Outrageous: David Cay Johnston Explains How Big Corporations Withhold Your Taxes and Then Pocket Them

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By the way, there is no such thing as deregulation. There is only new regulation. Everything is regulated. I tell my students -- I teach law and graduate business students one day a week at Syracuse University -- I tell them, “Here’s how thoroughly regulated your life is. This university has a rule regulating how many times you can ask somebody out on a date before it’s harassment. Baseball regulates how many stitches are on the baseball. Everything is regulated.”

Under the Chicago School theories, we get new rules that encourage lying, cheating, stealing and fraud. In fact, one of the leading professors from that school, Dean Daniel Fischel, has written the bestselling textbook on securities law in America. You know what that book tells law students? That there is no need for a fraud statute in the securities markets. By the way, his clients were Enron, Michael Milken and Charles Keating of the Keating Five -- three of the biggest fraudsters of our time. Yet, that’s the number-one selling textbook for law students on securities law. And it says there’s no need in the securities to have a fraud statute. Think about all the trouble we're in because of the frauds that went on in the dot-con era -- not “dot-com,” but dot-con era -- in the late ’90s.

Think about the selling of mortgages, not so much to the consumers, but to investors -- particularly public pension-funds -- by Wall Street, where they lied through their teeth, where they faked documents and faked records. Massive fraud and not a single prosecution of any significant person today. Whereas during the savings and loan crisis [of the 1980s], Bill Black got us 1,000 high-level felony convictions and 3,000 convictions overall.

As a parodist on the Internet pointed out, "Where did that get Bill Black? He’s a professor at an obscure college in the Midwest." Whereas the people who looked the other way, look how well they’re doing.

JH: (Laughs) Yes, they’re all in the White House, at this point.

DCJ: They literally are. Barack Obama has surrounded himself with people from Wall Street. Remember when Glenn Beck was telling everybody Obama's not comfortable around white people? I went and looked at the White House table of organization. (Laughs) I got to tell you, he was surrounded by white people from Wall Street.

JH: A lot of the things that you detail in the book come down to companies that are not profiting only by providing goods and services -- traditional transactions of a capitalist society -- they’re deriving rents. Can you explain what rent-seeking is and how it differs from productive capitalism?

DCJ: First of all, everybody is a rent-seeker. Rent-seeking means you try to get paid more than you deserve, more than you should be paid. We have lots of research on this. For example, I know you’ll be shocked to hear that people who are good-looking and taller tend to be better paid than people who are unattractive and shorter. A shocking thought, but it’s a reality in the world.

In the case of corporations, what they do is they get rules passed that prevent competitors from coming into the markets, so they can charge higher prices. As I said, all you need is a penny a day extra, from every person in America, and you have an extra billion dollars at the end of the year. This problem of rent-seeking is, then, compounded by our campaign finance system. What big business -- and that’s those 2,600 companies which own 80 percent of the business assets in America – what those 2,600 companies have figured out, and their leaders have figured out, because people running these firms are very smart people, is that it is easier to mine Congress and the state legislatures for gold than to go out and earn it in the marketplace. Sometimes all you need is to get one word put in to a regulation.