Corporate secrecy, anonymous corporations, lack of transparency… but we can do something about it.
Politico this morning: Big win for conservative big money
Are We the People the boss of the corporations, or are the corporations the boss of We the People? The Securities and Exchange Commission (SEC) needs to be reminded which way that question is supposed to be answered.
The SEC is the agency set up by We the People to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” The SEC states that “all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. … Only through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions.”
One would think those basic corporate facts and timely, comprehensive, and accurate information needed by investors would include access to a company’s tax returns. One would think they would include information about where the executives of the company are spending millions and millions of the company’s dollars. And one would think they would include disclosure of the ratio of CEO “pay ratio” of compensation to worker compensation, as required by the 2010 Dodd-Frank law.
But so far the SEC is not asking corporations to provide investors and the public with this information. Don’t shareholders — and We the People — deserve to know what these companies are really doing and how much they are really making?
What Are These Companies Really Earning?
Companies tell their investors that they are making tons of money. But to get out of paying taxes the same companies tell the IRS something entirely different. Don’t investors have a right to know what the companies they invest in are telling the tax office?
Last month Catherine Rampell wrote in the Washington Post, in “Shareholders, public deserve tax transparency,” that:
“[There is an] array of eye-glazingly complicated tax avoidance strategies adopted by America’s biggest companies … The basic rationale behind tax transparency is that shareholders (and creditors and the general public) deserve to know what publicly traded companies are doing, particularly if complicated tax acrobatics are distorting their operational and investment decisions.”
She points out that we started out requiring this.
This is not a new idea. In fact, when the modern federal corporate income tax was introduced in 1909, it came with a requirement to disclose the returns. Such transparency mandates were fought over bitterly for the next couple of decades, and U.S. returns have been confidential since 1935.
What About Company “Donations”?
If a company’s executives are literally giving the company’s money away to politicians, “charities” (maybe run by a relative), “think tanks” (that employ relatives, etc.) or other worthy recipients, shouldn’t investors be provided with information about who is getting the company’s money, and how much they are getting? (Milton Friedman notably claimed that such donations are “theft” from the company.)
(Note: If a company gives money to a politician, and is not simply “giving the money away” for nothing — with absolutely no expectation of getting anything in return — that would be bribery, under the law.)
Last week in The Nation Zoë Carpenter wrote about this in, “SEC Faces Renewed Pressure to Consider a Corporate Disclosure Rule”:
The campaign to lift the veil on secret corporate campaign donations hit a milestone on Thursday. More than 1 million comments have been submitted to the US Securities and Exchange Commission calling for a requirement that corporations disclose political spending to their shareholders—ten times more than for any other rule-making petition to the SEC, according to the Corporate Reform Coalition.
“Investors want to know how their money is being spent,” Tim Smith, director of shareholder engagement at the firm Walden Asset Management, said at a press conference outside the SEC in Washington. A sign over his right shoulder read, “Your money is being invested in secret. Why is the SEC doing nothing?”
Why Is SEC Sitting On These Rules?
So why is the SEC just sitting on these proposals to disclose basic information to shareholders? In the case of the CEO pay ratio, this is even required by a law passed almost 5 years ago.
Could it be that the people working at the SEC really do know who is the boss now? (“Boss” as in the writer of the big paycheck and future employer.) Maybe, and maybe not. Who’s to say?
In early 2013 the Project On Government Oversight (POGO) released it report, “Dangerous Liaisons: Revolving Door at SEC Creates Risk of Regulatory Capture”:
A revolving door blurs the lines between one of the nation’s most important regulatory agencies and the interests it regulates. Former employees of the Securities and Exchange Commission (SEC) routinely help corporations try to influence SEC rulemaking, counter the agency’s investigations of suspected wrongdoing, soften the blow of SEC enforcement actions, block shareholder proposals, and win exemptions from federal law. POGO’s report examines many manifestations of the revolving door, analyzes how the revolving door can influence the SEC, and explores how to mitigate the most harmful effects.
At the time of the report’s release Bloomberg reported,
From 2001 to 2010, POGO says, more than 400 SEC alumni filed about 2,000 disclosure forms (which POGO obtained using the Freedom of Information Act) saying they planned to represent an employer before the SEC. That may vastly understate the problem because, as POGO points out, former SEC employees must file such statements for only two years after departing.
The SEC has exempted some senior employees (even sometimes blacking out their names on SEC documents) from a one-year cooling-off period during which they are barred from representing clients before the agency, POGO found.
