David Cay Johnston on the Pillaging of the Public Treasury

TRANSCRIPT:

PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I’m Paul Jay in Baltimore, and we’re continuing our Reality Asserts Itself series with David Cay Johnston.

David writes in an Al Jazeera America piece—.

Talking about the shocking numbers behind corporate welfare, David Cay Johnston writes,

“Such burdens are especially hard on the poor. The bottom fifth of households in all but one state pay a larger share of their income in state and local taxes than the top 1 percent of earners. This means that corporate welfare effectively redistributes from the poor to those rich enough to own corporate stock.

Now joining us is David Cay Johnston.

Thanks for joining us again, David.

DAVID CAY JOHNSTON, PULITZER PRIZE-WINNING INVESTIGATIVE REPORTER: Glad to be here.

JAY: And David—.

JAY: David, quickly, is a bestselling author, an investigative journalist. He’s a Pulitzer-prize-winning journalist. And his recent books are: The Fine Print: How Big Companies Use “Plain English” to Rob You Blind; he’s got a new book coming out, Divided: The Perils of Our Growing Inequality. He writes for Al Jazeera America, Tax Analysts, and he’s got a weekly piece for Newsweek.

So we’re picking up where we left off. That quote is at the heart of a lot of what you’re working on right now, that far from redistributing wealth from the middle class, the working class, the rich to the poor, it’s quite the other way around.

JOHNSTON: That’s right. So let me start with the bottom end here, Social Security, alright? That’s described all the time by the right in America as a redistribution program. No, it’s a time transfer program. I worked since I was 13 years old and paid Social Security taxes so that in a couple of years I’ll start collecting my Social Security, and it will be paid for by workers who came after me. That isn’t a redistribution of any significant amount. There is a little bit of downward redistribution ’cause low-paid workers like my brother in manual labor get relatively more than me, somebody who’s paid the top Social Security tax every year. But that’s a minor amount of money. And it’s a time transfer.

But what we’re doing with these subsidies and tax policies is we literally are doing what the Bible calls evil: we are taking from the widow and the poor and giving to the rich. So, Boeing—this new report I wrote about in my Al Jazeera column—has got over $13 billion of welfare from state and local governments. And this isn’t the government saying, well, we want research done on better jets; we’ll give you some money. No, no, no. We’re talking about you don’t pay property tax, we’ll give you free land, we’ll build a building for you. Walmart: 90 percent of Walmart distribution centers are built with your tax dollars, and so are, it appears, about a third of Walmart stores. Home Depot, Lowe’s, shopping centers, Cabela’s, they all build their stores with your tax dollars that they take from the local schools and the police and the fire department. So my book Free Lunch explains all of this.

JAY: Okay. The counterargument’s going to be they bring jobs.

JOHNSTON: Well, bring jobs, but go do it with your own capital. You know, I started a business with my son and nobody gave us any money. Nobody came and said, oh, hey, we’ll give you $1 million. Boy, I could have done a really great business instead of one with 25 employees if I’d had millions of dollars of subsidies.

Why can’t these companies stand up on their own two feet and earn their way in the world? I thought we lived in a country of capitalism and markets. This is corporate socialism. And in corporate socialism what you do is you privatize the profits and you socialize the losses and the costs. So, right now Bloomberg business news calculates—and I’ve looked at the numbers, and I think they’re in the right ballpark if not pretty much right on the head—we are subsidizing the too-big-to-fail banks to the tune of $83 billion a year. That is more than the cost of the food stamp program in a country where statistically every 52nd person you meet has no income except food stamps—and the Republicans want to cut that. Boeing is getting 12 percent of all the state and local welfare in this country, from state—you know, I mean, 12 percent for one company? We are giving money to Deutsche Bank, a German bank.

Twenty-nine hundred American companies at least—and, you know, unlike other things, we don’t have great statistics on this. You have to go dig out every deal and find the records. Well, at least 2,900 large companies in America, including many foreign companies, get to keep the state income taxes withheld from their workers’ paychecks. The worker has the state income taxes withheld: you get your paycheck, you made x dollars, and this, this, this, this gets sliced off. The company doesn’t turn over the state income taxes. The state lets them keep it. There are hundreds of thousands of workers covered by this.

JAY: And the rationale for that is?

JOHNSTON: They’re creating jobs. And the workers don’t know this, because the law treats the workers as having paid the tax because it was withheld from their check.

JAY: This is like paying a fee to have your own job.

JOHNSTON: Oh, it’s being taxed by the boss. And I first wrote about this three years ago, exposed it about three years ago, and the audiences have the same reaction you do when I give talks, you know? And I say, I know it’s really hard to believe. It sounds absolutely impossible to believe. And go read my pieces, and I’ve got the actual statutes that were passed. This is crazy. And we aren’t just giving it to American companies. There’s a communist Chinese bank from Beijing that gets this deal. We give it to the Swiss and European banks that have been instrumental in setting up the tax shelters that cheat all the rest of us.

