I try to stay away from politics on the blog and focus on economics. However, presidential candidate Mitt Romney is being castigated in the media for making a simple, factual statement.
In response to a question from an audience member, Mitt Romney stated, “corporations are people, my friend.” According to NPR, this was “an early Christmas gift” to Democrats because it “made their goal of pushing the narrative that he is a tool of corporate America much easier by providing them with that handy piece of video.”
Color me confused. What did Romney say that (a) suggests he is a tool of corporate America, or (b) is factually inaccurate? Corporations are people. The revenue generated by a firm ultimately goes to individuals whether in the form of wages or profits that go to the owners of the firm (which, in the case of public companies, are the stockholders). Costs beyond wages for a particular firm are paid to other individuals and firms for supplies, services rendered, etc. This is a basic fact and the reason that one will, at times, hear an economist claim that “corporations don’t pay taxes, people do.”
This simple fact, however, has either been misunderstood or misconstrued by the commentariat. In fact, the NPR post explicitly misses this point as the reporter writes:
Anybody these days fortunate to have a 401(k) retirement plan, or even a job with a corporation, understands that when a company makes a profit, there’s a benefit to that firm’s “stakeholders,” as executive-types like to say.
This, however, is only part of the story. It goes beyond profit. Anybody who works for a corporation or who owns or works for a firm that sells goods and services to a corporation benefits from that corporation’s existence. This is what it means to say that corporations are people. Romney was correct.