Why Not Hire the Woman Who Wrote the Book on the Struggles of the Middle Class?

Apparently, Obama decided to use his Labor Day weekend radio address not to pay tribute to all that organized labor did to create the middle class in this country, but to try to persuade voters that he is doing enough to save it.

On Monday, we celebrate Labor Day. It’s a chance to get together with family and friends, to throw some food on the grill, and have a good time. But it’s also a day to honor the American worker – to reaffirm our commitment to the great American middle class that has, for generations, made our economy the envy of the world.

That is especially important now. I don’t have to tell you that this is a very tough time for our country. Millions of our neighbors have been swept up in the worst recession in our lifetimes. And long before this recession hit, the middle class had been taking some hard shots. Long before this recession, the values of hard work and responsibility that built this country had been given short shrift.

For a decade, middle class families felt the sting of stagnant incomes and declining economic security. Companies were rewarded with tax breaks for creating jobs overseas. Wall Street firms turned huge profits by taking, in some cases, reckless risks and cutting corners. All of this came at the expense of working Americans, who were fighting harder and harder just to stay afloat – often borrowing against inflated home values to pay their bills. Ultimately, the house of cards collapsed.

So this Labor Day, we should recommit ourselves to our time-honored values and to this fundamental truth: to heal our economy, we need more than a healthy stock market; we need bustling main streets and a growing, thriving middle class. That’s why I will keep working day-by-day to restore opportunity, economic security, and that basic American Dream for our families and future generations.

First, that means doing everything we can to accelerate job creation. The steps we have taken to date have stopped the bleeding: investments in roads and bridges and high-speed railroads that will lead to hundreds of thousands of jobs in the private sector; emergency steps to prevent the layoffs of hundreds of thousands of teachers and firefighters and police officers; and tax cuts and loans for small business owners who create most of the jobs in America. We also ended a tax loophole that encouraged companies to create jobs overseas. Instead, I’m fighting to pass a law to provide tax breaks to the folks who create jobs right here in America.

Aside from being a pretty big snub to Labor (what about your promise to pass EFCA, oh ye savior of the middle class?), Obama’s focus on the plight of the middle class reminded me of one big thing he has thus far refused to do to help the middle class: hire the woman who, literally, wrote the book on the problems faced by the middle class.

I guess Obama thinks he can save the middle class with neither experts on it nor those who have traditionally fought for it?

  1. phred says:

    The only reason he bothered to be so long-winded is because the FCC would censor his original statement, “Fuck the UAW”.

  2. bobschacht says:

    Why, EW, don’t you see? Geithner and Summers have a plan to save the Middle Class! And surely it will work this time! After all, Larry Summers says so! And why do you keep bleating in support of women advisers? What do they know? After all, the Great Middle Class was created by Men!

    /S {<– Please note snark tag, or I'm in a heap of trouble!}

    Bob in AZ

    • GlenJo says:

      Well, maybe our definition of “saving” is different.

      He’s going to save it in a Mason jar, pickled in formaldehyde, and put it on Larry Summer’s desk. Rahm will stop by to spit in it when he’s in an especially good mood.

    • croghan27 says:

      (aside) Was not Labour Day moved to the first Monday in September because the original day for labour, was May Day – something the workers came up with themselves to commerate the deaths by corporation supporting Chicago police. Four were killed in the action and four more hanged after some show trials. (It was overlayed on a traditional day in the northern hemisphere to mark the end of winter and the beginning of the growing season – new birth and all that.)

      I would also question if Christine Romer was not listened to ….. as pointed out by bmaz – the WH is populated with a motly crew of anti-middle class militants and her message would empower working people, by creating employment (A frightening thought in itself.)She was indeed listened to, if only to see what they should NOT do to create employment. (Besides, she was, well, only a womens.)

      • bobschacht says:

        I would also question if Christine Romer was not listened to ….. as pointed out by bmaz – the WH is populated with a motly crew of anti-middle class militants and her message would empower working people, by creating employment (A frightening thought in itself.)She was indeed listened to, if only to see what they should NOT do to create employment. (Besides, she was, well, only a womens.)

        Maybe she just got tired of being called a fucking idiot by Rahm.

        Bob in AZ

  3. BoxTurtle says:

    I guess Obama thinks he can save the middle class

    OBJECTION! Assumes material not in evidence.

    Boxturtle (I thinks he wants the middle class gone, since he knows we won’t vote for him again)

    • phred says:

      I was wondering about that. Who actually listens to the radio address other than reporters looking for sound bites? Nothing personal, EW. I have never known anyone who listens to them.

