Another way in which the state supports corporations and the super rich is via subsidies and tax breaks. America has had a long history of changes to its tax rates. The number of taxable income brackets and the definition of the “top earning bracket” have been changed many times during American history as well. To fund WWI in 1917 there was a large hike in income taxes for the top-earning bracket from 7% to 67%. This tax rate only applied to those who made more than two million dollars per year. (Many were able to find loopholes and ways of not paying, however.) There was a reduction in 1925 after the war, but in 1932 the top tax rate was increased again to 63% and this time it applied to those who made one million or more dollars. The top tax rate rose again to 91%, its highest rate ever with the passage of the Individual Income Tax Act of 1944, which applied to citizens making $200,000 or more.
LBJ cut the top tax rate to 77% in 1964 during the Vietnam War and Reagan reduced it further to 38.5%. He also bailed out Continental Illinois bank with $7.5 billion of taxpayer money in 1984, the biggest bailout in American history before the turn of the century. By 1988 the top tax rate was only 28%, but the top bracket was redefined to include those who made only $29,750 or more. Anyone who made less paid 15%. George Bush Senior then approved the increase of the top tax rate to 31% to get a budget that would limit future spending. After Reagan and Bush deregulated the savings and loan industry, causing massive corruption and financial ruin for the lower class, Bush Sr. signed the $300 billion savings and loan bailout bill to save the the corrupt industry.
Clinton increased the top tax rate to 39.6% but he also signed the Gramm–Leach–Bliley Act (GLBA), also known as the “Financial Services Modernization Act” of 1999, which repealed the Glass Steagall Act of 1933 that helped to regulate American banks. The Gramm–Leach–Bliley Act allows commercial banks, investment banks, securities firms, and insurance companies to consolidate, and it prohibits the SEC (security and exchange commission) and all other regulatory agencies from regulating large investment banks. Clinton also signed NAFTA into law with devastating effects on the working class in America and abroad. Once in office, George Bush Jr. then decreased the top tax rate to 35% and President Obama increased it back to Clinton’s rate.
Reagan did more than nearly halve the top tax rate. He ushered in a new era of extreme corporatism. When he became President, he made Don Regan, chairman of Merrill Lynch, (the richest retail brokerage firm in America at the time) his treasury secretary, so that he could use the state to further benefit corporate America and enact tax cuts for rich. Don later became White House Chief of Staff. Reagan also ensured wages for working people stayed about the same, even as their productivity increased. Bankruptcies increased by 610% as a result of his policies.1 This had many devastating effects on the middle class and the poor.
The disparity between the rich and the poor in America has only become exponentially greater. CEOs were paid 35 times as much as their workers on average during Reagan’s term, but today they are paid 380 times as much on average2, and the richest 1% of households in America now have more than the bottom 95% collectively3 The richest have so much more than the rest of us because corporations have become even more entrenched in governments. The Federal Reserve and private banks still control US currency, and corporate executives have worked their way into the government by running for office and influencing people already in power though groups like the American Legislative Exchange Council, (ALEC) where politicians and corporate executive sit down together to decide state policy.
One example of a corporate executive parasite turned politician is Henry Paulson, former Chairman and CEO of Goldman Sachs (one of the largest investment banks in the country with $850 billion dollars in assets in 2010) made Treasury Secretary under Bush and member of the Financial Stability Oversight Board that oversaw the “Troubled Asset Relief Program.” TARP was enacted under the “Emergency Stabilization Act of 2008” in October of 2008 to give corrupt American banks $700 billion dollars after they had destroyed the economy with their greed. This proposal waived all laws and said explicitly “it may not be reviewed by any court.” George W. Bush approved it and Obama supported it.
As President, Obama also nominated Stuart A. Levey and then Tim Geithner to be Treasury Secretary. Geithner was President of the New York Federal Reserve from 2003 to 2009 and in January 2012 Levey was made Chief Legal Officer of HSBC, one of the largest banks in the world worth $2.556 trillion in assets in 2011. (HSBC is also neck-deep in drug cartel money.) Geithner did not propose any laws that would regulate the banks. Instead, with his authority over $350 billion of money from TARP, he gave billions to corrupt, major corporations like the American International Group, (AIG). These corporations were not required to say what they did with this money and executives gave themselves billions in bonuses. Jack Lew, a former very well-paid COO at Citigroup from 2006 to 2008 was made Treasury Secretary on February 28, 2013, illustrating how corrupt businessmen are actively sought out for government positions.
