Monday, December 31, 2018


Facing possible liquidation, Sears to close 80 more stores in March

Sears Holdings has announced plans to close 80 more Sears and Kmart stores across the US in March, in addition to the nearly 200 stores already set for closure. In October, the retailer filed for bankruptcy and was operating nearly 700 stores, saying it would close only 142 unprofitable stores. The next month, it was announced that 40 additional stores would be closed.
Workers at the stores in the latest round of closures were told that liquidation sales would begin in two weeks and that adjacent Sears Auto Centers would also be shut down.
Sears Chairman and former CEO Eddie Lampert has offered to buy Kmart and Sears out of bankruptcy through his hedge fund ESL Investments. Transform Holdco LLC, an affiliate of ESL, submitted a last-minute bid on Friday to purchase all the assets of Sears Holding, with 425 stores valued at $4.4 billion. This includes a $1.3 billion financing commitment from three financial groups.
The company and its advisers now have until January 4 to determine whether the bid is “qualified.” Transform said that if the bid is successful the company that emerges will employ up to 50,000 people, of the existing 68,000 employees.
Lampert had made a $4.6 billion proposal to buy the company on December 6. The deal included 500 stores, the Kenmore appliance and DieHard Tool brands, 50,000 employees, key real estate and the company’s inventory and receivables.
Sears faces liquidation if the latest offer is not approved by a bankruptcy judge. Recently, US Bankruptcy Court Judge Robert Drain allowed the company to sell its home-improvement service business to for $60 million. The company, once an icon of American capitalism, has been suffering for years as it faces competition from online retailers like
For much of the 20th century Sears was not only the nation’s largest retailer, but also its largest private-sector employer. With hundreds of stores across the country as well as a catalog which sold countless items, it was the mainstay of many communities and towns.
In 2005, Lampert used Kmart, which he bought out of bankruptcy two years before, to purchase Sears for $11 billion and then merged the two. He later resigned as CEO but remained on as chairman.
The fate of Sears follows a long line of mergers and acquisitions in recent years which have decimated the retail industry. The buyouts are a desperate attempt to avoid bankruptcy and outright liquidation by corporate sharks. In May it was announced that the retail industry was responsible for one third of all job cuts last year alone.
The stagnation of workers’ wages and declining working conditions means fewer purchases of goods and services from retailers like Sears, who face monopoly competition from Amazon and other retailers. The loss of Sears stores will hit the poorest communities the hardest, as the last avenues of employment dry up.
Since 2011, Sears lost over $11 billion, including $5.8 billion in the last five years. More than 1,000 stores have closed in the last decade, 700 stores just in the last two years.
Lampert’s bid to buy Sears follows the trend of the growing financialization of US capitalism. ESL Investments, Lampert’s hedge fund, already holds around 40 percent of Sears Holding’s debt—$1.1 billion in loans.
Should Sears survive outright liquidation, its “rescue” will come at the expense of the remaining workers who will be forced to work harder and longer for less pay to ensure company profits.

