A Growing Rift Between Senate and Executive

When President Obama said that, rather than launch a broad inquiry into Bush administration programs like the treatment of terrorism suspects, he believed it best to “look forward as opposed to looking backwards”, that didn’t cut it with the Senate Intelligence Committee. Shortly after Obama’s inauguration they voted 14-1 to embark on an investigation of their own into the prior administration’s and the CIA’s policy of rendition, detention and interrogation — more bluntly stated as torture inflicted on terror suspects sent to secret “black site” prisons in Thailand, Romania, Poland, Lithuania and elsewhere during the Bush years where these practices would theoretically be beyond U.S. law.

Leon Panetta, the CIA director at the time, agreed to make the millions of documents available to the Senate committee staffers — 6.2 million by this account — possibly a deliberate overload in the hope that the Senate would despair and go away. But they persevered and plowed through a document release that spanned five years ending in September 2006, when the CIA prisoners were transferred to Guantánamo.

In a basement room at a CIA facility the agency set up a separate network into which thousands of documents were downloaded daily for Senate staffers to pore through to ferret out what had actually happened in the agency’s detention and interrogation program. The resulting 6,300-page report was completed by the Senate committee at the end of 2012 when it was submitted to the CIA for its official response.

Today’s CIA director, John Brennan, who was a senior CIA official at the beginning of the Bush administration when the interrogations were first begun, has found himself in an awkward position. During his confirmation hearing last year, he said that he had always been opposed to the “enhanced interrogation” techniques employed by the CIA and had voiced his opposition to other agency officials. “He did not say to whom he had expressed these misgivings, and former CIA officials at the time said they could not recall Mr. Brennan’s having opposed the program.”

Brennan came on board in early 2013 and produced a 122-page rebuttal, strongly objecting not so much to the report’s facts as its incendiary conclusions. The report said that the CIA’s use of torture was more brutal and extensive than had ever been revealed and that it had yielded little of value, contrary to what had all along been reported to the White House, Congress and the public in justification of America’s adoption of torture.

the leak

In mid-December of last year in an open hearing, intelligence committee member Sen. Mark Udall of Colorado referred to a CIA document he had seen that tipped off the folks at Langley that Senate staffers had somehow come upon the CIA’s own internal review of its detention and interrogation practices. That set a group of CIA staffers hacking into the network they had set up for the Senate readers, combing through computer logs to see if they could discover whether the internal review was indeed what the outsiders had come upon.

That meant the CIA was investigating its congressional overseers, instead of the other way round, which raised questions of law. It prompted agency chief John Brennan to confess the snooping at a meeting he requested in January with Democrat Dianne Feinstein, the chair of the Senate Intelligence Committee, and its ranking Republican member, Georgia’s Saxby Chambliss.

The CIA’s review, which summarized thousands of documents, had been ordered up in 2009 by Panetta, evidently to learn what the Senate crew was likely to find out and prevent surprises. What was so problematic was that it had come to the same conclusions as the Senate’s report about more widespread torture and its low value yield. Udall had said the CIA review “is consistent with the intelligence committee’s report” and “conflicts with the official CIA response to the committee’s report”. That is, it contradicted Brennan’s rebuttal. And why had it not been given to the committee’s researchers?

dispute erupts

First, the CIA had hacked into the supposedly private network it had set up for the Senate crew. Then this February, Sen. Feinstein learned that the CIA’s acting general counsel, Robert Eatinger, had lodged a criminal complaint with the Justice Department accusing the Senate’s document reviewers of accessing unauthorized material.

It can be said that Ms Feinstein went ballistic at that point, and when the media began reporting the accusation, she took to the Senate floor in March to give a blistering 45-minute tongue-lashing to the CIA for what she considered their violation of the separation of powers and the Fourth Amendment’s strictures against search and seizure. And she accused the agency of removing documents from the investigators’ computers, the most conspicuous being what had come to be called the “Panetta Review” itself.

Brennan lashed back. He stridently denied his agency had hacked into the Senate-dedicated computers. “Nothing could be further from the truth”, he said. “I mean, we wouldn’t do that. I mean, that’s just beyond the scope of reason.”

But at the end of July, a report by the CIA’s inspector general confirmed that, using a false identity, three information technology officers and two lawyers had indeed broken into the Senate computers. Brennan issued an apology to Feinstein and Chambliss. There were calls for him to resign for either lying or an inability to control his agency, but the President stands by him.