Soon after the report was released: April, 2013, Ex-SEC chief Schapiro takes revolving door back to private sector,
With her seat barely cold at the chairmanship of the Securities and Exchange Commission, Schapiro will become a managing director at a financial consulting and lobbying firm that has hired a slew of former financial regulators over the last several years and that represents for many a nexus of the cozy relations between banks and their regulators.
Are We the People the boss of the corporations, or are the corporations the boss of We the People? Who’s to say? Not the SEC, apparently.
Eric Cantor was a congressman from Virginia and was House majority leader. He was known for being particularly friendly to Wall Street and the giant, multinational corporations.
In the June Republican primary, his Virginia constituents got fed up with this and booted him, choosing to nominate Cantor’s challenger, David Brat, instead. Conservative Erik Erikson explained at FOX, that Cantor’s Virginia constituents did this because, “K Street, the den of Washington lobbyists, became his chief constituency.”
Cantor didn’t bother to finish his current term supposedly representing his Virginia constituents. He resigned from office effective August 18.
Just two weeks later Cantor has gone to his reward. Cantor will receive a huge, fat, lucrative, awe-inspiring, 1-percent-making, mansion-jet-and-yacht-buying, zillion-figure paycheck from his Wall Street/corporate constituents. He will become board member, vice chairman and managing director of investment bank Moelis & Co. (It typically takes longer than two weeks to negotiate a senior position like this one, if you know what I mean.)
Cantor earned this senior investment banking position with his vast experience in investment banking, if you know what I mean. (Cantor has a law degree, and a Masters in real estate, and worked in real estate development for his father before entering the clearly more lucrative field of representing certain constituencies, if you know what I mean.)
“Eric has proven himself to be a pro-business advocate and one who will enhance our boardroom discussions with CEOs and senior management as we help them navigate their most important strategic decisions,” Moelis CEO Ken Moelis said in a statement.
Wink, wink, nudge, nudge, say no more, if you know what I mean.
Take The Gold Or Take The Lead
Our system has become corrupted and everyone knows what I mean. Everyone understands that government officials who “play ball” can get a huge paycheck after leaving government if they help certain big businesses while serving in government. The Nation explains, in When a Congressman Becomes a Lobbyist, He Gets a 1,452 Percent Raise (On Average), Secret deals, bribery and “buying” members of Congress are commonplace in today’s government. (See also: Tauzin, Billy.) (And: Public Interest Groups Call For Corruption Investigation Into Prescription Drug Law.)
Neil Barofsky was Special United States Treasury Department Inspector General overseeing the Troubled Assets Relief Program (TARP). In the preface to his book Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, Barofsky explained that people in government are given two choices, “the gold or the lead.” From the NY Times review, (emphasis added, for emphasis)
Mr. Barofsky, wearing an unseasonal wool suit at odds with a “Washington-appropriate wardrobe,” is poised to let the hostess seat them at a front table of her choosing, but Mr. Allison insists on a private table in the rear. Then he gets down to business.
“Have you thought at all about what you’ll be doing next?” Mr. Allison asks Mr. Barofsky, soon adding, “Out there in the market, there are consequences for some of the things that you’re saying and the way that you’re saying them.”
“Allison was essentially threatening me with lifelong unemployment,” Mr. Barofsky concludes, and alternatively suggesting a plum government appointment some day if Mr. Barofsky would simply “change your tone.”
When Mr. Barofsky tells his deputy of the exchange, the deputy says, “It was the gold or the lead,” resorting to the lingo of their joint experience prosecuting Latin American drug kingpins in New York: Cooperate and share the riches, or don’t and get plugged.
There are “consequences” if you don’t play ball. But if you do play ball, there are rewards. And everyone knows it.
Cantor represented Wall Street instead of Virginia in the Congress. His Virginia constituents didn’t like it, and booted him. Cantor has gone to his reward: a big pot of Wall Street gold. And everyone knows it.
Solution? Make it a law: No person employed by the government in any capacity may receive compensation in any form that is significantly greater than the compensation they received for their public service, for a period of five years.
A Virginia state senator took a bribe to resign, thereby throwing control of the state Senate to the other party. In exchange for this scheme he got a nice job and his daughter received a judgeship.
This was big news last week.
So … will he be prosecuted for taking a bribe, or not? What is the public to think if he is not prosecuted?
After all, it’s not like the guy is a banker or anything.
It has become a “truth” on the right that the IRS “targets” conservative “political” groups. Here is what is going on.