      • nycterrierist says:

        That’s a keeper.
        Obummer is indeed a ‘farce advocate’ —
        except for the status quo and the plutocrats.

  4. bmaz says:

    I guess Obama thinks he can save the middle class with neither experts on it nor those who have traditionally fought for it?

    And with a boatload of people that have actively fought against the middle class.

    • fatster says:

      Pardon me for doing this, bmaz, but I just have to:

      “And with a boatload yachtload of people that have actively fought against the middle class.”

    • pdaly says:

      Oh they know what they are doing. /(snark)

      This approach comes straight from the wisdom of Winnie The Pooh, circa 1970s, and I quote:

      Winnie the Pooh: Say, Rabbit. How would it be if once we’re out of sight of this old pit, we just try to find it again?
      Rabbit: What’s the good of that?
      Winnie the Pooh: Well, it’s just that we keep looking for home, but we keep finding this pit, so I just thought that if we looked for this pit, we might find home.

      (from Winnie the Pooh and Tigger Too (1974))

      There’s nothing like putting Pooh on a problem to fix things up nice and all.

  5. skdadl says:

    Right on, EW. Thank you for writing this — I wouldn’t have known about Obama’s speech otherwise. What a smug, self-centred speech on a holiday that is so totally not about him or his cohorts.

    For historical reasons I forget but could probably look up, we also do Labour Day this weekend, although the Europeans do a rather better job from a genuine labour/working-class pov, I think, on May Day.

    One cheering note from Europe: Irish anti-war protestors threw shoes and eggs at Tony Blair in Dublin yesterday when he arrived somewhere for a book-signing. Have you seen some of the glurge that is apparently in that book? He’s definitely in the running for the bad-sex-in-fiction award this year. The Irish know what serious writing is about.

  6. Peterr says:

    First, that means doing everything we can to accelerate job creation.

    Did he say “everything”?

    I do not think this word means what he thinks it means.

    /Inigo Montoya

  7. Teddy Partridge says:

    Welcome, fellow Fierce Advocatees, to the place under the bus.

    You’ll find it’s quite lushly decorated; it always pays to send the gays first, if only for our design esthetic.

    Mind you, please leave some room, as we’ve heard there are Hispanics and some non-child-bearing-age women on the way as well.

    • phred says:

      Child-bearing-age ones are here too, Teddy, courtesy of Nelson/Stupak and Presidential signing statements ; )

      By the way, I love what you’ve done with the place! ; )

      • Teddy Partridge says:

        Oh, the child-bearing womynfolk arrived with us Gheys, that ceremony of Forced-Birth Signing Statement was only the beginning. The powers-that-be thought those ladies would be safe with us, but there seems to be some lesbian bonding over there in the candle-making, knitting, and macrame area….

  8. Stephen says:

    So it’s a chance to throw some food on the grill and have a good time. My God, does this man and his handlers realize what’s going on or what they are saying? Along with his latest vindication of Shrub, I am now almost sure we can kiss Social Security goodbye amongst other things. I wonder if Dawn has called up Elizabeth and warned her about the treatment she received. This guy is a flake. I’m now recalling the days of “eleventh dimensional chess”.

      • Stephen says:

        You are absolutely right Marcy. It sure will be interesting to see how this plays out for Liz. I have a feeling she will let us know about any double dealing by the WH. Apparently she has been spotted visiting the palace recently. I’d love to see her spar with Rambo, Larry, and Timmy because I don’t think she will take their BS. Btw I got the impression Sheila Bair was drifting to the dark side a little on some issues but I can’t remember what.

      • bobschacht says:

        Warren’s situation is also a bit different. As head of the Congressional Oversight Panel, she’s been dealing with Congress more than Dawn Johnsen was, and has more experience, I think, with inside the Beltway stuff than Johnsen had. Warren has shown more savvy than most people had expected.

        And on the other hand, I think Obama “needs” Warren (to help with the next two months of electoral politics) a lot more than he “needed” Johnsen, who might have hurt him in the voting booth as much as she might have helped him. I think Obama’s team is having a bunch of arguments about Warren as electoral asset right about now. Right now, the public thinks Obama is too cozy with the banksters (they associate him, fairly or not, with “bank bail-outs”). Warren could help him change that image.

        Bob in AZ

      • econobuzz says:

        I’m pretty darn sure that Warren knows and has thought about how badly Obama treated Johnsen.

        FWIW, I would much rather see Warren be an independent champion for doubling Social Security.

