Looming Curses of Privatization

Monday, September 17, 2012 by Common Dreams

by Paul Buchheit

With the breakdown of the private financial industry, and with the decision by corporations to stop meeting their tax responsibilities, and with the dramatic surge in tax haven abuse, less tax revenue is available to state and local governments. Deprived of funding, governments are forced to consider privatization schemes to balance their budgets. But any such scheme comes with adversity and pain.

The futility of diverting public funds into the hands of profitseekers has been well-documented. Here are a few of the gathering curses of privatization.

1. Public treasures sold off for short-term budget needs

In his 2006 budget President Bush proposed auctioning off 300,000 acres of national forest in 41 states. This followed attempts by both the Reagan Administration and Clinton-era Republicans to privatize public land.

Now, with continuing budget shortfalls, the Cato Institute and other libertarian groups are pressing for property deals, with the justification that land should be "allocated to the highest-value use," presumably making it available to the highest bidder for consumption purposes.

That brings us to Paul Ryan's dubiously-named Path to Prosperity, which proposes to sell millions of acres of "unneeded federal land" and billions of dollars worth of federal assets. He's starting in his own backyard: the state of Wisconsin is considering the sale of DNR land for some ready cash. The Path to Prosperity is based in part on Republican Jason Chaffetz' "Disposal of Excess Federal Lands Act of 2011," which would unload millions of acres of land in America's west. Worse yet is Rep. Cliff Stearns' perplexing recommendation to "sell off some of our national parks." Mitt Romney also chimed in, admitting that he didn't know "what the purpose is" of public lands.


2. Infrastructure decaying in the hands of profit-seekers

David Cay Johnston describes the deteriorating state of America's infrastructure, with grids and pipelines neglected by monopolistic industries that cut costs rather than provide maintenance. Meanwhile, they achieve profit margins of over 50%, eight times the corporate average.

The government agencies that are usually blamed for the crumbling infrastructure are often staffed with regulators from the industries they're expected to monitor. If and when accidents happen, the companies responsible can plead hardship and demand rate increases from the public.

It's getting worse as corporations become fewer and more powerful. Almost every American adult can relate to the monopolistic phone and Internet industry that controls our public airwaves. According to the Organization for Economic Cooperation and Development, South Korea has Internet speeds up to 200 times faster than the average speed in the U.S., at about half the cost. Free-market enterprise is simply not working in the U.S. telecommunications industry.

3. Water no longer available for the common good

According to Food and Water Watch, "The finance industry is promoting water privatization as a way to help local governments pay for budget shortfalls and improvement projects." The chief economist of Citigroup concurred: "I expect to see a globally integrated market for fresh water within 25 to 30 years."

But while profits average 12 to 15 percent per year, water and sewer utility rates typically rise 33 to 63 percent, and short-term business ventures are subject to abandonment after just a few years. Desperate local governments often regret their hasty decisions. A Century Foundation report concluded that with privatization "Competition is hard to create and maintain, cost savings (if any) from privatization erode over time, and service quality often suffers."

Numerous examples of water privatization abuse have been documented. In Pennsylvania and California, the American Water Company took over towns and raised rates by 70% or more. In Atlanta, United Water Services demanded more money from the city while prompting federal complaints about water quality. Felton, California privatized its water and received a 74 percent proposed rate increase over three years. Coatesville, Pennsylvania saw an 85 percent increase. Shell owns groundwater rights in Colorado, oil tycoon T. Boone Pickens is buying up the water in drought-stricken Texas, and water in Alaska is being pumped into tankers and sold in the Middle East.

In another ominous note for the future, the House passed the Clean Water Cooperative Federalism Act of 2011, which would deny the Environmental Protection Agency the right to enforce the Clean Water Act. Our water is getting dirtier and scarcer. But a hedge fund advisor put a capitalist spin on it, noting the "serious profit opportunities" in water. "If you play it right," he added, "the results of this impending water crisis can be very good."

4. Our children put at risk with unproven educational methods

The few charter schools with good reviews have functioned with limited enrollments, retention policies favoring likely-to-succeed individuals, and an absence of special needs students. This violates a precept underscored by Chief Justice Warren in Brown vs. the Board of Education: "Education...is a right which must be made available to all on equal terms." Charters aren't even close to that. The Louisiana Believes project, for example, which will eventually be the country's most extensive voucher system, has only 5,000 slots available for about 380,000 eligible students.