Sea Of Smear Ads From Anonymous Donors
Who is providing the sea of anonymous money behind the nasty smear-campaign ads in local, state and national elections? You might (not) be surprised to find out that these ads are from “social welfare” organizations! These organizations don’t have to disclose their donors because they are tax-exempt nonprofits that, according to the Internal Revenue Service (IRS), “must be operated exclusively to promote social welfare.”
That’s right, your community, state and nation elections are being flooded with nasty, political, smear-campaign ads from organizations that claim to “further the common good and general welfare of the people of the community” and have no involvement with political campaigns.
Social Welfare Organizations
Here are the technical details. A 501(c)(4) charity is a group that does not have to disclose its donors to the public. The law says these groups must operate “exclusively” as “social welfare” organizations and not political organizations. They “must operate primarily to further the common good and general welfare of the people of the community.” (Disclosure: The Campaign for America’s Future operates as a 501(c)(4) organization; its sister organization, the Institute for America’s Future, is a 501(c)(3) organization.)
But government agencies have to “interpret” laws when it comes to their own day-to-day operating rules, and there are grey areas between activities that could be seen as “social welfare” and activities that could be seen as electoral politics. Is voter-registration a general social welfare activity or a political activity? Is issuing a well-researched policy paper on the effect of a higher minimum wage on poverty a social welfare activity or a political lobbying activity?
So years ago the IRS decided that these social welfare groups could spend “up to 49%” of their efforts in politically related activity.
“Congressman Bob Bobson Eats Babies” Is Not A Political Ad?
Obviously these groups are not supposed to be running campaign ads. But a smear ad appearing a week before an election that says “your member of Congress Bob Bobson eats babies” but not “vote against Bob Bobson for eating babies” has been “interpreted” to be a social welfare activity and not a political ad.
Because of this huge, vast, gaping loophole a number of (mostly Republican) political election campaign-related organizations that wanted to hide their donors figured out they could become “social welfare” organizations to run these campaign ads. Then “the Republican majority” on the Supreme Court as E.J. Dionne calls them, allowed billionaires and corporations (even foreign-owned corporations) to put unlimited sums of money into politics. This opened the floodgates of influence-buying – the more money you put into politics, the more tax breaks, contracts, subsidies, monopoly protection, etc. you get back – and a race was on.
Keeping Campaign Donors Secret
Corporations and billionaires that wanted to keep their influence-buying secret could put money into these “social welfare” organizations (and the people running these organizations could make themselves a fortune), so there was a flood of applications to the IRS to start conservative, tax-exempt, “social welfare” nonprofit organizations.
At the same time, Senate Republicans also filibustered the DISCLOSE Act that would let the public know who was funding all of these smear ads.
The Phony IRS “Scandal”
Republicans charge that the IRS is “targeting” conservative “political” groups when they look to see if “social welfare” groups are actually illegally engaging in election-related politics. It has become a “truth” on the right that “the government” is “harassing” conservatives for their politics. They say the IRS is “intimidating” them by looking into “their political activities.”
This all feeds into the Republican/Fox News/Wall Street Journal/talk radio/blog “scandal machine.” For example, the Wall Street Journal today has this “story” today, “GOP Report on IRS: Only Tea Party Groups Received ‘Systematic Scrutiny’.” The party issues a “report” and the conservative media machine blasts the “findings” around the wingnutosphere, and the “outrage” ensues.
Republicans in the House of Representatives have been holding hearings intended to drive this idea of IRS “harassment” out to their followers. Rep. Darrell Issa (R-Calif.) has his Oversight and Government Reform Committee holding televised (FOX) “hearings” that haul people before them to be yelled at by various Republicans. One person, threatened by Republicans with prosecution and jail, was advised by her attorney to assert her Fifth Amendment rights, so Republicans made her appear for hours, repeating again and again that she was “pleading the Fifth.” Now Republicans plan to vote to hold her in “contempt” for asserting her constitutional rights, and have even created a logo advertising the contempt vote:
Here’s The Thing
The IRS is required by law to look at all applicants to see if they are engaged in impermissible political activity. If they are engaged primarily in political activity, they are neither “charities” nor “social welfare” organizations and, by law, are not supposed to receive special tax status allowing them to keep their donors secret. That alone should tell you that something is fishy with the corporate/conservative accusation that the IRS is “targeting” conservative “political” groups. The IRS is required by law to see if groups are “political.”
This is really about Republicans trying to stop the IRS from policing the big right-wing political groups that are using special tax status to mask their donors. This is an intimidation tactic; it’s an attempt to keep the IRS from seeing if these groups are engaged in political campaign activity and shut down the ones that are, all in an effort to mask their billionaire/corporate and foreign corporate donors.
