Corporate Altruism?

June 20, 2011
Posted by Jay Livingston

I do not have a very sophisticated theory of the firm. I have never taken a business course, and, I must confess, I have never read Ronald Coase.* But I wonder how sophisticated a theory of the firm we need to be skeptical when corporations lobby for huge tax breaks saying that these will allow them to create jobs. Which is what they are doing. Corporations are asking us to buy a theory of corporate altruism.

US-based companies have bales of cash profits overseas, and they are now asking for huge tax breaks to “repatriate” all that glorious black ink. They will use it, they say, to create jobs here in the US.

Corporations and their lobbyists say the tax break could resuscitate the gasping recovery by inducing multinational corporations to inject $1 trillion or more into the economy, and they promoted the proposal as "the next stimulus" at a conference Wednesday in Washington, D.C.

"This is about creating jobs, expanding U.S. businesses and strengthening American companies," said Rep. Kevin Brady, R-Texas, who introduced such a measure this spring.

Really? How about this theory: Corporations are not in business to create jobs. They are in business to make money – money for the people who own the shares and money for the executives who run the show (and often own a hefty sackful of those shares or options). If they have to create jobs to do that, fine. But if they can do that without spending money creating jobs, even better.

We’ve been here before, so I guess you could classify this under “Fool me once . . . .” A front page article in the Times today (here), gives the details. In 2005, as part of the “American Job Creation Act,” the Bushies gave US corporations a similar “repatriation holiday” (yes, that’s what it’s called). And oh what a holiday celebration there was.

While the tax break lured 800 companies into bringing $312 billion back to the United States, 92 percent of that was used for dividends and stock buybacks, according to the nonpartisan National Bureau of Economic Research. The study concluded the program "did not increase domestic investment, employment or research and development."

The law forbade the use of repatriated funds directly for executive compensation or stock buybacks, but companies found plenty of ways around it. "Fungibility is one of my favorite words," [said Jay Schwartz, who in 2005 was head of Merck's international tax department].

Shareholders and executives made out very well, thank you. But none of those ex-pat dollars went to employee wages or to hiring. Some companies actually cut jobs.

A few years later, something similar happened in the bank bailout. The government gave the banks a ton of money with few strings attached. The bankers, rather than sending that money into the economy, used it first to shore up their own balance sheets and bonuses. (“Fool me once again. . . .”) Senators held hearings to register their shock and dismay at the bankers’ priorities and low level of altruism. And now, three years later, some of our lawmakers like Rep. Brady (quoted above) are still pushing that good old theory of corporate altruism.

* I’m not even sure how to pronounce his name.

Repo Men

June 19, 2011
Posted by Jay Livingston

“We will take America back.”

Rick Perry was here in New York Wednesday, and that was the rousing line he used to close his speech. It’s a frequent meme in Perry’s presidential campaign and on the right generally.

To talk about taking America back raises the question: whose country is this anyway? Since the late 19th century, the right wing has often put forth the idea that the US is their country and that it is being threatened if not actually destroyed by these other groups – more recently arrived, urban, ethnic, darker. In Sarah Palin’s famous phrase, these others are not “the real America.” (An earlier post on this is here.)

When Republicans are out of power – outvoted by these less real Americans – their rallying cry is, “Take back our country.” Our country, not theirs.

A comment on a recent post pointed out that “take back America” has also been used by the left, for example in the summer 2007 Take Back America Conference. I hadn’t remembered this conference, and I just didn’t recall the left as crying “take back” as regularly as does the right. Was I a victim of selective perception and confirmation bias?

Fortunately, Lexis-Nexis is less prone to these cognitive biases. To compare, I searched for the following phrases:*

Take back our country
Take our country back
Take back America

I used two time periods starting nearly two years before an election and ending on Nov. 6 after the election:

• Republicans in power (leading up to the Democratic victory of 2008)
• Democrats in power (leading up to the Republican victory of 2010)

Here’s the final tally

• Republicans (2009-2010) 2645
• Democrats (2007-2008) 1647

I also calculated the daily averages for calendar quarters.

(Click on the graph for a larger view.)

Up until about six months before the election, there’s no difference. But at the top of the stretch turn (or when it’s gun lap time, depending on your preference in sports), when the election comes into view, the Republicans swing into full take-back mode. In 2008, the Democrats had endured seven years of GOP/Bush rule, and by mid-2008, it was clear that things in the US were not going well under Bush. We might have expected the Democrats to pound the take-back theme. But they didn’t.**

But in 2010, with Obama in office for little more than a year, the Republicans were clamoring for their supporters to take America back, presumably from the Democratic usurpers.

-------------------------------------------

*I left out “Take America back” (sorry, Gov. Perry) because the citations were a mixed bag. Too many of them were “take America back to the 1930s” or similar phrases that had nothing to do with who the country rightly belonged to. These references occurred far less frequently than the other three phrases, but I wasn’t going to read through the several hundred of them in order to pick out the relevant ones – not for just one lousy blog post.

** True, the Democrats had won the Congressional election of 2006, but the “take-back” theme was not part of that election either. The comparable numbers for the last two periods on the graph are 1.4 and 0.9.

The Big Time

June 16, 2011
Posted by Jay Livingston

I’m now officially on the masthead at Sociological Images, which has a less select readership than does this blog. (By “less select,” I mean that they get 25,000 - 50,000 hits a day.) Most of my posts there will also be cross-posted here, but not all. My post there today was an updated recycling of a SocioBlog post of 3-4 years ago, so I didn’t bother to repost it here. It’s about urinals. If you’re interested, you can find it here.

Health and Voting

June 16, 2011
Posted by Jay Livingston

Maps showing county-level data:

• Change in life expectancy 1987-2007
• Change in the Presidential vote – 2004 - 2008 (blue indicates a shift to the Dems, brown a shift to the GOP)
  

I haven’t gotten the data and computed a measure of association, but the maps look very similar to my eye. Counties that swung right in 2008 are much more likely to have experienced a smaller increase (and in some cases a decrease) in life expectancy.

What’s going on here? Health care was a big issue in the 2008 election. It looks as though counties that had experienced the worst health outcomes in the previous two decades were voting to keep the medical status quo. Counties where life expectancy had increased were voting for a change.

The voting map is here. The life expectancy map is here, and the original study with interactive maps is here. Click on a county and find its life expectancy by race and sex, also short comparison lists of countries where LE is longer and where LE is shorter. The results are not encouraging. The title of the study is, “Falling behind: life expectancy in US counties from 2000 to 2007 in an international context.”

HT: Mark Kleiman