Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released. The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005. [Source]
President Barack Obama says the current corporate tax system is outdated, unfair and inefficient. He is calling for an end to dozens of subsidies and loopholes that he says offer tax breaks to companies that move jobs and profits overseas.
Obama says the current system is "not right and it needs to change."
The Obama administration is proposing cutting corporate tax rates from 35 percent to 28 percent. That is still higher than the 25 percent rate sought by congressional Republicans.
Obama said in a statement Wednesday that his framework lowers the corporate tax rate and broadens the tax base and will increase competitiveness for companies across the U.S.
Obama: Current tax system unfair; overhaul would make US businesses more competitive
The Associated Press February 22, 2012
President Barack Obama on Wednesday proposed a lower corporate tax rate and an end to dozens of loopholes he said helps companies move jobs and profits overseas. "It's not right and it needs to change," he said.
The president wants to lower the corporate tax rate from the current 35 percent, the highest in the world after Japan. Under his plan, manufacturers would receive incentives so that their effective tax rate could be even lower.
Obama's election-year plan would set a new 28 percent corporate tax rate, still higher than the 25 percent rate sought by congressional Republicans.
"It's a framework that lowers the corporate tax rate and broadens the tax base in order to increase competitiveness for companies across the nation," Obama said in a statement.
Corporations would have to give up dozens of cherished loopholes and subsidies that they now enjoy. Corporations with overseas operations would also face an unspecified minimum tax on their foreign earnings.
The proposal outlined by Geithner would also eliminate tax loopholes and subsidies that Geithner called "fundamentally unfair."
Obama also would set a minimum tax on the foreign earning of U.S. companies.
Chances of accomplishing such change in the tax system are slim in a year dominated mostly with presidential and congressional elections. But for Obama, the proposal is part of a larger tax plan that is central to his re-election strategy.
Treasury Secretary Timothy Geithner, who rolled out the plan Wednesday morning, acknowledged that the debate "will be politically contentious."
"Some will say these proposals are too tough on business, and others will say that they're not tough enough," he said.
Obama's plan would be part of a larger effort to overhaul the U.S. tax system, and it dovetails with Obama's call for raising taxes on millionaires and maintaining current rates on individuals making $200,000 or less. But White House spokesman Jay Carney said Congress could act separately on the corporate tax component of Obama's overall tax strategy.
Republican reaction was mixed. House Ways and Means Committee Chairman Dave Camp, R-Mich., said he appreciated the administration's plan, though it set a corporate tax rate that is higher than the 25 percent he has proposed. He faulted Obama, however, for not offering a wholesale overhaul of the entire tax system for businesses and individuals.
"While this is a good step by the administration, I will borrow from the president's own words to Congress from just yesterday: 'Don't stop here. Keep going,'" Camp said in a statement. But Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, dismissed the president's plan as a "set of bullet points designed more for the campaign trail than an actual blueprint for fixing our tax code."
While the 35 percent nominal corporate tax rate ranks among the highest, deductions, credits and exemptions allow many corporations to pay taxes at a much lower rate.
Under the framework proposed by the administration, the rate cuts, closed loopholes and the minimum tax on overseas earning would result in no increase to the deficit.
That means that many businesses that slip through loopholes or enjoy subsidies and pay an effective tax rate that is substantially less than the 35 percent corporate tax could end up paying more under Obama's plan. Others, however, would pay less while some would simply benefit from a more simplified system.
Reducing the corporate tax rate from 35 percent to 28 percent would reduce tax revenues by about $700 billion over the next decade, according to an estimate prepared in October by the Joint Committee on Taxation, the official scorekeeper for Congress.
That means lawmakers would have to find about $70 billion a year in tax increases to keep the package from adding to the budget deficit, hardly an easy task. In 2010, the corporate income tax raised a total of $278 billion, according to the Internal Revenue Service. Corporate income taxes have been shrinking as a share of overall federal taxes for decades. In 2010, corporate income taxes made up just 12 percent of all federal tax receipts, down from 24 percent in 1960, according to the IRS.
Geithner said the Obama plan aims to help U.S. businesses, especially manufacturers who face strong international competition. Obama's plan would lower the effective rate for manufacturers to 25 percent by offering other tax incentives that emphasize development of clean energy systems.
Many members of both parties have said they favor overhauling the nation's individual and corporate tax systems, which they complain have rates that are too high and are riddled with too many deductions.
The corporate tax debate has made its way into the presidential contest. Former Massachusetts Gov. Mitt Romney has called for a 25 percent rate, former House Speaker Newt Gingrich, R-Ga., would cut the corporate tax rate to 12.5 percent, and former Sen. Rick Santorum, R-Pa., would exempt domestic manufacturers from the corporate tax and halve the top rate for other businesses.
While Obama has been promoting various aspects of his economic agenda in personal appearances and speeches, the decision to leave the corporate tax plan to the Treasury Department to unveil signaled its lower priority.
What's more, the administration's framework leaves much for Congress to decide — a deliberate move by the administration to encourage negotiations but which also doesn't subject the plan to detailed scrutiny.
Obama's plan is not as ambitious as a House Republican proposal that would lower the corporate rate to 25 percent.
Still, Obama has said corporate tax rates are too high and has proposed eliminating tax breaks for American companies that move jobs and profits overseas. He also has proposed giving tax breaks to U.S. manufacturers, to firms that return jobs to this country and to companies that relocate to some communities that have lost big employers.
Geithner told a House committee last week that the administration wants to create more incentives for corporations to invest in the United States.
"We want to bring down the rate, and we think we can, to a level that's closer to the average of that of our major competitors," Geithner told the House Ways and Means Committee.
White House economic adviser Gene Sperling has advocated a minimum tax on global profits. Currently many corporations do not invest overseas profits in the United States to avoid the 35 percent tax rate.
One of the driving forces behind the ongoing Occupy Wall Street protests is the fact that corporations have not been paying their fair share in taxes. A new report from Citizens for Tax Justice will no nothing to alleviate the protesters’ frustration.
CTJ looked at 280 companies, all of them members of the Fortune 500, and found that “while the federal corporate tax code ostensibly requires big corporations to pay a 35 percent corporate income tax rate, on average, the 280 corporations in our study paid only about half that amount.” And those who paid even half the statutory corporate tax rate paid far more than many of their competitors.
In fact, in the last three years, 78 corporations had at least one year where they paid no federal income tax at all, while 30 corporations paid not a dime over the entire three years. Those 30 corporations paid nothing, even though they made $160 billion in profits over that period:
– Seventy-eight of the 280 companies paid zero or less in federal income taxes in at least one year from 2008 to 2010…In the years they paid no income tax, these companies earned $156 billion in pretax U.S. profits. But instead of paying $55 billion in income taxes as the 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they reported negative taxes (often receiving outright tax rebate checks from the U.S. Treasury), totaling $21.8 billion. These companies’ “negative tax rates” mean that they made more after taxes than before taxes in those no-tax years.
– Thirty corporations paid less than nothing in aggregate federal income taxes over the entire 2008-10 period. These companies, whose pretax U.S. profits totaled $160 billion over the three years, included: Pepco Holdings (–57.6% tax rate), General Electric (–45.3%), DuPont (–3.4%), Verizon (–2.9%), Boeing (–1.8%), Wells Fargo (–1.4%) and Honeywell (–0.7%).
As CTJ’s report put it, “just as workers pay their fair share of taxes on their earnings, so should successful businesses pay their fair share on their success. But today corporate tax loopholes are so out of control that most Americans can rightfully complain, ‘I pay more federal income taxes than General Electric, Boeing, DuPont, Wells Fargo, Verizon, etc., etc., all put together.’ That’s an unacceptable situation.” And its one that lawmakers could fix, if they were willing to stand up to the nation’s biggest corporations.
The 280 most profitable U.S. corporations are sheltering half their profits from federal income taxes, and 30 of them paid less than zero in the last three years, according to a new study.
The study also found that 78 of the corporations paid no federal income tax in at least one of the last three years. The study, by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, expands on a preliminary report in June by the advocacy group that sparked controversy (see 12 Major Corporations Pay Less Than Zero in Taxes).
The average effective tax rate for all 280 companies in the study over the three-year period was 18.5 percent. For the period 2009-2010 it was 17.3 percent, less than half the statutory rate of 35 percent. Total tax subsidies given to all 280 profitable corporations amounted to $222.7 billion from 2008-2010. Thirty companies enjoyed a negative income tax rate over the three year period, despite combined pre-tax profits of $160 billion.
Wells Fargo topped the list of 280 U.S. corporations receiving the most in tax subsidies, getting nearly $18 billion in tax breaks from the U.S. Treasury in the last three years.
Pepco Holdings had the lowest effective tax rate of all the companies in the study, at negative 57.6 percent over the three year period.
The study was released at a time when many corporations are lobbying for lower corporate rates and a tax holiday on repatriated foreign profits.
“Our study provides proof that too many corporations are already being coddled by our tax system,” said Citizens for Tax Justice director Robert McIntyre, the report’s lead author.
Some companies within sectors fare worse than others, the study found. For example, the report found that FedEx paid a 0.9 percent tax rate over the three-year period, while its competitor, UPS, paid a 24.1 percent rate.
While retailers and wholesalers in the study generally pay average effective tax rates of about 30 percent, online commerce giant Amazon.com paid a rate of only 7.9 percent on its $1.8 billion in profits from 2008 to 2010.
Financial services companies received the largest share (16.8 percent) of all federal tax subsidies over the last three years. More than half of the federal corporate tax subsidies for companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas and pipelines.
The top 10 defense contractors saw their combined tax rate decline from 19.3 percent in 2008 to a mere 10.6 percent rate in 2010.
U.S. corporations with significant (10 percent or more of their total worldwide profits) foreign profits paid tax rates to foreign countries that were almost a third higher than the taxes they paid to the IRS on their domestic profits.
Most of the corporations do not release their tax returns. Instead the study relied on the annual reports and 10-K forms filed by the corporations with the Securities and Exchange Commission, which often include information on the tax liabilities and benefits claimed on their financial statements. These can differ from the actual tax returns they file with the IRS, however, and many of the companies pay other types of taxes, such as state and payroll taxes.
The United States may soon wind up with a distinction that makes business leaders cringe — the highest corporate tax rate in the world.
Topping out at 35 percent, America’s official corporate income tax rate trails that of only Japan, at 39.5 percent, which has said it plans to lower its rate. It is nearly triple Ireland’s and 10 percentage points higher than in Denmark, Austria or China. To help companies here stay competitive, many executives say, Congress should lower it.
But by taking advantage of myriad breaks and loopholes that other countries generally do not offer, United States corporations pay only slightly more on average than their counterparts in other industrial countries. And some American corporations use aggressive strategies to pay less — often far less — than their competitors abroad and at home. A Government Accountability Office study released in 2008 found that 55 percent of United States companies paid no federal income taxes during at least one year in a seven-year period it studied.
The paradox of the United States tax code — high rates with a bounty of subsidies, shelters and special breaks — has made American multinationals “world leaders in tax avoidance,” according to Edward D. Kleinbard, a professor at the University of Southern California who was head of the Congressional joint committee on taxes. This has profound implications for businesses, the economy and the federal budget.
As Congress wrestles with how to get the deficit under control, one big point of contention is whether spending cuts will need to be accompanied by an increase in taxes on some individuals or businesses. Facing a full-court press from business leaders who say the tax system is outdated and onerous, President Obama, Congress and business leaders have been warily negotiating various proposals, though mostly about whether to cut the top corporate rate and to tighten tax laws and not about whether to increase revenue.
The United States is virtually alone in trying to tax its multinational corporations on their foreign earnings, but it allows companies to avoid those taxes indefinitely by keeping profits overseas. That encourages companies to use accounting maneuvers to shift profits to low-tax countries and to invest profits offshore, says David S. Miller, a partner at Cadwalader, Wickersham & Taft in New York.
Honeywell International, the New Jersey company that makes things as diverse as aerospace components and First Alert smoke detectors, reported in regulatory filings that in the last five years, it paid cash income taxes in the United States and abroad equal to 15 percent of its profits. On Friday, a Honeywell spokeswoman pointed out that the company had since made a large pension contribution, which effectively cut its profits and made its tax rate closer to 22 percent.
A major domestic competitor, United Technologies, reported an average of 24 percent over that time. A German rival, Siemens, reported 29 percent of its total profit.
In addition to being complex and uneven, the United States corporate tax code is inefficient and has become a diminishing source of revenue. Corporate taxes accounted for about 9 percent of all federal revenue in 2010. At $191 billion, they were equal to 1.3 percent of the nation’s gross domestic product. Most industrial countries collect more from companies, about 2.5 percent of output. Only a portion of that disparity can be explained by the many types of businesses in the United States that elect to be taxed at an individual rate.
“Whether the test is fairness or efficiency, the U.S. system gets really low marks,” said Michelle Hanlon, an M.I.T. professor who says the country needs to completely revamp the way it taxes corporations.