One year since Trump’s tax cuts: a balance sheet

Stock buybacks reach $1 trillion

December marked one year since the passage of Trump’s corporate tax windfall legislation, cutting the corporate tax rate from 35 percent down to just 21 percent. Officially known as the “Tax Cuts and Jobs Act of 2017,” the legislation handed some $1.5 trillion to the major corporations and the super-rich while leaving the working class to shoulder the burden.
As we predicted in its December 21, 2017 perspective, the bill “marks a new stage in the decades-long social counterrevolution in the United States. It will make America, already the most unequal advanced economy in the world, far more unequal, entrenching the rule of an unaccountable financial oligarchy.” One year later, a balance sheet of the legislation’s effects on American society confirms this analysis.
In October, the United States Treasury announced that the federal budget deficit has risen to $779 billion, up 17 percent from the previous fiscal year. The Congressional Budget Office (CBO) issued a report in April projecting the national debt will now increase by $1.9 trillion over the next decade. The spike in the deficit will precipitate a new round off assaults on the few remaining social programs in the US—above all, Social Security, Medicare, and Medicaid.
After-tax profits rose nearly 20 percent in the third quarter from the previous year as a result of the cuts, while wage growth remained static. After-tax corporate profits are now growing nearly 10 percent faster than pre-tax profits, a phenomenon which usually only occurs around recessions. The first three quarters of this year saw enormous tax savings for some of America’s largest corporations. Walmart saved $1.6 billion, with Bank of America saving $2.4 billion. AT&T and Verizon saved $2.2 billion and $1.75 billion, respectively. Apple alone has collected a whopping $4.5 billion.
Corporate spokesmen and media pundits at the time had made promises of raising wages, handing out bonuses and creating new jobs. In reality, the handouts in the form of bonuses and raises for workers amounted to a small fraction of the $200 billion in savings on income tax. A recent report by the Economic Policy Institute estimated that bonuses gave workers only 2 cents more per hour over the past year. Wages overall have increased only 3.1 percent over the course of the year, barely keeping up with the rate of inflation. By comparison, dividend payouts to corporate shareholders have set a new annual record of $420 billion. The majority of the payouts went to the wealthiest 10 percent of the US population, which owns 84 percent of all stock holdings.
Capital investment—intended to fund research and development and create jobs—rose at the beginning of the year only to fall sharply in the third quarter. Conversely, stock buybacks—a method by which a corporation repurchases shares in order to artificially inflate their value without creating anything or hiring employees—surged to previously unseen heights.
The total amount of S&P 500 company buybacks alone neared $200 billion in the third quarter, with a total buybacks reaching $579 billion for the first nine months of 2018. The total amount of buybacks is expected to top $1 trillion by the end of the year, according to Goldman Sachs analysts. This is almost double the amount of the previous annual buyback record of $589 billion in 2007—the year that began the financial meltdown that triggered the worst recession since the Great Depression.
It is now clear the vast majority of corporate spending from the tax cut has gone to the further enrichment of a tiny parasitic layer of investors and CEOs. Whatever expenditures made on paltry handouts to workers have been dwarfed by buybacks and dividends, a financial orgy that once again threatens another and even greater financial meltdown. The events of the past year once again underscore the deeply intractable crisis of capitalism, marked by a degree of financialization of the world economy that has long ago surpassed the point of no return. Profit is now primarily made not through the growth of the productive forces, but rather, through their destruction.
In fact, many corporations have instead carried out layoffs in spite of their surge in profits. General Motors (GM) has announced plans to lay off 15,000 workers and shut down five plants in the United States and Canada, along with two unspecified plants internationally. While GM is planning to cut $6.5 billion in costs, it has squandered over $10 billion in stock buybacks and dividend payouts for its richest investors since 2017, and $25 billion since 2012.
Bank of America has cut 5,000 jobs this year alone. Bank of America CEO Brian Moynihan has cited the growth of automation and online banking as the impetus for the layoffs. According to Moynihan himself, the corporation has cut 100,000 jobs since 2010 when he took over the company. Wells Fargo, another bank that has made billions from the cuts, followed suit in an announcement that it plans to downsize its work force by up to 10 percent. This came shortly after an announcement of $40 billion in stock buybacks since the law passed.
AT&T slashed more than 10,000 union jobs this year in an acceleration of layoffs from last year. Verizon has laid off 3,100 employees this year, while announcing a buyout offer cutting an additional 10,000 workers. The company recently made the decision to outsource 2,500 jobs to Infosys, a large Indian technology firm.
The trade unions representing many of the affected workers, such as the United Auto Workers (UAW) and Communications Workers of America (CWA), have directly collaborated in imposing the layoffs and plant closures.
The Democratic Party offered only nominal opposition to the tax cuts. While voting against the legislation last year in a party-line vote in both the House and Senate, the Democrats are not proposing to introduce legislation to repeal the cuts once they regain control of the House of Representatives January 3—neither partially nor as a whole. The Republican Party introduced legislation to repeal, deauthorize, defund, or otherwise do away with Affordable Care Act (ACA) 83 times during Obama’s presidency. The Democrats are opposed to even a symbolic gesture against the tax cuts, as doing so would risk alienating the party from its corporate base.

Trump’s Gentrification Scheme to Enrich Real Estate Developers

A tax loophole intended to help the poor is funneling money to wealthy investors.


December 28, 2018

Buried within the more than 500 pages of Donald Trump’s 2017 tax cut was an unobtrusive line item with potentially damaging consequences. Proposed by Senator Tim Scott of South Carolina, the provision allows governors to select certain census tracts in their states, in economically distressed areas, as “opportunity zones.” The Treasury certified the last of these zones in June, bringing the total number to 8,700. Now, investors who fund projects in these areas will get sizable tax breaks—even on unrelated investments. As long as they dump profits into a fund earmarked for the opportunity zones, they can defer or even eliminate the capital gains they would otherwise have owed.

