Do you find that $20 bill in your pocket evaporating faster than ever, and your paychecks taking you shorter and shorter distances? It’s no hallucination. There’s a shift going on. It’s a shift helping ensure the comfortable middle-class lifestyles our parents enjoyed become as obsolete as an eight-track tape player.
Costs once borne by better-heeled folks are increasingly bearing down on the fragile shoulders of American taxpayers. Expenses, burdens, commitments, and responsibilities once assumed by employers are now the obligation of the American wage earner. In short, if you look around, you’ll find things are being shifted. And the more they’re shifted, the more likely you are to be shafted.
Try this: Go to any search engine and type in the phrase “costs shifted to taxpayers.” Next, tweak that line and make it “costs shifted to employees.”
You’ll find article after article bearing the same essential story line. Expenses not so long ago shouldered by someone in corporate America are now being subtly and gradually transitioned to the backs of average folks.
There’s the case in Ohio where the payouts to victims resulting from medical malpractice lawsuits may soon be vacuumed from Buckeye taxpayers’ accounts rather than insurers’. There’s the report from Washington State about a state senate initiative to let employers and insurance companies negotiate with injured workers and pay out less than the workers’ claims are worth, with the logical result that injured, disabled individuals will turn to public assistance.
And of course, there are the instances of mega-rich retail empires that gorge on profits while failing to pay living wages or provide affordable health insurance to their workers, ensuring those workers will turn to taxpayer-financed programs like Medicaid to garner the assistance they or their family members will likely require.
Caught in the crossfire
Your ability to raise kids and build college, home, and retirement savings might not be too badly dented by just one of these shifts. But when the shifts are coming from all directions, well, it’s no surprise editorial cartoons are portraying the U.S. middle class as a chalk line on pavement behind police tape.
Amid the growing library of books examining this phenomenon, one of my favorites is David Cay Johnston’s New York Times bestseller Free Lunch.
What’s that, you say? There’s no such thing as a free lunch? That’s right, someone must pick up the tab when, as the book’s subtitle says, “the wealthiest Americans enrich themselves at government expense.” That someone is you.
In the book, Johnston details how tax subsidies continue to be dispensed to the country’s most-moneyed individuals while jobs for average Americans disappear. Who’s reaping those windfalls? Big box retailers, gigantic shopping complexes, professional sports franchises, and politically-connected companies get the money that’s been shifted. All the while, schools and libraries, police departments, parks and playgrounds, and John Q. Public get shafted.
Johnston maintains a consistently indignant stance throughout the book, but rises to near blood-boiling rage — and takes his readers there as well — when describing a particular category of outdoor sporting goods retailer whose nearly city-sized stores are planted just off the exit ramps of many interstate highways.
These retail corporations (Johnston pinpoints two particular names) seek subsidies from local municipalities that include free land, monetary grants, and recapture of sales, property, and other taxes to build and operate stores, arguing their stores will bring traffic into the town once they arrive.
The only problem is that once they arrive, they usually don’t generate the boomtown commercial atmosphere promised. (One store I pass in the extreme corner of northwest Indiana sticks out in the middle of a one-time cornfield, but the area around it is as bleak as a 1930s-era Dust Bowl hamlet.)
Townsfolk have paid the tab for the store, and are helping fund its continued operation through tax givebacks, while the retailer’s corporate owners reap giant profits. How big? Between 2004 and 2006, one retailer earned $223 million, while collecting almost $294 million in subsidies. I don’t know about you, but I call that elevating the role of shifting and shafting to an art form.
Don’t shaft yourself
So, why all this about the shift and the shaft? I’m not asking you to occupy Wall Street or rage against corporate greed. That’s not going to make one iota of difference in how your personal household finances stack up.
But it could be you’re looking for a reason to put your financial house in order. It might be you’re the type who needs a little righteous indignation to spur you to life-changing action. It may be you can make needed personal spending, saving, and investing transformations only by coming to grips with the full extent of the encroachment into the pants pockets of you and your fellow Americans.
If that’s the case, while you’re not likely to be able to avoid being affected by all the shifting, you may be able to survive some of the shafting.
Very good article, thanks.
As virtually everyone here points out, a corporation’s primary responsibility is to make a profit for its shareholders. When we try to task corporations with other duties (for example, paying a fair wage or providing health insurance for their workers) these secondary goals are bound to be eroded by the first. Systematically “cutting costs” (i.e. benefits for the workers) is the name of the game, and shifting costs to the public is a great way to improve a company’s bottom line.
A government elected by the people and working for the people should be the natural counter weight to the profit-focused thrust of the corporation, but all too often those mega-businesses buy off (i.e. lobby) our public representatives and get what they want. We all need to be more vigilant, like the author of this post.
And hats off to the “Occupy” kids for finally setting the stage for some meaningful discussions on the state of today’s America!
Good grief people, give Jeffrey a break here. He’s reporting his observations and expressing his opinions on a topic that affects all of us. What’s a blog for, if not to provide a forum for expressing opinion? And what’s the value of a blog that only tells you what you want to hear?
It don’t matter what party you belong to. If you don’t recognize the huge influences that companies have on Washington and subsequently on us, you are just being naive.
I agree with poster, this has a lot to do with personal finances. This influences taxes, how much things cost, how much we have to pay and to a degree, the potential for you and I to build wealth.
