The Wonk Room

U.S. Falls To 12th In The World In Percentage Of Young People With A College Degree

When it first came into office, the Obama administration said that one of its primary education goals is making the U.S. the country with the highest proportion of college graduates in the world by 2020. “In a global economy where the most valuable skill you can sell is your knowledge, a good education is no longer just a pathway to opportunity — it is a prerequisite,” Obama said.

But reaching that goal has only gotten harder in recent years, as America’s educational attainment has plummeted. According to a new report by the College Board, the U.S. is now 12th among OECD nations in the percentage of 25-34 year olds with a college degree:

Canada is number one in terms of attainment, with 56 percent of 24-35 year olds obtaining a college degree, compared to 40 percent of Americans. Two years ago, the latest data put the United States tenth. “The growing education deficit is no less a threat to our nation’s long-term well-being than the current fiscal crisis,” said Gaston Caperton, the president of the College Board.

To get a sense of how much has to be done to catch up, consider that “the U.S. would have to add 1 million college degrees per year through 2025, on top of the 2 million degrees already awarded annually, to reach 56 percent.” Part of the problem here is that the U.S. is also falling behind in terms of percentage of the population that even attends college. Just 35 percent of 18-24 year olds were enrolled in some form of higher education in 2008, according to the National Center on Public Policy and Education, compared to more than 50 percent of South Koreans.

In order to address this problem, policymakers will have to do many things, but one of the first is improving educational opportunities for minorities:

Part of the challenge in reaching the goal of 55 percent of young Americans with an associate degree or higher lies in erasing disparities in educational attainment for low-income students and underrepresented minorities. By eliminating the severity of disparities between underrepresented minorities and white Americans, it is estimated that more than half the degrees needed to meet the 55 percent goal would be produced.

The Lumina Foundation estimates that the American economy will face a shortage of 16 million college educated workers by 2025. As former President Bill Clinton said, falling educational attainment is a real problem and “we are headed into long-term economic decline if we don’t do something about it.”

Chamber Shows It’s Beholden To Big Business By Sitting Out Debate On Small Business Lending

The U.S. Chamber of Commerce likes to portray itself as a defender of all businesses, big and small. During the debate over financial regulatory reform, the Chamber continually ginned up concern about the bill’s impact on small businesses, falsely claiming over and over that the new regulations would restrict credit for butchers and florists. The Chamber even flew in a host of small business owners to lobby lawmakers on the matter.

Today, meanwhile, the Chamber is hosting an event entitled “Behind the Curtain: The Health Care Law’s Impact on Small Business,” which the Chamber claims is aimed at “placing the spotlight directly on the entrepreneurs who will feel the financial and regulatory impact of the health care law – some of the people who constitute the nation’s real economic engine, who are the key to creating enterprise and lifting the U.S. out of the recession.”

But while it is content to use small businesses as a shield against legislation that it doesn’t like, the Chamber’s recent actions show that it isn’t really interested in helping those businesses get through the recession. After all, the Senate last week cleared a procedural hurdle towards passage of a bill providing $30 billion for small businesses lending. But as Bloomberg News noted, while the debate was going on, the Chamber was “mostly silent”:

Bruce Josten, the top lobbyist for the Chamber, Washington’s biggest business advocacy group, wrote lawmakers on July 23 saying it supports the underlying tax and Small Business Administration provisions. The letter doesn’t mention the $30 billion fund, and the Chamber doesn’t have a position on it, spokesman J.P. Fielder said in an e-mail. He declined to say why.

The lack of support coming from the Chamber has small businesses riled up. “Credit [for small businesses] is a terrible problem,” said Fred Knapp, president of the South Carolina Small Business Chamber of Commerce (which has no relation to the U.S. Chamber). “These groups are tied to big businesses. That’s all this is about.”

As James Verini pointed out in the Washington Monthly, far from being a defender of all businesses, the Chamber is “beholden to a cadre of multinationals whose interests are often inimical to those of small business. In 2008, a third of its revenues came from just nineteen companies.” Indeed, on everything from health care to regulatory reform, the Chamber took the position that favored huge corporations and kept small businesses at a competitive disadvantage relative to the big guys.

