THE RADICAL, REACTIONARY, TOTALLY POLITICAL SUPREME COURT

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The Supreme Court’s rulings last week on abortion, a gun violence prevention measure, and public funding of religious institutions reflect a political and ideological agenda, not a coherent legal or judicial philosophy, as I will discuss below. All of them overturned long-standing precedents – something all of the justices had pledged not to do in their confirmation hearings. There are three important areas where the contradictory nature of the reasoning underlying these rulings is most evident:

  • Belief in a weak federal government and strong state governments,
  • Belief in “originalism,” i.e., that the language and meaning of the Constitution and its amendments as and when written should be adhered to, and
  • Belief in the legality of precedents and rights unspecified in the Constitution only if they reflect long-standing practices in the country.

In this post, I’ll explore the belief in a weak federal government and strong state governments as a rationale for the justices’ rulings and demonstrate their inconsistent and contradictory use it. I’ll cover the other rationales in subsequent posts.

Conservatives have traditionally supported a weak federal government and strong state governments. However, for the six justices in the majority in each of these recent rulings their commitment to this belief seems to depend on the issue.

There are two main pillars behind the weak federal and strong state government position. One is support for “states’ rights;” leaving as much of the public sector role and policy making to lower levels of government that are closer to the grassroots. Having control of schools and elections in local and state hands are two bedrock conservative examples of this. The exercise of “states’ rights” has, both historically and currently, reflected racism. Racism was an important component of “states’ rights” politics in the 1960s as it was pushback against federal Civil Rights laws, including voting rights and school desegregation.

The second pillar of conservative support for a weak federal government is opposition to regulation of businesses and the private sector. Conservatives typically believe that an economy that is as unfettered by government regulation as possible will be the most productive (if not necessarily the fairest). They also typically believe in market place and private sector solutions to social issues (e.g., privatization), not government programs as solutions.

In the June 24, 2022, ruling overturning Roe v. Wade’s establishment of a right to an abortion, the Supreme Court ruled that the federal government could not constitutionally guarantee this right. On the face of it, this reflects a belief in a weak federal government and a “states’ rights” approach where policies on abortion would be left to state governments. However, Alito’s opinion seems to go out of its way to ensure that anti-abortion advocates could pursue a nationwide, federal ban on abortion (i.e., a strong federal government role) by repeatedly writing that the abortion debate is being returned “to the people and their elected representatives.”  He does not write that the decision is being returned to the states. The implication is that those “elected representatives” could be those in Congress. Therefore, within this one decision and opinion, Alito and the five other concurring justices are at best unclear and at worst contradictory about whether they believe the Constitution creates a strong or weak federal government in relation to the states, at least in realm of abortion law. [1]

The Supreme Court’s June 23, 2022, decision declaring unconstitutional New York State’s requirements for obtaining a permit to carry a gun in public is an assertion of a strong federal government with the power to overrule states’ laws regulating guns. The Court is furthering federal enforcement of an individual “right” to bear arms based on its interpretation of the Second Amendment. (I discussed the problems with their interpretation of the Second Amendment in this previous post and won’t go into them here.) This ruling overturns a state law that has been in place for over 100 years and effectively renders any state law restricting ownership or carrying of a gun presumptively unconstitutional. The ruling, among other problems, seems to ignore the language of the Second Amendment that the right to bear arms is predicated on “being necessary for the security of a free State.” A state and the people living in it are neither more secure nor freer with an expanded “right” of individuals to carrying guns in public. [2]

On June 21, 2022, the Supreme Court issued a ruling ordering the state of Maine to allow public dollars to pay for children’s attendance at religious schools. Putting aside for the moment the First Amendment language that prohibits the government from making any “law respecting an establishment of religion” (as the six deciding justices apparently did), this ruling reflects a belief in a strong federal government that can tell states how to spend their money. This is the antithesis of “states’ rights” and a weak federal government, which conservatives typically support. This follows a pattern of decisions where the Supreme Court has overturned decades-old, affirmed precedents and ordered state or local governments to take actions that benefit or support religious groups. In Missouri, the Court ordered the state to include religious organizations in a program funding playground maintenance. In Montana, it ordered the state to include religious schools in a scholarship tax credit. It ordered Boston to include Christian groups in a program allowing non-profit organizations to fly a flag on a city flagpole. [3] Most recently, it ruled that a Washington state school district had to allow a football coach to lead players and others in prayer on the football field, despite students reporting that they felt coerced. [4] (I wonder how the Court would rule if the religious group asking for government support were Jewish, Muslim, or some other non-Christian religion. We may find out one of these days.)

One final note. Election laws and the running of elections (along with schools) have been hallmarks of conservatives’ insistence on state responsibility and control with no or very limited federal government involvement. In recent years, the Supreme Court has overturned the Voting Rights Act, stopping federal oversight of election laws in states that had (and have) a history of discriminating against Black voters. It has refused to intervene as states have engaged in voter suppression and extreme gerrymandering with political and racial goals. However, back in 2000, the Supreme Court stepped into the presidential election in Florida (in Bush v. Gore) and ordered the state to stop counting ballots. The dissenting justices and many others identified this decision as a turning point when the “conservative” justices on the Court first displayed in a dramatic way their willingness to cast aside any coherent judicial philosophy or reasoning, upend precedent, and issue a ruling to achieve the political result they personally supported.

The recent rulings by these six Supreme Court justices (Roberts, Alito, Barrett, Gorsuch, Kavanaugh, and Thomas) are clearly political and ideological, if for no other reason than the judicial philosophy and reasoning behind them is inconsistent and contradictory. Given the lack of a coherent judicial philosophy or reasoning, the only rational conclusion I can come to, is that these justices are acting on the basis of their personal political and ideological beliefs and sympathies, and not as judges upholding the laws established by the legislative and executive branches of government. Rather, they are dramatically legislating from the bench; something conservatives used to criticize others for doing. They are radical reactionaries, not conservatives. (See this previous post for more detail on why this is appropriate terminology for describing them.)

In my next posts, I will review the six radical, reactionary Supreme Court justices’ contradictory and inconsistent uses of their supposed beliefs in “originalism” and in the legality of precedents and rights unspecified in the Constitution only if they reflect long-standing practices in the country.

In the meantime, Heather Cox Richardson has posted a 33-minute reflection on the state of our (supposed) democracy after the recent momentous and anti-democratic decisions by the Supreme Court. Her commentary and perspective are, as always, thoughtful, poignant, and steeped in history. I encourage you to listen to all or part of it (perhaps the last ten minutes if you’re short on time). I’ve linked to it on my Facebook page: https://www.facebook.com/john.lippitt.161/

[1]      Hubbell, R., 5/4/22, “The hard path forward,” Today’s Edition Newsletter (https://roberthubbell.substack.com/p/the-hard-path-forward)

[2]      Johnson, J., 6/23/22, “ ‘Devastating’: Supreme Court blows massive hole in state gun control efforts,” Common Dreams (https://www.commondreams.org/news/2022/06/23/devastating-supreme-court-blows-massive-hole-state-gun-control-efforts)

[3]      Atkins Stohr, K., 6/22/22, “Remember separation of church and state? Apparently the Supreme Court doesn’t.” The Boston Globe

[4]      Conley, J., 6/27/22, “Supreme Court takes ‘wrecking ball’ to separation of church and state with prayer ruling,” Common Dreams (https://www.commondreams.org/news/2022/06/27/supreme-court-takes-wrecking-ball-separation-church-and-state-prayer-ruling)

THE POWER OF THE GUN INDUSTRY

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The gun industry has a powerful influence on policy making in the US as well as in shaping judicial rulings on gun laws and the discussion of guns and gun violence.

Part of the gun industry’s power and influence comes from its size and its ability and willingness to spend on political campaigns and lobbying. It produces roughly 10 million guns per year, resulting in sales revenue of about $12 billion. With profits of approximately $1 billion annually, it has spent $120 million on lobbying over the last ten years. In the two-year 2020 election cycle, the advocacy groups associated with the gun industry spent over $18 million on election campaigns. While the National Rifle Association (NRA) was the source of $5 million of this spending, it has been declining in membership and financial clout. However, other gun advocacy groups have been picking up much of the slack. [1]

For example, the organization Gun Owners of America has been increasing its activity. It opposes the U.S. House passed Protect Our Kids Act as well as the emerging bipartisan Senate proposal to address gun violence. It has “concern” about expanded waiting periods on gun purchases and red flag laws that would allow courts to remove guns from people deemed to be a danger to themselves or others. It opposes the proposal to ban untraceable “ghost” guns and is spreading misinformation about what it would do. [2]

Another piece of the gun industry’s power comes from its shaping of the discussion of guns and the Second Amendment. It has shifted the discussion from a well-regulated militia, e.g., the National Guard, to an individual right to ownership of any and all types of guns. It also shifted the discussion from the security of the state to personal self-defense. (See this previous post for more detail.) This shift in language, especially to an individual’s supposed right to own a gun (including a semi-automatic assault weapon), is pervasive in the media, widespread in the court system, and even echoed by Democrats and President Biden.

The 2008 Supreme Court’s 5 to 4 decision that created an individual right to possess a firearm, District of Columbia vs. Heller, overturned 217 years of interpretation of the Second Amendment and numerous court precedents allowing restrictions on an individual’s possession of a gun. It was described by former Supreme Court Justice John Paul Stevens (appointed by Republican President Gerald Ford) as “unquestionably the most clearly incorrect decision that the Supreme Court announced during my tenure on the bench,” which extended 35 years from 1975 – 2010.

Former Chief Justice Warren Burger (appointed by Republican President Richard Nixon) called the gun industry’s and the NRA’s promotion of this interpretation of the Second Amendment “One of the greatest pieces of fraud, I repeat the word fraud, on the American public by special interest groups that I have ever seen in my lifetime.” These two statements by conservative, former Supreme Court Justices underscore the hypocrisy of the supposed originalism of the supporters of this interpretation, who ignore the first two phrases of the Second Amendment: “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.”

Nonetheless, the media, the courts, essentially all Republicans, and even most Democrats speak of the individual right to bear arms as an unquestioned constitutional right. Questioning this interpretation of the Second Amendment or citing Justices Stevens’ and Burger’s statements about it are almost completely absent from the discourse. Based on this manufactured right, the Supreme Court seems all but certain to make a ruling this month that will find unconstitutional a New York law, in place since 1913, that requires someone carrying a concealed gun in public to have a permit.

It appears that the originalist judicial philosophy (supposedly underlying this interpretation of the Second Amendment as creating an individual right to bear arms) was invented as an intellectual smokescreen to justify this and other radical, reactionary judicial rulings. The originalists claim that the Constitution’s language, including on rights, freedom, and liberty, should always and forever be interpreted with the meaning they had in 1791 (when African Americans were slaves) or in 1868 when the 14th Amendment was passed (when women had no rights and almost all schools were segregated). [3] Such a claim seems ludicrous on its face and the Supreme Court rulings by its adherents are radical, reactionary, and inconsistent. The failure of the media and Democrats to point out these facts is hard to understand.

The gun industry also displays its power on the Internet and social media, which have certainly played a role in fomenting the American gun culture and even gun violence. Given that most TV networks, magazines, and newspapers banned gun ads years ago, digital advertising via Google and other Internet sites is essential to the gun industry’s marketing.

In 2004, based on Google’s corporate value “don’t be evil” and as a matter of ethics, Google’s cofounder Sergey Brin announced that gun ads would be banned. Nonetheless, Google’s ad systems have provided billions of views of gun makers’ ads since then. A study by the independent, non-profit, investigative journalism organization ProPublica found that between March 9 and June 6, 2022 (90 days), the fifteen largest gun sellers in the U.S. placed ads through Google that produced 120 million impressions (i.e., the displaying of an  ad to a viewer). [4] This is an average of roughly 1.3 million views of a gun ad per day.

Every time an ad is viewed, Google earns a small fee. Some of the gun ads have appeared on Google’s own sites, a clear breach of Google’s stated policy. However, the vast majority of them are placed via a long-standing and well-known loophole in Google’s policy. Although Google bans gun ads on its own ad network and on sites it owns, ads sold by partners but placed using Google’s systems are not restricted by Google.

Gun makers and sellers can use Google’s advertising system to place gun ads on websites that allow gun ads. This is where the vast majority of gun ads show up.

Although a website owner can theoretically ban certain types of ads, such as gun ads, Google’s ad systems’ enforcement of such a ban has loopholes. Most notably, if a person has visited a gun maker’s website, Google’s tools facilitate the tracking of that person as they browse other sites. When that person is at another website, one that may ban gun ads, this tracking and targeting tool can display a gun ad. This retargeting (as it’s called) of a person is a loophole Google purposefully built into its advertising system over a decade ago.

For example, although Publishers Clearing House does not accept gun ads, in a recent three-month period roughly 4.6 million views of ads for Savage Arms guns occurred on the Publishers Clearing House website. Gun ads have also been documented as showing up on websites such as The Denver Post, Merriam-Webster’s dictionary, the Britannica, U.S. News & World Report, Ultimate Classic Rock, Parent Influence (on an article about “How to handle teen drama), and on Baby Games (amid brightly colored kids’ games), as well as on recipe sites and quiz game sites.

Google makes money on each of the hundreds of millions of views each year of gun ads. Note that Google dominates the digital advertising world with 28.6% of total digital ad revenue in the U.S.; Facebook has 23.8% and Amazon 11.3%, giving the big three an overwhelming 63.7% of the market. Therefore, gun ads via Google’s advertising systems are important both to the gun industry and to Google’s revenue.

[1]      Siders, D., & Fuchs, H., 6/10/22, “The NRA isn’t the only group advocating for the Second Amendment,” Politico (https://www.politico.com/minutes/congress/06-10-2022/more-than-just-nra/)

[2]      Giorno, T., 6/14/22, “Gun Owners of America pushes back on bipartisan gun control legislation,” Open Secrets (https://www.opensecrets.org/news/2022/06/gun-owners-of-america-pushes-back-on-bipartisan-gun-control-legislation)

[3]      Mogulescu, M., 6/6/22, “It’s time for Democrats to stop agreeing that the Second Amendment protects an individual’s right to bear arms,” Common Dreams (https://www.commondreams.org/views/2022/06/06/its-time-democrats-stop-agreeing-second-amendment-protects-individuals-right-bear)

[4]      Silverman, C., &Talbot, R., 6/14/22, “Google says it bans gun ads. It actually makes money from them.” ProPublica (https://www.propublica.org/article/google-guns-ads-firearms-alphabet-advertising)

GUN VIOLENCE’S HIDDEN ACCOMPLICES

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Nowhere else in the world does civilian gun violence take anywhere near the toll that it does in the US. Other countries have and are taking strong, effective steps to reduce gun violence. We, too, can substantially reduce gun violence but it will not be easy or quick. It will take sustained, hard, and at times uncomfortable advocacy to achieve the changes in policies, practices, and attitudes that are necessary to substantially reduce gun violence here.

While the media coverage of mass shootings almost always says the shooter or shooters acted alone, their indirect or hidden accomplices are many and we cannot continue to let them avoid responsibility. The radical reactionaries on the Supreme Court are accomplices because they have given individuals the right to own arms, including semi-automatic assault weapons with large magazines that have no purpose other than killing as many people as possible as quickly as possible.

Members of Congress who block a ban on assault weapons and high-capacity magazines are accomplices. State legislators and Governors who have acted similarly are accomplices. This also applies to the blocking of other gun violence prevention measures, such as comprehensive background checks, waiting periods on taking possession of a gun, increasing to 21 the age requirement for buying a gun, laws keeping guns out of the hands of people most likely to use them to harm themselves or others, red flag laws that allow guns to be taken away from people who have indicated a likelihood to use them to harm themselves or others, etc.

The top of the list of accomplices today includes Governor Abbott of Texas, who proudly signed seven bills weakening regulations that reduce gun violence. In addition, despite saying that mental health services are what’s needed to prevent to mass shootings, he has refused to accept the Affordable Care Act’s expansion of Medicaid eligibility for low-income residents of TX (Medicaid pays for more mental health services than any other health insurer) and he used over $200 million from the state agency that provides mental health services to bus immigrants to Washington as a stunt to support Trump’s border policies. [1]

Also high on the accomplice list is Fox TV (it’s not news), which promotes grievance, hate, and sometimes violence to a largely white, male audience. The social media companies are on the list as well. They allowed the video of the May 14th mass shooting at the Buffalo food market to be seen by millions and to still be widely available two days after the shooting. Facebook took over ten hours to remove a link to the video. Twitch, where the shooter live-streamed the attack, is owned by Amazon. The ability to share video of a mass shooting with millions is what multiplies its impact and makes it real terrorism. [2]

Some of these accomplices are attacking those who are calling them out for their complicity, claiming we are using a tragedy for political purposes. They are hypocrites. First of all, they have used tragedies, fear, hate, and misinformation (let’s call it what it is – lies) for years to expand access to guns and foment their use. Second, while these accomplices appeal to our natural instinct to take the high-road in moments of crisis, they take the low-road time and time again – and appear to have no shame for doing so.