Some of the census tracts that have been identified as opportunity zones may be truly distressed. But it’s dubious whether others should qualify—this summer, for example, much of Long Island City in New York was named an opportunity zone. Now that Amazon has announced it’s moving one of its two HQ2 branches there, the retail behemoth could nab a $225 million tax break simply because the site happens to fall in one such zone—this, on top of the $1.7 billion New York has already offered Amazon. Investors who purchase apartment buildings for the influx of tech employees will also see tax breaks. So will anyone building office parks, or grocery stores. That money may well be better spent elsewhere, but during the debate over the tax bill, such questions received very little attention. Neither, really, did the zones themselves. Since its passage, though, President Donald Trump has enthusiastically promoted the plan, issuing press releases boasting that “new investment will flow into blighted developments, stalled infrastructure projects, and other desperately needed economic enhancements” and create fiscal improvements that will “help turn dreams to reality.”
The thinking behind the zones reflects Republican faith in privatization as a cure-all. If Trump has departed from conservative orthodoxy on trade and entitlements, he is squarely with the party when it comes to this issue. On the campaign trail, he promised to spend $1.5 trillion on the country’s infrastructure, but when the details of his plan were released a month before the election, it was merely a proposal to privatize roads, bridges, and waterways. Trump has similar plans for the nation’s air traffic control system, the Department of Veterans Affairs, and even the Postal Service. Each one offers huge upsides for a select group of financiers and business owners, but does little to nothing for the American people.

None of these promises has fully gone into law—apart from opportunity zones, the first of which the Treasury implemented this spring. Since then, a number of funds have cropped up to cash in on the boom. Anthony Scaramucci, who served as Trump’s director of communications for all of ten days, plans to launch a $3 billion “opportunity fund” at his hedge fund Skybridge Capital. Cadre, the real estate crowdfunding platform partially owned by Jared Kushner and his brother, Joshua, is also focused on exploiting the zones. As Charles Clinton, the CEO of EquityMultiple, a real estate investment startup, said in September, they are “one of the biggest real estate investment opportunities in decades.” 

Similar efforts have been undertaken in the past. In the 1980s, Margaret Thatcher created eleven “enterprise zones” in the United Kingdom, which produced fewer jobs than promised. Each cost the government between $35,000 and $45,000, indexed for inflation. The areas are still home to some of the poorest people in the country. During the 1990s, Bill Clinton set up 104 “empowerment zones” in six urban areas around the United States, including Atlanta, Baltimore, and New York, as well as three rural areas, in Kentucky, Mississippi, and Texas. Clinton’s plan (unlike Trump’s) tried to encourage not just capital investment, but also hiring and upfront investments in equipment. But research on empowerment zones has found that they had little to no effect on economic growth or poverty. They were expensive, too, costing $850 per resident.

One of the reasons why these zones often fail to deliver an economic boost is that governors and investors tend to pick areas that are already on an upswing. (Long Island City is a good example; it had been gentrifying for years before Andrew Cuomo nominated it as an opportunity zone.) In May, the Urban Institute found that 28 percent of the census tracts governors had designated as opportunity zones already benefit from some of the highest levels of private investment. They’d be attractive areas in which to invest with or without a big tax giveaway. In other words, opportunity zones are a massive handout for investors, and there is scant evidence that they bring investment to the places that need it most.

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Of course, Trump himself has experience bilking tax breaks and subsidies to make massive profits. He accumulated at least $885 million in tax breaks, grants, and other subsidies from New York to build his empire of hotels and high rises, according to The New York Times, including the longest tax abatement the city ever handed out, 40 years, to rehabilitate the Grand Hyatt Hotel in the ’70s. He even pocketed $150,000 from a fund meant to help small businesses damaged in the September 11 attacks. (He owned a Wall Street skyscraper not far from Ground Zero, but it wasn’t damaged when the planes hit the Twin Towers.) Trump may be the country’s preeminent expert in spotting a government handout to developers and squeezing it for all it’s worth. It’s no surprise that he’d be as excited to stamp his name on these opportunity zones as he would one of his hotels.

Trump may be the country’s preeminent expert in spotting a government handout and squeezing it for all it’s worth.

But these misguided policies have lasting consequences. For one, there is no way to ensure that investors who were already planning to put money into housing or infrastructure don’t just decide to do it in opportunity zones to reap the tax benefits. Second, the zones typically allow investors to retain complete control over their projects. After state governments designate the areas, local communities get no say over what is invested in and by whom. Don’t like the new toll road in your town financed by a hedge fund? You may have no way to vote it down or give input into how it’s implemented.

There’s a better way. Lyndon Johnson’s Great Society directly financed construction across the country. Dwight Eisenhower built the country’s network of highways. The bipartisan Community Development Block Grant program, enacted in 1974 by Republican President Gerald Ford, gives local communities money for projects they decide are most important for their economies—a program that Trump wants to eliminate.

