Trickle Downers

The Prospect's ongoing exposé of the folly, dysfunctions, and sheer idiocy of feed-the-rich economic policies.

Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.

Trickle Downers

Scott Walker Doubles Down on Foxconn-omics

(Gage Skidmore)
 

It was just a few months ago that Wisconsin Governor Scott Walker unveiled a massive deal that would give the Taiwanese manufacturing giant Foxconn $3 billion in tax subsidies to open a $10 billion LCD TV factory, promising to bring 13,000 jobs to southeastern Wisconsin.

That’s a public cost of $230,000 per job. Initial estimates found that the state wouldn’t break even on its investment until 2043. On top of the massive tax subsidies, Foxconn will benefit from a host of other goodies—lower electricity rates, state funding for road construction and worker training, exemptions from certain environmental regulations, and unprecedented special treatment in the state court systems.

In short, Walker handed a foreign corporation the keys to the government.

Now, with another major manufacturer threatening to cut hundreds of jobs in Wisconsin, Walker is doubling down on his corporate welfare program. Following the passage of the GOP tax cut, Kimberly-Clark (the company that makes Kleenex, Huggies diapers, and Cottonelle toilet paper) announced in January that it would deliver a dividend increase for its shareholders and a $2.3 billion share buyback. The company said it would then use the remainder of its tax cut savings to restructure its operations.

That apparently means cutting 5,000 jobs in the United States, including 600 positions from its operations in northeastern Wisconsin. The company turned a $3.3 billion profit in 2017.

In a last-ditch effort to save those jobs, Walker is falling back on his Foxconn playbook. On Monday, he proposed legislation that would give Kimberly-Clark the same deal as Foxconn: 17 percent tax credits on qualifying wages at the company’s two plants.

 

 

As the Milwaukee Journal-Sentinel points out, Wisconsin taxpayers would be on the hook for $8,500 in Kimberly-Clark tax credits for one $50,000 salaried job.

Walker is running for re-election in 2018 and he’s faced scrutiny over his failure to make good on a 2010 campaign promise to create 250,000 jobs in the state. He’s not only failed to meet that mark by nearly 65,000 jobs, but Wisconsin’s manufacturing industry has continued to wither away.

The conservative governor has failed to entice businesses to set up shop with his policies of union busting and deep budget cuts to everything from the public university system to infrastructure. 

As Walker has attacked public welfare programs (he’s pushed for drug-testing requirements for state welfare recipients and work requirements for Medicaid beneficiaries), he’s unabashedly set up a generous corporate welfare program that flies in the face of the GOP’s purported vision of free-market capitalism. 

After privatizing the state economic development agency in 2011, Walker has lavished companies with lucrative tax subsidies. In return, companies like Ashley Furniture have announced layoffs, offshored operations, or simply failed to meet job-creation promises.

The Foxconn deal may be the biggest, but, as Walker has shown, it will be far from the last. The governor has now invited any Wisconsin company to threaten to uproot unless it gets a sweet new tax subsidy.

Call it Foxconn-omics.

Amazon Warehouses May Leave Cities Worse For Wear

A new report finds that localities with Amazon warehouses haven’t seen an overall boost in employment.

AP Photo/Patrick Semansky Myrtice Harris packages products for shipment at an Amazon fulfillment center in Baltimore. trickle-downers_35.jpg T he battle between cities to host Amazon’s second headquarters continues to dominate headlines, but the new HQ remains only the latest and largest prize in the tech giant’s long history of masterfully soliciting public subsidies. In Amazon’s quest to control same-day delivery, its network of almost 100 fulfillment centers—where products are sorted, packaged, and shipped—has now spread across 25 states. Lured by the prospect of hundreds or even thousands of new full-time warehouse jobs with competitive pay and benefits, local government officials crawl over each other to land the world’s largest online retailer in their backyard. But according to a new report by the Economic Policy Institute (EPI), many of these policymakers might really be selling their constituents short. The report found that, on average, counties that are home to Amazon...

ExxonMobil Plays Trump Like a Fiddle

President Donald Trump—the great dealmaker—has an ego fueled by flattery, which is allowing corporate America to play him like a fiddle. Since the passage of his massive tax cuts, Trump has trumpeted the news of one-time bonuses, wage hikes, capital investment projects, and job creation promises as affirmations of his genius.