The time for being polite and civil in the face of gun massacres, which are terrorism, has long since passed. After fifty-five years of mass shootings in schools – going back to the University of Texas at Austin in 1966 – defenders of gun “rights” for individuals no longer deserve any presumption of good faith or restraint on our part given the hundreds of thousands of lives lost, including so many children. A polite and civil response has only led to an ever-mounting death toll. [3] (Please see my previous post for why claims of individual gun “rights” are the result of a manipulation of the meaning of the 2nd Amendment to the Constitution.)

It will require a strong and loud, and yes, confrontational, movement to produce meaningful action to reduce gun violence in this country. I urge you to speak out and act out however you are comfortable to contribute to this movement.

[1]      Jeffery, C., 5/26/22, “He did not act alone,” Mother Jones (https://www.motherjones.com/politics/2022/05/uvalde-texas-massacre-accomplices/)

[2]      Harwell, D., & Oremus, W., 5/16/22, “Only 22 saw the Buffalo shooting live. Millions have seen it since.” The Washington Post

[3]      Hubbell, R., 5/28/22, “He did not act alone,” Today’s Edition Newsletter (https://roberthubbell.substack.com/p/he-did-not-act-alone?s=r)

GUN VIOLENCE, THE SECOND AMENDMENT, AND THE “ORIGINALISTS”

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The rash of recent gun violence has refocused attention on the Second Amendment to the Constitution, which reads:

“A well regulated Militia, being necessary for the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.”

The radical reactionaries on the Supreme Court, who are supposedly “originalists,”  have interpreted this language as giving individuals the right to bear arms and an individual right to security through armed self-defense.

Somehow the “originalists” have forgotten (or choose to ignore) the first two phrases of the amendment’s language which link the right to bear arms to a well-regulated militia and the security of the state. Clearly, the original writers of the Second Amendment did NOT have in mind the right of each individual, on his or her own, to bear arms. And they had no possible conception that arms would include semi-automatic weapons that could fire multiple bullets per second; the arms they knew took many seconds to reload for a second shot. So much for originalism! (I’ll write more about the hypocrisy of the “originalists” on the Supreme Court in a future post.)

Actually, what the writers of the Second Amendment had in mind was security against slave revolts. The Second Amendment was pushed by Patrick Henry (Governor of Virginia) and George Mason (intellectual leader of the anti-Constitution anti-federalists). They were worried that the new Constitution would give the federal government the sole power to form militias, preventing states and local entities from doing so. They were also concerned that Northerners would dominate the new federal government. Given that parts of Virginia, for example, had more enslaved Blacks than Whites, Henry and Mason (and others) wanted to ensure that southern states had the power to form militias to protect white slave owners from slave revolts. [1] Therefore, if there’s any originalism in the right-wing justices’ support of an individual right to bear arms, it’s originalism that has strong racist overtones.

The ”originalists” supposedly don’t support any evolution of the meaning of the Constitution over time; according to them, it’s the original language and intent of the writers that should govern judicial decision making. Furthermore, a leading “originalist,” Justice Alito, just wrote in his draft decision overturning Roe vs. Wade, that for an unwritten right to be legitimate, it must be deeply rooted in the nation’s history and have been understood to exist when the 14th Amendment was ratified in 1868. Under either of these originalist principles, an individual right to bear arms, particularly the types of arms available today, would be impossible to assert in a truly originalist interpretation of the Constitution. Again, so much for honest originalism!

A constitutional right to individual gun ownership is a relatively new interpretation of the Second Amendment, invented by the gun industry in the 1970s and aided and abetted by the National Rifle Association (NRA). It wasn’t until the mid-1970s that the Republican Party adopted support of individual gun ownership as a core belief and policy position. In the 1960s, Republicans were strong supporters of gun control, in part because they were strong supporters of law and order. Furthermore, during the 1960s, with the rise of the Black Power movement and pushback from the Black community against racism by police, Republicans were concerned about Blacks having guns. So, for example, in 1967, California passed the Mulford Act, the most sweeping gun control law in the country. It banned personal possession of a firearm without a permit and was signed into law by Governor Ronald Reagan. At the federal level, the Gun Control Act of 1968 was passed, which restricted the sale of firearms across state lines. Neither of these laws raised any constitutional concerns at the time.

Until 1959, every legal article about the Second Amendment concluded that it was not intended to guarantee an individual’s right to own a gun. In the 1970s, legal scholars funded by the gun and ammunition industry, and their front group the NRA, began to make the argument that the Second Amendment did establish an individual right to gun ownership. [2]

In 1972, the Republican Party’s policy platform supported gun laws restricting the sale of handguns. However, in 1975, as he geared up to challenge President Gerald Ford for the 1976 presidential nomination, Ronald Reagan took a stand against gun control.

In 1977, an at-the-time radical wing of the NRA took control of the organization and shifted its focus from marksmanship and responsible gun ownership by hunters to assertion of a right to individual ownership of guns for self-defense and to opposition to any restrictions on gun ownership. In 1980, the Republican Party platform opposed the federal registration of firearms for the first time and the NRA, for the first time, endorsed a presidential candidate: Republican Ronald Reagan. This led to the Firearms Owners Protection Act of 1986, which repealed much of the Gun Control Act of 1968 and dramatically weakened federal gun control. Ironically, it was signed into law by President Reagan (who 19 years earlier had signed California’s strong gun control law).

Nonetheless, after three mass shootings in four years, the Violent Crime Control and Law Enforcement Act of 1994 included a ban on assault weapons and large capacity  ammunition magazines, as they had been used in the mass shootings and were key to making  the horrific carnage possible. However, this ban had a ten-year sunset provision. Therefore, the ban expired in 2004 and has not been renewed despite numerous attempts to do so.

These are key elements of the history of the Second Amendment and policies on gun ownership that have gotten us to where we are today. There have been over 230 mass shootings in the US already in 2022 – well over one per day. (A mass shooting is defined as one where four or more people are injured or killed, not including the shooter.) There were 20 in the week after the May 24th Uvalde, TX, school shooting. In the 230 mass shootings so far this year, 256 people have been killed and 1,010 injured. Historically, there were nearly 700 mass shootings in 2021, a significant increase from 611 in 2020 and 417 in 2019. [3]

I urge you to speak out and act out however you are comfortable to contribute to the movement to take strong action to reduce gun violence in this country. Nowhere else in the world does civilian gun violence take anywhere near the toll that it does in the US. Other countries have and are taking strong, effective steps to reduce gun violence. We can too. We have a long way to go; the sooner we start the better.

[1]      Mystal, E., 2022, “Allow me to retort: A Black guy’s guide to the Constitution,” NY, NY. The New Press.

[2]      Richardson, H. C., 5/24/22, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/may-24-2022?s=r)

[3]      Ledur, J., & Rabinowitz, K., 6/3/22, “There have been over 200 mass shootings so far in 2022,” The Washington Post

FOUR WAYS TO TACKLE INFLATION AND ITS HARMFUL EFFECTS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

This post will summarize four ways to attack the current inflation and its harmful effects, as well as one traditional way of reducing inflation that will probably be counterproductive.

Because what we are experiencing is not traditional inflation, interest rate increases by the Federal Reserve are not likely to be effective in reducing inflation and may well do more harm than good. Typically, interest rate increases slow the economy and job growth, which increases unemployment and slows the rate of wage increases. In the current conditions, this would have little effect on inflation because it is not being driven by wage increases and labor costs, but rather by price gouging by monopolistic corporations, supply chain problems from the pandemic, and the war in Ukraine. In this environment, slowing job and wage growth would increase economic hardship for workers and likely do them more harm than any good due that might come from decreased inflation.

There are other ways to more effectively address the harm that price increases are doing to household budgets. One way is to decrease household costs. The Biden Administration has proposed and taken a number of steps to do this. It is working to increase the supply of oil to put downward pressure on gasoline prices, but the big oil corporations are not cooperating. It is trying to reduce drug costs, but Congress is not cooperating. It is doing what it can to address supply chain problems and to reduce monopolistic power that lets companies increase prices unjustifiably, but these two tactics are not ones that will quickly produce benefits by reducing prices. (See this previous post for more detail on these efforts.)

A second way household budgets can be helped is by increasing incomes. An enhanced child tax credit and/or an expanded earned income tax credit would do this, but these have been blocked by Republicans in Congress with the complicity of a few corporate Democrats, most notably Senators Manchin and Sinema. An increase in the minimum wage would also be helpful but has not made progress in Congress.

Helping families pay the costs of child and elder care would have a three-fold benefit, but again, Congress, particularly the Senate, has not passed legislation to do this. Help with child care and elder care expenses would reduce costs for families, helping alleviate the hardship of increases in other prices. Increased affordability and access to child and elder care would allow parents and caregivers to increase their participation in the workforce, thereby increasing household income. Furthermore, this increase in workforce participation would expand the labor supply, reducing the upward pressure on labor costs of the currently tight labor market. This would reduce the albeit relatively small contribution of labor costs to inflation. [1]

A way to attack the “inflation” that is actually corporate price gouging would be to implement a  windfall profits tax. Senator Bernie Sanders (Independent of VT) has filed the Ending Corporate Greed Act, which would implement a 95% tax on the windfall profits of large corporations (those with more than $500 million in annual profits). The bill defines windfall or excess profits as profits in excess of a corporation’s average profits from 2015 through 2019, adjusted for inflation. (See these previous posts for examples of the extraordinary profits big corporations have been making recently:

The proposed tax closely parallels the World War II windfall profits tax. Windfall profits taxes were also implemented in the 1980s on oil and gas companies and during the Korean War and World War I. [2]

The goal of a windfall profits tax would be to get corporations to stop price gouging because their ability to inflate profits would be significantly reduced. However, if corporations continue to charge high prices and generate big profits, the tax revenue from the windfall profits tax could be used to provide assistance to working families facing economic hardship due to increased prices.

Price gouging can also be tackled directly. Senators Elizabeth Warren (Democrat from MA) and Tammy Baldwin (D-WI), along with Representative Jan Schakowsky (D-IL), have introduced the Price Gouging Prevention Act of 2022. It would prohibit price gouging during market disruptions such as the current pandemic. It would empower the Federal Trade Commission (FTC) and state attorneys general to enforce a ban on excessive price increases. It would require public companies to report and explain price increases in their quarterly filings with the Securities and Exchange Commission. [3]

I encourage to you contact President Biden and your Representative and Senators in Congress. Tell them you support a windfall profits tax, as well as other steps to combat price gouging, inflation, and the hardships they are causing.

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Bivens, J., 4/8/22, “Child care and elder care investments are a tool for reducing inflationary expectations without pain,” Economic Policy Institute (https://www.epi.org/blog/child-care-and-elder-care-investments-are-a-tool-for-reducing-inflationary-expectations-without-pain/)

[2]      Avi-Yonah, R., 4/18/22, “Time to tax excessive corporate profits,” The American Prospect (https://prospect.org/economy/time-to-tax-excessive-corporate-profits/)

[3]      Johnson, J., 5/12/22, “New Warren bill would empower feds to crack down on corporate price gouging,” Common Dreams (https://www.commondreams.org/news/2022/05/12/new-warren-bill-would-empower-feds-crack-down-corporate-price-gouging)

GOOD ECONOMIC NEWS ACCOMPANIED BY PRICE GOUGING AND INFLATION

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

There is good economic news, in case you missed it, which is likely because the mainstream media tend to give it little coverage. The bad news is that price gouging and inflation continue. Multiple ways to tackle them will be presented in my next post.

Good economic news:

  • The number of workers receiving unemployment benefits (1,384,000) is at the lowest level since Jan. 17, 1970, i.e., over 52 years ago. Applications for unemployment benefits are below pre-pandemic levels. [1]
  • Employers posted 11.5 million job openings in March, an unprecedented two job openings for every unemployed person.
  • The economy has generated over 400,000 jobs per month for an unprecedented 12 consecutive months.

Bad economic news:

  • Inflation remains high at 8.3% in April, although it was down a bit from 8.5% in March. Major contributors were airlines’ fares (up 33.3% with only a small fraction attributable to higher fuel costs), energy prices (up 30%, see below for some background), and food (up 9.4%, the highest rate in 40 years).
  • Gasoline prices continue to be a key driver of consumer “inflation.” However, price gouging seems like a more accurate description as gasoline prices have gone up or remained very high despite falling or stabilizing prices for a barrel of crude oil. Moreover, Exxon Mobil and Chevron, the largest U.S. oil corporations, reported soaring profits again for the first quarter of 2022. Exxon Mobil reported $5.5 billion in profits for the quarter despite a $3.4 billion loss from abandoning its operations in Russia. Chevron reported $6.3 billion in profits for the quarter, over four and a half times its profits in the first quarter of 2021. [2] Energy giant Shell reported record first quarter profits of $9.1 billion, up from $3.2 billion the previous year. This prompted calls from the British government to impose a windfall profits tax on the London-based corporation. [3] (More on a windfall profits tax in my next post.)
  • Top executives of six of the largest oil and gas corporations were called to appear before Congress. They refused to commit to lowering gas prices for consumers. They refused to reduce record profits, dividends to shareholder, or buying of their company’s own stock. Over the last year, they’ve spent roughly $40 billion buying back their own corporations’ stock, which drives up the stock price, rewarding themselves and other shareholders. [4]
  • The oil and gas executives also refused to increase production of gasoline, which would tend to lower prices.

Josh Bivens, Director of Research at the Economic Policy Institute, describes consumer inflation as “corporate … greed and market power … channeled into much higher prices and profit margins.” He notes that “normally corporate profits should be about 12% of the cost of anything … [but now] corporate profits [are] accounting for 54% of the total rise in prices.” He notes that increased costs of labor are not driving inflation as they are lower than the overall rate of inflation. Corporations, he states, are able to increase prices and profits now because unusual events have distorted the normal operation of the economy. [5] In other words, this “inflation” is opportunistic price gouging by the airlines, the oil and gas corporations, the meat packers, and others.

In my next post, I’ll summarize four ways to attack the current inflation and its harmful effects, as well as one traditional way of reducing inflation that will probably be counterproductive.

[1]      Ott, M., 5/6/22, “More Americans applied for jobless aid last week,” The Boston Globe from the Associated Press (Note the negative headline on an article that had overwhelmingly good news.)

[2]      Business Talking Points, 4/30/22, “Exxon Mobil and Chevron report soaring earnings,” The Boston Globe from the New York Times

[3]      Business Talking Points, 5/6/22, “Shell earnings soar on higher oil prices,” The Boston Globe from the Associated Press

[4]      Joselow, M, & DeBonis, M., 4/7/22, “Panel grills oil company executives,” The Boston Globe from the Washington Post

[5]      Martinez, A., host of Morning Edition, 5/10/22, “Are corporations using inflationary times to raise prices and up their profits?” National Public Radio (https://www.npr.org/2022/05/10/1097820864/are-corporations-using-inflationary-times-to-raise-prices-and-up-their-profits)

GOOD ECONOMIC NEWS AND THE FIGHT AGAINST INFLATION

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

President Biden gave an important speech last Tuesday on the economy, including both the good news and an update on the fight against inflation. However, I saw very little coverage of the speech in the mainstream media. Here are some highlights:

  • 3 million jobs have been added to the economy in the first 15 months of Biden’s presidency – a record.
  • The unemployment rate is down to 3.6%.
  • 4 million new businesses were started in 2021 – 20% more than any other year on record.
  • The federal deficit declined $350 billion last year and is projected to decline by $1.5 trillion this fiscal yearwhich would be the biggest decline in history. Biden noted that this will decrease inflationary pressures. This quarter the U.S. will actually have a surplus and will reduce the accumulated federal debt. This is the first time this has happened since the Clinton presidency in 2000. (Note that under President Trump, who pledged to reduce the debt, it instead grew by $8 trillion [40%] – from $19.6 trillion to $27.5 trillion. The growth of the debt in Trump’s last year was almost $5 trillion, while in Biden’s first year it was $2 trillion.)

