Right Effect, Wrong Cause

Yesterday the NYT proffered its latest The Great Divide column. Before I go any further, in the NYT's own words:

The Great Divide is a series on inequality — the haves, the have-nots and everyone in between — in the United States and around the world, and its implications for economics, politics, society and culture. The series moderator is Joseph E. Stiglitz, a Nobel laureate in economics, a Columbia professor and a former chairman of the Council of Economic Advisers and chief economist for the World Bank.*

This latest instructional column from the enlightened to the rest of us, How Can We Jump-Start the Struggle for Gender Equality? purports to demonstrate that something went wrong during the Vanguard's Righteous March to Parity Between the Sexes. Besides, that is, all those fussy dimorphic details which, since they are unimportant to the Vanguard are unimportant in fact.

[Starting in the 1960s, the] traditional division of labor by gender was challenged from all sides. Women’s share of the labor force, husbands’ share of housework, the integration of occupations once categorized by gender and women’s share of management jobs all rocketed upward from the 1970s till sometime in the 1990s. Women went from earning fewer than 10 percent of law and medicine degrees in 1970 to earning almost half of them by the early 2000s.

I don't think it is possible to cogently argue that, circa 1968, women were not subject to all manner of legal handicaps due to their choosing poorly as to which team they were to be conceived into. Similarly, I think that no matter how hard you might look, or no matter how many rocks you might wish to overturn, you would be hard pressed to find anyone wishing to reimpose all those petty, demeaning, senseless shackles.

Wonderful, even more indefensible nonsense for history's ash heap. Game over. Post over, sans point.

Not so fast, wonder wings. After making occupational advances across the board for two decades …

… the movement toward equality stopped. The labor force hit 46 percent female in 1994, and it hasn’t changed much since. Women’s full-time annual earnings were 76 percent of men’s in 2001, and 77 percent in 2011. Although women do earn a majority of academic degrees, their specialties pay less, so that earnings even for women with doctorate degrees working full time are 77 percent of men’s. Attitudinal changes also stalled. In two decades there has been little change in the level of agreement with the statement, “It is much better for everyone involved if the man is the achiever outside the home and the woman takes care of the home and family.

There are a couple things worth remembering here. Just as Jim Crow laws were a grotesque imposition on blacks because of their race, women were also subject to nearly endless impositions because of their gender. In the early 1960s, it was difficult for women to own property, obtain credit, and were barred from many jobs. And we must give credit where it is due. Progressives were the ones taking on Jim Crow, and tearing down the equally pervasive, demeaning, and unjustified subjugation of women.

And then they succumbed to Progressivism's twin diseases: submerging individuals within the group, and rampaging hubris. Both are on prominent display in the quoted para above, and throughout the article. It doesn't matter what individual women, or men, want; only that groups adhere to Progressives' insistence upon the only equality that matters — outcome. Attitudinal changes have "stalled", because they fail to adhere to the Progressive notion of what constitutes the correct attitude.

Progressives fancy themselves as being reality based and, ipso facto, correct in their every thought and deed. Whether Creationist or Dawkinsian, there is precious little disagreement to be found that women and men have always faced very different life challenges. Yet it is the Dawkinsian Progressive who falls, and falls hard, for the belief, as religious as anything you might find in revealed texts, that evolution stops at the neck line.

According to Dr. Cohen, sociology professor and author of a coming-real-soon-now book "The Family: Diversity, Inequality and Social Change", the blame lies with men and society. Men haven't moved into traditionally female occupations, and our society has failed to implement work-family policies oriented towards promoting gender equality.

Unfortunately for Dr. Cohen's Progressive vision, reality bites.

Here is a list of “non-traditional” (i.e., less than 25% female) occupations.

As it turns out, there are quite a lot of them, with an average female participation rate of roughly 10%. Taking a for instance, it is hard to imagine how work-family policies, no matter what they might be, differentially impact nursing and being a mechanic. Yet nursing remains overwhelmingly female, and any occupation with the word “mechanic” attached is at least 96% male. (My occupation, pilot, is 98.7% male, despite a cornucopia of job offers for any qualified female.) It appears that the other foot can be shod with the same shoe: women don't appear the least inclined to move into traditionally male occupations.

