Active Revolving Door Stacks Tax Policy in Corporate America’s Favor
Newsletter 95: And many other policies too
With legislative negotiations heating up, corporate influence over Congress is getting a lot of attention. It’s really no wonder; thanks to millions of dollars poured into lawmakers’ campaign coffers and lobbyists’ pockets, many popular policies are on the line. But while this may be the most obvious means by which corporate America shapes policy to suit its whims, it’s far from the only one.
New reporting from the New York Times illustrates in stark detail how the active revolving door between the Treasury Department and the accounting industry has been key to the effort to stack the tax code in corporate America’s favor. This play for power may largely escape public scrutiny, but the strategy is there to see for anyone who cares to look. As the New York Times details, tax lawyers who do brief stints in government are generally rewarded upon their return to the private sector with sizable raises and promotions. In some cases, young lawyers are explicitly told that a trip through the revolving door is their path to career advancement. Why? Hint: it is not because one to two years in government makes you that much better a lawyer. What it does do is give you the inside knowledge and personal connections to tilt the tax code in corporate America’s favor that much more effectively. To cite just a few examples from the piece, revolvers have been key players in securing policies that made corporate offshoring easier, shielded at least one of private equity’s tax avoidance schemes, and made generous tax breaks for U.S. “manufacturers” available to practically any company that wanted them.
Antitrust
Unfortunately, the Treasury Department is not the only place where the public interest is suffering thanks to an active revolving door. My colleague Andrea Beaty has shone a light on the frequency at which career officials in the antitrust agencies switch sides. In the American Prospect last week she honed in on one particular role, the Deputy Assistant Attorney General for the Antitrust Division’s Economic Analysis Group. Since 1983, all but two of the figures who held that role have gone on to work for, or have come from, economic consulting firms that “provide analysis and testimony for [merging] clients, charging the clients potentially thousands of dollars an hour.”
Especially when compared to predecessors, the revolving door between political appointees and corporate America has turned much more slowly under Biden. Up to this point, however, this administration has given little indication that it is aware of or has plans to address instances where the revolving door runs deeper, including into the career ranks. Andrea offers some proposals in her piece and will have more in her forthcoming white paper. What is clear from the New York Times piece and Andrea’s research is that we cannot afford to ignore this problem or expect it to go away on its own.
Personnel
The Senate confirmation backlog is growing and hundreds of positions still lack nominees. But some are not satisfied to simply speculate about the roles that are currently open. It seems that talk about who will be the next to fill Cabinet positions when the current occupants step down has already begun. While we hope not to be devoting too much time to this topic anytime soon, we couldn’t ignore rumors that “some within the administration have...floated [Commerce Secretary Gina] Raimondo as a successor to Treasury Secretary Janet Yellen if the latter resigns after the 2022 midterms.” As Vishal Narayanaswamy wrote for our blog, “this would be a disaster.” Raimondo has consistently shown herself to be a reliable ally of corporate interests and a flighty friend to the public.
Most notably, when faced with one of the most important tests of the pandemic -- whether to support the TRIPS waiver and open source vaccine IP -- Raimondo was staunchly opposed, putting pharmaceutical companies’ profits over human lives. When it came time for the White House to make the decision, she was ultimately shut out of the room. Elsewhere, in infrastructure negotiations, Raimondo quickly undercut Biden’s promises for broadband policy. As it concerns the Commerce Department’s own influence over broadband policy through the National Telecommunications and Information Administration (NTIA), Raimondo has seemed more concerned with good press than with actually getting things done. Nothing about her tenure thus far would suggest that a promotion is in order.
Governance
In last week’s edition, I highlighted how increasing the Occupational Safety and Hazard Administration’s (OSHA) capacity would be essential to meeting the agency’s existing obligations, including Biden’s new vaccine mandate and the Emergency Temporary Standard, and its potential new ones, like standards for workers laboring in extreme heat. In a welcome development, the Biden administration announced this week that it would develop workplace safety rules for extreme heat. That makes increasing the size of OSHA’s budget all the more urgent. After all, whatever rule OSHA develops will only be as strong as its ability to enforce it.
Recent reporting from the Intercept underscores that just looking forward in crafting agencies’ budgets will not be enough, however. Attrition and outright suppression under President Trump left a backlog of work at many agencies, including the Environmental Protection Agency (EPA). As the Intercept details, the EPA’s “New Chemicals Division has avoided calculating the exposure to — and thus the risk posed by — hundreds of chemicals and have repeatedly resisted calls to change that policy even after scientists have shown that it puts the public at risk.” Assessments of capacity shortfalls must take account of mountains of unfinished work like this one. This story, in which senior career officials are often the ones suppressing evidence, should also spur reflection about the structures and incentives that push them to do so and the changes that will be necessary to stop it.
Climate Finance
The report on a government-wide strategy to address climate-related financial risk, mandated in Biden’s May executive order, is officially overdue. So far, there is no word on when we can expect to see the joint plan from Treasury Secretary Yellen, National Economic Council Director Brian Deese, National Climate Advisor Gina McCarthy, and Office of Management and Budget Director Sholanda Young. If you want to know more about what climate groups hope to see from the report, I would suggest this excellent list of recommendations from the coalition, Stop the Money Pipeline.
According to Washington Postreporting, Yellen appears unlikely to recommend these steps. That article cites the continued presence of three Trump appointees on the Financial Stability Oversight Council (FSOC) as one potential reason for limited ambition. That, quite simply, should have absolutely zero bearing on the final report or on the scope of FSOC’s action. Yellen currently has the two-thirds majority that she needs to recommend climate action and to begin designating institutions as systemically important. And if she wishes to increase the size of that majority she can by pushing President Biden to fire Trump holdover and climate-skeptic Thomas Workman. She should also reconsider her reported support for reappointing Jerome Powell, one of the three Trump holdovers on FSOC, as chair of the Federal Reserve.
Want more? Check out some of the pieces that we have published or contributed research or thoughts to in the last week:
Closing the Revolving Door in Antitrust
Fed's Powell Must Place Embattled Bank Presidents On Leave, Ethics Watchdogs Write In Letter
Powell’s Carlyle Past Meets the Fed Ethics Scandal Present
The State of Independent Agency Nominations - Update for Summer 2021
Analysis: Powell, juggling policy and renomination, now faces an ethics blowup
Fed ethics under the microscope
How Top Accounting Firms Help Their Clients Sidestep Taxes
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