Plutocracy Watch: Bushonomics vs. Free Market

NPR's Fresh Air yesterday interviewed David Cay Johnston about his new book, Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill). Cay Johnston's main thesis: ever since the Reagan years, the U.S. Federal Government has pursued an unstated policy of massive wealth redistribution from the poor and middle class to the already wealthy.

Madville Times readers will not be surprised; you've read here about such policies at the state and local level. Among the points Free Lunch adds to the argument that the plutocrats are destroying the free market:

1. George W. Bush amassed two-thirds of his wealth thanks to eminent domain and a tax increase that supported the building of a new stadium for the Texas Rangers that Bush and his buddies could have afforded to build with their own capital. Bush was able to sell the team for a profit (and dodge taxes by claiming $17 million in compensation as capital gains).
2. But stadiums help the community as a whole with economic development, you say? Bonk. Stadiums simply concentrate relatively fixed recreation spending in one place. Cay Johnston cites stats from the last baseball strike, during which time cities with sidelined major league baseball teams saw their restaurants, movie theaters, nightclubs, and video arcades enjoy big boosts in business. Tax deals for stadiums only benefit the wealthy corporate owners and drain revenue from operators of smaller venues.
3. Funneling money into big stadiums takes money away from other public works, like parks and youth programs, and is "intimately connected," Cay Johnston contends, to an increase in youth gang activity.
   
4. Big box stores often get to use their sales tax dollars to pay off the cost of the building (think of it as Tax Increment Financing with sales tax). The big box store's competitors and folks who never shop at the big box store basically subsidize the big box store, a clear violation of free market principles.
   
5. Wal-Mart gets deals like this for about a third of its stores, but it brings no increase to the total economic pie in a community; it just concentrates the wealth.
   
6. In its first three years as a publicly traded company, Cabela's made $223M in profit. It got subsidy deals worth $293M.
   
7. America has doubled its wealth since the 1980s, but incomes for most Americans have stagnated. More people lack health insurance and pension plans. The vast majority of Americans are either barely better off, no better off, or worse off than they were before Reagan.
8. The alarm industry gets $2 billion worth of free labor from taxpayers. The police spend $50 every time they check out a burglar alarm. 99% of burglar alarms are false. One out of eight police calls is a false burglar alarm, which takes time away from investigating actual studies. Plus, the average police call takes 30 minutes. The average burglary takes 5 minutes. The alarm industry plays on people's fears of crime, makes money by providing a simple device and monitoring service, then leaves it to taxpayers to pay for the actual police protection. The alarm industry makes a margin of 77% on its monitoring service.
   

Brian Doherty at Reason provides more details ["The Cost of a Free Lunch," 2007.12.28]. Reason also offers this 2006 article noting that economic development incentives for big corporations don't produce the results the corporations promise. The conclusion:

It’s unfair to give carpetbagging companies tax cuts while denying them to businesses that have invested in a community for generations—and are more likely to stay there as well. Many companies that seek subsidies pack up and leave once the public giveaways disappear. A Sony Music factory in Carrollton, Georgia, for example, closed in 2001, laying off 1,500 employees, after its tax benefits and other subsidies came to an end. Sony sought out other markets that would again allow it to avoid paying property and other taxes....

“If governors and legislators would just put away the states’ wallets, if all of them in every state would do that, you’d see little change in economic development,” [Atlanta economic development consultant J. Mac] Holladay predicts. “In fact, if every business got a fairer shake, you’d witness faster economic growth” [John F. Sugg, "The Folly of Southern Hospitality," Reason, May 2007].

The Madville Times loves the free market. It's too bad the Republicans don't believe in it any more.