But corporations are rushing headlong into this lucrative new market anyway, while paying little heed to the body of research confirming their relative ineffectiveness. This includes studies from Stanford University, the Department of Education, Johns Hopkins University, and the RAND Corporation.

In addition to their poor performance, charters are more segregated, less likely to accept students with disabilities, and conducive to a widening of the racial and rich-poor education gaps.

Still, despite all the damning evidence, the charter myth persists in the American mind. And it's getting worse. The newest blind rush into privatization heralds 'virtual' schools, which offer lessons to homebound kids on their computers, even at the K-12 level. In what seems obvious to most of us, virtual schools don't work for children. A 2009 Department of Education study on blended online and face-to-face instruction reported results that were "significantly positive for undergraduate and other older learners but not for K-12 students."

A lengthy New York Times investigation of one of K12 Inc's online schools concluded that "By almost every educational measure, the Agora Cyber Charter School is failing. Nearly 60 percent of its students are behind grade level in math. Nearly 50 percent trail in reading. A third do not graduate on time. And hundreds of children, from kindergartners to seniors, withdraw within months after they enroll."

5. Colleges gradually being replaced with prisons

America has the highest incarceration rate in the world, and despite a falling violent crime rate, more people are going to jail. As explained by Michelle Alexander, "federal funding flows to those agencies that increase dramatically the volume of drug arrests, not the agencies most successful in bringing down the bosses."

So as education funding drops again this year in most of the states, spending on prisons increases. The U.S. spends over two times as much per prisoner as per public school student. California spends more on prisons than it does on higher education.

The profit motive is hastening prison privatization. Quickly. From 1990 to 2009, the number of prisoners in private facilities increased by more than 1600%, from about 7,000 to over 125,000 inmates. Corrections Corporation of America recently offered to run the prison system in any state willing to guarantee that jails stay 90% full.

Yet studies show that private prisons perform poorly in numerous ways: prevention of intra-prison violence, jail conditions, rehabilitation efforts. A 10-month investigation by the New York Times concluded that "the state's halfway houses have mutated into a shadow corrections network, where drugs, gang activity and violence, including sexual assaults, often go unchecked." Even so, New Jersey Governor Chris Christie insisted that "Places like this are to be celebrated."

The U.S. Department of Justice offered this appraisal: "There is no evidence showing that private prisons will have a dramatic impact on how prisons operate. The promises of 20-percent savings in operational costs have simply not materialized."

Prisons, like public land and utilities and schools, are up for sale in America. Essential public needs are fast becoming the newest products on the market.

Record Corporate Profits: 1000 Words or Less

Now. let's bring it on home...

BOOM!!!


(That blue line is the actual unemployment rate which includes everyone who wants/needs a job--whether they are looking or not and whether they have a part time job or not.--jef)

32 Corporations Spent More on Compensation for Top Executives in 2010 Than They Paid in Income Taxes

Wednesday 22 June 2011

by: Pat Garofalo, ThinkProgress | News Analysis 

 

Over the last few decades, executive pay at large corporations has skyrocketed. Today, American CEOs make 263 times the average compensation for American workers, up from the 30 to 1 ratio in the 1970s. In 2010 alone, CEO pay went up 27 percent while average worker pay went up just 2 percent.

At the same time, corporate tax revenue has plunged to historic lows. During the 1960s, for instance, the United States consistently raised nearly 4 percent of GDP in corporate revenue. During the 1970s, the total was still above 2.5 percent of GDP. But the U.S. now raises less than 1.5 percent of GDP from the corporate income tax.

 

According to a new report called “S.& P. 500 Executive Pay: Bigger Than …Whatever You Think It Is,” put together by the independent research firm R. G. Associates, there are currently 32 companies that actually spent more on compensation for their top executives in 2010 than they paid in corporate income taxes:

Total executive pay increased by 13.9 percent in 2010 among the 483 companies where data was available for the analysis. The total pay for those companies’ 2,591 named executives, before taxes, was $14.3 billion…Warming to his subject, Mr. Ciesielski also determined that 158 companies paid more in cash compensation to their top guys and gals last year than they paid in audit fees to their accounting firms. Thirty-two companies paid their top executives more in 2010 than they paid in cash income taxes.