Biden stated that inflation is a serious problem and that reducing it and its impact on families will be his top priority. It is a major problem worldwide and the strength of the U.S. economy has put us in a better position to deal with it than almost any other country. It is driven by supply chain problems and the war in Ukraine that have put supply and demand out of synch. (Why Biden didn’t include corporate price gouging I don’t know. More on this in my next post.) He noted that 60% of inflation in March was due to gasoline prices. Food prices are up in part because Ukraine and Russia are major producers of wheat and corn. However, their shipments of these food supplies have effectively stopped. The Biden Administration and European allies are working to get the 20 – 30 million tons of grain in Ukrainian silos shipped out and into world markets. Biden also noted that four meat processors control the U.S. market and set meat prices. The Administration is working to increase competition in the meat industry as well as elsewhere. Biden repeated his statement that “capitalism without competition isn’t capitalism, it’s exploitation.”

The Biden Administration has also worked with allies to release 240 million  barrels of oil from strategic reserves to increase supply and put downward pressure on prices. Biden noted that the price of a barrel of oil has been steady for weeks but that gas prices have continued to go up. In addition, the Administration is working to increase domestic oil production, the production of biofuels, and the generation of clean energy. These steps could reduce household utility bills by up to $500 per year. (Note that the big oil corporations are not responding to requests to increase oil production, presumably because low supplies and high prices fuel high profits for them.)

The Biden Administration has been fighting to decrease other costs for families in addition to those of food and gas. It has asked for authority to negotiate drug prices in Medicare and cap the price of insulin. However, the U.S. Senate has not passed these proposals. It is tackling supply chain problems by working with labor and port operators to speed up the movement of goods at ports. It has also been working with trucking companies and truckers to speed up the movement of goods to markets.

FACEBOOK KNOWS IT PROMOTES MISINFORMATION AND WILL CONTINUE TO DO SO WITHOUT GOVERNMENT REGULATION

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Facebook’s promotion of low-quality, right-wing content and disinformation has been clearly documented. For example, in April 2021, The Daily Wire, a bigoted, sexist, anti-immigrant, far-right website that produces no original reporting and a low volume of articles had by far the highest distribution / engagement on Facebook. Second highest was the British tabloid, the Daily Mail, followed by Fox News. Four of the top six sources of content engagement on Facebook were right-wing publishers of disinformation. Credible media got much less engagement due to Facebook’s content promotion algorithm. For example, for April 2021: [1]

  • The Daily Wire (1st)          74.9 million Facebook engagements based on 1,385 articles
  • CNN (4th)                         23.1 million Facebook engagements based on 4,765 articles
  • NBC (7th)                         18.7 million Facebook engagements based on 2,596 articles
  • New York Times (8th)      18.6 million Facebook engagements based on 6,326 articles
  • Washington Post (14th)   12.3 million Facebook engagements based on 6,228 articles

Facebook’s reality, driven by its content promotion algorithm, is NOT the reality outside of Facebook. The Daily Wire is NOT more popular than CNN, NBC, the New York Times, and the Washington Post in the world outside of Facebook, let alone more popular than all four of them combined – and the almost 20,000 articles they publish per month compared to the less than 1,400 articles of The Daily Wire, none of which contain original reporting. Facebook promotes this alternative reality because it maximizes its profits. (See this previous post for more detail.)

The election-related disinformation that flourishes on Facebook is a global crisis. There are 36 national elections in countries around the globe in 2022 and many of them will be affected by disinformation on Facebook. Some may be affected to an even greater degree than what has occurred in the U.S., where a strong case can be made that disinformation on social media (with Facebook as a major if not the major player) led to the election of Trump in 2016.

Facebook (and its parent Meta) know how to stop the proliferation of disinformation and have done so for short periods of time at least twice. Meta refers to these instances as “break the glass” emergencies, but the emergency is not short-term and specific incident related, it’s long-term and endemic.

For five days after the 2020 U.S. national election, Facebook’s News Feed and other features operated very differently. Facebook adjusted its content promotion calculations, i.e., its algorithm, to more strongly promote credible news sources. By implication, it deprioritized or down ranked sources publishing disinformation and divisive or hateful content. Facebook did this to slow the spread of disinformation about election fraud and the presidential election being stolen. However, it was too little and too late, lasting only five days in the face of many months of spreading lies about the election. Nonetheless, during the life of the adjusted algorithm, Facebook engagement for credible sources such as the New York Times, CNN, and NPR spiked up and the engagement dropped for the extreme right-wing sources, as well as for hyper-partisan left-wing sources.

Some Facebook staff pushed to make the algorithm change permanent, but were overruled by Facebook’s senior management, including Joel Kaplan, a Republican operative who had previously intervened on behalf of right-wing sources and the Facebook algorithm that promotes them. Moreover, as Facebook returned to “normal” operation, Facebook also eliminated its civic-integrity unit.

After the January 6, 2021, insurrection at the U.S. Capitol, Meta and Facebook again “broke the glass” and instituted more preferential promotion for credible news sources, but again, only for a few days.

Many concerned people from across the globe and from all walks of life – from policy makers to advocates to marginalized people – are calling on Facebook (and other social media platforms, including Instagram [also owned by Facebook’s parent Meta]) to take three steps: [2]

  1. Be transparent: disclose business models, algorithms, and content moderation practices; and release internal data on the effects and harms of the current mode of operation. This would allow independent verification of whether content amplification and moderation are effectively combatting disinformation, protecting elections and democracy, and keeping people, especially young people and children, safe.
  2. Change content promotion algorithms: stop preferential promotion of the most incendiary, hateful, and harmful content to the most vulnerable audiences.
  3. Protect all people equally: bolster content moderation to protect all people, especially marginalized and vulnerable groups, in all countries and all languages.

Facebook and the other social media companies won’t do this on their own. Without government regulation, they will continue to put profits before social responsibility . We must take steps to reduce the disinformation and divisiveness spread by Facebook and other social media platforms. Doing so is critical to the well-being of all of us, especially our children, and to the well-being of society and democracy. Government regulation clearly has to be an important part of the answer.

I encourage to you contact President Biden and your Congress people. Tell them you want strong regulation of Facebook and other social media platforms, including requirements to implement the three steps outlined above. (See this previous post for more on fixes for the harmful behavior of Facebook and other social media platforms.)

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Legum, J., 5/6/21, “Facebook’s problem isn’t Trump – it’s the algorithm,” Popular Information (https://popular.info/p/facebooks-problem-isnt-trump-its)

[2]      Change the Terms Coalition, retrieved from the Internet 5/2/22, https://www.changetheterms.org/

FACEBOOK KNOWS IT PROMOTES MISINFORMATION AND DOES SO TO MAXIMIZE PROFITS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Facebook promotes misinformation. It knows this is harmful, it knows how to fix it, but it does it anyway – for the sake of profits. This is true across the full range of content from racist and misogynistic disinformation to Russian propaganda. It is true globally and across languages with the worst abuses probably occurring outside the U.S. and in languages other than English.

Facebook undermines democracy and promotes divisiveness and hate (as do other social media platforms such as Instagram, TikTok, Twitter, and YouTube) based on conscious decisions by senior management. (See this previous post on the harm being done by Facebook and other social media platforms.)

The reason that Facebook (and other social media platforms) refuse to effectively control (i.e., “moderate”) content is that profits come first. In 2021, Facebook made $39.4 billion in profits primarily from advertising exquisitely targeted to its almost three billion users.

Perhaps the ultimate confirmation of this is that Facebook and Instagram (both owned by Meta) have been blocked in Russia after the invasion of the Ukraine, but Facebook and Instagram are still publishing and promoting Russian propaganda around the world. Although they claim to be moderating disinformation from Russia, 80% of disinformation about U.S. biological weapons has been posted without being flagged or blocked. [1]

Currently, Facebook’s only incentives to moderate the content it allows and promotes are to avoid government regulation and to not be so offensive that advertisers pull their ads. In an effort to address concerns about content moderation – which admittedly sometimes requires making difficult, judgmental decisions that will be unpopular with some people – Facebook created an “Oversight Board” in 2019 to review its moderation decisions. Facebook claims the Board is independent and recruited an impressive set of individuals to serve on it. [2]

Roughly a year ago, the Board issued its first major report, a 12,000-word review of Facebook’s decision to indefinitely suspend Donald Trump from Facebook. The Board affirmed the decision to suspend Trump, but stated that it was inappropriate to make the suspension indefinite.

The Board said Facebook should either make the suspension permanent or set a specific length of time for it. The Board noted that Facebook management was seeking to dodge responsibility and that it should impose and justify a specific penalty.

The Board also posed questions to Facebook management whose answers it felt were essential to enabling it to do its oversight job. However, Facebook management refused to answer questions and failed to provide information on:

  • The extent to which the Facebook’s design decisions, including algorithms, policies, procedures, and technical features, amplified Trump’s posts.
  • Whether an internal analysis had been done of whether such design decisions might have contributed to the insurrection at the Capitol on January 6, 2021.
  • Content violations by followers of Trump’s accounts.

The Board noted that without this information it was difficult for it to assess whether less severe measures, taken sooner, might have been effective in solving the problem of Trump’s violations of Facebook’s standards.

As the Board suggests, the central issue is not simply Trump’s posts, but Facebook’s amplification of those posts and others like them. In other words, the real issue is the nature of Facebook’s content promotion algorithm and whether it promotes posts from Trump and from people expressing views like or in support of Trump’s posts. However, the Board’s jurisdiction, as defined by Facebook management, excludes oversight of Facebook’s algorithm and business practices. Furthermore, the Board has no power to compel Facebook management to abide by its decisions and recommendations – or even to simply answer its questions. It will be effective only to the extent that Facebook management voluntarily cooperates, which would mean reducing profits – not something they will do voluntarily.

Although Facebook founder and now chief executive of its parent Meta, Mark Zuckerberg, once stated: “At the heart of these accusations is this idea that we prioritize profit over safety and well-being. That’s just not true.” The data clearly show that this is true – and hardly anyone believed Zuckerberg when he said it wasn’t.

My next post will provide documentation of Facebook’s promotion of disinformation and divisiveness, as well as its conscious decision to do this and its ability – and occasional willingness – to change this. The post will also include steps that can and should be taken to force Facebook and other social media platforms to change their behavior.

[1]      Benavidez, N., & Coyer, K., 4/17/22, “Facebook ought to be protecting democracy worldwide every day,” The Boston Globe

[2]      Legum, J., 5/6/21, “Facebook’s problem isn’t Trump – it’s the algorithm,” Popular Information (https://popular.info/p/facebooks-problem-isnt-trump-its)

STOP SUPPORTING FOX TV WITH MONEY FROM YOUR CABLE BILL

National Fox “News” TV [1] is a major contributor (if not THE major contributor) to the disinformation, divisiveness, hate, and lack of civility that are undermining our society and democracy. It also drives the nationwide hyper-partisanship and the gridlock in Congress. Since its debut in 1996, Fox TV’s primetime viewership has grown to 2.5 million, with evangelical Christians as its most reliable audience. Its penetration and impact have been facilitated by its claim to be news and, moreover, to be fair and balanced. It has grown increasingly radical and extreme over time, including noticeably more so since 2019. Its core themes have been:

  • Stoking racism and the belief that anti-white bias is a serious problem (most recently and notably in its constant, withering, distorted attack on critical race theory),
  • Fanning the flames of “culture wars” against same sex marriage, LGBTQ+ rights, abortion, etc. as a fight against evil with white evangelical Christians as a key target, and
  • Promoting the belief that “liberals” are literally trying to destroy the country.

As national Fox TV consciously strives to generate outrage based on white resentment and supposed threats to Christianity, Trump and his acolytes in the Republican party have provided a reinforcing feedback loop that amplifies and exacerbates the disinformation, divisiveness, hate, and lack of civility. There is no mechanism for slowing this runaway train. [2]

Although social media play a critical role in amplifying disinformation and fostering divisiveness and other negative outcomes, much of the misinformation originates with national Fox TV. The content of other extremist channels like One American News Network (OANN) and Newsmax raise similar concerns but their audiences are minimal when compared to Fox TV’s audience. (See the Defenders of Democracy Against Disinformation website and this page about Fox TV in particular for more information.)

A significant portion of Fox’s revenue comes from the fees it receives from cable TV providers like Verizon and RCN, which transmit Fox programming to more than 100 million consumers every day.

Therefore, if you are paying Verizon or RCN (or any other provider that includes Fox TV) for your TV service, you are providing revenue to Fox, possibly as much as $2 per month. I do not want to provide one cent to Fox, but when I contacted Verizon multiple times to say I didn’t want to pay for the Fox channel, I was told that Fox can only be removed from my cable package if ALL news channels are removed. Verizon includes Fox in its News Bundle and it is inseparable from the other News channels. RCN customers have had a similar experience. This is unacceptable, in part because Fox isn’t news – it’s disinformation and propaganda. Therefore, it shouldn’t be in the News bundle to begin with.

I’m contacting senior executives at Verizon (see contact information and a sample letter below) to ask that Fox be removed from the News Bundle so that I don’t have to pay for Fox’s propaganda. I do want access to credible news on my TV but I don’t want to give money to Fox. Two of the four executives I’m targeting have email contact forms on the Internet. The other two (as far as I can tell) are only available by regular mail. I’ve also included contact information below for the CEO of RCN for those of you who are RCN subscribers. If you have another cable TV provider, please do an Internet search to find contact information for senior executives.

I encourage you to join me in contacting executives at your cable TV provider to ask that Fox be dropped from your service so we don’t have to give it money as part of our cable bills. I’ve drafted a letter to Hans Vestberg, the Verizon Chairman and Chief Executive Officer (see below). Please feel free to modify it as you see fit – particularly, of course, if you have a different cable TV provider but have the same Fox problem. Please send it by regular mail to him and to the Corporate Social Responsibility officer listed below at the address provided. Please email it to the other two executives using the webpage links for them presented below.

If you would like to call Verizon’s corporate headquarters, the number is 212-395-1000.

Senior executives at Verizon
Hans Vestberg, Chairman and Chief Executive Officer
Rose Stuckey Kirk, Corporate Social Responsibility Officer
Jim Gerace, External Communications and Media Relations, email form: https://www.verizon.com/about/our-company/leader/contact/916685
Manon Brouillette, Verizon Consumer Group, email form: https://www.verizon.com/about/our-company/leader/contact/922789

Chief Executive Officer at RCN
John Holanda, Chief Executive Officer
RCN
PO Box 11816
Newark, NJ
07101-8116

Sample letter to Verizon CEO

April 24, 2022

Mr. Hans Vestberg, Chairman and Chief Executive Officer
Verizon
1095 Avenue of the Americas
New York, NY
10036

Dear Mr. Vestberg,

We have been Verizon customers for many years. We are very unhappy that we have to pay money each month through our Verizon bill to Fox TV. We have called and asked multiple times to have Fox removed from our cable TV package but have been told that it’s part of the News Bundle and cannot be removed unless all news channels are removed.

Fox TV is NOT news. Much of its content is inaccurate information and could more properly be described as propaganda. It fuels divisiveness and hate. We do NOT want our money supporting an organization that undermines our democracy and civility in our society.

If a resolution to this issue cannot be provided by Verizon, we will consider changing or eliminating our cable TV service, along with our Internet and landline services that are currently bundled with our cable TV service.

Please let us know what you are doing to stop forcing your customers who want good, informational news channels from paying money to Fox TV. If we don’t hear from you, we will assume nothing is being done and will pursue alternatives to our Verizon FIOS service.

Thank you for your time and attention to this important matter.

<Note: I’d recommend signing your letter by including your name(s), address, phone number, and an email address to indicate that you are serious and want an answer.>

[1]      I put News in quotes because Fox TV delivers more disinformation than news. Hereafter, I will refer to it as Fox TV and drop “News” because I don’t want to imply that it provides news. I also use “national” before Fox TV to make clear that my focus is on the national programming and not the programming of local Fox affiliates.

[2]      Drum, K., Sept.-Oct. 2021, “The real source of America’s rising rage,” Mother Jones   (https://www.motherjones.com/politics/2021/07/american-anger-polarization-fox-news/)

EXAMPLES OF CORRUPT CAPITALISTIC BEHAVIOR Part 5

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The on-going saga of corrupt, extreme capitalistic behavior by big corporations is manifesting itself dramatically in the wake of the pandemic in price gouging for the sake of increasing profits. This enriches wealthy shareholders, including corporate executives, while ripping off consumers. Some recent examples are presented below. (See this previous post for some background, ways to fight price gouging, and previous examples ranging from disposable diapers to gasoline.)