JAY: You mean giving bailout money.

JOHNSTON: Oh, not only bailout money. No, no, no. We let them keep the state income taxes where they have American banking operations. Rupert Murdoch gets a huge deal in New Jersey. (By the way, the biggest place that this is done is New Jersey, where Chris Christie is governor.) And people don’t know about it. They have no idea.

JAY: Just, again, to say the biggest—this is allowing companies to keep state taxes that are coming from workers’ wages. New Jersey.

JOHNSTON: That’s right. And then the workers don’t know. The only company I know of that’s told the workers about it is General Electric in Ohio.

And here’s what it does to your profits. General Electric made one of these deals in Ohio. It’s going to invest $100 million to modernize one of its factories that builds jet engines and stuff like that. Well, let’s assume the annual profits—92 percent of the money will come from the taxpayers. They’re going to put up 8 percent of GE’s money for the refurbishing of the factory. Well, if the factory makes an 8 percent profit on the total investment, that means that they make 100 percent annual profit. They put up 8 percent, they earn 8 percent a year. No wonder they’re fabulously rich.

And meanwhile what do you and I get told? Our children can’t have better schools; we can’t afford it. We’re going to have to get rid of police and firefighters. We’ll have to close the library. Why? Well, because we need to build a new store for Walmart, we need to build a new store for Lowe’s. There’s actually, by the way, a Lowe’s store built on one of these deals where at the end of the period where they get to rent the place for $1 a year came, ’cause the bonds for it were paid off with the taxpayers, you know what Lowe’s did? They closed the store on a weekend, they loaded everything up in a truck, and they drove it over to the next town line, where they got the same deal at another town so they could have the store for free.

JAY: So this is the way these big companies are playing states off against each other, playing cities off against each other.

JOHNSTON: And picking your pocket by taking your tax dollars and using them for private gain instead of public purposes.

JAY: Now, part of this is such concentrated wealth comes with concentrated political power.

JOHNSTON: Oh, yes. Yes.

JAY: I mean, the politicians are not pushing back in this. They are getting their campaigns financed by these people.

JOHNSTON: They can’t, because first of all, if you don’t play ball, they’ll run somebody against you. I had some very wealthy people in Rochester, New York, where I live—I have neighbors around me, ’cause housing is so cheap, who own their own jets, okay? And I made the statement one night a number of years ago, when people were sitting in my backyard, that, you know, really rich people can just push speed-dial and get their congressman on the phone, whereupon one of my guests reached in, flipped his phone open, pushed one button, and was talking to our congressperson. Do you think you could get a meeting if you just call up and say, hi, I’m a constituent, I’d like to talk to my Congressman? Just try.

JAY: No, I was in the office of a television magnate in Canada who owns a bunch of TV stations. Just to prove how powerful he was to me, he picked up the phone and called the prime minister and got him on the phone.

JOHNSTON: Right.

JAY: So, concentrated ownership, concentrated political power, your father grew up thinking this is fixable. You’re an investigative journalist with a sense of outrage that if I investigate and I reveal, this is going to get fixed. Do you still do believe this is fixable?

JOHNSTON: Two parts to that, and I’ll try to be as brief as I can.

JAY: And what I mean by fixable: within the framework of—

JOHNSTON: No, without a revolution.

JAY: —without changing how things are owned and who has power.

JOHNSTON: When I wrote exposés in the ’60s, ’70s, and the ’80s, the very early ones I did were a quarter of a million dollars in today’s money about some local government thing. Things happened. People got fired. Contracts got changed. I have exposed in the last 20 years numerous billion-dollar, multibillion-dollar ripoffs. Nothing happened in all but one of those cases. Congress has done nothing. I keep telling people, you’re getting ripped off here for so many billion dollars. Nothing happens.

On the one hand, that makes be pessimistic. Alright? But I try to keep this perspective in mind. We have a constitution that enshrines the ownership of human beings. We got rid of slavery. It took 638,000 people dying, including about 40,000 black Americans, but we got rid of slavery. A hundred and twenty years ago, when the movement to end child labor—.

JAY: Can I just say that it took a civil war.

JOHNSTON: Yes. Well, that’s the six hundred and some thousand people who died. But we did get rid of it.

When the movement to stop child labor came along 120 years ago, there were ministers, the Jerry Falwells and Pat Robertsons of the day, who went around saying, those who want child labor laws are the agents of the devil, for it is God’s plan that these children should be working in these factories. There is no evil that I can’t find you somewhere a supposedly religious person will support. We got child labor laws. We didn’t have any violence over that. We had the Triangle Shirtwaist factory, where these hundred young women leaped to their deaths after they were locked in by their employer—who, by the way, continued after that to do the same thing. We got workers compensation laws. Women got back the right to vote in this country. We got environmental laws signed by a Republican president, Richard Nixon. We can fix any problem we have. If you don’t believe that, then you don’t believe in the Constitution, which sets forth the six noble purposes of this country.