This isn’t really surprising when you consider that several of the largest U.S. corporations simply paid no taxes at all last year. General Electric, for instance, made more than $5 billion last year, but had a tax rate of -64 percent, meaning it received billions in tax benefits. Boeing hasn’t paid any federal income tax in three years, while CEO Jim McNerny made $19 million last year.

At the moment, a slew of multinational corporations — who already pay exceedingly low taxes — are lobbying for yet another tax boondoggle that would cost the government nearly $80 billion in revenue over the next ten years. With corporate taxes already so low, and corporations flush with cash and paying tens of millions to their CEOs, there’s little reason to grant these huge companies yet another giant tax giveaway.

+++++++

(In fact, the way the economy is, giving these unrepentant fools another tax break counts as treason to these eyes.--jef)

Want to Cut the Deficit? Restore Fair Taxes on Corporations and the Wealthy (2 articles)

Friday, March 25, 2011 by CommonDreams.org
by Deborah Burger

If the deficit hawks in Congress are serious about righting our economic ship and reducing deficits in the federal budget and many state capitols, it would we worth listening to the voices rising from the streets suggesting a very different solution than more cuts in safety net programs, education, pensions, and worker’s rights.

Greed at the upper echelons of our society is bankrupting our governments at every level. "Suggesting corporations and the wealthiest Americans pay their fair share," writes Deborah Burger, "usually earns one the reproof of advocating class warfare. But class warfare when practiced by the elites is apparently perfectly acceptable. The average CEO who was paid $27 for every dollar earned by an employer 25 years ago – during which wages have mostly fallen or stagnated – now gets a ratio of about $275 to $1."

This is not a budget fight, it’s a fight for the future of an America in which everyone should be able to retire in dignity, not worry about whether they can go to the doctor when they get sick, or whether there will still be schools for their kids.

How will we pay for it? By increasing the revenues from those who can most afford it, not by punishing those who have the least. By requiring corporations and the wealthiest individuals to pay their fair share, and stop blaming working people for an economic crisis created by Wall Street and exploited by their politician acolytes.

We’ve all heard the arguments. Pass more corporate tax breaks because that’s what makes the economy grow. Except it doesn’t.

Corporate profits per employee are at record levels. At $1.6 trillion, third quarter 2009 corporate profits were the highest ever recorded. Yet official unemployment still hovers near 9 percent, and the real jobless number is probably double that. Whatever big corporations are doing with their record profits, they are not hiring more workers.

Or the argument that our 35 percent corporate tax rate is one of the highest in the world. Except few if any major corporations pay anywhere near that amount. Half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years from 1998 to 2005, according to a recent Government Accounting Office study.

How do they accomplish this? Pages of corporate tax loopholes that render the supposed tax rate meaningless, loopholes not available to the average working family.

Who are some of those tax scofflaws? Bank of America and Citigroup, two of the financial institutions that, unlike workers did actually create the financial meltdown, paid no taxes in 2009. Boeing, just awarded a new $35 billion contract by the federal government to build airplanes, also paid no taxes between 2008 and 2010 despite recording $10 billion in profits those year, reports Citizens for Tax Justice.

Where’s the shared sacrifice from these corporate giants? Not from General Electric which, as the New York Times reported March 24, made $14.2 billion in profits in 2010, but paid no U.S. taxes, and was rewarded with the appointment of their top executive to head President Obama’s Council on Jobs and Competitiveness. Apparently paying no taxes is a model for how to be competitive.

Then there’s the wealthiest Americans who won a two year extension on tax breaks in December and also profited from the near elimination of estate taxes, at a time when the richest 5 percent of Americans control 23 percent of total income, compared to just 12 percent for the 40 percent at the bottom.

According to Merrill Lynch Global Wealth Management and Capgemini Consulting, there were about 3 million high net worth individuals and ultra high net wealth individuals in the US in 2009, those with investable assets, excluding primary residences and consumables, of from $1 million to $30 million.

Calculations by the Institute for Health and Socio-Economic Policy, research arm of National Nurses United, shows that a one-time wealth surcharge of 14% on those assets would more than pay for the $1.6 trillion budget deficit projection for 2011. Or, it would support about 33.8 million households at the national real median income level for 2008, pay for a year’s worth of AIDS medication for about 142 million patients, or create 34 million jobs at $50,000 per year.

