"The American economy is sputtering and we are running out of options. Interest rates can't go any lower. Another burst of government spending -- whether a good or bad idea -- looks politically impossible. Can anything protect us from the dangers of stagnation or a double dip? Actually, there is a second stimulus that could have a dramatic effect on the economy -- even more so than government spending. And it won't add to the deficit."
Nevermind that it is only the commoners such as me, who see the "economy sputtering" and there is clear evidence that well financed politicians are blocking every effort to invest in infrastructure or redressing the massive inequality and dispossession that has been getting worse and worse, since Reagan was elected. Fareed is offering up a bait of spending money that workers around the country earned for their companies at one time and is now offshored instead. At least 1.6 trillion of which is "permanently invested offshore" as part of tax avoidance and offshoring schemes aimed at leveraging slave wages in other countries and tax avoidance here. (NY Times article) and as happened with about 400 billion they repatriated in 2004, they are trying to sell the USA on letting them repatriate the money at low tax rates on grounds that they'll invest it here, when - as happened in 2004 such repatriation will most likely go to CEO salaries and bonuses as it did in 2004. The New York times article recaps that:
" it led to no discernible increase in American investment or hiring. On the contrary, some of the companies that brought back the most money laid off thousands of workers, and a study by the National Bureau of Economic Research later concluded that 92 cents on every dollar was used for dividends, stock buybacks or executive bonuses."
Nevermind that government tax breaks unless they come as specific exemptions only result in more money in executive and financier coffers, or that our various companies have been running a rigged, union busting, pension stealing, cheating system of corporate governance that has resulted in that 1.8 trillion declared and even more undeclared money hidden around the world in secret accounts. But of course the CEOs didn't come out and remind him of that. Instead he talks indirectly of the benefits "if only" the honorable CEO's would spend that money here. We tried that, they pay no attention to carrots when they can dig into the nation's wealth in other ways. So Fareed notes:
The Federal Reserve recently reported that America's 500 largest non-financial companies have accumulated an astonishing $1.8 trillion of cash on their balance sheets. By any calculation (for example, as a percentage of assets), this is higher than it has been in almost half a century. Yet most corporations are not spending this money on new plants, equipment or workers. Were they to loosen their purse strings, hundreds of billions of dollars would start pouring through the economy. These investments would probably have greater effect and staying power than a government stimulus.
And other reports put the estimated money hidden abroad even higher. But so far carrots haven't gotten us any "stimulus" and Obama's begging and cajoling them is taken as "anti-business." "Pro-business" means letting them bring that money home as bonuses and for them to buy up foreclosed properties with. In other words, the switch is that none of that money would actually go to stimulus unless it is highly taxed. I say tax it all.
To be clear: There is a strong case for a temporary and targeted government stimulus. Consumers and companies are being very cautious about spending. Right now, government spending is keeping the economy afloat. Without a second stimulus, state and local governments will have to slash spending and raise taxes, which will produce a downward spiral of higher unemployment, slower growth, lower tax revenue and a larger deficit. Joel Klein, the New York City schools chancellor, told me that when the stimulus money runs out at the end of this year, he will be forced to lay off 5,000 teachers. Multiply that example a thousand times to get a sense of what 2011 could look like.
Of course the obvious fact that we have these CEOs, their companies, and their well heeled investors paying lower tax rates than unemployed Steel workers, while lobbying for lower wages and fewer benefits for the 99% of us nation-wide (actually world-wide) doesn't seem to connect with Fareed. Fact is none of them pay their fair share of taxes, and the afore mentioned New York time article showed that the "offshoring" is also just a means to funnel more wealth to their officers and leading investors. The irresponsibility and cheapness of our wealthy has a direct relationship to the loss of jobs for teachers, fire-fighters, police and workers across the country. Who will buy their products if they don't invest in the USA? Chinese, Vietnamese, etc.. of course silly. And our folks will soon be poor enough to be willing to work for slave labor wages.
Fareed buys into their sales pitch:
But government spending can only be a bridge to private-sector investment. The key to a sustainable recovery and robust economic growth is to get companies investing in America. So why are they reluctant, despite having mounds of cash? I put this question to a series of business leaders, all of whom were expansive on the topic yet did not want to be quoted by name, for fear of offending people in Washington.