Not all American companies are willing or able to reduce their taxes drastically. Taxes vary more by industry here than abroad, according to a study released in February by Kevin S. Markle of Dartmouth and Douglas A. Shackelford of the University of North Carolina. At the high end, American retailers paid 31 percent in total income taxes, construction 30 percent and manufacturers 26 percent. Financial services companies paid an average of 20 percent, real estate 19 percent and mining 6 percent.
(Measuring taxes paid by companies is imprecise because tax filings remain private. In many cases, the estimates reported in a company’s financial filings with regulators overstate taxes paid in a year because they include deferred taxes. Nonetheless, academics, economists and elected officials use the estimates for comparative purposes.)
Because some companies are so effective at minimizing taxes, the average works out to far less than the official rate. United States companies pay about a quarter of their profits in federal income taxes, a few percentage points higher than the rate paid by companies in most other major industrial countries, according to a number of studies and tax experts.
Assorted proposals being discussed in Washington call for the rate to be lowered officially to about 25 percent and some tax breaks to be eliminated so that revenue remains unchanged.
But some prominent business leaders, including the chief executive of Procter & Gamble, are pushing for the rate to be reduced without reining in tax shelters. That would make the United States virtually the only country to change corporate taxes in recent years in a way that ended up adding to its deficit.
“One fact we know is that in all of the countries that have lowered their corporate rates in recent years, they still collected the same amount in revenues or more,” said Reuven S. Avi-Yonah, an international tax lawyer who teaches at the University of Michigan. “This means that they were broadening the base of the profits that corporations were actually taxed on.”
Procter & Gamble, whose products include Tide detergent and Crest toothpaste, paid an average of 24 percent of its profits in worldwide income taxes over the last three years, according to regulatory filings. That is nearly the same rate reported by two big European rivals, Unilever and Henkel.
Yet Robert A. McDonald, P.& G.’s top executive, testified before a Congressional committee this year about the need to cut the United States tax rate without ending tax breaks and shelters.
“We need a tax system that addresses today’s hypercompetitive global marketplace,” Mr. McDonald said, arguing that the playing field was tilted away from American businesses.
Many liberal groups counter that ending the breaks, subsidies and shelters in the corporate tax code could provide enough money to lower the rate several percentage points and still increase revenue.
Furthermore, some business owners complain that the American system unfairly rewards disingenuous bookkeeping rather than innovation.
It forces companies to compete “based not on product quality and services, but on accounting gymnastics,” said Paul Egerman, former chairman and chief executive of eScription, a medical transcription service in Boston.
No one is certain how much creative accounting costs the federal government in lost revenue, but most estimates say it easily exceeds $50 billion a year. Targeted tax preferences, which Congress created to intentionally benefit specific companies or industries, cost an estimated $100 billion more a year.
Many tax analysts are skeptical that Congress, business leaders and the Obama administration will be able to reach a deal before the 2012 election.
“It’s human nature that people are going to fight harder to preserve a benefit they already have than to get some new benefit,” said Clint Stretch, a principal at Deloitte Tax and a former counsel to the Congressional Joint Committee on Taxation. “The only way tax reform makes everyone happy is if everyone wins. And with the federal budget where it is today, that’s not possible.”
Public outcry against lofty executive compensation has been constant since the beginning of the financial crisis, and a new study from the Institute for Policy Studies is sure to fan the flames even more.
The progressive Washington think tank found that 25 of the 100 highest-paid CEOs are actually making more money than their companies are paying in federal income taxes. The average compensation for those 25 CEOs was $16.7 million, according to Reuters.
The IPS report also notes that many of the companies spent more money on lobbying than they paid in taxes.
Presidential candidate Mitt Romney sparked controversy with his statement earlier this week suggesting "corporations are people."
Legally, that statement is true. The Supreme Court ruled in the 1886 case Santa Clara County v. Southern Pacific Railroad Company that corporations share with people the same protections under the Fourteenth Amendment. However, his defense of his statement involves the logic that a corporation is considered a person because a corporation is comprised of individual people – a defense that does not follow the ruling, in which a corporation as an entity is presented as a person in and of itself. His inaccurate defense aside, Romney’s initial statement gives rise to a question.
If Mitt Romney believes that corporations are equivalent to people, why does he not support forcing corporations to pay their fair share of taxes?
Last year, Forbes reported that some of the "world's biggest, most profitable corporations enjoy a far lower tax rate than you do – that is, if they pay taxes at all."
"From Bank of America to ExxonMobil to General Electric, these big businesses have gone quarters or entire years without paying their income taxes – at a time when the effective tax rate on a median family is 13.6 percent."
The United States has the second lowest tax rate for corporations in the world, with about two-thirds of corporations neglecting to pay any federal income tax. Loopholes in the tax code allow for corporations to avoid paying their share of taxes. As if that was not enough, according to a report analyzed by Think Progress, “…major corporations earned $173 billion in profits put together. Yet these major corporations paid an average federal corporate income tax rate…of -1.5 percent, meaning they actually got money back from the Treasury in the form of tax benefits.”
This escaping of paying a fair share of taxes is not a new phenomenon – Ronald Reagan, during his presidency, found that corporations during the eighties were not paying their income taxes. Think Progress states:
"So Reagan undertook a comprehensive tax reform effort that actually raised the corporate taxes and closed numerous loopholes that allowed big firms to dodge their tax responsibilities. As part of these reforms, Reagan passed the 1986 Tax Reform Act…
"During the signing ceremony for the speech, Reagan explained that his goal in pursuing these reforms was to make sure ‘that everybody and every corporation pay their fair share.'"
He closed tax loopholes for corporations that were worth $300 billion over five years.
If one believes a "corporation" is a "person," why should a corporation be able to avoid the responsibility each person bears, of paying a fair share of taxes? It is not fair that the average person must pay more than a corporation in taxes, when a corporation is considered a person.
If raising taxes on corporations is not on the table, why not consider following in Reagan’s footsteps and closing loopholes that allow corporations to escape their duty of paying taxes? Reagan is the Republican hero, after all.
The corporate tax rate is 35%. But an examination of 280 of the nation's largest corporations suggests that many aren't paying anything close to that.
The real tax rate paid by a slew of major corporations averages closer to 18.5%, according to a study released Thursday by two liberal tax research groups.
The report issued by Citizens for Tax Justice and the Institute on Taxation and Economic Policy paints the corporate tax code as wildly inefficient, filled with loopholes and subject to the influence of lobbyists who carve out special provisions for the companies they represent.
The study looked at 280 companies in the Fortune 500 that were profitable for all three years between 2008 and 2010.
The results: 111 companies paid effective tax rates of less than 17.5% over the three-year period; 98 paid a rate between 17.5% and 30%; and 71 paid more than 30%.
The average rate? 18.5%.
Some companies paid zero. And 30 actually owed less than nothing in income taxes over the three years.
How does that happen?
At the root of the problem is a system of inverted incentives that encourages corporations to lobby for special tax breaks -- and politicians to insert them into the tax code.
Corporations pay lobbyists. Lobbyists convince lawmakers to add tax breaks. Lawmakers modify the tax code.
It wasn't always like this. The corporate tax code was cleaned of special tax breaks during the Reagan administration.
The clean slate didn't last long, and over time, special provisions have been added back in. NASCAR racetrack owners are allowed to write off the costs of their racetracks. There's the sweet deal for companies that make Puerto Rican rum.
Some of the biggest breaks go to companies that are allowed to write off investments in equipment more quickly than they actually depreciate. The American tax machine
And certain companies enjoy incentives geared specifically at their businesses. The oil and gas industry, for example, is allowed to write off some drilling and exploration expenses.
All the breaks add up -- sometimes eliminating a company's tax burden altogether. Other companies reported so many "excess tax breaks" that their tax burden went "negative," the study said.
According to the study, utility Pepco Holdings and conglomerate General Electric have the highest negative income tax rates.
Pepco's profits totaled $882 million over the three-year period, while the company had a negative tax rate of 57.6%. GE earned $10.5 billion, with a negative rate of 45.3%, according to the study.
Pepco (POM, Fortune 500) said Thursday that it always operates within the law, and that the IRS audits every income tax return filed by the company.
"Pepco Holdings pays all its required taxes, including but not limited to income, sales, use, property, and gross receipts taxes, in all the taxing jurisdictions within which it operates," the company said in a statement.
The truth about GE's tax bill
GE (GE, Fortune 500), which runs an extremely complicated multi-national operation, took issue with the study, calling it "inaccurate and distorted."
"GE paid billions of dollars in taxes in the United States over the last decade, and we expect our overall tax rate will be approximately 30% in 2011," the company said in a statement.
"We believe the U.S. tax system needs to be reformed to close all loopholes, to lower the corporate rate and to provide a territorial system like every other major country in the world."
GE is not alone in calling for reform. Most lawmakers acknowledge the system is broken. President Obama called for corporate tax reform in his State of the Union address and the concept has support among lawmakers on both sides of the aisle.
The idea of reform is to lower the corporate tax rate while greatly scaling back tax breaks, loopholes and other provisions of the tax code that allow most corporate income to avoid taxation.
Despite the general consensus that something must be done, lawmakers are not likely to tackle the issue anytime soon. It's possible that the congressional super committee, now trying to find a way to cut the deficit, will make reform recommendations.
But don't count on too much action. The political atmosphere on Capitol Hill has prevented movement on many fiscal and tax issues in recent months.
Daniel Shaviro, a tax professor at New York University School of Law, said he doesn't anticipate big changes in the corporate tax code, at least in the near term.
"There is widespread sympathy for lowering the corporate rates," Shaviro said. "But I I tend to doubt it happens anytime soon." To top of page
Most U.S. and foreign corporations doing business in the United States avoid paying any federal income taxes, despite trillions of dollars worth of sales, a government study released on Tuesday said.
The Government Accountability Office said 72 percent of all foreign corporations and about 57 percent of U.S. companies doing business in the United States paid no federal income taxes for at least one year between 1998 and 2005.
More than half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years in that period, the report said.
During that time corporate sales in the United States totaled $2.5 trillion, according to Democratic Sens. Carl Levin of Michigan and Byron Dorgan of North Dakota, who requested the GAO study.
The report did not name any companies. The GAO said corporations escaped paying federal income taxes for a variety of reasons including operating losses, tax credits and an ability to use transactions within the company to shift income to low tax countries.
With the U.S. budget deficit this year running close to the record $413 billion that was set in 2004 and projected to hit a record $486 billion next year, lawmakers are looking to plug holes in the U.S. tax code and generate more revenues.
Dorgan in a statement called the report "a shocking indictment of the current tax system." Levin said it made clear that "too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States."
The study showed about 28 percent of large foreign corporations, those with more than $250 million in assets, doing business in the United States paid no federal income taxes in 2005 despite $372 billion in gross receipts, the senators said. About 25 percent of the largest U.S. companies paid no federal income taxes in 2005 despite $1.1 trillion in gross sales that year, they said.
Citizens United came after years where the Court chipped away at existing, needed campaign laws. Now the new ruling has unlocked massive campaign spending, much of it through front groups, cutouts, and nonprofits, without disclosing who is paying the bill.Money talks, but refuses to leave its name. In 2010, the anonymous funding vastly favors the GOP. Other years, the money may favor Democrats. But there can be little doubt it will warp policymaking. For example, lawmakers who vote on bank regulation will know that a pro-consumer stance could be punished with sudden, secret spending for a foe. Lobbyists have a new bludgeon with which to persuade. Did Citizens United matter? The answer is yes—significantly.And unless remedied, the ruling points toward a truly dystopian future, when candidates, campaigns, and parties are drowned out by special interest funding as loud as it is stealthy. - Michael Waldman, Supreme Court's Citizens United Decision Will Warp Policymaking, September 27, 2010
The Citizens United decision does far more than simply provide Fortune 500 companies with a massive megaphone to blast their political views to the masses;it also empowers them to drown out any voices that disagree with them. In 2008, the Obama and McCain campaigns combined spent just over $1.1 billion, an enormous, record-breaking sum at the time. $1.1 billion is nothing, however, compared to the billions of dollars in tax subsidies given to the oil industry every year, or the $117 billion fee President Obama wants to impose on the Wall Street bankers who created the Great Recession. Indeed, with hundreds of billions of dollars of corporate profits at stake every time Congress begins a session, wealthy corporations would be foolish not to spend tens of billions of dollars every election cycle to make sure that their interests are protected. No one, including the candidates themselves, have the ability to compete with such giant expenditures. - Ian Millhiser, Citizens United Decision: ‘A Rejection of the Common Sense of the American People’, Think Progress, January 21, 2010
The modern division of labor consists of a ruling class (top 1%) that control about 40% of all financial assets, a managerial class ( the top 2%-10%) who control about 35% of all assets, with the other 90% of the working masses dividing up the 25% that’s left. The pyramid is organized by a complex and highly specialized division of labor, state-run education, massive corporations, government bureaucracy, the judiciary, intelligence organizations, mediatic propaganda machines and mainstream religion.Those rare few that actually wake up and see the zombie world are quickly diagnosed by the DSM-5 and given anti-depressants. There are two things everyone wants all the time, and one of them is money. Control of the money is the magic wand that rules the world. All the other religious, patriotic and historical paraphernalia are directly related to allowing the 1% to control the creation of money. Take that away, and they are nothing but media hacks. The current era which began with the creation of the Federal Reserve and the involvement of the United States in WWI is coming to an end. The great mistake most “awake” people make is believing redemption is at hand while underestimating the ruling class. The masters of propaganda and finance and are much more in control then they will ever reveal through their own channels. Their imaginations are immense and their capacity to orchestrate drama has no limits. They are the voice of reason while the dissenters are “diagnosed” with a collection of ailments that quickly marginalize them. - Robert Bonomo, What QE3 Will Look Like, Activist Post, August 12, 2011
Corporations can literally and legally buy elections and shape the government like never before in our nation’s history.