In other words, we could more than balance our federal and state budgets without cutting Social Security or slashing pensions for public servants or depriving students of access to a decent education or far too many Americans of access to healthcare.

Turn off the Fox News echo chamber and you can hear the sounds of those calling for economic justice and a more fair tax system every day in the streets of Madison, Columbus, Indianapolis, and other cities across America. They have opened a door that will not be closed, and their voices are getting louder.

+++++++

Friday, March 25, 2011 by CommonDreams.org
General Electric: King of the Tax Dodgers
by Chuck Collins

Congressional Republicans are about to cut the Tsunami Warning System from the National Weather Service budget. But if General Electric paid their fair share of taxes, we could reverse this and billions in additional budget cuts.

GE — best known for its light bulbs, refrigerators — and lately, its nuclear reactors — is one of the country's biggest tax dodgers.

Recent filings show that in 2010, General Electric reported global profits of $14.2 billion, claiming $5.1 billion from U.S. operations.

How much did it pay in U.S. corporate taxes? Zero. Actually, less than zero. We taxpayers paid G.E. $3.2 billion.

As David Kocieniewski reports in The New York Times, G.E. "has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than most multinational companies."

According to Citizens for Tax Justice, between 2006 and 2010, General Electric reported $26.3 billion in pretax profits to its shareholders but paid no U.S. taxes. In fact, they received $4.2 billion in refunds from Uncle Sam for an effective tax rate of negative 15.8 percent over these five years.

General Electric accomplishes this feat by using is political muscle in Congress and lobbying for special tax treatment and corporate welfare. It also aggressively moves is profits to offshore tax havens including Bermuda, Singapore, and Luxembourg.

While several divisions of GE have struggled over the last decade, GE's accountants think of themselves as a profit center. The company¹s 975-member tax division includes many former Treasury and IRS officials who never a met a loophole they didn¹t love.

Why do we tolerate the behavior of companies like General Electric? These Benedict Arnold corporations reap all the benefits of doing business in the U.S. ­yet avoid their responsibilities for paying. Next time they have a fire at one of their plants, they should call the Fire Department in Bermuda.

GE will only pay its fair share when enough citizens wake up and demand that our politicians crack down on tax dodgers. No politician should be allowed to propose a budget cut or moan about austerity until they crack down on the scofflaws such as General Electric.

Corporations Push To Revive Tax Break That Incentivizes Them To Stash More Money Overseas

By Pat Garofalo - ThinkProgress

A group of multinational corporations have been undertaking a quiet lobbying campaign in an attempt to goad Congress into approving what it known as a tax repatriation holiday. Such a holiday would allow these corporations to bring money they have stashed overseas back to the U.S. at a dramatically lower tax rate. Usually, repatriated money is subject to the statutory U.S. corporate tax rate of 35 percent, and remains untaxed until it comes back to the U.S.

The corporate case for this tax break is that it will bring a flood of capital into the U.S. that will be spent on domestic investment and job creation. 2012 Republican presidential contender Mitt Romney is pushing the policy by making similar claims. However, research into a previous repatriation holiday — enacted by Congress in 2004 — shows that it did not deliver the promised returns in terms of investment or job creation, instead going to line the pockets of corporate executives.

Not only that, but the 2004 tax break also wound up increasing the amount of money corporations stow offshore, as they parked even more of it there in the hopes that Congress would approve another holiday somewhere down the line:

Research by Northwestern’s Brennan indicates companies rationally concluded that if they were granted one special one-time tax break, they might very well be granted another. That gave them the incentive to attribute even more of their profits to foreign operations, like a shopper waiting for an end-of-season sale. By the end of 2006 the total “permanently” reinvested abroad had exceeded the 2004 peak. It has continued to grow since.

Of course, it makes sense that corporations would simply leave money overseas, rather than pay the statutory tax rate, if they are convinced that Congress will continue to approve misguided tax breaks over and over. Sen. Kent Conrad (D-ND) said that approving another tax holiday without closing the myriad loopholes in the corporate tax code “makes a farce out of the whole system.”

As CAP’s Seth Hanlon noted, the nonsensical U.S. corporate tax code combines the ability to stow tax-free cash overseas with a slew of loopholes; these have driven corporate tax revenue down to one of the lowest points in history. Approving another repatriation holiday would fix none of those problems and constitute just another giveaway to corporations that already aren’t paying their fair share.