Transcript
Richard Wolff (0:10)
Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives. Jobs, debts, income, those for ourselves, those coming down the road, and those facing our children in the years ahead. I'm your host, Richard Wolff. I've been a professor of economics all my adult life. And I hope that has prepared me well to present to you an economic analysis of what's been going on, particularly over the last week. Well, many of our thoughts and fears have been galvanized in recent days by the horrific events in Las Vegas. So it seemed fitting to begin this show by talking about an economic dimension of all of that that you may not have thought about and that the media coverage has not dealt with. Over 500 people injured, hundreds of them being treated in the network of hospitals in Clark county, which is the county where Las Vegas is. But here's an economic dimension that makes a horrible story worse. We don't have universal health care in the United States, as you all know. And therefore what's already beginning to happen is that the victims of this tragedy are already being confronted with bills from the county hospitals that have treated them. So that in addition to the trauma, in addition to the wound, they have that peculiar American addition, which is economic anxiety on top of everything else. So grievous is it that the Clark County Commission Chair, Steve Sisolak, has set up a GoFundMe account begging for charity to help defray some of the economic costs that are being imposed on the victims of this tragedy. Random victims shot because we don't have a national health insurance the way every other advanced industrial country does. Something to think about. I want to turn next to the question of tax reform because that is what's on the agenda for the Congress. That's what's in the media every day. And I'm going to be talking about it repeatedly. And I'm going to take different parts of what's being proposed by the Trump and GOP administration that is trying to push this through the Congress. What I want to deal with today is one particular part and that part has to do with so called bringing the prophets home. This has to be explained because it is as outrageous as, as anything I ever report on. Here's the story. Big corporations got the laws changed some years ago to enable them to do the if you can show that the profits you've earned as a big company, and I'm talking General Motors, General Electric, Apple, Google, you name it, big American corporations based in the United States. If you can show that you've earned profits Abroad, which, as I'll tell you in a minute, is easy to do. You don't have to pay the 35% profits income tax that are required of all corporations working in the United States. So, for example, if you're a company that has a subsidiary, say, in Ireland, you sell what you normally do, but you don't sell it, say, to somebody in Ohio or somebody in Nigeria. It doesn't matter. Directly from your headquarters in New York, here's what you. You sell what you produce in New York to your subsidiary in Ireland at a price equal to cost, so there's no profit there. Then your subsidiary sells it to your buyer, your customer, wherever he or she may be located, at the high price that makes the profit. In that way, you may be an American company, but your profits show up in the other country. They are therefore listed as foreign profits, and therefore they don't have to pay income tax. Not 35%, not 20, not 10. Zero. Companies have been doing this for years. That's called tax evasion. Is it legal? Yes, it is, because the company is doing it and others like them were able to get the law to read like that. Year after year, they avoid taxes. And therefore the government doesn't have the money to provide the services we all need. And therefore the government comes after us for more taxes to compensate the government for the taxes it can't raise on some of the biggest corporations in the world. Apple currently is listed as the number one corporation which has. Are you ready? Hundreds of billions of dollars in profits sitting overseas on which they have paid zero taxes. Does the government of the United States go after them for manipulating so the profits show up over there? No. Does the government go after them for using this as a tax evasion mechanism? No. Has the government made consistent efforts to change this law so it can get the taxes from these large corporations? No. But here's what Trump and the GOP bring the profits home. Now, you big companies, and we'll give you a break. We'll only charge you. And this is what Gary Cohn, the adviser to Mr. Trump, said this last week. We'll give you just 10%, not 35, 10. You know what this is? This is a reward offered by the United States government to the corporations that have successfully evaded their share of taxes for years. And as if that weren't bad enough, we've been here before. Back in 2004, we did this the first time. We gave them a break. They could bring the money home. They got a lower tax rate. Did it lead to the jobs we would have when the profits came home. No, it didn't. And it isn't going to do it this time either. Why not? Because even though the profits are abroad, companies