Other countries affected by the recession like the United Kingdom followed the bailout model as well with the 2008 UK Bank rescue package while Greece implemented austerity measures. Iceland, however, is one of the few countries in the world that has not used the bailout model or implemented austerity and instead jailed its criminal bankers, and their economy and quality of life have improved as a result.
Henry Paulson isn’t the only former Goldman Sachs executive on the treasury board. In fact, the Bush and Clinton treasury departments had 11 former Goldman Sachs executives. Obama hired 14 former Goldman Sachs employees for various positions in his administration who made their careers even more profitable by abolishing financial regulations and increasing capital for their friends on Wall Street. Rahm Emanuel is but one example. Before becoming Obama Chief of Staff, Rahm Emanuel was paid $3,000 per month by Goldman Sachs. Rahm was also a senior adviser to Clinton. Robert Rubin, co-COO and Co-Chairman of Goldman Sachs was made Treasury Secretary under Clinton and an economic adviser under Obama. Robert Hormats, Vice Chairman of Goldman Sachs was made Undersecretary of State for Economic Growth, Energy, and the Environment under Obama. Stephen Friedman, Chairman of the President’s Foreign Intelligence Advisory Board under Obama and Director of the National Economic Council under Bush was formerly co-chief operating officer and chairman of Goldman Sachs. Dianna Farrell, Deputy Director of the National Economic Council under Obama was formerly a Goldman Sachs financial analyst and founding President and CEO of the JPMorgan Chase Institute. Philip Murphy who worked for Goldman Sachs for 23 years, holding multiple positions including President of Goldman Sachs in Asia and Senior Director of Goldman Sach’s Frankfurt office was made Ambassador to Germany in 2009 under Obama. Mark A. Patterson former lobbyist, Vice President, and Managing Director of Goldman Sachs was made Chief of Staff to the Secretary of the Treasury under Obama in 2009. Adam Storch, vice president of the business intelligence group at Goldman Sachs was made managing executive of the U.S. Securities and Exchange Commission’s Division of Enforcement in 2009. Alexander Lasry, analyst for Goldman Sachs was made special assistant to Valerie Jarrett (Director of the Office of Public Engagement and Intergovernmental Affairs and senior adviser to the president) under Obama from 2010 to 2012. Sonal Shah, former VP of Goldman Sachs was made Director of the Office of Social Innovation and Civic Participation under Obama in 2009. Gregory B. Craig, former White House counsel under Obama and Director of Policy Planning under Clinton became a lawyer for Goldman Sachs after leaving office. Gary Gensler, Co-head of Finance and partner at Goldman Sachs where he worked for 18 years was made Assistant Secretary of the Treasury for Financial Markets and Under Secretary of the Treasury for Domestic Finance under Clinton and Chairperson of the Commodity Futures Trading Commission under Obama. Neel Kashkari, former head of information technology at Goldman Sachs was made aide to the Treasury Secretary and President of the Federal Reserve Bank of Minneapolis.
It’s not just Goldman Sachs executives that get hired to regulate themselves and others like them in government. Executives for other corporate giants get the same treatment. For example, Michael Froman, a former Citigroup executive was made US Trade representative, deputy assistant to the President, and Deputy National Security Adviser for International Economic Affairs at the NSC and NEC under Obama. (Froman also sent an email revealed by wikileaks to Obama’s campaign manager, John Podesta, recommending a litany of individuals for high level positions in the administration who were then appointed to make up about half of his cabinet4). Anne Fudge is another example. She was a member of a number of corporate boards, including those of General Electric, Novartis, Unilever and Infosys before being hired as a member of Obama’s ‘National Commission on Fiscal Responsibility and Reform.
TARP passed even though there was a democratic majority in congress at the time that stated it was opposed to crony capitalism. In fact, far more democrats (a total of 172) voted in favor of TARP than republicans (a total of 91) did. In America republican politicians openly and boastfully work for corporations, whereas democratic politicians often condemn corporatism and express concern about economic inequality while simultaneously supporting underhanded corporations just as fervently because they’re the source of their funding too. They just do it more discreetly to avoid being seen as hypocrites. Very few politicians are not on the side of big business alone, despite their rhetoric. However, there are a few exceptions. Dennis Kucinich, for example, voted no on the bank bail-out of 2008 and asked during the debate:
“Why aren’t we asking Wall Street to clean up its own mess? Why aren’t we putting up new regulatory structures to protect investors?…Why aren’t we reducing debt for Main Street instead of Wall Street? Isn’t it time for fundamental change in our debt based monetary system, so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the United States Congress or the board of directors of Goldman Sachs?”
