Elizabeth Warren: The Corporate-Welfare Queen

[_ajax18]

She is bound to garner support from moderates (and probably some Racist Republicans who like the fact that she's blonde/blue.. lol).

[_EAllusion]

TARP provided a net-gain to the treasury. So if Warren's opposition to the bank bailouts is supposed to represent opposition to corporate welfare, then you've got positions in contradiction Kevin.

[_ajax18]

Corporate welfare works through subsidization of businesses and selective offering of contracts.

Like Obamaphones?

[_Kevin Graham]

Artificially cheap loans (and selective tax breaks) are the primary way corporate welfare operates. That's what TARP essentially was. Do you not understand what corporate welfare is? The government rarely goes out and just hands businesses bags of cash. Corporate welfare works through subsidization of businesses and selective offering of contracts.

Uh, yes I do understand what corporate welfare is, as you already know, Mr. "I'm Back to Being a Condescending Prick." I never said a damn word about bags of cash and I have no idea why anyone would infer that from what I said. I just don't see a low interest rates for loans given to some corporations, the same kind of corporate welfare as say, a 0% effective tax rate, or maybe a bill that will hurt their competition, or kill a regulation that will ultimately increase their profits. It is a corrupt system of quid pro quo.

I was simply pointing out that you didn't provide an example of corporate welfare that costs the taxpayers. It seems to me the reason she has the audacity to support the EX-IM bank is because it has been around for nearly a century and it has had a consistent track record of investing in domestic jobs growth while bringing in revenues, however modest those may be. Bailing out banks for a profit doesn't have that kind of track record, and we were all nervous as to whether or not it would even work to save the banks at all. That they survived and were able to pay back the money with interest was just gravy.

The reason these politicians generally give handouts to corporations is because they're getting something in return from their primary donors. They're effectively on their payroll (I wonder how many Republicans will be soon retiring to get million dollar salaries working for Citigroup!). You may remember that was the main reason I supported McCain back in 2008. He appeared to be the first politician who even acknowledged the problem of money controlling politics. But Warren is like McCain on steroids.

And yes, the bank bailouts eventually did produce a net gain for taxpayers, but that is beside the point. TARP was viewed as a necessity to ease a financial crisis and free up lending again; it wasn't a way to fatten the wallets of those working on their next campaign. In fact, some of these banks didn't even want the money they were forced to take!

Thanks to this jackass Republican from Kansas, banks are now free to engage in the same risky shenanigans that got us in that mess in the first place. And their gambling cost American taxpayers in more ways than just tax-subsidized bailouts. Home values plummeted, millions went bankrupt, loans became difficult to obtain, unemployment skyrocketed, etc.

Warren believes these banks should be broken up so there should never be such a thing as "too big to fail." But the same banks that were bailed out are roughly 40% BIGGER than they were before they were deemed "too big to fail" six years ago.

And Warren's indignant ranting is far more profound and nuanced than anything you'll find on one of ajax's Facebook memes. While she may support a job/revenue supporting government entity like the EX-IM bank, she also believes the government should treat all Americans the same way it treats corporations. For instance, her fight against the interest rates Americans have to pay for things like education. So at least she's not a hypocrite.

[_Kevin Graham]

Obamaphones ajax? I guess next you'll be talking about Warren's "$5.4 million dollar mansion"! Right? It is all over the Right Wing blogosphere, your primary source of information.

"While U.S. Sen. Elizabeth Warren sleeps in her $5 million mansion..." (FOX)

Reality:

"Warren’s house -- a clapboard Victorian built in 1890 -- was purchased in 1995 for $447,000...It’s worth noting that the use of the term "mansion" may be a bit of a stretch. The house has two bedrooms and three-and-a-half baths, and 3,728 square feet of living space ... almost half of the house’s $1.9 million in assessed value comes from the land, not the structure itself. And a key factor in the price growth likely stems from its location in a good school district, the easy access to fancy neighborhood amenities, and its close proximity to Harvard University, where Mann is a law professor, and where Warren taught before winning her Senate race." (Reality)

[_EAllusion]

I just don't see a low interest rates for loans given to some corporations, the same kind of corporate welfare as say, a 0% effective tax rate, or maybe a bill that will hurt their competition, or kill a regulation that will ultimately increase their profits. It is a corrupt system of quid pro quo.

Any interest rate beneath a market rate is free money to that business. Heck You can parlay low interest loan sources into direct capital investment that can be liquidated to repay the loan and skim the top. The interest rate is the cost of finance and it is of substantial benefit to have that cost be as low as possible. The beneficiary gains a a competitive advantage, and the larger the loan amount the larger the number that subsidy represents. It functions exactly as the other items you list. It makes the cost of doing business cheaper for politically connected companies to the detriment of their competitors.

[_EAllusion]

Think of it this way Kevin:

We've entered into one of Ajax's nightmares. The dirty Mexicans have taken over the presidency and using the legal principle that the president can do whatever he wants if he prefaces it by saying it is for national security, he has decided to give Mexicans a lift. Ajax has had this nightmare twice, and it is has played out two different ways. In scenario A, El Presidente has decreed that anyone who is an illegal immigrant will receive home loans they apply for from the government at a rate not to exceed 1% with loosened criteria for acceptance. In scenario B, El Presidente has decreed that illegal immigrant homes are not subject to property taxes.

Thinking about scenario A and B, which do you think is more valuable? Where does the value derive from?