By Stephen D. Foster Jr., Addicting Info July 4, 2011
Citizens United — this is the 2010 Supreme Court case that shocked America, influenced an election, and reversed over 100 years of campaign finance laws. In this case, corporations were declared as people and as such declared to have the same rights as people do. It also opened the doors for corporations to pour unprecedented amounts of campaign donations into elections; and what’s more, these donations can be totally secret.Corporations can now literally and legally buy elections and shape the government like never before in our nation’s history.
The economic world we live in today is dominated by corporations. Huge corporations that boast massive profits and span continents. But corporations also wield political power and are lobbying heavily to be free from any and all government regulations that would make them responsible and liable. Republicans have been defending corporations since the late 1800′s and have literally gone on a history revising crusade to show that even the founding fathers supported corporations. But is this the case? What did the founders really think about corporations?
The origin of modern corporations can be traced all the way back to 17th century England when Queen Elizabeth I created the East India Trading Company. At first, corporations were small, quasi government institutions that were chartered by the crown for a specific purpose. If corporations stepped out of line, the crown did not hesitate to revoke their charters. Corporations generated so much revenue that they even began taking on increased political power. Corporations were also organized to finance large projects such as exploration, which leads us to the American colonies.
To say that the founding fathers supported corporations is very absurd. Its quite the opposite in fact. Corporations like the East India Trading Company were despised by the founders and they were just one reason why they chose to revolt against England. Corporations represented the moneyed interests much like they do today and they often wielded political power, sometimes to the point of governing a colony all by themselves like the Massachusetts Bay Company did.
But there is more evidence that the Revolutionary generation despised corporations. The East India Company was the largest corporation of its day and its dominance of trade angered the colonists so much, that they dumped the tea products it had on a ship into Boston Harbor which today is universally known as the Boston Tea Party. At the time, in Britain, large corporations funded elections generously and its stock was owned by nearly everyone in parliament. The founding fathers did not think much of these corporations that had great wealth and great influence in government. And that is precisely why they put restrictions upon them after the government was organized under the Constitution.
After the nation’s founding, corporations were granted charters by the state as they are today. Unlike today, however, corporations were only permitted to exist 20 or 30 years and could only deal in one commodity, could not hold stock in other companies, and their property holdings were limited to what they needed to accomplish their business goals. And perhaps the most important facet of all this is that most states in the early days of the nation had laws on the books that made any political contribution by corporations a criminal offense. When you think about it, the regulations imposed on corporations in the early days of America were far harsher than they are now.
That is hardly proof that the founders supported corporations. In fact its quite the opposite. The corporate entity was so restrictive that many of America’s corporate giants set up their entities to avoid the corporate restrictions. For example, Andrew Carnegie set up his steel company as a limited partnership and John D. Rockefeller set up his Standard Oil company as a trust which would later be rightfully busted up into smaller companies by Theodore Roosevelt.
For those who need more evidence, how about statements from the founders themselves. As we all know, big banks are also considered corporations and here is what Thomas Jefferson thought about them. In an 1802 letter to Secretary of State Albert Gallatin, Jefferson said,
“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.”
Thomas Jefferson also said this in 1816,
“I hope that we shall crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country.”
Jefferson wasn’t the only founding father to make statements about corporations. John Adams also had an opinion.
“Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or ever will do good.”
These statements make it pretty clear that corporations were not trusted by the founders. The founders knew that huge corporations only preyed upon the people. But as the founding generation began to fade away, corporations began using their power to gain political favor and eventually that political favor would turn into political power. And corporations would take advantage of a war to do it.
As the Civil War raged across the land, corporations made an effort to take advantage of the situation, selling products at high prices, especially to the government. Corporations even sold to both sides throughout the war. Basically, corporations proved even then that they had no allegiance to any country when great profits were at stake. Abraham Lincoln, the first Republican to be President also had plenty to say about corporations…
“The money powers prey upon the nation in times of peace and conspire against it in times of adversity. The banking powers are more despotic than a monarchy, more insolent than autocracy, more selfish than bureaucracy. They denounce as public enemies all who question their methods or throw light upon their crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe.”
And in a November 21, 1864 letter to Col. William F. Elkins, Lincoln wrote,
“We may congratulate ourselves that this cruel war is nearing its end. It has cost a vast amount of treasure and blood … It has indeed been a trying hour for the Republic; but I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. As a result of war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands, and the Republic is destroyed. I feel at this moment more anxiety for the safety of my country than ever before, even in the midst of war. God grant that my suspicions may prove groundless.”
Unfortunately, Lincoln’s suspicions were anything but groundless. They were in fact, prophetic. After the Civil War, corporations began aligning themselves with Republican politicians, who proved themselves to be up to the task of helping corporations gain more power. Corporations had free reign and total power over its workforce and could sell virtually anything they wanted even if the product was a bad one. Corporations treated workers like slaves. Wages were extremely low. Workers received no benefits, no vacation days, no health insurance, no workers compensation. President Grover Cleveland witnessed how corporations treated its labor force and had this to say in 1888,
“As we view the achievements of aggregated capital, we discover the existence of trusts, combinations, and monopolies, while the citizen is struggling far in the rear, or is trampled beneath an iron heel. Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people’s masters.”
To put it bluntly, corporations didn’t care about its workers or the people who bought their products. The only rule of the game was to make as much profit as possible, no matter what. As the 19th century ended and the 20th century began, corporations were getting bigger and bigger. Many began buying up smaller companies, becoming monopolies that controlled whole industries. This practice eliminated competition and as a result, prices had skyrocketed and no one could challenge them. That was, until Theodore Roosevelt became the President.
Theodore Roosevelt did not hate corporations. He simply wanted them to treat workers how they deserved to be treated and to serve the public faithfully and honestly. He believed in honest competition and fair prices. Roosevelt believed that government had not only a duty, but a right to regulate corporations just as the founding generation had done, stating that,
“The great corporations which we have grown to speak of rather loosely as trusts are the creatures of the State, and the State not only has the right to control them, but it is duty bound to control them wherever the need of such control is shown.”
And in his State of The Union Address in 1902, Roosevelt stated his intentions toward corporations.
“Our aim is not to do away with corporations; on the contrary, these big aggregations are an inevitable development of modern industrialism, and the effort to destroy them would be futile unless accomplished in ways that would work the utmost mischief to the entire body politic. We can do nothing of good in the way of regulating and supervising these corporations until we fix clearly in our minds that we are not attacking the corporations, but endeavoring to do away with any evil in them. We are not hostile to them; we are merely determined that they shall be so handled as to serve the public good. We draw the line against misconduct, not against wealth.”
To that end he fought for corporate regulation, he fought for fair wages for workers, he fought for safe and healthy work environments, and he fought to protect consumers. And the people loved him for it. Roosevelt’s policies toward corporations were immensely popular. He busted up so many giant corporations that he became known as a “trust buster”. The busting up of these corporations created a lot more competition for customers and for employees, resulting in higher wages and lower prices and more jobs. And you know what? Corporate profits did just fine.
Teddy never stopped fighting for workers and consumers even after his presidency when he said this as the Progressive Party candidate for President in 1912,
“We wish to control big business so as to secure among other things good wages for the wage-workers and reasonable prices for the consumers. Wherever in any business the prosperity of the businessman is obtained by lowering the wages of his workmen and charging an excessive price to the consumers we wish to interfere and stop such practices. We will not submit to that kind of prosperity any more than we will submit to prosperity obtained by swindling investors or getting unfair advantages over business rivals.”
Roosevelt didn’t win the presidency in 1912, although he most certainly would have if the Republican ticket hadn’t been split. But Woodrow Wilson would continue the fight for workers and consumers. As America entered the 1920′s, corporations began to gain political favors once again as business minded Republicans controlled the White House and Congress. Regulations were being stripped away and banks as large entities were on the rise. These banks and corporations abused the stock market which would lead to the crash of 1929 and the Great Depression. Corporate profits had surged throughout the decade and unfair speculation had caused economic bubbles that had to burst.
Corporate bosses also flexed their muscles over America’s legal system, spending great deals of money to get away with nearly anything. In a statement of sarcasm that speaks to this despicable practice, Senator George Norris, after an industrialist was acquitted of charges of corruption, said that “We ought to pass a law that no man worth $100,000,000 should be tried for a crime.”
The Franklin Roosevelt era would bring new calls for corporate regulation and corporate tax hikes. These new regulations once again kept corporations honest and protected consumers. Workers also benefited from these new regulations, getting fair wages, pensions, and safe working conditions. Corporations were taxed at a rate of 91% and even with all of that, corporations still made huge profits. Life changed dramatically for the middle class. People had jobs with livable wages and promise for the future. Corporations once again served a purpose as consumers were treated fairly and the economy soared. Unemployment was also very low. But these trends did not last long as corporate greed would once again fuel another grab for political power. Corporations began aligning themselves more and more with the Republican Party, and as this relationship grew, corporations found a way to make record profits.
Throughout the 1980′s up to today, corporations have outsourced millions of American jobs to cheap labor overseas. As a result of this, corporate profits have broke record after record, while the unemployment rate has jumped higher and higher. Corporate tax rates began getting lower and lower, while more tax loopholes were created to help corporations evade most of them altogether.
When the Republican Party took control of government in 2001, they went on a crusade on behalf of corporations (how could they refuse, they were on the payroll), to blame workers for economic downturns and outsourcing. Corporations also decided to take advantage of a national tragedy.
After 9/11, there was an understandable push to go to war against terrorists hiding in Afghanistan. But corporations, as in other times of war and tragedy, began pushing for a war against Iraq. And they got their wish. Corporations have since made billions in war profits off of the War in Iraq and have proven once again that profit is far more important than the lives of soldiers. Lincoln was right. This is yet another reason why corporations need to be put in their place. As Henry Ford once said, “Do you want to know the cause of war? It is capitalism, greed, the dirty hunger for dollars. Take away the capitalist and you will sweep war from the earth.”
Republicans are now on the verge of stripping away all corporate regulations and worker’s rights. But it was the 2010 Citizens United decision that really made corporations into political powers. Not only were corporations declared to be people but corporations also now have the power to buy elections at will. The problem with this Supreme Court decision is that it goes against everything the founding fathers believed in. In the Constitution, it says
“We the people…”, not “We the corporations…”.
The founding fathers never addressed corporations in the Constitution because it never occurred to them that corporations would be perceived as people. And why would they have? Corporations don’t eat, they don’t breathe, they don’t vote, they don’t fight battles in wars. Remember all the limitations the founders placed on corporations mentioned earlier? In the Constitution, the founders speak only of the people. The founders did not limit lifetimes of people, nor did they outlaw a persons right to donate to political campaigns. They also did not limit people to specific life goals like they did with corporations.
This should make it absolutely clear that the founders never intended for corporations to be people. The decision by the clearly activist, conservative majority of the court is an abomination that can never be Constitutionally justified. Now it is our duty to call on Congress to bring forward a Constitutional Amendment that bans corporate personhood and bans corporations from interfering with government and legal elections that only real people have the right to donate to and vote in. Because whatever these greedy, arrogant CEO’s and Republicans think, its the opinion of the founding generation that matters most. Corporations are not people. People are people.
The slide show above shows how political spending by outside groups has morphed over the years and how Citizens United made it easier for big donors to pay for political advertisements. Click bottom right hand corner to view presentation full screen.
Unprecedented political spending. Secret donors. New ways for unions and corporations to spend money on politics.
An analysis by the Center for Responsive Politics reveals that the Citizens United v. Federal Election Commission Supreme Court ruling of January 2010 has profoundly affected the nation's political landscape.
Corporations and unions both benefited from the ruling, being able to use their general treasuries to pay for independent expenditures for the first time.
The National Education Association had a different strategy. It set up a so called "super PAC" and financed it with $3.3 million from its general treasury. Pre-Citizens United unions could only spend money on independent expenditures using funds that were voluntarily donated to their political action committee by union members. Now unions can tap into funds that come directly from union member's dues. Unions are still banned from using their treasuries to donate to congressional campaigns and party committees.
