Bernie Sanders was wrong about GE. But that doesn't make Jeffrey Immelt right.
Presidential candidate Bernie Sanders and General Electric CEO Jeffrey Immelt got themselves into a bit of a spat this week.
It started when the New York Daily News interviewed Sanders on Monday and prompted the Vermont senator to give an example of a corporation that's "destroying the fabric of America." Sanders pointed to GE: "What we have seen over the many years is shutting down of many major plants in this country. Sending jobs to low-wage countries," Sanders said. "And General Electric, doing a very good job avoiding taxes. In fact, in a given year, they pay nothing in taxes."
This did not sit well with Immelt. He fired back from the op-ed pages of The Washington Post on Wednesday, citing the numerous factories and employment GE still maintains in the U.S., and its annual $20 billion in American exports. He also called the tax charge a straight-up lie: "We pay billions in taxes, including federal, state, and local taxes."
So we have two disputes here, the offshoring of jobs and GE's taxes. Let's work through them.
Whatever Immelt's protestations, GE has earned itself a reputation as something of a pioneer in offshoring jobs. Its famous Appliance Park manufacturing center in Kentucky peaked at 23,000 jobs in the 1960s, then fell below 16,000 in 1984, and hit a low of 1,863 in 2011. GE has reportedly eliminated around 16,000 jobs in the United States since 2008 alone.
There's a possibility this process may be slowly turning around: GE added some new assembly lines to Appliance Park in more recent years, and it's rebuilding some of its IT workforce state-side. Whether this is a genuine turnaround or a mere blip remains to be seen.
But what's especially weird is that Immelt doesn't defend this history at all. His citations of GE employment within the U.S. are completely free of context: What were those numbers 10 years ago, or 20, and so on? Moreover, he pretends Sanders is incensed over GE selling goods and services outside of American, as opposed to moving jobs specifically outside the country's borders.
The tax question is a bit more tricky, and Sanders' charge is likely overly simplistic. The official federal corporate tax rate of 35 percent has so many loopholes and carve outs that actual tax payments fluctuate wildly from company to company and year to year. The Congressional Budget Office estimated that, since the 1980s, American companies have paid an average effective tax rate of just 25.6 percent on their domestic profits. Citizens for Tax Justice (CTJ) estimated it was just 18.5 percent for Fortune 500 companies between 2008 and 2010.
CTJ says GE specifically managed to avoid paying any federal corporate taxes from 2008 to 2013, and very few state corporate taxes from 2010 to 2014. GE disputes this conclusion, but hasn't made its tax payments public. So anyone who wants to investigate has to infer what they can from what's available in the public record. And the demise of GE's lending and finance division in 2015 will probably change things a lot going forward. Whether or not the U.S. corporate tax system is "designed for today's economy," in Immelt's extremely ideologically-loaded wording, it's certainly an incomprehensible mess.
But GE has worked very hard to usher in this state of affairs. The company reportedly expended over $200 million on lobbying during the 2000s, most of it devoted to the subject of tax legislation. And it employs a veritable army of lawyers and accountants to make full use of the loopholes it lobbies for.
At the end of the day, GE is a corporation and profit is its fundamental motivator. As with all other companies, the idea that GE should always be seeking to maximize its margins and thus maximize its payouts to shareholders is baked into its institutional culture. So of course GE constantly works to minimize its tax burden and to move its operations wherever costs, like labor, are the lowest.
All of which makes Immelt's paean to GE's good corporate citizenship a bit too precious: It is undoubtedly true that GE serves a valuable and productive role in the ecology of the American economy — or is at least capable of doing so. But whether or not it does so isn't determined by any sense of ethical obligation. It's determined by policy, and whether our national system of taxes, regulations, institutions, and laws ensures that when GE inevitably pursues its for-profit nature, it winds up making life better for all Americans, rich and working class alike.
The value of Sanders' campaign is it's forcing the country to ask itself whether we've actually built such a system — and if we haven't, then what such a system would might like. But that also means railing against GE's moral fiber is rather silly.