The Cafeteria is... Free?

David Cay Johnston explores the Corporate Free Lunch



When I was a freshman in business school back in 1977, we had a mandatory course called 'Management and Society'. Professor John A. Hornaday. Interesting class. One time we had Edsel Ford in as a guest speaker (yes, the very Edsel that the infamous lemon was named after). Someone asked him how long a Ford vehicle should be expected to reliably last. Edsel said, "If you are diligent about changing the oil every 2,000 miles, and rotate the tires a couple of times a year, there's no reason why your Ford shouldn't last for five years." Five years? I immediately thought of the family cars we'd tried to keep going forever with cheap plug and wire kits, glue, duct tape, jumper cables and bondo.

One day Hornaday asked us, "How many of you people have a positive attitude towards unions?" Out of about 35 students, I raised my hand with about 2 or 3 other guys. I had a feeling right then, that I just might be a fish out of water, and that this was going to be a very long four years for me...

Just the same, I remember learning in that class that a corporation was a public charter, set up for public purposes. In return for granting the partners and shareholders limited liability, a corporation was expected to provide something in return for the public good; for the commonweal. In addition, it was recognized at the time that:

- Corporations should be willing and ready to regulate their own behavior, in order to keep the government from having to step in and do so.

- Maximizing shareholder value (the stock price) is a corporate strategy, but it doesn't necessarily need to be the corporate strategy. A lot of that depends upon the cash position of the company, how much debt it's carrying, the long-range view of the market, the nature of the competition, the age of the company, potential for growth, etc...

Bear in mind, of course, that this was during the Carter administration. The Reagan Revolution was just in the process of picking up steam before it emerged triumphant by the time I graduated. In the years after that, we increasingly came to see that the only "stakeholders" who mattered at all were the shareholders, and apparently, the executive class at the very top of the corporations.

The inevitable deregulation, union-busting, and the shifting of the corporate tax burden onto you and me was one set of things to be expected, but was the plan to have new regulations set up that would funnel subsidized wealth into the hands of a priviliged few? This is the charge of Pulitzer-winning journalist David Cay Johnston in his book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense

There are lots of problems with the government. I've spent my life exposing all sorts of problems with government. But government is fundamentally essential. Government is what creates for us civilization. We created this country so that we could be free, so that we could pursue our lives the way that we want to pursue them. And wealth is a byproduct of that. But the government is being turned into a vehicle not to ensure our liberties and create a level playing field but instead into a vehicle to take from the many to enrich the few.

It takes great fortitude and moral conviction not to go and shop for the lower prices at the big box stores like Wal-Mart, Sam's Club, Costco, etc... and to not contribute to the downfall of mom-and-pop businesses around the country, but are we all aware of the extent to which corporations of this kind are actually subsidized, can pit towns against each other to win tax breaks, and even get license from the government to keep the sales tax they charge us?

Listen to Johnston on NPR's Fresh Air

Investigative reporter David Cay Johnston explores in his new book how in recent years, government subsidies and new regulations have quietly funneled money from the poor and the middle class to the rich and politically connected.

...or...

Read and watch Johnston on Democracy Now!

From Democracy Now...

DAVID CAY JOHNSTON: Between 1945 and the election of Ronald Reagan, we had a government that was focused on creating and nurturing the middle class. When I was a young man, I was able to go to college only because it was free. It didn’t matter that I didn’t have any money—my dad was a 100 percent disabled veteran, and I went to work when I was ten years old and full time since I was thirteen—because it was free.

Today, the cost of a college education, a state college education, is about $10,000 a year. The average income of the bottom half of taxpayers—that’s not families, that’s taxpayers—is about $15,000. Think you can go to college if two-thirds of your income would have to go to college? I don’t think so.

Well, Mr.—what Mr. Reagan did in 1980 was he asked a question that had a very powerful effect. He said, “Are you better off than you were four years ago?” And Americans said no, they weren’t. And they elected him to office, and they set in motion a major change in government policy, a change that I think has been perverted. I do not believe Reagan intended all of the things that have been done since he started this happening.

