(Please welcome in the comments Pulitzer Prize winning NYT writer David Cay Johnston, author of Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense [and Stick You with the Bill] – jh)
In 1980, Ronald Reagan asked the question — "Are you better off than you were four years ago?" David Cay Johnston is asking that question again, in the wake of the "smaller government" and deregulation mania of the Reagan era. With fewer people having pension plans and health insurance, and more people in debt and filing for bankruptcy, the answer is largely — no.
But not for all. Many have flourished, and Johnston argues that in large part this has happened because the government has rewritten the rules to favor the rich, the politically connected and the politically powerful at the expense of everyone else. The government is now in the business of wealth redistribution by virtue of reaching into the pockets of the poor and the middle class (or by allowing big business to do so) and funneling money to those with the political clout to have the law written to their advantage.
Johnston uses the "big box" stores as an example of how this is happening. The common myth is that Walmart can operate more efficiently than small stores by buying in large quantities, and that’s how they can afford to offer lower prices. But as Johnston says, that’s largely a crock. They are able to operate at a profit because they charge sales tax on items, and then put it in their pockets; they also profit by cutting deals whereby they pay no property tax. It’s called "tax increment financing." The schools, the police and fired departments, the parks and civic programs that used to get that money now don’t — and worse, local businesses can’t compete against these stores subsidized by their own communities. It’s lose-lose for the locals, but big wins for some of the richest people in the world.
As Johnston points out, a small community in the Poconos gave a $36 million dollar tax break to Cabellas to build the world’s largest sporting goods store — that’s $8,000 for every man, woman and child in the community, more than the entire city budget for over a decade. The theory is that people will drive from all around to get there, bringing money into the community. Only in an age of online sales, that doesn’t really happen. He says that for the first three years that Cabellas was publicly traded, they reported profits of $222 million, but they made deals for $294 million in subsidies. They’re not in the business of selling goods, he argues — they’re in the business of soaking the public. They’re not increasing the pie, not competing in the market — they’re looking to the government to reach into your pocket and make them rich.
Johnston also says, amusingly enough, that such tax swindles are responsible for two-thirds of George W. Bush’s wealth, Mr. "lower taxes" himself. By getting a half cent sales tax increase to build a stadium for the Texas Rangers, which they were then able to buy at far less than cost, the value of the team when it sold which put the money in Bush’s pocket was largely the value of the stadium. He owes his fortune to corporate welfare.
What’s the solution? Well, it’s not going to stop until people in their communities start balking and refusing to subsidize their own demise. He also thinks (unsurprisingly) that the political donor class has undue influence over how laws get made, which allow lobbyists to sit there and analyze every bill for ways to slip stuff in at every juncture in ways that the public does not understand until the thievery becomes manifest.
Since the Supreme Court has shown open hostility to campaign finance reform, Johnston sees one potential solution as having the government pay every expense of our elected officials (mailers, golf trips, plane fare, etc.) such that lobbyists aren’t the ones doing it, and favors aren’t owed in return. As someone who sees primary challenges as one of the key ways we change the balance of entrenched political power in DC I have to wonder if this won’t serve to exacerbate the advantage incumbents already have, but it is something that’s worth thinking about.
Please welcome David Cay Johnston in the comments.