With the Russian takeover of Crimea we are seeing just a bit of the damage done to the world by the invastion of Iraq. We used to be able to say, with some authority, “This is wrong, you shouldn’t do it.” But now everyone can say, “What are you talking about? You invaded Iraq based on a bunch of obvious lies.”
We the People have a right to know why this all happened, don’t we? We need a Truth Commission that investigates how the Bush administration led us to war, how the media was complicit, who made money from it, who tortured people, who allowed “contractors” to act with impunity, etc.
Also, there’s this: Why We Did It, a Rachel Maddow documentary:
Big companies have discovered a loophole that lets them avoid paying their taxes. These tax-dodgers are holding $2 trillion-plus of taxable profits outside of the US, on which they could owe as much as $700 billion in taxes. What could our country do with this $700 billion it is owed? Why won’t Congress just make them pay what they owe?
These companies discovered that they can move jobs, factories, labs, call centers and profit centers out of the country and by doing that they can avoid paying U.S. corporate taxes. Instead of figuring out how to get these companies to pay the taxes they owe, Congress is considering proposals to reward them and encourage more companies to do this.
The Loophole That Lets Companies Avoid Paying Taxes
Current tax laws let companies defer paying the taxes they owe on profits made outside the country until they “bring the money back.” The reason for this is that some companies want to use this money to expand, leading to increased future profits. This is good for these companies and our country because they expand profits and the country gets additional tax revenue later.
But more and more companies have been cheating, using this “deferral” to avoid paying taxes at all. They are holding profits outside of the country simply to avoid taxes and not to invest and expand, even though this is not the intent of this tax rule. Some companies are even inventing ways to make it look like their US profits were made outside of the US so they can take advantage of this mistake in the tax laws. Other companies actually move jobs, factories, call centers and profit centers out of the country to take advantage of this loophole.
It has gotten so bad that U.S. companies are holding as much as $2 trillion or more outside of the country. If this were taxed at the top tax rate of 35 percent, that would mean $700 billion in taxes is already owed, but is being kept away from being used to fix bridges, improve schools, pay judges and the other things We the People (government) do to make our lives better. Also those profits are being kept away from use investing in the US, as well as from shareholders.
Meanwhile companies that keep jobs and production inside the U.S. and don’t cheat on their taxes are at a clear disadvantage. They have to compete with companies that lay off U.S. workers and close U.S. factories, and get to not pay their taxes because they did that. And, of course, they have less money to use for
bribes lobbying to get what they want.
Here are the proposals currently being discussed in Congress to address this:
- Make these companies just pay the taxes they owe and stop moving jobs and factories, etc. out of the country. (No one is actually suggesting this, these companies are very powerful and spread a lot of
bribelobbying and campaign money around.)
- Let them just keep doing what they have been doing, which encourages more companies to move jobs, factories, etc. out of the country. This is the current status quo.
- Let them off the hook and have a “tax holiday” that lets off the hook for some or all of the taxes they owe. There are proposals before the Congress to do this. (Too bad for those companies that actually paid their taxes.)
- Change the tax laws so companies that move jobs, factories, call centers and profit centers out of the country don’t have to pay taxes. This is called a “Territorial Tax System” and there are proposals before Congress to do this. (Too bad for companies that don’t want to move jobs, factories etc out of the country, they won’t be able to compete.)
Two of the proposal in front of the Congress include,
- Republican Rep. Dave Camp’s House Ways & Means proposal gives a tax holiday to companies that owe taxes (#3), and then cuts taxes on profits made from moving jobs and production out of the U.S. by 90 percent (#4). Finally it would cut top U.S. corporate tax rates from 35 percent to 25 percent.
- The Partnership to Build America Act (sponsored by Sen. Michael Bennet (D-Colo.) and Rep. John Delaney (D-Md.)) would let companies that owe taxes bring home offshore profits tax-free (#3) if they use some of the money to buy bonds in an “infrastructure bank.” This would be a loan, so the companies get even this money back, with interest.
Call your member of Congress and ask them to just make these companies bring those profits home and pay their taxes, period. Tell them no “tax holidays” and no “territorial tax.” Just make them pay their taxes.
There is consensus across the (sane) spectrum that the country absolutely needs to repair and modernize our infrastructure. There is widespread agreement this will help the economy now and in the future, and will create jobs. But Republicans in Congress refuse to allow infrastructure projects to proceed. Why? Because doing so will help the economy now and in the future, and will create jobs. Republicans in Congress are committing economic sabotage, and they know it.
