Who runs the government?
Why, K Street, of course. A recent study claims that for every dollar spent in lobbying, corporate returns reap $220 in benefits. And what companies have seen the best bang for the lobbying buck?
The largest recipients of tax breaks were concentrated in the pharmaceutical and technology fields, including Pfizer, Merck, Hewlett Packard, Johnson & Johnson and IBM. Pfizer alone repatriated $37 billion, representing 70 percent of its revenue in 2004, the study found. The now-beleaguered financial industry also benefited from the provision, including Citigroup, J.P. Morgan Chase, Morgan Stanley and Merrill Lynch, all of which have since received tens of billions of dollars in federal bailout money.
And just how exactly has the 2004 Job Creation Act fared. [No guessing allowed.]
Dismally, of course.
…the Congressional Research Service and others have since found that many companies cut jobs in the wake of the tax break and that nearly all the money was used for stock buybacks or dividends. Supporters failed in a bid to include a similar tax break in this year’s stimulus legislation, and a Senate subcommittee has launched an investigation into how companies used their tax savings under the 2004 program.
The provision was championed in part by the Homeland Investment Coalition, a group of companies and trade associations that was formed to push for the repatriation holiday. The Pharmaceutical Research and Manufacturers of America (PhRMA), one of the disbanded coalition’s members, said in a statement Friday that “repatriation of profits provided a new source of investment for American companies.”
Congressional research may be fine and dandy, but Congressional loopholes and K Street direct the candy.
And let’s have a hand of applause for our wise corporate leaders whose advertising delights us hourly.
And we should never forget those Congressional and administrative leaders whose sonorous tones and Election Day promises never fail to amuse.
Posturing has become such a fine art that America should consider it as one of its great gifts to the world.
Update: Michael Hirsch in Newsweek reports that a newly formed group called “Coalition for Business Finance Reform” has been formed. The group comprises those very firms that brought us Financial Disaster. There avowed purpose: “To stand against heavy regulation of ‘over-the-counter’ derivatives.”
Whereas once these trades went totally unregulated, Geithner would require that they be “reported to trade repositories and be subject to robust standards” for documenting and collateralizing, among other new rules.
But it’s unlikely this will do much to change Wall Street. Geithner’s new rules would allow the over-the-counter market to boom again, orchestrated by global giants that will continue to be “too big to fail” (they may have to be rescued again someday, in other words). And most of it will still occur largely out of sight of regulated exchanges. The response favored by the administration, the Federal Reserve and even many in Congress is to create a new all-knowing “systemic risk regulator” with as-yet-undetermined powers. Is such a person sitting at 30,000 feet really going to be able to keep up with all this onrushing complexity, especially as over-the-counter trading resumes in quiet places around the world? It is a triumph of hope over experience to think so.
Krugman is right to complain that boring “old-fashioned” banking has been replaced by a new breed of wheelers and dealers that just can’t keep their bulging eyes off the money in the vault.