People Keep Blaming Corporations for our Current Economy

I keep reading people blaming “Giant Corporate America”, “Big Oil”, or just placing blanket blame on corporations in this country as a whole for the economic situation in which we find our country.

Usually the claim is that “these corporate giants don’t pay taxes and that is why we are in the economic situation in which we find ourselves.” That is just simply idiotic. Do you honestly think they would get away without paying taxes all together and stay out from under the microscope? Now of course, we have a couple of corporations that have recently been excused from paying taxes under the current administration, which is wrong, but that has been done selectively, not simply because they are “Big Corporate America” and I will touch on that at the end. Right now I am referring to the current economic condition in which we have been since mid 2008.

People also blame the Bush era tax cuts. Any economic infant knows that if you want to stimulate business that you reduce taxes and/or regulation. It spurs investment, reinvestment which in turn includes hiring help which also in turn increases tax revenue, etc. When you increase business, production is increased, hiring is needed to compensate, and you increase your prospect for increasing that momentum throughout the free market as you increase the amount of people with income with which they can purchase more products or services. These tax cuts were needed to stimulate the economy after the Dot.Com crashes, the events of 9/11 and the virtual stand still into which our economy fell as a result. The tax cuts proved their own point, it worked, and it was continuing to work. The problem did not come from the Bush era tax cuts either; they had absolutely nothing to do with what happened to our economy to cause it to be where it is now.

We are in the economic condition we are in now because of Community Reinvestment Act amendments throughout the 1990s and because in 1992, Congress passed the Federal Housing Enterprises Financial Safety and Soundness Act (GSE [Government Sponsored Enterprise] Act) which for the first time established that a proportion of each GSEs' (Fannie Mae and Freddie Mac) annual loan purchases come from low-income households and low-income and minority neighborhoods.

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Under the Clinton administration, federal regulators began using the act to combat “red-lining,” a practice by which banks loaned money to some communities but not to others, based on economic status. “No loan is exempt, no bank is immune,” warned then-Attorney General Janet Reno. “For those who thumb their nose at us, I promise vigorous enforcement.”

The Clinton-Reno threat of “vigorous enforcement” pushed banks to make the now infamous loans that many blame for the current meltdown, Richman said. “Banks, in order to not get in trouble with the regulators, had to make loans to people who shouldn’t have been getting mortgage loans.”

This threat combined with the government backing of Fannie and Freddie set the stage for the current uncertainty, because the “banks could just sell the loans off to Fannie or Freddie,” who could buy them with little regard for negative financial outcomes, Richman said.

http://www.cnsnews.com/public/content/article.aspx?RsrcID=36048

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The debt on these ‘High-Risk’ loans ballooned out of control as the recipients; very predictably, found themselves’ unable to repay these large variable rate loans. These loans are why we all saw these outrageously priced McMansions throughout the 1990’s that financially responsible people asked themselves, “How can people be affording these huge houses with these huge prices?”

Those in congress and on the board of the GSEs were repeatedly warned by oversight regulators of the impending result of the accumulating debt, but these members, such as Barney Frank, Maxine Waters, Franklin Rains, Gregory Meeks, etc. repeatedly rebuked the regulators. The regulators spokesmen were accused of lying, fabricating the data, and even so much as accusing them of being racist or as if they had it in for low-income citizens.

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The banks themselves are often given the blame for “predatory lending”, or placing people in these high-risk home loans, but the fact is that these banks were forced to make these loans by our own government.

Some of the same people in government, who were a part of forcing these banks to make these loans, are the very same people pointing the blame at the banks today. Barrack Obama himself was an attorney who sued banks, such as Citibank, on behalf of the organization ACORN in order to force them to implement these policies of lending to low-income, high risk individuals. The huge amount of debt that it forced these private banks to accumulate was just that great. So, great was the accumulation of debt that when congress and the white house were finally forcibly confronted with the scope of the failure that was at their doorsteps and which they could no longer deny, it was an emergency of catastrophic proportions. That is why they were so panicked and emphatic about the dire need to bail out the banks. Remember, these banks were promised the backing of the federal government through Fannie Mae and Freddie Mac should these loans ever fall through. Those in government who were responsible knew that they were at fault and it was time to move to action and work towards shifting the blame elsewhere.

You couple all this and years of a congress ham stringing our own energy resources in favor of energy technology that does not yet exist.  Insanely strangling the countries access to energy despite the fact that the raw resources, infrastructure to convert, and infrastructure to supply these resource already exists and is currently in place to the point that our economy has no choice but to continue it's downward trend.  It is self evident to anyone objective who has their eyes open.

So, as far as the usual claims made to place blame on corporate America for our economic situation, I point out this. Corporations do pay taxes; they have to by law just like everyone else. Of course if they are getting inside, sweetheart deals with the government such as is currently the case with GM or GE and that violates the law then prosecute the hell out of them. But if they are simply taking legal deductions that you just don't happen to like, but are not illegal. Then you should contact your congressman to voice you opposition to such deductions. Take action. Do something to have that changed instead of just using it as a boogieman at which to point your finger.

These accusations that “Big Bad Corporate America” is simply not paying taxes are a load of hot air. I'm sure it makes some people feel good to vent by pointing their finger at businesses, because these entrepreneurs are more successful than them, as well as to make blanket accusations based on nothing more than consensus of opinion. But simply pointing the blame at Corporations doesn't make it true.

The problem is not because taxes are too low. The problem is too many taxes, too much regulation, and too much interference by the government in private industry. Government has become too big and too involved. We will never fix the problems until we can admit to their true causes.

Government doesn't fix problems, Government is the problem.

- Ronald Reagan