Bill Clinton thinks corps will put people first, profits second…all on their own.
So, Bill baby thinks the corps are going to see the light and return to the good old days of having a social conscience. Heck, they will even see the light regarding their role as a member of society in the US. And, here is the best part. This is all going to happen without the government!
“I think the government can have incentives that will encourage it, but I think by and large it will happen, if it does, because of proof that markets work better that way,” Clinton said…
Right out of the Milton et al, Republican, conservative free market text book. (Hope you are all reading Beverly’s post.)
He quantified it with: “This corporate change, Clinton said, will be one of the most important keys to building a better future.” Well he sure has that correct. It is important as a key to building a better future.
Seems many at the meeting were all jumping on the band wagon. Tony James, Blackstone Group’s president and COO sighted Costco. Like Costco has been around since 1983 and now the other corps are going to follow its business model? Yeah right!
But, just in case you still don’t get this concept of the Wall Street Democrat consider:
“Whether it is or not, companies … have a short-term perspective. A lot of these companies feel duty-bound to pay the lowest taxes they can pay. America has to face the fact that we have not reformed our corporate tax laws,” Clinton said.
So a lot of these executives — even if they want to bring the money home — think, ‘This is crazy. I can borrow the money in America … and better that I borrow the money at 2% than repatriate it at 20%, or 10%, or 5%, or 6%, or whatever it is.’ We need to reform the tax system,” Clinton said.
Granted, he could not be talking about simply lowering the rate, but actually making the rate mean something. I doubt it. After all, you can borrow in the US at 2% and no pay taxes. Do you really believe he’s talking about fixing this arbitrage game?
I still say Obama putting Jason Furman on his payroll back in his first run for president was the exchange for Hillary and Bill and the DLC keeping the money policy in this nation and him getting to be president.
Beware people, the money saw the Climate Change march and a few other signs and now are gearing up their pre-emption strategy to get the masses to back off with words from the prophet Bill that corps are going to change…all on their own. I’m not going with hope on this one.
With the stock market and corporate profits at or near time highs, do you really think corporations are going to voluntarily change what they are doing? I don’t.! Why should they? Things seem to be working pretty good for them with the things the way they are. It’s the people that are hurting, not the corporations.
What I wrote earlier:
Sorkin counters; ‘What? We’ve been told repeatedly that the United States has the highest corporate tax rate in the developed world — 35 percent — which is higher than the nominal tax rates in places like Ireland (12.5 percent), Britain (21 percent) and the Netherlands (25 percent) and the 24.1 percent average rate of all countries that are part of the Organization for Economic Cooperation and Development.’
Sorkin goes on with Kleinbard’s points. ‘All that is true,” contends Professor Kleinbard; however, most United States multinational companies do not pay anywhere near 35 percent. Companies paid an average 12.6 percent, according to the Government Accountability Office, which last measured it in 2010 and avoid taxes by deliberately stashing piles of cash abroad.’
So what is the deal? Are corporations being taxed too high and deliberately keep money out of the US to avoid taxes? The argument by Kleinbard is “lower tax rates are not driving companies to inversions; instead, he contends it is all the money that companies have overseas — some $2 trillion — and don’t want to bring back to the United States despite protestations by many chief executives that they wish they could.”
Companies have become adept at avoiding corporate taxes and take advantage of the US tax code, are more competitive than their foreign counterparts, and do not face the same “anti-abuse” rules which non-US companies face in stricter territorial tax systems. Inside of accepted accounting rules, US firms take full advantage in operations in lower tax jurisdictions in a cash tax matter and also through the U.S GAAP measurement of a company’s performance.”
And are they suffering with all of this money outside of the US?
“Is the excess $2 trillion in profits trapped overseas due to high US corporate taxes? Kleinbard thinks not and points to one company in particular which has used it to their advantage. In 2013, Apple was borrowing in the US and using its offshore foreign earnings to pay the incurred interest. The burdensome US tax code allows interest earned on offshore cash to be included in the US company’s income offsetting the tax deduction on interest expense from US borrowing. In effect, no harm is done to company’s economic stance from borrowing.
While there is agreement the US tax code is inefficient; Kleinbard states, “one of the few deficiencies it has avoided is imposing an unfair international business tax competitive burden on sophisticated U.S. multinationals.” Have It Your Way
Capital no longer knows national boundaries. Just as we are beset by stateless actors creating wars, so too are we burdened with capital which has become an essentially stateless entity. We are operating under a set of rules that are anachronistic.
I recently read Ron Chernow’s House of Morgan, the attitudes we see are similar to those espoused by Morgan and the barons of the Gilded Age. In 1971 the Powell Memo laid out a pretty clear set of goals, the general idea being a State that was responsive if not obedient to business and more particularly capital. Bill Clinton jumped on that bandwagon long ago.
One practical step we might look at is limiting the deductibility of corporate interest. That would limit the private equity vultures to some extent and might make the sort of strategy Apple is using less convenient. Ultimately though we are going to have to slay the dragon of Friedmanism. Corporations exist to serve shareholder value only to the extent we say they do.
