

The other key component of Susan Bysiewicz’s economic plan is her clean energy program, again largely financed by that tiny transaction tax (perhaps I should dub it the “ttt” or “TTT” element of her plan).  This plan would require utilities to purchase renewable energy from businesses, homeowners, et al, providing grid access to producers.  Again a portion of the transaction tax would finance the higher initial costs of electricity from clean sources until the technology develops to make it competitive to fossil fuels.  Since grid upgrades would be needed by utilities to provide access to the producers of this clean energy, the plan would rely on a national infrastructure bank to finance their cost; however, Susan Bysiewicz’s plan does not provide any further details on this national infrastructure bank.

For me, the transaction tax, the homeownership vesting plan, and the clean energy contracts program represent the economic heart of Susan Bysiewicz’s accountability plan.  But there are other components to the plan which I will attempt to summarize below.

The plan advocates ending the Bush tax breaks for the wealthy, the removal of the tax loopholes for large corporations, and the taxing of hedge fund compensation as ordinary income, with no portion receiving capital gains treatment.  The tax loopholes mentioned in Susan’s plan include the offshore tax havens currently available to corporations  in the Cayman Islands, Bermuda, Bahamas, etc., the tax subsidies to the oil and gas industry, the ethanol tax break for giant agribusinesses, the currently allowable deductions for extravagant entertainment, and the tax deferral of foreign source income, permitting corporations to offset federal income tax with foreign income taxes.  The latter tax corporate loophole is especially troubling to me since it encourages foreign rather than domestic investment.  In contrast, domestic corporations with no operations overseas do not receive comparable tax credits for state income taxes paid but merely a tax deduction.  Dollar for dollar, a tax credit is much more advantageous than a tax deduction since it minimizes taxes considerably, by about 65% on foreign source income.  So, logically, the question is why should corporations with foreign operations receive this more favorable tax treatment for its foreign operations as compared to its domestic operations?  Should they be so rewarded for investing in China and exporting our jobs overseas?

Another key part of Bysiewicz’s plan is her proposed attack on the corporate lobbyist control of government, including a ban on earmarks, contributions and gifts from lobbyists to members of Congress, a constitutional amendment to overturn the Citizen’s United Decision and reverse the flood of corporate money into elections, and a five-year ban (instead of the current one year) on members of Congress from becoming lobbyists as well as on lobbyists from becoming members of Congress or senior congressional staff.  This component attacks the core of the corruption in Washington today, the influence of monied interests over governmental officials.  It is needed today more than ever since our government has become transformed through legalized bribery into a plutocracy from a democracy.

The remaining chapters of Susan Bysiewicz’s plan for America’s reform propose the return of American troops from Afghanistan and Iraq as well as the closing of many military bases in Europe and Japan, and immigration reform, since the latter system is broken, failing to enforce the laws and fostering a shadow economy.

All in all, the Accountability Plan of Susan Bysiewicz is progressive, specific, comprehensive, and scholarly:  it is supported by facts, statistics, and proposals by noted economists.  Susan’s plan demonstrates her avowed commitment to reform.  However, there are some obvious omissions from her plan from an aggressive progressive point of view:

1. There is no mention of the need for the re-enactment of the Glass-Steagall Act.  I found this omission disappointing, if not egregious, since the marriage of commercial and investment banking not only precipitated the Great Depression but also our very own in 2007, in light of the fact that it occurred merely within eight years of its repeal in 1999.
2. There is no mention of the need to revamp our trade agreements.  We need a level playing field in which to compete.  Our trade deficit continues to grow each year and our jobs continue to be outsourced overseas.  Why not propose an international minimum wage since we now have a global economy, and such an economy demands some minimal standards of fair play and human decency.  By exploiting and hiring labor in Cambodia at $.22/hour, or in China at $.25/hour, are we not all guilty of condoning slavery?  All humans deserve a minimal standard of living, including those in shanties in Southeast Asia and India.
3. There is no mention of a large-scale infrastructure program.  Obama in his recent jobs bill merely proposed a meager $140 billion investment in infrastructure, when economists are calling for an investment of at least $1.5 trillion to $2 trillion.  America is now one of the shabbiest industrial leaders in terms of infrastructure.  Such an investment would create millions of jobs, improve our capital assets, spur research and development, and spawn new industries.
4. There is no mention of a major jobs bill like CETA or the WPA.  Extensions of unemployment benefits do little to restore hope and dignity to those who are unemployed.  Nor do they provide the on-the-job training necessary for those to be hired if and when the economy ever improves.  I got my first job on CETA; my father obtained his first job on the WPA.  These programs work.  And Americans want to work.

