Monday, April 15, 2013

The Corporate Betrayal of America, Mad Maggie Memories, and Nice Negotiating, Obama, But He's Joined the Club!

It's nice to have all the figures isn't it?

The Corporate Betrayal of America

by Paul Buchheit

Multinational corporations have built their businesses on the backs of American taxpayers. They've depended on government research, national defense, the legal and educational systems, and our infrastructure.

Yet they've turned around and mocked us with declining tax payments. They've cut workers. They've refused to invest their massive profits in job-producing research and development. And they've insulted existing employees with low wages and dwindling retirement support.

(Photo: Lindsay/flickr)

As a final disdainful act, many of them have tried to convince us that they LOSE money in the U.S. while only making profits overseas.

Here are the facts.

Business Built on Our Backs

(a) Research

The most essential aspect of business growth is the long-term basic research that is largely conducted with government money. Starting in the 1950s, taxpayer-funded research at the Defense Advanced Research Projects Agency (the Internet), the National Institute of Health (pharmaceuticals), and the National Science Foundation (the Digital Library Initiative) has laid a half-century foundation for corporate product development. Even today 60% of university research is government-supported.

The tech industry is a special case, with many computer and communications companies coming of age in the 1990s, when industry funding for computer research declined dramatically and government research funding continued to climb. As of 2009 universities were still receiving ten times more science & engineering funding from government than from industry.

(b) Infrastructure

Thanks to the taxpayer-funded National Highway System, corporations have acquired access to markets across the country for over 60 years. Along with road construction came the water, electric, and telephone facilities needed to sustain their businesses.

Today, the publicly supported communications infrastructure allows the richest 10% of Americans to readily manipulate their 80% share of the stock market. CEOs rely on roads and seaports and airports to ship their products, the FAA and TSA and Coast Guard and Department of Transportation to safeguard them, a nationwide energy grid to power their factories, and communications towers and satellites to conduct online business. Private jets use 16 percent of air traffic control resources while paying only 3% of the bill.

(c) Law

A litany of advantages accrues to the business world through the legal system. The wealthiest Americans are the main beneficiaries of tax laws, property rights, zoning rules, patent and copyright provisions, trade pacts, antitrust legislation, and contract regulations.

Their companies benefit, despite their publicly voiced objections to regulatory agencies, from SBA and SEC guidelines that generally favor business, and from FDA and USDA quality control measures that minimize consumer complaints and product recalls.

The growing numbers of financial industry executives have profited from 30 years of deregulation, most notably the repeal of the Glass-Steagall Act. Lobbying by the financial industry has stifled reasonable proposals like a sales tax on financial transactions.

More big advantages are enjoyed by multinational corporations through trade agreements like NAFTA, with international disputes resolved by the business-friendly World Bank, International Monetary Fund, and World Trade Organization. Federal judicial law protects our biggest companies from foreign infringement. The proposed Trans-Pacific Partnership would put governments around the world at the mercy of corporate decision-makers.

(d) Education

Public colleges have helped to train the chemists, physicists, chip designers, programmers, engineers, production line workers, market analysts, and testers who create modern technological devices. At the primary and secondary levels, the "equal opportunity" principle mandated by the Supreme Court in Brown vs. the Board of Education has contributed to business growth, building the math and language skills that until recently led the world.

(e) Defense

The U.S. government will be spending $55 billion on Homeland Security this year, in addition to $673 billion for the military. Most of their resources, along with local police and emergency services and the National Guard, are focused on crimes against wealth.

Belittling Us Instead Of Paying Us Back

Instead of paying for their decades of government-supported growth, corporations have nearly stopped paying taxes, leaving payroll deductions and individual income taxes as the main sources of federal revenue.

From 2003 to 2011 total corporate profits more than doubled from $900 billion to almost $2 trillion, but the corporate income tax rate dropped by more than half, from 22.5% to 10%.

