So if you’re like most people, myself included, you’ve probably been wondering how the stock market can be going up while American job losses keep rising, and the dollar keeps sinking.
In fact, it seems that there’s a full economic slow-motion meltdown underway in this country, with record numbers of people on food stamps, countless people being evicted, losing their homes, filing for bankruptcy, living in tents …..
Yet the CEO class — you know, those guys who now make half the money in the country — seem to be doing just fine, and their personal little casino known as Wall Street has been having a banner year …
Doesn’t make any sense, does it?
Well, actually, according to this blog post I just found, it does!
It makes a lot of sense.
I’ll try to hit the broad strokes:
Daniel Gross points out that part of the reason that the American stock markets are going up even though unemployment is rising and the real economy suffering is because multinational corporations headquartered in the U.S. are experiencing strong sales abroad:
Here’s a puzzle: The stock markets are doing very well, yet the performance of the underlying economy doesn’t seem to justify optimism. The buoyant S&P 500 has risen 53 percent since the March bottom. And while the economy expanded at a 3.5 percent rate in the third quarter, unemployment is high, incomes are stagnant, and consumers are shaky…
It could be that the notion the stock market is an accurate gauge of the domestic economy’s temperature is outdated.
Ya think? I’d say that’s an understatement. Of course, if we come up with a new, universally accepted barometer of the domestic economy, the media wouldn’t be able to tell us every day how great the “recovery” is, now would they? They might actually have to tell us the truth. And they sure don’t want to do that.
And anyway, according to the trickle-down economic theory that has been in place in this country for almost 30 years now, supposedly what is good for Corporate America is good for Americans. Right?
Don’t American Workers Win?
The fact that companies based in America are raking in profits from sales abroad is good for American workers, right?
Gross points out that American workers don’t benefit because a lot of the goods sold abroad by American multinationals are made abroad.
We’ve all seen that one coming for a good long time. Sure, having U.S. companies bypass worker-safety laws, environmental laws, unions, minimum-wage laws, and pretty much every other law our forefathers fought and bled and in some cases died for does give us lower-priced goods. For a while. But then, the bill comes due. Suddenly nobody makes anything any more, nobody has a job anymore, and therefore nobody can afford to buy even the cheap shitty crap made overseas.
Ah, but if these corporations are doing so well, there’s a little bit of a silver lining, right? I mean, they have to pay taxes here, don’t they?
Don’t Multinationals Pay A Lot in Taxes?
Well, at least the multinationals are paying a good chunk of taxes into the American economy, right?
The Washington Post notes:
About two-thirds of corporations operating in the United States did not pay taxes annually from 1998 to 2005, according to a new report scheduled to be made public today from the U.S. Government Accountability Office…
In 2005, about 28 percent of large corporations paid no taxes…
Wait a minute. I had to pay taxes. And I’m hardly rich, and I’m certainly not a corporation. So I have to pay taxes, but “large corporations” can get away with paying none?
Dorgan and Sen. Carl M. Levin (D-Mich.) requested the report out of concern that some corporations were using “transfer pricing” to reduce their tax bills. The practice allows multi-national companies to transfer goods and assets between internal divisions so they can record income in a jurisdiction with low tax rates…
[Senator] Levin said: “This report makes clear that too many corporations are using tax trickery to send their profits overseas and avoid paying their fair share in the United States.”
Indeed, as Pulitzer prize winning journalist David Cay Johnston documents, American multinationals pay much less in taxes than they should through a variety of widespread schemes, including:
Selling valuable assets of the American companies to foreign subsidiaries based in tax havens for next to nothing, so that those valuable assets can be taxed at much lower foreign rates
Pretending that costs were spent in the United States, so that the companies can count them as costs or deductions in the U.S. and pay less taxes to the American government
Booking profits as if they occurred in the subsidiary’s tax haven countries, so that taxes paid on profits are at the much lower safe haven rate
Working out sweetheart deals with certain foreign governments, so that the companies can pretend they paid more in foreign taxes than they actually did, to obtain higher U.S. tax credits than are warranted
Pretending they are headquartered in tax havens like Bermuda, the Cayman Islands or Panama, so that they can enjoy all of the benefits of actually being based in America (including the use of American law and the court system, listing on the Dow, etc.), with the tax benefits associated with having a principal address in a sunny tax haven.
And myriad other scams
As Johnston documents, the American economy is hurt by the massive underpayment of taxes by the huge multinationals.