Outsourcing the Deficit

By Gus Tyler

Published July 14, 2006, issue of July 14, 2006.
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At first blush, it is a mystery. We’re talking about the tax receipts of the federal government; they are projected to total about $250 billion more this year than they did last year and, as a result, will bring down the budgetary deficit by about $150 billion more than was projected just six months ago.

Where is this money coming from? It is not based on any change in the Bush policy of rewarding the richest in the land with tax cuts — cuts that run into the billions of dollars and that, projected over a 10-year period, will cost Uncle Sam trillions. The flood of revenue into the federal coffers comes primarily not from individuals but from corporations. Federal income from corporations has tripled since 2003. Simultaneously, there has been an upward leap in taxes from stock market profits and executive bonuses.

In our lifetime, a profound metamorphosis has taken place in the corporate world. It has been embodied in the rise of global corporations and, subsequently, in the mergers of such corporations into mega-corporations. The driving force behind such global mergers is the search for cheap labor.

Let’s take examples drawn from two different kinds of American industry — first from the labor-intensive apparel industry, with its historically low wages, and then from the capital-intensive auto industry.

Starting shortly after World War II, American apparel producers outsourced labor to lands where workers were paid in pennies for doing the work that American apparel workers performed for dollars. Today, apparel trades factories, once the largest factory employer in this country, are virtually nonexistent.

Not many years later, the same process started among auto companies. American autoworkers, who typically earn about $50,000 a year, including fringe benefits, are now being displaced by workers in Third World countries who earn about $5,000 a year. American auto corporations, to strengthen their position in world markets, began merging with auto companies of other lands to form global mega-firms that realize mega-profits.

The incredible income realized by such firms provides the Internal Revenue Service a treasure-trove. The question is: Is it worth it — in terms of lost jobs and incomes of American workers and those who depend for survival on those workers’ pay?

The captains of industry seem to think so. Whatever happens to the rest of us, they’ll make out fine. Of them the psalmist might have written, “Yea, they ride through the valley of death but they do not fear, for they are the meanest SOBs in the valley.”






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