Giant meat processor Tyson Foods posted a $1 billion profit last quarter, a 48% increase, while increasing meat prices for consumers by double digits. The price of beef is up 16% over the last year, a significantly bigger increase than the already high 7.5% increase in the price of food in general. The four biggest meat processing corporations (Tyson Foods, Cargill, JBS, and National Beef Packing Co.) control over 70% of the market for beef and have tripled their profit margins during the pandemic. The Justice Department is investigating them for price fixing. [1]

Nike’s profit increased by 125% last year to $5.7 billion, but it’s blaming “inflation” for a 10.5% price hike on its expensive sneakers, which are made in Vietnam by workers earning less than a dollar an hour. Phil Knight, Nike co-founder and previous chairman and CEO, became $26.7 billion richer during the pandemic as the price of Nike’s stock doubled from March 2020 to April 2022, largely due to the growth in profits.

Price gouging of a slightly different sort is evident at Moderna, which received $2.5 billion from U.S. taxpayers to develop its COVID vaccine. Its pricing of its vaccine and its refusal to share production of it with others to serve the global need have led to a $12.2 billion profit in 2021, a huge turnaround from a $737 million loss in 2020. As a result, its stock price has increased from $20 in Feb. 2020 to $165 in April 2022. It has given its CEO a $923 million golden parachute and handed out $360 million in stock options to two top executives.

At Amazon, profits increased by 75% last year to a record $35 billion. A $20 price hike in a Prime membership was blamed on “inflation” while Amazon denied workers a $3 raise and illegally underpaid drivers. Executive Chairman Jeff Bezos became $81 billion richer during the pandemic as Amazon’s stock price increased 50% from March 2020 to April 2022.

Price gouging by the pharmaceutical industry has been routine for years. (See this previous post from Jan. 2022 and this one from Jan. 2019 for background.) Outrage over drug price gouging is growing and, with a specific focus on insulin, the drug diabetics require to stay alive, President Biden is calling for a limit on its price and the U.S. House has taken action to implement one. Price controls are one way to counter price gouging.

On March 31, 2022, the U.S. House of Representatives passed a bill, 232 to 193, to limit what diabetics have to pay for insulin to $35 a month or 25% of one’s insurance companies’ negotiated price, whichever is lower. One hundred ninety-three (193) Republicans (all but 12 of them) voted against reducing the cost of insulin for the 30 million Americans with diabetes who require it to live.

The fate of the bill in the Senate is uncertain. Last November, House Democrats passed a bill that would have addressed drug costs more broadly, including allowing Medicare to negotiate drug prices. However, Republicans and a couple Democrats blocked that bill in the Senate. [2]

The price of insulin in the U.S. has soared from $21 in 1999 to $332 in 2019 and now costs ten times more in the U.S. than in any other wealthy country. This could happen only because there is no regulation or negotiation by the U.S. government to keep the price reasonable. There is no reason for the high price other than corporate price gouging as insulin is a 100-year-old drug. [3] However, only three companies – Novo Nordisk, Sanofi, and Eli Lilly – supply insulin in the United States. Estimates of the cost to produce a vial of insulin range from $2.28 to $6.16 depending on the version of insulin and other factors, [4] so the over $300 retail cost represents a huge mark-up and huge profits for the drug makers. (See this previous post for more detail.)

[1]      Puzzanghera, J., 2/19/22, “Why are beef prices so high? Some ranchers and White House say it’s more than just inflation,” The Boston Globe

[2]      Sprunt, B., 3/31/22, “House passes bill to cap insulin prices,” NPR (https://www.npr.org/2022/03/31/1090085513/house-passes-bill-to-cap-insulin-prices)

[3]      Richardson, H. C., 4/1/22, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/april-1-2022?s=r)

[4]      Silverman, E., 6/22/19,  “Insulin rationing high in US, survey finds,” The Boston Globe

WHY AMERICANS ARE SO PESSIMISTIC ABOUT THE ECONOMY

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Americans are pessimistic about the economy, the Biden administration, and Democrats in Congress despite the good news about jobs, unemployment, and wages. Although inflation, pandemic fatigue, partisanship, and the negativity of the mainstream media have a role to play, Americans’ economic insecurity probably plays a significant role. [1]

Over the last 40 years, economic insecurity has been increasing for middle and lower-income households. Many of these households see government policies undermining their economic security and are not optimistic that government is doing or will do much that will improve their economic well-being.

Middle and lower-income households in the U.S. have seen very little income (or wealth) growth in the last 40 years, while the rich have experienced big increases in income and wealth. This growth in economic inequality has been much more dramatic in the U.S. than in other wealthy democracies.

Furthermore, these households are now exposed to much more financial risk than they were 40 years ago. Jobs are much less stable due to off-shoring and the growth of contract, gig, and part-time work. When a job is lost, new jobs with similar pay and benefits are often hard to find. And unemployment benefits are generally not available to workers who are not full-time employees.

Retirement benefits are much less secure. They have been shifted from company sponsored plans with income and often health insurance guarantees to individual savings plans where the individual assumes the risks and responsibilities of saving and investing for their retirement.

Unions used to help by ensuring jobs had good pay and benefits, as well as some stability. Unionization had an impact not only on union jobs but on the economy as a whole because non-union employers had to compete with union employers to hire workers. However, unionization in the private sector has plunged from 35% in the 1950s to 6% today. This greatly reduces the power of workers in the job market and has led to an erosion of economic well-being and stability for workers.

The risk of bankruptcy due to a health crisis is very real as private insurance has introduced limits on coverage and increased co-pays, although access to reasonably good health insurance has been improved to some extent by the Affordable Care Act (aka Obama Care). The security of the equity in one’s home was shattered by the housing market collapse and the Great Recession of 2008. Debt from higher education has skyrocketed at the same time as the good jobs needed to pay back student loans have become harder to find and keep for many.

The effect of the pandemic on jobs and earnings was dramatic. Everyone is now aware of the risks of a pandemic and this undermines middle and lower-income workers sense of security. Many of the emergency pandemic economic measures made a real difference for these workers, but now it’s clear they were only temporary relief. Furthermore, the stress of the pandemic, along with that of political divisiveness, climate change (and the related crises from forest fires to more frequent and powerful storms), as well as international conflicts, are additional unsettling influences on people’s state of mind.

Finally, Americans are not optimistic that government and its leaders will effectively address their economic insecurity and stress. The failure of the Build Back Better bill – which would have supported families by extending the Child Tax Credit, helped them pay for child care, strengthened the health insurance system, reduced the price of drugs, reduced the cost of higher education, etc. – does not give middle and lower-income households any faith that help is on the way. By the way, all of the factors increasing economic insecurity have, of course, hit Black and Latino households harder the white households.

The termination of pandemic economic assistance policies, despite their popularity, indicates to middle and lower-income households and workers – the bulk of the American public – that the U.S. political system is broken and does not, and cannot be expected to, work for them and reduce their economic insecurity.

Given all of this, it’s not surprising that the public is pessimistic about the economy and the government, even if there are jobs to be had and pay is increasing.

[1]      Hacker, J. S., & Kapczynski, A., 3/22/22, “The great disconnect,” The American Prospect (https://prospect.org/economy/great-disconnect-american-economy/)

GOOD AND BAD NEWS FROM THE ECONOMY AND FOR WORKERS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The good news: First, the U.S. economy is creating lots of jobs: 1.7 million in the first three months of 2022. Wages are up 5.6% over the last year while unemployment continues to fall and is near its all-time low at 3.6%. The number of Americans getting unemployment benefits is at a 50-year low. [1] (These figures are particularly impressive given that many workers are re-entering the workforce after dropping out during the pandemic.)

This economic recovery in the U.S. is extraordinary; it has happened eight years faster than the recovery after the Great Recession of 2008 and is stronger than in other countries. Much of the credit belongs to the American Rescue Plan, passed in March 2021, which injected $1.9 trillion into the economy, spurring its recovery. It was passed by Democrats in Congress without a single Republican vote and enthusiastically signed into law by President Biden, who had been championing its passage.

Second, consumer spending is rising. This indicates that individuals and families are doing better economically and have money to spend. It’s also good for the overall economy, which is fueled by consumer spending. Business at restaurants, hotels, and airlines is increasing.

Third, workers at Amazon’s huge warehouse in New York City voted strongly to unionize (2,654 to 2,131). They overcame strong opposition from Amazon to form the first union of Amazon employees. This is one of the biggest wins for union organizing in decades, in part because Amazon is the country’s second largest employer and has 1.6 million employees globally. It also comes in the face of decades of declining unionization where the percentage of workers in unions has dropped from roughly 33% (one in three) in the 1940s to 20.1% (one in five) in 1983 to 10.3% (one in ten) in 2021. There has also been a series of unionization victories at Starbucks. [2]

The bad news: First, inflation is high at 7.9%; its highest in 40 years, but similar to what it is in other countries. Increasing evidence is pointing to corporate price gouging as a significant contributor to “inflation.” Corporate profits rose 25% in 2021, the biggest increase since 1976, while hitting record highs and totaling $2.8 trillion. [3] Corporations are able to increase prices and profits because of a lack of competition, which gives them monopolistic power. This is profiteering, i.e., making an unreasonable profit on sales of essential goods, especially during emergencies. (See previous posts here, here, and here for more about price gouging, which is profiteering by a different name.) As a first step to stop price gouging, there is a Big Oil Windfall Profits Tax bill in Congress. [4] (See this previous post for more information.)

Second, soaring profits on Wall St. sent the average bonus senior employees received to a record $257,500! This is 20% higher than last year and the overall bonus pool is estimated to be $45 billion. [5] The U.S. system of extreme capitalism allows our elite financiers to make huge sums of money while many workers struggle to make ends meet. Thus, economic inequality continues to grow.

Third, the gender pay gap in the U.S. remains stubbornly high, declining only 1.1% in the last 37 years from 23.2% in 1994 to 22.1% in 2021. From 1979 to 1994, it had declined from 37.7% to 23.2%, in part because men’s wages were stagnant. The wage gap has persisted over the last 37 years despite the fact that the percentage of women with a four-year college degree has grown to 43.8% (from 23.8%) and now exceeds that of men (37.4% now and 25.1% in 1994). [6]

Fourth, David Weil, an expert on how employers cheat workers out of their pay, was rejected for confirmation to a key post in the Labor Department. The Senate voted not to confirm him with “No” votes from all Republicans and three Democrats: Manchin (WV), Sinema (AZ), and Kelly (AZ). The only explanation for this vote effectively condoning wage theft by employers is that these Senators value campaign funds from corporate donors more than they care about fairness for American workers. Employer wage theft is increasingly happening because employers misclassify workers as contractors instead of employees, thus bypassing labor standards such as minimum wage and overtime pay laws. [7] It also means that workers don’t get benefits such as paid sick and vacation time, health insurance, and retirement benefits. Employers also steal pay from employees by failing to pay extra for overtime, not giving workers their tips, and not including all hours on the job as paid time.

[1]      Ott, M., 3/25/22, “US jobless claims per week lowest since 1969,” The Boston Globe from the Associated Press

[2]      Weise, K., & Scheiber, N., 4/2/22, “Amazon workers on Staten Island vote to unionize in landmark win for labor,” The Boston Globe from The New York Times

[3]      Johnson, J., 3/31/22, “ ‘Their inflation strategy is working’: Corporate profits soared to record high in 2021,” Common Dreams (https://www.commondreams.org/news/2022/03/31/their-inflation-strategy-working-corporate-profits-soared-record-high-2021)

[4]      Corbett, J., 3/17/22, “New campaign aims to ‘Stop the Oil Profiteering’ of fossil fuel giants,” Common Dreams (https://www.commondreams.org/news/2022/03/17/new-campaign-aims-stop-oil-profiteering-fossil-fuel-giants)

[5]      Associated Press, 3/24/22, “Average Wall Street bonus last year reached record $257,500,” The Boston Globe

[6]      Gould, E., 3/10/22, “Equal pay day,” Economic Policy Institute (https://www.epi.org/blog/equal-pay-day-there-has-been-little-progress-in-closing-the-gender-wage-gap/)

[7]      Kuttner, R., 4/1/22, “The shame of corporate Democrats,” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/shame-of-corporate-democrats-david-weil-labor/)

FIXES FOR INSTAGRAM AND FACEBOOK

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The evidence that Facebook and Instagram are harmful, especially to teens and young people, goes back to 2006 and has been growing consistently more definitive over the last fifteen years. (See my previous post for more detail.) The pressure from the public, especially parents, and most recently from Congress to address this problem is mounting.

In response, in mid-March, Meta Platforms (the new parent corporation for Facebook and Instagram) made an announcement of some new and coming parental supervision tools for Instagram. Note that teens will have to consent to their parents’ use of supervision tools! Furthermore, teens will know what their parents are seeing about their account and activity. Rather than building in universal safety controls, Meta claims it wants to enable parents to control teens’ social media activity because parents know their teens best and teens have different maturity levels. This sounds to me like a classic blame the victim – and the victim’s parents – strategy.

Moreover, Meta knows that many parents aren’t tech savvy and/or won’t have the time and energy to effectively control teens’ social media activity. It also knows that teens tend to be far more tech savvy than their parents and will often be able to evade parental controls. It could easily institute universal strategies to eliminate or greatly reduce the potential for harm from its platforms. Finally, it knows that teens’ vulnerability changes over time and that having harm protections in place by default would be much more effective than relying on parents to recognize and quickly react to teens’ changing vulnerability.

Here’s what Meta announced about new parental supervision tools for Instagram: [1]

  • A Family Center providing information to teach parents how to talk about social media with teens.
  • An ability for teens to invite a parent to supervise their social media account.
  • Parental ability to see how much time their teens are spending on Instagram, whom they are following, who is following them, and when they complain to Instagram about another user. However, a parent will have to have an Instagram account themselves to do so.
  • Future plans for:
    • Parental ability to limit when teens can use Instagram (e.g., not during school or after bedtime),
    • Blocking of access to inappropriate content by parents and/or based on ratings by the International Age Rating Coalition, and
    • Parental supervision tools for its Oculus Quest virtual reality program, where parents, experts, and the British government have raised concerns about exposure to violence and harassment.

Meta acknowledged in its statement that many parents are not on social media and are not tech savvy – meaning that these parental controls are often meaningless. Furthermore, many of these controls, including the future plans, seem like controls that should have been put in place years ago and before these products ever went on the market, i.e., they’re too little too late.

A bipartisan bill has been introduced in Congress, the Kids’ Online Safety Act (KOSA), requiring Facebook, Instagram, and other social media platforms to provide parents with more control over their children’s online interactions. The bill reflects months of congressional investigations and a history of failures by the social media platforms to respond to their documented harmful effects on young users. [2] Congress last passed legislation to protect children when they’re online, including their privacy, 24 years ago. [3] Needless to say, much has change since then and the current business model of Facebook, Instagram, and the Internet as a whole is simply not healthy for kids and teens.

KOSA would require social media platforms to provide “easy-to-use” tools to limit screen time, protect personal data, and keep kids under 16 safe. It holds the online platforms accountable by establishing an obligation for them to put the interests of children first and to make safety the default. It requires them to prevent the promotion of bullying, sexually abusive behavior, eating disorders, self-harm, and other harmful content. The bill mandates an annual independent audit of risks to minors, steps taken to prevent harm, and compliance with KOSA. [4]

The bill would require the social media platforms to be transparent about how they operate. It would require giving parents the ability to disable addictive product features and modify content recommendation algorithms to limit or ban certain types of content. It would require the social media platforms to provide researchers and regulators with access to company data to monitor and investigate actual and potential harm to teens and children. This would allow parents and policymakers to assess whether the online platforms are actually taking effective steps to protect children.

The root of the problems with social media platforms is that there is greater profit in promoting unsafe behaviors, creating animosity, encouraging extremism, and fueling pseudo-science than there is in creating a safe place for civil discourse based on facts. Our system of capitalism and the deference to and alignment of our policymakers with large corporations has allowed this business model that commodifies and exploits human attention to explode unchecked. In the world of social media, you, your time and attention span, and your clicks are the products that are being sold – to advertisers. This means the social media business is a race to the bottom; an enterprise based on stimulating, titillating, and capturing our most base emotional and subconscious responses. Social media’s ability to do harm to individuals, our society, and our democracy is well-documented and endemic to the current business model. Without strong and effective public oversight and control, the social media platforms will continue to inflict substantial harms.

I urge you to contact President Biden, as well as your U.S. Representative and Senators, to let them know that you support the Kids’ Online Safety Act and additional actions to regulate social media platforms.