Corporations generally did not directly get involved in political spending but rather donated more than $15 million to a new type of political group known as a "super PAC". These groups may raise unlimited amounts of money from any source as long as the donors are disclosed and the groups only spend money on independent expenditures. The top two corporate donors in 2010 were TRT Holdings and Alliance Resource Partners, which each donated about $2.5 million to the 'super PAC' American Crossroads. Corporate donations are likely higher than reported as conservative non-profit groups spent $121 million without disclosing where the money came from.
The ruling allowed corporations and unions to use their general treasuries to pay for political advertisements that expressly call for the election or defeat of a candidate, also known as independent expenditures. This ruling subsequently allowed non-profit corporations under the tax code 501c to spend unlimited amounts of money running these political advertisements while not revealing their donors.
Influencing elections cannot, by law, be the primary purpose of the non-profits.
These nonprofits certainly took advantage of their new power, however, spending $61.3 million on independent expenditures in 2010.
Top findings of the Center's study include:
The percentage of spending coming from groups that do not disclose their donors has risen from 1 percent to 47 percent since the 2006 midterm elections
501c non-profit spending increased from zero percent of total spending by outside groups in 2006 to 42 percent in 2010.
Outside interest groups spent more on election season political advertising than party committees for the first time in at least two decades, besting party committees by about $105 million.
The amount of independent expenditure and electioneering communication spending by outside groups has quadrupled since 2006.
Seventy-two percent of political advertising spending by outside groups in 2010 came from sources that were prohibited from spending money in 2006
For many years conventional wisdom has said that the whole world is controlled by the monied elite, or more recently by the huge multi-national corporations that seem to sometime control the very air we breathe. Now, new research by a team based in ETH-Zurich, Switzerland, has shown that what we’ve suspected all along, is apparently true. The team has uploaded their results onto the preprint server arXiv.
Using data obtained (circa 2007) from the Orbis database (a global database containing financial information on public and private companies) the team, in what is being heralded as the first of its kind, analyzed data from over 43,000 corporations, looking at both upstream and downstream connections between them all and found that when graphed, the data represented a bowtie of sorts, with the knot, or core representing just 147 entities who control nearly 40 percent of all of monetary value of transnational corporations (TNCs).
In this analysis the focus was on corporations that have ownership in their own assets as well as those of other institutions and who exert influence via ownership in second, third, fourth, etc. tier entities that hold influence over others in the web, as they call it; the interconnecting network of TNCs that together make up the whole of the largest corporations in the world. In analyzing the data they found, and then in building the network maps, the authors of the report sought to uncover the structure and control mechanisms that make up the murky world of corporate finance and ownership.
To zero in on the significant controlling corporations, the team started with a list of 43,060 TNCs taken from a sample of 30 million economic “actors” in the Orbis database. They then applied a recursive algorithm designed to find and point out all of the ownership pathways between them all. The resulting TNC network produced a graph with 600,508 nodes and 1,006,987 ownership connections. The team then graphed the results in several different ways to show the different ways that corporate ownership is held; the main theme in each, showing that just a very few corporations through direct and indirect ownership (via stocks, bonds, etc.) exert tremendous influence over the actions of those corporations, which in turn exert a huge impact on the rest of us.
The authors conclude their report by asking, perhaps rhetorically, what are the implications of having so few exert so much influence, and perhaps more importantly, in an economic sense, what the implications are of such a structure on market competitiveness.
More information: The network of global corporate control, Stefania Vitali, James B. Glattfelder, Stefano Battiston, arXiv:1107.5728v1 [q-fin.GN] http://arxiv.org/abs/1107.5728
Abstract The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic "super-entity" that raises new important issues both for researchers and policy makers.
With just under two weeks before voters head to the polls, the 2010 midterm election cycle is on track to be the most expensive in history, flush with 40 percent more cash than in 2008, according to the latest figures from the nonpartisan Campaign Finance Institute.
The group estimates $564 million will be spent by political committees and nonprofit groups this year, including $334 million by pro-Republican organizations and $230 million by pro-Democratic groups.
Experts say spending by independent third-parties are driving the surge, infusing 73 percent more cash into the campaign through mid-October than they did two years ago.
President Obama and top Democrats have pointed to the record sums as the basis for their criticism of groups like Crossroads GPS and Americans for Prosperity, which don't have to disclose the identities of their donors.
"Their lips are sealed, but the floodgates are open," Obama said. "If we just stand by and allow the special interests to silence anybody who's got the guts to stand up to them, our country is going to be a very different place."
The administration has said the Supreme Court's "Citizens United" decision has played a key role in unleashing the flood of cash, by lifting campaign finance restrictions on direct, independent electioneering by corporations, and unions using their general funds in the weeks before elections.
But Campaign Finance Institute executive director Michael Malbin said it's too soon to tell whether the court's decision facilitated an influx of new money – or just allowed corporations to spend it differently.
"While the [Supreme Court's] decision enables more direct business participation, it does not mean more business corporations will feel an incentive to act in this way, instead of giving money through intermediaries (including trade associations and non-profit advocacy groups) as they have done in the past," he said. "The evidence so far is mixed; any conclusion is highly premature."
Impact of Citizens United Debated
Malbin points out that a significant amount of campaign spending by third party groups does not have to be reported at all, under the law. Moreover, groups that do report, occasionally overestimate spending to gain a competitive advantage, or underestimate to later show they exceeded expectations, he said.
Many corporations may also be wary of directly, publicly tying their names to specific candidates. Target Corp. and Best Buy, for example, drew fire earlier this year when they made direct contributions to a political group supporting Republican gubernatorial candidate Tom Emmer.
And some experts say the uptick in political spending by third-party groups may simply be continuing through the channels that they have always used.
"The day before 'Citizens United,' corporations had the right to make unlimited contributions to issue advocacy," said Allison Hayward of the Center for Competitive Politics. "The one thing that's changed is specific advocacy [for candidates]… There would have been a lot of spending even if there hadn't been 'Citizens United.'"
Still, skeptics say the court's decision has undoubtedly given business corporations new confidence in directly campaigning for or against a candidate, and allowed them to give secretly to nonprofit interest groups, like the U.S. Chamber of Commerce, which orchestrate elaborate election advertising campaigns.
"'Citizens United' represents an enormous change in how elections are funded," said Trevor Potter, president of the Campaign Legal Center, adding that, in his view, even if the influence of 'Citizens United' is not fully apparent it is definitely having an effect.
The modern division of labor consists of a ruling class (top 1%) that control about 40% of all financial assets, a managerial class ( the top 2%-10%) who control about 35% of all assets, with the other 90% of the working masses dividing up the 25% that’s left. The pyramid is organized by a complex and highly specialized division of labor, state-run education, massive corporations, government bureaucracy, the judiciary, intelligence organizations, mediatic propaganda machines and mainstream religion. Those rare few that actually wake up and see the zombie world are quickly diagnosed by the DSM-5 and given anti-depressants. There are two things everyone wants all the time, and one of them is money. Control of the money is the magic wand that rules the world. All the other religious, patriotic and historical paraphernalia are directly related to allowing the 1% to control the creation of money. Take that away, and they are nothing but media hacks. The current era which began with the creation of the Federal Reserve and the involvement of the United States in WWI is coming to an end. The great mistake most “awake” people make is believing redemption is at hand while underestimating the ruling class. The masters of propaganda and finance and are much more in control then they will ever reveal through their own channels. Their imaginations are immense and their capacity to orchestrate drama has no limits. They are the voice of reason while the dissenters are “diagnosed” with a collection of ailments that quickly marginalize them. - Robert Bonomo, What QE3 Will Look Like, Activist Post, August 12, 2011
The American model of high productivity and low pay has friends in high places; the U.S. government is in collusion with corporations to lower the standard of living of the workforce -- first the private sector and then everyone else.
By Mark Provost, Truthout
December 14, 2010
According to a recent CNN poll, three out of four Americans believe the recession is not over. Unemployment has not been this high for this long in most Americans’ lifetime. By every measure, the U.S. economy is failing to recover from the Great Recession.
Every measure except one.
In the last 18-20 months, corporate profits climbed at the fastest pace on record. Non-financial companies are reporting the highest free cash flow (profits after dividends and capital expenditures) in a half-century. Profit margins at S&P 500 companies are now above 9%, approaching uncharted territory. Joseph Lavorgna, chief U.S. economist of Deutsche Bank, stresses,
“Not only are we seeing a tremendous V-shaped recovery in corporate profits, but we are in fact seeing the biggest corporate profit recovery ever.”
The Obama recovery is turning the traditional formula on its head; corporate profits have not been a leading indicator of economic recovery, but a lagging indicator of Main St. impoverishment. The Greatest Recovery in corporate profits and the Great Recession are two sides of the same coin.
Worker-advocacy group Change to Win released the results of a recent survey which found that wage stagnation ranks as the most common impact of the Great Recession. Workers will believe in the recovery narrative when they see a raise in their paychecks. For now, productivity gains are going straight to their employers’ bottom line.
Andrew Sum, professor of economics at Northeastern University, concludes that the current expansion “has seen the most lopsided gains in corporate profits relative to real wages in our history.”
The Greatest Recovery marks corporate executives’ latest triumph in their decades-long campaign against labor. Since the Reagan expansion, U.S. corporate profits exhibited a permanent tendency to soar at the expense of wages.The top one percent of income earners accrued nearly two-thirds of all economic growth.Profit margins expanded in an unprecedented super-cycle while workers struggled through increasingly lopsided, jobless recoveries. The last three expansions presaged the Greatest Recovery and defined its precise shape.
The unequal distribution of income between profits and wages is ultimately reflective of an unequal distribution of power between business and labor — at the workplace and in Washington.
President Obama signaled his commitment to continuity early on. Despite underestimating the rise of unemployment in late 2008 and early 2009, Obama’s advisors rejected the public employment option swifter than its counterpart in healthcare reform. President Obama initially defended the stimulus on the specific grounds that the private sector would create 95% of the jobs.
Some critics of the plan correctly argued that, given the decline in demand, the stimulus should have been larger. Size was not the only problem. Larry Summers, Obama’s former chair of economic advisors, designed the stimulus to maximize GDP rather than employment — job creation, private sector included, was at best an incidental goal.
Twenty-six million Americans are presently unemployed or underemployed. According to Economic Policy Institute’s Heidi Schierholz,
“If the rate of job growth were to continue at October’s rate, the economy would achieve prerecession unemployment rates (5% in 2007) in roughly 20 years.”
The Obama administration’s laissez-faire attitude towards the reeling labor market contrasts sharply with the direct assistance it provided to the financial industry. The two-dozen Treasury and Federal Reserve policies implemented during the financial crisis shared one overriding goal: prevent prices from falling in the real estate, bond, and equity markets. Yet, the Obama administration ignored the Employee Free Choice Act even as the price of labor (wages and salaries) suffered the sharpest decline in 50 years. The administration’s economic policy regime compels workers to the free market while protecting banks from its ruinous fallout.
President Obama’s refusal to resolve the unemployment crisis provides the corporate sector with a crucial, often overlooked, subsidy.High unemployment permits management to extort wage concessions and productivity gains from their anxious employees. An article in the December issue of The Economist explains,
“Since the end of 2008 business-sector productivity has grown at an impressive annualized rate of 4.2% while hourly compensation has crept ahead by just 2.1%. Unit labor costs have fallen at an annualized 2% rate, the steepest cumulative decline since the 1950s. Profits owe their V-shape in great part to employment’s L-shape.”
The unemployment crisis qualifies as a national emergency; it’s also the foundation of the Greatest Recovery.
Profits are rising sharply in the United States, but wages are not. The unemployment rate remains high, and a rapid increase in jobs is not forecast. Clearly, American business has shed jobs in short order. The resulting rise in productivity is not being shared by workers. How much longer can this go on? The authors analyze the disturbing numbers. - Andrew Sum and Joseph McLaughlin, The Massive Shedding of Jobs in America, Challenge, December 2010
By Mark Provost, Truthout
January 8, 2011
In a January 2009 ABC interview with George Stephanopoulos, then President-elect Barack Obama said fixing the economy required shared sacrifice:
"Everybody's going to have to give. Everybody's going to have to have some skin in the game."
For the past two years, American workers submitted to the president's appeal — taking steep paycuts despite hectic productivity growth.By contrast, corporate executives have extracted record profits by sabotaging the recovery on every front — eliminating employees, repressing wages, withholding investment and shirking federal taxes.
The global recession increased unemployment in every country, but the American experience is unparalleled. According to a July Organization for Economic Cooperation and Development (OECD) report, the US accounted for half of all job losses among the 31 richest countries from 2007 to mid-2010. The rise of US unemployment greatly exceeded the fall in economic output. Aside from Canada, US Gross Domestic Product (GDP) actually declined less than any other rich country from mid-2008 to mid-2010.
Washington's embrace of labor market flexibility ensured companies encountered little resistance when they launched their brutal recovery plans.Leading into the recession, the US had the weakest worker protections against individual and collective dismissals in the world, according to a 2008 OECD study. Blackrock's Robert Doll explains,
"When the markets faltered in 2008 and revenue growth stalled, US companies moved decisively to cut costs — unlike their European and Japanese counterparts."