Maybe something more than stalled attitudes is involved. Maybe a great many women are concluding that, given a choice, they would far rather be nurses than mechanics. And just as many men are wondering why they would want to be primary school teachers when they could be working on cars.

If that is so, and the list of still “traditional” occupations suggests it is, then perhaps evolution didn’t stop at the neck line, and, consequently, equality of opportunity should not be expected to yield anything remotely resembling equality of outcome. Maybe, just maybe, unfair evolutionary discrimination has tilted the playing field in many more directions than just plumbing and upper body strength. Mechanical aptitude is unfairly — by Progressive standards — distributed. So why should we attribute to "stalled attitudes", or defective work-family policies, that which is far better explained by nature itself?

Which points at a fundamental objection to Dr. Cohen's urging us to imitate Iceland's family policies, and chiding "frightened traditionalists" in the US who are, poor benighted dears, averse to state-run child care.

There's even a term for it: Parity Error. So long as women are not eager to become mechanics, pilots, carpenters, masons, welders, ad nauseum, then men must do those things.

According to Dr. Cohen, If you want a society in which men are welcome and willing to be day care workers, you may need a workplace culture that accepts — or encourages — fathers’ spending more time at home with their children. To unblock the path toward gender equality, these policies may be the best ideas we have.

Until he concocts policies that encourage women to do things they resolutely refuse to do, then the best ideas Progressives have are no better than bolting a kick-stand on a tricycle.

---

* The reality deficits in this piece are so glaring and central that whatever Dr. Stiglitz' brilliance in economics, he is utterly devoid of skeptical moderation.

Postmodernism, it's continued relevance

In a recent post on this blog I linked to a Lee Harris column which asked "why isn't socialism dead?"  The key point was that socialism lives on in the dimension of myth.  The author concluded that piece:

This is why socialism isn't dead, and why in our own century it may well spring back into life with a force and vigor shocking to those who have, with good reason, declared socialism to be no longer viable. It is also why Georges Sorel is perhaps even more relevant today than he was a hundred years ago. He knew that it was hopeless to guide men by reason and argument alone. Men need myths -- and until capitalism can come up with a transformative myth of its own, it may well be that many men will prefer to find their myths in the same place they found them in the first part of the twentieth century -- the myth of revolutionary socialism.

This is the challenge that capitalism faces in the world today -- whether it will rise to the challenge is perhaps the most urgent question of our time, and those who refuse to confront this challenge are doing no service to reason or to human dignity and freedom. Bad myths can only be driven out by better myths, and unless capitalism can provide a better myth than socialism, the latter will again prevail.

I prefer to use a term other than capitalism as do most of the readers of this blog.  There are even bigger problems than word usage.  There is a combination of the myth of socialism and the propagation of a toxic idea meant to undermine the ability of a free society to defend itself.  Dr. Sanity offers the following:

 What are these "dangerous trends that began decades ago"? To understand what is happening in the world today, one must understand the a philosophy that has taken root in Western Civilization and brought us to this point in history--and, yes, ideas really matter; and when you are basing your society on bad ones, then you can expect bad things to happen.

The philosophy that is behind these dangerous trends is Postmodernism; and Barack Obama represents the culmination and embodiment of the perfect postmodern demagogue.

There have been prior posts on this blog   dealing with Postmodernism as well as  additional posts at at Dr. Sanity blog.  She continues:
 

We can think of the four pillars--POLITICAL CORRECTNESS, MULTICULTURALISM, RADICAL ENVIRONMENTALISM, and TERRORISM-- as the foundation for both the socialist revival (particularly in the Western hemisphere recently) and for the rapid advancement of the Islamic Jihad and Islamic fundamentalism.