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Peng, I., 3/17/22, “Meta adds parental tools to Instagram,” The Boston Globe from Bloomberg News

[2]      Zakrzewski, C., 2/17/22, “Senators introduce children’s online safety bill after months of hearings,” The Boston Globe from the Washington Post

[3]      Monahan, D., 3/22/22, “Diverse coalition of advocates urges Congress to pass legislation to protect kids and teens online,” Fairplay (https://fairplayforkids.org/march-22-2022-diverse-coalition-of-advocates-urges-congress-to-pass-legislation-to-protect-kids-and-teens-online/)

[4]      Blumenthal, Senator R., retrieved 2/16/22 from the Internet, “Blumenthal & Blackburn introduce comprehensive Kids’ Online Safety legislation,” (https://www.blumenthal.senate.gov/newsroom/press/release/blumenthal-and-blackburn-introduce-comprehensive-kids-online-safety-legislation)

THE HARMS OF INSTAGRAM, FACEBOOK, AND SOCIAL MEDIA

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The news that Facebook and Instagram are harmful, especially to teens and young people, is not new. In 2006, a college professor, Joni Siani, whose class on Interpersonal Communications had access to Facebook a year before the public, found almost immediately that the Facebook experience was stressful and depressing for her students. Her class effectively became a Facebook group therapy session. That’s the beginning of a story I’ll come back to in a minute. [1] (By the way, Facebook and Instagram are now part of a new corporate entity, Meta Platforms. This name change seems to me to be an effort to obfuscate responsibility and accountability for the harms caused by Facebook and Instagram.)

In 2019, the docudrama The Social Dilemma came out, which highlights the manipulation and harms of social media. I encourage you to watch the film (on Netflix) or at least watch the 2 ½ minute trailer that’s available on the website. I urge you to explore the website; there’s a wealth of information under the button “The Dilemma” and a variety of ways to pushback under the “Take Action” button.

The Social Dilemma was created by the Center for Humane Technology, which was founded in 2013 by a Google design ethicist. The Center’s website provides terrific resources for understanding the effects of social media platforms and how to use them intelligently. It has modules for parents and educators on how to help teens be safe, smart users of social media.

Last fall, a former Facebook employee, Frances Haugen, blew the whistle on Facebook’s practices with testimony to Congress, an appearance on 60 Minutes, and a trove of inside documents that the Wall Street Journal reported on extensively. (Blogger Whitney Tilson in one of her posts provides links to Haugen’s interview on 60 Minutes and to the Wall St. Journal’s investigative articles based on documents provided by Haugen. Tilson also wrote a letter to Facebook COO Sheryl Sandberg that’s part of her blog post.)

Haugen documented that Facebook is a threat to our children and our democracy. Furthermore, she made it clear that Facebook knows this but fails to take steps to reduce the harm because doing so would hurt profits. I previously wrote about the threats of Facebook to our children and our democracy here and what can be done about them here.

Instagram, a Facebook partner under the Meta Platforms umbrella, says it only allows users on its platform who are 13 or older, but its age verification tools are weak. Its algorithm (i.e., its decision-making processes) for what information to direct to individual users has been shown to promote harmful content to youth who are particularly susceptible to such messages, such as material promoting eating disorders. Instagram was developing a separate product targeting children under 13 until criticism and pushback from parents and child advocacy organizations caused it to announce that it had paused (but not terminated) development.

A resource for responding to social media’s threats to children is an organization called Fairplay and its website. Formerly the Campaign for a Commercial Free Childhood, Fairplay has been fighting for years to protect kids from the manipulation and harm from commercial advertising and social media platforms. If you want to get updates from Fairplay, click on “Connect” under the “About” button to sign-up. Fairplay helps parents manage kids’ screen time and provides alternatives to screen time. It sponsors a Screen-free Week every spring. It has established the Screen Time Action Network to support parents concerned about the effects of screen time and social media platforms on their children.

Returning to the story of that college professor, Joni Siani, who in 2006 saw the harm that Facebook did to her college students, in 2013, she wrote a book about the love-hate relationship between users and their digital devices titled Celling your soul: no app for life. And she started an organization called No App for Life.

In 2021, Siani and No App for Life partnered with Fairplay and its Screen Time Action Network to create three podcasts titled The Harms. They present three stories of parents who lost a child due to social media platforms’ harmful impacts on their children. One describes the ruthless assaults of social media “friends” that led to a suicide. One describes how “fun” online challenges can lead to horrible results. And one describes how drug dealers sell their products on social media, even posting ads amongst all the other ads seen on social media constantly. These horrific examples are from strong families who were trying to do everything right in managing their children’s social media activities but were overwhelmed by the power of social media.

My next post will summarize Meta Platforms recent announcement of new and planned parental supervision tools, as well as the bipartisan Kids Online Safety Act, which has been introduced in Congress.

[1]      Rogers, J., & Siani, J., 3/6/22, “What do I do now? Unthinkable stories Big Tech  doesn’t want to tell,” Fairplay’s Screen Time Action Network and No App for Life Podcasts (https://fairplayforkids.org/harms-podcast/)

MORE EVIDENCE THAT “INFLATION” IS PRICE GOUGING

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

More evidence is emerging that price gouging, particularly by big corporations, is responsible for a good portion of recent consumer price increases. Inflation is normally the result of increases in production costs. In a competitive market, production cost increases result in decreased profits. However, currently, corporate profits are increasing, often dramatically. With production cost increases, profits would be expected to decline because producers will be competing for consumers based on price. Therefore, they would restrain price increases to avoid losing customers. Some of the cost increases might be passed through to consumers in order to reduce the decline in profits. With real competition in a free-market, a producer’s prices and profits can’t increase dramatically because other producers in the market (or new ones who will enter it) will take advantage of the opportunity to make good but lower profits by charging a lower price.

When consumer prices increase and profits increase dramatically, real competition is NOT occurring. Rather, it shows that producers have monopolistic power and are able to increase prices and their profits because consumers have no or few choices. In some cases, the few producers in the market may collude and raise their prices in tandem rather than actually competing with each other. This is illegal price fixing.

In 2019, before the pandemic, big U.S. corporations had about $1 trillion in profits. In 2021, during the pandemic, their profits were $1.7 trillion, a 70% increase. One estimate is that these increased profits account for 60% of the price increases that consumers are experiencing; it’s supposedly “inflation” but it’s really price gouging. [1]

For example, Proctor & Gamble (P&G) increased the prices of its Pampers brand diapers last April blaming increased costs. However, its previous quarterly profits had been $3.8 billion and, six months later, its profits were over $5 billion. These exorbitant profits allowed it to spend $3 billion buying back its own stock. Corporate stock buybacks increase the price of a corporation’s stock, benefiting big, wealthy shareholders, including corporate executives. (Note: Until 1982, stock buybacks were considered illegal market manipulation.)

In a competitive market, consumers would buy other brands of diapers to avoid the P&G price increase. However, effectively, there is only one other brand of disposable diapers, Huggies, which are made by Kimberly-Clark. These two corporations control 80% of the global disposable diaper market. Kimberly-Clark just happened to increase its prices for Huggies at roughly the same time as P&G increased its prices for Pampers.

As another example, as gas prices at the pump skyrocket, the big oil corporations’ 2021 profits were at seven-year highs, even before the most recent dramatic gas price increases:

  • Exxon Mobil: $23 billion, highest since 2014
  • Chevron: $15.6 billion, highest since 2014
  • Shell: $19.3 billion, highest since 2014
  • BP: $12.9 billion, highest since 2013

Big oil is using the smoke screen of the war in Ukraine and inflation elsewhere in the economy to engage in price gouging. The U.S. gets only about 7% of its imported petroleum products from Russia and this represents just 3% of the oil the U.S. consumes. Moreover, in 2020, the U.S. exported more petroleum products than it imported. This is hardly a situation where the loss of Russian oil would result in such dramatic price increases if the oil market was a truly competitive one.

One way to tackle price gouging is with a windfall profits tax. Democrats in Congress have introduced the Big Oil Windfall Profits Tax bill. It is estimated that this tax would raise $45 billion per year. That money would be used to provide rebates to middle and lower income households of $240 (single tax filers) to $360 (joint tax filers) per year. [2] A windfall profits tax would seem to be called for in many other sectors of the economy as well, such as meat packers, diaper makers, drug manufacturers, car dealers, and shipping corporations.

Other ways to fight price gouging include:

  • Price controls,
  • Stronger enforcement of anti-trust laws including breaking up giant corporations that have monopolistic power in their markets,
  • Stronger action to stop and penalize anti-competitive market behavior including criminal charges against executives who engage in price fixing, and
  • Banning stock buybacks, which provide corporate executives with a strong incentive for price gouging to increase profits. [3]

As President Joe Biden said, “Capitalism without competition isn’t capitalism, it’s exploitation.” He’s right. Price gouging is one important manifestation of that exploitation. This exploitation of consumers is one result of the current extreme capitalism in the U.S. that has allowed the emergence of huge corporations that reduce or eliminate competition. We need to fight price gouging and anti-competitive capitalism with both short-term and long-term strategies.

I urge you to contact President Biden and your U.S. Representative and Senators to let them know that you support a range of actions to stop price gouging. Tell them you support the Big Oil Windfall Profits Tax bill and urge them to pass it quickly. Urge them to institute a windfall profits tax on all businesses that are engaging in price gouging, not just big oil. Ask them to support stronger enforcement of antitrust laws and to penalize anti-competitive market behavior. Tell them to ban stock buybacks and, if all else fails, to institute price controls on price gouging companies.

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Hightower, J., 2/1/22, “Corporate profiteers’ pandemic strategy: Gouge consumers and blame Joe Biden,” The Hightower Lowdown (https://hightowerlowdown.org/article/corporate-profiteers-pandemic-strategy-gouge-consumers-and-blame-joe-biden/)

[2]      Germanos, A., 3/10/22, “Dems introduce windfall tax on big oil so companies ‘pay a price when they price gouge’ ,” Common Dreams (https://www.commondreams.org/news/2022/03/10/dems-introduce-windfall-tax-big-oil-so-companies-pay-price-when-they-price-gouge)

[3]      Hightower, J., 2/1/22, see above

PRICE GOUGING BY BIG PHARMA

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Big increases in the prices of many drugs from multiple manufacturers in January appear to be price gouging by the big drug companies. Price gouging by big corporations is increasingly being blamed as a major contributor to the current high level of inflation. (See this previous post for more detail.)

Thirteen Members of Congress have sent a letter to the industry trade group (the Pharmaceutical Research and Manufacturers of America [PhRMA]) asking for an explanation and justification for the price increases. [1] The letter alleges that the big drug companies are using their monopolistic power in the market to raise prices to increase their already large profits, i.e., to engage in price gouging. [2]

The broad price increases by virtually every manufacturer of popular prescription drugs appear to be coordinated and perhaps timed to coincide with (and therefore go unnoticed due to) the high inflation the economy is experiencing. These drug price increases will contribute to keeping inflation high. Although drug companies often increase some prices in January, they also often increase prices in July as well. Therefore, these drug price increases are probably not the only increases in drug prices consumers, Medicare and other health insurers, and the economy are likely to experience this year. [3]

A study of drug prices over the first 25 days of January found that drug companies increased the prices of 72% of the 187 different formulations of the 100 top selling drugs and on 26% of all brand name drugs. While the average increase for brand name drugs was 5.1%, for 118 drugs the increase was 10% or more. The highest price increase was 60%!

A separate study of price increases on the 20 drugs with the highest expenditures by Medicare found that prices were raised on 16 of them. Twelve of them had increases of 4.0% or more and four of those had increases of 6.0% or more. These price increases are estimated to cost Medicare and seniors $2.5 billion this year. Many of these drugs have been on the market for years and some for decades, so it appears that these price increases are only occurring to increase the already high profits of the drug companies.

The pharmaceutical drug industry’s profits (i.e., operating margin) are 26.4% of revenue compared with an average of 13.2% across all U.S. industries. [4] A profit margin of 10% is generally considered good and one of 20% is considered high. So, the pharmaceutical drug industry’s 26.4% is very high and price increases are possible only because of a lack of competition, i.e., a lack of other manufacturers that would sell at lower prices and be happy to have somewhat lower, but still healthy, profit margins.

Pfizer Inc., for example, is the manufacturer of eight of the twenty drugs with the highest price increases in January 2022, all of which were 10% or higher. In 2021, it reported revenues of $81.3 billion and profits of $25.2 billion, both of which had roughly doubled from 2020. Its 2021 profit margin was 31.0%. Nonetheless, it significantly increased drug prices in January 2022 and projects that in 2022 its revenue will grow 23% and its profit margin will grow to 37%. [5] It’s hard to view its price increases as anything but monopolistic power in the market for its drugs and greed for even more exorbitant profits.

The Build Back Better Act (BBBA) included some provisions to address high drug prices, including allowing Medicare to negotiate drug prices with manufacturers (which the Veterans’ Administration and every private health insurer and other country do). With the BBBA stalled, a standalone bill was introduced in the U.S. Senate to cut drug prices. However, Republicans blocked voting on the bill.

President Biden, in his State of the Union speech on March 1st, called for Congressional action to cut drug prices, including allowing Medicare to negotiate drug prices and putting a cap on the price of insulin at $35 per month. The price of insulin in the U.S. is eight times what it is in Canada and ten times the average price in three dozen other countries. [6]

I urge you to contact President Biden and your U.S. Representative and Senators to let them know that you support a range of actions to control and reduce drug prices. Allowing Medicare to negotiate drug prices is one. Price controls and a windfall profits tax are others. (By the way, price controls and a windfall profits tax should be considered for all businesses that are engaging in price gouging, not just the drug companies.)

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

UPDATE: I wrote about price gouging by drug companies in 2016, including highlighting the huge price increases ($100 to $608) for EpiPens, which inject a drug to treat severe allergic reactions, such as to peanuts or a bee sting. On Feb. 28, 2022, the EpiPen price gouger, Mylan (now Viatris), agreed to a $264 million class-action lawsuit settlement for illegal monopolistic behavior. EpiPens are made by two subsidiaries of Pfizer, which settled its piece of the lawsuit for $345 million last July. [7]

[1]      Corbett, J., 3/2/22, “Warren demands big pharma end ‘corporate price gouging’,” Common Dreams (https://www.commondreams.org/news/2022/03/02/warren-demands-big-pharma-end-corporate-price-gouging)

[2]      Price gouging typically refers to price increases when businesses are taking advantage of spikes in demand or shortages of supply and charge exorbitant prices for necessities, often after a natural disaster or another type of emergency. Here it refers to businesses that are taking advantage of having monopolistic power, which means they control the supply in the market.

[3]      Senator Elizabeth Warren et al., 3/1/22, “Letter to PhRMA on January 2022 drug price increases,” (https://www.warren.senate.gov/imo/media/doc/2022.03.01%20Letter%20to%20PhRMA%20on%20January%202022%20Drug%20Price%20Increases%20(1).pdf)

[4]      Stern School of Business, Jan. 2022, “Margins by sector (US),” New York University (https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html)

[5]      Pfizer Inc., 2/8/22, “Pfizer reports fourth-quarter and full-year 2021 results,” (https://s28.q4cdn.com/781576035/files/doc_financials/2021/q4/Q4-2021-PFE-Earnings-Release.pdf)

[6]      RAND Corporation, 1/6/21, “The astronomical price of insulin hurts American families,” (https://www.rand.org/blog/rand-review/2021/01/the-astronomical-price-of-insulin-hurts-american-families.html)

[7]      Jimenez, J., 2/28/22, “Viatris agrees to settle EpiPen antitrust litigation for $264 million,” The New York Times

PRICE GOUGING BY BIG PHARMA (3/5/22, #452) Categories:

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Big increases in the prices of many drugs from multiple manufacturers in January appear to be price gouging by the big drug companies. Price gouging by big corporations is increasingly being blamed as a major contributor to the current high level of inflation. (See this previous post for more detail.)

Thirteen Members of Congress have sent a letter to the industry trade group (the Pharmaceutical Research and Manufacturers of America [PhRMA]) asking for an explanation and justification for the price increases. [1] The letter alleges that the big drug companies are using their monopolistic power in the market to raise prices to increase their already large profits, i.e., to engage in price gouging. [2]

The broad price increases by virtually every manufacturer of popular prescription drugs appear to be coordinated and perhaps timed to coincide with (and therefore go unnoticed due to) the high inflation the economy is experiencing. These drug price increases will contribute to keeping inflation high. Although drug companies often increase some prices in January, they also often increase prices in July as well. Therefore, these drug price increases are probably not the only increases in drug prices consumers, Medicare and other health insurers, and the economy are likely to experience this year. [3]

A study of drug prices over the first 25 days of January found that drug companies increased the prices of 72% of the 187 different formulations of the 100 top selling drugs and on 26% of all brand name drugs. While the average increase for brand name drugs was 5.1%, for 118 drugs the increase was 10% or more. The highest price increase was 60%!

