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CORPORATE BAILOUTS ABUSE TAX PAYERS
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CORPORATE BAILOUTS ABUSE TAX PAYERS1. CORPORATE BAILOUTS CONSTITUTE RENT-SEEKING, WHICH UNDERMINES THE PUBLIC TRUST Robert W. McGee, Director, Center for Accounting, Auditing and Tax Studies at Florida International University, November 20, 2008.
It is a classic situation of rent-seeking, using the force of government to feather one’s own nest at the expense of the general public. This phenomenon has been discussed and analyzed elsewhere (Congleton, Hillman & Konrad, 2008; Lockard & Tullock, 2001; Tullock, 1987, 1989, 1993, 2005), so there is no need to do it here. All that needs to be said here is that corporate bailouts constitute rent seeking activity. They are a form of corporate welfare, a transfer of wealth from the lower and middle economic classes to the middle and upper economic classes. 2. BAILOUTS ARE UNETHICAL BECAUSE THEY STEAL TAXPAYER MONEY FOR CORPORATIONS Robert W. McGee, Director, Center for Accounting, Auditing and Tax Studies at Florida International University, November 20, 2008. “An Ethical Analysis of Corporate Bailouts,” SSRN Working Paper, Accessed 12-11-2008, Is it ethical for corporate executives to ask the government to bail out their company or industry? Corporate executives have a fiduciary duty to maximize shareholder wealth. But they have other moral duties that go beyond their duty as a corporate officer. They have a moral obligation not to steal. If they ask the government to do the stealing for them it does not change the ethics of the situation. If the government acts as their agent they do not insulate themselves from moral responsibility. Having the government extract millions or billions of dollars from the citizenry so that their employer can survive or prosper is not any different, in substance, from taking assets from the citizenry by force. 3. TAXPAYERS HAVE TO UNFAIRLY PAY THOUSANDS TO SUPPORT CORPORATE BAILOUTS Jay Bookman, Editorial Board, September 24, 2008. “Paulson proposal puts CEOs first, public last; Treasury boss' bailout plan reveals his bias toward Wall Street,” THE ATLANTA JOURNAL-CONSTITUTION, p. A16. If taxpayers are being required to cough up $2,300 for every man, woman and child in the country to finance this bailout, basic fairness requires that their direct interests be protected first. Fairness also requires that Wall Street be required to share in the pain. In fact, we already have a useful and longstanding precedent for that approach. Under federal law, if you carelessly start a forest fire or range fire, the government has the right to bill you for the cost of bringing that fire under control. There's no reason that same logic shouldn't apply to those on Wall Street who have also been playing with fire for far too long. 4. CORPORATE BAILOUTS DIRECTLY EXPLOIT TAXPAYERS AND LEAD TO WORSE PRACTICES Robert W. McGee, Director, Center for Accounting, Auditing and Tax Studies at Florida International University, November 20, 2008. “An Ethical Analysis of Corporate Bailouts,” SSRN Working Paper, Accessed 12-11-2008, Those who must pay are rationally ignorant, a term economists use to describe a situation where the cost of gaining the information is outweighed by the effort needed to acquire and use the information. If a bailout costs the average taxpayer a few hundred dollars, there will not be much incentive to hop on the next plane to Washington or other capital city and spend a few days and a few thousand dollars visiting their Congressional or Parliamentary representatives to protest the bailout, especially if the probability of success is low and if they do not even realize that the cost of the bailout is coming out of their pockets. But those who stand to gain or lose a lot – the people who work in the distressed industry and the people who own shares – have a tremendous incentive to lobby legislators. Thus, there is a built-in bias in favor of the special interests and against the general public. CORPORATE BAILOUTS ABUSE TAX PAYERS1. THE BAILOUT WILL COST EACH TAXPAYER ALMOST $24,000, WHICH COMPOUNDS POVERTY Lewis Lucas, Staff Writer, November 26, 2008. “Corporate bailouts will extend poverty,” PennLive.com. Bloomberg news this week revealed that the total taxpayer tab so far for the banking bailout is the financial equivalent of $24,000 for every man, woman and child in our country. This gargantuan and virtually oversight-free boondoggle is a shocking example of corporate welfare that would make Marie Antoinette blush. And all this at a time when the "little people" (taxpayers) are particularly vulnerable to this financial "adjustment." According to U.S. Department of Agriculture figures, 11.1 percent of taxpayers (12.6 million) are food insecure, meaning households were uncertain of having enough groceries to subsist. And these are 2007 figures; 2008 figures to be much worse. 2. THE GOVERNMENT MANIPULATES RHETORIC TO FOSTER SUPPORT FOR “BAILOUTS” Frank James, Staff Writer, October 1, 2008. “Bailout is now 'rescue plan',” THE SWAMP, Chris Lugo, Green Party of Tennessee candidate for US Senate, September 23, 2008. “Just Say No to Corporate Bailouts,” OpEdNews.com, Accessed 12-10-2008, The reality of the situation is that the American taxpayers are being held responsible for the irresponsible investment decisions and speculative actions of private corporations and private investors. When the economy was booming and Wall Street was raking in record profits on fraudulent business dealings taxpayers saw none of the benefits, but when it is time to save those same corporations and their investors from the brink of irrelevance then the taxpayers are expected to foot the bill. The end result is that the investors reap all of the profits when times are good but when times are bad the American taxpayers pay the bills. This time the price tag is too high. In addition to the $650 billion dollars the federal treasury is paying annually for the defense budget plus the costs of the war in Iraq, the general public is now expected to foot a trillion dollar bill based on speculation. 4. CORPORATE WELFARE IS UNETHICAL BECAUSE IT ABUSES GOVERNMENT POWERS TO TAX Robert W. McGee, Director, Center for Accounting, Auditing and Tax Studies at Florida International University, November 20, 2008. “An Ethical Analysis of Corporate Bailouts,” SSRN Working Paper, Accessed 12-11-2008, Is it ethical for politicians to use the force of government to subsidize an industry that is not in distress? Governments in practically all countries subsidize at least some industries some of the time, even industries that are not in distress. Oil companies receive special treatment at times even in years when they are earning record profits. Farmers in practically every developed western economy, as well as Japan, receive some kind of subsidy or protection from foreign competition. In all such cases, those helped represent special interests, a small minority of the general population. They are using government to feather their nests at the expense of the general population. Such abuse of the governmental process is inherently unfair and unethical whether one applies utilitarian ethics or rights theory. Download 343.42 Kb. Share with your friends:
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