Working In These Times
Stranger Than Fiction: Republicans Rip ‘Vulture Capitalism,’ While Obama Praises ‘Insourcing’ Firms
With Republican presidential contenders angry about the “vulture capitalism” (as Rick Perry labeled it) practiced by Mitt Romney’s private equity firm Bain Capital, last week President Barack Obama—displaying what some pundits called exquisite timing—hailed a handful of U.S. corporations bringing a handful of jobs back to the United States.
But labor and progressives have good reason to ask hard questions about Obama’s glorification of “insourcing” jobs. Obama proposed tax incentives to encourage the return of jobs to the United States, ignoring the inconvenient fact that many of the nation’s largest corporations shipping jobs overseas already pay little or nothing in federal corporate taxes.
However,this reality was obscured by the propitious timing of the event celebrating the insourcing of jobs.
'FREE ENTERPRISE ON TRIAL'
While Romney’s Republican foes in the GOP primary race have dared to put “free enterprise on trial,” as the former private equity kingpin said, Obama has floated above the fray.
The president steered clear of directly criticizing the “job creators” who have been deified by Republicans, at least until the recent avalanche of opportunistic but correct assessments of job-destroying private-equity firms that derive profits from closing down plants, exporting jobs, selling off vital parts of corporations and looting workers’ pension funds. Bain’s record has been excoriated by the new defenders of the working class, Newt Gingrich and Perry.
Instead of lashing out at the ravages caused by ruthless and rootless corporations, last Wednesday Obama commended a group of corporations who are setting a positive model for their fellow CEOs by bringing jobs back to the United States. Obama proclaimed that the actions of these firms showed a growing trend toward “insourcing,” meaning U.S. firms bringing jobs back to their country.
Obama declared that this was the start of a badly-needed shift in corporate policy toward restoring American manufacturing. He noted that after a decade of decline in U.S. manufacturing jobs, the past two years have witnessed a growth in factory employment, a foundation on which the nation must build:
I don’t want America to be a nation that’s primarily known for financial speculation, and racking up debt and buying stuff from other nations. I want us to be known for making and selling products all over the world stamped with three proud words, ‘Made in America.'
Obama promised to promote this trend by rewarding corporations that return jobs to America with more favorable tax treatment, and by increasing taxes on corporations that continue to “outsource” or offshore” American jobs. From 2000 to 2010, U.S. corporations eliminated 2.9 million U.S. jobs while boosting employment by 2.4 million in foreign sites.
True, the flow of jobs being sent back to the United States are welcome, and President Obama has both a responsibility and a legitimate political need to encourage the growth of jobs here.
However, there are some unsettling elements to the “Insourcing” pitch by Obama:
SALUTING BIG OUTSOURCERS
Several of the corporations specifically saluted by Obama for their new trickle of U.S.-bound jobs have sent torrents of jobs to repressive low-wage nations overseas. As previously reported on this website, Milwaukee-based Master Lock, which shipped nearly 1,300 jobs to Mexico and China, has brought back only a mere 100 jobs to Milwaukee. Yet Obama declared incorrectly:
And today, for the first time in 15 years, Master Lock’s Milwaukee complex is running at full capacity.
We have heard Rick Perry and Newt Gingrich—as well as progressives like MSNBC TV host Lawrence O’Donnell—stress that Bain operates to maximize profits at the expense of workers’ jobs, family-sustaining wages and pensions. As one Bain executive, Marc Woplow admitted:
I never thought of what I do for a living as job creation. The primary goal of private equity is to create wealth for your investors.
Responding to Romney’s claims that Bain helped generate jobs, a pro-Gingrich consultant countered:
Show me where those jobs are. I would contend that they are Mexican jobs and Southeast Asian jobs.
Jumping into the fray Monday was an hysterical and witty TV ad released by political satirist/TV host Stephen Colbert's "super-PAC." Since Romney has insisted that "corporations are people," the ad follows this logic to even more absurd lengths by labeling "Mitt the Ripper" as a serial killer.
This whole episode shows that figures on the Right like Perry and Gingrich are now willing to play on widespread public anxiety over offshoring, which is felt by 86 percent of Americans, and to reinforce the sense that corporations have responsibilities more important than maximxing profits for their shareholders.
Meanwhile, President Obama soft-pedaled the idea of confronting CEOs with any moral claims and promoting the notion that corporate charters should enforce consideration of broader social considerations such as domestic employment, fair labor practices, and environmental sustainability. Instead, he suggested that the CEOs on stage with him properly recognize that their primary mission was generating profits for stockholders, but were also astutely seeing improved opportunities at home.
In Obama's formulation, corporate responsibility to workers and the nation is secondary and amorphous relative to CEOs' specific and binding obligation to maximum profits to stockholders:
All these folks onstage, they are businesspeople first [emphasis added], and they’re looking at the bottom line. But they also feel good about the fact that they’re restoring hope and creating jobs here in the United States. And that’s part of the responsibility that comes with being a leader in America—a responsibility not just to the shareholders or the stakeholders, but to the country that made all this incredible wealth and opportunity possible
CAN CORPORATE TAXES BE CUT MORE?
Obama outlined a vague and potentially troubling plan for rewarding corporations that move jobs back to the United States and removing tax incentives for overseas production:
…in the next few weeks, we’re also going to put forward new tax proposals that reward companies that choose to bring jobs home and invest in America. And we’re going to eliminate tax breaks for companies that are moving jobs overseas.
But how can these proposed tax rewards have any impact? The effective tax rate of U.S. corporations is already among the very lowest among advanced nations. For example, huge job out-sourcer General Electric, which earned $14.2 billion in profits, was among many corporations that in recent years paid nothing in federal income taxes.
So how can the government possibly reward the corporation that already has everything?
More fundamentally, how does the nation move toward more economic equality if cororations continue to esacape a fair share of taxes and pass the burden on to working families facied with sliding wages?
FREE TRADE DEALS MEAN MORE OFFSHORING
Finally, Obama proudly and perversely took credit for new “free trade agreements" with South Korea, Panama and Colombia, which together further undermine workers, the U.S. industrial base, and the ability of the US government to fairly tax corporations and the super-rich. These agreements modeled on the North American Free Trade Agreement will continue to encourage the export of jobs.
Overall, the strategy behind Obama’s plan for insourcing remains mystifying, says Frank Emspak, professor emeritus of the School for Workers at the University of Wisconsin and a long-time expert on industrial restructuring.
“I really don’t see what it is,” Emspak told In These Times. ”The only thing I saw was tax cuts to encourage manufacturing, and that ‘s the least effective way to encourage job creation in the U.S. We need to generate more effective demand, by raising real wages. Second, we need to restrict capital mobility to prevent the shift of more jobs and capital out of the U.S., undermining our productive base. I didn’t see any of that.”
The situation that global manufacturers currently face—including rising costs of transportation and restive Chinese workers winning a 30-percent wage increase in the auto parts industry—is slowing down U.S. CEOs' headlong rush to shift production overseas and feeding small growth in U.S. manufacturing, Emspak noted.
By exaggerating the modest (but welcome) insourcing trend, Obama—as well as Democrats and progressives nervous about offering any critical feedback on the president’s proposals in an election year—are bypassing a chance to put forth the comprehensive industrial plan so desperately needed to shore up the nation’s disintegrating productive base, Emspak argues.
“The Democrats would actually have some room right now to rebuild the manufacturing economy and enunciate a program,” Emspak said. “Bu I don’t even see the liberals in Congress talking about it.”