Below is a flow chart that has been adapted from Stephen Hick's book, Explaining Postmodernism (p. 173), which summarizes the evolution of these four strategies/pillars of leftist/progressive thought; and though I have written about it before, it is well worth repeating over and over again as the perfect postmodern storm that swirls around approaches a Category 5; and as reason, truth, and reality are belittled and ignored by our leaders:

The refusal to accept failure combined with the spawn of Postmodernism gives the radical left considerable ability to undermine freedom.

Eternal Flame

I'm not talking about the eternal flame at the grave site of JFK, this being the 50th anniversary of his death.  Well let me get right to it...

In light of the horrors brought about in the twentieth century by the revolutionary myth of socialism, it is easy to sympathize with those who believe mankind could not possibly be tempted to try the socialist experiment again. If the liberal rationalist Renan was surprised that "Socialists were beyond discouragement" at the beginning of the twentieth century, how much more surprised must his contemporary counterparts be to discover that socialism is also beyond discouragement at the beginning of the twenty-first century. Yet this is a lesson that Evo Morales and Hugo Chavez, under the guidance of their mentor, Fidel Castro, seem determined to impress upon us.

It may well be that socialism isn't dead because socialism cannot die. As Sorel argued, the revolutionary myth may, like religion, continue to thrive in "the profounder regions of our mental life," in those realms unreachable by mere reason and argument, where even a hundred proofs of failure are insufficient to wean us from those primordial illusions that we so badly wish to be true. Who doesn't want to see the wicked and the arrogant put in their place? Who among the downtrodden and the dispossessed can fail to be stirred by the promise of a world in which all men are equal, and each has what he needs?

Here we have the problem facing those who, like Hernando de Soto, believe that capitalism is the only rational alternative left after the disastrous collapse of so many socialist experiments. Yes, capitalism is the only rational method of proceeding; but is the mere appeal to reason sufficient to make the mass of men and women, especially among the poor and the rejected, shut their ears to those who promise them the socialist apocalypse, especially when the men who are making these promises possess charisma and glamour, and are willing to stand up, in revolutionary defiance, to their oppressors?

The shrewd and realistic Florentine statesman and thinker, Guicciardini, once advised: "Never fight against religion...this concept has too much empire over the minds of men." And to the extent that socialism is a religion, then those who wish to fight it with mere reason and argument may well be in for a losing battle. Furthermore, as populism spreads, it is inevitable that the myth of socialism will gain in strength among the people who have the least cause to be happy with their place in the capitalist world-order, and who will naturally be overjoyed to put their faith in those who promise them a quick fix to their poverty and an end to their suffering.

Earlier in the article the author states:

  Instead, he argues that it is only by refusing to accept the failure of socialism that one can become a "true revolutionary." Indeed, for Sorel, the whole point of the myth of the socialist revolution is not that the human societies will be transformed in the distant future, but that the individuals who dedicate their lives to this myth will be transformed into comrades and revolutionaries in the present. In short, revolution is not a means to achieve socialism; rather, the myth of socialism is a useful illusion that turns ordinary men into comrades and revolutionaries united in a common struggle -- a band of brothers, so to speak.

Sorel, for whom religion was important, drew a comparison between the Christian and the socialist revolutionary. The Christian's life is transformed because he accepts the myth that Christ will one day return and usher in the end of time; the revolutionary socialist's life is transformed because he accepts the myth that one day socialism will triumph, and justice for all will prevail. What mattered for Sorel, in both cases, is not the scientific truth or falsity of the myth believed in, but what believing in the myth does to the lives of those who have accepted it, and who refuse to be daunted by the repeated failure of their apocalyptic expectations. How many times have Christians in the last two thousand years been convinced that the Second Coming was at hand, only to be bitterly disappointed -- yet none of these disappointments was ever enough to keep them from holding on to their great myth. So, too, Sorel argued, the myth of socialism will continue to have power, despite the various failures of socialist experiments, so long as there are revolutionaries who are unwilling to relinquish their great myth. That is why he rejected scientific socialism -- if it was merely science, it lacked the power of a religion to change individual's lives. Thus for Sorel there was "an...analogy between religion and the revolutionary Socialism which aims at the apprenticeship, preparation, and even the reconstruction of the individual -- a gigantic task."