In another example, the Chamber is currently lobbying the Senate against Democratic plans to close tax loopholes that multinational corporations use to dodge the corporate income tax. Such tax evasion shifts the tax burden back onto small businesses and individuals who pay the full statutory tax rate, but the Chamber is siding with the tax dodging multinationals.

As my colleague Brad Johnson has documented, the Chamber’s Board of Directors is also “overwhelmingly Republican, having contributed six to one to conservative over liberal politicians.” And it’s telling that the Chamber refused to weigh in on the one piece of legislation currently before the Congress that could provide some aid to ailing small businesses, but which Republicans have been obstructing.

Deficit Fraud Pence Promises GOP Will Throw ‘Everything We’ve Got’ Into Extending Tax Cuts For The Rich

According to a spokesman quoted in today’s Wall Street Journal, Senate Majority Leader Harry Reid (D-NV) plans to address the scheduled expiration of the Bush tax cuts in September. The goal, which President Obama campaigned on, is to renew the cuts for the lower- and middle-class while allowing the cuts for the rich to expire.

Republicans, meanwhile, are throwing their full weight behind renewing the cuts for the rich, with many stating on the record that extending those cuts shouldn’t be paid for. (Extending the cuts for the wealthy is subject to pay-go rules, meaning that pay-go would have to be waived in order to pass the extension without paying for it.) In fact, Rep. Mike Pence (R-IN) said over the weekend that House Republicans will throw “everything we’ve got” into extending the tax cuts for the rich.

But just one day before promising to go to bat for the rich, Pence was excoriating the Obama administration about the deficit. “This year alone the deficit is projected to surpass last year’s record and soar to $1.47 trillion,” Pence said. “We cannot continue to postpone the hard choices and sacrifices that are necessary to stop this fiscal train wreck.”

Of course, Pence’s preferred outcome when it comes to tax cuts would add at least $678 billion to the deficit, while only benefiting the richest two percent of the country. Inclusive of debt-service costs, it’s closer to $800 billion. And Congress would have to waive the pay-go law that Democrats worked to put in place in order to do it.

This all combines to make Pence the epitome of a deficit peacock: scaremongering about the deficit to score political points, but fundamentally disinterested in taking the necessary steps to rein in the deficit. Allowing the tax cuts for the wealthy to lapse is a common sense first step in getting the long-term structural deficit under control (as the Bush tax cuts are one of its primary drivers), but Pence scoffs at the very idea.

As Treasury Secretary Tim Geithner said on Meet the Press yesterday, “I think it is fair and good policy to allow those tax cuts that only go to two to three percent of the highest earners in the country to expire as scheduled.” Geithner added that “we have to make sure we can continue to earn confidence around the world that we’re going to have the will as a country to bring these large inherited deficits down over time to a much more manageable level.”

Incidentally, in the same speech in which he proved his complete lack of concern about the deficit, Pence also tried to claim that Democrats favor allowing all of the Bush tax cuts to expire at the end of the year. Politifact rated his statement “false,” adding that it “verges on a scare tactic.”

Rep. Camp Justifies Corporate Tax Dodging, Says It Means The Corporate Tax Rate Should Be Cut

This week, the Joint Committee on Taxation released a report looking at six different U.S. companies — identified simply as Alpha, Bravo, Charlie, Delta, Echo and Foxtrot — and the ways in which they take advantage of the loophole-ridden U.S. tax code to evade the corporate income tax. The six companies “reported effective tax rates at least 10 percentage points lower than the U.S. statutory rate for a period of years.”

One company in particular, which was labeled “Delta” in the report, makes about half of its income in the United States, but counts far less as subject to U.S. taxes. “Approximately 45 to 55 percent of Delta’s revenue is from U.S. operations, but an average of only 10 percent of its earnings before income taxes are reported as U.S. earnings,” the report shows.

Some House Democrats, as well as the Obama administration, have attempted for the last two years to crack down on this sort of reclassification of income for the purpose of tax dodging. Multinationals “shift the burden of paying for our national security and homeland security and other public services to small businesses and family taxpayers, who play by the rules and do not engage in these shenanigans,” said Rep. Lloyd Doggett (D-TX).