The US now has the highest unemployment rate among the ten major developed countries.
The private sector has not only been the chief source of massive dislocation in the labor market, but has also been a beneficiary. Over the past two years, productivity has soared while unit labor costs have plummeted.By imposing layoffs and wage concessions, US companies are supplying their own demand for a tractable labor market. Private sector union membership is the lowest on record. Deutsche Bank Chief Economist Joseph LaVorgna notes that profits-per-employee are the highest on record, adding,
"I think what investors are missing — and even the Federal Reserve — is the phenomenal health of the corporate sector."
Due to falling tax revenues, state and local government layoffs are accelerating. In contrast, US companies increased their headcounts in November at the fastest pace in three years, marking the tenth consecutive month of private sector job creation. The headline numbers conceal a dismal reality; after a lost decade of employment growth, the private sector cannot keep pace with new entrants into the workforce.
The few new jobs are unlikely to satisfy Americans who lost careers. In November, temporary labor represented an astonishing 80 percent of private sector job growth. Companies are transforming temporary labor into a permanent feature of the American workforce. United Press International (UPI) reports that,
"This year, 26.2 percent of new private sector jobs are temporary, compared to 10.9 percent in the recovery after the 1990s recession and 7.1 percent in previous recoveries."
The remainder of 2010 private sector job growth has consisted mainly of low-wage, scant-benefit service sector jobs, especially bars and restaurants, which added 143,000 jobs, growing at four times the rate of the rest of the economy.
Aside from job fairs, large corporations have been conspicuously absent from the tepid jobs recovery — but they are leading the profit recovery.Part of the reason is the expansion of overseas sales, but the profit recovery is primarily coming off the backs of American workers. After decades of globalization, US multinationals still employ two-thirds of their global workforce from the US (21.1 million workers out of a total 31.2 million). Corporate executives are hammering American workers precisely because they are so dependent on them.
An annual study by USA Today found that private sector paychecks as a share of Americans' total income fell to 41.9 percent earlier this year, a record low. Conservative analysts seized on the report as proof of President Obama's agenda to redistribute wealth from, in their words, those "pulling the cart" to those "simply riding in it." Their accusation withstands the evidence — only it's corporate executives and wealthy investors enjoying the free ride.Corporate executives have found a simple formula: the less they contribute to the economy, the more they keep for themselves and shareholders. A Federal Reserve flow of funds report reveals corporate profits represented a near-record 11.2 percent of national income in the second quarter.
Nonfinancial companies have amassed nearly $2 trillion in cash, representing 11 percent of total assets, a sixty-year high. Companies have not deployed the cash on hiring as weak demand and excess capacity plague most industries. Companies have found better use for the cash. As Robert Doll explains,
"High cash levels are already generating dividend increases, share buybacks, capital investments and M&A [mergers and acquisitions] activity — all extremely shareholder-friendly."
Companies invested $262 billion in equipment and software investment in the third quarter;that compares with nearly $80 billion in share buybacks. The paradox of substantial liquid assets accompanying a shortfall in investment validates Keynes's idea that slumps are caused by excess savings. Three decades of lopsided expansions have hampered demand by clotting the circulation of national income in corporate balance sheets. An article in the July issue of The Economist observes that, "business investment is as low as it has ever been as a share of GDP."
The decades-long shift in the tax burden from corporations to working Americans has accelerated under President Obama. For the past two years, executives have reported record profits to their shareholders, partially because they are paying a pittance in federal taxes. Corporate taxes as a percentage of GDP in 2009 and 2010 are the lowest on record at just over 1 percent.
Corporate executives complain that the US has the highest corporate tax rate in the world, but there's a considerable difference between the statutory 35 percent rate and what companies actually pay (the effective rate). Here again, large corporations lead the charge in tax arbitrage. US tax law allows multinationals to indefinitely defer their tax obligations on foreign earned profits until they "repatriate" (send back) the profits to the US. US corporations have increased their overseas stash by 70 percent in four years, now over $1 trillion — largely by dodging US taxes through a practice known as "transfer pricing."
Transfer pricing allows companies to allocate costs in countries with high tax rates and book profits in low-tax jurisdictions and tax havens — regardless of the origin of sale. US companies are using transfer pricing to avoid US tax obligations to the tune of $60 billion dollars annually, according to a study by Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.
The corporate cash glut has become a point of recurrent contention between the Obama administration and corporate executives. In mid-December, a group of 20 corporate executives met with the Obama administration and pleaded for a tax holiday on the $1 trillion stashed overseas, claiming the money will spur jobs and investment.In 2004, corporate executives convinced President Bush and Congress to include a similar amnesty provision in the American Jobs Creation Act; 842 companies participated in the program, repatriating $312 billion back to the US at 5.25 percent rather than at 35 percent. In 2009, the Congressional Research Service concluded that most of the money went to stock buybacks and dividends — in direct violation of the Act.
The Obama administration and corporate executives saved American capitalism. The US economy may never recover.
Christina Romer, former member of President Obama's Council of Economic Advisors, accuses the administration of "shamefully ignoring" the unemployed. Paul Krugman echoes her concerns, observing that Washington has lost interest in "the forgotten millions."
America's unemployed have been ignored and forgotten, but they are far from superfluous. Over the last two years, out-of-work Americans have played a critical role in helping the richest one percent recover trillions in financial wealth.
Obama's advisers often congratulate themselves for avoiding another Great Depression — an assertion not amenable to serious analysis or debate. A better way to evaluate their claims is to compare the US economy to other rich countries over the last few years.
On the basis of sustaining economic growth, the United States is doing better than nearly all advanced economies. From the first quarter of 2008 to the end of 2010, US gross domestic product (GDP) growth outperformed every G-7 country except Canada.
But when it comes to jobs, US policymakers fall short of their rosy self-evaluations. Despite the second-highest economic growth, Paul Wiseman of the Associated Press (AP) reports:
"The U.S. job market remains the group's weakest. U.S. employment bottomed and started growing again a year ago, but there are still 5.4 percent fewer American jobs than in December 2007. That's a much sharper drop than in any other G-7 country."
According to an important study by Andrew Sum and Joseph McLaughlin, the US boasted one of the lowest unemployment rates in the rich world before the housing crash — now, it's the highest.
The gap between economic growth and job creation reflects three separate but mutually reinforcing factors: US corporate governance, Obama's economic policies and the deregulation of US labor markets.
Old economic models assume that companies merely react to external changes in demand — lacking independent agency or power. While executives must adapt to falling demand, they retain a fair amount of discretion in how they will respond and who will bear the brunt of the pain. Corporate culture and organization vary from country to country.
In the boardrooms of corporate America, profits aren't everything — they are the only thing.A JPMorgan researchreportconcludes that the current corporate profit recovery is more dependent on falling unit-labor costs than during any previous expansion. At some level, corporate executives are aware that they are lowering workers' living standards, but their decisions are neither coordinated nor intentionally harmful. Call it the "paradox of profitability." Executives are acting in their own and their shareholders' best interest: maximizing profit margins in the face of weak demand by extensive layoffs and pay cuts. But what has been good for every company's income statement has been a disaster for working families and their communities.
Obama's lopsided recovery also reflects lopsided government intervention. Apart from all the talk about jobs, the Obama administration never supported a concrete employment plan. The stimulus provided relief, but it was too small and did not focus on job creation.
The administration's problem is not a question of economics, but a matter of values and priorities. In the first Great Depression, President Roosevelt created an alphabet soup of institutions — the Works Progress Administration (WPA), the Tennessee Valley Authority (TVA) and the Civilian Conservation Corps (CCC) — to directly relieve the unemployment problem, a crisis the private sector was unable and unwilling to solve. In the current crisis, banks were handed bottomless bowls of alphabet soup — the Troubled Asset Relief Program (TARP), the Public-Private Investment Program (PPIP) and the Term Asset-Backed Securities Loan Facility (TALF) — while politicians dithered over extending inadequate unemployment benefits.
The unemployment crisis has its origins in the housing crash, but the prior deregulation of the labor market made the fallout more severe. Like other changes to economic policy in recent decades, the deregulation of the labor market tilts the balance of power in favor of business and against workers. Unlike financial system reform, the deregulation of the labor market is not on President Obama's agenda and has escaped much commentary.
Labor-market deregulation boils down to three things: weak unions, weak worker protection laws and weak overall employment. In addition to protecting wages and benefits, unions also protect jobs. Union contracts prevent management from indiscriminately firing workers and shifting the burden onto remaining employees.After decades of imposed decline, the United States currently has the fourth-lowest private sector union membership in the Organization for Economic Cooperation and Development (OECD).
America's low rate of union membership partly explains why unemployment rose so fast and — thanks to hectic productivity growth — hiring has been so slow.
Proponents of labor-market flexibility argue that it's easier for the private sector to create jobs when the transactional costs associated with hiring and firing are reduced. Perhaps fortunately, legal protections for American workers cannot get any lower: US labor laws make it the easiest place in the word to fire or replace employees, according to the OECD.
Another consequence of labor-market flexibility has been the shift from full-time jobs to temporary positions. In 2010, 26 percent of all news jobs were temporary — compared with less than 11 percent in the early 1990's recovery and just 7.1 percent in the early 2000's.
The American model of high productivity and low pay has friends in high places.Former Obama adviser and General Motors (GM) car czar Steven Rattner argues that America's unemployment crisis is a sign of strength:
Perversely, the nagging high jobless rate reflects two of the most promising attributes of the American economy: its flexibility and its productivity. Eliminating jobs — with all the wrenching human costs — raises productivity and, thereby, competitiveness.
Unusually, US productivity grew right through the recession; normally, companies can't reduce costs fast enough to keep productivity from falling.
That kind of efficiency is perhaps our most precious economic asset. However tempting it may be, we need to resist tinkering with the labor market. Policy proposals aimed too directly at raising employment may well collaterally end up dragging on productivity.
Rattner comes dangerously close to articulating a full-unemployment policy. He suggests unemployed workers don't merit the same massive government intervention that served GM and the banks so well. When Wall Street was on the ropes, both administrations sensibly argued, "doing nothing is not an option." For the long-term unemployed, doing nothing appears to be Washington's preferred policy.
The unemployment crisis has been a godsend for America's superrich, who own the vast majority of financial assets — stocks, bonds, currency and commodities.
Persistent unemployment and weak unions have changed the American workforce into a buyers' market — job seekers and workers are now "price takers" rather than "price makers."Obama's recovery shares with Reagan's early years the distinction of being the only two post-war expansions where wage concessions have been the rule rather than the exception. The year 2009 marked the slowest wage growth on record, followed by the second slowest in 2010.
America's labor market depression propels asset price appreciation. In the last two years, US corporate profits and share prices rose at the fastest pace in history — and the fastest in the G-7. Considering the source of profits, the soaring stock market appears less a beacon of prosperity than a reliable proxy for America's new misery index. Mark Whitehouse of The Wall Street Journal describes Obama's hamster wheel recovery:
From mid-2009 through the end of 2010, output per hour at U.S. nonfarm businesses rose 5.2% as companies found ways to squeeze more from their existing workers. But the lion's share of that gain went to shareholders in the form of record profits, rather than to workers in the form of raises. Hourly wages, adjusted for inflation, rose only 0.3%, according to the Labor Department. In other words, companies shared only 6% of productivity gains with their workers. That compares to 58% since records began in 1947.
Workers' wages and salaries represent roughly two-thirds of production costs and drive inflation. High inflation is a bondholders' worst enemy because bonds are fixed-income securities. For example, if a bond yields a fixed five percent and inflation is running at four percent, the bond's real return is reduced to one percent. High unemployment constrains labor costs and, thus, also functions as an anchor on inflation and inflation expectations — protecting bondholders' real return and principal. Thanks to the absence of real wage growth and inflation over the last two years, bond funds have attracted record inflows and investors have profited immensely.
The Federal Reserve has played the leading role in sustaining the recovery, but monetary policies work indirectly and disproportionately favor the wealthy. Low interest rates have helped banks recapitalize, allowed businesses and households to refinance debt and provided Wall Street with a tsunami of liquidity — but its impact on employment and wage growth has been negligible.
CNBC's Jim Cramer provides insight into the counterintuitive link between a rotten economy and soaring asset prices:
"We are and have been in the longest 'bad news is good news' moment that I have ever come across in my 31 years of trading. That means the bad news keeps producing the low interest rates that make stocks, particularly stocks with decent dividend protection, more attractive than their fixed income alternatives."
In other words, the longer Ben Bernanke's policies fail to lower unemployment, the longer Wall Street enjoys a free ride.
Out-of-work Americans deserve more than unemployment checks — they deserve dividends.The rich would never have recovered without them.