But I’m asking the question in Free Lunch: Are you better off than you were in 1980? And on the surface, America is much better off. The country is more than twice as wealthy in real terms as it was in 1980. Per person, adjusted for inflation, the economy now puts out $1.70 for every dollar that it put out in 1980. Those are absolutely tremendous economic numbers.

So how come we’re not all really well-off? Why is it one-in-seven families has filed bankruptcy in the last twenty-five years? Why is it people are so mired in debt that television ads are just full of debt relief and take on more debt ads, sometimes at 99 percent interest? Why is it that so many people don’t have health insurance and so many people no longer have a retirement plan?

AMY GOODMAN: Didn’t that wealth transfer massively begin—I mean, accelerate with Reagan?

DAVID CAY JOHNSTON: Oh, yes. No, that’s—I’m sorry, that’s exactly my point, Amy, is that what happened is that we put in place all sorts of new programs, many of which were never written about in the news media, that got no attention whatsoever. We created healthcare billionaires while making healthcare unavailable to one-in-seven Americans. And we did this with government money. We allowed people to buy public assets for, in some cases, a fraction of a penny on the dollar and then poured government money into them.

And, you know, our national myth that Ronald Reagan ran for office on was that there were all these welfare queen Cadillacs—welfare queens driving Cadillacs out there. I think there was, in fact, one scam artist who went to prison. But what’s really going on is welfare at the top, and way beyond what’s been reported in the news media as corporate welfare. We have built into the scaffolding of the new economy rules that funnel money to the top.

JUAN GONZALEZ: You also delve into this whole phenomena across America of the big box stores, the Targets and the Wal-Marts and the Kmarts. And obviously they’ve—to some, they at least offer cheaper goods, cheaper consumer goods. Your analysis of their impact?

DAVID CAY JOHNSTON: Well, first of all, they say they offer cheaper goods. I don’t accept that that’s necessarily true. But here’s what happens. And this is a good example of where the news media hasn’t done a good job. I have tons of news clips that say, oh, this new shopping mall is coming or a new Wal-Mart or a new Cabela’s store, and thanks to tax increment financing, this store is going to be built. Well, what is tax increment financing? I’ll tell you what it is. You go to the store with your goods, you pay for it at Wal-Mart, and there’s a very good chance that that store has made a deal with the government that the sales taxes you are required to pay, that government requires you to pay, never go to the government. Instead, those sales taxes are kept by Wal-Mart and used to pay the cost of the store. And typically in those deals, the store is tax exempt, just like a church.

Now, there are two ways that it’s important to think about this. One is, that means your kid’s schools, your police department, your library, your parks are not getting that money. And you’ll notice we keep saying we’re starved for money. We’re twice as wealthy as we were in 1980, but we’ve got to close hospitals, and we’ve got to close schools, and we don’t have money for all sorts of things like after-school programs, even though we’re twice as wealthy. The second thing to think about is, imagine that you own Amy Goodman’s or Juan’s department store across the street. You suddenly have to compete with people whom the government is giving a huge leg up on. You think you would go broke after a while? Well, in fact, you will.

And I tell about a man named Jim Weaknecht who owned a little store in the Poconos of Pennsylvania. He sold fishing tackle, hunting gear, stuff like that. And the way he made his living in his little tiny store, enough that he was able to have his wife stay at home and raise their three kids full time, was by charging less than a company called Cabela’s. Well, then Cabela’s came to town. This little city of 4,000 people made a deal to give Cabela’s $36 million to build a store. That’s more than the city budget for that town for ten years. It’s $8,000 for every man, woman, and child in that town to have this store. And even though he charged lower prices, he was pretty quickly run out of business.

That’s not market capitalism, which is what Ronald Reagan said he was going to bring us. He said, you know, government’s the problem, we need markets as a solution. Well, that’s not the market. That’s corporate socialism. And what we’ve gotten is corporate socialism for the politically connected rich—not all the rich, the politically connected rich—and market capitalism for everybody else.