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The Quiet Robbery
SHORT TAKES: Jaime Harrison Shows His Stand-Up Comic Potential; Netflix's Ozark-Style Money Laundering; Sinema Cashes In; C'mon, U.S., Pay The $5 Billion;
| Jonathan Tasini | Feb 3 |
LONG TAKE
Here’s my concern today: will the supply chain problems gripping the globe gum up the delivery of balloons, streamers and horns that are put to use to throw a party for the latest corporate event flogging a public relations celebration of a promise of new jobs? Because those events are standard boosterism needing all the tools of a party—even if they actually are annoucements of yet another quiet robbery of tax payers.
You may have read about this:
In what has been called the largest economic development project in state history, Intel has announced plans for a $20 billion semiconductor manufacturing facility near Columbus that is scheduled to go online in 2025. The mega project, which could balloon to $100 billion within the next decade, is expected to employ 3000 people, earning an average salary of $135,000 a year. While located in Central Ohio, Intel’s new facility is expected to have a far-reaching impact across the state.
The quiet robbery part:
Ohio offered Intel Corp. incentives worth roughly $2 billion to secure a new $20 billion chipmaking factory that the company says will help alleviate a global shortage and create a new technology hub in the Midwest.
The state's development director said Friday that the combination of tax breaks and incentives are likely the largest ever offered by Ohio for what state leaders say is the biggest economic development deal in its history.
I can almost guarantee you this: the incentives will not pay for themselves, the job promises will never be kept and taxpayers will have to foot the bill.
It’s one of the most pernicious economic scams, and it happens, mostly quietly, in every community. Tens of billions of dollars in total nationwide get thrown at corporations to convince CEOs to decide to bring jobs to a particular community—usually with the winner being the highest bidder, the politician willing to give the most dough.
And the money isn’t gifted to a struggling, small business or even a medium-sized company. In this case, boy, is that true: Intel is like a cash machine—just in the 4th quarter of 2021 the company banked $20.5 billion. And as CEO Pat Gelsinger gushed: “Q4 represented a great finish to a great year. We exceeded top-line quarterly guidance by over $1 billion and delivered the best quarterly and full-year revenue in the company’s history”. Oh, yes, and Gelsinger is giddy about that because he was given a $110 million pay package to take the job last year.
But, sure, throw the hard-earned tax money at the wealthiest corporations.
Intel did not invent corporate welfare subsidy handouts. Over many decades, corporations have demanded handouts. Using fear, coercion and intimidation, companies pit one community against another in a competition that drains billions of dollars in tax money from cities and states. These deals often hurt local small businesses, the oft-praised heartbeat of Main Street who, already competing to survive against behemoths like Amazon, Wal-Mart or Target, rarely have the same political capital to buy off politicians and extract lavish incentives.
Virtually every politician, Democratic or Republican, takes the bait, fearing the electoral blowback for failing to secure new jobs or letting existing jobs leave. Rather than form municipal or regional economic development hubs to resist corporate demands for giveaways, political leaders act alone.
They throw capital at the feet of large corporations in a race-to-the-bottom, content to bask in the shine of the short-term good headlines because when the bill comes due years later it is likely that the same politician, who signed off on the give-away, will be long gone—leaving the taxpayers holding the bag for the price-tag. Smoothing the way for the corporate pitch is the uncritical boosterism of local media, which is ill-equipped to analyze economic data and usually simply parrots the pro-subsidy propaganda.
In turn, vast numbers of regular people who worry about having a decent paying job, are blinded by the carefully-generated public relations hoopla; they don’t have time to research the price of the cost of corporate economic terrorism. Thus, a handout to a company today is rarely understood later as a reason for the lack of funds available to fix crumbling schools, keep fire stations open, pave highways and upgrade critical social services.
In fact, the price of corporate subsidies has been staggering. To choose one state, over the course of three-plus decades New York has squandered billions of dollars in tax money through ill-fated, politically-motivated programs with names like “Empire Zones”, “StartUP-NY” and “Tax-Free NY”.
Here’s a residue partly of the Andrew Cuomo reign: through 2017 (and it continues today) New York has the dubious distinction of having the most expensive economic development tax subsidy efforts in the entire nation. The state gave away $1.2 billion in corporate tax subsidies in 2017—courtesy of Cuomo, who filled his campaign coffers thanks to the gratitude of corporate beneficiaries of the subsidies. Two years earlier, the state doled out $8.25 billion—which, when compared to the ten most populous states, was a sum that was three times the amount of the next three states combined.
