Job Creation – A Pliable (Fraudulent) Rhetoric in the Current Debate over Debt and Debt Ceilings

When it comes to job creation both Democrats and Republicans reflexively trot out small business as the engine of growth. These flights of breathy admiration for plucky small business owners are part of our national myth, right up there with cowboys. There probably is some truth in this myth as long as you accept the other side of the equation which includes the fact that jobs in small businesses are lower paying and less stable than those in the middle and big size companies.

But to demonstrate the extent to which today’s political environment has lost any sense of consistency, we now have the Republicans saying that any tax increases on the wealthy and corporations are “job killers”.

Since when have wealthy individuals created jobs? They don’t start new entrepreneurial ventures. They do buy extra vacation homes and fly to Vermont and Colorado and Switzerland more frequently in their private jets for skiing and apres ski fun. Much of this extravagance also occurs outside of the US. It is well known that unlike poor and middle class people, wealthy people do not spend incremental income. They save a large portion of it. Poor and middle class must spend every dollar to keep up. I defy you to find data that supports the wealthy as a source of new job creation.

As for big corporations, they are sitting on huge pools of cash and not creating jobs now. 

Companies had a record $ 1.91 trillion in cash and other liquid assets at the end of the first quarter, the report also showed, up from $ 1.86 trillion in the prior three months. Six consecutive quarters of profit growth helped fuel a 96 percent jump in the Standard & Poor’s 500 Index from its recession-low in March 2009 through March 2011.  ((http://www.businessweek.com/news/2011-06-09/household-worth-in-u-s-increases-by-943-billion-fed-says.html))

There has been consternation that though corporate profits and productivity have soared since the 2008 meltdown, corporations are not investing in the US economy. To some extent this may merely be a symptom that big corporations are not beholden to any nation state. Just because IBM has headquarters in Armonk, NY does not mean that it is primarily US-centric in its business activities and future plans. IBM’s 2010 Annual Report reported sales as follows:  Americas $42,044 billion; Europe/Middle East/Africa $31,866 billion; Asia Pacific $23,150 billion. The report further glows about the opportunities in the emerging boom economies of India and China. The US (not even reported separately, just as part of the “Americas”) is not a high growth region.

To satisfy you own curiosity about how widespread this global phenomenon is look up some recent annual reports for companies like GE, Walmart, Caterpillar, or just choose your favorite large company that has headquarters in the US.

Returning to wealthy individuals, it would not be surprising if one could look into their portfolios to discover that they reflect the same global thinking as found in the IBM example.

A final note must be made that during the 1950’s and into the 1960’s and again in the 1990’s Federal taxes on wealthy individuals and corporations were significantly higher than they are today. Yet, those periods are marked by higher than average job creation. George Bush’s huge tax give aways tot he wealthy (really a transfer of Chinese liquidity to the US wealthy through the Federal tax system) in the 2000’s coincided with the lowest job creation period in US history dating all the way back to Hervet Hoover.

Corporations as Persons – Freedom of Speech, now Right to Privacy – Bring on Three Strikes!

The case of the Federal Communications Commission v. AT&T1 now being heard before the US Supreme Court raises anew the craziness of the thinking that has position corporations to be “persons” in the first place.

Noun vs Adjective!

First we have several of the justices focusing argument around the difference between “persons” and “personal”.

But several justices said it was too much of a leap to go from saying that corporations might be “persons” for some purposes to saying that their “personal privacy” could be invaded. Chief Justice John G. Roberts Jr. said he could think of many instances “where the adjective was very different from the root noun.” “You have craft and crafty,” he said. “Totally different. Crafty doesn’t have much to do with craft. Squirrel, squirrelly. Right?” “Pastor and pastoral,” he went on. “Same root, totally different.”

Can they be serious that the issue here is the difference between a noun and an adjective and the not novel observation that a common root does not universally generate a common smenatic value?

Common Usage

As reported, during the oral arguments, “Can you give me any examples in common usage where people would refer to the personal privacy of a corporation?” Justice Scalia asked Mr. Klineberg. “Do you have any examples from The New York Times, from, you know, Boswell, from anywhere, that anybody refers to the interests of a corporation as the ‘personal privacy’ of General Motors?”

Following Scalia’s line of argument, we might ask ourselves to find examples from common usage, excepting those generated by the Court’s long standing finding that corporations are “persons for some purposes”, where people refer to corporations or any business entities as persons. Even corporations only use the impersonal pronouns “it” and “they” in referring to themselves. Certainly corporations acting in groups use the pronoun “we” in the collective sense. But, can anyone find examples where people in common usage use “I” “you”, “he” or “she” in referring to corporations. Corporations certainly never use these pronouns in speaking of the corporation. Ask the common person anywhere whether they think that a corporation is a person in any sense that relates to the classic uses in American history. Does the the Declaration of Independence’s line, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” Does anyone think that corporations have unalienable rights to Life, Liberty, and the pursuit of Happiness?

Last year’s Supreme Court decision granting corporations the right to free speech, and by extension the right to spend whatever amounts of money they want to express their opinions, is a now well known extension of the corporation as a person. With the thinking revealed in these oral arguments, who knows where this court could find on the issue of the right of corporations to personal privacy.

Three strikes and you are dissolved!

Perhaps we should envision some further extensions of this thinking. If corporations are persons, then why don’t we apply the same penalties to their misbehavior that we do to real persons? Repeat offenders are regularly sentenced to long terms in jail or even life in prison. Shouldn’t we apply this thinking to corporations and hold them to the same accountability? Three strikes and you are dissolved!

  1. See the NYTimes,  “Court Weighs Whether Corporations Have Personal Privacy Rights” By ADAM LIPTAK Published: January 19, 201 []

Free Markets – free? markets? – lessons not learned

“Free market” has always struck me as a rather strange phrase. Never more so than in this period of financial market disasters. The phrase ‘free market’ continues to be used reflexively. Just as commentators go right on speaking of Wall St. as a source of capital and innovation, few want to ask out loud why we need most of  Wall St.’s “services”; few people are openly using the most obvious words to describe these services as gambling; and, we go right on using this phrase, “free market” to describe an economy that is not free and in many sectors not a market. A recent exception to this are the comments of Ben Friedman, a professor of economics at Harvard, who said, speaking on the PBS Newshour1  of the continuing high percentage of our “best and brightest” going to employment on Wall St., “…it’s all the more troubling when I think that, after they leave us, so many of them go into activities that are not economically productive for the country, for society, even, just narrowly, for the economy.” Continue reading

  1. http://www.pbs.org/newshour/bb/business/jan-june10/makingsense_06-04.html []

Do We Need Wall St. and all the other gamblers in the financial services world?

What Is the Function of Wall St.?

The global financial meltdown of 2008 – 2009 with its ongoing sequelae seems not to have definitively demonstrated the dangers of our continuing belief in the religion of “free markets” nor shaken, especially it seems in the Obama administration, our thrall with Wall St. and all things financial. We are seeing the combined effects of Wall St.’s funding of the Democrats and Republicans, the primacy of Wall St-ers in positions in government,1 and the tendency of the rest of us to want to beat the table and make wonderfully large profits (winnings). A deeper question here is what is the function and usefulness of gambling in the financial markets for our overall economy and society? Continue reading

  1. Obama did not invent this situation; Wall St-ers have held most of the important economic positions in the government for generations of presidencies. []