In other words, the bank moved its money around so that most of its earnings took place in foreign countries with low tax rates. Thanks to our completely fucked corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to zero out its taxes. A GAO report, in fact, found that between 1998 and 2005, roughly two thirds of all corporations operating in the U.S. paid no taxes at all.
In fact, foreign earnings weren’t the issue. While Goldman could have helped itself by cooperating with Taibbi, it declined to talk to him. Still, it’s a slip.
Reached on the phone, Taibbi acknowledges that the low bill may not have come from offshoring after all. He notes that Congressman Lloyd Doggett was among those in the story attributing the tax bill to offshoring and that the tax question was one of those asked and unanswered by Goldman.
Taibbi’s critics might say that it’s ridiculous to point to a small factual error if the entire thesis of the story is preposterous.
But if you believe as I do that the argument is defensible—namely that Goldman/Wall Street contributions can be found in major crackups, and that Goldman is fairly singled out as Wall Street’s leader—it strikes me that there’s a difference between using facts selectively in a polemical piece (e.g. Goldman paid a tiny tax in 2008 without mentioning it might have paid a lot in other years) and mistakenly attributing a true outrage to the wrong cause.
There are other arguable nits—one fact-crammed passage seems to imply Goldman become a bank holding company to qualify for TARP when it would have qualified anyway. But the fact is, anyone who thinks these quibbles sink this 10,000-word piece is wrong.
The main and misunderstood strength of “Bubble Machine” is that Taibbi is taking a backward look at events that we already know were problems and/or catastrophes for millions of Americans, the financial system and the economy—the Tech Wreck, the Mortgage Wreck, last summer’s oil bubble, etc.—and looks at whether and how Goldman and Wall Street fit in. In each case, he finds that Goldman and Wall Street are there and seeks to explain how they contributed. To argue that their roles might be exaggerated is one thing. To argue that these events aren’t problems or these actors played no role is not credible.
The outrage that fuels the piece is not only welcome but strangely missing from the conventional business press, which, with few exceptions, has been numb to the moral dimension of the crisis.
The weakness of the piece is where others might find strength, its polemical nature and its hyperbole. When you call Goldman a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” you’re in a sense offering a big fat disclaimer—this piece is not to be taken literally and perhaps not even seriously. You make it easy for the Gasparinos of the world. When you say Goldman engineered various crises when you mean something perhaps more nuanced, that’s a problem. It’s not that you lose cognoscenti—that’s fine—but readers then are left to figure out where the case against Goldman ends and license begins. It doesn ‘t seem fair to them.
In the end, like the grandmother who worries whether something is “good for the Jews,” I worry about whether Taibbi-ism is good for accountability-oriented journalism in the financial space.
I think it most certainly will be. But in any case, mainstreamers dismiss him at their peril. Taibbi represents a challenge to the conventional business press’s increasingly narrow focus, its incrementalism, its concern with petty scoops at the expense of asking the big questions of the big institutions on its beat.
The lesson of Taibbi is that if conventional business journalism is unwilling or unable to step back and take in the sweep of this crisis, and the systemic distortions that underlie it, somebody else will.