On top of this, the most profitable corporations get the biggest subsidies. The Federal Reserve provided more than $16 trillion in welfare assistance to financial institutions and corporations. According to U.S. PIRG and Citizens for Tax Justice, 280 top-earning Fortune 500 companies, which together paid only half of the maximum 35 percent corporate tax rate, received $223 billion in tax subsidies.

What have they been doing with their windfall profits? Anywhere from $2.2 trillion to $3.4 trillion in cash is being held by non-financial corporations, who have chosen to fatten stockholders rather than invest in new production facilities and the employees needed to make them functional. Worse yet, as reported by The Nation, Market Watch, and Business Ins ider, they've been steadily cutting jobs in order to 'streamline' their operations.

For the employees who remain, average real wages were $17.42 in 2007, down from $19.34 in 1972 (based on 2007 dollars). Wages as a percentage of the economy are at an all-time low.

An Added Insult - Profits Declared Overseas, But Not in the U.S.

Multinational corporations use the vacuous argument of an excessive U.S. tax rate to defend their tax avoidance, although in reality the U.S. has the third-lowest rate of tax revenue per GDP among all OECD countries.

The biggest tax avoiders are not content to just shirk their tax responsibilities. To sustain the image of profitmaking for their investors, many of them claim hefty worldwide incomes while reporting little or no income in the United States. Pfizer, for example, just declared their fifth straight annual loss in the U.S., despite a five-year income total of over $50 billion.

A review of SEC data reveals more chicanery. In the last two years Citigroup reported $27.8 billion in foreign income, but a $5 billion loss in the United States. Exxon credits the U.S. for 1/3 of its revenue and 40% of its assets, but only 15% of its income. Apple has 2/3 of its employees in the U.S. but claims only 1/3 of its profits as U.S. income.

Summing Up the Absurdity: You Made Us the Best, But We Don't Have To Pay

Forbes responded to suggestions of American decline with this stirring defense: "We lead the world in Internet innovation, music, movies, biotech and many other technological fields that require out-of-the-box thinking. From Apple to DreamWorks Studios, from Amazon to Zynga, we are the world's innovators."

They might have added, "And we don't have to give anything back to the people who made it all possible."
Paul Buchheit
 Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (,,, and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at

More in-depth Mad Maggie memories and moral musings.


The most egregious Margaret Thatcher myth is that she liberated the consumer. Just ask private renters, whose ranks are swelling daily, if they feel cherished (or even acknowledged) as consumers and brace yourself for an expletive-laden reply.

The much-vaunted privatisation programme didn’t liberate the consumer. It created cartels or monopolies and captive markets, exploited by victorious corporations.

There was a timely article in the Guardian newspaper on Saturday about how the six big energy suppliers in the UK have doubled their profit margins, on the back of bloated consumer prices. Thatcher privatised gas and electricity and their cost to the consumer has more than doubled in the past five years.

Rail privatisation – actually enacted by her successor John Major, though Thatcherite through and through – has resulted in ballooning taxpayer subsidies and the highest ticket prices in the world. Water bills in England and Wales are to increase by 5.7% this year. In Scotland, which retained state ownership after Thatcher privatised water in the rest of the UK in 1989, there will be no increase.

Another trademark Thatcher policy – bus deregulation – led to competition for a short time, swiftly followed by a small number of companies – in many towns, just two – becoming dominant and hiking up fares. The technical term is oligopoly.

There are five large bus companies, four big banks (too big to fail but getting bigger anyway), four big supermarkets, four big accountancy firms, and six big energy companies. There’s a pattern here. Competition in capitalist economies inexorably leads to takeovers and concentration, thus negating the original competition.

It’s illuminating that the answer of the Right to the failures of privatisation and finance is more competition. Smaller banks, for example, giving the consumer more choice. To start the process again in other words. Unfortunately the end point will be the same.

It’s worth noting in passing the argument of David Schweickart in After Capitalism that worker-controlled firms would preserve genuine competition because they would be less inclined to grow and absorb the competition. Less competition means less of its opposite, monopoly.

