March 9, 2005 By Joel S. Hirschhorn For its cancerous growth, Wal-Mart has exploited cheap foreign and domestic labor and is now a metaphor for the export of American jobs and prosperity to other nations. Some say Americans have a love-hate relationship with Wal-Mart. Maybe - but the more you know, the more you hate. Some bargains are not what they seem to be. No other company has faced so much passionate grassroots opposition to its expansion across America. It has been painted as evil incarnate for its destruction of open space, exploitation of workers here and abroad, destruction of domestic manufacturing and its jobs, and ruination of small town America and small, locally owned businesses. Its huge imports have exported our prosperity and given China and other nations some control over our future. Its focus on providing low prices has shaped Wal-Mart's defense: we just give consumers what they want, don't blame us for being better at offering low prices than everyone else. The logical way to challenge this defense is to invoke what economists call externalization of costs. Wal-Mart shifts health care and other costs to all taxpayers, who subsidize Wal-Mart and its customers, yet receive no benefits. Call it the Wal-Mart tax. Consider these examples: in Iowa, for example, 845 Wal-Mart workers or members of their families are on Medicaid. In Connecticut, 1,028 Wal-Mart employees are in the state's medical care assistance program, or 11.3 percent of its workers in the state. In Alabama, Wal-Mart employees had 3,864 children on Medicaid. In Georgia, Wal-Mart employees had 10,261 children receiving state medical care assistance. In Tennessee, Wal-Mart had 9,617 employees receiving state health care assistance, nearly 25 percent of the company's entire workforce in the state. Both state and federal taxpayer money is being spent to assist Wal-Mart employees and their families. Yet it is inconceivable that Wal-Mart can be legally prohibited from continuing its practices. Nor can imports be directly prohibited because of international trade agreements. It is on the consumer demand side that some solution is possible. Consider this thought experiment. Competitors to Wal-Mart buy products made in the U.S., and give their employees decent wages and good enough benefits to keep them from needing government assistance. American manufacturers also offer good jobs with decent wages and benefits. Competitors offer the same type products, but at higher prices. Then, consider offsetting Wal-Mart's unfair low cost, low price advantage by taxing sales at Wal-Mart by the cost differential to level the retail playing field. The "offset sales tax" can be split between local and state governments to supplement various social service programs, pay for infrastructure costs, such as more roads and police, required for stores, and assist start-up costs for new decent-wage retail and manufacturing enterprises. For millions of low income Americans, their survival need for low Wal-Mart prices cannot be ignored. So the social equity question becomes: How to help those Americans who truly require and depend on Wal-Mart's low prices? Only those consumers, not the ones who like those low prices, but can afford higher, unsubsidized prices. Local or state government can provide to those requesting and qualifying for it a special offset sales tax exemption identification card. Low income individuals or families would present some type of evidence of their status. By using the tax exemption cards at checkout they would still take advantage of the low prices, while others would not. To determine the tax, government authorities could estimate from current databases what fraction of customers would likely qualify, including those receiving Medicaid, food stamps, welfare, unemployment insurance, or supplemental social security benefits. A great many Wal-Mart employees would qualify. Wal-Mart's unfair competitive advantage would diminish. Over time, those low income people currently in desperate need of low Wal-Mart prices would find more employment opportunities as competitors and their domestic suppliers expanded their operations. Naturally, it sounds complicated, but this approach does not impose legal restrictions on Wal-Mart, yet serves the greater public interest by not causing taxpayers in general to pay the price for Wal-Mart's low prices. Other retailers would also be put in the same category, based on a determination of their dependence on imports and whether their wage/benefit structure places burdens on government programs. Special sales taxes have always been used, such as luxury and cigarette sales taxes. The "offset sales tax" would be applied to overall sales, not specific products, and not just Wal-Mart. Interestingly, a bill to levy a special sales tax on Wal-Mart and similar chains has recently been introduced in Montana, exactly for the purpose of offsetting welfare costs for low-paid employees. Connecticut's House Majority Leader Christopher Donovan said: "Here is the richest retail company in the world, and we, the taxpayers, are subsidizing their [medical] coverage. I think people aren't aware of the extent that we're subsidizing the biggest, richest, most powerful companies. Wal-Mart shoppers need to know there's an extra cost of doing business." Most Americans know that something needs to be done about the Wal-Martization of our nation and the exporting of our prosperity that is destroying our middle class. Wal-Mart has wiped out the heart and soul of U.S. manufacturing, which in turn has steadily destroyed good jobs here. Nothing illegal, but not patriotic. Not when you understand that what Wal-Mart has itself done, and compelled other retailers to do, has created more demand for its low priced goods by creating more low income Americans. Call it the Wal-Mart squeeze. Wal-Mart is pouring money into political pockets to protect itself from government action, which Americans must demand. It is not effective to fight Wal-Mart one store expansion at a time, because many more new stores are built than are blocked. Wal-Mart's prosperity is not America's prosperity. Neither is China's prosperity. What's good for Wal-Mart is not good for America, and we do not have to say "in the long run," because the long run has already come.

