Conservatives never tire of telling us that this country needs more tax cuts. They speak to us as if we were in grammar school, advising us that if a business taxes were cut the private sector would invest more, build things, hire people, and we’d all be better off.
In fact, an excess of capital at the disposal of corporations and affluent individuals has actually harmed our economy. They have used their vast capital resources to fuel artificial booms that have produced severe and ruinous recessions. With too much money to burn, they fuel the pump-and-dump cycle. For example, up until around 2006, house prices were increasing by more than ten percent year-over –year. When the bubble burst, it left this country’s housing market in a shambles, and because of the implosion of the debt market, nearly brought down the entire global economy. The consequences of this flashpoint event will be felt for a generation.
After scores of investment banks were bailed out, none used its increased cash reserves to build factories, hire people, or enrich our lives. That sort of economic activity is far too mundane for the current entrepreneurial crew, and they have deigned to give us crap like exotic financial instruments few can understand. Take credit default swaps, for example, a type of investment insurance policy that bankrupted AIG overnight. In these deals, people will bet on the success or failure of investments that they might not have a stake in. They might bet that asset X will collapse in value. They don’t own Asset X. This gives them every incentive to make asset X crash, and if a few hundred thousand lives are crashed in the balance, who cares? Call it financial schadenfreude.
In law, it is illegal for me to buy fire insurance on John’s home because then I have an incentive to see John’s house burn down. However, in credit default swaps, people are essentially making more money if other peoples’ homes go up in smoke. Unfortunately, in the late 1990s, while President Clinton was in office, it was determined to dispense with this venerable aspect of insurance law and let all hell break loose.
Meanwhile the utility and business objectives of companies that actually are producing something are becoming more dubious all the time.
For example, a few hours ago I was trying to type 670.8 € (i), the number of a New York legal rule that provides that one has six months to complete an appeal. However, the computer insisted on doing strange things to the “e” I typed and it persisted in giving me a graphic of a light bulb every time I typed “(i).” Why? Because Windows and Word and the warlocks of Silicon Valley insist on updating and “improving” their programs every new release. This is what business invests in when it has too much cash to burn.
Or consider what happened when I bought my new computer. I found that the operating system was not compatible with the e-mail program on my old computer. This is what we call planned obsolescence; make something obsolete or incompatible with the new junk so you’ll have to buy more new junk. The upshot: computer hot shots sucked a few hundred more dollars out of my hide and I can’t find several hundred e-mails.
Of course, when I get really steamed at my irascible computer, I have to go to the gym to blow off steam. But my gym never stays the same. As soon as I finally get used to a certain piece of equipment—poof—it is gone and replaced by a newer piece of equipment. And after I have mangled a joint because of my unfortunate encounter with a newer weight machine, I have to go to the pharmacy to buy some over-the-counter dope. But the stuff is never in the same place. Retail stores don’t want you to know your way around their stores; if you knew where stuff was, you would just come in, buy what you want, and leave. They want you to run into thousands of things that you don’t need but might buy. So retailers are constantly renovating their stores and constantly changing the location of items. The expenses they incur doing this are tax write-offs. Meanwhile, your taxes and mine continue to go up.
But doesn’t business do wonderful things, like make new drugs that cure people of all sorts of terrible illnesses? Not always.
There are, for example, many new AIDS drugs, and these drugs have made AIDS a manageable condition for most. Who made the drugs? The granddaddy of AIDS drugs was AZT, also known as Retrovir. However, some altruistic pharmaceutical firm did not invent it. A doctor on Uncle Sam’s payroll synthesized it in 1964 while looking for a cure for cancer. It didn’t cure cancer, but it did a number on the AIDS virus. And what did the drug company do? It just rounded up people for clinical trials, and for that the FDA gave a pharmaceutical company the patent on AZT.
Many AIDS drugs, particularly the NRTIs class of AIDS drugs, are descendants of AZT. Similarly, Norvir is an AIDS drug in the protease inhibitor class of AIDS drugs, and its synthesis arguably helped scientists fabricate more protease inhibitors. The government subsidized Norvir’s development. (Incidentally, when the recommended dosage of Norvir was dramatically reduced, the drug company had the gall to try to quadruple its price.) In any event, the equitable owners of these AIDS drugs are not the drug companies, but you and me, the American People.
With all of the deceit and chicanery corporations routinely practice, they have shrunk the tax base and made millions of Americans poor and miserable. They have fed booms which lead inexorably to busts, have complicated our live with floods of useless or at the very least taxing “innovations,” and have very rarely contributed one whit to the betterment of mankind. The solution: raise taxes sky high and use the garnered revenues to once and for all really combat poverty, disease and bigotry and give us something better than junk and stuff and gadgets.