This week the Obama Administration, after a year of perseverating, finally came forward with a modest proposal to tax big financial institutions, and Republican leaders reacted as if the President were proposing to nationalize the banks.
What President Obama has proposed is a relatively modest tax on the assets of the largest banks in the country. It’s not much different in form than the tax you pay on your property. The President argues that the tax would ensure that the banks pay back the government for the financial rescue package. But the more important reason for taxing bank assets is that big banks have behaved recklessly with the confidence that they were too big for the government to allow them to fail. The Bush Administration handed out cash to rescue the banks with the same lack of accounting that they handed out cash in Iraq and Afghanistan. No one insisted that taxpayers were entitled to any share in the bank’s profits after the crisis passed.
In a system in which companies are regarded as too big to fail the rules are stacked for the big banks: heads the bank win; tails the taxpayer loses.
Without a tax on bank assets we have subsidized record bank profits, and now Wall Street is handing out billions in bonuses to reward their executives for surviving the financial crisis they created. It’s not just the taxpayers who are being ripped off. Even the banks’ own shareholders have been short changed.
But the big banks weren’t the big story this week. The big story was the Supreme Court’s decision to reverse a century of established law and strike down limits on corporation spending in political campaigns. The case before the Supreme Court involved the narrow question whether a television film financed by a corporation that disparaged Hillary Clinton on the eve of a presidential primary should be regarded as a political expenditure subject to limitations on corporate spending. Even Justice Scalia had to admit that of course the film was a political attack ad.
But the Court didn’t stop by ruling on the nature of the ad. Instead of just deciding the case, the five activist conservative justices reached out to strike down any limits on corporate expenditures. They reasoned that corporations have the same free speech rights as anyone else.
The difficulty with corporate speech is that corporations can outspend anyone else by a huge magnitude and thereby intimidate officeholders from supporting legislation against the interests of big business. Imagine now the difficulty the President will have getting any legislation through Congress taxing big banks or regulating health insurers. Any representative who votes against big business will face a tidal wave of attack ads.
Competitive free enterprise is a great thing, but corporations are what lawyers call a “legal fiction.” Corporations are created under state law for the purpose of allowing shareholders to aggregate their investments and create greater wealth for themselves and the nation. Corporations are not political parties.
I don’t want my pension funds invested in a company that supports political candidates. I want my money invested productively, and when my company earns big profits, I don’t want to share my profits with either corporate executives who reward themselves with bonuses or politicians.
What can be done now after the Supreme Court’s decision? Congress can use its power to regulate commerce to require that companies must disclose to their shareholders all of their political expenditures in advance and obtain their shareholders’ approval before spending company assets on political causes. But who will be willing to stand up in Congress and propose such legislation against the implied threat of millions of dollars of attack ads financed by big business?