  9. posaune says:

    You know, I was just thinking today how the banks and corporations and/or big pharma have:
    1. Hoarded the cash from the taxpayer bailouts;
    2. Walked away with almost everything on HCR’
    3. Are “hoarding” the best foreclosed properties in the locations most likely to recover;
    4. Cut jobs far beyond what was necessary and reduced the unemployed to less than serfs with no hope of wages ever recovering.

    So, given all that the corporations control now, what’s next for a country that will have no credit, no manufacturing, no professionals, no middle class? Why, it’s the food supply! Yes! Remember all those home builders, like Pulte, Centex, Craftmark, etc., well, now they are taking their cash and creating farmland REITS! And what is the most quickly produced product we can come up with for export to balance the trade deficit? Try grain, and meat. Ok, at the risk of looking over-the-deep-end paranoid, I can’t help but think of 1840’s Ireland. Or Poland in the 1770’s-90’s. {See Braudel: Structures of Everyday Life}; Hence the rise of poppy seed ingestion in its efficacy in staving off starvation, with opiod side effects, of course.

  10. melior says:

    posaune @30:

    And what is the most quickly produced product we can come up with for export?

    Ooh, ooh, Mistah Kotter! It’s cluster bombs & soldiers of fortune & MOABs & drones & ISO9000 consultants, right?

    Defense & Security
    U.S. to ease export control restrictions
    30 August 2010
    President Barack Obama is expected to announce on Tuesday that the United States will ease restrictions on exporting products with military applications.

    • posaune says:

      oooh, right! silly me to forget the big ticket items.
      But, I still think we’re going to be shipping food out in an effort to keep the dollar hanging on by a thread.

      • gnomedigest says:

        Our own military has documented that their approach creates more terrorists. So one can assume, after all this time continuing to pursue these terrorist creating policies, that its part of the point. Need to keep a strong supply of boogiemen with which to scare the bedwetting american public.

        Only makes sense that MIC should end up making a few extra bucks selling weapons to the terrorists. The boogiemen probably look scarier when they are armed.

  11. klynn says:


    Sorry to go OT but here in Ohio, I am getting sick to my stomach at the talk that the GOP plan to take back the House in November and make Bohner speaker.


    Please help to keep that from happening.

    • BoxTurtle says:

      I keep tellin’ ya…if you think Bohner is bad, wait till you experience Portman.

      Boxturtle (Get used to the idea, I think it highly unlikely the Dems will retain the house)

  12. b2020 says:

    “I don’t have to tell you that this is a very tough time for our country. Millions of our neighbors have been swept up in the worst recession in our lifetimes.”

    You have seen them. I have seen them. They are no longer part of our community, our values, our great nation. Let us not talk to those unfortunate souls, lest their misfortune should contaminate our comfortable repose. How would one reach those structurally penniless, electronically disconnected and frankly redundant former members of the workforce anyway? Let us not talk *about* those unfortunate souls either. I will let Alan Simpson talk – eloquently, in continued service to this great country – about the burden the swept ones represent to our country, adding as they are to the rigors of the tough times *we* are going through. Instead, let me talk to you about *me*…

    What a sociopath. What a pathetic excuse for a human being. No wonder assassination and torture does not bother him. Is it a requirement to be developmentally challenged and/or suffering neurological disorder to withstand the rigors of a presidential campaign these days? Between Bush and this guy, one really has to wonder.

  13. wlarip says:

    Obama appears to be saving the announcement of Warren’s appointment until after Labor Day. I think it would fall into the category of ‘galvanize the base’. But it is too little, too late.

    More importantly, the text of his Labor Day address is true. So why is it that, when he says it, it seems like meaningless drivel? Is it because his flair for grandiose rhetoric is inversely dwarfed by his miniscule, timid, tepid actions to help desperate people and his rock-solid commitment to maintaining the status quo?

    His political capital is gone along with the good will that many of us felt for him. But what is really lost, besides the opportunity for real change, is the next decade as we descend into an era of devisiveness that will make the last 10 years seem like Cumbahya.

    The American people long for a leader to remind them what the term, ‘shared sacrifice’ means. It’s a top-to-bottom concept. It reinforces the idea, however foolish, that we are all in this together which helps to apply restraint to those of ‘us’ that need restraining.

    ‘Hope springs eternal’ and it is in our national identity that, when things are darkest, the most unlikely person will come along to make a difference. That day is coming but that game changer isn’t Obama.

    “Lilies that fester smell far worse than weeds”.

  14. veganrevolution says:

    Oilbummer ain’t gonna do diddly to help the working class. And why do the elite insist on calling the working class middle class?