can use those profits to make money, which they do. That doesn't sit in a bank account. It's used to do whatever it's profitable for that company to do from Ireland or from wherever the profits are stashed. So it has no effect bringing it home. It just was a tax avoidance mechanism. And we're now going to reward these companies for doing that by giving them an even lower rate than they themselves expected. And guess what? If it's only for a year, which is what's being proposed, what is the message you're sending to corporations? As soon as this year is over, start doing it again, just like you did it before 2004, just like you did it between then and now. Do it again once this law, this window of opportunity is closed down again because you'll save a lot of taxes and eventually another bought and paid for federal government will give you a special break as a reward. Someone say the system was rigged? Of course it is. And please understand that when major corporations stash. And by the way, the current estimate is over $2 trillion of money, profits earned by American companies stashed abroad. When they evade taxes on that money, either we have fewer services or we pay the higher taxes to make up for what they don't pay. That's the economics of it. Next thing, economic update. The Consumer Financial Protection Board in Washington keeps records on a whole lot of issues and does surveys of how consumer finances are going. And here's a statistic I wanted to share with you because it gives a window on the economic recovery we hear so much about but can't seem to locate when we go looking for it. One half of US citizens, according to the Consumer Financial Protection Board, have trouble paying their bills. 50% have trouble paying their bills in the survey conducted by them. That's not an economy that has recovered. You're recovered when you don't have trouble, or at least when not 50% of your citizens report that next item. Some of you have asked me what happened to the Soviet Union after it dissolved 1989 and became Russia. When it gave up the socialism, it said it had to go back to the capitalism before its revolution in 1917 to join the rest of the world's capitalist nations. And I thought you'd be interested in two statistics that come from a recent paper of the National Bureau of Economic Research. That's a famous source of all kinds of economic research in the United States. And the paper is entitled for those of you that are interested, From Soviets to Inequality and Property in Russia 1905-2016. This is produced by the team of researchers that are based at Berkeley, Piketty and Saez, whose work I often quote because it is the leading work on inequality in the world. And their website, which you can find at Piketty and Saez, is where everybody goes in the economics profession for these numbers. Here's the story. When Russia went from capitalist to what it called socialist, it dramatically changed the distribution of income and wealth in Russia. From a very unequal distribution, it became radically less unequal. And when it collapsed in 1989 and went back to capitalism, it also went back to gross inequality. Before the collapse in 1989, the Soviet Union's distribution of wealth and income was was much less unequal than that of the United States today or as of 2016. The new Russia, the new capitalist Russia has caught up with the United States and has a distribution of wealth and income rather like that here in the United States. That is to say, very unequal. You might also be interested to know that the NBER research I'm quoting indicates that wealth and income are much more unequally distributed in Russia today than in the People's Republic of China today. Something to think about. Next item. Eastern Europe is experiencing a surge of right wing populist governmentspoland Hungary and beyond. What's going on? Well, what's going on can be described in many ways, but I would like to get to the core of the economics of it. When the Soviet union collapsed in 1989, so too did the communist governments of Eastern Europe, one after the other. In some cases it started even before the Soviet Union collapsed, as in the case of Poland. The hope of the Eastern Europeans was that by leaving the Soviet system, by joining the west, for example, by joining the European Common Market, in some cases by joining NATO, they would enjoy the economic standards of living that they associated with Scandinavia, Germany and France. It was not their plan to join the economic conditions of Europe's poorer countries, Greece, Portugal, Spain, Italy and so on. Unfortunately, what the hopes of the Eastern Europeans were and what has happened are not the same. Eastern Europe is now the poor part of a unified Europe. Eastern Europe is not achieving what it had hoped for. It is achieving a status much closer to that of Greece, Portugal, etc. Etc. And why is that? Because they have become, in effect, colonies of Western Europe. If you look at the statistics, for example, the bulk of the Banks in Eastern Europe are, are subsidiaries of Western banks who came in there once the Soviet Union was gone and gobbled them up. Likewise, the big employers in many of these countries are Western companies