Tell Sid he needn’t have bothered

The Thatcherite dream of a share-owning democracy – encapsulated in the ‘Tell Sid’ advertising campaign – is now so contradicted by reality that it is not even espoused by the Right. Turn up to a shareholder meeting and get outvoted, by a factor of 10,000-1, by a hedge fund based in Dubai. Although it is ironic that the value of shares, for the ordinary punters that do own them, has been maintained by huge state subsidy – otherwise known as Quantitative Easing. 

But on one point the Red Pepper article is wrong. The author – Alex Nunns – argues that Margaret Thatcher didn’t make people richer. The rich got richer and the poorer got poorer. But spiralling inequality and rising overall wealth are not mutually exclusive. Both happened in the 1980s. Some people, not just the already wealthy, did get richer and progress. Real wages rose.

Margaret Thatcher was immensely and deliberatively destructive. It wasn’t just the mines. Between 1980 and 1983, capacity in British industry dropped by a quarter. There were deep recessions and massive spikes in unemployment twice under her premiership. 
But there was also something to put in the place of that which was being destroyed. Privatisation, finance and a property boom.

“What is the explanation of this curious combination of the permanent unemployment of 11% of the population with a general sense of comparative prosperity on the part of the bulk of the population?” asked the Fabian, Beatrice Webb, in 1925. There was something of that “curious combination” about the 1980s, and that goes a long way to explaining why she won three elections, albeit on a little more than 40% of the vote.

Enemies without benefits

But now, it seems to me, the current Thatcherites in power in the UK are entirely negative. There are unmistakable Thatcher re-treads – the ‘aspiration’ rhetoric, supply-side, tax-cutting and red-tape shredding, solutions as the panacea for economic stagnation, and a ‘Help to Buy’ scheme for council house tenants where once there was the flagship, ‘Right to Buy’ scheme.

But these pretences can’t displace the fact that only 20% of council tenants are in full-time employment, real wages have been stagnating or falling since 2003 (in that way, Britain is completing its Americanisation) and renting a home, as opposed to taking out a mortgage, has become common practice. A new source of growth and economic expansion – which Thatcher had up her sleeve – is nowhere on the horizon. You can’t do Thatcher twice. There’s no such thing as Big Bang mark 2.

Thatcher’s acolytes in government are, in some ways, more punitive than she ever was. The sanction regime for unemployment benefit claimants is more ruthless than anything seen in the 1980s. There are food banks all over the country now. I don’t recall them in 1988.

In truth, Margaret Thatcher’s vision of popular capitalism has died.

What we have in its place are necrophile politics and economics. Social attitudes – in terms of sex, sexuality and culture generally - have moved on in the last thirty years, but politics and economics are stuck as if in a time-warp. Even Franklin Roosevelt reaction to the 1930s Great Depression – funding huge cultural and conservation schemes – seem somehow more modern, and alive, than the current forlorn hope that the ill winds will eventually blow themselves out if we all work harder.

Whilst this once formidable Tory trailblazer is dead, her ideas are more resurgent than ever,” wrote Lynne Segal in another Red Pepper article. Despite flurries of resistance, she went on, “the left has yet to strike any real chord with the broader public.”