After the longest recession since WWII, many Americans are still struggling while S&P 500 corporations are sitting on $800 billion in cash and making massive profits. Now, economists from Northeastern University have released a study that finds our sluggish economic recovery has almost solely benefited corporations. According to the study:
"Between the second quarter of 2009 and the fourth quarter of 2010, real national income in the U.S. increased by $528 billion. Pre-tax corporate profits by themselves had increased by $464 billion while aggregate real wages and salaries rose by only $7 billion or only .1%. Over this six quarter period, corporate profits captured 88% of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1% of the growth in real national income. ...The absence of any positive share of national income growth due to wages and salaries received by American workers during the current economic recovery is historically unprecedented."
The New York Times adds,
"According to the Bureau of Labor Statistics, average real hourly earnings for all employees actually declined by 1.1 percent from June 2009, when the recovery began, to May 2011, the month for which the most recent earnings numbers are available."
So as average wages fall, and nearly 14 million people remain unemployed, America's economic recovery has almost entirely benefited corporations. This development adds another chapter to the decline of the middle class, whose incomes are shrinking and wages are stagnating. Last year, top executives' salaries increased 27 percent, while workers' salaries increased only 2 percent.
At the moment, income inequality in America is the worst it's been since the 1920s, as the richest 1 percent make nearly 25 percent of the country's income.
Perhaps it's fitting that, as the Columbia Journalism Review points out, the Business section of today's New York Times reads like a "snapshot of the gilded age economy." Stories in the April 1 section include one on the $17 million paid to the CEOs of Fannie Mae and Freddie Mac in 2009 and 2010--fresh off the taxpayers bailing out the two lenders to the tune of $150 billion--and another on the multi-billion dollar lending program the Fed used to save the likes of Fannie and Freddie.
While millions of Americans confront the daily miseries of unemployment, home foreclosure and poverty as a result of the economic crisis, corporate profits are soaring.
Walmart, the world’s largest retail chain, announced last week that its profits grew by 27 percent in the fourth quarter of 2010, while sales at US stores have declined for the second year in a row. The company made $6 billion in profits in the fourth quarter, up from $4.8 billion a year before and $3.5 billion in the third quarter of 2010.
Home Depot posted a 72 percent increase in profits, after sales increased by 3.8 percent in the fourth quarter. Profits reached $587 million, up from $342 million a year earlier.
Hundreds of companies have posted similar figures. The story is the same: sales and revenues have fallen or ticked up slightly, while profits have grown by double digits.
The discrepancy between revenues and profits is due to the fact that the “recovery” in corporate balance sheets is built on layoffs and speedup.
“A lot of the recent profits are based on the revenue from cost-cutting,” said James L. Butkeiwiz, professor of economics at the University of Delaware, in a telephone interview.
Walmart, for instance, cut over 11,000 jobs at its Sam’s Club warehouse stores in January 2010, about 10 percent of the subsidiary’s workforce. Home Depot cut 7,000 jobs in 2009 and shuttered 34 of its Expo home design stores in 2009.
Corporate profits reached an annual rate of $1.659 trillion in the third quarter of 2010, and it is possible that fourth quarter profits, which have not yet been aggregated, were even higher.
As a result of these record profits, companies have found themselves with huge stockpiles of cash. US corporations had a record $1.93 trillion in cash and similar assets in December, the last time figures were released.
Instead of investing, companies have used this cash to buy back their own stocks, enriching executives and shareholders without creating jobs. In January 2011, stock buybacks reached their highest level since the start of the economic downturn. That month, companies bought back $57 billion in shares, compared to $357 billion for all of last year, according to Trimtabs, the finance data company.
Intel, the maker of computer chips, announced the largest buyback thus far, amounting to $10 billion, on January 24. Within two weeks, Pfizer, the pharmaceutical company, and media conglomerate Time Warner each followed with $5 billion.
Trimtabs said that buyback activity was up by 25 percent in the fourth quarter over the third, reaching an average of $1.7 billion daily.
“Companies have a lot of cash and they don’t feel very confident in investing it,” said Vincent Deluard, the company’s executive vice president, in a telephone interview.
Compared to boosting dividends, the more traditional method of disbursing excess cash, stock buybacks are preferred by executives because they increase the values of their own existing shares.
“Stock buybacks benefit executives,” said Charles Elson, a professor of corporate governance at the University of Delaware. “If they have options, then a buyback is significantly more favorable than just paying dividends.”
Aggressive wage cuts, together with layoffs and speedup, have resulted in drastic increases in labor productivity, which grew by 6 percent in 2010 following similar gains the previous year.
“Firms have maintained productivity by laying off workers, and they’re not willing to hire,” said Dr. Butkeiwicz. “Often, productivity falls in recessions, but it hasn’t this time around.”
As a result, corporations have managed to increase productivity while cutting output.
“Companies have to be happy, there’s no question about that,” Butkeiwicz said. “They’ve got to do something with their money, so they’re just buying back stock.”
In the face of an economic crisis that has led to at least 8 million layoffs and over 6 million home foreclosures,by its own estimates the Obama administration’s programs have created 586,340 jobs, only about one 16th of those lost since the beginning of the recession. High unemployment is in fact a deliberate policy, aimed at providing a rapid recovery in corporate profits at the expense of workers.
This policy is manifest most clearly at General Motors, which posted its first annual profit since 2004 last week. The company made $4.7 billion for the year, the most since 1999, in a dramatic return to profitability.
This was the direct outcome of the Obama administration’s restructuring program, in which the government insisted that workers take major concessions. The contract forced onto auto workers in 2009 drastically increased the proportion of workers making $14 per hour, half the previous wage, combined with thousands of layoffs.
This White House-managed corporate restructuring, initiated in early 2009, opened the floodgates for other companies to take similar measures on their own initiative, using the economic crisis to lay off thousands and impose speedup and wage cuts on those who remained.
Two years after the process started, the end result is clear: millions unemployed, millions in foreclosure, and record corporate profits.
Over the last decade, the share of U.S. national income taken home by workers has plummeted to a record low.
Check out the chart below, compiled by the Labor Department, and posted this week by conservative writer David Frum. It shows that the decline began with the brief recession that followed 9/11 in 2001. But it continued even as the economy picked up again, and got even worse once the Great Recession hit. In the weak recovery since then, workers' share of income just kept on falling.
Why are workers taking home such a reduced share of the pie?Opinions differ, but many experts think that the trend has to do with a number of factors, including a decline in the bargaining power of labor, and increased competition from foreign workers. Similarly, over the last year or so, U.S. companies have made record profits, while unemployment has stayed high and wages have barely risen.
Still, there's little sense that either Obama administration or Congress plan to do much about this growing inequality. Indeed, any serious action to boost the economy and cut unemployment now seems to be off the table
It is, you might say, the best of times, and the worst of times.
Call it a tale of two economies. Across a range of measures, the current "recovery" is among the weakest since the government began keeping records.Meanwhile, American corporations, which already have been raking in massive profits, are poised to report strong second quarter profits.And despite that imbalance, one economic commentator notes that those same corporations are still lobbying for more tax breaks--concerns over the deficit be damned.
The Great Recession officially ended in June 2009, but the recovery has been lackluster in the extreme. It's not just the 9.1 percent unemployment rate, the nearly 14 million jobless, or the anemic 1.8 percent GDP growth in the first quarter--numbers we're all familiar with at this point.
As the Wall Street Journal reports, banks are lending less money now--both through credit card lines and home loans--than when the recovery began, according to numbers from the New York Fed.
And although household debt is lower than it was at the height of the boom, it's still high enough to exert a severe drag on the economy.In 2007, the average household had borrowed 127 percent of its annual income to fund purchases. That's now down to 112 percent--in part because banks have written off some debt as uncollectable. But it could take years before it descends the average level for the 1990s, 84 percent, which experts say is a healthier mark.
So, things are bleak--but not for American companies and shareholders.The Journal reports separately that according to an analysis by Brown Brothers Harriman, second-quarter earnings for companies in the Standard & Poor's 500-stock index are expected to rise by 13.6 percent compared to a year ago, when they're announced later this month.
Given all this, you might expect that corporations would at least be doing what they can to help solve the deficit problem that many experts say imperils the long-term stability of the economy. But as David Leonhardt of the New York Times observes today, the opposite is the case.
Leonhardt uses as an example the Business Roundtable, a trade group that's generally seen as moderate, and talks about the deficit problem in sober, restrained tones. But lately, he writes, its actions are telling a different story:
Rhetoric aside, it consistently lobbies for a higher deficit.The roundtable defends corporate tax loopholes and even argues for new ones. It pushes for a lower corporate tax rate. It favors the permanent extension of the Bush tax cuts. It opposes a reduction in the tax subsidy for health insurance, a reduction that was part of the 2009 health reform bill. Oh, and the roundtable also favors new spending on roads, bridges and other infrastructure.
It's not just the Roundtable. Leonhardt continues:
Today's business groups struggle to come up with any specific deficit plan. Last year, the Business Council—a group of top corporate executives headed by Jamie Dimon of JPMorgan Chase—and the roundtable released a 49-page plan that simultaneously warned that projected deficits would "retard future growth" and called for policies that would add hundreds of billions of dollars a year to the deficit.
So to recap: This recovery is among the weakest since World War Two. But three years after the financial industry caused the economy to tank, corporations are doing better than ever, without using their profits to hire people. Meanwhile, they're lobbying for more tax breaks, which would make the deficit problem worse.
At least 25 top United States companies paid more to their chief executives in 2010 than they did to the federal government in taxes,according to a study released on Wednesday.
The companies — which include household names like eBay, Boeing, General Electric and Verizon — averaged $1.9 billion each in profits, according to the study by the Institute for Policy Studies, a liberal-leaning research group. But a variety of shelters, loopholes and tax reduction strategies allowed the companies to average $304 million each in tax benefits — which can be taken as a refund or used as write-off against earnings in future years.
The chief executives of those companies were paid an average of more than $16 million a year, the study found, a figure substantially higher than the $10.8 million average for all companies in the Standard & Poor’s 500-stock index.
The financial data in the report was taken from the companies’ regulatory filings, which can differ from what is actually filed on a corporate tax return. Even in a year when a company claims an overall tax benefit, it may pay some cash taxes while accumulating credits that can be redeemed in future years.For instance, General Electric reported a federal tax benefit of more than $3 billion in 2010, but company officials said they still expected to pay a small amount of cash taxes.
The authors of the study, which examined the regulatory filings of the 100 companies with the best-paid chief executives,said that their findings suggested that current United States policy was rewarding tax avoidance rather than innovation.
“We have no evidence that C.E.O.’s are fashioning, with their executive leadership, more effective and efficient enterprises,” the study concluded. “On the other hand, ample evidence suggests that C.E.O.’s and their corporations are expending considerably more energy on avoiding taxes than perhaps ever before — at a time when the federal government desperately needs more revenue to maintain basic services for the American people.”
The study comes at a time when business leaders have been lobbying for a cut in corporate taxes and Congress and the Obama administration are considering an overhaul of the tax code to reduce the federal budget deficit.
Many business leaders say that the top corporate statutory rate of 35 percent, which is higher than any country except Japan, is hobbling the economy and making it difficult for domestic companies to compete with overseas rivals. A coalition led by high-technology companies and pharmaceutical manufacturers have been pushing for a “repatriation holiday,” which would let them bring as much as $1 trillion in foreign profits back to the United States at substantially reduced rates.
But the Obama administration has said it will consider lowering the corporate rate only if Congress agrees to eliminate enough loopholes and tax subsidies to pay for any drop in revenue. Many policy experts estimate that the United States could lower its corporate rate to the high 20s if it eliminated the maze of tax breaks that favor specific industries and investors.
The report found, however, that many of the nation’s largest and highly profitable companies paid far less than the statutory rate.
Verizon, which earned $11.9 billion in pretax United States profits, received a federal tax refund of $705 million. The company’s chairman, Ivan Seidenberg, meanwhile, received $18.1 million in compensation. The online retailer eBay reported pretax profits of $848 million and received a $113 million federal refund. John Donahoe, eBay’s chief executive, collected a compensation package worth $12.4 million, the study said.
Verizon and eBay officials disputed the report. Robert Varretoni, a company spokesman, said that the $18 million in compensation for Mr. Seidenberg was a target, which will only be paid in full if the company stock rises when his bonus is fully vested in three years. Mr. Varretoni also said it was misleading of the report to cite Verizon’s tax benefit without noting that the company also incurred billions of dollars in deferred taxes which “will be paid over time.”
“The fact is, Verizon fully complies with all tax laws and pays its fair share of taxes,” Mr. Varretoni said.
John Pluhowski, eBay's vice president for corporate communications, said on Wednesday that the study did not accurately portray the taxes paid by the company in 2010. Mr. Pluhowski said that eBay had paid $646 million in taxes to federal and local governments worldwide in 2010, much of it in the United States. The $131 million tax benefit eBay reported on its U.S. federal taxes was due, in large part, to accounting adjustments made after the company settled several audits with the I.R.S. for previous years' taxes. (EBay was asked to comment on Tuesday before this article was published, but did not respond.)
Chaz Bickers, a Boeing spokesman, said that the company’s taxes have declined in recent years because it has made huge investments in United States manufacturing. Mr. Bickers said that the company also paid hundreds of millions in cash taxes and incurred an additional $1 billion in deferred taxes that it will pay at some date in the future.