The problem is we have to decide we’re going to fix it. The people who wanted to get rid of slavery, they were willing to go to war—and ultimately did—over it. The people who fought for unions, who sat down in the Flint, Michigan, plant, knew and were told General Motors may machine-gun you the way the Rockefellers machine-gunned women and children in Colorado in—I think it was 1905. They took that risk. We can fix this problem of the government creating this oligarchical class that is not accountable, that is trying to get us to pay for all the public services that make them rich, but we have to choose to do it. We have to wake up. We have to say, everybody should vote. Nobody should stand in line for more than a couple of minutes to vote. We should not have gerrymandered districts where you put everybody who’s black or everybody who’s a union member in a district so that you concentrate their voting power and dilute the Congress. And remember, the current Congress is controlled by the Republicans, and yet the Democrats got—I think it was 1.4 million more votes than the Republicans. We have to be citizens.

And if we don’t want to be citizens, I can tell you where we’re going to go. You’re going to be worse and worse off economically unless you are in the servant class to the rich—doctors, lawyers, accountants, managers of enterprises. Your children are going to be worse off. Your public health is going to deteriorate. But the really wealthy are going to do just great, because you’re going to be subsidizing them.

JAY: I’m assuming one mostly can do this through electoral means.

JOHNSTON: Oh. Yeah.

JAY: No, let me finish my sentence. But don’t you have to change how things are owned? If you have a handful of billionaires owning the commanding heights of the economy and a politics now dominated by their money, you have to get to where the power is. The power comes from that ownership. As we talked before about how estate taxes are virtually nonexistent, you’re talking now generation after generation of billionaires who essentially control political life.

JOHNSTON: Well, the founding fathers actually put forth a solution for this. One of the first laws Congress passed—and I have a piece in Newsweek about this, “Why Thomas Jefferson Favored Profit Sharing”. One of the first laws they passed in 1792 was a subsidy law for the cod fishing industry, which the British Navy had been harassing. In order to get the subsidy, you had to have a contract with your sailors ahead of time—sort of sounds like modern collective bargaining. And secondly, five-eighths of the subsidy went to the fishermen and only three-eighths to the owners. If we simply got back rules that allowed workers to organize and have unions the way all of our economic competitors do—in Germany, executives [incompr.] by golly, that would make a change.

JAY: I did a Reality Asserts Itself with Ralph Nader, and I asked him, do you think you could pass any of those reforms that you were able to do—you know, from seatbelts to the EPA and such—could you do any of that now? And his answer was no. He says the politics is so dominated by this concentrated wealth that you can’t make those kinds of reforms. Like, what I’m getting at is—.

JOHNSTON: Listen, I agree. You know, Ralph—.

JAY: Well, let me ask you a concrete question, like, specific, like, which Nader supports. To start with, for example, if you want to take on the power of finance, which is so dominant, is there any way to do that other than some kind of publicly owned banking?

JOHNSTON: Well, it’d be a good idea to have publicly owned banking. But, sure, the government first of all should be prosecuting the crimes that have been committed. And I have written in Newsweek several times about Eric Holder—

JAY: But they won’t.

JOHNSTON: —fear of this. Well, Schneiderman can. He’s the attorney general of New York.

But, look, right now it would be extremely difficult to do these things today, but the answer to that is people have to become active and organized and their numbers will overcome these problems. If we had one of the things the founding fathers wanted, everybody to be a capitalist, to be either a farmer, or to at least own your own tools if you were a worker, to not be entirely wage-dependent—it’s why in New Jersey they call the county supervisors freeholders. If we went back to that idea, we would find a much different country if all workers were paid partly in securities. That’s why these executives are so rich. It’s all the stock that’s given to them. And it should be widely distributed.

JAY: But that horse has left the barn.

JOHNSTON: No it hasn’t. No. No, no. We can—no. We can change anything we want to change. The problem is we don’t choose to. And I’m sorry if I sound like I’m telling a bunch of ordinary Americans it’s your fault, but you know what? It’s your fault. You elected these people. You chose these people who are destroying your families, destroying your life, who are making the lives of your future generations worse off. When people come to realize that—and all the polls indicate that that’s changing. You know, a majority of Republicans now favor restoring—not raising, restoring the minimum wage to where it was when I was a minimum-wage worker in the ’60s. A majority of Republicans now favor a whole group of things, like progressive tax policies.

We need to simply get back to doing the work. But when we spend our time, instead of doing the hard work of making a change, watching Dancing with the Stars, going to the baseball game, saying, oh, there’s nothing I can do about it, then we don’t get anywhere. You know. Man up, be a citizen, get involved, and we can change this.

JAY: Okay. Thanks for joining us.

JOHNSTON: Thank you.

JAY: And thank you for joining us on Reality Asserts Itself on The Real News Network.