A separate study of price increases on the 20 drugs with the highest expenditures by Medicare found that prices were raised on 16 of them. Twelve of them had increases of 4.0% or more and four of those had increases of 6.0% or more. These price increases are estimated to cost Medicare and seniors $2.5 billion this year. Many of these drugs have been on the market for years and some for decades, so it appears that these price increases are only occurring to increase the already high profits of the drug companies.

The pharmaceutical drug industry’s profits (i.e., operating margin) are 26.4% of revenue compared with an average of 13.2% across all U.S. industries. [4] A profit margin of 10% is generally considered good and one of 20% is considered high. So, the pharmaceutical drug industry’s 26.4% is very high and price increases are possible only because of a lack of competition from companies that would be willing to sell at lower prices and have lower profit margins.

Pfizer Inc., for example, is the manufacturer of eight of the twenty drugs with the highest price increases in January 2022, all of which were 10% or higher. In 2021, it reported revenues of $81.3 billion and profits of $25.2 billion, both of which had roughly doubled from 2020. Its 2021 profit margin was 31.0%. Nonetheless, it significantly increased drug prices in January 2022 and projects that in 2022 its revenue will grow 23% and its profit margin will grow to 37%. [5] It’s hard to view this as anything but monopolistic power in the market for its drugs and greed for even more exorbitant profits.

The Build Back Better Act (BBBA) included some provisions to address high drug prices, including allowing Medicare to negotiate drug prices with manufacturers (which the Veterans’ Administration and every private health insurer and other country do). With the BBBA stalled, a standalone bill was introduced in the U.S. Senate to cut drug prices. However, Republicans blocked voting on the bill.

President Biden, in his State of the Union speech on March 1st, called for Congressional action to cut drug prices, including allowing Medicare to negotiate drug prices and putting a cap on the price of insulin at $35 per month. The price of insulin in the U.S. is eight times what it is in Canada and ten times the average price in three dozen other countries. [6]

I urge you to contact President Biden and your U.S. Representative and Senators to let them know that you support a range of actions to control and reduce drug prices. Allowing Medicare to negotiate drug prices is one. Price controls and a windfall profits tax are others. (By the way, price controls and a windfall profits tax should be considered for all businesses that are engaging in price gouging, not just the drug companies.)

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

UPDATE: I wrote about price gouging by drug companies in 2016, including highlighting the huge price increases ($100 to $608) for EpiPens, which inject a drug to treat severe allergic reactions, such as to peanuts or a bee sting. On Feb. 28,2022, the EpiPen price gouger, Mylan (now Viatris), agreed to a $264 million class-action lawsuit settlement for illegal monopolistic behavior. EpiPens are made by two subsidiaries of Pfizer, which settled its piece of the lawsuit for $345 million last July. [7]

[1]      Corbett, J., 3/2/22, “Warren demands big pharma end ‘corporate price gouging’,” Common Dreams (https://www.commondreams.org/news/2022/03/02/warren-demands-big-pharma-end-corporate-price-gouging)

[2]      Price gouging typically refers to price increases when businesses are taking advantage of spikes in demand or shortages of supply and charge exorbitant prices for necessities, often after a natural disaster or another type of emergency. Here it refers to businesses that are taking advantage of having monopolistic power, which means they control the supply in the market.

[3]      Senator Elizabeth Warren et al., 3/1/22, “Letter to PhRMA on January 2022 drug price increases,” (https://www.warren.senate.gov/imo/media/doc/2022.03.01%20Letter%20to%20PhRMA%20on%20January%202022%20Drug%20Price%20Increases%20(1).pdf)

[4]      Stern School of Business, Jan. 2022, “Margins by sector (US),” New York University (https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html)

[5]      Pfizer Inc., 2/8/22, “Pfizer reports fourth-quarter and full-year 2021 results,” (https://s28.q4cdn.com/781576035/files/doc_financials/2021/q4/Q4-2021-PFE-Earnings-Release.pdf)

[6]      RAND Corporation, 1/6/21, “The astronomical price of insulin hurts American families,” (https://www.rand.org/blog/rand-review/2021/01/the-astronomical-price-of-insulin-hurts-american-families.html)

[7]      Jimenez, J., 2/28/22, “Viatris agrees to settle EpiPen antitrust litigation for $264 million,” The New York Times

GOOD AND BAD ECONOMIC NEWS YOU MAY NOT HAVE HEARD

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The mainstream media continue to downplay extraordinarily positive economic news, not to mention the successes of the policies of the Biden Administration and congressional Democrats. In case you didn’t hear this, the number of Americans needing unemployment benefits fell to a 52-year low, i.e., the lowest number since March 1970. The unemployment rate is quite low at 4.0% and employers added 467,000 jobs in January. The estimates of job growth in November and December were revised upward by a combined 709,000 jobs. (Note: In the Boston Globe, this great economic news was not presented until page 6 of the second section and only warranted a short article, written by the Associated Press, that was about half of one column in length.) [1]

Employers added a record 6.4 million jobs in 2021, in good part due to actions of Democrats and the Biden Administration. Spending authorized by the American Rescue Plan Act (ARPA), which was passed in March, boosted economic activity. Vaccination programs and other steps to control Covid allowed businesses to reopen and workers to go back to work.

Economic growth for all of 2021 was 5.7%; the highest since 1984. This continues the historical pattern over the last 100 years of the economy performing better under Democratic Presidents than under Republican ones. (See this previous post for more details.)

There are two pieces of bad news from recent economic data. One is that consumer prices are increasing; more on that below. The other is that while unemployment is down overall, unemployment is higher and falling more slowly for non-White workers than for White workers. This is especially true for Black women. As-of the end of 2021, unemployment rates and their declines since October were as follows: [2]

  • White workers: 2% unemployed (down 20%)
  • Asian American workers: 8% unemployed (down 11%)
  • Latino / Hispanic workers: 9% unemployed (down 14%)
  • Black workers: 1% unemployed (down   9%)

Consumer prices have increased 7.5% over the last year; the highest rate since 1982. Although Covid-related supply chain problems and growing consumer demand are responsible in part, growing attention is focusing on price gouging by large corporations. The extreme capitalism that our policies have allowed to flourish over the last 40 years has resulted in a dramatic decrease in competition in many industries and markets. (See this previous post for more details.) The lack of competition and monopolistic control of markets has allowed huge corporations in many industries to raise prices and increase profits more than a competitive market would allow (i.e., to engage in price gouging [3]). This has been evident in the prices of gasoline, food, and many consumer products due to large, monopolistic corporations in everything from trans-oceanic shipping to oil and gasoline production to food production.

Analysis of car prices shows that dealers are engaging in price gouging in the face of growing demand and limited supply. Manufacturers’ prices to dealers for new cars are up only 2% over a year ago but consumers are paying 12% more than they did a year ago. Edmunds, a car-shopping research company, found that 82% of consumers paid more than the manufacturers’ suggested retail price (MSRP) in January 2022, compared with just 3% in 2021 and almost no one in 2020. Profits for large car dealer networks have, not surprisingly, skyrocketed. [4] Prices for used cars and trucks are up 40.5% from a year ago. This is another indication that car dealers are price gouging. [5]

The Federal Trade Commission is investigating the market behavior of the large oil and gas corporations. [6] Gasoline prices in January (i.e., before the Ukraine war) had jumped 40% over a year earlier to $3.49 a gallon from $2.49. Natural gas prices were almost four times what they were a year ago. Costs are not driving these price increases; the oil and gas corporations are taking advantage of the pandemic to increase profits by price gouging.

The Federal Maritime Commission is examining the large shipping corporations for price gouging. There are three alliances of nine trans-oceanic shippers that transport 80% of all seaborne cargo (up from 40% in 1998). The price of transporting a standard shipping container from China to the U.S. has increased from about $2,000 before the pandemic to $20,000 last August and roughly $14,000 in January. The shippers’ profits in 2020 were around $25 billion; it’s estimated that their profits were 12 times as much, $300 billion, in 2021. This is a clear indication that the increases in shipping prices are price gouging. [7]

As a final example, the handful of huge slaughterhouses and meatpackers that control the market for beef, poultry, and pork have tripled their profit margins during the pandemic. The Justice Department is investigating them for price fixing. The four biggest meatpacking corporations (Cargill, JBS, Tyson Foods, and National Beef Packing Co.) control over 70% of the market for beef. The price of beef is up 16% over the last year, significantly higher than the already high rate of increase of 7.5% for food in general. Cattle ranchers filed an anti-trust lawsuit against the four big meatpacking corporations in 2019; food retailers and wholesalers sued them in 2020. Ranchers now receive only 39% of the retail price of beef; down from 45% in 2017. JBS previously paid $52.5 million to settle a lawsuit over beef price fixing. [8] Again, these are clear signs that the increases in meat prices are price gouging.

[1]      Ott, M., 2/25/22, “Jobless aid numbers now lowest since 1970,” The Boston Globe from the Associated Press

[2]      Broady, K., & Barr, A., 2/11/22, “December’s jobs report reveals a growing racial employment gap, especially for Black women,” Brookings (https://www.brookings.edu/blog/the-avenue/2022/01/11/decembers-jobs-report-reveals-a-growing-racial-employment-gap-especially-for-black-women/

[3]     Price gouging refers to when businesses take advantage of spikes in demand or shortages of supply and charge exorbitant prices for necessities, often after a natural disaster or another type of emergency.

[4]      Elizalde, R., 2/23/22, “Car prices are above MSRP because of price gouging rather than inflation,” Forbes (https://www.forbes.com/sites/raulelizalde/2022/02/23/car-prices-above-msrp-reflect-price-gouging-rather-than-inflation/?sh=61d09cabb60a)

[5]      Shen, M., 2/13/22, “Used cars cost 40.5% more than last year as gas prices rise. New car prices also climbing,” USA Today

[6]      Tankersley, J., & Rappeport, A., 12/25/21, “As prices rise, President Biden turns to antitrust enforcers,” The Boston Globe from the New York Times

[7]      Khafagy, A., 2/2/22, “The hidden costs of containerization,” The American Prospect (https://prospect.org/economy/hidden-costs-of-containerization/)

[8]      Puzzanghera, J., 2/19/22, “Why are beef prices so high? Some ranchers and White House say it’s more than just inflation,” The Boston Globe

SUPPORTING CHILDREN AND FAMILIES: SOMETHING EVERY DEMOCRAT OUGHT TO BE CAMPAIGNING ON NOW

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Democrats in Congress and the Biden Administration enacted a nearly universal Child Tax Credit as part of the American Rescue Plan Act (ARPA) in March 2021. It provided almost every family in America with $3,600 annually for each child under age 6 and $3,000 for each child age 6 and up. Importantly, the credit was paid on a monthly basis rather than having to wait until one filed a tax return at the end of the year to get the money. In effect, it provided a universal basic monthly income for families with kids, something most wealthy countries do. [1]

The effect of this enhanced Child Tax Credit was dramatic – the child poverty rate declined by almost half. However, ARPA authorized these payments for only one year. Many politicians and policy analysts thought that the program would prove so effective and so popular that it would be extended. This is what was proposed by the Biden Administration and most Democrats in Congress as part of the Build Back Better bill.

Last summer, as the Build Back Better (BBB) bill was taking shape, the debate between Democratic progressives and centrists was whether to make the enhanced Child Tax Credit permanent or just extend it for five years. But then, Senators Joe Manchin and Kyrsten Sinema went rogue. They claimed they were concerned about the budgetary impact, but voted for an increased defense budget many times more expensive. They claimed that families were benefiting from it that didn’t need it or deserve it. I’ll come back to these arguments below.

Now, the question is whether any form of the enhanced Child Tax Credit will survive in whatever the Build Back Better bill becomes.

Longstanding research shows substantial benefits for child outcomes from family economic support. This research was bolstered very recently by a research paper published in the prestigious Proceedings of the National Academy of Sciences. In a randomized control trial, the most definitive kind of scientific study (the same approach as is used for testing new drugs), monthly cash support of $4,000 per year given to poor mothers with infants was found to result in changes in the infant’s brain activity that are associated with better development of important cognitive skills. [2]

Despite the strong body of research that documents that economic support for families improves children’s cognitive, school success, and life success outcomes, the Republicans and a few Democrats in Congress let the enhanced Child Tax Credit expire in January. As a result, 3.7 million more children are now in families living in poverty. The overall child poverty rate increased from 12.1% to 17.0% (a 41% increase in the poverty rate) and the impact on non-White children was greater:

  • White children in poverty increased from    7.5% to 11.4% (+3.9%)
  • Black children in poverty increased from   19.5% to 25.4% (+5.9%)
  • Latino children in poverty increased from  16.8% to 23.9% (+7.1%)
  • Asian children in poverty increased from   11.9% to 15.1% (+3.2%) [3]

The Child Tax Credit is a potent anti-poverty program. It is also extremely efficient. There are no middlemen, no application hassles, and no bureaucracy required to determine who’s eligible and who’s not; the government just provides money to all families with children, the same way it provides money to all seniors through Social Security. And the benefits are taxable, so higher income families who have less need for the money pay some of it back in income tax.

Senator Manchin has said he might support an enhanced Child Tax Credit if it had strict income limits or a work requirement. This would make it an inefficient, counter-productive policy because it requires a large bureaucratic effort to determine who is eligible and who isn’t, and mistakes will undoubtedly occur. It creates complexity and confusion because parents’ work status and income can change, often frequently for low-income workers and those in part-time jobs. Furthermore, it creates what are called “cliff effects” where as a parent’s earned income increases, they fall off the eligibility cliff and lose benefits. This creates a perverse incentive for low-income workers to refuse increases in pay or hours, or even to refuse a new job, because this might reduce their eligibility for benefits from the Child Tax Credit.

It would also make the Child Tax Credit less politically popular because middle-class parents wouldn’t get it. This reduced political support means that it will be more likely to be cut or eliminated in the future.

The Child Tax Credit is an issue that exposes the hypocrisy of many Republicans and some conservative Democrats. They claim they support family values and a right to life (as well as to liberty and the pursuit of happiness), but don’t support the enhanced Child Tax Credit that supports families and improves a child’s likelihood of leading a successful and fulfilling life.

I urge you to contact President Biden and your U.S. Representative and Senators to let them know that you support the enhanced Child Tax Credit, which would provide economic support to over 36 million families and over 61 million children. Tell them that this is what family values really are all about and that this is what a right to a life is all about for children in America.

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Kuttner, R., 2/18/22, “Save the Child Tax Credit,” The American Prospect blog (https://prospect.org/blogs/tap/save-the-child-tax-credit/)

[2]      Troller-Renfree, S. V., et al., 2/1/22, “The impact of a poverty reduction intervention on infant brain activity,” Proceedings of the National Academy of Sciences (https://www.pnas.org/content/119/5/e2115649119)

[3]      Center on Poverty and Social Policy, 2/17/22, “3.7 million more children in poverty in Jan 2022 without monthly Child Tax Credit,” Columbia University (https://www.povertycenter.columbia.edu/news-internal/monthly-poverty-january-2022)

MEDICARE PRIVATIZATION CAN’T BE FIXED; IT MUST BE ELIMINATED

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The private health insurers in America have been working for decades to privatize Medicare, our public health insurance for all seniors, so they can profit from this large public funding stream. If we want to improve quality and control costs in our health care system, the privatization of Medicare must be stopped and rolled back. This and two other posts summarize:

  • The history and background of Medicare and efforts to privatize it (this previous post),
  • The unsuccessful efforts to control the costs and improve the quality of the privatized Medicare Advantage plans (this previous post), and
  • What needs to happen to save Medicare (this post). [1]

Theoretically, the problems of cost, quality, and access to health care services that arise with the privatized Medicare Advantage (MA) and Direct Contracting (DC) programs can be fixed with technical changes in laws and regulations. However, these approaches have been tried in the past without success. Some of the practices the MA and DC companies use to increase their revenues and profits are illegal. The Department of Justice has filed lawsuits against large MA providers for their “upcoding” gamesmanship to get more revenue per enrollee (see this previous post for more details). However, even lawsuits are unlikely to solve this problem permanently. And it won’t solve the gaming of the Medicare payment system in other ways.

