Several articles and revelations over the past few months have raised a curious relationship between President Obama, Democratic politicians, and General Electric. It could all be a coincidence, but it also could be a classic example of the cozy relationship between powerful interests in business and government getting together. Woodrow Wilson recognized this type of incestuous political relationship almost one hundred years ago: “The government, which was designed for the people, has got into the hands of bosses and their employees, the special interests. An invisible empire has been set up above the forms of democracy.”
Did Wilson get it right? You decide, coincidence or political incest:
– Before going into the first point, remember that the Democrats controlled both houses of Congress from 2007 through 2010 and controlled the White House for the past two and a half years. Thus, no one can totally blame Bush for the following situations.
A few months ago news reports were all a flutter when it was revealed that General Electric had over $14 billion in worldwide profits and over $5.1 billion in domestic earnings in 2010 but had not paid any Federal income taxes. In fact, not only did GE not pay any income taxes, the Federal government, via the income tax laws and process, actually gave GE a $3.2 billion dollar tax refund. This happened when Democrats were in charge of just about any function of government.
The Democrats almost made GE pay some taxes. “Active Financing” is when a company like GE makes a loan overseas and generates interest income. Under current tax laws, all of that revenue is tax free. A few years ago, Congress was looking to close this loophole, an action that was supported by Charles Rangel, then the chairman of the House Ways and Means committee. His committee had the primary responsibility for writing and revising the tax code.
One day, Rangel was fully supportive of closing the loophole and forcing overseas American financing companies to pay taxes on the active financing revenue. However, almost overnight, Rangel reversed his position and as chairman of the committee was able to block any attempt to close the loophole, a loophole that would have generated billions of dollars a year for the Treasury. Turns out a GE foundation shortly afterwards donated $30 million to New York City schools, of which $11 million went to schools in Charles Rangel’s Congressional district.
Thus, GE avoids possibly billions in taxes over the years while Democrat Rangel gets a one time gift worth only millions for his district. Coincidence or incest?
– It is no secret that the economic policies of this administration and the Democratic Party controlled Congress have been a disaster. High unemployment persists, private sector job growth is anemic, economic growth is low, and the national debt skyrockets. The President is desperate to find a way to generate job growth. What does he do?
He calls Jeff Immelt, currently the CEO of General Electric and appoints him chairman of the newly formed Presidential Council on Jobs and Competitiveness, a group given the task of generating ideas for job growth. Shortly thereafter, rumors start in Washington that Immelt is going to leave General Electric and take a high ranking job with the Obama administration. Incest or coincidence?
– In an article written by Charles Kadiec of Forbes, which was summarized in the May 20, 2011 issue of The Week magazine, we find another Obama/GE tryst. The article was titled “Obama Can’t Hide His Lust For Power.” According to Mr. Kadiec, Jeff Immelt of CEO of General Electric (you remember him from above), was a major contributor to Obama’s 2008 Presidential campaign. He was also one of the first American CEOs to ask the administration for a financial bailout from TARP.
However, while the administration capped executive bonuses at other financial institutions and companies that received TARP bail out funds, the Obama administration placed no such limits on GE’s executive compensation processes. Incest or coincidence?
– The next example comes from the March 16, 2011 issue of Forbes magazine. In an article titled, “Chevy Volt: The Car From Atlas Shrugged Motors – Who Is Going To buy All These Cars” and it was written by Patrick Michaels. Mr. Michaels was not too kind in his review of the Volt concept, General Motors’ all electric car:
* The Volt will cost over $40,000 so GM successfully lobbied the administration and the political class to give Volt buyers a $7,500 federal rebate for buying a GM Volt.
* A Volt model failed to start when it was to be demonstrated at the 2010 Detroit Auto Show, not a good start.
* The expected mileage using a fully charged Volt battery had been continuously revised downward, so much now that it is expected to have only a 25 to 50 mile range on electric power only.
* Consumer Reports ran a series of tests on the Volt and they estimated that the electric motor range is only 25 miles or so and it gets that much only because the Volt heating system is especially weak since running the heater drains the battery even quicker. The article questions how much lower the mileage will go in hot weather and the car’s air conditioning system is working.
* The Volt requires premium fuel so any gas savings from using the electric motor is at least partially offset by the more expensive use of premium gas.
* The Volt has been billed as an electric car that has a small gas motor that kicks in when the electric battery runs out of power. However, according to the article, the premium gas engine also kicks in when the vehicle travels at highway speeds. Thus, the Volt is really not a revolutionary electric car, it is a hybrid car. Nothing special, considering the many other hybrid cars on the market that sell for much less and get nowhere near as much taxpayer subsidy.
* GM has announced that they will produce 100,000 Volts in the next two years but in the three months preceding this Forbes article, only 928 Volts had been sold in total.
This is a major embarrassment not only to GM but also to the Obama administration who has been a big advocate of electric cars. If the Volt fails and tens of thousands of Volts are not sold, it will seriously damage the Obama administration’s goal of getting a million electric cars on the roads of America within a few years. It will not look good if the primary driver of this goal, the Volt, has unwanted vehicles sitting in GM’s parking lots.
However, not to worry. According to the article, General Electric has committed to buying 50,000 Volts in the next two years, seriously reducing the possibility that Volts will go unsold in the short term. Almost everybody wins in this case. General Motors is happy to sell a poorly performing auto. President Obama is happy because it falsely looks like he is greening the country. General Electric is happy because President Obama is happy.
The only people that are not happy are U.S. taxpayers. If GE actually buys the 50,000 Volts, the U.S. government will be paying GE $375,000,000 of taxpayer money via the Volt rebate program that GM lobbied so hard for. Thus, not only did GE not pay any income taxes in 2010 and received a $3.2 billion Federal income tax credit, they will also get another $375 million in this Volt deal while continuing to cozy up to the Obama administration. Incest or coincidence?
– Why might GE want to continue to cozy up to the Obama administration? GE is one of the largest wind energy turbine manufacturers in the world. What if somewhere in the near future, the political class decided to give tax breaks to companies that invest in alternative energy sources, say wind? Incest of coincidence?
Pretty sad stuff. U.S. taxpayers suffer while political favors are bought and paid for. This is why we need to change our political processes so that they would allow only individual citizens to contribute to political campaigns. Corporations like GE, unions, PACs, etc. would not be allowed to contribute to campaigns. In this world, politicians would be much more likely to act for the good of the country and not the good of their next election campaign. Taxpayer money would not be wasted on projects that benefit only the political class and the unions and businesses that fund our politicians.
Until we can make these changes to get the big organized money out of our politics we will likely see more and more political incest and fewer cases of coincidences.