Republicans are Anti-Business: A Frame for Progressives

Here is a question that will throw fear into the heart of every Republican.

Why are you anti-business?

In a debate or news conference, this will fluster them. For the most part, they will talk about the tax breaks and other government programs they champion. These you can dismiss as Corporate Welfare, and return to that embarassing question of "why are you anti-business?"

Let me explain below the fold.

American Business is burdened by a number of disadvantages in the globalized economy:

Pensions
Health Insurance
Taxes

Now, let us examine the burdens each of these places on business and see where the alleviation of these burdens and the resulting advantages leads us.

My fundamental argument is that each of these burdens takes business into an area of expertise that has nothing to do with their core competency. A business is best organized, as Peter Drucker noted, when it seeks to accomplish a single goal. A department, division or company, let alone an individual, tasked with more than one objective, are doomed to sub-optimal performance.

To task American Business with Pension administration is to drain resources and focus away from their core competency. See Peter F Drucker's The New Pluralism

There is one simple reason why the last 150 years have been years in which one institution after the other has become autonomous: the task-centered and autonomous institution is the only one that performs. Performance requires clear focus and narrow concentration. Multipurpose institutions do not perform.

In this article, Drucker addresses the question of corporations and performance. As well as their responsibility for the common good.

Drucker is quite clear in his concern over the need to allow corporations to focus on their core competency. See quotations from this Wall Street Journal article, printed upon the death of this American icon (14 November 2005).

We are left, therefore, with the conclusion that Drucker would advise against asking Corporations to take care of employee pensions.

Indeed, American automobile manufacturers claim, and GM especially, that pensions cannot be sustained. These are defined benefit plans. They are basically Ponzi schemes. As long as the company is expanding, you can pay the current retirees from the contributions of new employees and the expanding profits of the company. This is the situation with Social Security.

For a corroborating article, see General Motors Getting Eaten Alive by a Free Lunch

By Allan Sloan
Tuesday, April 19, 2005

A big reason that GM has gotten into such trouble is that the pension and health care commitments it made to employees decades ago seemed to be a free lunch.

We now understand the burden of pensions on business. Pensions need to be put in the hands of individuals, and in fact, we are well on the road to this end. The universal 401k program will mean that a worker takes their pension with them when they move to a new job. This frees the worker from fear of losing their retirement. It means they can move to where the grass is greener. It means the work force can be more efficiently redistributed in response to economic necessities.

Let us now look at the burden of Health Care.

Health Care, currently tied to the business employing you, is both a shackle to the employee, and a burden to the company. It too, is not an area of expertise associated with an organization's core competency.

Moreover, within the United States, it disadvantages small businesses versus large businesses, as this article shows:

Small businesses face an unjust disadvantage when it comes to providing health care. Here's a bold proposal for change.

But there is nothing sacrosanct about employer-provided health insurance. Corporations only began offering the benefit during World War II as a way to entice workers with compensation that wasn't subject to wartime wage controls. Gary Claxton, health-care expert for the Kaiser Family Foundation, a nonpartisan health-care think tank, says that entrepreneurs would benefit from rethinking this arrangement. "Small businesses would be better off if we disconnected the tax break," he says, "because then they'd be competing equally for workers based on wages."

In order to relieve organizations of this burden, individuals should be covered by a national health plan.  This, too, will help free the worker from fear of losing a job, or changing to another.

Finally, lets look at taxes on companies.

Economists are quite agreed that while companies can be used to collect taxes on individuals (Sales Tax) and taxes on employees (Social Security and Medicare) there is no good reason to tax companies. For example, see this 1996 Canadian article for statements about this conventional wisdom.

However, the article then proceeds to argue for the possibility of three good taxes:

1. Taxes designed to influence economic decisions for social reasons such as the Carbon Emissions tax.

2. Taxes on Economic Rent. That is, tax on pure profits from holding monopoly or other rights. See Wikipedia and Economic Rent.

3. Taxes on foreigners. To the extent that a tax can be exported, it is good for individual countries.

Leaving aside these three examples, it seems clear that taxes on income at the company level makes no sense. They merely introduce inefficiencies into the market place, allow for Congressional mischief, or create hidden taxes on customers (which is why politicians like them).

