If you had heard that the CEO of one of the country’s biggest and most influential companies met and scolded the senior staff of a major TV business news station (which is also owned by the company) to persuade them to run political stories that would be favorable for the company would you think there was anything wrong with that? If you said yes, then you would be correct, but would you believe that this type of behavior happened not in Russia, or China, or Iran even, but right here in the US? Unfortunately, “spinning” news stories in its favor is just the tip of the iceberg for General Electric which, in our view, has lost its way and in the process has become a detriment to the growth and well being of the US middle class. Moreover, as the past two years have shown, the Obama Administration, like its predecessors, is really nothing more than a combination of the interests of the most powerful corporations in the country. Call it an oligarchy or whatever you like, but the link between big business and politics is becoming more obvious everyday with the American middle class suffering the biggest loss from the relationship. Our newest entry to the LRG Capital Report will explain in detail just how this cozy big business (GE in this case)-Washington relationship is, in effect, screwing over the working class American and making everything this Administration and Congress say about hope and change sound like nothing more than a lot of hot air.
The real issue with US economic policy today is that no one in a position of power has a clue how to address the structural issues in the US economy. Either that or they are willing to ignore the obvious for the sake of not risking their career. The fact of the matter is that the US economy on a structural basis is broken. Starting in the 1970’s, we outsourced our manufacturing sector and began shifting to a services economy (financial services in particular). Companies like GE, who’s former CEO Jack Welch made a career from borrowing at cheap rates, buying out companies and outsourcing the jobs overseas. We can’t blame the CEO’s, who saw an opportunity to make profits for their companies, but the cost to the working class in the US has been huge and Washington has only aided the handoff of our nations prosperity to Asia, OPEC and Wall Street with misinformation, and a tax policy that promotes gutting US jobs. What Americans are slowly starting to figure out is that globalism isn’t beneficial to ALL Americans as our government and business leaders have led us to believe. In theory, globalization sounds like a positive concept in a world of free trade, but if you are the only one in the game that is following the rules while other countries manipulate their currencies and put tariffs on their resources then you stand to lose more than anyone since the game is rigged against you.
Over 5 million manufacturing jobs have been off shored since 2000. Because of these policies, the average American has seen his income dramatically fall over the last 30 years. Forty years ago one parent worked and people got by. Today, both parents work (if they can find jobs) and can still only barely get by. On the flip side, CEO salaries have increased from 30 times the median salary of the average worker to 300 times the average where its stands today. Are today’s bosses 10 times more capable than their peers 40 years ago? Does anyone see a shortage of management talent with more MBA’s being pumped out from our nation’s schools than engineers? The answer is an obvious and resounding NO. But instead of focusing on wage disparity and income gaps, the media and Washington shifts the focus to keeping the stock market over 10,000 or housing prices up, both of which are important to the US economy, but not nearly as important as jobs and income. While the stock market and real estate are important in terms of retirement and savings, they don’t pay for goods and services (at least not since the housing bust).
We are in an era where the line between politics and media has been blurred. Most Americans know that the economic readings that the government publishes are skewed in the governments favor at best, and at worst complete lies (like the unemployment rate). One might ask why the CEO of GE would have to yell at the heads of CNBC because he felt they were being too “anti-administration”. What is it that GE does not want the public to know? Well, a good place to start is by looking at GE’s 2009 tax bill which, when all said and done, was $0. This is the same company that has outsourced millions of US jobs and got bailed out by American taxpayers in the form of $139 billion in FDIC guarantees and support by the Fed for its commercial paper. If you put it all together, you get a story of national suicide with taxpayers funding corporations in the form of cheap credit to outsource workers.
Unfortunately, GE is not alone. About 2/3rds of corporations operating in the United States did not pay taxes annually from 1998 to 2005. Goldman Sachs, who made a fortune over the past decade by advising on deals that would eventually offshore US jobs, and also got a $10 billion bailout from the government, paid a whopping $14 million in taxes worldwide in 2008. These numbers are simply staggering and are a testament to just how bad the lobbying efforts in Washington have become. Members of Congress have shown time and time again that they will sell out to the highest bidder.
The only way out of this economic depression is to reverse the policies that have gotten us here. The loss of our manufacturing sector impoverished Americans while producing oversized gains for Wall Street, shareholders and corporate executives. These jobs can be brought home where they belong by taxing corporations according to where value is added to their product. If value is added to their goods in China, then those corporations would have a higher tax rate. If value is added to their goods in the US, they would have a lower tax rate. This change in corporate taxation would offset cheap foreign labor that has sucked jobs out of the US, and at the same time increase the total tax base and revenue for the government. Obviously corporations and Wall Street will fight to block any legislation that would potentially reduce short term earnings, but the alternative will be an America that we will not recognize. If we stay on this current course of borrowing and spending inflation will, without a doubt, at some point get out of control putting further pressure on an already weakened and frustrated labor force.
Clearly the first two years of the Obama administration have been an economic disaster for the US with sky high unemployment and record foreclosures. At some point, the Obama administration will have to stop blaming President Bush for our current problems. We were promised transparency from the Obama administration but so far all we have gotten is more lies and spin about economic policies that benefit global conglomerates, while gutting the American middle class. With mid-term Congressional elections only a few months away now, it will be interesting to see if Americans have begun to wake up to the idea that globalization was a big lie. In the last election, Americans voted for the then Senator Obama thinking that his lack of experience would be a benefit such that he didn’t have to cater to the lobbyists and same corrupt networks who currently hold power in Washington, but the past two years have shown otherwise. Wall Street understands the frustration and has already planned and paid for the change in leadership in advance with contributions to the Republican party surging to a near multi -year record, or 68% of the total. The sad conclusion for the Obama administration is that even those who the President burned so much political capital to bail out have turned against him and will almost certainly be one of the main factors to cost him his second term.