Looking at one full decade, the cost of the New York subsidies soared from $4.4 billion in 2000 to $5.3 billion in 2010, even though in that period there was, as one analysis determined, “little credible analysis of whether the cost to the state is worth the number of jobs created, few if any guarantees about job quality, minimal analysis of whether alternative uses of funds would generate more or better jobs, and no guarantee that the jobs promised actually will materialize. Indeed, so little accountability is there that in many cases there is not even a public report about whether promised performance targets have been met.”[4] [emphasis added].
Nationally, the giveaways to corporations cost states and localities $70 billion a year, according to Good Jobs First, the leading U.S. organization on corporate subsidies. The scale of corporate giveaways comes despite research that there is “little evidence that they generate new jobs or other direct economic benefits to the states that employ them” and mostly are the product of an environment in which large establishments have greater bargaining power and thus are able to extract incentives, even though they are not producing or promising higher than average employment gains.”
The concrete damage to communities comes from the “opportunity cost” of the giveaways. What is meant by “opportunity cost”? It is a simple idea: a dollar spent in one area—say, a corporate tax break—is a dollar we don’t have the “opportunity” to spend on, for example, rebuilding a local fire station, fixing a pothole, improving roads or upgrading a subway station.
Take school districts. In New York, 402 school districts, according to a 2018 analysis lost more than $322 million due to corporate tax abatements that came prior. Assuming the average annual 2017 salary of a New York teacher was just below $82,000, that money could have hired more than 3,900 teachers. In other words, we lost the opportunity to hire teachers (or fix crumbling schools) because of the dollars spent on corporate tax abatements.
You can find this insane process in virtually every state. And, without much attention, it is costing every single person money.
It is a quiet robbery—doing deep, corrosive damage to people.
SHORT TAKES
Jaime Harrison Shows His Stand-Up Comic Potential
You can’t hang out in the realm of politics if you aren’t willing to laugh, and find the humor in the wacky behavior of so many of the people who grab the mic and try to snow everyone with utter bullshit. Politics is serious business but it’s riddled with posers and careerists who mouth the most ridiculous crap, usually to cover up their own incompetence.
Consider Jaime Harrison. You might have read recently that he’s wrapped up in some power struggle with the White House political operation over who gets to call the shots in the party. Harrison took to Twitter to defend himself against a recent media story that criticized his “leadership”. I have very little interest about who is “right” in this pissing match because whoever comes out on top will not change the underlying rot inside the party—which I’ve written about now and again, and keep threatening to write a book about.
His Twitter defense was such a self-own, and ludicrous, but offers a sliver of insight into how bad Democratic Party politics can be.
So, here’s the relevant snippet from his Twitter rant:
I took a race for the senate where no one gave me a shot & turned it into one of the most exciting races last cycles. Started with 100 email addresses and $0, I out-raised & out debated a 20+ year incumbent Senator. Had him begging, crying & gave him the fight of his damn life!
Hilarious!!!
Where to start?
First, if you were one of the dupes who donated a single dollar to his South Carolina Senate race against Lindsey Graham, my sympathies. And if you lived in his alternate universe of his race being “one of the most exciting races”, you have my sympathies and a recommendation that you seek professional help.
No one with any sense of politics thought the odious Graham would lose the general election (his only semi threat was losing in a primary but he dodged that bullet by kissing Trump’s ring but that’s a side story). It’s SOUTH CAROLINA.
What Harrison did do was raise *100 million* and essentially set it on fire with one goal: to raise his profile and advance his political career. If he actually thought he would win, then, he has more serious issues going on upstairs in terms of being in touch with reality—and he lost that race by ten points. Aside: Graham’s previous general election opponent in 2014, Brad Hutto, spent $522,000 and lost by 17-18 points so Harrison needed 200x that amount of money to cut the loss to 10 points...bravo!
Second, to not heap scorn just on Harrison, in that same cycle, Amy McGrath raised and spent $90 million in her race against Mitch McConnell. Guess what? She lost. No she was shellacked—losing by 16 points. Not a surprise!
So, and I made this point at the time, together, these two candidates burned through almost $200 million in two races that were sure losers.
