BUSINESS » THOMAS FRIEDMAN

Tom Friedman’s Apple Hunch

February 21, 2013   ·   1 Comments

Source: FAIR

Friedman

By Peter Hart:

New York Times columnist Tom Friedman is, for reasons that remain entirely unclear, considered a wise man in elite media circles. His columns and books are read by others in the business, who then turn around and pretend they know something because they read it in a Tom Friedman column.

So on Sunday (2/17/13) Friedman wrote a column about how government policies are harming the recovery. What we need is some kind of grand bargain to, as the headline puts is, "unparalyze" the economy and spur new growth. What's that mean? Cuts to Social Security and Medicare, along with "tax reform."

And he kicks off his column with an example that he evidently believes supports his case:

Apple is currently sitting on $137 billion of cash in the bank. There are many reasons Apple has not spent its cash hoard, but I'll bet anything that one of them is the uncertain economic and tax environment in this country. Think about how much better we'd all be if Apple, and the many other companies sitting on cash, felt confident enough in the future to spend it. These are the most dynamic companies in the world. They don’t need any government help to innovate.

So Apple is hoarding cash because  "we do not have our political house in order." Friedman doesn't dismiss the idea that a massive recession may have curtailed demand for Apple products, but that's not the main story. Economist and media critic Dean Baker does a thorough job of explaining the problems with Friedman's argument.

While Friedman's argument rests on his hunch about why Apple is sitting on cash, reporters at outlets like his own New York Times have done, well, actual journalism. And it offers a different view of Apple's predicament. Charles Duhigg and David Kocieniewski (4/12/12) showed how Apple keeps an office in Nevada to avoid millions in California state taxes. And more importantly, Apple

was a pioneer of an accounting technique known as the "Double Irish With a Dutch Sandwich," which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean.

The Times reported that in the previous year, Apple "paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent."

So when Friedman talks about tax policy and "uncertainty," in reality we're talking about the efforts by Apple and other tech giants to avoid paying taxes–which is why they lobbied for a "repatriation holiday," which would permit them to bring that money back into the United States without paying the normal tax rate.

In other words, it's not at all likely that Apple is waiting for Medicare cuts to act. It is looking to avoid paying taxes.

But Friedman's "bet" serves to cover up the issue of corporate tax-dodging and frame the debate along the usual Beltway lines–i.e., whether political leaders will have the "bravery" to cut Medicare spending in order to make sure the wealthy don't have to pay too much in taxes.

But Friedman's explanation of reality appeals to others in the media, like NBC Meet the Press host David Gregory (2/17/13), who cited it favorably while interviewing White House chief of staff Denis McDonough:

He's sitting on over $100 billion–in cash, $171 billion in cash at Apple. Why? Because there's uncertainty in the marketplace. Tom Friedman, writing this morning–something that caught my eye. He said, "You can feel the economy wants to launch, but Washington is sitting on the national mood button. What we–the people feel like the children of permanently divorcing parents."

So Friedman's hunch about Apple now resembles an eye-catching fact. People like David Gregory like to call for more "sacrifice" in the form of benefit cuts for seniors. But now they've found a new way to do it, by endorsing tax cuts for mega-corporations like Apple. We wouldn't want them to suffer, after all.

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Readers Comments (1)

  1. carlyle says:

    If Apple was the world’s producer of cat skins, nothing would make them hire more cat skinners than increased demand for cat skins.
    This applies to all of the things they really do produce.

     

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