As for the accusation that the Senate analysts hacked into a CIA computer system apart from the one set up for them to swipe the Panetta Review, the contention that they had the skills to do so is ludicrous. Panetta’s review didn’t begin until three years after the 2006 cutoff of the document stream available to the Senate investigators. What’s obvious is that a whistleblower at CIA slipped the damning report into their segregated download in the hopes that it would be discovered.

The CIA is an organization that has already admitted destroying the videotapes of interrogation sessions that utilized torture. This destruction of evidence was approved by none other than Robert Eatinger, the CIA lawyer with the chutzpah to file the fatuous complaint with the Justice Department, and who is in so deep as to be mentioned 1,600 times in the Senate report. In keeping with what we are reporting here — Obama covering up for the CIA — the President exonerated those who destroyed the tapes.

taking sides

We are on Feinstein’s side on this one, but it needs to be said that as ostensible overseer of the intelligence community, she has instead been its staunch defender (excessively so, as we have said). She has fully supported the NSA and government spying, and refers to the rest of us as “the privacy people”, so there is a tinge of schadenfreude to see her outraged that her committee has been made to taste its own medicine.

Fed Up U.S. Corporations Continue Flight to Other Shores

Burger King is the latest example of other countries successfully luring U.S. companies to relocate. While countries around the world have engaged in a downward spiral of lowering corporate tax rates to lure corporate migration, the United States has moved in the opposite direction.

With the highest statutory corporate rate of the 34 developed countries in the Organization for Economic Cooperation and Development (OECD), the U.S. has deigned not to compete. We will keep our rate the same at 35%, thank you. Worse, the U.S. is almost the only country that taxes a company’s profits when they are brought home no matter where in the world they were earned.

To avoid the IRS, corporations at one time could simply reincorporate in tax havens such as Bermuda or the Cayman Islands, but in 2004 and again in 2012, Congress passed legislation that made “that type of tax strategy virtually impossible”. Our strategy is not to attract corporations to move here; rather, we bolt the doors to keep companies from leaving.

With no sign of tax reform, companies are resorting to the one device left, the maneuver referred to as “inversion”, by which a U.S. corporation buys or merges into a foreign company in order to transfer its domicile out of the United States and pay its taxes to a less avaricious country. In what is clearly a glitch in its lockdown strategy, the U.S. permits inversions provided that the foreign company ends up owning at least 20% of the U.S. company’s stock. President Obama wants that raised to 50% — quickly, to stop the loss of tax revenue.

There’s near universal recognition that the U.S. corporate tax rate is too high. The president has urged its reduction — repeatedly in his state of the union addresses, for example — and both sides of the aisle in Congress agree that our 35% makes the United States noncompetitive, drives businesses offshore and jobs along with them. But it never goes beyond talk. Put another way, imagine the impossibility of persuading a foreign company to “invert” into the United States with the promise of paying the world’s highest tax rate and on its profits worldwide.

Treasury Secretary Jack Lew thinks the nation needs a “new sense of economic patriotism”, as he said in a letter to House Ways and Means Committee Chairman Dave Camp (R-Mich.). He asked that Congress prohibit inversions retroactive to May 2014 to “shut down this abuse of our tax system”. Indicative of the Democrats’ wrong-footed approach, congressional inaction in the face of this latest wave of inversions has Obama and Lew searching for ways to lock in U.S. companies by executive action instead of competing. That’s driving the wrong way down a one-way street.

outbound traffic

Inversions are not new. About 50 companies in the last 30 years have made the transition according to Bloomberg. But 20 of those have occurred in just the last year and a half, and the pace is accelerating. Since April of this year, when the major pharmaceutical company, Pfizer, announced plans to buy Britain’s AstraZeneca for $118 billion, 17 of the Fortune 500 companies have contacted investment bankers to assess prospects for an inversion deal, says The New York Times. Reports of corporations looking to move “are sparks that have lit a dry timber”, says Michigan Democrat Sander Levin, a ranking member of the House Ways and Means Committee.

Three of the OECD countries are English speaking — the U.K., Canada and Ireland — desirable for American companies, and they have aggressively lowered their tax rates to attract corporate relocations.

The U.K. in 2010 declared that it would “send out the message loud and clear that Britain is open for business”. Rules were relaxed and a tax rate reduction to around 20% has brought dozens of foreign companies to London. Canada lowered its rate in stages from 2006 to 2012 to its current 15% rate. Ireland’s rate is 12.5% — so low that other OECD countries are angry. Ireland had been bailed out to the tune of $90 billion by the European Union and the International Monetary Fund after the 2008 crisis.