    Nader tried to warn people about the Dems, and now 10 years later it’s all hitting the fan. Look, Oilbummer will never appoint Warren. He’s an evil capitalist oink oink. Bottom line.

      • mplo says:

        Well then, in the event that Warren does get hired, they’ll probably relegate her to a corner of a back room somewhere in the White House, and then invite her to knock herself out.

      • brendanx says:

        I don’t think they’ll hire her. I think that article about her Harvard job indicates that they just want to make sure she loses income on top of not getting the job (see Dawn Johnsen). Emanuel fancies himself a real tough guy. It’s the kind of petty vindictiveness you’d expect.

  15. SueTheRedWA says:

    Somewhat OT: Husband was out meeting with a customer. Customer was delayed in getting back to us, because his brother-in-law, age 49, had three heart attacks in quick succession. BiL didn’t have insurance even though it was suggested to him and he could afford it. BiL instead made extra mortgage payments and maxed out his 401k contribution. Per customer, just the cost of initial transport was $90,000. Customer believes that BiL will lose everything because of this. Glad that our government was working so hard to keep medical expenses down and insurnace affordable.>s

  16. mplo says:

    May I make a suggestion regarding Obama’s possible appointment of Elizabeth Warren? Don’t hold your breath(s).

  17. PriscillaQOB says:

    The rich who own us via corporations will not allow anything to be “done” to help us. They have learned that they can do whatever they want to without any negative consequences. Their incomes have increased. Their profit-taking is hitting the roof. Their ability to spend and travel and obtain health care is unfettered. They can gamble and steal and manipulate and Obama has guaranteed them that they will be rescued with no strings attached.

    This speech is merely pro forma Labor Day rhetoric as a show piece. Unless and until the people rise up and put a stop to this, as Thomas Jefferson so eloquently urged, nothing will change for the better for us. History is rife with examples to prove this. Problem is that there will be untold suffering and misery for a prolonged period of time until the wagon is righted again and we are able to travel along the road to middle class prosperity free of the yoke of the greedy oligarchs.

    • veganrevolution says:

      It’s weird. My take is that Oilbummer is ideologically opposed to any form of leftism. He seems intransigent almost, as though his rigid dogmatism won’t allow for new ideas. This possibly is his biggest problem, much like Hoover, who could not get himself to think outside the box.

      Oilbummer seems to be blissfully unaware of the coming storm if he continues on this destructive Social Darwinian path.

  18. econobuzz says:

    All along, Obama’s strategy to win the presidency was to promise to blow low- and middle-income folks, but stay in office by blowing high-income folks. It’s pure justice that he is now being abandoned by the former and getting ass fucked by the latter.

  19. Bluetoe2 says:

    The current administration is not about the struggles of the working and middle class. It’s about addressing the “perils” to the plutocracy.

  20. kall says:

    It’s all part of his eleven-dimensional chess game for saving the middle class. First you give trillions to the banks who blew up the economy, then you legally require people to buy health insurance from a parasitic oligopoly that is thus incentivized to keep raising their prices, and finally you create a commission and appoint a slew of people ideologically bent on cutting Social Security.

    It’s brilliant. Only a fucking retard would think otherwise.

  21. liberalarts says:

    The further we get along in this administration, the more convinced I become Obama and crew are headed in exactly the direction they want to take and doing pretty much as they planned. Or at least the people around him are. Wouldn’t surprise me if he’s one of those academically bright types who’s a knucklehead–but with a keen nose for the main chance, as our UK cousins (almost) put it.

  22. canadianbeaver says:

    We are heading back to single income families. There simply are not going to be enough jobs for both spouses to have, without others doing without. The last 20 years has proved unsustainable. So we go back to living on one paycheque and within those wages. So much for everyone having 2 cars and a new home.

  23. lefttown says:

    Along with Romer, Shirley Sherrod showed great integrity when she refused to be part of this sham of a Democratic administration. Maybe they can’t convince Warren to take the job under the constraints Obama would be putting on her.
    (I’m not listening to one word coming out of Obama’s lying mouth until he says he’s disbanding the Catfood Commission. Not that I’ve been listening to him, anyway.)

  24. RodL2 says:

    Whatever happened to recess appointments? Is Obama afraid to use them?
    No, he’s a toady for corporations.

  25. stevedaly says:

    Lets see…. President Obama said,’We also ended a tax loophole that encouraged companies to create jobs overseas.’

    What? Where did that come from? When did that happen? Just before the midterms?