These were powerful words that few people there wanted to hear. The Obama administration was as corrupted by corporate influence (if not more so) than previous administrations. Goldman Sachs contributed almost one million dollars to the Obama administration, more than any private contributor. (UBS, Morgan Stanley, and Citigroup also made sizable contributions.) Although the Obama administration did pass the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010 that put some restrictions on the practices of banks and corporations, it hardly reformed Wall Street. It created a vice chairman of supervision to oversee the Federal Reserve and allegedly ensure it serves public interests, but the only way that the Fed could serve public interest would be to print money with no interest or dissolve. The Dodd-Frank Act was also co-authored by Chris Dodd who approved a $165 billion bailout for AIG, $160 billion of which went to executives as bonuses.
The financial crisis in America from 2006 to 2010 had devastating effects on many Americans who lost their homes and their jobs. U.S. foreclosure filings skyrocketed by 81% in 2008 and by 225% since 2006.5 In January of 2009 alone, there were 598,000 job losses (not including farm jobs) and from the beginning of the recession to February of 2009, 3.6 million people lost their jobs.6 Some of these people lost their employment because their employers went bankrupt, but many were just laid off just to increase profits. (GM and General Electric have cut more than 200,000 jobs collectively.) Laying off workers benefits corporate executives in the short-term, (because they have less people to pay), but it ultimately hurts them in the long-run if the layoffs are unnecessary. Skilled workers are also left jobless as a result and the rest of the economy often suffers while the owners of big banks and other financial institutions make a killing. In a 2016 interview with Noam Chomsky, he explains “By 2007, right before the crash for which they had considerable responsibility, financial institutions accounted for a stunning 40 percent of corporate profit.”7 Further, according to a study by Emmanuel Saez of UC Berkeley, during the first three years of the so-called “recovery” after the crash, the richest 1% of the population captured 95% of the post-recession increase in income.8
The real criminals of the 20th and 21st century are the CEOs, the politicians, the bankers, the lobbyists, militaries, and police that fight for corporate interests, and the other greedy actors in charge. The CEOs of large corporations make far more money than average criminals robbing liquor stores or selling dime bags on street corners, because corporate executives have the law on their side and the politicians in their pockets. They stay away from the workers they exploit and the harm they do, and so long as they can mold public opinion, few see their paths of destruction.
Large corporations talk about corporate responsibility to increase sales and public trust, and many often fall for it. For example, in 2010, Toyota equipped millions of their cars with faulty accelerators. Some jammed, causing about a dozen drivers to die from collisions.9 Following the scandal, they made a commercial thanking Americans for their business. It was intended to improve public relations. But their phony gratitude was insensitive and inappropriately timed, and they never acknowledged their mistakes publicly.
Due to a law that limits the amount of money car companies can be fined for producing faulty cars, Toyota was only fined $16.4 million dollars. Despite all of the recalled cars, Toyota still had a profit of $2.3 billion in 2010. Their fine was less than one hundredth of their profits that year. GM has recalled millions of cars in recent years for safety reasons as well and the company along with Chrysler) was bailed out by Bush with $13.4 billion from TARP when in financial trouble. The rest of the American auto industry received about $66.6 billion from TARP.
Corporate exploitation will not end via legal means or by “working within the system” because the largest corporations are embedded in the system and governments were only invented to protect and increase the profits of state rulers. Positive reforms can’t be made when they run counter to primary purpose of the institution attempting to be reformed. Only through popular resistance, revolt, and organization can out autonomy, freedom, and socioeconomic justice be restored.
1 Moore, Michael: Capitalism: A Love Story. 22:16. 2009. Film.
3 DeNavas Walt, Carmen, et al: Income, Poverty, and Health Insurance Coverage in the United States. 2011 U.S. Census Bureau <census.gov/prod/2012pubs/p60-243.pdf>
9 If your accelerator jams, all you need to do is take your key out of the ignition and the car will come to a stop once it runs out of momentum.