Medtronic, a prominent maker of implanted medical devices, intends to move to Ireland. It provides an example of what our tax laws have led to. Medtronic is set to buy Covidien, which produces surgical tools and devices. Covidien, ostensibly an American company, has been on the run from taxes since 1997 when it moved to Bermuda and then to Switzerland in 2009. In May it switched its domicile to Ireland when Switzerland tightened rules on executive pay. If you presume Covidien’s management is in Ireland and will be joined by Medtronic’s, you would be mistaken, however. Medtronic’s management will stay put in Minneapolis and Covidien’s operates out of Mansfield, Massachusetts.

Not all inversion attempts are going forward, it should be noted. Pfizer’s attempt met with stiff resistance in Britain, which feared that cost-cutting Pfizer would eviscerate AstraZeneca’s strong research efforts. Pfizer withdrew.

Walgreen, the 113-year-old Illinois-based drugstore chain, was hit with resistance on this side of the Atlantic when it planned an inversion as part of its acquisition of Alliance Boots, a British drugstore chain.
Walgreen derives nearly all sales and profits from its 8,700 stores in the U.S. and almost a quarter of its $72 billion in revenue comes from sales to Medicare and Medicaid. The “betrayal” had earned the company adjectives such as “unfair, “unconscionable” and “
deeply unpatriotic”. It decided to back down.

But there are many more intended inversions in the pipeline, scrambling to flee before Washington shuts the valves.

money in exile

High taxes are not the only reason for U.S. corporations to take flight. Our multinationals have an enormous and growing horde of cash lying offshore which can be put to use in an inversion. Profits from foreign operations had grown to $1.5 trillion at the end of last year, says The Wall Street Journal, but there they sit because to bring them home means paying that 35% (net of taxes paid to the local countries).

Companies have been angling for years for a special deal to bring those profits home, like the one-time dispensation awarded by the George W. Bush administration in 2004, which cut the tax rate to 5.25% on repatriated profits. With no movement toward a repeat of that deal — which didn’t go well, as we reported three years ago — U.S. companies with billions stashed abroad have borrowed heavily here for purposes of stock buybacks and dividends rather than bring the money home and suffer the tax hit. Apple, for example, sits on $132 billion at its foreign subsidiaries yet the company floated bond issues in this country of $12 billion this year and $17 billion last year to buy back its own stock.

Inversions provide an outlet for the cash stash. The money can be used to finance buying the foreign company in the inversion deal, and can then be employed in the combined venture. Those stranded profits become money that is never coming home.

all talk

There have been repeated proposals to drop the rate to, say, 25%, and get rid of the loopholes that result in an effective tax rate well below the posted 35%. A study by Citizens for Tax Justice reports that of the 288 corporations that were profitable between 2008 and 2012, the average tax rate was 19.4%.

But the averages mask the inequities in the American tax hairball. Companies whose business is solely in the U.S. — food chains, retailers, railroads, truckers, for example — are exposed to the full 35% (more like 40%, counting state and local taxes), whereas companies with extensive foreign operations or transferrable intellectual property such as pharmaceutical patents and software have had at their disposal a wealth of devices to evade U.S. taxes. Thus we see General Electric pay a tax rate of 3.6% in the three year stretch ending in 2012, while retailer Wal-Mart was saddled with 33.6%.

To “level the playing field” and make a tax rate cut revenue neutral — that is, to bring in the same amount of tax income — all tax breaks must be eliminated, even those judged as worthwhile, according to Congress’s nonpartisan Joint Committee on Taxation. That’s when we would see that “businesses all want to get rid of the other guy’s tax deductions”, Sen. Carl Levin pointed out in the Times.

maybe, then nowhere near

It looked last year as if Congress would finally get serious about tax reform. The bipartisan and bicameral combination of Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways and Means Camp had worked for years on tax reform that would have cut the rate to 25%. But unity
did not extend to the rest of Congress. Sensing futility, Baucus accepted a posting to China as U.S. ambassador. Camp labored on and presented a comprehensive plan to overhaul taxes, both corporate and personal, early this year. Too boring for House Speaker John Boehner — “ Blah, blah, blah” was how he greeted this work of unparalleled importance. In February, with the entire rest of a year stretched out before him, Boehner announced that the House would not address tax reform in 2014. After all, it’s an election year, and the sole job of Congress is to keep their jobs in Congress. The business of the country will just have to wait. Dave Camp announced that he, too, would leave.