NO they should fear offending the vast majority of Americans who have supported, funded, and once staffed these companies; and are now getting the shaft from them.
"Economic uncertainty was the primary cause of their caution. "We've just been through a tsunami and that produces caution," one told me. But in addition to economics, they kept talking about politics, about the uncertainty surrounding regulations and taxes. Some have even begun to speak out publicly. Jeffrey Immelt, chief executive of General Electric, complained Friday that government was not in sync with entrepreneurs. The Business Roundtable, which had supported the Obama administration, has begun to complain about the myriad laws and regulations being cooked up in Washington."
General Electric moved a lot of it's manufacturing abroad. Now they claim they are moving them back home. But they don't want to invest here unless they can do it on their terms. In other words, they ware witholding investment as part of a game to force Americans to accept corporate rule. Like John Galt's team in Atlas Shrugged, it's basically a financial strike at American Workers, bureaucrats and the people of this country in general. "Economic uncertainty?" Bullhocky, they know that they can get firesale prices if they hold off, and more importantly they are trying to extort tax breaks from a congress that is just flaccid enough to give into their designs. More "laws" and "regulations" is code for "we won't be held accountable."
He quotes a CEO as saying:
One CEO told me, "Almost every agency we deal with has announced some expansion of its authority, which naturally makes me concerned about what's in store for us for the future."
So they lobby for de-regulation and fund the Tea Party instead. And he quotes Another as:
.... pointed out that between the health-care bill, financial reform and possibly cap-and-trade, his company had lawyers working day and night to figure out the implications of all these new regulations. Lobbyists have been delighted by all this activity. "[Obama] exaggerates our power, but he increases demand for our services," super lobbyist Tony Podesta told the New York Times.
The combination of 1.8 trillion dollars and lobbyists can certainly get a lot done.
"Most of the business leaders I spoke to had voted for Barack Obama. They still admire him. Those who had met him thought he was unusually smart. But all think he is, at his core, anti-business. When I asked for specifics, they pointed to the fact that Obama has no business executives in his Cabinet, that he rarely consults with CEOs (except for photo ops), that he has almost no private-sector experience, that he's made clear he thinks government and nonprofit work are superior to the private sector. It all added up to a profound sense of distrust.
All that is smoke. They know it is smoke. The Obama administration has been the most business friendly Democratic Presidency the business community has ever seen. The man has reached out over and over again to accommodate them. And if they get what they want with the two trade agreements they are negotiating they'll have almost complete impunity and immunity from laws they don't like. So what they are really saying is "we want it all" -- they want their 1.8 trillion in bonuses and stock options -- not to pay any taxes on it.
Fact is they act like they own us
Some of this is a product of chance. The economic crisis forced the government to expand its authority in dozens of areas, from finance to automobiles. But precisely because of these circumstances, Obama needs to outline a growth and competitiveness agenda that is compelling to the business community. This might sound like psychology more than economics, and the populist left will surely scream that the last thing we need to do is pander to business. But the first thing we need is for these people to start spending their money -- soon. As a leading New York businessman who publicly supported Obama during the campaign told me, "their perception is our reality."
Maybe they have a point. We need industrial policy, and corporate CEO's need to have executive advisory roles on a board of governors. They have much more power than that currently. It's just all from behind closed doors. And given the revolving door and the fact that corporations write much of our regulations and laws lately. I have trouble taking them at face value. Also given Obama's administration habit of coddling them up until now, and CEO tendency to have a ruthless and thankless negotiating style. I don't believe them.
No what we need to do is to tax the hell out of that 1.8 trillion and yes, stop coddling CEOs and demand them to earn their money instead. My perception is that these are greedy b*st*rds. And Coddling them will only allow them to run yet another swindle on the taxpaying public, employees and their customers. And yes we need a growth agenda -- spend that money on infrastructure, invest in our people, decentralize our industry, and stop coddling the oligarchs. And yes, we need to reform our regulation process. Just not at the demand of often irresponsible industrialists.
- Sources and references:
- Fareed Zakaria is editor of Newsweek International. His e-mail address is email@example.com.
- NY Times article: http://www.nytimes.com/2013/05/22/business/for-us-companies-money-offshore-means-manhattan.html