Saving Government and Consumer Dollars

The newspapers and the airwaves are filled these days with reports and discussions about President Clinton’s deficit reduction and tax proposals. Words like “investments,” “savings,” “incentives,” “job training,” “government-industry partnerships,” “industrial policy,” and “technology transfer,” are repeated again and again.

Two weeks ago in Los Angeles, California Speaker of the House, Willie Brown, convened an economic summit to discuss what can be done about the economic slump that our most populous state is experiencing. Speaker after speaker emphasized the need for new policies, new structures and new programs to help business. More than a few of these speakers seemed to be blaming the state government for their problems and seeking more subsidies (handouts) from that same state government. What is missing from the talk of most of these corporate officials and government people is a normative analysis of what went wrong. A normative analysis, for a moment replacing the economic jargon, would ask how our economy was damaged by “greed,” “speculation with other people’s money,” “mismanagement,” “business fraud”, “monopolistic practices,” “corporate crime,” ” corruption,” and “abuse of power.”

Back in the early Seventies, Senator Philip Hart (Dem. Mich) estimated that consumers lost almost a quarter of their shopping dollars to marketplace fraud, deceptive advertising, price-fixing and other wrongs by sellers. After 12 years of Reagan-Bush’s anti-consumer government, taken as a whole, it is doubtful whether conditions are any better today. These hundreds of billions of dollars amount to quite a reduction in the value of disposable incomes each year.

Bank crimes and mismanagement, ala the Savings and Loan debacle, will soon cost Americans over $500 billion for the bailout.

Stimulated by the greed of investment bankers, corporate CEOs and their law firms, hundreds of companies were merged with one another in the go-go Eighties, not for any rational economic reasons for the companies involved, but to jack up huge fees for the consultants and a golden pay package for the CEOs. These mergers, acquisitions and leveraged buyouts, created no new jobs nor any new wealth and left communities devastated.

What these deals did accomplish was to drain $1 trillion away from productive investment, jeopardize more than a few pension trusts and overload the acquiring companies with huge debt. Since the debt incurred for these deals was borrowed money, not equity capital, the interest paid was deductible, thereby reducing their federal tax contributions to Washington.

In May 1992, the respected General Accounting Office (GAO) of Congress reported that “unscrupulous health care providers, including practitioners and medical equipment suppliers, cheat health insurance companies and programs out of billions of dollars annually.” What is GAO’s estimate for what this “fraud and abuse” is costing?: $70 billion for last year alone.

Then there is the unreported cash income for off-the-books work that the federal government estimates drains away nearly $100 billion in unpaid taxes. Add that to the clever transfer pricing and other ways multinational corporations can maneuver between countries to escape paying taxes to Uncle Sam and it adds up to real money. Clearly, improved law enforcement can collect much of this money so law-abiding citizens don’t have to be taxed more to make up the difference.

The same GAO reported a few years ago that $50 billion in military contracts could be saved yearly. Report after report from this investigative arm of Congress shows that the federal departments could prune more tens of billions from their wasteful practices, from the fraud that special interests practice on the government, from the bloated subsidies, uncollected debts and lucrative giveaways that make Washington into a frenzied bazaar of accounts receivables for these business interests.

The above examples are just samples of annually lost opportunities to make our economy more efficient and more valuable for the American people. Why a thorough energy conservation program throughout the country from vehicles to buildings to appliances would be equivalent to an effective pay raise for everyone. Remember, Ben Franklin’s adage “a penny saved is a penny earned.”

Consumer skills clinics would lead to more astute shopping for food, insurance, credit, housing, and health care that, again, would be equivalent to “giving yourself a raise.” Instead of mega billions of dollars of corporate welfare payments, 10,000 publically funded community consumer training clinics for adults would save tens of billions of dollars a year for the cost of one half of a single obsolete B-2 bomber.

It is way over due for a national discussion to start over these qualitative or normative aspects of our burdened economy.

We need to answer these questions if only to avoid new and costly economic programs that fall right into the waiting laps of the wrongdoers, the power brokers and the rest of those self-selected cadre whose business is doing in honest, self-reliant business, their workers and consumers.

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