So the eternal flame of the socialist myth will continue to burn in the hearts and minds of some.  It is why socialists can not tolerate competing belief systems and why they do not respect the rights of the individual or a preference for voluntary cooperation instead of coercion. 
 

What Happened in 1973?

Via Russ Roberts at Cafe Hayek, here's an interesting chart related to income inequality:

One thing that's interesting, is that in the last 100 years, the very rich did not get that much richer than everybody else.

Russ dissects the chart:

Let’s just look at the bottom 99%, the clear light circles. Put all your biases aside for a moment. Just look at it and try to summarize what you see. I see four different eras. From 1913 until roughly 1940, it’s flat. From 1940 to 1973, it’s rising almost steadily, roughly tripling. Then for 20 years, 1973–1993, it’s basically flat. Then in 1993, it starts to rise but the increases are erratic.

I would describe it slightly differently.  There was a brief spike up during WWII, then things were roughly flat till around 1950 which is when Income Growth for the bottom 99% started rising steadily.

Russ wonders why the change in 1973:

When the left talks about the middle class being “hollowed out,” or stagnation in the standard of living of average American, they like to blame it on declining unionization, a fraying social contract between business and labor, or the rich hoarding more for themselves and leaving less for the rest of us via tax policy or regulation. But none of these kinds of explanations are likely to explain the sharpness in the change of the rate of growth starting in 1973. Private sector unionization has been declining steadily since 1950. I don’t think the social contract got revised in an especially tough way in 1973. And I don’t think the rich had a big confab in 1973 when they remade public policy. Was there a big change in tax policy or regulation in 1973? If there was, I missed it.

His explanation?  Well, I'll let you go directly to Cafe Hayek to find out the cause of flattening Income Growth for the bottom 99% starting in 1973.

Anti-Anti-Trust: The Standard Oil Case

I've concluded over years of occasional study that Antitrust law does more harm than good, particularly when viewed from perspective of the consumer.  There are a wide variety of subtle reasons why I believe this and my plan is to occasionally write about various aspects of those reasons.

I approach many narratives with skepticism, and the Antitrust narrative is one of those.  When looking at Antitrust cases, I've noticed that the glorious narrative of noble "Trust Busters" courageously fighting uber-powerful, evil corporations for the benefit of the consumer doesn't hold up very well and is quite dependent on spin.  In other words, the facts don't speak for themselves.  The following is one example (from ANTITRUST: THE CASE FOR REPEAL by Dominick T.. Armentano):

The conventional account of the Standard Oil case goes something like this.  The Standard Oil Company employed ruthless business practices to monopolize the petroleum industry in the nineteenth century.  After achieving its monopoly, Standard reduced market output and raised the market price of kerosene, the industry's major product. The federal government indicted Standard under the Sherman Act at the very pinnacle of its monopolistic power, proved in court that it had acted unreasonably toward consumers and competitors, and obtained a divestiture of the company that helped to restore competition in the petroleum industry. 

This account has almost nothing in common with the actual facts.  It is not possible to review the entire history of the case here, but a summary of the government findings against and actual conduct of Standard Oil will serve to make the point. 

The Standard Oil Company was a major force in the development of the petroleum industry in the nineteenth century.  It grew from being a small Ohio corporation in 1870, with perhaps a 4-percent market share, to become a giant, multidivisional conglomerate company by 1890, when it enjoyed as much as 85 percent of the domestic petroleum refining market.  This growth was the result of shrewd bargaining for crude oil, intelligent investments in research and development, rebates from railroads, strict financial accounting, vertical and horizontal integration to realize specific efficiencies, investments in tank cars and pipelines to more effectively control the transportation of crude oil and refined product, and a host of other managerial innovations.  Internally-generated efficiency allowed the company to purchase other businesses and manage additional assets with the same commitment to efficiency and even to expand its corporate operations abroad. 