    The information is on Congressman Frank Kratovil’s website:

    Today, Rep. Frank Kratovil backed bipartisan legislation to repeal onerous small business reporting requirements contained in the recently passed health care bill…. The legislation also closed tax loopholes that create incentives for companies to move their operations overseas, offshoring jobs in the process. …..

    The legislation is fiscally responsible and pays for itself by also closing tax loopholes for corporations that ship American jobs overseas and stick American taxpayers with the bill. The bill eliminates the foreign tax credit that was originally designed to prevent double taxation but has instead created economic incentives encouraging companies to move jobs offshore to avoid U.S. taxation. Foreign tax credit abuse is among the IRS’s top compliance concerns for large corporate taxpayers. In 2004, U.S. multinational corporations paid an effective U.S. tax rate of just 2% on their $700 billion of foreign active earnings.

    “Companies that take American jobs overseas should not be able to benefit from tax loopholes that leave the American people picking up the tab,” said Kratovil. “By closing this loop hole we are taking the burden off the taxpayer and small business owners and putting it back on the large multi-national companies that are taking jobs overseas.”

    Although a majority of members voted for this legislation, it failed to get the two-thirds support required to pass under the procedure with which it was considered. Despite this bill’s failure, Rep. Kratovil pledged his support to continue to fight for the offending provision’s repeal.


    So there was a bill that a lot of congresspersons could go on record as favoring right before midterms, but due to Pelosie’s procedures it could not pass.

    So why did the President say it did pass?

    I’m confused.

    • papau says:

      “We also ended a tax loophole that encouraged companies to create jobs overseas.”

      No such provision in health reform bill – indeed outsourcing medical care will continue and increase.

      But he did not lie – except he refers to a tiny 9+ billion fix to eliminate the more obvious taking of deductions for expenses not tax deductibe in the US – a 9 billion (CBO estimates changed) fix to a 300 billion problem created by bad rules under IRS Code 482 (accounting that splits away income made by corporation as not being earned in the US), The tiny fix in the $26 billion “jobs bill” that was passed in August to provide aid to states to retain teachers and police and fire – and any other state worker.

      Summary below:

      Summary. The bill includes a package of provisions developed jointly by the Treasury Department, the Committee on Ways and Means and the Senate Finance Committee to curtail abuses of the U.S. foreign tax credit system and other targeted abuses. This system is intended to ensure that U.S.-based multinational companies are not subject to double taxation. However, taxpayers have taken advantage of the U.S. foreign tax credit system to reduce the U.S. tax due on completely unrelated foreign income in a manner that has nothing to do with eliminating double taxation. The bill would eliminate $14.451 billion of foreign tax credit loopholes.
      Rules to prevent splitting foreign tax credits from income. To prevent double taxation (i.e., full taxation by both a foreign country and by the United States on the same item of income), taxpayers are permitted to claim foreign tax credits with respect to foreign taxes paid on income earned offshore. Taxpayers have devised several techniques for splitting foreign taxes from the foreign income on which those taxes were paid. With these techniques, the foreign income remains offshore and untaxed by the United States, while the foreign taxes are currently available in the U.S. to offset U.S. tax that is due on other foreign source income. In many cases, the foreign income is permanently reinvested offshore such that it likely will never be repatriated and taxed in the U.S. This use of foreign tax credits has nothing to do with relieving double taxation. The President’s FY2011 Budget proposes to adopt a matching rule to prevent the separation of creditable foreign taxes from the associated foreign income. The bill would adopt the President’s Budget proposal by implementing a matching rule that would suspend the recognition of foreign tax credits until the related foreign income is taken into account for U.S. tax purposes. The bill targets abusive techniques and does not affect timing differences that result from normal tax accounting differences between foreign and U.S. tax rules. The provision would apply to all “split” foreign taxes claimed by taxpayers after the date of introduction. This proposal is estimated to raise $6.325 billion over 10 years.

      Denial of foreign tax credit with respect to foreign income not subject to United States taxation by reason of covered asset acquisitions. There are certain rules that permit taxpayers to treat a stock acquisition as an asset acquisition under U.S. tax law. Taxpayers can obtain similar results by acquiring interests in entities that are treated as corporations for foreign tax purposes, but as non-corporate entities (such as partnerships) for U.S. tax purposes. These transactions (“covered asset acquisitions”) result in a step-up in the basis of the assets of the acquired entity to the fair market value that was paid for the stock (or interest in the business entity). In the foreign context, this step-up usually exists only for U.S. tax purposes, and not for foreign tax purposes. As a result, depreciation for U.S. tax purposes exceeds depreciation for foreign tax purposes, such that the U.S. taxable base is lower than foreign taxable base. Because foreign taxes – and therefore foreign tax credits – are based on the foreign taxable base, there are more foreign tax credits than are necessary to avoid double tax on the U.S. tax base. Taxpayers are using these additional foreign tax credits to reduce taxes imposed on other, completely unrelated foreign income. The bill would prevent taxpayers from claiming the foreign tax credit with respect to foreign income that is never subject to U.S. taxation because of a covered asset acquisition. The provision would generally apply to related party transactions occurring after the date of introduction and unrelated party transactions occurring after the date of enactment. This proposal is estimated to raise $4.025 billion over 10 years.