The Joint Committee on Taxation has estimated that the tax incentives in opportunity zones will cost $1.5 billion a year for the first eight years. Just think what that money could do if directed to build new water lines in Flint, affordable housing in Fresno, decent school buildings in Baltimore, or better roads in Akron. Bankers on Wall Street might not get a payday. But do we care more about their dreams, or those of poor residents in neglected communities? 

TRUMPERNOMICS FOR THE RICH…. and his parasitic family!
Report: Trump Says He Doesn't Care About the National Debt Because the Crisis Will Hit After He's Gone

 "Trump's alleged comment is maddening and disheartening,
but at least he's being straightforward about his indefensible
and self-serving neglect.  I'll leave you with 
this reminder of the scope of the problem, not that anyone in power is going to do a damn thing about it."


"The tax overhaul would mean an unprecedented windfall for the super-rich, on top

of the fact that virtually all income gains during the period of the supposed

recovery from the financial crash of 2008 have gone to the top 1 percent income


“The undermining of the I.R.S.’s enforcement capability coincides nicely with the Republican playbook: Enrich wealthy individuals and corporations with tax giveaways that balloon the deficit, justifying spending cuts for health care, education and infrastructure, then amplify the process by not holding high-end taxpayers accountable for the amounts they owe.”

A Gutted I.R.S. Makes the Rich Richer

With enforcement enfeebled, as much as 20 percent of potential tax revenues go uncollected.
By The Editorial Board

The editorial board represents the opinions of the board, its editor and the publisher. It is separate from the newsroom and the Op-Ed section.
Let’s take a moment to pity the Internal Revenue Service. Yes, to many Americans, it’s a money-grabbing ogre siphoning hard-earned cash to the faceless federal bureaucracy.
But the nation’s tax collector today is an enfeebled enforcer. Its budget has been bled dry by a Republican Congress in service to wealthy donors and businesses aggressively pursuing tax avoidance, leaving uncollected 18 percent to 20 percent of potential tax revenues annually. That’s the conclusion in articles by the journalism site ProPublica, co-published by The Atlantic and The Times.
Loopholes are beyond the means of most Americans who earn salaries or are paid hourly wages, and are exploited by those who derive significant income from investments or business revenue. Although we’d all like to pay less, relative to most developed nations our tax burden is a pretty good deal.
It’s an even better deal for the richest Americans, who have benefited the most from President Trump’s tax cuts. The rich are different: They’re more likely to cheat, according to one study of I.R.S. data. And the I.R.S. has about as many auditors now as it did 60 years ago, when there were half as many Americans. The undermining of the I.R.S.’s enforcement capability coincides nicely with the Republican playbook: Enrich wealthy individuals and corporations with tax giveaways that balloon the deficit, justifying spending cuts for health care, education and infrastructure, then amplify the process by not holding high-end taxpayers accountable for the amounts they owe.
Dodging taxes is as old as taxes themselves. Just ask Mr. Trump, who has employed systematic dodging for decades, according to a Times investigation.
We got a good look at one of the bigger problems, the proclivity of the wealthy to hide cash from the I.R.S., in 2008, when the Justice Department was able to pierce the Swiss bank secrecy veil during an investigation of UBS. The department uncovered thousands of rich Americans who were hiding about $18 billion in offshore accounts arranged by that Swiss bank. Many were compelled to fess up and pay up. But eight years later, the Panama Papers, millions of files hacked from a Panamanian law firm that specialized in caching money for the rich and powerful, disclosed that there were still plenty of rich people willing to play hide-and-seek with the I.R.S.
The odds are in their favor, and growing. ProPublica reported that I.R.S. audits dropped 42 percent from 2010 to 2017, a period in which the I.R.S. budget was lopped by $2.5 billion, adjusted for inflation. New investigations of people who don’t file dropped to 362,000 last year, from 2.4 million in 2011. That costs the Treasury $3 billion annually in uncollected taxes. More than $8 billion in back taxes did not get collected in 2017 because the agency couldn’t get to them before the 10-year statute of limitations ran out, another worsening problem. Tax delinquents can simply wait the agency out. ProPublica estimated the total shortfall of uncollected funds since 2011 at $95 billion.
These uncollected billions could pay for any number of things: better care of wounded veterans, infrastructure improvements such as a desperately needed new tunnel between New York and New Jersey. You could even build an expensive wall.
One area where the I.R.S. still bares its teeth is in auditing people in the lowest tax bracket. If you are claiming the earned-income tax credit, which provides cash for people who typically earn less than $20,000 annually, you are as likely to be audited as someone earning between $500,000 and $1 million. ProPublica reported that 36 percent of all I.R.S. audits focused on this group. It may not be a crime to be poor in the G.O.P.’s America, but you can expect to be treated like a criminal for accepting the government’s cash to make ends meet. At best, that’s an inefficient use of I.R.S. agents: Compliance should apply to all, but the I.R.S. should do most of its fishing where the big fish are.
The Trump/G.O.P. tax policy is now operating at peak failure. The tax cuts have failed to increase gross domestic product beyond the “sugar high” stimulus they gave to an economy already heading toward record low unemployment. The economy seems to be slowing, making a mockery of the promise of strong growth that was used to peddle the tax cuts.
The stock market is shuddering at the idea of a slowdown, which corporations contributed to by using their tax windfall to buy back more than $1 trillion of their own stock. They have, to this point, immolated capital instead of using it for additional hiring, increased wages or further business investments.
A CNBC poll found that millionaires are still sanguine about the economy. They can well afford to be. If their stocks lose value, they can take a write-off. If stocks rise, their maximum long-term capital gains tax is only 20 percent. Most American households don’t own stocks — or no longer own them, having been forced to liquidate stock holdings in the Great Recession, which was precipitated by a collapse in the housing market. Thus the wealth gap grows, reaching levels not seen since the Roaring Twenties.
To pay for the millionaire tax cuts, sacrifices had to be made. So Congress limited deductions for state and local taxes to $10,000 annually. While that generally applies to well-to-do people who can itemize their tax returns, it was also a clear shot against blue states such as California and New York that have relatively high state and local taxes. But reducing these deductions, along with higher interest rates, punished the housing market, which is stagnant nationally and in a free fall in the Northeast.
Our ability to keep the $1 trillion deficit created by the Trump tax cuts from deepening depends in part on collecting taxes to which the government is legally entitled.
Think of it this way: To protect our nation, we have the most powerful army in the world. To protect our tax base, we have an army on the order of Liechtenstein’s.
The lack of deterrence will only encourage more cheating. The I.R.S. needs to be capable of doing the job for which it was created — from answering taxpayers’ questions to chasing down the richest cheats, even if they occupy the Oval Office