[_Kevin Graham]

Any interest rate beneath a market rate is free money to that business.

Yes, a loan designed to benefit American corporations that will likely stabilize or increase its contribution to American jobs, thus repaying American taxpayers in a far more dimensional way that simply increasing revenues for the Treasury.

Are you saying the bank should make more money for the taxpayer by raising interest rates on those companies who, for all you know, wouldn't even be interested in those loans had interest rates not been so reduced? No, you're likely saying we should abolish the bank altogether and the end result to that is the taxpayer gets nothing at all.

If the bank is still making a profit for the Treasury, what's the crime to the taxpayer? Taxpayers are effectively investing in their own economy. You're quibbling over fairness in the global market whereas Warren's concerns are mainly domestic. It isn't her job to make sure Japanese companies creating Japanese jobs have absolute fairness in the global market. She wasn't elected for that.

It functions exactly as the other items you list

For the company receiving the money perhaps. But other examples of corporate welfare are comparable only to loans provided at negative interest rates since that money is never returned and forever lost. In those situations, the only payback goes to the individual legislators who helped facilitate the handout in the first place.

It makes the cost of doing business cheaper for politically connected companies to the detriment of their competitors.

Since it doesn't compete with private domestic lenders and those competitors you allude to are international, it isn't like the bank is giving a better interest rate to Lockheed and not to General Dynamics, both of which are American based corporations. Instead, it is giving discount loans to companies that are planning to buy from American based Boeing instead of Russia's Irkut. Most of the beneficiaries of the bank are all American corporations like Boeing, Bechtel, General Electric and Caterpillar.

How is any of this different than giving corporations a lower tax rate for staying domestic and not moving jobs overseas? It effectively creates an advantage for American companies that don't have to pay the same kinds of taxes as do their competitors is say, Brazil or Sweden. And what about giving tax breaks to "small businesses" so they can better compete in the market? That's something both sides have generally supported and the intent is the same: create more jobs for the economy. Are you against these measures as well?

To throw this example with EX-IM under the umbrella of corporate welfare in the context of what Warren opposes, is nothing short of ridiculous. Because in order for this to be meaningfully comparable, Warren would 1) need to be receiving substantial campaign contributions from EX-IM, 2) she must be reciprocating by pushing legislation written by EX-IM executives and 3) the taxpayer must lose on all counts.

In any event, not much has come from the Warren camp that would explain just how much she supports the bank, why or for how long. Robert Samuelson was against it once, but recently argued that he is now for it... at least for now. Perhaps Warren's reasons are similar:

As I said, I’ve favored curbing or eliminating the Ex-Im Bank in the past. I might again. But this is the wrong time for two reasons. First, in this fragile economic recovery, we shouldn’t jeopardize job creation. Ex-Im estimates that its programs helped support 205,000 jobs in 2013; whatever the actual figure, it’s a plus. Second, other countries provide export credit subsidies. The United States sometimes needs a counter. In 2012, China’s credit subsidies alone exceeded Ex-Im’s by almost 50 percent.

Overhauling Ex-Im belongs in a big budget bargain combining needed spending cutbacks and tax increases. My complaint about today’s debate is that it’s political theater. By exaggerating Ex-Im’s importance, the tea party types pretend they’re making a major assault on government spending when they’re not.

[_Kevin Graham]

Elizabeth Warren was right: The links between Citigroup and government run deep

Washington's version of Six Degrees of Kevin Bacon is much less exciting than everybody else's. It's called One Degree of Citigroup, and it's not much of a game since so many economic policymakers have worked at the banking behemoth. It's exactly the point Elizabeth Warren made in a big speech last week, expressing anger that Citigroup and other big banks were able to weaken a key Wall Street regulation in the new government spending bill.

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In many ways, however, this isn't One Degree of Citigroup. It's One Degree of Robert Rubin. After his stint as President Bill Clinton's Treasury secretary, Rubin decamped for the newly-created Citigroup, which formed after Congress passed a law ending the Depression-era prohibition on banks and securities firms from operating under the same roof. And then Rubin's long list of proteges followed. It's been enough to turn Citigroup into a kind of government-in-exile for Democratic policymakers, with current and past employees including current Treasury secretary Jack Lew, former Office Management and Budget chief Peter Orszag and current U.S. Trade Representative Mike Froman. (Former Treasury secretary Tim Geithner politely declined an inquiry about whether he'd be interested in joining the bank).

[_EAllusion]

Yes, a loan designed to benefit American corporations that will likely stabilize or increase its contribution to American jobs...

How is any of this different than giving corporations a lower tax rate for staying domestic and not moving jobs overseas?

Saying, "I favor corporate welfare for [politically connected] American companies," is quite different than saying, "I do not favor corporate welfare."

You just wrote a response that goes into a defense of the type of corporate welfare you favor. It goes without saying that virtually all corporate welfare is abstractedly defended as beneficial. What's important for this thread is it shifted from "Warren is not a corporate welfare queen!" to "Warren's corporate welfare programs are good and have the right motives!"

For the company receiving the money perhaps. But other examples of corporate welfare are comparable only to loans provided at negative interest rates since that money is never returned and forever lost. In those situations, the only payback goes to the individual legislators who helped facilitate the handout in the first place.

Subsidies through tax breaks can, and sometimes do, pay for themselves by taxing more growth at a lower rate. (Of course, what happens to competitor revenues isn't necessarily the same story.) The other two are revenue neutral until you examine the downstream effects of selective regulation.