Tuesday, July 21, 2009

The Great American Bubble Machine

The brilliant Mr. Taibbi knocks another one out of the park. If every american took The Crash Course and read Taibbi we might have a chance.

The Great American Bubble Machine by Matt Taibbi

teaser:

"And here's the real punch line. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008?

Fourteen million dollars.

That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion — yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.

How is this possible? According to Goldman's annual report, the low taxes are due in large part to changes in the bank's "geographic earnings mix." 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 twothirds of all corporations operating in the U.S. paid no taxes at all.

This should be a pitchforklevel outrage — but somehow, when Goldman released its post-bailout tax profile, hardly anyone said a word. One of the few to remark on the obscenity was Rep. Lloyd Doggett, a Democrat from Texas who serves on the House Ways and Means Committee. "With the right hand out begging for bailout money," he said, "the left is hiding it offshore."

2 comments:

  1. Taibbi's pieces are excellent, and get to the heart of things.

    They stand in stark contrast to recent showpiece essays by Malcolm Gladwell (New Yorker) and Michael Lewis (Vanity Fair) which each tries in its own way to exonerate the system and blame everything on "bad apples" like an insecure, bullying petty tyrant (Cassano at AIGFP) or the "overconfident" Jimmy Coyne at Bear and others like him.

    No, this is not about personalities, except insofar as the system itself both selects for those types and then reinforces and intensifies those traits.

    ReplyDelete
  2. Wow .....now this post has opened my eyes a litle more.....Well writen too. This brings to light how the same people that like the system to protect them do not want to help the system too when needed.

    ReplyDelete

 
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