The lengths the MA insurers will go to protect their profits was underscored by their active opposition to improving Medicare by adding hearing, vision, and dental benefits as was proposed by the Build Back Better Act. Recognizing that a more level field of competition from an improved public Medicare program was a threat to their profits, they engaged in a multi-million-dollar public relations campaign against the enhanced Medicare benefits. Despite the private sector’s rhetoric about believing in competition, in health care (as elsewhere) private providers do NOT want competition from the public sector on an even playing field. This is evident here with MA insurers and it was evident in the development of the Affordable Care Act (ACA) when private health insurers opposed and killed the inclusion of a public, Medicare-like option among the subsidized health insurance alternatives in the ACA marketplaces.

Both the MA insurers and the new DC entities are private companies that will pursue profits relentlessly. They can be constrained only by government regulation, which is extremely difficult if not impossible to implement effectively. Moreover, doing so would be costly and therefore inefficient. These corporations are timeless and soulless legal entities that have shown through past behavior that their only commitment is to maximizing profits. The MA insurers have shown time after time that they will find ways around government regulations or ways to game the regulations for their profit.

The delivery of key societal services, such as health care, by the public sector, i.e., government, is not only fairer and more compassionate than delivery by the private sector, it is also more efficient, effective, and streamlined. The private sector’s profit motive adds costs (i.e., profits, advertising, and administrative overhead) and incentivizes cost-cutting, often through denying needed services and cutting corners on quality. Furthermore, the private sector has no incentive to address inequality, bias, or discrimination; its only goal is to maximize profits.

To reverse the scourge that Medicare privatization has clearly become, and that is exacerbated by Direct Contracting, we need to assert strong public control over Medicare. This can and should be done by changing or reversing past policy decisions.

The privatization of Medicare is an example of the extreme capitalism that has come to dominate the U.S. economy. Bob Kuttner wrote about this in his powerful and poignant article analyzing the history of capitalism in our democracy. [2] (I summarized his article in this previous post.) This hyper-capitalism, as he calls it, includes the privatization and/or deregulation of important public services and public goods, including health care and health insurance.

Based on historical experience, Kuttner concludes that nothing short of full public control will stop the private sector’s relentless drive to capture – and profit from – Medicare spending. This large, public funding stream, currently $800 billion and projected to double by 2028 as more baby boomers become Medicare-eligible, is seen by private sector capitalists as a tremendous, irresistible profit opportunity.

Kuttner notes that without strong and effective public constraints capitalism evolves into an extreme form (which he calls hyper-capitalism) that serves wealthy individuals (i.e., plutocrats) and large corporations but leaves everyone else behind. This is antithetical to the ideals and principles on which our democracy was founded – equal opportunity for all, including the ability to realistically pursue happiness and a good life through access to health care and true freedom to make important life choices, such as where to live and work. These ideals and principles, as well as the public goods and basic societal functions that effectuate them, can only be ensured by an assertive government of, by, and for the people, not one that’s controlled by the plutocrats and wealthy corporations for their benefit.

A first step for saving Medicare is to eliminate the Direct Contracting privatization option created by the Trump Administration. Over 50 Democratic members of Congress, along with Physicians for a National Health Program (a  membership organization of 24,000 doctors and other health professionals), are calling on the Biden Administration to eliminate the Direct Contracting Medicare privatization program. A majority of the 53 current Direct Contracting companies are investor owned (i.e., owned by private equity or hedge fund vulture capitalists not by a health insurer or a healthy services provider). They are allowed to spend as little as 60% of their Medicare payments on patient care with the rest going to profits and overhead. So far, the Biden Administration has only paused the most extreme form of DC, while letting the other DC pilot programs proceed, despite questions over their legality. [3] [4]

I urge you to contact President Biden and ask him to eliminate the Direct Contracting Medicare privatization scheme. You can also let him know that you support reducing and eventually eliminating other Medicare privatization, while strengthening the public Medicare program. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

I also urge you to contact your U.S. Representative and Senators to let them know that you support elimination of the Direct Contracting Medicare privatization scheme. You can also let them know that you support reducing and eliminating Medicare privatization, while strengthening the public Medicare program. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Caress, B., 1/24/22, “The dark history of Medicare privatization,” The American Prospect (https://prospect.org/health/dark-history-of-medicare-privatization/)

[2]      Kuttner, R., 12/1/21, “Capitalism vs. liberty,” The American Prospect (https://prospect.org/politics/capitalism-vs-liberty/)

[3]      Johnson, J., 2/3/22, “Warren warns, ‘Corporate vultures’ circling Medicare on Biden’s watch,” Common Dreams (https://www.commondreams.org/news/2022/02/03/warren-warns-corporate-vultures-are-circling-medicare-bidens-watch)

[4]      Johnson, J., 2/16/22, “Physicians slam industry push to ‘fix’ – not end – Medicare privatization scheme,” Common Dreams (https://www.commondreams.org/news/2022/02/16/physicians-slam-industry-push-fix-not-end-medicare-privatization-scheme)

LACK OF ETHICS AT THE SUPREME COURT AND IN THE FEDERAL JUDICIARY

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

There’s a lack of ethics at the U.S. Supreme Court, both in terms of the justices themselves and in the Chief Justice’s oversight of the federal judiciary. Unlike every other member of state and federal judiciaries, the Supreme Court’s nine justices aren’t subject to ethics rules or a code of conduct, not even the ones that govern the rest of the federal judiciary. Requests for them to subject themselves to those rules have fallen on deaf ears and efforts in Congress to impose ethical standards have gone nowhere.

The 1978 Ethics in Government Act, passed in the aftermath of President Nixon’s Watergate scandal, does require the justices to file annual disclosure statements of their and family members’ financial interests. Nonetheless, Justice Thomas had to amend 20 years of disclosure statements to indicate that his wife had received hundreds of thousands of dollars of income from the Heritage Foundation, a conservative think tank. He has repeatedly been criticized for not recusing himself in cases where he appeared to have a conflict of interest based on his wife’s financial interests. [1]

There also have been issues with conflicts of interest due to justices’ ownership of stock in corporations with business before the court. For example, in 2016, Chief Justice Roberts had two instances of such conflicts. In a case involving Microsoft, he disclosed well after that fact that he had sold over $250,000 of Microsoft stock in the year prior to hearing the case. He also participated in a case involving Texas Instruments while owning over $100,000 worth of company stock. He admitted after the fact that he should have recused himself on that case.

At least four current justices have book deals worth hundreds of thousands, if not millions, of dollars. Federal employment guidelines say that justices can’t accept more than $30,000 annually in outside pay. However, book income is exempt, but, nonetheless, it has potential conflicts of interest.

Nearly every justice has been questioned at one point or another on ethical issues such as appearing at partisan events or fundraisers, or accepting travel packages or other gifts. Justice Gorsuch just gave a speech at the annual conference of the politically active, powerful, conservative legal group, the Federalist Society. His speech was the only part of the conference program that was closed to the media. Without a code of conduct that indicates what’s appropriate and what isn’t, it’s up to each individual justice’s discretion (or lack thereof).

For the rest of the federal judiciary, the Chief Justice of the Supreme Court, John Roberts, has responsibility for overseeing its ethical standards and practices. Despite numerous examples of federal judges with conflicts of interest, in his year-end report on the federal judiciary Roberts argues for “institutional independence” and for the “Judiciary’s power to manage its internal affairs”. [2]

However, the evidence indicates that Chief Justice Roberts and the federal judiciary are NOT doing a good job of managing their internal affairs. In September, the Wall Street Journal reported that between 2010 and 2018, 131 federal judges improperly heard cases involving corporations where they or family members were shareholders. This is, of course, a violation of the conflict-of-interest rules for federal judges. Subsequent to the Wall Street Journal’s reporting, 136 judges have, after the fact, informed parties in 777 cases that they should have recused themselves because of a conflict of interest.

In response to these and other revelations, members of Congress have expressed interest in:

  • Making all federal judges’ financial disclosure statements public (as they are for elected officials) so that conflicts of interest would be apparent,
  • Imposing a code of conduct on the Supreme Court justices,
  • Updating judicial ethics rules and disclosure requirements for all federal judges, including ones governing gifts, such as travel packages, and
  • Imposing civil sanctions on judges who fail to recuse themselves when the judicial code of conduct requires them to do so.

The Roberts report’s only acknowledgement of the conflict-of-interest problems among federal judges is a statement that judicial ethics training programs need to be more rigorous. It also asserts that inappropriate behavior in the judicial workplace (presumably referring to multiple reports of sexual harassment and misconduct) can be addressed with expanded guidance and training.

Given the evidence of a variety of ethical problems at the Supreme Court and in the federal judiciary, Roberts’ call for judicial independence and autonomy sounds like an effort to avoid the standards, accountability, and transparency that would be put in place by a code of conduct for the Supreme Court Justices and by an enhanced code of conduct for the rest of the federal judiciary.

[1]      O’Brien, T. L., 5/2/21, “Supreme Court’s ethics problems are bigger than Coney Barrett,” Bloomberg (https://www.bloomberg.com/opinion/articles/2021-05-02/supreme-court-s-ethics-problems-are-bigger-than-coney-barrett)

[2]      Mystal, E., 1/24/22, “Roberts gets an F on his annual report,” The Nation (https://www.thenation.com/article/society/john-roberts-report/)

PRIVATIZED MEDICARE CAN’T BE CONTROLLED

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

For decades, the private health insurers in America have, step by step, been privatizing Medicare, our public health insurance for all seniors, in order to make profits off this large public funding stream. Not surprisingly, they made dramatic new inroads during the Trump administration.

If we want to improve quality and control costs in our health care system for seniors, the privatization of Medicare must be stopped and rolled back. This and two other posts will summarize:

  • The history and background of Medicare and efforts to privatize it (a previous post),
  • The unsuccessful efforts to control the costs and improve the quality of the privatized Medicare Advantage plans (this post), and
  • What Medicare needs to do to fix what’s wrong, control runaway costs, and improve quality. [1]

Over the last 30 years, multiple efforts have attempted to control the costs of the privatized Medicare Advantage (MA) plans and to protect MA enrollees’ access to health care services (i.e., to reduce unwarranted denials of services or payments). However, the MA insurance companies always seem to find a way to dodge or get around new laws or regulations with these goals. Sometimes they block or weaken them before they’re ever enacted (e.g., through lobbying and campaign spending). Sometimes they alter their practices to skirt and undermine them.

When the privatized Medicare Advantage plans came into existence in 1985 (see my previous post for more details), reimbursement rates for MA plans were set at 95% of what seniors cost Medicare because the private insurers claimed they would be more efficient than the public Medicare program and would save Medicare money. However, MA insurance companies ended up spending 6% more per enrollee than Medicare, so they lobbied for and got higher and higher payments from Medicare. Instead of saving Medicare money, they cost it more and more. In 1997, the Clinton Administration’s Balanced Budget Act cut the excessive payments to MA plans and stopped the MA insurers from creaming-the-crop by enrolling healthier-than-average (i.e., less expensive) seniors. However, in 1999 and 2000, the MA companies got Congress to weaken these initiatives and then, under the pro-privatization George W. Bush Administration, they actually got increases in their payments from Medicare. The Obama Administration, as part of the Affordable Care Act (ACA) in 2010, tried again to cut excessive payments to MA insurers. The ACA cut about $14 billion from MA plans’ excess costs by limiting them to only 1% more per enrollee than traditional, public Medicare costs. In response, an extensive and expensive ad and media campaign was initiated by the MA health insurers and Republicans claiming that Obama and the ACA were hurting seniors by cutting Medicare – a  campaign you may well remember. As a result, two years later, under tremendous pressure, the Obama Administration backed off and instead of cutting MA rates by 2.3% to move toward the targeted savings, it increased them by 3.3%

The private Medicare Advantage insurers have been successful time after time in overcoming Medicare’s efforts to control their excessive costs. They are so big and profitable that they can spend the money needed to stymie Medicare’s efforts by engaging in campaign spending, lobbying, and advertising. Any time there is an effort to cut their funding, they run a massive media and lobbying campaign saying that the government is trying to cut spending on Medicare. This scares seniors and legislators into opposing efforts to make MA more cost effective. [2]

The private Medicare Advantage insurers also find innovative (and sometimes fraudulent) ways to dodge cost controls and increase their revenue. A major one is claiming that their enrollees are sicker than they actually are because the payments they receive are greater for sicker seniors. Codes indicating the presence of diseases and negative health conditions are added to enrollees’ records even if the MA provider is providing no treatment or services for those ailments. It is estimated that in 2019 this “upcoding” (as it is referred to) cost Medicare $9 billion. [3]

Another way that the private Medicare Advantage insurers are gaming Medicare is through its five-star quality rating program that provides bonuses to MA plans with high ratings. The original purpose of the quality rating program was to help seniors pick high quality plans. When the program was initiated in 2009, 15% of plans got 4 or 4.5 stars and none got 5 stars. Today, 86% of plans are rated at 4 or 5 stars and, therefore, get about $6 billion in quality bonuses. Yet research finds that MA plan quality has not improved. The only thing that has improved is the MA insurers’ ability to game the system to get billions in bonus payments.

When the pro-privatization Trump Administration came into power, it created a program to fully privatize Medicare called Direct Contracting. Some experts have described it as Medicare Advantage on steroids. For example, one of the three Direct Contracting models would allow all seniors in designated geographic areas to be enrolled in a privatized Direct Contracting health care plan with no right to opt out. In addition, for the first time, Direct Contracting would allow investor-controlled firms – as opposed to firms controlled by health service providers – to provide Medicare services. This would turn over the delivery of Medicare’s health care services to private investors like hedge fund and private equity vulture capitalists whose only goal is to make money. [4]

In a recent 18-month period, private investors spent $50 billion buying Medicare Advantage insurers and these new Direct Contracting firms because of the opportunities they see to make large profits. These deals value the purchased firms at an average of $87,000 for each senior they estimate they will enroll. This is indicative of the level of profit investors believe can be generated from Medicare payments to these firms. [5]

My next post will describe what Medicare needs to do to fix what’s wrong, control runaway costs, and improve quality.


[1]      Caress, B., 1/24/22, “The dark history of Medicare privatization,” The American Prospect (https://prospect.org/health/dark-history-of-medicare-privatization/)

[2]      Caress, B., 1/24/22, see above

[3]      Gilfillan, R., & Berwick, D., 9/29/21, “Medicare Advantage, Direct Contracting, and the Medicare ‘money machine,’ Part 1: The risk-score game,” Health Affairs (https://www.healthaffairs.org/do/10.1377/forefront.20210927.6239/full/)

[4]      Gilfillan, R., & Berwick, D., 9/30/21, “Medicare Advantage, Direct Contracting, and the Medicare ‘money machine,’ Part 2: Building on the ACO model,” Health Affairs (https://www.healthaffairs.org/do/10.1377/forefront.20210928.795755/full/)

[5]      Gilfillan, R., & Berwick, D., 9/29/21, see above

THE ECONOMY PERFORMS BETTER UNDER DEMOCRATIC PRESIDENTS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

I’ve written before about the fact that the economy has historically performed better under Democratic Presidents than under Republicans. With the economy booming under President Biden, this pattern is both being confirmed and extended, and it’s receiving some attention. For example, Heather Cox Richardson, an historian, wrote the following in her Feb. 5, 2022, blog post (my bolding):

The economy has boomed under President Joe Biden, putting the lie to the old trope that Democrats don’t manage the economy as well as Republicans.

This should not come as a surprise to anyone. The economy has performed better under Democrats than Republicans since at least World War II. CNN Business reports that since 1945, the Standard & Poor’s 500—a market index of 500 leading U.S. publicly traded companies—has averaged an annual gain of 11.2% during years when Democrats controlled the White House, and a 6.9% average gain under Republicans. In the same time period, gross domestic product grew by an average of 4.1% under Democrats, 2.5% under Republicans. Job growth, too, is significantly stronger under Democrats than Republicans.

“[T]here has been a stark pattern in the United States for nearly a century,” wrote David Leonhardt of the New York Times last year, “The economy has grown significantly faster under Democratic presidents than Republican ones.”

The persistence of the myth that Democrats are bad for the economy is an interesting example of the endurance of political rhetoric over reality. …

In the end, … the economists Leonhardt interviewed last year think [that] behind Democrats’ ability to manage the economy better than Republicans [is the fact that] Republicans tend to cling to abstract theories about how the economy works—theories about high tariffs or tax cuts, for example, which tend to concentrate wealth upward—while Democrats are more pragmatic, willing to pay attention to facts on the ground and to historical lessons about what works and what doesn’t.”

