General Electric CEO Jeff Immelt has an interesting op-ed today in the Washington Post, hitting back against charges that his company is “destroying the moral fabric” of the country with a culture of corporate greed. The thrust of Immelt’s response is that, unlike politicians, companies like GE “create wealth and jobs, instead of just calling for them in speeches.”
That’s a strong comeback, but of course General Electric’s executives, Immelt in particular, have not always been models of capitalist virtue themselves. They have come in for quite a bit of deserved criticism over the years by aggressively chasing government handouts and subsidies and, even worse, pursuing a lobbying strategy that has put their market rivals at a political and regulatory disadvantage. CEI’s former journalism fellow Tim Carney, for example, has been on GE’s case for cronyism for many years, from his first book, The Big Ripoff, to his work as a visiting fellow at the American Enterprise Institute and his column in the Washington Examiner.
Immelt also responds, in the op-ed, to charges that GE pays “nothing in taxes,” and reiterated the need for comprehensive tax reform. Many people will still remember the media brouhaha started by the New York Times over GE’s 2010 corporate income tax return. The fallout and misunderstandings generated by that initial story are explained in great detail by Allan Sloan and Jeff Gerth in their Fortune article from April 2011 and by Tax Foundation president Scott Hodge here. Megan McArdle, writing at the time in The Atlantic, also weighed in on the controversy. The general verdict was that the New York Times’ sensational story was not quite the stinging indictment of corporate malfeasance the newspaper’s editors seem to have hoped for. Megan explains:
Does GE take advantage of the complexity of the code to reduce its tax bill beyond what congress intended? Absolutely. And does GE lobby a great deal on tax provisions that benefit the company? Again, absolutely. But unlike most people, this doesn't seem to me to be specially evil for doing so. I don't think it's particularly different from the AARP lobbying on the taxation of social security benefits, or middle-class journalists taking every conceivable home office deduction they're allowed. People, whether singly or in organizations, will ever strive to pay as little in taxes as possible. As long as they're operating within the law, they have the same level of moral culpability.
For me, this is an argument against complexity, not an argument against GE.
So the question about what kind of reputation large multinational corporations like GE deserve is complicated. Obviously they’re pursuing the largest profit they can make, which in the eyes of some people makes them “greedy.” But so does every other for-profit company in the world. Engaging in cronyist deals through the political process, however, is always disreputable and should be criticized by left-leaning and free market observers alike. On taxes, we should also expect every company—just as most individual taxpayers do—to use existing provisions of tax law to reduce their ultimate liability. If they violated the law, then let them be prosecuted, but let’s refrain from calling for the tar and feathers just because a given company’s tax bill seems smaller than some people think it should be.
We can appreciate the productive work and economic success of GE while also condemning their leadership when they venture into cronyism. We shouldn’t, however, claim that all of their 125,000 domestic employees are actively working to destroy the nation’s moral fabric. A lot of them are making engine parts and medical scanners, leaving the nation’s mobility and health improved, and its moral rectitude unscathed.