Standard Oil's efficiency made the company extremely successful: it kept its costs low and was able to sell more and more of its refined product, usually at a lower and lower price, in the open marketplace.  Prices for kerosene fell from 30 cents a gallon in 1869 to 9 cents in 1880, 7.4 cents in 1890, and 5.9 cents in 1897.  Most important, this feat was accomplished in a market open to competitors, the number and organizational size of which increased greatly after 1890.  Indeed, the competitors grew so quickly in the years preceding the federal antitrust case that Standard's market share in petroleum refining declined from roughly 85 percent in 1890 to 64 percent in 1911.  In 1911, at least 147 refining companies were competing with Standard, including such large firms as Gulf, Texaco, Union, Pure, Associated Oil and Gas, and Shell.

So, before and during the period when Antitrust action was brought against Standard Oil, prices were plummeting and Standard Oil's market share dropped significantly.  Harm to the consumer was nowhere to be seen and, in fact, consumers benefited hugely from the price drop.

There are quite a number of other Antitrust cases like this that follow this "Anti" narrative.  The common wisdom is often just a particularly spin and narrative which don't reflect the facts particularly well.

Textin' in the Girls Room

My daughters aren't allowed to use their phones at school.  So when they need to reach me during the school day about rides or other after school activities, they sneak into the girls room to use their phones to text me.

In my day it was "Smokin' in the Boys Room:"

Now it's "Textin' in the Girls Room." The new lyrics would be:

Textin' in the girls room
Textin' in the girls room
Teacher don't you fill me up with your rules
Everybody knows that textin' ain't allowed in school!

The $317,000 Question

With the rollout of Obamacare being such an epic fiasco that using the term risks libeling epic fiascos, it's easy to lose sight of the problems Obamacare was meant to address in the first place.

Perhaps that is too generous.  That the healthcare system in the US is a shambolic contraption is an assertion that can probably be made without fear of contradiction, even on the internet.  But nothing I read in the run-up to Obamacare's passage, or since, has seemed to this glorified heavy equipment operator of even coming close to properly conceiving the problem, never mind the inherent tradeoffs in any conceivable "solution".  

(In the following, I am going to make notional assertions, most of which I'm not going to source, as a basis to conceptualize what is in play.  Which is kind of like saying I'm making it all up; keep in mind that since my argument is conceptual, it does not rely upon numerical exactitude.)

In the developed world, 21st Century edition, almost everybody dies from disease or decrepitude, rather than misadventure. To simplify things, assume that everyone dies from illness or old age.  To simplify even further, so far as healthcare goes, the difference between the two is without distinction.

As a first approximation, all people have, from the point of view of the health care system, a bathtub shaped lifecycle:  significant involvement in the beginning, quickly dropping to very little involvement, until shortly before the end, roughly two years, when the demand for health care resources quickly rises.

Oddly, that healthcare lifecycle cost doesn't vary a heck of a lot with lifespan: it is the sides of the bathtub that matter, not how wide it is.  The proximate cause of our ultimate demise isn't particularly germane to its cost.  Non-smokers live longer than smokers, but they die no more cheaply.

Time for a hard fact: on average, the lifecycle cost to the healthcare system of a human is $317,000.

Already, the first conceptual hurdle is staring us in the face:  anyone using the words "health" and "insurance" next to each other is to demonstrate for all to see a comprehensive inability to grasp what insurance is about.  To wit, insurance pools risk.  A great many homeowners buy fire insurance, very few of them have their homes go up in smoke.  But if all houses were built knowing in advance that they would eventually burn down, there would be nobody around to take the other side of that bet.  As David Cohen, a longtime member of the PJA, memorably put it, the fire insurance market consists of bets by homeowners that their houses will burn down, and counter bets by insurance companies that they won't.  

Clearly, when it comes to healthcare costs, that doesn't apply, because all the houses, or near enough as makes no difference, burn down.  So what healthcare "coverage" really amounts to is cost shifting.

That is what poses the question at the top of this post.  Assume everyone lives to 75, and the average per-capita lifecycle cost is $317,000.  The simplest answer to that $317,000 question is to leave it up to the individual.  Ignoring troublesome things like inflation and interest return, all good libertarians will start self-funding their own life cycle costs from the git-go, to the tune of $4300 per year.  