That is true, sadly. We have Thatcherism by default because there is no agreement about what to put in place of its rampant failure.
In the U.S. the left is so trivialized (and its speeches and announced programs so unreported on by the MSM) that the alternatives that have been offered are virtually unknown outside of the left's most committed followers.
Never mind the hypocrisy of Republicans attacking the president for doing exactly what they wanted him to do - a comprehensive lack of shame is, after all, the GOP's greatest political strength - and remember the 2010 midterm elections, when the Republicans ran a very similar game against Obama regarding Medicare and very nearly took over all of Congress.
Every Democrat running for re-election in 2014 will have this stinking dead albatross hanging around their neck, and the smart ones are already putting daylight between themselves and the White House
Feature this response to the president's budget proposal from Rep. Keith Ellison (D-MN): "They cannot lay that dead cat at our door. I don't know how it's going to affect the president's brand, but it would be completely unfair to affect the House Democratic Caucus brand, because we had nothing to do with it and most of us are affirmatively and explicitly against it."
If you're in the business of getting anyone with a (D) after their name elected in 2014, it's time to start stocking up on canned goods and survival gear when an excellent Democrat like Keith Ellison gets to talking about dead cats and "the president's brand" in the same breath.
The rest of us get to spend the coming election cycle watching this communication -deficient administration try to square that circle with seniors who will already be terrified by the GOP's blistering message campaign. The best answer the White House will be able to conjure is, "Yeah, cutting Social Security benefits was in our budget, but we didn't really mean it, it was only a negotiating tactic, trust us."
Quiz: Which political demographic shows up in great numbers for mid-term elections?
Answer: Seniors. 
Do the math. 
The single biggest impediment to this administration's agenda is the Republican majority in the House of Representatives, and with this budget proposal, President Obama obliterated any chance the Democrats have of reclaiming that chamber at a time when the Republican Party is very publicly flying apart at the seams
An opportunity of historic proportions was available here - not just in this election cycle, but in the next one, and the one after that - to beat back the madness of these deliberately destructive conservatives at a time when they are falling upon each other like sharks in a blood pool. All Mr. Obama had to do was hold his coalition together, a task easily within his means.
Instead, he threw a live hand grenade at his own people. A Democratic president has put Social Security on the negotiating table. The fact of it is offensive in itself, whether or not this budget ever sees the light of day
Rank-and-file Democrats are astonished at this turn of events; it is a profound betrayal from a president who was re-elected on the promise to defend that which he now offers as fodder in a deficit debate that should not include Social Security to begin with.
See, all the "responsible" people in Washington DC and the "news" media push very hard on the idea that working people have to eat cuts to the benefits they've already paid for, because these responsible people think that is the only responsible way to be responsible about the deficit. William Greider explains why that whole argument is howling nonsense:

Again and again, self-righteous critics have portrayed Social Security as the profligate monster borrowing from the Treasury and sucking the life out of federal government.
Guess what? It's the other way around. The federal government borrows from Social Security. The Treasury has been borrowing from the Social Security Trust Fund for 30 years, and the debt to Social Security beneficiaries now totals nearly $3 trillion.
The day is approaching when that money will be needed for its original purpose: paying Social Security benefits to the working people who contributed to the fund.
That is the real crisis that makes the financial barons and their media collaborators so anxious to cut Social Security benefits. They would like to get out of repaying the debt-that is, giving the money back to the people who earned it. The only way to do this is cut the benefits-over and over again. Count on it. If the president and Congress succeed in this malicious scheme, they will come back again and again to cut more and more.
Mr. Obama has, finally and forever, joined the club. He has sided with the people who stole the Social Security trust, and who now argue that the only "responsible" thing to do is to make old, sick people pay the freight for that theft
They don't want to pay back what they took, and the president has chosen to play their game. He did not have to do this - indeed, he was elected twice on the promise to defend what he now begs to give away - but he did it anyway, and in doing so, he sold out the people who put him where he is.
A lot of people still think George W. Bush was stupid, and a failure as president. All he did was translate billions of taxpayer dollars into the bank accounts of his friends by way of tax cuts and war profiteering. He was not stupid. In fact, one can argue that, according to the metrics of those he most closely represented, Mr. Bush was the most successful president in American history.
Mr. Obama is not stupid, either. 
It was no mistake, and according to the metrics of those Mr. Obama most closely represents, this will also be considered a success. The final attack on Social Security has begun, and it was a Democratic president who struck the blow. Even if his budget goes nowhere, or is voted down by his fellow Democrats, the deed is done.

To say the least.

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