      Separate application of foreign tax credit limitation to items resourced under tax treaties. To prevent double taxation (i.e., full taxation by both a foreign country and by the United States on the same item of income), taxpayers are permitted to claim foreign tax credits with respect to foreign taxes paid on income earned offshore. To appropriately limit use of the foreign tax credit system to avoidance of double taxation, foreign tax credits are limited to the maximum amount of U.S. tax that could be imposed on the taxpayer’s foreign source income (i.e., thirty-five percent (35%) of the taxpayer’s foreign source income). Taxpayers have devised a technique to use the U.S. treaty network to enhance foreign tax credit utilization – well beyond what is needed to avoid double taxation – by artificially inflating foreign source income. With this technique, ownership of income-producing assets that would ordinarily be held by U.S.-based multinational companies in the United States (e.g., investments in U.S. securities) is shifted to foreign branches and disregarded entities. This income is often lightly taxed on a net basis by the foreign country, but the treaty prevails in categorizing the entire gross amount of the income generated by the U.S. assets as foreign source. This artificially inflates the taxpayer’s foreign source income and allows the taxpayer to use foreign tax credits to reduce taxes on foreign source income beyond the maximum amount of U.S. tax that could be imposed on such income. This unintended tax planning technique has nothing to do with relieving double taxation. The bill respects the treaty commitment to treating such income as foreign source, but segregates the income so that it is not the basis for claiming foreign tax credits that have nothing to do with double taxation. In doing so, the bill conforms the foreign tax credit treatment of taxpayers operating abroad through foreign branches and disregarded entities to the treatment already afforded to taxpayers operating through foreign corporations. The provision would apply to taxable years beginning after the date of enactment. This proposal is estimated to raise $253 million over 10 years.

      Limitation on the use of section 956 for foreign tax credit planning (i.e., the “hopscotch” rule). U.S.-based multinational companies typically have complex foreign structures designed to mitigate their worldwide tax expense. In many cases, these structures include companies located in low-tax jurisdictions (e.g., tax havens such as Bermuda and the Cayman Islands) in a multi-tier chain of subsidiaries. If a foreign subsidiary with a relative high tax expense distributes a dividend up through a chain of companies, the foreign tax credit on the dividend ultimately received by the U.S. shareholder is a blend of the tax rates of each foreign subsidiary in that chain. If there is a tax-haven company in that chain, the U.S. tax due on the dividend may be significantly higher than the tax would have been if the foreign subsidiary’s dividend could have simply “hopscotched” over the chain as a direct distribution to the U.S. shareholder. Affirmative use of section 956, which was originally enacted as an anti-abuse provision, readily accomplishes this “hopscotch” by deeming a dividend from a foreign subsidiary directly to the U.S. shareholder. By taking advantage of this “hopscotch” rule, the foreign tax credit on this “deemed dividend” can be greater than the foreign tax credit would be on an actual dividend. The bill would limit the amount of foreign tax credits that may be claimed with respect to a deemed dividend under section 956 to the amount that would have been allowed with respect to an actual dividend. The provision would apply to the affirmative use of section 956 after the date of introduction. This proposal is estimated to raise $1.010 billion over 10 years.

      Special rule with respect to certain redemptions by foreign subsidiaries. Where a foreign-based multinational company owns a U.S. company, and that U.S. company owns a foreign subsidiary, the earnings of the foreign subsidiary are generally subject to U.S. tax when they are distributed to the U.S. shareholder. When those earnings are then distributed by the U.S. company to its foreign shareholder, a thirty percent (30%) withholding tax applies, unless reduced by treaty or some other provision of the tax code. Foreign-based multinational companies have devised a technique for avoiding U.S. taxation of such foreign subsidiary earnings. This technique involves a provision of the tax code that was originally enacted as an anti-abuse rule that treats certain sales of stock between related parties as a dividend. For example, under this provision, where a foreign-based multinational corporation sells stock in the U.S. company to its foreign subsidiary, the cash received from the foreign subsidiary in this sale is treated as a dividend from that foreign subsidiary. This deemed dividend allows the foreign subsidiary’s earnings to completely – and permanently – bypass the U.S. tax system. The bill would eliminate this type of tax planning by preventing the foreign subsidiary’s earnings from being reduced and, as a result, the earnings would remain subject to U.S. tax (including withholding tax) when repatriated to the foreign parent corporation as a dividend. The provision would apply to acquisitions after the date of introduction. This proposal is estimated to raise $255 million over 10 years.