That spectacular indifference is what probably set off the wave of companies looking for foreign companies to buy or merge into. And Wall Street, seeing the opportunity to broker major deals, is in a scramble to oblige in finding compatible un-same-tax marriage partners.

Sen. Ron Wyden, the Oregon Democrat who has shown a willingness to work across the aisle, and who has effectively taken Max Baucus’ place on the Senate Finance Committee, said in a May Wall Street Journal op-ed that it is a mistake to blame “these runaway corporations alone and simply question their morality or patriotism…that would be ignoring our own failure to bring the tax code into the 21st century”. He advocates cutting the rate to 25% and eliminating loopholes as an immediate fix, but that’s for now. He advocates that we switch to a territorial tax structure.

And that would be the ultimate and most sensible fix. All the countries in the G-8 save ours and 26 of 34 member countries of the Organization for Economic Cooperation (OECD) have territorial tax schemes. It means a company, irrespective of where it is domiciled, pays taxes to a country only on the profits it has earned in that country. It is arguable that a state has no justification for taxing that portion of a business’s sales and profits that are generated entirely in another country. Shouldn’t we adopt a “territorial” tax scheme whereby profits earned in other countries not be taxed here at all?

Or, rather than profits earned in a particular country, given how their distribution is manipulated, why not adopt what is called “unitary” taxation. Under that arrangement, irrespective of where corporate tax departments have shifted them, a corporation’s worldwide profits would be apportioned to countries according to a formula based on assets, sales and other activity in each jurisdiction. Such a scheme would rid the world of accounting legerdemain, bogus transfers of intellectual property, tax havens, domiciles shifted here, headquarters there — the works.

It also has the effect of freeing a country to charge what it thinks appropriate as a tax rate without concern for other countries’ rates. If you want to sell in our country, each can say, here’s what you will pay.

That it is so hard to imagine the United States acceding to such a plan shows how ossified the thinking has become in this country.

Gaza: What the Media Has Failed to Report

Astounding! 57,000 Border Kids and Congress Goes on Vacation

Frantic to head home for August, the House at the last minute passed two stopgap immigration bills after the extraordinary spectacle of Senator Ted Cruz (R-Tx) crossing to the other side of the Capitol to rally a Tea Party uprising against House Speaker John Boehner, who was desperate to pass something.

But the bills, one authorizing $659 million were just window-dressing, a pretense of doing that something, because the Senate had scattered to the fifty states for its own recess.

So nothing went forward and our entire Congress, leaving what to do about more than 57,000 Central American youths unattended to, skipped town for five weeks of what we call vacation but they call their “district work period”. Seriously. That’s what they call it.

It was Harry Truman who came up with the “do nothing Congress” label that we use today. But the Congress of his day passed 906 bills; today’s 113th Congress has passed only 142 so far this year. It set a record last year by passing the fewest bills in its modern history. But it is now well along this year to break last year’s record of doing nothing (see chart below) with the least productive year since someone began counting in the late 1940s.

And it’s worth mentioning that of the 142 many are mere expressions of sentiment that evanesce without a trace. To avoid the controversies that attend dealing with the nation’s problems, congressional members prefer the safety of passing innocuous resolutions — such as declaring “National Aphasia Awareness Month” (You weren’t aware?), commemoration of the centennial of Webster University, or honoring George and Barbara Bush on their birthdays.
Bloomberg/Business Week produced this remarkable chart
(too big for this page) that’s worth spending some time with which you can access by clicking its reduced image. It shows how many bills Congress actually did churn out in 2013 — about what, we are left to wonder — but how few come up for a vote and are passed. Almost all of Congress’ work product goes nowhere. But you can bet that members head home to boast of those bills to nowhere, leaving folks in their district to assume they went somewhere. Perhaps that was their sole purpose.

To give credit where due, Congress did arrive at a bipartisan $17 billion veterans bill that would speed access to hospital care outside VA hospitals and give the VA secretary the power to fire venal and corrupt Veterans Administration executives. But consider what they didn’t do.

Congress’s not-to-do list

The failure to deal with immigration is nowhere near all that Congress failed to do. We here offer a list of some of the avoided major items:

Congress ignored the public by failing to increase the minimum wage, favored by 71% per CNNMoney’s poll and 73% at Pew Research. You could say that Congress allowed the minimum wage to be reduced. Inflation, however low, has nevertheless chewed away at the buying power of the $7.25 an hour floor set five years ago.