His State of the Union Address Wednesday night was no different. As Trump proclaimed:

Since we passed tax cuts, roughly 3 million workers have already gotten tax-cut bonuses—many of them thousands and thousands of dollars per worker, and it’s getting more, every month, every week. Apple has just announced it plans to invest a total of $350 billion in America, and hire another 20,000 workers. And just a little while ago, Exxon Mobil announced a $50 billion investment in the United States. Just a little while ago.

This, in fact, is our new American moment. There has never been a better time to start living the American Dream.

So what about that ExxonMobil investment? ExxonMobil CEO Darren Woods, who took over for Rex Tillerson when he went to work for Trump, announced Monday that the company would be investing $50 billion in capital and exploration investments over the next five years—a move, he said, that is thanks in part to the corporate tax cuts. Trump repeated the news in his address to much applause, as Tillerson looked on from the front row.

It turns out the fossil fuel giant was, in all likelihood, going to make that investment anyway. As Americans for Tax Fairness point out, SEC filings show that ExxonMobil made about $53 billion in domestic investment in the five-year period between 2012-2016. This suggests that the company will continue to invest in capital spending at a similar (or even lower) pace.

The company was already paying an absurdly low rate in corporate taxes—just 13.6 percent on $60 billion in U.S. profits between 2008-2015. Lowering the statutory rate to 21 percent, then, doesn’t do much for its after-tax profits.

Of course, ExxonMobil is an incredibly powerful corporate actor—the third largest company in the world. It has a tremendous interest in currying favor with its regulator, the Trump administration.  Trump’s presidency could prove highly lucrative for the company, enhancing prospects for drilling along the U.S. coasts, in the Arctic National Wildlife Refuge, and potential for new fracking operations on public land.

It’s also absurd to assert that news of these bonuses is anything more than savvy public relations. And that money that Apple is “bringing back” from overseas is merely an accounting move on paper—and an affirmation that it was evading U.S. taxation by shifting its income into foreign accounts. Apple’s move is not any sort of tribute to the brilliance of Trump’s deal making on taxes.

Corporations like ExxonMobil and Apple will continue to misrepresent their typical business operations as all due to the brilliance of Trump. The flattery will work. But that does not mean the Trump tax cuts are working.  

Good Riddance, Sam Brownback

The governor may be (finally) leaving Kansas, but his trickle-down legacy has saddled us all. 

(Gage Skidmore) Governor Sam Brownback of Kansas speaking at the 2017 Conservative Political Action Conference (CPAC) in National Harbor, Maryland. trickle-downers_35.jpg U ltimately, it was Mike Pence who bailed Kansas out from its economic disaster. The vice president had to cast two tie-breaking votes in the Senate Wednesday to get Sam Brownback, his fellow conservative evangelical and GOP right-winger, confirmed as President Trump’s ambassador at-large for religious freedom—a position Brownback was nominated for nearly a year ago. Brownback has now officially announced that he’s resigning his position as Kansas governor next Thursday. The former U.S. senator was first elected governor in 2010, spearheading the Tea Party backlash against Barack Obama. He promptly turned his own state into a Petri dish for radical trickle-down economics , promising it would prompt a “shot of adrenaline” into the Kansas economy. The reckless cuts to income and business taxes didn’t work, as I...

Bank of Whose America?

By eliminating a popular free checking account, Bank of America only reminds us that traditional banking is for everyone—except the poor.

AP Photo/Mark Lennihan
AP Photo/Mark Lennihan Customers use an ATM outside a Bank of America branch in New York trickle-downers_35.jpg B ank of America has recently faced a backlash over the elimination of a basic checking account that required no monthly fee or minimum balance. The eBanking account, introduced in 2010, allowed customers to waive the monthly fee if they only used digital banking services. In 2013, Bank of America began slowly moving depositors from the eBanking account to a standard account that came with a $12 monthly fee (waived if a person has a monthly direct deposit of at least $250 or $1,500 in the account). That process was just completed, and the free eBanking account is no more. The elimination of the basic, no-fee account has sparked anger from people who see the move as pushing low-income people away from traditional banking services. A Change.org petition currently has over 50,000 signatures for Bank of America to bring the account back. Low-income people do tend to use...

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