      Modification of affiliation rules for purposes of rules allocating interest expense. To prevent double taxation (i.e., full taxation by both a foreign country and by the United States on the same item of income), taxpayers are permitted to claim foreign tax credits with respect to foreign taxes paid on income earned offshore. To appropriately limit use of the foreign tax credit system to avoidance of double taxation, foreign tax credits are limited to the maximum amount of U.S. tax that could be imposed on the taxpayer’s foreign source income (i.e., thirty-five percent (35%) of the taxpayer’s foreign source income). Taxpayers have used various techniques to minimize the amount of foreign source interest expense, which has the effect of artificially boosting foreign

      source income. In turn, this permits taxpayers to utilize more foreign tax credits than would otherwise be possible, and the use of such additional foreign tax credits has nothing to do with relieving double taxation. To prevent taxpayers from avoiding these rules, Treasury regulations prevent taxpayers from excluding foreign interest expense from the foreign tax credit limitation by placing it in foreign subsidiaries. The regulations achieve this result by including certain subsidiaries in the U.S. affiliated group. As a result, foreign source interest expense will be taken into account in the determination of the foreign tax credit limitation. The bill would modify the affiliation rules to strengthen these anti-abuse rules. The provision would apply to taxable years beginning after the date of enactment. This proposal is estimated to raise $405 million over 10 years.

      Repeal of 80/20 rules. Under current law, dividends and interest paid by a domestic corporation are generally considered U.S.-source income to the recipient and are generally subject to gross basis withholding if paid to a foreign person. If at least eighty percent (80%) of a corporation’s gross income during a three-year period is foreign source income and is attributable to the active conduct of a foreign trade or business (a so-called “80/20 company”), dividends and interest paid by the corporation will generally not be subject to the gross basis withholding rules. Furthermore, interest received from an 80/20 company can increase the foreign source inxome of, and therefore the amount of foreign tax credits that may be claimed by, a U.S. multinational company. Treasury has become aware that some companies have abused the 80/20 company rules. As a result, the President’s 2011 Budget proposes to repeal these rules. The bill would adopt the President’s Budget proposal to repeal the 80/20 company rules. The bill would also repeal the 80/20 rules for interest paid by resident alien individuals. The bill would include relief for existing 80/20 companies that meet specific requirements and are not abusing the 80/20 company rules. Subject to the relief for these existing 80/20 companies, the provision would apply to taxable years beginning after December 31, 2010. This provision is estimated to raise $153 million over 10 years.

      Source rules on guarantees. Under current law, the treatment of guarantee fees under the source rules is unclear. If guarantee fees are sourced like services, they are sourced according to the location in which the services were performed. If the guarantee fees are sourced like interest, they are sourced by reference to the country of residence of the payor. A recent court case determined that guarantee fees should be sourced like services. Sourcing guarantee fees in a manner similar to services would permit U.S. subsidiaries of foreign corporations to engage in earning stripping transactions by making deductible payments to foreign affiliates (thereby reducing their U.S. income tax liability) without the imposition of U.S. withholding tax on the payment. The bill would provide that guarantees issued after the date of enactment will be sourced like interest and, as a result, if paid by U.S. taxpayers to foreign persons will generally be subject to withholding tax. No inference is intended with respect to the treatment of guarantees issued before the date of enactment. This proposal is estimated to raise $2.025 billion over 10 years.

      Technical correction to statute of limitations provision in the HIRE Act. The bill would make a technical correction to the foreign compliance provisions of the Hiring Incentives to Restore Employment (HIRE) Act that would clarify the circumstances under which the statute of limitations will be tolled for corporations that fail to provide certain information on cross-border transactions or foreign assets. Under the technical correction, the statute of limitations period will not be tolled if the failure to provide such information is shown to be due to reasonable cause and not willful neglect. This proposal is estimated to not have any revenue effect over 10 years.

      • stevedaly says:

        I’m still confused.

