Editor's Note: We appreciate the ongoing debate between author Dave Stratman and Axis of Logic Reader, Remy Waller in the Reader Comment section of Stratman's critique of the film documentary, "Inside Job". They continue their earlier exchange with this discussion on corporate bailouts and tax breaks. Waller leads with an attack: accuses Stratman of making a "false statement", denies that the bailouts were "a strategic attack" defends the government and corporations and demands sources for checking the facts. Stratman responds with a vigorous defense of his critique of the film documentary, Inside Job is an Inside Job: A Misleading View of the Economic Crisis

- Les Blough, Editor

Axis of Logic Reader, Remy Waller comments:

"Predictable" is not the same as premeditated. The fact that none of the perpetrators involved were prosecuted does not prove that they had made a "planned strategic attack on the working people of this country. Why were they not prosecuted? Because the government has been compromised and corrupted. I agree, the "bailouts" were not necessary, but again, the fact that bailouts were legislated does not prove your claim of a "strategic attack". "The government gave companies tax breaks to ship their jobs overseas and to replace workers with machines" is a false statement. The Government does not give tax breaks to companies to ship jobs overseas. If you know of such a case, please refer me to the specific tax code which you are referring to, and the year that it was passed, so that I can check your facts.

Author Dave Stratman responds:

Remy--

Let me deal with your latter points first. You say that "The Government does not give tax breaks to companies to ship jobs overseas." I'm not a lawyer and have no idea how to look up the specific tax code, but maybe you'll accept as evidence this press release from the U.S. Treasury of May 4, 2009 TG-119 entitled "Leveling the Playing Field: Curbing Tax Havens and Removing Tax Incentives for Shifting Jobs Overseas" The release begins, "There is no higher economic priority for President Obama than creating new, well-paying jobs in the United States. Yet today, our tax code actually provides a competitive advantage to companies that invest and create jobs overseas compared to those that invest and create those same jobs in the U.S." (My emphasis)

The tax mechanism by which corporations are encouraged to ship their jobs overseas is simple. They are not required to pay taxes on their overseas profits until these profits are repatriated. David Lynch considered the question in USA Today, "Does tax code send U.S. jobs offshore?"

Lynch writes:

"At issue is the U.S. tax code's treatment of profits earned by foreign subsidiaries of American corporations. Profits earned in the United States are subject to the 35% corporate tax. But multinational corporations can defer paying U.S. taxes on their overseas profits until they return them to the USA — transfers that often don't happen for years. General Electric, for example, has $62 billion in "undistributed earnings" parked offshore, according to recent Securities and Exchange Commission filings. Drug giant Pfizer boasts $60 billion. ExxonMobil has $56 billion.

"'If you had two companies in Pittsburgh that both were going to expand capacity and create 100 jobs, our tax code puts the company who chooses to put the plant in Pittsburgh at a competitive disadvantage over the company that chooses to move to a tax haven,' says former White House economist Gene Sperling, a Clinton adviser....

"From 2000 through 2005, U.S. multinationals eliminated 2.1 million jobs at home while adding 784,000 to their payrolls abroad, according to the Bureau of Economic Analysis. At the end of 2005, the most recent statistics available, U.S. corporations employed almost 9 million people outside the United States." (See also this WSJ article, "U.S. Tax Code Provisions Encourage Offshore Jobs,"

Moving on to the question of tax breaks encouraging companies to replace workers with machines... Here the mechanism is a bit more complicated. It's called "accelerated depreciation," which Wikipediaexplains in this way:

"Accelerated depreciation refers to any one of several methods by which a company, for 'financial accounting' and/or tax purposes, depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an asset’s life....For tax purposes, accelerated depreciation provides a way of deferring corporate income taxes by reducing taxable income in current years, in exchange for increased taxable income in future years. This is a valuable tax incentive that encourages businesses to purchase new assets."

"Accelerated depreciation" is the means by which the government uses the tax code to promote corporate investment in new machinery. Now Wikipedia doesn't come out and say that the manufacturer's purpose in investing in machinery is to replace or cheapen the cost of labor, but we're not in disagreement about that, are we? Here's an article from the Heritage Foundation, "Technology Explains Drop in Manufacturing Jobs, Explains Drop in Manufacturing Jobs," which explains that "American manufacturers now employ fewer workers to produce more"--because of all that tax-incentivized capital investment.

Both corporate tax incentives were big parts of Reagan's tax cuts (and have continued) which were supposedly supported by the "Laffer Curve," according to which, the more tax breaks you gave to corporations and the rich, the more we would all thrive. It was bullshit, of course. After 1982 the stock market rocketed upwards, while workers' wages and labor's share of the national wealth dropped dramatically. This suggests to me that the government was using the tax codes as instruments of class war--and doing a pretty effective job at it. (I don't mean to suggest that the overseas tax incentive began with Reagan.)

Moving now to your first point, "'Predictable' is not the same as premeditated." Well, that's true, of course. But the disastrous results of the banking practices which brought on the crisis were not only predictable. It took years of coordinated effort involving the Clinton and Bush administrations, members of Congress, banking and insurance executives, and the Federal Reserve Bank to make them possible. What's more, they continue to engage in these practices even after they led to disaster. So the results are not only predicable but deliberate.

You write,

"The fact that none of the perpetrators involved were prosecuted does not prove that they had made a 'planned strategic attack on the working people of this country.'"

No one of these points proves the case on its own--that the perps are still in charge; that they were paid hundreds of millions of dollars in bonuses, much of it in public moneys; that the crash was only made possible by the coordinated effort of many actors; that the basis of the crash was fraud; that the crash is being used here and in Europe to do exactly what the rulers have been trying to do for years: repeal social democracy in Europe and undermine Social Security and Medicare and impose austerity here; and that nothing has changed in bank or government policy to reverse the practices that led to the crash.

No one of them may be absolute proof, but they do form a very compelling pattern.

You seem to find it difficult to believe that the government actually has a purpose to its policies, such as tax codes, or that it would use such things as tax codes to benefit the powerful. I contend that we can understand nothing about life in our society unless we see these things in their context. The context of the banking crisis is the same context as the corporate tax breaks: the class war. Every government policy, every tax code shows the stamp of that war and is meant, directly or indirectly, to benefit the class of bankers, corporate CEOs, arms manufacturers, and the super-rich which dominates our society.

Dave Stratman
newdemocracyworld.org
20 Moraine Street
Boston, MA 02130
617-524-4073

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