Wealthy CEOs want even more for themselves and Republicans are hearing their call
The State newspaper here in Columbia recently published an op-ed submitted by the Chairman and President of Michelin North America, Pete Selleck.
Mr. Selleck’s op-ed was ostensibly written to voice his concern about the national debt. Indeed, he went so far as to suggest that South Carolina voters should cast their ballots only for a candidate who has a serious plan for reducing it. That this would logically dictate that no South Carolinian could vote for any of the current Republican presidential candidates was a logical dictate that Mr. Selleck probably did not intend to make.
Pulling out the GOP Fear-Mongering Playbook, Mr. Selleck then forecast impending doom if the debt is not reduced post-haste; i.e., it will mean saying goodbye to what he called “middle-class prosperity,” as if “middle-class prosperity” is still a staple of a U.S. economy that walks with a limp. It will also, he ominously warned us, bankrupt “entitlements” such as Medicare and Social Security.
His “solution,” such as it was, offered nothing other than the same debunked blather we have heard from Republicans for years, involving the same changes on the spending- and revenue-sides of the national economy and afflicted with the same terminal case of internal contradictions.
The spending side solution: No more “free stuff” for working poor or middle class people.
Ironically, the only suggestion Pete Selleck has per the spending-side is to cut the very “entitlements” he warns are jeopardized by a rising federal debt.
Now, understand that, when Republicans talk about “entitlements,” they are, in code, talking about what Mitt Romney condescendingly called “the free stuff” that his infamous 47% receive in varying degrees from the government. [Full Disclosure: Being solidly middle-class and 65, I am one of the “47%” and, according to Mittens’ Metrics, always have been.]
So, when they talk about “cutting entitlements,” Republicans are talking about making deep cuts to or just entirely cutting out programs such as SNAP, CHIP, Medicaid, Medicare, Social Security and lets not forget Obamacare. All of these, in differing combinations, are fast becoming lifelines to working-poor and middle-class persons/families. You know, the people who woke up one morning in the fall of 2008 to discover that the “rising tide” which has “lifted the boats” of the wealthy for the past 35 years had, instead of lifting their boats, swamped them and left them floundering and flailing in some right deep, murky water.
Hence, unless one lives in a Gingerbread House on the far side of Alice’s Looking Glass, he/she is, at this moment, scratching his/her head. On the one hand, Mr. Selleck is implying that, if we don’t reduce the federal debt, “all of our ‘free stuff'” will be in jeopardy. On the other hand, he is implying that, if we don’t cut out “all of our ‘free stuff,'” any chance of reducing the federal debt will be in jeopardy.
I live in South Carolina. I am accustomed to cognitive dissonance. On a daily basis.
The Revenue Side Solution: More and more “free stuff for wealthy corporations and individuals.
The logical disconnect gets worse when Mr. Selleck transitions from his only spending-side solution to his only revenue-side solution.
While he endorses cutting/taking away “all of the ‘free stuff'” received by those of us in the lazy, government-dependent “47%” (spending-side solution), he enthusiastically supports making some serious additions to “all of the ‘free stuff'” that wealthy corporations/individuals receive from the government (uh, revenue-side solution), which is what his op-ed was really lobbying for.
In essence, his revenue-side solution to the problem of the federal debt involves not an increase but a decrease in federal revenue. The corporate tax rate, he says, should be reduced or done away with entirely. Tax loopholes for corporations, and wealthy individuals, should be increased.
In other words, he thinks we should double-down on the same policies that, for 35 years, have resulted in record corporate profits, record salaries/bonuses for their executives, wealth inequality that rivals the inequality of the Gilded Age and federal deficits/debt that rocketed upward during the George W. Bush administration.
As I said, I live in South Carolina. I am accustomed to cognitive dissonance. On a daily basis.
Trickle-down economics: The magical thinking Mr. Selleck and his Republicans want to sell us.
Mr. Selleck, Sam Brownback, Paul Ryan and their fellow Republicans know that there is no recorded instance of this revenue-side theory being successful in practice. Indeed, it is based on the trickle-down economics of Ronald Reagan that have resulted in thirty-five years of upward income redistribution and its resultant wealth inequality gap.
The argument is that corporations should be minimally taxed, if at all, because record corporate profits represent that “rising tide” which “lifts all boats.” According to them, record corporate profits create both economic growth and the jobs that come with it. How? They say that corporations reinvest those profits in their means of production which creates more jobs which creates more demand for workers which leads to higher wages which leads to a continuing cycle of economic growth – all of which, of course, leads to higher revenues for government coffers and a reduction of the federal debt.
Here’s the problem:
When Reagan-style Republicans began to rig the effective tax rate of U.S. corporations and it began its free-fall 35 years ago, corporations began recording record profits. But, instead of reinvesting those profits in their means of production, the corporations and their executives – who also managed to get their individual effective tax rates rigged – got greedy. And, they…
(1) Used those record profits to increase executive compensation to almost obscene levels.
I have written about this previously, but it bears repeating that, as reported by the Economic Policy Institute, average compensation for the American worker, adjusted for inflation, rose 5.4% between 1978 and 2012. At the same time, according to the Keystone Research Center, CEO compensation, adjusted for inflation, rose an almost unbelievable 876%. Indeed, as the Bureau of Labor Statistics notes, the purchasing power of the middle-class, adjusted for inflation, has flat-lined since 1979, while the purchasing power of CEO’s, adjusted for inflation, has risen as exponentially as their compensation.
In other words, as effective corporate tax rates for wealthy corporations and wealthy individuals have decreased, their profits/compensation have risen to levels never before seen in the U.S. At the same time, wages/salaries for everyone else have been virtually stagnant.
(2) Used those record profits to invest in the new, exotic financial instruments that were being developed on Wall Street. Financial instruments that promised much larger returns on a supercharged timetable relative to what they could realize by reinvesting in their means of production. Which meant no increase in production, no contribution to economic growth and no new jobs. Just windfall profits shared only by those at the top.
(3) Parked as much of those record profits as possible in tax-sheltered offshore/foreign accounts. Need I explain this? I didn’t think so.
Memo to Pete Selleck: I’m not buying what your selling.
Selleck’s economics, like Reagan before him, have been variously characterized as “voodoo economics,” “magical thinking” and just plain “bogus.” The inimitable Paul Krugman, who more than any person alive, has introduced non-economists like me to a basic understanding of economics, says that “supply-side economics, it’s now clear, is the ultimate zombie.” He also adds, as we have seen, that “no amount of evidence or logic can kill it.”
Hence, though such diverse groups as the GAO, the Organization for Economic Cooperation and Development and the Center for Tax Justice have issued studies indicating that the effective tax rate for U.S. corporations is not the highest but one of the lowest among developed nations. We will spend this campaign season listening to Republican candidates call for cutting taxes on corporations and wealthy individuals/families.
And, despite the absence of any evidence to suggest that cutting taxes increases economic growth, creates jobs, results in larger federal revenues or reduces federal deficits/debt, we will spend this campaign season listening to Republican candidates call for, well, you know.
Dr. Krugman was prescient: “No amount of evidence or logic can kill it.”
Mr. Selleck is selling the same thing as Sam Brownback sold to the state of Kansas. He is selling the same thing that, for 35 years, has slowly but surely turned this country into what is almost an economic plutocracy. I’m not buying.