        The congressional website says the bill failed:

        Roll Date Issue Question Result Title/Description
        514 30-Jul H R 5982 On Motion to F To amend the Internal
        Suspend the Revenue Code of 1986 to
        Rules and Pass repeal the expansion e of certain inforation i reporting requirements to corporations and to payments for property, to eliminate loopholes which encourage companies to move operations offshore, and for other purposes


        So to me ‘F’ means “Failed”. So why is our President saying it passed?

  26. sabretoothedcritter says:

    I’m glad I was late to read your post EW, because the quote from O’s speech just pissed me off. I was in a bad mood yesterday anyway, and I would have been screaming at the computer with each line.
    I really do try to be fair to the President. If I can acknowledge that W did at least a couple things right, then I should do that for O too. But when I hear platitude after platitude from him, while his “policies” result in the opposite of his platitudes, I cannot give him credit for attempting to do what is right, for what he is attempting is not right.
    Let me think…to date, I think O’s only accomplishment I think is worthy of acknowledgment is the nuclear reduction agreement with Russia. I hope that wasn’t just another platitude.

  27. Oval12345678akaJamesKSayre says:

    Senator Obama campaigned as a progressive Democrat. Once safely enscounced in the Oval Office, he surrounded himself with Wall Street corporate banking criminals and Middle East war hawks. Now President Obama rules as a corporate Republican. He has done virtually nothing for his main backers: blacks, union members, progressives and young people. Heck of a fraud-job, Barack. If the Republicans some how win control of the House of Representatives, their first order of business will be to draw up Articles of Impeachment against President Obama. Bitter fruits to be harvested by the do-little White House and the do-little Congress. Back in January 2009, the Senate could have been reorganized with new rules and the filly-buster could have been tossed out and would have had bills being passed with only 51 votes. Imagine, a democracy in the US Senate… Of course, the Senate Dems can still eliminate the filly-buster in January 2011…

    • Stephen says:

      Barack Obama appointed eleven members of the Trilateral Commission to top-level and key positions in his administration within his first ten days in office. Thats what you call stacking the deck.

  28. reddflagg says:

    Obama apparently has decided to take a job as a network pundit a bit early, and let his conjoined twin Rahma do all of the messy executive stuff. But as one might guess his work effort at his pundit job is mediocre at best. First off, I cringe every time he uses the American popularization of class terminology “middle class”. Does that mean that everyone is middle class, so “hooray for everyone?” Or does it mean that he only cares about the ten percent or so of the population in the (accurate terminology) middle class: small manufacturers, storekeepers, professionals etc.? Because (as skadadl rightly notes) on this piss-poor celebration that passes for the labor holiday in the USA I would like to hear something about the group that has suffered the most in recent decades, the overwhelming majority of the population (80% plus) in the working class. And to put it bluntly, until something substantial is passed by the democravens for the working class, namely EFCA, I will never support or vote for another democraven again.

  29. papau says:

    Hope and change and transformational – – –

    Who knew that meant destroy unions, destroy Social Security, and back-up the insurance companies so that a tight regulation, national budget for basic care, single payer for basic care plan can never be passed, and that military welfare and outsourcing of government worker and military unit jobs was to be locked in – – – –

    I really never heard that speech – not even the part about not enough votes with 59 votes in the Senate to confirm the the judges nominated for the 1 in 8 positions in the Judicial branch that are not currently filled. Nor did I hear about the need for more tax cuts as “stimulus” because business will not spend the $2 trillion in cash that they are sitting on unless the goverment gives them a few hundred billion more. – – – –

    I doubt Reagan could have been elected on the above far right program. Amazing that we thought he was to the left of Hillary – that Obama was the true progressive. – – –

    Well in a few months he will have what he wants – a GOP controlled Congress so he can tell the Obama fans that those conservative judge nominations is the best he can do with a conservative Senate.

  30. arcadesproject says:

    I saw a video clip of O’s radio address, the one in which he opposed ‘privatization’ of Social Security. He neglected to mention that he intends to cut it. Anyway, before the talk started, a title came on the screen. It read ‘Your Weekly Radio Address’. Which strruck me as resonant. It says, to me, Yeah. This is your radio address. The rest of the time I talk to important people.

  31. KarenM says:

    I guess Obama thinks he can save the middle class with neither experts on it nor those who have traditionally fought for it?

    As I commented on another post here, he has waaay too many elite, white men advising him. What could they possibly know about the rest of us? Zip!

  32. brendanx says:

    Obama’s mesmerized by that big Chamber of Commerce sign opposite his house (especially now that the big sign in support of EFCA is longer there beside it).