who went to Eastern Europe from Western Europe for one big, cheap wages, low standards of living. And they went there because that's what kept them there. Now they're not about to give those workers higher wages to give them what they thought they would get in the west because they didn't understand how capitalism works. They get low wages, they get to be the poor part of Europe. They thought that wouldn't happen, but they didn't understand how capitalism works. It's a little like the United States where the poorest states are Mississippi, New Mexico and the Commonwealth of Puerto Rico. These have been the poorest states for a long, long time. Capitalism doesn't erase these kinds of inequalities. Indeed, it often makes them worse and it often keeps them for many decades. That's how the system works. Puerto Rico is in the process of being made even poorer than it was before, and it was the poorest part. I will come back to that in a few minutes. Eastern European people are furious at what's happening to them. Furious at the Europeans beginning to question joining the European Common Market because the promise of being part of European Community has been broken and right wing politicians jumped, denouncing the rest of Europe, associating Europe with the need to take in immigrants from the countries that Europe is bombing in the Middle east and fear that their situation will deteriorate even further if they have to share their meager economy with with desperate refugees is turning people in Eastern Europe towards the right wing politicians that express their anger and disappointment about Europe, coupled with their anxiety about immigration, it's producing right wing politics in Europe. But then again, once the Europeans discover that the solutions offered by the right wingers are nothing at all, who knows where they may then go next Item. A sign of where Europe may go is already in the air. And that has to do with two political developments that are economic in their significance. One is occurring in the poor country of Portugal and the other is occurring in the rich country of the United Kingdom. And I want to note it here so, so we can follow it in the future. Portugal had elections very, very recently. And in those elections, the governing alliance in Portugal, which had won the national elections in 2015, followed up by sweeping the municipal elections in Portugal. This at the end of September or the first day of October. Excuse me. The government of Portugal is unique in Europe because it's clearly committed against austerity. It is not going to hurt the mass of people to get out of the economic crisis since 2008. Instead it is giving money to poor people. It is built trickle up rather than trickle down, which is the austerity formula. The government of Portugal, in case you did not know and, and why would you given the media blackout? The government of Portugal is an alliance of three political the Portuguese Socialist Party, the Portuguese Communist Party and the Portuguese anti capitalist left bloc party. That's right, it's a left wing government. They won the national elections in 2015. They just swept the municipals on the basis of what? We are not going to make the mass of people pay for the financial crisis they did not cause and from which they have already suffered eight or nine years. We're going to help them first and that's the way forward. And the people of Portugal have voted for them massively. And the other sign of the wind changing is in Britain. Six months ago the Labour Party leader Jeremy Corbyn was was looked at as a long shot who could never win national office. Here we are six months later. The Brexit negotiations between Britain and Europe are going nowhere fast. The cost to Britain is becoming clear. The Conservative government of Theresa May is not handling the situation well and the newspapers are now full of the likelihood that Mr. Corbyn may become the next Prime Minister of England. And, and he too is a trickle up, not a trickle down politician. Very interesting that the winds of Europe are shifting. Next item. The New York Times recently bemoaned, as many people do, that banks in America, the financial system isn't doing what it should do, which is loaning money to businesses who will hire people and provide jobs. And they shake their finger, they scold the financial industry. Well, far be it from me to defend the financial industry, but the New York Times is making an analytical mistake. The banks aren't the problem, they are just a symptom. The reason the banks don't do what it is you would like them to do is that nothing else in this economy is working in that direction. When they lend to businesses, it's mainly so the businesses can either move production abroad or automate jobs out of existence. If the businesses that the banks lend to are not job creators, but businesses in other countries creating jobs there, that's because it's more profitable, which is the way this system works, not just by banks, but by everybody. In short, the banks are not the problem because they are responding to the system. The system is the problem. It's the system that's not working and picking out one part of it and putting all your