There is a bipartisan consensus — it even includes the Chamber of Commerce! — that the country has fallen behind and must maintain and modernize our infrastructure for the good of our economy.
President Obama talked about infrastructure in Jacksonville in July, saying,
We know strong infrastructure is a key ingredient to a thriving economy. That’s how the United States became the best place in the world to do business.
On the other end of things the Chamber of Commerce’s “Jobs & Growth Agenda” includes a section on “Reliable and Secure Infrastructure.” The Chamber says,
The U.S. Chamber is leading the charge to improve the quality of America’s infrastructure—whether it’s transportation, energy, or water networks—all of which directly impact our ability to compete in the global economy.
By modernizing our national infrastructure, we can improve commercial efficiency, increase U.S. competitiveness in the global economy, and create much-needed jobs in the near term.
Here are just a few of the other voices supporting a boost in infrastructure spending:
Fareed Zakaria, Fixing infrastructure would help fix economy
Alliance for American Manufacturing, How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth
Business Insider, STUDY: Every $1 Of Infrastructure Spending Boosts The Economy By $2
Consensus vs. Obstruction
The Chamber of Commerce might say they are “leading the charge” but the Republicans in the Congress are obstructing the troops.
After the President asked for just a bit more infrastructure work, please, the Senate Republican leader responded, “No!” The House Republican leader has said that fixing the infrastructure is “more stimulus spending doomed to fail.”
The kook right (perhaps that should read “Koch right”) that really “leads the charge” for Republicans these days says Infrastructure Spending Is Not the Federal Government’s Business or that infrastructure spending is just more “big government.” Heritage Foundation claims here that government spending on infrastructure “takes money out of the economy”. Some of the (Koch-funded) kooks even actually claim that investing in infrastructure hurts the economy.
Obstruction Agenda Is Sabotage, Not Ideology
Look at this chart from the Financial Times’ FT Alphaville, The collapse of US infrastructure spending, charted:
This looks like lots of other recent charts, like the ones that show consumer confidence plunging in the face of Republican obstruction of everything (and especially their repeated hostage-taking over the debt-ceiling and their shutting down the government.) It is clear all of these things hurt the economy, and they continue to do them.
Maintaining the infrastructure is not about ideology. Even the conservative Chamber of Commerce understands that you have to maintain the roads and bridges, etc., and that it damages the economy if you don’t. And yet we don’t, and the obstruction continues.
So this is about a different agenda. Paul Krugman says it best at his blog,
This kind of behavior — ever-shifting rationales for an unchanging policy (see: Bush tax cuts, invasion of Iraq, etc.) — is a “tell”. It says that something else is really motivating the policy advocacy.
It is past time to argue that the Republican obstruction is hurting the economy, because it just is, and they know it. It is also past time to argue that they are doing this for some kind of ideological reason. Investing in infrastructure is not about ideology. Austerity is not about ideology.
Hurting the economy is not about ideology. There is a different agenda at work here. This is not an argument between differing visions of how best to help our economy. When this much is being done, hurting the economy again and again, and when the results of these actions are clearly that we are all being harmed, and yet it continues, this is not an accident. It is an agenda.
Economic Sabotage — Why?
So it is past time to argue if they are hurting the economy – that is settled. It is economic sabotage. There is no longer any question.
Now it is time to talk about why they are doing this.
Is it to damage Democratic election prospects? Are they betting that by making everyone feel enough pain, and blaming Democrats and President Obama, they can make people forget who got us into this mess? Do they think that economic sabotage will get them votes? That is the most charitable theory. Considering that much of the funding of the apparatus of the right that is behind this is secret, there are worse conclusions that could understandably be reached.
Thom Hartmann asks if the Koch Brothers are the New “Copper Kings?”
PS Also explains why we hear so much about the Keystone pipeline.
Hey if you knew Friday what Republicans were going to do over the weekend you could place bets on the stock market, and make millions.
Because no one on Wall Street ever does.
* In December 2008, the Fed hired Pimco, along with three other big Wall Street firms, to implement enormous purchases of agency MBS to keep interest rates low and spur the U.S. economy.
* Over the next few years, Pimco repeatedly invested heavily in those same securities – far more than other big investors, even considering its size.
* Pimco’s mortgage plays in 2009 and 2012 – when Fed buying was heavy – handed the firm and investors in the Total Return Fund a gain of $10 billion, excluding net investment flows, according to Reuters estimates.
PS I also mean people at the Fed should go to jail for this.
But we already know they won’t.
Another PS – $10 billion could but nice things for We the People. But it won’t.