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jeez, everything is piled up here - political advantage, taxpayer burdain, exporting jobs, etc. etc. - everything... And not a word about Wal*Mart's use of eminent domain to deprive private owners of their private properties. Sounds like this whole article is really driven more by envy for the rich than by real concern for the consumers!

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Originally posted by ShEV: jeez, everything is piled up here - political advantage, taxpayer burdain, exporting jobs, etc. etc. - everything... And not a word about Wal*Mart's use of eminent domain to deprive private owners of their private properties. Sounds like this whole article is really driven more by envy for the rich than by real concern for the consumers!

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well, i don't see anything here that looks like "envy for the rich" (quotes ?), however this article makes good points, particularly regarding all of us paying for health insurance of the employees of the richest retail company in the world... as far as "Wal*Mart's use of eminent domain to deprive private owners of their private properties." - am not exactly sure what u mean here, but i highlited few parts where article refers to wallmart's destructive effect on US small private business, if this is what u meant...if not - then enlighten me on yet another act of wrongdoing of this octopus... generally, i hope, we both agree that wallmart is evil...

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Originally posted by raspizdyaichik: generally, i hope, we both agree that wallmart is evil...

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Once again -- typical liberal approach... Nothing new here.

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like the article. I dont say things like Walmart is evil, but it comes close :) Can someone argue with the notion that it is harmful to small businesses? They even have a commercial where some small business owner says - "thanks to walmart I get thousands of people passing my store" :) The argument of health coverage is also a good one. why the f*ck are our taxes paying for Walmart's health coverage?

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"Я это понимаю на рациональном уровне, но не могу принять на эмоциональном" --Бизнесмен Борис Березовский

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Originally posted by Egor: The argument of health coverage is also a good one. why the f*ck are our taxes paying for Walmart's health coverage?

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Egor, this is another spin - it's not Wal-Mart. Majority of part-time employees in any business won’t be qualified for health benefits because they don’t produce enough for their employer to pay it share of the coverage.

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Originally posted by TAP3AH:

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Originally posted by Egor: The argument of health coverage is also a good one. why the f*ck are our taxes paying for Walmart's health coverage?

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Egor, this is another spin - it's not Wal-Mart. Majority of part-time employees in any business won’t be qualified for health benefits because they don’t produce enough for their employer to pay it share of the coverage.

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...your "part-time employee" explanation is a beautiful example of wishful thinking, but it has nothing to do with reality... read this: http://www.aflcio.org/corporateamerica/ns10212003.cfm and this: http://www.aflcio.org/corporateamerica/walmart/

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Originally posted by raspizdyaichik: ...your "part-time employee" explanation is a beautiful example of wishful thinking, but it has nothing to do with reality... read this: http://www.aflcio.org/corporateamerica/ns10212003.cfm and this: http://www.aflcio.org/corporateamerica/walmart/

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Blah, blah, blah... It’s good to leave under communism!! So, how much should we pay to a middle-school dropout without any special skills or a willingness to learn? Your afl-whatever-cio friends say $12 to $14 per hour??!! I say why stop there?!! Let’s pay them $55 per hour and make up the difference by raising prices!! I don’t care – I don’t shop Wal-Mart! Poor people and lower-middle class folks do!! Make them pay for it!!

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Originally posted by TAP3AH:

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Originally posted by raspizdyaichik: ...your "part-time employee" explanation is a beautiful example of wishful thinking, but it has nothing to do with reality... read this: http://www.aflcio.org/corporateamerica/ns10212003.cfm and this: http://www.aflcio.org/corporateamerica/walmart/

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Blah, blah, blah... It’s good to leave under communism!! So, how much should we pay to a middle-school dropout without any special skills or a willingness to learn? Your afl-whatever-cio friends say $12 to $14 per hour??!! I say why stop there?!! Let’s pay them $55 per hour and make up the difference by raising prices!! I don’t care – I don’t shop Wal-Mart! Poor people and lower-middle class folks do!! Make them pay for it!!

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Tarzan, you make good points. Successful businesses always get dragged through the mud... But this does not change the fact that this is not healthy for the economy. regardless of intentions, fairness, etc. It's still true that the health coverage issue is magnified by Walmart. Its also true that the trade imbalance is magnified. factories are closed, small businesses are closed in these small towns. Whether or not we are pro or anti Wal-Mart - these things do not change. They do what they do! :)

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"Я это понимаю на рациональном уровне, но не могу принять на эмоциональном" --Бизнесмен Борис Березовский

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Originally posted by Egor: Its also true that the trade imbalance is magnified. factories are closed, small businesses are closed in these small towns.

