Gretchen Morgenson’s Times article today is enough to make you retch.
Buried in the law extending unemployment benefits and reauthorizing the tax credit for homebuyers was a “little” gift to any company that happened to lose money in the past five years. Here’s how she describes the largesse:
But tucked inside the law was another prize: a tax break that lets big companies offset losses incurred in 2008 and 2009 against profits booked as far back as 2004. The tax cuts will generate corporate refunds or relief worth about $33 billion, according to an administration estimate.
Before the bill became law, the so-called look-back on losses was limited to small businesses and could be used to counterbalance just two years of profits. Now the profit offset goes back five years, and the law allows big companies to take advantage of it, too. The only companies that can’t participate are Fannie Mae and Freddie Mac and any institution that took money under the Troubled Asset Relief Program.
Among the biggest beneficiaries are home builders, analysts say. Once again, at the front of the government assistance line, stand some of the very companies that contributed mightily to the credit crisis by building and financing too many homes.
Morgenson takes this travesty to task by focusing on the homebuilders. Fair enough. There are too many of them, they are financially in fine shape and based on recent history they appear to be managed by fools. Why they should receive such a gift is beyond comprehension.
There’s to my mind a bigger issue here, however. Why in an era in which the federal deficit is soaring beyond any comprehensible level and the absolute certainty that the majority of Americans are going to have to pony up substantially more money in taxes in order to dig out of this hole is the Congress and the Obama administration doling out tax breaks to corporatios that amount to $33 billion?
There is no stimulus argument here, this is simply a gift to constituencies or perhaps more to the point a political payoff. As Morgenson properly points out the guys that took the payola for this one aren’t exactly the best dealmakers. The cash that the lobbyists spread around for this one is chump change compared to the benefit bestowed.
With each of these outrages it becomes more evident that Washington and certain segments of the business community are simply involved in looting. Sadly, these raids seem to engender little or no outrage and in fact receive little notice. Where it leads is an open question at this point in time but I think it fair to say that it will probably be to no good end.
This represents nothing less than an assault on the integrity of the economic system. To say it’s business as usual is facile. Surely, these sorts of deals have gone down in the past but there was usually an element of restraint involved. Bones were thrown to the political class and similar bones were delivered to those offering the bribes. No longer is that the case. The vault seems to have been opened wide and those with cash invited in to help themselves as they please.