“We pay our taxes and we have added 5,000 more U.S. manufacturing jobs that were incentivized by tax benefits,” he said.
While the accounting strategies used to lower taxes varied from company to company,the report found that 18 of the 25 corporations had offshore subsidiaries, which can be used to shelter income.
To discourage companies from gaming the tax system, the report called for tighter rules on offshore tax havens and new restrictions on write-offs for executive compensation.
“Instead of sharing responsibility for addressing our nation’s fiscal challenges,” said Chuck Collins, a senior scholar at the institute who co-wrote the study, “corporations are rewarding C.E.O.’s for aggressive tax avoidance.”
They will get away with it, at least in this life. “They” are the Wall Street usurers, people of a sort condemned in Scripture, who have brought more misery to this nation than we have known since the Great Depression. “They” will not suffer for their crimes because they have a majority ownership position in our political system. That is the meaning of the banking plea bargain that the Obama administration is pressuring state attorneys general to negotiate with the titans of the financial world.
It is a sellout deal that, in return for a pittance of compensation by banks to ripped-off mortgage holders, would grant the banks blanket immunity from any prosecution. That is intended to short-circuit investigations by a score of aggressive state officials, inquiries that offer the public a last best hope to get to the bottom of the housing scandal that has cost U.S. homeowners $6.6 trillion in home equity in the past five years and left 14.6 million Americans owing more than their homes are worth.
The $20 billion or so that the banks would pony up is chump change to them compared with the trillions that the Fed and other public agencies spent to bail them out. The banks were given direct cash subsidies, virtually zero-interest loans, and the Fed took $2 trillion in bad paper off their hands while the banks exacerbated the banking crisis they had created through additional shady practices, including fraudulent mortgage foreclosures.
Yet the administration has rushed to the aid of the banks once again and is attempting to intimidate the few state attorneys general who have the gumption to protect the public interest they are sworn to serve. As Gretchen Morgenson of The New York Times reported:
“Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices. …
“In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement. …”
Donovan has good reason not to want an exploration of the origins of the housing meltdown: He has been a big-time player in the housing racket for decades.Back in the Clinton administration, when government-supported housing became a fig leaf for bundling suspect mortgages into what turned out to be toxic securities, Donovan was a deputy assistant secretary at HUD and acting Federal Housing Administration commissioner. He was up to his eyeballs in this business when the Clinton administration pushed through legislation banning any regulation of the market in derivatives based on home mortgages.
Armed with his insider connections, Donovan then went to work for the Prudential conglomerate (no surprise there), working deals with the same government housing agencies that he had helped run.
As The New York Times reported in 2008 after President Barack Obama picked him to be secretary of HUD,
“Mr. Donovan was a managing director at Prudential Mortgage Capital Co., in charge of its portfolio of investments in affordable housing loans, including Fannie Mae and the Federal Housing Administration debt.”
The HUD website boasts in its bio of Donovan that “under Secretary Donovan’s leadership, HUD has helped stabilize the housing market and worked to keep responsible families in their homes.” If that is so, we have to assume that the tens of millions savaged by an out-of-control banking industry were not “responsible.” And if the housing market has in any way been “stabilized,” why did the Commerce Department report Tuesday that new home sales have dropped for the third month in a row?
Shifting the blame from the swindlers to the victims is the cynical rot at the core of the response of both the Bush and Obama administrations to the housing collapse.It is a response that aims to forgive and forget the crimes of Wall Street while allowing ordinary folks to sink deeper into the pit of debt and despair. It infects Donovan and many others who claim to be concerned for the very homeowners they are betraying by undermining the few officials such as Schneiderman who seek to hold the bankers accountable.
In her article about the pressure being brought to bear on Schneiderman to go along with the sellout, Morgenson reported that according to an attendee at a memorial service this month for former New York Gov. Hugh Carey, as Schneiderman was leaving he “became embroiled in a contentious conversation with Kathryn S. Wylde, a member of the board of the Federal Reserve Bank of New York who represents the public.”
When interviewed by Morgenson, Wylde claimed that her conversation with Schneiderman was “not unpleasant” but that she told him:
“It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it.Wall Street is our Main Street—love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”
News flash: Congressional Republicans want to raise your taxes.
Impossible, right? GOP lawmakers are so virulently anti-tax, surely they will fight to prevent a payroll tax increase on virtually every wage-earner starting Jan. 1, right?
Apparently not.
Many of the same Republicans who fought hammer-and-tong to keep the George W. Bush-era income tax cuts from expiring on schedule are now saying a different "temporary" tax cut should end as planned. By their own definition, that amounts to a tax increase.
The tax break extension they oppose is sought by President Barack Obama. Unlike proposed changes in the income tax, this policy helps the 46 percent of all Americans who owe no federal income taxes but who pay a "payroll tax" on practically every dime they earn.
There are other differences as well, and Republicans say their stand is consistent with their goal of long-term tax policies that will spur employment and lend greater certainty to the economy.
"It's always a net positive to let taxpayers keep more of what they earn," says Rep. Jeb Hensarling, "but not all tax relief is created equal for the purposes of helping to get the economy moving again." The Texas lawmaker is on the House GOP leadership team.
The debate is likely to boil up in coming weeks as a special bipartisan committee seeks big deficit reductions and weighs which tax cuts are sacrosanct.
At issue is a tax that the vast majority of workers pay, but many don't recognize because they don't read, or don't understand their pay stubs. Workers normally pay 6.2 percent of their wages toward a tax designated for Social Security. Their employer pays an equal amount, for a total of 12.4 percent per worker.
As part of a bipartisan spending deal last December, Congress approved Obama's request to reduce the workers' share to 4.2 percent for one year; employers' rate did not change. Obama wants Congress to extend the reduction for an additional year. If not, the rate will return to 6.2 percent on Jan. 1.
Obama cited the payroll tax in his weekend radio and Internet address Saturday, when he urged Congress to work together on measures that help the economy and create jobs.
"There are things we can do right now that will mean more customers for businesses and more jobs across the country. We can cut payroll taxes again, so families have an extra $1,000 to spend," he said.
Social Security payroll taxes apply only to the first $106,800 of a worker's wages. Therefore, $2,136 is the biggest benefit anyone can gain from the one-year reduction.
The great majority of Americans make less than $106,800 a year.Millions of workers pay more in payroll taxes than in federal income taxes.
The 12-month tax reduction will cost the government about $120 billion this year, and a similar amount next year if it's renewed.
That worries Rep. David Camp, R-Mich., chairman of the tax-writing Ways and Means Committee, and a member of the House-Senate supercommittee tasked with finding new deficit cuts.
Tax reductions, "no matter how well-intended," will push the deficit higher, making the panel's task that much harder, Camp's office said.
But Republican lawmakers haven't always worried about tax cuts increasing the deficit. They led the fight to extend the life of a much bigger tax break: the major 2001 income tax reduction enacted under Bush. It was scheduled to expire at the start of this year. Obama campaigned on a pledge to end the tax break only for the richest Americans, but solid GOP opposition forced him to back down.
Many Republicans are adamant about not raising taxes but largely silent on what it would mean to let the payroll tax break expire.
Republicans cite key differences between the two "temporary" taxes, starting with the fact that the Bush measure had a 10-year life from the start.To stimulate job growth, these lawmakers say, it's better to reduce income tax rates for people and for companies than to extend the payroll tax break.
"We don't need short-term gestures. We need long-term fundamental changes in our tax structure and our regulatory structure that people who create jobs can rely on," said Sen. Lamar Alexander, R-Tenn., when asked about the payroll tax matter.
House Majority Leader Eric Cantor, R-Va., "has never believed that this type of temporary tax relief is the best way to grow the economy," said spokesman Brad Dayspring.
The nonpartisan Congressional Budget Office says payroll tax reductions give the economy a short-term boost. But it says the benefit is bigger if employers get the tax break instead of, or along with, workers.
Some top Republicans have taken a wait-and-see approach, expecting the payroll tax issue to be a bargaining chip in the upcoming debt reduction talks.
Neither House Speaker John Boehner, R-Ohio, nor Senate Minority Leader Mitch McConnell, R-Ky., has taken a firm stand on whether to extend the one-year tax cut.
Most GOP presidential candidates also are treading lightly.
Former Massachusetts Gov. Mitt Romney did not flatly rule out an extra year for the payroll tax cut, but he "would prefer to see the payroll tax cut on the employer side" to spur job growth, his campaign said.
Former House speaker Newt Gingrich said Republicans will fall under increasing pressure to extend the payroll tax cut. If they refuse, he said in a recent speech, "we're going to end up in a position where we're going to raise taxes on the lowest-income Americans the day they go to work."
Many Democrats also are ambivalent about Obama's proposed tax cut extension. They are more focused on protecting social programs from deep spending cuts. Some worry that a multiyear reduction in the tax designated for Social Security could undermine that program's health and stature.
For decades the payroll tax generated more revenue than the Social Security paid out in benefits. The excess was used to fund other government operations. Last year, however, Social Security benefits began outstripping revenue from its designated sources, forcing the program to start tapping its "trust fund" of government obligations.
What lies in store for Greece, Portugal, Spain, Ireland, Italy, and, in short order, the United States, is the wholesale sell-off of public property to private corporations at bargain basement prices.
What the despots who gather in their secretive lairs at Davos, Cernobbio, Bilderberg, and G8/G20 are bringing about is a world where no property is owned by the state, which by default means the people. Total corporate control over every facet of life equals extreme fascism.
What is occurring in Greece is a bellwether for what will befall other nations in Europe, as well as the United States, if the bankers get their way. And in Greece, the people know how generations of investments by the taxpayers are being turned over to vampire capitalists who have the full backing of the International Monetary Fund, European Commission, and the European Central Bank.
The European and global bankers have demanded that the Greek government sell off entirely or assume a minority stake in a number of state enterprises and utilities.
For example, this year global capitalists are slated to acquire 84 percent of OTE, the Greek telecommunications provider. In addition, private bankers will assume 66 percent ownership of the Greek Postal Savings Bank; 51 percent of the National Lottery; 60 percent of the Salonika Water Authority; 68 percent of DEPA, the natural gas utility; and 25 percent ownership of the ports of Piraeus and Salonika.
Next year, the capitalist grab for public property increases in intensity with Athens International Airport coming under 79 percent private ownership. The global capitalists will also obtain 100 percent ownership of the Egniata toll motorway; 60 percent of Hellenic Post; 66 percent of OPAP, the state-run video-lotto and online sports betting firm; 73 percent of the Athens Water Authority; 83 percent of DEI, the Greek Electric Authority; and 51 percent of the Greek Regional Airports Authority.
The Greek Communist Party has vowed to fight against the acquisition of public property by the private sector. In fact, it is the Communist parties of Europe that have been the most vocal against the power grab by the bankers but their opposition to the privatization moves receives very little attention by the corporate-controlled media.
Massive sell-off lists of public property are now being drawn up by the governments of Portugal, Spain, Italy, and Ireland.In the United States, there are calls for the privatization of the US Postal Service, Social Security, and Medicare.
One Libyan government official this reporter spoke to in Tripoli, during an intensive NATO bombing assault, opined that the same fate is in store for the Libyan Socialist Jamahiriyah. With the highest standard of living in Africa, Libyans could witness the U.S.- and NATO-backed rebel government begin to sell off Libyan government assets to global capitalists.
A new bipartisan plan to reduce government borrowing would target some of the most cherished tax breaks enjoyed by millions of families— those promoting health insurance, home ownership, charitable giving and retirement savings — in exchange for lowering overall tax rates for everyone.
Many taxpayers would face higher taxes — a total of at least $1.2 trillion over the next decade, and perhaps more.
The details and impact of the plan, released this week by the bipartisan "Gang of Six" senators, emerged as President Barack Obama called congressional leaders to the White House on Wednesday to determine, in separate meetings, their bottom line for extending the nation's debt limit while also cutting spending at the greatest amount possible. The role of additional tax revenue remained a sticking point.
With the default deadline of Aug. 2 approaching, the White House signaled for the first time that Obama would be willing to sign off on a short-term extension of the debt limit if a grander deal were in the works and needed only a few days' worth of extra time to wind its way through the legislative process.
For its part, the Gang of Six plan punts on many of the most difficult issues, leaving it to congressional committees to fill in the details later. But supporters say it provides a framework to simplify the tax code, making it easier for businesses and individuals to comply while eliminating incentives to game the system.
"I think this is an attempt to find a middle ground on taxes that emphasizes keeping rates low and broadening the base as much as possible, and I think that's a very positive aspect of it," said Eugene Steuerle, a former Treasury official who worked on the last tax reform package that passed Congress, in 1986.
Coupled with spending cuts, the plan would reduce deficits by nearly $4 trillion over the next decade. While Obama and senators from both parties lauded the plan as a possible breakthrough in their negotiations, some congressional leaders said the plan lacks details and could produce much bigger tax increases than advertised.
