The lessons of the 2008 financial crisis have been forgotten! The policies that got us into the crisis (deregulation, tax cuts) and the idea that what’s good for the bankers is good for America have once again taken hold. Trickle-down economics, the idea that anything that increases corporate profits is good for the economy, is making a comeback.
This is NUTS! Schizophrenic!
Over the last two years profits have soared while unemployment has remained disastrously high. The corporations have not used their increasing profits to hire more people. Why would anyone believe that handing even more money to corporations in the form of bigger tax cuts with no strings attached would lead to faster job creation?
Trickle-down “economics” is clearly rising again – and even some very stupid Democrats are buying into it. Look at the arguments Republicans are using to defend outrageous tax loopholes. How can people simultaneously demand savage cuts in Medicare and Medicaid and defend special tax breaks favoring hedge fund managers and owners of corporate jets?
A spokesman for Eric Cantor, the House majority leader, told Greg Sargent of The Washington Post: “You can’t help the wage earner by taxing the wage payer offering a job.” He went on to falsely say that the tax breaks at issue mainly help small businesses (they are actually for big corporations). But the basic argument was that anything that leaves more money in the hands of corporations will mean more jobs.
Okay, you dummies, if you believe that, I have a bridge in Brooklyn I can sell you – or how about some forestland in Arizona! It has only been slightly burned!
What about all those trillions in profits from overseas subsidiaries that U.S. corporations are supposed to pay taxes on? They are supposed to pay taxes when those profits are transferred back to the U.S. But these corporations want to bring all that money home to give to the CEOs and the shareholders without paying any taxes. So, now there’s a move afoot by their Republican friends in Congress to offer an “amnesty” under which companies could move funds back home while paying hardly any taxes. And there are some very stupid Democrats supporting this idea, claiming that it would create jobs.
NO, IT WON’T! We have been here before!
A similar tax holiday was offered in 2004, with a similar sales pitch. It was a total failure! Companies took advantage of the amnesty to move a lot of money back to the United States. But they used that money to pay dividends, pay down debt, buy up other companies, and buy back their own stock – everything except creating jobs. There is no evidence that the 2004 tax holiday did anything at all to stimulate the economy. What the tax holiday did do, however, was give big corporations a chance to avoid paying taxes. They would eventually have brought the money home anyway, and paid taxes on it. In return for all the untaxed money, these companies moved even more jobs overseas. Now they now they are pushing their Republican friends to once again let them bring overseas profits home nearly tax-free.
How can anyone imagine that lack of corporate cash is what’s holding back recovery in America right now? After all, it’s widely understood that corporations are already sitting on large amounts of cash that they are NOT using to grow their businesses here at home and hire more Americans. In fact, that idle cash has become a major conservative talking point, with right-wingers claiming that businesses are failing to invest because of political uncertainty.
That is false!
The evidence strongly says that the real reason businesses are sitting on cash is lack of consumer demand. Americans are only buying necessities and growing their savings. If corporations already have plenty of cash they are not using, why would giving them another tax break that would increase their piles of cash do anything to help the recovery?
Lack of corporate cash is not the problem facing America. Big business already has the money it needs to expand; what it lacks is a reason to expand with consumers still on the ropes and the government slashing spending. Claims that a corporate tax holiday would create jobs, or that ending the tax break for corporate jets would destroy jobs, are nonsense.
What our economy needs is direct job creation by the government and mortgage-debt relief for stressed consumers.
What America does not need is a transfer of billions of dollars to corporations that have no intention of hiring anyone except more lobbyists.
Edited version of: Corporate Cash Con, By Paul Krugman. NY Times