It was all about ego.
Now, I don’t really care about these two losing races in the abstract—both of these folks will be forgotten in history.
But, there are a few serious lessons here.
To promote their own personal political careers, they played on peoples’ anger at two visible pieces of garbage in the Republican Party. And bragging about building big email lists is part of the con: building those lists turns into a massive fundraising operation which relies on people sitting on their asses and being able to click on a computer and donate. For the record, I did not give a single dollar to either of those races.
Anger is not a strategy. In fact, in these two cases, anger allowed two shakedown artists to fleece hard-earned money from people who, rightly, despise Graham and McConnell.
AND AND AND… the McGrath-Harrison shakedown burned through money that could have gone to lord knows how many grassroots organizations who run on financial fumes and are doing real organizing on wage issues, justice, immigration, housing… you name it. Hell, forget giving an organization $100 million—$250,000 for many such organizations would be a huge injection of resources. So… figure $250K for each recipient out of the Harrison-McGrath $200 million bonfire=800 organizations…who might be doing long-term, real systemic change, work.
All money wasted. Except for the part that helps advance a career (though I think no one wants any part of McGrath at this point).
Here’s the especially ironic part about Harrison: When he was first tapped to head the Democratic National Committee, part of the rationale for giving him the job was his supposed relationship with state parties. The theory here, which many of you have heard is: state parties is where the action is, state parties have been ignored by the national leaders, and state parties need to be built up, in part, to win statewide and legislative races that have a big influence on the once-every-decade Congressional redistricting.
Ok, that theory is fine—with two observations.
First, imagine if the importance of state parties was so upper-most in Harrison’s mind that… he declared that, instead of running an unwinnable race in South Carolina, he was going to direct all the money he raised to state parties and/or was going to lead a massive fundraising effort for state parties. But…nah!
Second, and more important, let’s be honest: many, if not most, state parties are basket cases not solely because of a lack of funding. State parties are dysfunctional because they act as the primary tool to snuff out imagination, innovation and new leadership—and that’s a significant reason Democrats lose races at the local level.
The people who stand as the centurions over state parties too often do so to protect incumbents and keep their hands on patronage that conveys power and influence. The party apparatus gives rise mostly to people who run for office and have no intention of upsetting the status quo; state parties value careerists not revolutionaries. That is an environment that Harrison is very comfortable with because he is a product of that environment.
So endeth a short rumination on the dismal state of the Democratic Party.
Netflix's Ozark-Style Money Laundering
Ozark—I’m a big fan of the series, though after binging part one of Season 4 I’m irritated I have to wait for a long time for the rest, and, truthfully, it feels a bit less gripping than the first three seasons because the writers seem ready to wrap the saga. But, I digress—lo and behold, the top executives of Netflix have taken a page right out of Marty’s money laundering acumen.
The definition of money laundering is roughly “the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses”. If you just alter one word “illegally” to “legally”, well, presto, you have the Netflix scam—and I would argue it’s scummier than the machinations of a drug lord.
Consider this running scam, per Matt Gardner at the Institute for Taxation and Economic Policy:
Streaming giant Netflix reportedly added fewer new subscribers than anticipated in 2021, but the company still reported record profits and continued its long-running tax avoidance streak. Released last week, the company’s 2021 financial report shows it doubled its profits to $5.3 billion from the previous year and reported an effective federal corporate income tax rate of 1.1 percent.
At a time when many small businesses face pandemic-related challenges, Netflix is among large corporations that are handsomely profiting from changing consumer behavior. Its pre-tax U.S. income of $5.3 billion is almost twice the record-breaking $2.7 billion in profits it enjoyed in 2020. The company’s current federal income tax bill is $58 million, which is just 1.1 percent of its $5.3 billion in pre-tax profits for the year. [emphasis added]
And:
Anyone astonished by the company’s tax avoidance this year must not have been paying attention last year Or the year before that. Or the year before that. In the four years since the Trump tax cuts took effect, Netflix has enjoyed $10.5 billion of U.S. pretax income and has reported just $81 million of current federal income tax, for a total four-year effective tax rate of 0.8 percent. [emphasis added]
Of course, there is a major difference between the people Marty launders money for—drug cartels—versus Netflix executives. The drug cartels are honest: they know they are breaking the law, and they don’t pretend otherwise.