That doesn't sound like much, except that for a good libertarian family of four that ends up at close as darnnit to $17,000 a year.  For some of us libertarians, while that is indeed a chunk o' cash, it is manageable.  However, not everyone is above average, and $17,000 per year would go some considerable way towards crowding out some of the luxuries in life. Like food and clothing.  

To make an expensive problem worse, healthcare is not merely a commodity. If my neighbor's house burns down, and they neglected to bet that it would, tough.  In my travels, I have been places (socialist, oddly enough) where that is apparently the attitude to the physically afflicted.  That simply isn't on the cards here in the US.  We will not tolerate the prospect of people with gaping, oozing, chest wounds panhandling.  

Looking at this problem from a life-cycle cost point of view has already led to a couple inescapable conclusions.  Paying for healthcare requires cost-shifting from the healthy to the sick, from the young to the old.  

Viewed through the prism of an insurance bet, it makes sense for a healthy mid-20s male to forego health care "insurance" altogether, or go with a high deductible catastrophic policy and self-insure up to the deductible.  Similarly, it doesn't seem to make much sense for me, having some time ago undergone that special operation, to nonetheless be required to pay for maternity coverage. 

But that is making the mistake of parsing a lifecycle into discreet events, then not checking to see if the sums add. Virtually all women have children, virtually all men become fathers, and essentially everyone living in the high-clover that precedes middle age will find themselves elderly.

Thus far, it sounds like I am making an argument for a single-payer system.  That is the seemingly obvious solution.  After all, if lifecycle costs are largely invariant, and are too high for the less well off, then those considerations pose a powerful moral argument for a system of redistributive taxation and cost shifting.

Unfortunately, single payer systems suffer the same problems to which socialist solutions seem prone: rationing, and pervasive shabbiness.  Moreover, single-payer systems free ride on the US healthcare market for innovation.

Instead, we first need to look at the US healthcare system posing two problems:  cost and affordability.  

Obamacare's fundamental problem, leaving aside the rampant fraud required for its passage, and then the staggering effort to first find, then harness, all the universe's incompetence for its implementation, was in taking a fiendishly difficult problem and trying to solve it all at once (as opposed to the GOP, which, SFAIK, has been entirely missing in action on this).

Instead, the better approach would have been to first address cost.  A great deal of the healthcare we consume does no good.  What is useful is almost always (except in more competitive realms such as elective plastic surgery and orthodontia) far more expensive than other activities that seemingly require similar skills and resources.  Even though healthcare isn't simply a commodity, it isn't immune from supply and demand; healthcare policies seem designed to shield the consumer from cost, leading to overconsumption.  The medical profession is decades behind aviation in adopting standardized procedures; inevitably there are more medical errors, more litigation, and less defense against litigation due to the absence of standards.  End defensive medicine.  The scope of healthcare is (thanks to some truly goofy court decisions) far too wide; infertility isn't fair, and I am sure that to some it comes as a crushing disappointment, but that may not be, to others, sufficient cause for having their wallets lightened.  None of this requires a massive federal bureaucracy, or thousands of pages of incomprehensible legislations, or truckloads of regulations to implement legislation.

Oh, and end the tax code's insane preference for employer purchased healthcare (Full disclosure:  this is an admission against interest.)

Yet even if we managed all that, and entered that nirvana where we purchased only what was useful, and its cost stood nearish to reality, it would still be too expensive for many to find affordable.  

Which is where the nut gets really hard to crack.  No one, not even the Rethuglicans and Teahadists, (who, as we all know, are eternally disappointed because we don't have enough poor people, and the ones we do have don't suffer nearly enough) is the least bit interested in people foregoing useful medical treatment due to lack of money.  Yet it is just as clear that given the scope of modern medicine, the cost of delivery will never be low enough for the affordability problem to disappear.

What then?  

