David Cay Johnston, former New York Times correspondent, and author of Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill), has an extremely powerful article up on the Mother Jones website today. It is a point by point guide to how to dismantle some of the most glaring abuses of the corporatist state that has developed since the Reagan revolution. It is a very powerful article, full of great zingers, and you should take the time to read it in full.
There's more downstairs . . .
First, Johnston reminds us that
the preamble to the Constitution tells us the nation's reason for being in 52 words that can be reduced to six principles: society, justice, peace, security, commonwealth, and freedom. Individual riches don't make the list. They are a product of American society, not its guiding purpose. Progress, then, must begin with a return to the best of the values that created this Second American Republic—one born, it's worth remembering, from the failure of the Articles of Confederation, whose principles (weak government, unfettered capitalism) found their resurrection in the economic policies of the past three decades.
But the wrong-wing campaign to destroy the idea of the common good has been all too successful:
we have transformed the idea that bankers would self-regulate from a crackpot notion into the essence of government policy, with results as predictable as if we removed all traffic lights and stop signs on the theory that most drivers are responsible.
The result, unfortunately, as Johnston notes, is that most people now believe that the purpose of America is to make people rich. This is a cultural problem that must be remedied, but it is going to require some very savvy national leadership. Sounds like a tailor-made challenge for President-elect Barack Obama, right!? But Johnston notes that all Obama has offered so far are "some interesting ideas to make the tax code more fair" that amount to "tinkering around the edges, not the kind of serious restructuring previous presidents, most notably Reagan, undertook."
This is especially tragic, because now that the Reagan Revolution has been so thoroughly discredited, Obama has a historic opportunity to fundamentally transform the nature and direction of the American economy.
Here's some of Johnston's specific policy proposals:
- Stop allowing companies to use one set of accounting rules to report to investors, and a second set of accounting rules to report to the IRS.
- Make the super-rich pay their share.
Back in 1990, people making more than $1 million in today's dollars earned less than 0.8 percent of all the wages paid in America. Last year these multimillionaires sucked up more than 5 percent, squeezing everyone else. Also during this period, the number of people getting million-dollar-plus salaries grew 12 times faster than the number of workers overall, tax data show—this in an economy where, in 2007, one in three workers earned less than $15,000, more than three-fourths made less than $50,000, and 99 percent earned less than $200,000.
- End tax deferrals of executive compensation.
While most of us must pay each time we get a paycheck, executives and corporations can defer their taxes for years, even decades. When the treasury finally gets the money, inflation has eroded its value; in the meantime, government must borrow more, pay more interest, and collect more from everyone else.
- Shut down overseas tax havens
In 1983 just 10 percent of America's corporate profits were funneled through places that charge little or no corporate income tax; today more than 25 percent of profits go through tax havens. The Obama administration could tell the Caymans—now fifth in the world in bank deposits—to repeal its bank secrecy laws or be invaded; since the island nation's total armed forces consists of about 300 police officers, it shouldn't be hard for technicians and auditors, accompanied by a few Marines, to fly in and seize all the records. Bermuda, which relies on the Royal Navy for its military, could be next, and so on. Long before we get to Switzerland and Luxembourg, their governments should have gotten the message.
- Force utilities to pay all the taxes they collect.
I did not know this, but Johnston reports that many utility companies collect hundreds of millions in use taxes that they never actually pass on to government. The numbers Johnston reports are eye-popping and enraging.
- Eliminate subsidies for big box chains and professional sports
Similar to the point above, many large retailers collect hundreds of millions in retail taxes that they never actually pass on to government. And check this out: the big four commercial sports, the MLB, the NFL, NBA, and NHL reported operating profits of $1.6 billion – but received $2 billion in local government subsidies. That’s right – professional sports would be bleeding as badly as General Motors if it weren’t for lots of extra juice from us taxpayers.
- Ground the Private Jet Exemption
The numbers are amazing. Really, you have to go read the entire article.
- Demolish the Mansion Deduction
This is sort of like social security – it’s a deadly third rail for politicians to even touch. But, did you know that Canada has almost exactly the same level of home ownership as the United States, and does not allow mortgage interest to be deducted?
- Stop Indenturing Students
This is one area where I just don’t understand why people tolerate it. We are seriously, seriously, screwing up our future here.
Over the past 40 years, the cost of public colleges has doubled, and financing tuition is an $85 billion a year business for credit companies. Sallie Mae, the biggest of the private student loan companies, earns an average 48 percent annual return, three times the return of commercial banks. Students who sign up for loans with what appear to be low fixed rates may discover upon graduating that they face an 18 percent rate; if they make a single late payment, late fees will be tacked on every month until the debt is paid off. And the law makes no allowance for students who can't find a job in a bad economy, or can't work because of illness, or choose to serve their communities by, say, joining Teach for America. Albert Lord, Sallie Mae's chief executive, has become so rich from student lending that he built his own private golf course just outside the nation's capital.
- Bring back usury laws
Again, the numbers Johnston reports are mind-numbing. In the past three decades,
credit card and other revolving debt has risen from $128 billion to $968 billion (adjusted for inflation), a 7.5-fold increase. Interest on this debt, at an average rate of about 18 percent.
And Johnston reminds us that one of the most damaging acts of the Bush administration, was the preemptory invalidating of state predatory lending law, despite the protests of all 50 state attorneys general.
- Protect Pensions
Did you know that, thanks to a little-known provision inserted by lobbyists in 2006, when a new buyer takes over a company, the new owners can wipe out up to 85 percent of the company’s pension obligation? Dude, we are so screwed.
There are a few other points in the original article, which, as I wrote above, is very much worth reading in its entirety.
I really wonder if most people understand the historic nature of the days we live in. The world’s financial system has collapsed. Trillions of dollars have been looted from the public, and from our future. Now is the time to propose and win fundamental changes – and Johnston has given us over a dozen solid, substantial examples of much-needed policy changes.