Nothing further was attempted on gun control after a filibuster a year ago April defeated a bill in the Senate to expand background checks, a measure that over 90% of Americans wanted then and now, as seen in these polls conducted as recently as this June.
In the meantime, 74 school shootings since Newtown, Connecticut, and 82 shot in Chicago over the July 4th weekend.

Congress fell short of reducing student loan interest rates, penalizing millions who sought college educations. They are left still paying 6.8% interest whereas banks can borrow from the government at near 0%.

The U.S. Postal Service posted a loss of $5 billion again because Congress has failed for years to relax its choke hold.

The five-year transportation bill expires at the end of September with Congress frozen in inaction. The Congressional Budget Office calculates that the balance in the trust fund’s highway account will fall to $2 billion by then, and its mass-transit account to only $1 billion. There are 700,000 jobs at stake.

The chart dramatically shows how unproductive Congress has become.The Transportation Department grades U.S. infrastructure with a “D” (there are some 63,000 bridges that are no longer structurally sound) but Congress refuses to spend, citing annual deficits and the $17.6 trillion national debt. “I haven’t heard a good reason why they haven’t acted,” chides Obama. “It’s not like they’ve been busy with other stuff”.

What’s needed to pass a bill, says Sen. Dick Durbin (D-Il), is an end the pesky moratorium on earmarks agreed to after the embarrassing $223 million slab of pork that was voted for Alaska’s “bridge to nowhere”. Durbin says earmarks are the “glue” that holds the transportation bill together. They “create a much better and more positive feeling”, Durbin told reporters. “The ‘positive feeling’ is the joy of spending other people’s money”, said retiring Sen. Tom Coburn (R-Ok) in a scornful Wall Street Journal op-ed.

The new U.S. fiscal year begins in less than three months with no movement on budgets — and Congress vacations for most of August and into September. Of course, the House and Senate haven’t passed the dozen appropriation bills needed to run the government in time for the October 1 deadline in almost two decades. Instead we will again run on the fumes of “continuing resolutions” — if even those can be agreed to. Otherwise, another government shutdown looms.

The need for tax reform is dire. Seemingly everyone, the president included, believes that the corporate profit tax rate, at 35% the world’s highest, must be lowered if the U.S. is to compete. Representative Dave Camp’s (R-Mi) committee had worked for months on a comprehensive reform proposal that was presented early this year. Too boring for House Speaker John Boehner (“Blah, blah, blah” was his reaction). The committee’s work was ignored and Camp is quitting the House. So are many others leaving Congress — members of what congressional scholar Norman Ornstein calls the “problem solving caucus”. They find continuance futile and will leave behind a body of increasingly uncompromising ideologues.

After years of hearing pledges from Congress to cut corporate tax rates, Boehner’s message was heard loud and clear. The consequence of Congress doing nothing is that fed up corporations are fleeing the U.S. using a maneuver called “inversion”. By merging with or acquiring foreign companies, they contrive to move their tax domicile to countries where profits will be taxed at much lower rates. The U.S. Treasury will be taking serious hits as this maneuver is becoming increasingly popular while Congress slumbers.

As for doing nothing on immigration, in the midst of World Cup Luis Gutiérrez (D-Ill) stood on the House floor and gave fellow members a red card for doing nothing. “You’re done…leave the field”.

But Congress members are not entirely inactive. With 5th Amendment evasions and vanished e-mail, the I.R.S. scandal keeps them preoccupied and half the members of the House asked to join the committee investigating Benghazi for — where are we? — the eighth time? As for Congress members left out of those proceedings? We hear they fill their time with an increase in free travel junkets paid for by corporate interests [link]. The House ethics committee attempted to hide that by eliminating the requirement that members report such swag, but they were caught in the act and had to reinstate it.

Small wonder then that public approval of Congress dropped to 7% in a June Gallup poll.

These people cost taxpayers a mountain of money. Uniquely, Michigan Republican Congressman Justin Amish thinks we should know what he
Staff costs as reportedon Congressman
Justin Amish’s website.
costs us. With remarkable candor (considering Congress’ more prevalent view that such things are none of our business) his website lays out his staff’s salary in this table, and the accompanying test spells out his own paycheck and the lavish benefits he and his employees enjoy. Multiply that times 434 other representatives, many of whom probably cost far more (Amish is a newcomer). As for the regal Senate, who knows what they cost us.

Claims of Media Bias Arise in Gaza Coverage