A corporation is a legal construct, a grant of immunity and protection. There is no reason that in exchange for those benefits we cannot include responsibilities to stakeholders like labor, consumers, and yes the general commonwealth. Corporations are not people nor are they citizens, at best they are collections of those groups. Corporate personhood in law needs to be narrowly defined. Corporate responsibility needs to be broadly defined.
Scariest part is that the possible next president of the United States, Hillary, may be every bit as daffy (what else can you call it?) as Bill!
I really don’t understand why progressives, like my senator, Dick Durbin, don’t pick up on the idea of taxing corporations, regardless of domicile, on a portion of their profits corresponding to their percentage of sales in the U.S. I read somewhere that California does this now and if anyone knows, I’d appreciate a comment about how that is working.
Slick Willie’s tendency to “daffyness” ought to be called what it is. Corruption. Same for Madame Secretary. People forget she was a corporate lawyer back in the day.
Yes, the tax comment is of importance but for me it’s the idea that the decline in share of income to labor will reverse itself on its own. You know “free market”. My question to Bill would be “where’s the beef” of that statement? Where in history have we experienced a market driven change of income distribution between capital and labor toward more equitable division as a result of “market forces”?
For him to have made such a statement confirms how deep into the ideology of Milton et al, free market ideology he and the faction of the Democratic party he leads have gone.
I’m doing my corporate responsibility course which is a requirement for my MBA this semester and it is an unending stream of assertions that corporations are becoming more ethical and that education is a way to help doing this. It’s driving me a bit batty.
It has led me to think more on the topic, however, and of how are institutional structures lead to the outcome of owners and managers having so much power. I’ve noticed essentially two things, a set of pervasive normative beliefs not unlike what justified the idea of the aristocracy in Belle Epoque Europe, or medieval Europe, the Roman Empire/Republic or Imperial China, which is what Clinton is espousing here. For some reason we are supposed to believe that those that hold power are magnanimous, wise, and just because (insert era specific elitist reasoning here).
The second thing is that we have developed a set of institutional practices that reflect this set of normative beliefs that is pervasive. Everything from accounting practices (we could require companies to report financial statements in a way that would be neutral between rewarding labor and capital but instead structure them to distinguish returns to equity in a way that looks more favorable then returns given to labor), legal practices (there is no reason why corporate boards must be composed only of representatives of the capital component of the firm, bankruptcy laws would be another case where capital tends to get a better deal than labor), to social practices (writing and speaking of legally separate corporate entities as if they are mere extensions of the will of their primary stockholder) and more all serve embed these beliefs in our society in ways we are rarely conscious of.
I’m not sure why there aren’t more political firebrands willing to take on these issues. There is an obvious democratic deficit in corporate structures, we have a pretty good body of evidence that leaving the guidance of institutions up to a small elite doesn’t work very well unless there is some form of democratic accountability in place, imperfect as that method may be. Yet we have corporations directly employing 100s of thousands of people without providing these people with any representation within the corporation itself. OF COURSE people in positions of power in organizations like this won’t act ethically, it’s like arguing that the Chinese Emperor is necessarily benevolent. It’s crazy.
And what seems to sustain this is the idea that free markets demand it. Yet, everything I’ve read in economics seems to be based on the assumption that capital and labor are essentially equals and that the results we see are the results of some sort of natural competitive pressures. Since our current legal and ideological systems both favor capital to labor this basic assumption is violated, which calls into question a lot of free market rhetoric (hardly the only thing that does). So how again does someone like Bill Clinton come to believe that business will naturally become more ethical when are institutions are structured to undermine this for the same reason that elitist institutions undermine any elite? And how is the market supposed to correct this when our basic institutions are biased in favor of capital? And why isn’t anyone that people actually listen to saying this from a position of influence?
Sorry for the rant, reading about these issues from an MBA perspective and having to write about it in a way that will get me through the course is causing some build up of inner rage.
Hi Tziniskes and welcome.
There are a few people of the elected class that are saying what you note.
I think the problem for many elected people is the problem of society: time. Having run for office and testified more than a handful of times, to be an elected official requires time. Thus such people look for ways to save time. That means learning a subject to just enough knowledge to feel comfortable to vote from their most trusted source.
And you know what happens with a little knowledge. We have had over 30 years of the elected class being taught as the citizenry combined with their experience of living being isolated from what the citizens they represent live. It is a difficult task, even if you come from a place as the vast majority of who you represent, to not loose the feeling of such living. To loose such means a loss of motivation to further understand what ever it is one is voting on. That is, to determine if what you have been taught actually jives with what is being live by those who live not as you.
No need to apologize for ranting. It is what we do here at AB.
It has been my contention since about the 1970s that politicians face one of two prospects, when they are elected to office, especially to congress; within a few years they either get turned to the Dark Side, of, if they refuse to give up their self-respect, they leave public ‘service’.
I see no other possible outcomes, do you?