For those criticizing the article, perhaps addressing specific points you disagree with in the form of an argument would be more helpful.
I agree with the article completely. Great comment Dave.
I’m afraid I have to agree with the last couple of commenters. This post read more like a write-in to a Fox News show than a personal finanace blog post that is (presumably) meant to educate and motivate a wide audience. I definitely support the inclusion of articles on issues that are more strategic than “earn miles on xx credit card!”, and believe that this diversification of subject matter would improve the blog. However, this post was shallow and exhibited a heavy political bias. Unfortunately it has lost your blog at least one regular reader.
Awful post. I don’t read this blog to see stuff like this.
Corinne,
It has everything to do with personal finance. Personal finance does not exist in a vacuum — it is impacted by both the market and government regulations. Said market is in many cases colluding with the government to scratch each other’s back with you left picking up the bill.
That absolutely impacts your bottom line.
I would like to add that I am a Conservative/Libertarian by ideology, but I also cannot ignore the evidence that we are being squeezed out between government and corporations who know we need them for our income, safety, health care, security, etc. Thankfully not all of them are like that, but enough are that it is completely corrupting the “free market” into something very destructive to us as individual consumers and free people.
I was really surprised to see this post here. It is extremely one sided and political and really has nothing to do with personal finance. These issues are very complicated, and ignoring that complexity makes this post into a rant about evil corporations and the government that encourages it.
I think our best chance of reigning in both government and corporations is to get the money out of politics. If you saw Jack Abramoff on 60 Minutes Sunday night, he explained how lobbyists are able to get politicians to do almost anything they want by promising donations or jobs in return. There’s been some talk recently about a constitutional amendment to overturn Citizens United. I think until that happens, we’ll continue to see more of this shifting.
Worst. Post. Ever.
Tony,
I agree with your basic premise that it is not necessarily a company’s responsibility to provide benefits, and companies and employees should negotiate in a free market. But the problem is that we are living in the real world, where the government increasingly gives out favors to corporate entities at the expense of human beings. The Tea Party and Occupy Wall Street have a significant amount of common ground if they would just see it. “Big Corporations” have too much power, and use that power to lobby government for preferential treatment. “Big Government” in turn writes even more onerous rules and regulations designed to favor one corporation over another, shafting the human beings in the process. “Big Corporations” and “Big Government” both get bigger as a result, and human beings are left holding the bag.
Employee should be able to compete openly for wages and benefits, but human beings are playing against a loaded deck run by the dealer.
I used to sound exactly like you, BTW, and I am a “Big Government” employee, to boot. But something is seriously wrong with our society. We shouldn’t “tear down the structure” like some OWS people want, but we also shouldn’t “let business run amok” like the Tea Party wants either. If we are going to shift the burden to the humans, we should provide mechanisms for the humans to actually be able to (a) compete for the services openly and (b) afford the damn things at all. Right now, humans are hamstrung by government regulations forbidding things like creating healthcare co-ops, reaching across state lines for insurance, etc. All to the benefit of “Big Insurance” at the expense of humans, and all because they can afford to line the pockets of politicians. Its very similar to the situation with the big investment banks that ran amok after deregulation: they privatized profits but socialized losses by shifting the burden to the taxpayer, because they were “too big to fail”. What BS.
Incidentally, I also picked up and read “Free Lunch”, and no book has enraged me more than that one did. Companies are doing exactly what Adam Smith warned against — chasing subsidies and radically skewing the market against actual, healthy competition. Like I said, human beings are the losers, crushed between the great wheels of Big Corporation and Big Government.
I think the moral of the story is …. Vote! It makes a difference … who we elect to make all of the detailed decisions … to the degree that they work for their own personal interests or the common good …. it makes a huge difference in the results. You either get a well run government that runs so well that people barely notice or a Detroit.
Register to vote and make sure you go to the polls for all elections … primaries and general elections. Even if you don’t know all of the candidates or all of the issues, work with what you do know and over time you will pick up alot of info and be able to make better and better judgments about who to elect.
Just get started on the road to civic involvement…every little bit of involvement adds up!
I think the author makes a valid point that companies do get too many incentives and in many cases take advantage of them while not passing on the added benefits of the extra profits they are pulling to their employees.
But let’s be realistic the reason of being of many companies is to make money for the owners and shareholders, period. That is the era we are living in.
I have some issues with the assumptions you make here. You say that large companies are “failing to pay living wages or provide affordable health insurance to their workers, ensuring those workers will turn to taxpayer-financed programs like Medicaid” — You are assuming it is a company’s duty to provide such things. It is not. If a business chooses to provide higher wages or benefits in order to attract higher-quality workers, they are free to do so. But they are in no way *obligated* to provide it.
A company’s primary responsibility is to make profit, which benefits their owners and/or shareholders. If a local municipality wishes to bribe them with tax breaks or other perks to open up in their area, why shouldn’t they accept?
While I am generally opposed to local governments giving breaks to big businesses in hopes of getting more jobs, I don’t think that a company that accepts such perks is doing anything wrong.
The overall premise of your article is wrong — costs aren’t being “shifted” to taxpayers. Taxpayers have ALWAYS bore the costs of fruitless government programs and inefficiency.
What you are really saying is that you have a problem with WHICH taxpayers are paying, while implying that the rich (and corporations) aren’t paying enough.