The Republican staff of the House Budget Committee issued a critique saying the revenue increase could exceed $2 trillion over the next decade, when compared with current tax policy.
"A tax increase is the wrong policy to pursue with so many Americans out of work," said House Majority Leader Eric Cantor, R-Va.
The plan would simplify the tax code by reducing the number of tax brackets from six to three, lowering the top rate from 35 percent to somewhere between 23 percent and 29 percent.That could provide a windfall for wealthy taxpayers because the 35 percent tax bracket currently applies to taxable income above $379,150.
To help pay for lower rates, the plan would reduce popular tax breaks for mortgage interest, health insurance, charitable giving and retirement savings.Other tax breaks would be spared, including the $1,000-per-child tax credit and the earned income tax credit, which helps the working poor stay out of poverty.
The alternative minimum tax, which was enacted in 1969 to make sure that high-income families pay at least some income tax, would be repealed. The tax was never indexed for inflation, so Congress routinely patches it each year — at an annual cost of about $70 billion — to prevent it from hitting more than 20 million middle-income families.
About 35 million households claimed the mortgage interest deduction in 2009, and about 36 million households claimed deductions for charitable contributions, according to the Joint Committee on Taxation, the congressional scorekeeper on taxes.
The Gang of Six plan does not specify how the tax breaks would be trimmed. Democrats have several proposals that would restrict wealthy families' use of the breaks, while preserving them for most low- and middle-income taxpayers. Such a plan would offset rate cuts for high-income families by limiting their ability to take advantage of various tax breaks.
For example, current law allows homeowners to deduct the interest they pay on home mortgages of up to $1 million. One proposal would lower the limit to $500,000 and exclude mortgage interest on second homes.
Starting in 2018, the new health care law would tax high-priced health insurance plans. There are several proposals to adjust the tax to include more health plans while sparing lower-income families with more modest coverage.
The Gang of Six plan is silent about taxes on capital gains and dividends,but tax experts said it would be difficult to generate more than $1 trillion in additional revenue without increasing taxes on investments. The current top rate on capital gains and dividends is 15 percent — well below the top rate for ordinary income.
"No matter what they do on the revenue side, by some measure they are going to be taking something away from somebody," Steuerle said. "The whole budget package is about asking a lot of people to give up something they think they have."
On the business side, the plan would lower the corporate income tax rate from 35 percent to somewhere between 23 percent and 29 percent, all of which would be funded by eliminating unspecified tax breaks for businesses.
Under current law, the U.S. taxes overseas profits of American corporations but only after they return those profits to the U.S. The proposal calls for a territorial tax system, which would tax only profits made in the U.S.The proposal could be a huge windfall for U.S.-based multinational corporations, though it would supposedly be financed by eliminating many of the tax breaks those same companies enjoy.
Business groups have already been lobbying Congress to keep their tax breaks and to create new ones, an effort that will only intensify if lawmakers dive into the details of overhauling the tax code.
"The bookshelves of policy analysts in Washington are loaded with statements of principle on tax reform that all sound good," said William Gale, an adviser to President George H. W. Bush's Council of Economic Advisers and now co-director of the Tax Policy Center. "And then they all die when you try to specify the details."
The Gang of Six senators is made up of Republicans Tom Coburn of Oklahoma, Mike Crapo of Idaho and Saxby Chambliss of Georgia and Democrats Kent Conrad of North Dakota, Mark Warner of Virginia and Dick Durbin of Illinois.
In his weekly address released Saturday, President Barack Obama called for a campaign of "nation building here at home," citing as an example of what is needed to rebuild the American economy an initiativehe announced Friday to "invest" tax dollars in what he called a "partnership" between the federal government and an initial group of 11 major corporations.
The administration's corporate partners in this venture include Caterpiller, Corning, Dow Chemical, Ford, Honeywell, Intel, Johnson and Johnson, Allegheny Technologies, Stryker and Proctor and Gamble.
Caterpillar Inc. is the bulldozer manufacturer that President Barack Obama used to help push his $787 billion stimulus plan. Chief Executive Officer Jim Owens, 63, is a member of the president’s Economic Recovery Advisory Board. Obama visited the Peoria, Illinois, headquarters on February 12, 2009, the final day of his campaign to press for Congressional passage. - How’s the stimulus working out for Caterpillar?, Michelle Malkin, April 21, 2009
Caterpillar Inc. of Illinois announced nearly 2,400 layoffs despite President Obama using his home state’s company as an example of a struggling manufacturer that would benefit from his economic stimulus plan and save jobs. The new round of job cuts will span five plants in Illinois, Indiana and Georgia, and follows the January news that Caterpillar would slash 22,000 people from its 112,000-person workforce. Mr. Obama hosted an event in support of his stimulus plan at the company’s Peoria, Ill., headquarters in mid-February, saying the $787 billion stimulus would be “a major step forward on our path to economic recovery.” - Caterpillar slashes jobs despite stimulus, Washington Times, March 17, 2009
Obama is not seeking new legislation from Congress to authorize his government-corporate partnership program--which he is calling the "Advanced Manufacturing Partnership"--and he did not say how the corporations in the partnership had been chosen.
"The President’s plan, which leverages existing programs and proposals, will invest more than $500 million to jumpstart this effort," the White House said in a statement released Friday.
"Even though we’ve turned our economy in the right direction over the past couple of years, many Americans are still hurting, and now is the time to focus on nation building here at home," Obama said before explaining the partnership in his Saturday address.
In addition to the 11 corporations, the administration also picked a small group of universities to participate in the government-corporate partnership. These include the Massachusetts Institute of Technology, Carnegie Mellon University, Georgia Institute of Technology, Stanford University, the University of California-Berkeley and the University of Michigan. The White House did not say how these universities were selected.
In a speech in Pittsburgh Friday announcing the government-corporate partnership program, Obama said that in American history such partnerships have often led the way in enterpreneurial breakthroughs.
"Throughout our history, our greatest breakthroughs have often come from partnerships just like this one," said Obama. "American innovation has always been sparked by individual scientists and entrepreneurs, often at universities like Carnegie Mellon or Georgia Tech or Berkeley or Stanford. But a lot of companies don’t invest in early ideas because it won’t pay off right away. And that’s where government can step in."
As described in the White House statement,the largest single element of the partnership program will have the Departments of Commerce, Agriculture, Homeland Security, Energy and Defense spending an estimated $300 million in tax dollars to "co-invest with industry"in the development of products including "small high-powered batteries" and "alternative energy."
"Starting this summer, the Departments of Defense, Homeland Security, Energy, Agriculture, Commerce and other agencies will coordinate a government-wide effort to leverage their existing funds and future budgets, with an initial goal of $300 million, to co-invest with industry in innovative technologies that will jumpstart domestic manufacturing capability essential to our national security and promote the long-term economic viability of critical U.S. industries," said the White House statement. "Initial investments include small high-powered batteries, advanced composites, metal fabrication, bio-manufacturing, and alternative energy, among others."
In his weekly address, President Obama explained his view that "nation building here at home" means government "investment" in education and infrastructure, as well as in the development of technology--including the kind of "clean energy" technology that will be one focus of his new government-corporate partnership.
"That means giving our kids the best education in the world so they have the knowledge and skills to succeed in this economy. It means rebuilding our crumbling roads, railways, and runways," said Obama. "And it means investing in the cutting-edge research and technologies that will spur growth in the years ahead – from clean energy to advanced manufacturing."
In his Friday speech at Pittsburgh as he announced the Advanced Manufacturing Partnership, Obama also put a focus on government "investment" in "clean energy" and pointed to the government bailouts of General Motors and Chrysler as successes.
"If we want a robust, growing economy, we need a robust, growing manufacturing sector. That’s why we told the auto industry two years ago that if they were willing to adapt, we’d stand by them. Today, they’re profitable, they’re creating jobs, and they’re repaying taxpayers ahead of schedule," said Obama.
"That's why we’ve launched a partnership to retrain workers with new skills. That’s why we’ve invested in clean energy manufacturing and new jobs building wind turbines and solar panels and advanced batteries," he said.
The White House said the creation of the government-corporate partnership program was based on a recomendation by the President's Council of Advisers on Science and Technology (PCAST). PCAST is co-chaired by John Holdren, head of the White House Office of Science and Technology Policy.
In Human Ecology: Problems and Solutions, a 1973 book that he co-authored with Paul Ehrlich and Anne H. Ehrlich, Holdren and his co-authors wrote:
“A massive campaign must be launched to restore a high-quality environment in North America and to de-develop the United States."
“De-development means bringing our economic system (especially patterns of consumption) into line with the realities of ecology and the global resource situation,” Holdren and the Ehrlichs wrote.
“Resources must be diverted from frivolous and wasteful uses in overdeveloped countries to filling the genuine needs of underdeveloped countries," Holdren and his co-authors wrote.
"This effort must be largely political, especially with regard to our overexploitation of world resources, but the campaign should be strongly supplemented by legal and boycott action against polluters and others whose activities damage the environment. The need for de-development presents our economists with a major challenge. They must design a stable, low-consumption economy in which there is a much more equitable distribution of wealth than in the present one.Redistribution of wealth both within and among nations is absolutely essential, if a decent life is to be provided for every human being.”
In a videotaped interview with CNSNews.com in September 2010, reporter Nicholas Ballays asked Holdren what he meant by a campaign to de-develop the United States.
“What we meant by that was stopping the kinds of activities that are destroying the environment and replacing them with activities that would produce both prosperity and environmental quality," said Holdren. "Thanks a lot.”
Ballasy followed-up: “And how do you plan on implementing that?”
Let’s start off with a general scenario that happens almost every election cycle: A corporate leader holds fundraisers for a politician. That politician gets elected into office. We’ve all heard examples of those very corporate leaders benefiting from government contracts and other kickbacks shortly after their chosen representative gets elected. Is this behavior ethical? Specifically, are cleantech companies and the Obama administration guilty of this behavior?
According to an analysis by the Center for Public Integrity, this collusion between corporation and State, specifically between clean tech companies and the Obama administration appears to be happening.
Steve Westly, a venture capitalist, raised more than $500,000 for the Obama presidential campaign.
Since 2009, four firms in The Westly Group’s portfolio are the beneficiaries of more than $510 million in Energy Department grants and loans.
In August, Westly was appointed to an Energy Department advisory committee that guides Cabinet secretary Steven Chu.
Some may argue that this is merely a “public-private” partnership. Private companies and the Federal Government allegedly work together to better our countries energy resources, environment, and economy.
But what is called a public-private partnership from one point of view can also be called the collusion of corporation and state from another. Imagine if we had the same scenario, but instead of clean tech companies and the Obama administration, insert Big Oil and the Bush Administration. (We probably don’t even need to use our imaginations for the latter scenario.)
Wouldn’t we be up in arms with such overt collusion? Wouldn’t we call to question Big Oil companies making a profit with the help of Federal Government grants, loans, and/or subsidies? We need to hold clean tech companies and the Obama administration accountable for such unethical behavior. Otherwise, we would be hypocrites.
Don’t get me wrong, we need clean tech (especially renewables) now more than ever. But there is a right way to do it, and a wrong way to do it. The wrong way to do it is to have the Federal Government picking the winners and losers of the clean tech industry.
The right way to do it is to discover, fund, and succeed or fail the various clean technologies in the marketplace. It is through this process that the best technologies, balancing profit with planetary concerns, will emerge.
Whether it is Big Oil or clean tech in bed with the Federal Government, the collusion of corporation and state, is still a collusion of corporation and state. We need to move towards a new era towards the separation of corporation and state. That is the only way we can truly be sustainable, not only for our economy, not only for our environment, but also for our ethical social behavior with each other.
The New World Order Plan is spiritually based: it is a conflict between God and His forces, on the one hand, and Satan and his demonic forces on the other side. Anyone who does not know Biblical doctrine about God and Satan, and who does not know Scriptural prophecy, cannot comprehend the nature of the struggle facing the world today. - David Bay, Cutting Edge Ministries
For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this world, against spiritual wickedness in high places. - Ephesians 6:12
For we are opposed around the world by a monolithic and ruthless conspiracy that relies on covert means for expanding its sphere of influence... Its preparations are concealed, not published. Its mistakes are buried, not headlined. Its dissenters are silenced, not praised. No expenditure is questioned, no rumor is printed, no secret is revealed. - President John F. Kennedy, April 27, 1961
The book in which they are embodied was first published in the year 1897 by Philip Stepanov for private circulation among his intimate friends. The first time Nilus published them was in 1901 in a book called The Great Within the Small and reprinted in 1905. A copy of this is in the British Museum bearing the date of its reception, August 10, 1906. All copies that were known to exist in Russia were destroyed in the Kerensky regime, and under his successors the possession of a copy by anyone in Soviet land was a crime sufficient to ensure the owner's of being shot on sight. The fact is in itself sufficient proof of the genuineness of the Protocols. The Jewish journals, of course, say that they are a forgery, leaving it to be understood that Professor Nilus, who embodied them in a work of his own, had concocted them for his own purposes.
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