anger on that misunderstands that each of the parts is doing what's profitable and avoiding what's difficult. And that's the problem. We have a system all of whose players are ending up doing things that we as a people don't need and don't want. The next item crossed my mind, and I didn't know how to present it to you, but I wanted to. It has to do with rural hospitals. They are closing. To give you the exact numbers, which I wanted to do, since 2010, 82 rural hospitals have closed in the United States and 700 more are at risk of closing over the next 10 years. That's according to the National Rural Health association, which, which keeps track of these numbers. The state that has suffered the most, Georgia. And I wanted to tell you the story of one part of Georgia, Wheeler county, caught my attention. The last hospital in Wheeler county closed in June of 2014. That brought the total number of hospitals in Wheeler county to zero. How many people live in Wheeler County? 8,000. 8,000 of our fellow citizens live in Georgia, in a county that has no hospitals at all anymore. Yes, we pay a lot of attention to the tragedies of Texas, Florida and Puerto Rico and the hurricanes. But an equal devastation not associated with nature at all can't be blamed on. Nature is happening across the United States as we let down our fellow citizens by being unable to provide a basic hospital service to thousands and tens of thousands and hundreds of thousands, with many more at risk. So poor are the reimbursement rates under Medicare and Medicaid that hospitals that treat older people who tend to have more medical difficulties, and poor people who rely on Medicaid. Those reimbursement rates can't keep the hospitals going. In a society that cared about its fellow citizens, we'd find other resources, wouldn't we? But we don't. We let the hospitals close and then the people suffer. And we wonder why there's anger in the country, why some people become deranged under the pressure. Watching someone you care about die because you can't get to a hospital can have all kinds of effects on your mental stability. Puerto Rico. I wanted to end the first half of today's show with Puerto Rico, but before I do, I want to remind you we maintain two websites that I want you to make use of. We update them every day. They are available to you without charge, 24 hours a day, seven days a week. One of them is democracyatwork.info. that's all one word democracyatwork.info and the other one RD Wolff with two Fs. These are websites through which you can communicate to us what you like and don't about this program. You can, with a click of your mouse, follow us on Facebook, Twitter and Instagram. Basically be a partner with us. Use the material on this program and on those websites to share with others who are interested and might be induced to come and watch or listen to the program. Just like you do work with us, we try to work with you and it will help the project we are engaged in building. For those of you interested in watching this program as a television program on a regular basis, please make use of our patreon.com availability P A T R E o-n.com patreon.com economicupdate we'll get you right it and we would appreciate your taking a look at that. So back to Puerto Rico, our final economic update. Puerto Rico was taken over by the United States over a century ago in a war with Spain. It was, in effect, an American colony, and it never stopped being an American colony. It was given some privileges, such as having the people of Puerto Rico be American citizens who could travel to the United States without going through the normal visa and passport and other kinds of problems. But it was a undervalued, underserved, badly treated place, which is why so many of its citizens left Puerto Rico and went to the mainland. The behavior of the government now, the way it's been treated as a debtor, the way it is now not able to have its own elected officials run their society because a commission of the United States Congress has the final authority. The way that Mr. Trump neglected to deal with the Puerto Rican crisis after the storm. These are all symptoms, all a continuing sad story. Puerto Rico is the poorest part of the United States, even poorer than the states of Mississippi and New Mexico, which are the poorest states. It has the highest sales tax of any part of the United States. The poorest people pay the highest taxes. And now they've been devastated by a storm. Most of the island without power, without communications. You know, you can tell the moral and economic fiber of a society by how it treats those who suffer the most and who have the least. And by that standard, the way we treat the colony, which is the truth of what it is of Puerto Rico, isn't any better than the way all the rest of the colonies of the world were treated, which is why they rose up and refused to continue to be colonies a short while ago. It's worth thinking about the inequality that makes Puerto Rico poor is being worsened now by the storm and the response. And that's on us. We've come to the end of the first half of Economic Update. Thank you very much for staying with us. After a short interlude, we will be right back.
