For the top 500 corporations the average CEO pay is roughly $10 million, although there are those like Genzyme Corp. Henri Termeer who will receive $160 million later in the year when French pharmaceutical giant Sanofy buys Genzyme. When we eliminate the top ten percent of income earners in America, the average income is around $33,000, indicative that for 90% of Americans (see my essay on Income Distribution in the US) the recession is not over.
Some politicians, journalists, economists, labor leaders and academics worry that we are still in recession and that a double-dip is possible, especially now that the catastrophe hit Japan and it has a global impact. Signs that indicate we can still face a lingering recession include, high unemployment, curbed consumption, especially in housing and durable goods, high energy prices that raise costs across the board and cut into spending for other goods and services, inflation of foodstuffs, sharp cuts in earnings and savings for middle class and working families, and higher taxes to go along with high fiscal deficits. Despite the pessimistic picture about a lingering recession, I am convinced that this will be limited to the broader middle and working class families, while corporations, especially the largest ones in the US and the world, are doing just great as is the top ten percent of income earners.
The pro-business advocates argue that if Obama carries through with his pledge to reduce corporate taxes,. which along with those of France are highest among the industrialized countries, the US would experience a jobs-growth economic recovery. If US corporations actually paid the legally designated 35%, they would in fact be at the top of OECD countries in terms of tax liability. Because of endless loopholes, however, the effective rate is very low and most corporations including Boeing, General Electric, and Wells Fargo pay nothing while receiving federal funds in various forms. This is the essence of corporate welfare thanks to tax laws that the government has in the books with the kind and generous assistance of corporate lobbies.
How can GE that generates $10 billion in pretax income pay nothing in taxes and in addition receive a $1.1 billion in tax benefit? GE Capital writes off a paper loss in the US while it shows a huge overseas profit for which it defers paying taxes indefinitely to the IRS, and it receives a tax benefit for depreciation deductions for its capital assets as well as loan losses in the US. Making matters worse, GE along with other corporations keep a great deal of their cash outside the US where they earn much higher rates than American banks pay.
Adding insult to injury on the corporate welfare issue, with a straight face ORACLE corporation's president Safra Catz argued that Obama's $800 billion federal stimulus was insufficient to restart the economy, but the $1 trillion which the large US corporations keep abroad could be repatriated, if the tax liability is not an obstacle. Cisco Systems, Pfizer, and other blue chip companies jumped on the 'tax holiday' bandwagon and demanded paying 5% instead of 35% in taxes on the money proposed repatriated money.
The US Congressional Research Service has concluded that when a corporation takes money out of the US, the direct result is job cuts that correspond to 1000 employees cut for every one billion dollars takes out of the US. The question of course is what corporations and politicians are proposing to cover the immense public deficit, if the Obama administration agrees to a seven-fold reduction of corporate taxes on repatriated capital.
The answer is what conservative governors Scott Walker of Wisconsin, John Kasich of Ohio, and Paul LePage of Maine proposed, namely have middle class and working Americans must take a sharp reduction in living standards, cuts in health and education, and reduction of the public employees workforce.
In 2002, the amount in corporate welfare was $125 billion or the same as what 60 million Americans paid in income taxes. The Koch brothers - co-founders of the CATO Institute and financiers to the Tea Party, are among the major beneficiaries of corporate welfare, while their right wing candidates are trying to convince voters that all social welfare programs must end. Return GOD to government along with corporate welfare and America will be strong again!