Netflix, on the other hand, is deceptive and dishonest: it lures its consumers with come-ons for all the entertainment one can swallow for an alleged bargain, while fleecing the very same consumers (at least, U.S. domestic subscribers) by dodging fair taxes, which eventually comes out of everyone’s pocket either in higher taxes for the average person and/or public services cut.
I’d rather have to deal with drug cartels—at least it’s all up front.
Sinema Cashes In
From one sleaze—tax dodging—to another: Krysten Sinema.
Understanding that I am not a doctor, but I can use any person’s ability to observe human behavior, I think she’s mentally ill and unfit to hold the office. In a chamber where there is a lot of nuttiness to point to that could employ a shrink full-time (Ted Cruz, Rand Paul, Tom Cotton, et al.), Sinema is especially bizarre—dishonest, performative behavior that is more fitting for someone in high school.
What has already been clear is that she has no core values other than her own deep narcissism (yes, okay, that doesn’t stand out as a unique profile in Congress). She will take money from anyone shaking a dollar bill at her.
That said, it’s a systemic problem. Using the undemocratic nature of the Senate to their advantage, she, and Manchin, are playing to the one crowd that matters, and it’s not voters. It’s big-money donors.
This Politico piece sheds some new light:
Among those donor groups with the most at stake before Congress, this quarter, Sinema received $3,500 from the Pharmaceutical Research and Manufacturers of America and $3,000 from Johnson & Johnson’s PAC, which have been fighting drug pricing provisions championed by Democrats in the Build Back Better Act. She also received $2,500 from the American Petroleum Institute, $5,000 from the Petroleum Alliance of Oklahoma, $3,000 from the Domestic Energy Producers Alliance, and $2,500 from ExxonMobil. In November, she also received $2,000 from the private corrections company, CoreCivic (President Joe Biden has ordered the Department of Justice not to renew contracts with private prison companies).
Her campaign has also seen some interest from Republicans. Shawn Smeallie, a GOP lobbyist, gave $2,000 this quarter, and Jeffrey MacKinnon, another Republican lobbyist, gave $1,000. Some Republican donors also gave to her campaign, including Harlan R. Crow, who gave $5,800 (and was refunded for an excess contribution this cycle), and Ken Langone, who gave $5,800.
I’ve said months ago that it’s almost a given Manchin will switch parties between now and his 2024 re-election campaign, especially if Republicans win the Senate in 2022—I doubt he can win as a Democrat in a state that voted for Trump by a margin of 40 points.
Sinema is a different case—I actually think she is bored in the Senate and has no interest in public policy. She’s more likely to skip re-election and wrangle corporate board seats and run a corporate lobbying organization for a multi-million payday—her landing place, in any case, when she loses the primary (I’m ready to donate to her opponent).
That’s the system.
C'mon, U.S., Pay The $5 Billion
I’ve written a bunch about the rampant immorality during the COVID pandemic, especially about the greed of Big PHARMA and tyranny of patent protections that have kept low-income countries in the global South from getting access to vaccines (here and here, for example).
Now, get this: the World Health Organization’s program to get the poorest people vaccinated is short of cash.
How short?
$5.2 billion.
Per the Financial Times (subscription required):
The Covax vaccine initiative set up to ensure Covid-19 vaccines reach the world’s poorest people is unable to accept new dose donations because it has nearly exhausted the funds needed to buy crucial accessories including syringes, one of its leaders has warned.
Vaccine shortages have plagued many poorer countries and contributed to the uneven rollout of jabs around the world. Public health experts have repeatedly said such disparities could lead to new coronavirus variants emerging in areas where fewer people have been vaccinated.
The World Health Organization-backed programme last week said it needed a fresh cash injection of $5.2bn to support its global vaccine rollout this year.
That amount of money is a rounding error in the U.S. budget. The U.S. should fund the entire shortage—as in yesterday.
If people are so callous to not care about poor people—and I’m not naive, plenty of people don’t care—there is a self-interested reason that goes directly to everyone’s pocketbook. As the snippet above remind us, variants arise in places where vaccination is sparse.
When variants arise, the economy seizes up—places remain closed, people get sick, supply chains continue to be gummed up, which has fed the TEMPORARY inflation.
Pay the whole amount—and do it for selfish reasons.
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