The New Corporate World Order: American Citizens Paying the Price for Tax-Dodging Companies
Stay up to date with the latest headlines via email.
The debate over Republicans’ insistence on continued tax breaks for the superrich and the corporations they run should come to a screeching halt with the report in Tuesday’s Wall Street Journal headlined “Big U.S. Firms Shift Hiring Abroad.” Those tax breaks over the past decade, leaving some corporations such as General Electric to pay no taxes at all, were supposed to lead to job creation, but just the opposite has occurred. As the WSJ put it, the multinational companies “cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show.”
General Electric, which was bailed out by taxpayers and which stored so much of its profit abroad that it paid no taxes for the past two years, was forced to tighten up, but while cutting its foreign workforce by 1,000 it cut a far more severe 28,000 in the United States. Jeffrey Immelt, the CEO of GE, recently appointed by President Barack Obama as his chief outside economic adviser, admits that this does not involve poorly paid work that Americans don’t want, but instead prime jobs: “We’ve globalized around markets, not cheap labor. The era of globalization around cheap labor is over. Today we go to China, we go to India, because that’s where the customers are.”
There is a bitter irony in that statement given that consumer purchasing power is down in the U.S. thanks to the devastating collapse of a housing bubble GE Capital fed with suspect mortgage financing that provided the company with well over half of its profits before the crash. The loss of well-paying jobs at multinationals like GE to other nations—54 percent of the GE workforce is foreign—exacerbates the plight of U.S. consumers while making the foreign customers even more attractive.
Of course it will be argued that multinational corporations have the right to arrange their business as they see fit in order to maximize profit. But if that is the case, do beleaguered American taxpayers have to foot the bill? When those corporations run into trouble overseas because of financial hustles or hostile locals and need the diplomatic and military might of the U.S. government to protect their interests abroad, it is again the U.S. taxpayer who must pay to maintain this new world order. It is an order, as we see with three current wars and a military budget that rivals Cold War highs, that is contributing mightily to the U.S. government debt. More than half of all discretionary spending, the dollars that the Republicans in Congress now want to take out of needed domestic programs, is accounted for by defense spending. That defense spending to support a massive network of military bases and deployed weapons and troops is key to establishing an order in which the interests of American corporations are attended to. If the companies don’t feel that way, let them operate under the flag of Liberia or the Cayman Islands.
No less important than U.S. military muscle is the power of the American government to construct and enforce a worldwide trade and finance structure to the advantage of U.S.-based multinational corporations. That is why the companies spend so much money lobbying Congress on matters ranging from regional trade agreements to international banking regulations. It is precisely the impact of trade agreements like NAFTA that has facilitated the erosion of well-paying jobs. And it was the deregulation of international banking standards, led by the U.S. Treasury Department under the past five presidents, that created the conditions for the recent disastrous housing and banking meltdown.