Saving the 9-11 invading Saudis’ arses!
"I doubt that Trump understands -- or cares about -- what message he's sending. Wealthy Saudis, including members of the extended royal family, have been his patrons for years, buying his distressed properties when he needed money.
“The Wahhabis finance thousands of madrassahs throughout the world where young boys are brainwashed into becoming fanatical foot-soldiers for the petrodollar-flush Saudis and other emirs of the Persian Gulf.” AMIL IMANI

 I recommend that Ignatius read Raymond Ibrahim's outstanding book Sword and Scimitar, which contains accounts of dynastic succession in the Muslim monarchies of the Middle East, where standard operating procedure for a new monarch on the death of his father was to strangle all his brothers.  Yes, it's awful.  But it has been happening for a very long time.  And it's not going to change quickly, no matter how outraged we pretend to be. MONICA SHOWALTER

“You saved my a rse again and again… So, I’ll save yours like Bush and Obama did!
"I doubt that Trump understands -- or cares about -- what message he's sending. Wealthy Saudis, including members of the extended royal family, have been his patrons for years, buying his distressed properties when he needed money. In the early 1990s, a Saudi prince purchased Trump's flashy yacht so that the then-struggling businessman could come up with cash to stave off personal bankruptcy, and later, the prince bought a share of the Plaza Hotel, one of Trump's many business deals gone bad. Trump also sold an entire floor of his landmark Trump Tower condominium to the Saudi government in 2001."
“The Wahhabis finance thousands of madrassahs throughout the world where young boys are brainwashed into becoming fanatical foot-soldiers for the petrodollar-flush Saudis and other emirs of the Persian Gulf.” AMIL IMANI

  I recommend that Ignatius read Raymond Ibrahim's outstanding book Sword and Scimitar, which contains accounts of dynastic succession in the Muslim monarchies of the Middle East, where standard operating procedure for a new monarch on the death of his father was to strangle all his brothers.  Yes, it's awful.  But it has been happening for a very long time.  And it's not going to change quickly, no matter how outraged we pretend to be. MONICA SHOWALTER

Swamp Keeper Trump prepares for the inevitable move to impeach him and ask for asylum in Scotland.
Fox News host Tucker Carlson said in an interview Thursday that President Donald Trump has succeeded as a conversation starter but has failed to keep his most important campaign promises.

“His chief promises were that he would build the wall, de-fund Planned Parenthood, and repeal Obamacare, and he hasn’t done any of those things,” Carlson told Urs Gehriger of the Swiss weekly Die Weltwoche.

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