Goldman Sachs issued a report recently claiming to debunk the fact that too-big-to-fail banks like itself get implicit taxpayer subsidies worth tens of billions of dollars a year.
But Goldman’s dissembling gets methodically disassembled by Bloomberg View’s Mark Whitehouse. It’s something to behold:
Before getting into the details, it’s important to note that the Goldman analysts are posing the question in an imprecise — and perhaps convenient — way. They’re asking whether big banks borrow at lower rates than small banks. The salient question is whether big banks, thanks to government support, are borrowing at rates lower than they otherwise would…
The Goldman analysts compare the yields on bonds issued by two groups of banks — the six largest U.S. institutions, and a few dozen smaller ones. They find that the bigger institutions’ cost of borrowing was, on average, 0.31 percentage point lower from 1999 through early 2013, but has lately been about 0.10 percentage point higher.
The analysis ignores a crucial distinction: The biggest banks are riskier because they use a lot more borrowed money, or leverage.
Read the whole thing.
— Michael Hiltzik of the Los Angeles Times is worth reading on why calls to end the corporate income tax—in part because companies like Apple dodge them— are just silly:
Unsurprisingly, about 40% of the profits of U.S. multinationals are reported in such countries as Bermuda, Ireland, Luxembourg and Switzerland, where taxes are minuscule or nonexistent for foreign firms, according to the Congressional Research Service. The phenomenon supposedly bolsters a common rationale you’ll hear for abolishing the corporate income tax, which is that it distorts corporate decision-making…
This argument is popular among economists. What it leaves out is that government in the real world requires revenue. Since all taxation imposes economic distortion in one way or another, the question boils down to how to do that in a fair, sensible and efficient way. Having a corporate income tax probably meets those requirements better than not having one…
So what should we do about loophole jockeys like Apple? The easiest remedy is to abolish the overseas income loophole: impose a single rate on all income earned by U.S. multinationals, with a credit for taxes paid to foreign countries.
— Dean Baker, writing about George Packer’s recent piece in The New Yorker on Silicon Valley, drops some common sense on the tech industry’s image machine and its enablers in the press and politics:
The piece basically shows that Silicon Valley fast lane is filled with self-absorbed twits who don’t have a clue about what the rest of the country looks like. So?
Seriously, who did we think was making big bucks in high tech, great philanthropists? As a general rule it is reasonable to assume that people who make lots of money in any industry, whether it finance, manufacturing, entertainment, or anything else, are primarily concerned with making money in that industry. I don’t know whether we should blame them for that fact, but we certainly should blame policy types who then imagine that these people’s success at money making gives them great insight into how we should run society.
Bill Gates got incredibly rich because he has sharp elbows and perhaps was willing to bend the law more than his competitors. The same applies to Mark Zuckerberg. That doesn’t mean that both are not smart and hard working people, but it does mean that they may not be the best people to determine our education policy or how best to lift the world’s poor out of poverty.
I can't help wondering if Michael Hiltzik (and Ryan Chittum, for that matter) take any deductions when settling up with the saintly, besieged IRS every year. f they do, how is that any less ethical that what Apple did, entirelylegally? And are calls for re-thinking corporate taxation any less 'silly' than calls by thinkers mired in the New Deal era to keep such taxes high in a world in which, thanks to the free movement of assets around the world as never before, 'capital' is increasingly difficult to define.
Sometimes I think left-wing ideologues continue to endorse ideas which fail when put into practice so that they can continue their careers as proponents of ideas which fail when put into practice. If those notions of the wonders of state power had been good ones, we wouldn't still be arguing about basic policy elements such as taxation and regulation. I'd still like to see a writer on the Left explain to me what the difference is, in the 21st century, between reactionary pro-statism with old social roots dating at least back to feudalism, and leftist politics. The state must prosper (check out income and unemployment figures in the DC metro area vs. those in the rest of the country) even if the nation suffers.
#1 Posted by Mark Richard, CJR on Fri 31 May 2013 at 12:48 PM
Hello Mark Richard,
I'm not quite sure if I can explain to you the difference between reactionary pro-statism with old social roots dating at least back to feudalism and leftist politics, in the 21 century. But I'd certainly like to try. So here goes: Reactionary pro-statism is generally shaken, not stirred, and some people like a slice of lime in it. (I'm not one of those people, though.) Old Social Roots is best done straight, no chaser. And as for feudalism, it's been several hundred years since that's been a popular item, but the generally accepted formula is half a bottle soured wine mixed with a fistful of uncured olives to give that classic medieval touch, back when people knew their place.
#2 Posted by Aaron Elstein, CJR on Fri 31 May 2013 at 02:23 PM
Well, Aaron, I guess Perky Insouciance is preferable to the other standard responses of our Mandarins, such as Heavy Irony and Huffy Indignation, when the sincerity of their motives gets a skeptical glance.
#3 Posted by Mark Richard, CJR on Sun 2 Jun 2013 at 09:04 PM