Boxer's Bailout Outsources Jobs

OCT. 20, 2010

By WAYNE LUSVARDI

U.S. Sen. Barbara Boxer has accused her opponent, Carly Fiorina, former CEO of Hewlett Packard, of outsourcing jobs. But by voting for HR1586, the State Bail Out Bill, it is apparently Barbara Boxer who is exporting jobs out of the state in an effort to bailout California and get re-elected.

Frank Aquila of Bloomberg News reports that HR1586, containing $26.1 billion in bailouts to bankrupt states like California, severely limits the use of foreign income tax credits by U.S. companies that operate overseas. Thus, due to punitive tax policies American companies are keeping and investing profits overseas rather than repatriating the profits back home as intended. Aquila estimates that there are upward to $1 trillion in profits that are not being repatriated back to the U.S.

President Obama signed the new law August 10, 2010 and Boxer voted in favor of the law August 5.

This bill will save 16,500 teachers jobs in California.

HR1586 is a rushed bill that hijacked the FAA Air Transportation Modernization and Safety Improvement Act and substituted bailouts for states right before elections. Aquila writes that “bringing home hundreds of billions, possibly trillions, of dollars should be a priority” because “most companies have far more cash than is needed” overseas. According to Aquila this would be the largest and fastest stimulus ever and arguably would not add to the federal deficit.

But because of the punitive structure of U.S. taxation, companies are investing those profits overseas instead of bringing the money home as intended under HR1586. Although it is hard to speculate, this may be a thumbs-down vote by U.S. corporations to an Obama attempt to rescue mid-term elections for Democrats.

The bill shifts a lot of funds around. It provides $26.1 billion for temporary state bailouts paid for with permanent tax increases and spending reductions from the Federal “Stimulus” Bill. In other words, it shifts money from the stimulus bill to HR1586 and is a tax increase.

The bill bails out state education systems to the tune of $10 billion, but at the cost of freezing state education budgets at the 2009 level (the money can not be used to reduce California’s debt). In other words, the bill actually prohibits California from making tough budget decisions.

In another move, the bill extends the federal Medicaid matching rate of 6.2 percent through 2010, which will end up costing $16.1 billion. No pain for Medicaid recipients until after elections.

The bill contains a provision for $9.7 billion in permanent tax increases impacting U.S.multinational companies. Democrats call these “tax loopholes” but corporations see them as maintaining a competitive advantage overseas.

To make all this work, HR1586 contains $14 billion in spending reductions from the Democrats stimulus bill. This is, perhaps, the source of Senator Boxer’s statement in an interview on October 14, that she “voted for over $2 trillion of tax cuts, the largest one was in the stimulus bill.”

But Sen. Boxer failed to disclose all the fund shifting involved to arrange for those tax cuts. Democrats call such maneuvers a “spending cut” but stimulus funds are not subject to PAYGO (pay-as-you-go) and are emergency funding. Thus, the Congressional Budget Office has estimated that this bill will end up increasing the federal deficit by $12.6 billion contrary to Frank Aquila’s of Bloomberg claims.