American Civility

Perhaps that is what Dick the butcher would intend today in a modern day admonition to rebel  Jack Cade in Shakespeare’s Henry VI.  The LA Times reports that bank lobbying increased 12% from 2008 to 2009 even as banks were receiving taxpayer funds that kept them alive long enough to wail against caps on bonuses and new taxes on their profits and capital.¹  There is something wrong here.

The web site Open Secrets, a 25 year old organization that tracks corporate lobbying, states there are 14,000 lobbyists in Washington spending $3.5 billion to influence Congress.²  Among the largest lobbyists are GE, AT&T, Exxon Mobil, Boeing, GM and Freddie Mac (both now part of the Federal group of companies), Verizon, Fedex, BP (formerly British Petroleum), Altria (the largest manufacturer of tobacco products), the American Medical Association, the association of pharmaceutical companies, and of course AARP and the U.S. Chamber of Commerce representing retirees and businesses respectively.  By industry, pharmaceutical and insurance lead the list.  The top two industry sectors that employed lobbyists are finance, insurance and real estate, and health.

The connections and causalities are apparent.  It is no accident we end up with crises in industries more apt to hire lobbyists, then are forced to swallow pork-ladened bills that are largely designed by lobbyists as Congress pretends it is correcting the original sources of the problem.

The problem is just not with lobbying.  There is a decadent relationship between government and large corporations that must be redressed.  The Cato Institute wrote a comprehensive study in 2007 enumerating $92 billion in “corporate welfare”, direct and indirect subsidies given to major corporations.³  About $24 billion taxpayer dollars (or now, Chinese credit) goes to farms, which subsidy has the unintended effect of putting a price floor on corn, for example, which price is further distorted when the government subsidizes ethanol.  The government also doles out subsidies to companies who clearly do not need it.  Cato cites IBM, General Electric, Honeywell, Xerox, and Dow Chemical among the largest beneficiaries of taxpayer largess under the pretext of technology research.  This is industrial policy at its nadir, and both political parties are at fault for continuing to fund it.

Corporations were “artificial persons” in the eyes of state law, where they are chartered, until the Supreme Court decided in Santa Clara County vs. Southern Pacific Railroad (1866) that they are protected as are natural persons under the “equal protection” clause of the Fourteenth Amendment.⁴  Because that case involved the state taxation of a business, few question its validity today.  In exchange for the right to tax corporations, the American voter is obliged to tolerate lobbying by these “juristic persons”, as the career politician has learned to benefit financially and politically from them.

Dissenters to that interpretation of the Santa Clara County case are prominent and represent both sides of the liberal-conservative debate.  In 1938 Justice Hugo Black remarked “I do not believe the word 'person' in the Fourteenth Amendment includes corporations … Neither the history nor the language of the Fourteenth Amendment justifies the belief that corporations are included within its protection.”⁵  More recently, economist Robert Reich writing in Supercapitalism (Random House, 2007), posits that corporations should not be treated as natural persons.  He argues for proscribing corporation lobbying and criminal liability in exchange for ending the corporate income tax—in effect reversing Santa Clara. 

Reich’s proposal has an economic purpose too:  “In reality, the corporate income tax is paid—indirectly—by the company’s consumers, shareholders, and employees … Abolishing the corporate income tax would … help capital markets work better.”  In this matter, Reich joins Milton Friedman who argued for an end to the double taxation of corporate profits in Capitalism and Freedom (University of Chicago Press, 1962).

This neat trade-off would, in a single stroke, contemporaneously attract more capital to our shores and end the adulteration of legislation that subverts the interests and freedom of individual, natural citizens.

In this matter we ought to heed the words of Thomas Jefferson⁶, “I hope we shall... crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.”

____________

[1] Popper, Nathaniel. “Banks step up spending on lobbying to fight proposed stiffer regulations”, LA Times, 16 February 2010, http://articles.latimes.com/2010/feb/16/business/la-fi-bank-lobbying16-2010feb16

[2] Open Secrets: http://www.opensecrets.org/index.php

[3] Slivinski, Stephen. “The Corporate Welfare State: How the Federal Government Subsidizes U.S. Businesses.” The Cato Institute, 14 May 2007, http://www.cato.org/pub_display.php?pub_id=8230

[4] Fourteenth Amendment. Section 1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

[5] Connecticut General Life Ins. Co. v. Johnson, 303 U.S. 77 (1938)

[6] Thomas Jefferson to George Logan, 1816.