Rep. David Camp (R-MI), however, justified the tax dodging, saying that if the U.S. just cut its corporate tax rate, such evasion wouldn’t happen:

[Camp] criticized the pamphlet for focusing on what the authors acknowledged did not attempt to be a representative sample of companies. He said the U.S. statutory corporate income rate of 35 percent, now the world’s second highest, “puts pressure” on companies to shift income.

First, Camp is characterizing the U.S. corporate tax rate as the world’s second-highest, which, while true on paper, does not account for the myriad credits, deductions, and straight-up loopholes that are available for corporations to lower their tax rate. Despite having a higher rate than many developed countries, the U.S. raises far less in corporate revenue. In fact, “the U.S. Office of Management and Budget estimates corporate tax receipts will account for just 7.2% of federal revenues in 2010, with large corporations contributing less than one-sixth as much as small business and individual taxpayers to the Federal Treasury.”

But furthermore, Camp is entirely dismissing huge multinationals dodging taxes, which shifts the tax burden onto individuals and businesses that don’t engage in such avoidance, and who ultimately have to pay more to make up for the lost revenue. Annually, individual and corporate tax evasion results in a $100 billion burden being dumped back onto those who pay the full statutory rate.

There can be a legitimate debate over whether the statutory rate is too high, but enforcing payment of the rate that is on the books shouldn’t be controversial. To that end, Doggett has introduced the International Tax Competitive Act of 2010, which “would treat a company as a U.S. company for tax purposes if its management and officers with day-to- day control are located in the U.S., even if its paper incorporation is offshore.”

Conrad Pushes Temporary Extension Of Bush Tax Cuts, Calls GOP Tax Plan A Formula For U.S. Decline

Earlier this month, Sen. Evan Bayh (D-IN) said that he agreed with Rep. Eric Cantor’s (R-VA) assertion that all of the Bush tax cuts should be extended, even those for the richest two percent of Americans. The Obama administration has proposed retaining the cuts for the lower- and middle-class while allowing those for the rich to expire on schedule at the end of the year.

Yesterday, Sen. Kent Conrad (D-ND), the chairman of the Senate Budget Committee, called for a temporary extension of all the cuts, including those for the wealthy, adding that “he thinks waiving so-called pay-go rules to extend the upper income rates should be considered”:

“Pay-go is not just a line in the sand,” he said. “There is a reason that you have a pay-go waiver, which requires 60 votes.”

Today, Conrad clarified that he is by no means endorsing the Republican line on a deficit-financed permanent extension of all the Bush tax cuts, saying that “the Republicans’ proposal to me is a formula for the decline of the United States.” His position is that the tax cuts for the rich should only be extended for 18-24 months, “until the recovery is on more solid ground.”

While Conrad’s position is far more nuanced than that of the Republicans, extending the Bush tax cuts is still one of the least stimulative steps that policymakers can take to boost the economy, generating just 29 cents of economic activity for every dollar spent (since the benefits overwhelmingly go to the wealthy, who are far more likely to save a dollar received than is someone from the lower- or middle-class). Extending all of the cuts for two years would cost $558 billion, including debt service costs, according to the Pew Fiscal Analysis Initiative.

Today, when asked if Democratic leaders are willing to consider extending all of the Bush tax cuts, Speaker of the House Nancy Pelosi (D-CA) said, “No. Our position has been that we support middle-income tax cuts.” Treasury Secretary Timothy Geithner also reiterated the administration’s position today:

Mr. Geithner said there is “still some uncertainty about how strong the recovery is going to be,” which may be impacting spending decisions by businesses and individuals. But he discounted that as a reason to extend the Bush-era tax cuts for top earners, saying most private forecasts show moderate economic growth and increasing public confidence in the recovery.

Yesterday, Sen. Ben Nelson (D-NE) “said through a spokesman that he also supported extending all the expiring tax cuts for now, adding that he wanted to offset the impact on federal deficits as much as possible.”