I cannot help but suspect that from their omission in her plan Susan fears being perceived as too progressive, pushing the envelope too far, alienating certain voters, or being labeled a radical.  Or perhaps she is not as aggressive as a progressive as I am or feels that full employment is attainable with a transaction tax, homeownership vesting program, and clean energy bill.  I disagree:  much, much more will be needed to achieve full employment.  More Elizabeth Warrens and Alan Graysons are needed in office today now more than ever.  And being labeled as a bold progressive has not hurt them:  rather, it has helped both of their campaigns.  I predict both Warren and Grayson will win their seats.

I urge Susan Bysiewicz not to hold back.  The American people are hungry for an authentic leader for real reform.  This is not the time to be perceived as too careful, too conservative, too calculating.  This is the moment for advocacy, for authenticity, for ardor.  And the depression (Susan’s own characterization of our circumstances today) now demands drastic, dramatic action, since the time for action was three years ago.

This was the failure of President Barack Obama, who campaigned on “hope and change” and “change you can believe in”.  Unfortunately, we do not see the change because he played it too safe, conceded early, failed to fight the good fight, agreed to too little.  Consequently our depression continues.  President Obama has not been bold enough:  he failed to walk the talk, and that is why many progressives have become disenchanted, if not disillusioned, with President Obama.  And so his presidency is now at risk.

And neither has Chris Murphy been progressive enough for me.  I recall attending one of his teleconferences in the summer of 2009 and hearing him urge patience to his Congressional constituents when they were losing their jobs, health insurance, and unable to pay their mortgages.  I heard him reiterate his faith in our present capitalistic system and the need for time for it to work.  I recall him saying that governments do not create jobs, businesses do.  But what if the jobs are being created everywhere but here?  I failed to hear Chris Murphy then propose major dramatic change and reform, a call to action, for all of us without employment and health insurance and on the verge of losing our homes.  It was at that moment in time I started to lose faith and hope in Congressman Chris Murphy.

In spite of his recent votes against the extension of the Bush tax cuts and the Defense Authorization Act, the fact that the securities and investment industry has been one of the top three industry donors to him concerns me.  How can I have confidence in him to vote for the re-enactment of the Glass-Steagall Act under those circumstances?  Is it any surprise that Representative Chris Murphy voted against H.R. 4213, “The American Jobs and Closing Tax Loopholes Act of 2010”:  a bill that would have ended a tax break for executives of investment funds, leading hedge funds, private equity firms and venture capitalists; a bill that would have changed the tax treatment of “carried interest,” which is the portion of a fund’s investment gains taken by fund managers as compensation, permitting those monies to be taxed at the capital gains tax rate of 15% instead of at the ordinary income tax rate of 35%?

Is it any wonder that President Obama, too, never followed through with his campaign promises to enact much tougher reforms of Wall Street when Goldman Sachs (or should we say, Government Sachs) was his largest contributor in 2008?  Is it any wonder that Congress has become a wholly-owned subsidiary of Wall Street and the multinational corporations with billions of dollars pouring into the campaigns of our elected officials via lobbyists, PACs, and contributions?

So when Congressman Chris Murphy repeatedly refused to grant me a short interview, saying he was too busy attending to the business of Washington, I could only suspect that, like most politicians, he was merely too busy raising money for his next campaign.

In contrast, Susan Bysiewicz had made herself readily available to each request for an interview.  I like that.  I appreciate her accesssibility:  isn’t that encouraging to the electorate, that a representative will make oneself available to one’s constituents?  I have never received the courtesy of a reply from Chris Murphy himself to my repeated requests for an interview.  Again, Susan Bysiewicz receives an “A” grade for her accessibility to the public for whom she intends to serve.  And I deeply thank her for her generosity.

I encourage all Connecticut residents and voters to read and study Susan Bysiewicz’s plan.  Several of its core features are great proposals.  Overall I give the plan an “A” grade, but with the proviso, “need for improvement”.  Yes, Susan, this is your plan, but all plans should be dynamic, not cast in stone, and as you prefaced at the commencement of the interview today, this plan evolved from listening to your constituents.  I urge you to continue listening to your constituents and to keep your plan open to further suggestions and improvements.

The Barefoot Accountant