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Egor, Wal-Mart never closed any factories nor small business - poor management and weak marketing did. People just love to blame everyone but themselves!

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rasp, if you like researching so much - check out Neil Boortz's site, he has info about eminent domain. I may agree that Wal*Mart is doing wrong, but if my reasons are different, why would I agree with your statement? The article sounds merely that "let's all hate this big rich company and the reasons are that they make a lot of money and they take advantage of poor"... Sounds like BS to me. Small businesses are hurting? Well, why don't we attack the large restaurant and cafe chains then? They are doing the exact same thing to the small businesses! This logic can be continued. As far as our taxes paying for somebody's medical benefits, well... First - our taxes are paying for our government anyway, and the bigger it is, the more money we waste, so if the gov. size is reduced, then there will be more money for everything. Second - I'd rather have my money pay for those who are working and doing something positive, than those who flat out sit on a wellfair and "don't do shit". Third, the article is a great tool of the media to make noise - but where are the facts and the actual sources of this data? Finally, Wal*Mart has been a most popular hero of all the business case studies on its use of technology and other advanced business strategies. So on one hand - it has done some good too. The majority (the very same majority that libs are trying to get to vote for them by turning them against the rich) is looking for a "better deal" and a better price. So all Wal*Mart really did (per this article) was to find all the ways possible to drive the price down and offer very affordable and/or cheap products. All that - to please that very same majority that this article now is trying to turn against the Wal*Mart. So no, I do not support this article. And I still do view Wal*Mart as an evil corporation but for completely different reasons, which lead back to the actual givernment allowing this very Wal*Mart take away private property of individuals to built their stores. Btw, building a Wal*Mart in a "poor" neighbourhood may increase the value of the land. But taking private property and build a Wal*Mart in a better neighbrouhood will most likely drive the value of the land down. So if you talk about economical effects of Wal*Mart - this is probably a better idea to discuss.

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Originally posted by TAP3AH:

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Originally posted by Egor: Its also true that the trade imbalance is magnified. factories are closed, small businesses are closed in these small towns.

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Egor, Wal-Mart never closed any factories nor small business - poor management and weak marketing did. People just love to blame everyone but themselves!

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I already said, i am not blaming them. they are just a business trying to make a few billion. :) I can't expect them to sacrifice profits for the common good :) But whether or not this is their fault, my point is that these consequences exist, are real, and are directly tied to walmart. There is no level playing field - our factiries have minimum wage. :) And small businesses used to hire high school dropouts and turn them into skilled laboreres. In fact most older blie collar workers are not college educated. This process is effectively destroyed. They go to work at walmart stay poor all their lives and depend on the government for their health coverage. Forget the blame game - just look at it in a vacuum. Not good.

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"Я это понимаю на рациональном уровне, но не могу принять на эмоциональном" --Бизнесмен Борис Березовский

Agree - not good. But you can blame the governemnt for that as easily - it is all about the insentive. If you give people the insentive to stay where they are, they will. If you make people move and look for ways to change their situation - most likely they will find them.

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I think walmart gets too big of a blame. though i do agree that it's presense creates some problems but then maybe they should be better regulated. In the last 10 years i saw huge transformation in several business: Walmart took over the inexpensive retail market (10 years ago walmart, k-mart were on the same level, with target lacking a little - now it's walmart, then a huge hole, then target, then k-mart). I also saw best buy winning a tech store marker (10 years ago Circuit City was a leader all over the country - nwo they are losing money). Home Depot was the king, now Lowe's (in southeastern states at least) has taken a huge chunk of that business from them. Publix came to atlanta around 8-9 years ago and now it's on the par with Kroger in atlanta. It's the business model that makes it work.. Not just cheap labor..

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Originally posted by Lionya: I think walmart gets too big of a blame. though i do agree that it's presense creates some problems but then maybe they should be better regulated. In the last 10 years i saw huge transformation in several business: Walmart took over the inexpensive retail market (10 years ago walmart, k-mart were on the same level, with target lacking a little - now it's walmart, then a huge hole, then target, then k-mart). I also saw best buy winning a tech store marker (10 years ago Circuit City was a leader all over the country - nwo they are losing money). Home Depot was the king, now Lowe's (in southeastern states at least) has taken a huge chunk of that business from them. Publix came to atlanta around 8-9 years ago and now it's on the par with Kroger in atlanta. It's the business model that makes it work.. Not just cheap labor..

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Lionya, agree with you completely. the question is... how do you regulate without being too communist? :)

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"Я это понимаю на рациональном уровне, но не могу принять на эмоциональном" --Бизнесмен Борис Березовский