IMHO, the least worst option is something akin to the Earned Income Tax Credit.  A per capita amount that is deemed (note the passive voice here -- it hides a great deal) sufficient to purchase adequate health coverage.  Obviously, this would require increasing taxes on the well off, but this amounts to making explicit that which is already the case -- cost shifting to those with extensive coverage.  Then I would pair that with a Health Savings Account that would be allowed to accrue indefinitely.  The consequence would be allowing more people over time to effectively self-insure, while exposing providers to price sensitivity.

By failing, for whatever reasons, to outline the problem President Obama certainly sold a bill of goods to Americans, and may well have done so to himself, as well.  He squandered an opportunity to make a systematic approach to a fiendishly difficult problem, instead succumbing to the curse of Progressives: a fetish for process and bureaucracy.  The result in the short term, has been a website that makes the Costa Concordia seem brilliant, and, in the long term, an adverse selection problem that will leave Obamacare with a far bigger hole below the water line.

Unfortunately, the Republican contribution to dealing with this ongoing sucking chest wound has proceeded no further than blank stares and slack, drooling, jaws.

The choice between Obamacare and [crickets], gives new meaning to the phrase "Stuck between the devil and the deep blue sea."

[Apologies for any disorganized thinking and writing, or offenses against grammar and clarity.  There is no time left for any of that high-falutin proof reading stuff.]

Big Power Corrupts Bigly

In 2010, General Electric (NYSE:GE) had revenues of $149 billion.  That's larger than the gross domestic product of all but about one-quarter of the countries on earth.  General Electric may also be the most diverse company in the world, involved in everything from jet engines to coffee makers, power plants to sealants, finance to lighting, and General Electric's "economy" is more diverse than the economy of many nations and most governments. They have over 300,000 employees working all over the world.  General Electric is currently number 6 on the list of Fortune 500 companies.  They are almost a nation unto themselves.

In 2010, GE had profits of $14,200,000,000, of which $5,100,000,000 was earned in the United States, yet GE paid no U.S. taxes:

...low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies. 

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

Other huge companies are also using hordes of lawyers and lobbyists to collude with the government to avoid taxes and let others bear the burden of funding the government:

While General Electric is one of the most skilled at reducing its tax burden, many other companies have become better at this as well. Although the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less. [...] 

Such strategies ... have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009.

And Big Government, including Obama, is definitely a willing player in the collusion:

Obama ... has designated G.E.’s chief executive, Jeffrey R. Immelt, as his liaison to the business community and as the chairman of the President’s Council on Jobs and Competitiveness, and it is expected to discuss corporate taxes. 

“He understands what it takes for America to compete in the global economy,” Mr. Obama said of Mr. Immelt, on his appointment in January, after touring a G.E. factory in upstate New York that makes turbines and generators for sale around the world. 

A review of company filings and Congressional records shows that one of the most striking advantages of General Electric is its ability to lobby for, win and take advantage of tax breaks.

I don't mean to pick on GE.  While they've been the most successful at the tax avoidance game, Big Money (Wall Street), Big Pharma, Big Oil, Big Military, etc. all have been quite successful at collaborating with Big Government to fleece the rest of the country via favorable tax and regulatory treatment for these important election campaign donors.  The Bigs fund the elections of the politicians and bureaucrats and the government largess is the return payment for that funding.

The solution is quite simple.  First, eliminate the corporate income tax completely, especially since it only represents 6.6 percent of all federal revenue anyway.  This will immediately eliminate all the current collusion and corruption.  This should actually be moderately easy to get through Congress, if not right now, then eventually.

Second, institute a revenue tax (NOT income tax), on all revenues over some amount, say $10 billion, with no loopholes, and increasing rates as revenues increase beyond $10 billion.  If economies of scale still favor the company even with the revenue tax, fine.  If not, the shareholders will force a breakup of the company because the new pieces will then be more profitable in aggregate because each piece will be smaller and able to avoid the tax on revenue.  This would help reduce the number of Bigs and their inherently corrupt relationship with Big Government.

Limiting the number of large and powerful companies would be a good thing since, to paraphrase Lord Acton, power corrupts and big power corrupts bigly.