One of the disadvantages of taxing corporations is that they migrate offshore, taking high paying jobs. A second objection is that taxes penalize successful companies, removing capital that could be invested in new markets and jobs.

Obviously, one would wish to preclude misappropriation of profits by upper management. This can be done by making dividends taxable as ordinary income, as well as taxing capital gains as ordinary income. In the world of a level playing field, who is to say clipping coupons should be treated better than the wages of your fry cook? Further, corporate planes, trains and automobiles, as well as houses and other perks not provided to all employees, should be treated as ordinary income, and taxed at the level of the individual.

The result is that there is no advantage to be gained by a company moving offshore, and local, state and national constituencies cannot use taxes to "buy" businesses and jobs, an elusive proposition at best, as illustrated by the new book Small Mart by Michael H. Shuman and Bill McKibben.

So, "Are You Anti-Business?"

You are if you oppose Pension Reform, Health Care Reform and Tax Reform.

So go bash the opposition for being anti-business.

•  no tax on business?

  Do I understand this correctly?  You don't think that corporation profits should be taxed so they can build up billions in profit, reinvest it, continue to pay labor poorly and they shouldn't be taxed to help pay for that government sponsored healthcare?

  by TeresaInPa on Mon Sep 04, 2006 at 04:22:53 PM PDT

  •  No Taxes

    OK. So where is the corporation going to put the cash?

    Buy back stock and raise share prices, which result in taxable capital gains.

    Pay out dividends, which are taxable.

    Reinvest in new products to remain competitive.

    Hire new workers, who pay taxes.

    Pay the execs and managers bonuses, which are taxable.

    You get the money for health care when you tax income of individuals.

    Like I said, corporations don't pay taxes, they pass them on to you and me. I would much prefer companies to pay out dividends to people in a higher tax bracket.

    by drdave on Mon Sep 04, 2006 at 04:33:32 PM PDT

•  Believe It or Not

  During the 30's it was suggested by Democrats in Congress that the govt provide health care and general pensions for Americans.  Business, at first, kinda supported the idea.

  However, that support dried up when the unions started winning those concessions via CBA's.  With no other place to get such things, workers and unions went right to the company.  Again, the idea that standard of living issues and work/jobs were tied together.  In Congress, sad but true, Republicans had sided with southern Democrats to block this plan.  Even FDR feared such legislation would end up costing everyone politically as southern Democrats would do anything to stop 'radical' unions (even then, there were problems).

  Business began to back off when they saw an opening.  By dealing with such issues on a case by case basis (via each business, etc), they could possibly win a few in court (there was, even then, a strong GOP/business view that such benefits were illegal and would be tossed out when taken to court).  By running a govt sponsored health/benefit program, all business would HAVE to chip in, much like they do today for SS or Unemployment.  At least this way, they stood a chance.

  THey lost, of course, and since then unions have filled that role.  And, it worked, as long as business HAD to do it, or face strikes.  Or couldn't bail out of, say, Michigan and move to, say, Alabama.  (One of the first major GOP post war reforms was not pro-labor, but the anti-union 'Right to Work' bill, which gave us today's breakdown between states where unions can have a closed shop, and others where workers don't have to join-Every southern state is a 'Right to Work' state.)

  Today, and even then, really, only govt can run such a program.  Nothing else will work, period.  The main reason?  Because the govt can manage it, and, pass laws to keep it effective.  If not, the first thing the GOP/business will do is pass laws designed to 'privatize' it.  Just like Bush is trying to do today with Social Security.

  by vetman on Mon Sep 04, 2006 at 04:24:48 PM PDT

  •  History

    I agree.  We are basically back to the pre-WW II situation where businesses want out (big time) of the pension and health care business.  And we can get tax reform in the bargain.

    By that I mean, reform of Tax Avoidance during the past five years.

    by drdave on Mon Sep 04, 2006 at 04:37:21 PM PDT

•  Not just anti-business

  But also a bunch of anti-American, whiny little crybabies.

  by Hannibal on Mon Sep 04, 2006 at 04:28:47 PM PDT

•  Tip Jar

  If your candidate can tar and feather your opponent with the label that they are anti-business, you will hear the opponent hauled screaming into the pit of historical oblivion.

  by drdave on Mon Sep 04, 2006 at 04:34:15 PM PDT