You can read the rest of her post with its more in-depth interesting historical perspective here: https://heathercoxrichardson.substack.com/p/february-5-2022

MEDICARE IS BEING PRIVATIZED AND IT’S A RIP OFF

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The private health insurers in America have been working for decades to privatize Medicare, our public health insurance for all seniors, so they can make profits off this large public funding stream. Not surprisingly, they made dramatic new inroads during the Trump administration.

If we want to improve quality and control costs in our health care system, the privatization of Medicare must be stopped and rolled back. This and two subsequent posts will summarize:

  • The history and background of Medicare and efforts to privatize it (this post),
  • The unsuccessful efforts to control the costs and improve the quality of the privatized Medicare Advantage plans, and
  • What Medicare needs to do to fix what’s gone wrong and to control runaway costs while improving quality. [1]

The U.S. health care system is the most expensive in the world with some of the worst outcomes. It costs nearly twice as much per person as in peer countries. It is eating up nearly $1 out of every $5 spent in the U.S. economy. Our policies (i.e., laws and regulations, or lack thereof) have allowed our private health care system to rip off consumers with high prices and poor quality for the sake of profits that enrich shareholders and executives.

The public, meanwhile, is less healthy and its economic security is at-risk, because even with insurance a major health problem is often astronomically costly. Surveys have found that of the adults who are not old enough to be eligible for Medicare roughly one in four (26% or about 52 million people) face challenges paying medical bills. Roughly 1 million individuals declare bankruptcy each year and for many of them (estimates range from 26% to 62%) medical bills are a significant – if not the driving – factor. This makes medical costs the number one cause of personal bankruptcies. [2]

Medicare was created in 1965 to provide health insurance for seniors that would pay their doctor and hospital bills. The Centers for Medicare and Medicaid Services (CMS) oversees Medicare (and Medicaid which is for low-income families and individuals) and sets the regulations for health insurance plans for seniors. Private insurance companies process the payments for health care services under a contract with CMS. The insurers get paid for services according to CMS regulations. However, the insurance companies manage the payments to health care providers and the processing and paperwork requirements.

Privatized Medicare Advantage (MA) plans were introduced in 1985 because private insurers claimed they were more efficient and, therefore, could save Medicare money and deliver better services – despite their poor performance record in the general health care market. MA plans are publicly funded, privately run, currently enroll 26 million seniors (40% of Medicare enrollees), cost $343 million a year, and are very profitable for the private insurers. Moreover, two corporations, Humana and UnitedHealthcare, are the insurers for half of all MA enrollees. As is true in so many sectors of the U.S. economy, this market has a few huge corporations with a very large portion of the market. Due to this limited competition, these huge corporations have monopolistic power (e.g., to raise prices and lower quality). This is a classic example of the hyper-capitalism that emerges when corporations aren’t strongly regulated.

The portion of Medicare that is privatized through Medicare Advantage (MA) plans is growing and has resulted in increased costs and a bewildering array of choices that often confuse and manipulate seniors – 3,834 MA plans are offered by nine different health insurance companies. This makes seniors’ health care complex, confusing, and costly, thereby undermining confidence in Medicare and in government programs in general.

Seniors buy MA plans because they typically cover services Medicare doesn’t cover (such as vision, hearing, and dental services) and/or reduce Medicare’s out-of-pocket costs (e.g., deductibles and co-pays). To cover their overhead and make a profit, MA plans aggressively control costs by requiring enrollees to only use in-network providers and to get prior approval for many services, especially expensive ones.

MA plans deny 4% of requests for prior approval of health care services and 8% of requests for payments for services that have been delivered. There is an appeal process but few people use it. When they do, the denials are reversed 75% of the time. Denying coverage for health care services not only saves the MA plans money, it also tends to drive seniors who have serious and expensive health issues off their MA plan and back onto traditional Medicare. This is a creaming-the-crop technique that leaves healthier, less expensive (and more profitable) seniors in MA plans and shifts the less healthy, more expensive seniors onto the public Medicare program. As a result, MA plans spend 10% to 25% less per enrollee than traditional Medicare does for comparable enrollees.

Nonetheless, over the 12 years from 2009 to 2021, Medicare paid MA private insurance companies $140 billion more than it would have spent if those seniors had stayed in traditional, public Medicare. (A further explanation of how this happens is in my next post.) MA plan insurance companies made a gross profit of $2,256 per enrollee in 2020 (which is more than double what they make on non-senior enrollees in the general health care market).

The bottom line is that the partial privatization of Medicare through Medicare Advantage plans has not saved Medicare money as promised (quite the opposite) and it has not produced better outcomes for seniors.

My next post will summarize the unsuccessful efforts to control the costs and improve the quality of the privatized Medicare Advantage plans. A subsequent post will describe what Medicare needs to do to fix what’s gone wrong and to control runaway costs while improving quality.

[1]      Caress, B., 1/24/22, “The dark history of Medicare privatization,” The American Prospect (https://prospect.org/health/dark-history-of-medicare-privatization/)

[2]      Amadeo, K., 1/20/22, “Medical bankruptcy and the economy,” The Balance (https://www.thebalance.com/medical-bankruptcy-statistics-4154729)

Good economic news ignored / downplayed by the mainstream media

Numbers released yesterday by the Bureau of Economic Analysis show that the U.S. economy grew by a 6.9% annual rate from October to December 2021 and 5.7 percent for all of 2021. That’s the fastest full-year growth since 1984. The U.S. economy also added 6 million jobs in 2021, bringing the unemployment rate below 4%. This growth is the outcome of dramatic changes in economic policy initiated by the Biden administration through measures like the American Rescue Plan and the bipartisan infrastructure law. Pay for workers is also growing.

Nonetheless, the mainstream media continue to downplay the extraordinary success of the economy, the Biden administration, and Democratic policies. Instead, they focus on the negatives. The Washington Post ran a story that began: “Even as the U.S. economy grew at its fastest pace in decades in 2021, the recovery has more recently flashed troubling warning signs, with soaring inflation, whipsawing financial markets and slowing consumer spending complicating the rebound.” What a surprising way to introduce a story on the best economic growth since 1984! The NY Times story’s headline was “Growth is surging in Biden’s economy. Why don’t voters feel better?” The answer is because the mainstream media aren’t reporting all the good news and even when they do, they highlight a negative spin! Read more at Heather Cox Richardson’s “Letters from an American” blog post of January 27 here: https://heathercoxrichardson.substack.com/p/january-27-2022

WHICH CORPORATIONS SUPPORT SEDITIOUS REPUBLICANS AND WHICH SUPPORT DEMOCRACY

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

A year after January 6, 2021, when, even after the insurrectionists’ attack on the Capitol, 147 Republicans objected (with no factual basis) to certifying the Electoral College vote that made Joe Biden President, it’s important to identify the corporations that are supporting the 147 objectors who opposed the peaceful, democratic transfer of power to the new, overwhelmingly elected President.

Remember that in reaction to the insurrection and the votes of those 147 Republicans against a peaceful transfer of power based on the will of the voters, hundreds of corporations stated they were suspending political contributions to the objectors, or in some cases all political contributions. Many pledged never to support the objectors in the future.

Corporate support of politicians and political committees is done through corporations’ political action committees (PACs). Popular Information has been monitoring corporate PACs through their reporting to the Federal Election Commission (FEC). It has published its findings in a corporate accountability index that lists 183 corporations and whether or not they have kept their pledges not to support the objectors.

GOOD NEWS: So far, 79 major corporations have kept their pledges and not donated directly to any of the 147 objectors or to committees that support them, typically the fundraising committees of the Republican National Committee. These include Airbnb, Allstate, Amazon, American Express, CBS, Clorox, Coca-Cola, eBay, Facebook, General Mills, Hallmark, Hilton, Kraft Heinz, Lyft, Marriott, Mastercard, McDonalds, Microsoft, Nike, Sony, Target, Walgreens, Walt Disney, and Zillow. (See the full list at the corporate accountability index.)

Charles Schwab, one of the country’s biggest brokerage firms, went even further. Immediately after the insurrection, it announced the dissolution of its PAC and said it would no longer make donations to politicians. The PAC’s remaining funds were donated to The Boys & Girls Club of America and historically Black colleges and universities. Hewlett Packard also shut down its PAC soon after January 6. Hallmark Cards actually requested that two objectors, Senators Josh Hawley (R-MO) and Roger Marshall (R-KS), return its PAC’s donations. [1]

Overall, Popular Information found that corporate PAC donations to objectors was down roughly 60% in 2021 as compared to 2019 (the comparable year from the previous election cycle). Of the 183 major corporations it contacted, seven explicitly pledged not to support objectors in 2022: Airbnb, BASF, Eversource Energy, Lyft, Microsoft, Dow, and American Express. [2]

BAD NEWS: To-date, 103 corporations have either given directly to objectors or to committees that support them, despite pledges not to donate to objectors, to suspend all PAC donations, or to re-evaluate their donation criteria.

  • Four corporations have broken their pledges and given directly to objectors and to committees supporting them: PriceWaterhouseCoopers: $184,000; Eli Lilly: $72,500; Cigna: $60,000; and Pacific Gas & Electric: $44,500.
  • Fifty-two corporations pledged to suspend all PAC contributions but then gave directly to objectors and often to committees supporting them as well, including Boeing: $375,500; Lockheed Martin: $323,000; GM: $158,500; as well as Aflac, American Airlines, Jet Blue, Kroger, Molson Coors, Stanley Black and Decker, T-Mobile, and UPS. (See the full list at the corporate accountability index.)
  • Seventeen corporations pledged to re-evaluate their donation criteria but then donated directly to objectors and sometimes to committees supporting them as well, including: Toyota; $95,500; Chevron: $71,000; Ford: $59,000; as well as Delta, Exxon Mobil, and FedEx. (See the full list at the corporate accountability index.) Toyota, after substantial public attention and pushback, announced in June, 2021, that it would change course and stop contributing to objectors. A clear indication that public pressure can be effective. (See more about how to do this at the end of this post.)
  • Thirty corporations have violated the spirt of their pledge by giving indirectly to objectors through committees that support them, despite pledging not to donate to objectors, to suspend all PAC donations, or to re-evaluate their donation criteria. These include: NextEra: $105,000; Dell: $60,000; Walmart: $60,000; Cozen O’Connor: $55,000; AT&T: $35,000; and $30,000 each from Comcast / NBC, Genentech, General Electric, Google, Intel, and Verizon. (See the full list at the corporate accountability index.)

The organization Citizens for Responsibility and Ethics in Washington (CREW) has also been monitoring corporate and industry trade groups’ donations to the objectors. [3]

GOOD NEWS: One hundred thirty-four (134) out of 248 corporations and industry groups that said they were suspending donations to the objectors have not contributed to them to-date.

BAD NEWS: Over the last year, despite promises made to hold the objectors accountable, 717 corporations and industry groups have given over $18 million to objectors and the Republican National Committee’s fundraising committees that support them.

The four largest corporate donors to objectors and committees supporting them are: Koch Industries ($308,000), American Crystal Sugar ($285,000), General Dynamics ($234,000), and Valero Energy ($208,000). These corporations never pledged to stop or alter political donations despite the Jan. 6 insurrection and the unfounded objections to the Electoral College vote.

The five top donors among industry trade groups are: Council of Insurance Agents & Brokers ($432,000), National Association of Realtors ($303,000), Independent Insurance Agents & Brokers of America ($270,000), National Electrical Contractors Association ($222,000), and the Credit Union National Association ($217,500).

GOOD NEWS: Activism by consumers, voters, and stakeholders in general (i.e., us) can have an effect of corporations. For example, as noted above, Toyota stopped its financial support of objectors after public attention and push back from consumers. I encourage you to take action however you see fit. Here are some ideas for steps you can take:

  • Patronize businesses that support democracy (i.e., they are not donating to the objectors).
  • Boycott businesses that are donating to the objectors.
  • Send letters, emails, or social media postings to corporations to thank them for doing the right thing or highlighting their bad behavior and asking them to change it. Address your communication to the CEO and/or the shareholder or customer relations office. This is particularly effective if you are a shareholder, customer, employee, retiree, or other stakeholder in the company, which you should note in your communication.
  • Submit a letter to the editor of a local media outlet (hardcopy or on-line), post to social media, and/or spread the word to your family and friends.

Every action makes a difference and together, many small actions add up to something bigger than the apparent sum of those actions. We all need to do our part to save our democracy from the forces that are undermining it. Corporate America must stand up for our democracy and stop supporting those who are undermining it. In the 2020 election cycle, five of the objectors received over 60% of their campaign donations from corporate PACs. [4] This has to stop and it’s our job to make it happen, as we did with Toyota.

[1]      Li, A., & Shah, A., 1/3/22, “The corporate insurrectionists: How companies have broken promises and funded seditionists,” CREW (https://www.citizensforethics.org/reports-investigations/crew-reports/the-corporate-insurrection-how-companies-have-broken-promises-and-funded-seditionists/)

[2]      Legum, J., Crosby, R., & Zekeria, T., 1/4/22, “Seven major corporations pledge not to support GOP objectors in 2022,” Popular Information (https://popular.info/p/seven-major-corporations-pledge-not)

[3]      Li, A., & Shah, A., 1/3/22, see above

[4]      Evers-Hillstrom, K., 1/8/21, “Exploring the top donors to GOP Electoral College objectors,” OpenSecrets (https://www.opensecrets.org/news/2021/01/objectors-to-electoralcollege-donors)

THE FUNDING OF THE JANUARY 6 INSURRECTION

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

I’m surprised we haven’t heard more from the U.S. House Select Committee to Investigate the January 6th Attack on the U.S. Capitol about the funding for the insurrectionists and the rally that preceded the attack on the Capitol. This, of course, was the rally at which Trump spoke for an hour, stated that our elections are corrupt, and then said to the crowd, “We fight like hell. And if you don’t fight like hell, you’re not gonna have a country any more. … So, we’re going to walk down Pennsylvania Avenue … we’re going to the Capitol … to take back our country.” After which, of course, the crowd walked to the Capitol and attacked it and the people there.

The organizations, people, and funding that organized and paid for that rally are a tangled web of inter-related people and entities. Many of them were also involved in the Trump campaign. The trail of the money, as well as the overlap and connections among people and organizations, was intentionally obscured. Money was run through multiple organizations before actually being spent on-the-ground. This served both to hide who the actual donors and funders were, as well as to hide who was actually paid to do the work.

Many of the entities the money flowed through are “dark money” groups; these are non-profit, social welfare organizations that do not have to reveal their donors, but are supposed to only engage in limited political activity. They are organized under section 501(c)(4) of the IRS regulations. However, the IRS is not enforcing any limitation on their political activity. (Note: Charitable non-profits, to which donations are tax deductible, are organized under section 501(c)(3) of the IRS regulations and are strictly limited in their political activity. Donations to 501(c)(4)  non-profits are not tax deductible.)

So, here’s some of the information that has been uncovered about some of the organizations involved in the January 6th rally that preceded and fomented the attack on the Capitol. [1] [2]

  • Women for America First (W4AF): got the permit for the rally from the National Park Service. It is a dark money group and Women for Trump is an affiliate. Julie Jenkins Fancelli (heir to the Publix supermarket money) donated $300,000 to W4AF for the rally.
  • Rule of Law Trust: a sponsor of the rally and a dark money group. It is affiliated with the Republican Attorneys General Association. It received $150,000 from Julie Jenkins Fancelli and often receives money from opaque non-profits including the Judicial Crisis Network (see below) and ones that are part of the right-wing Koch brothers’ funding network.
  • Turning Point: a sponsor of the rally and a dark money group. It received $39 million from undisclosed donors in fiscal year 2020. Turning Point USA and Turning Point Action are affiliates.
  • Tea Party Patriots: a sponsor of the rally and a dark money group. It has received over $4.7 million from the Judicial Crisis Network (see below) and nearly $4.3 million from 2016 through 2020 from Richard Uihlein (see below).
  • Judicial Crisis Network: a dark money group that gave money to multiple groups that were involved in organizing the rally. It is now known as the Concord Fund and gave over $4.7 million to the Tea Party Patriots and $50,000 to Turning Point. It has also given over $1.9 million to the Rule of Law Trust since 2013 and millions more to the Republican Attorneys General Association.
  • Event Strategies Inc.: was named on the permit for the rally and two individuals who were organizers for the rally were on its payroll. It was also used by the Trump campaign, receiving over $2.5 million from it, including over $800,000 in 2021 after the official election campaign was over.
  • American Made Media Consultants LLC: created by the Trump campaign apparently to hide the recipients of the over $770 million funneled through it by the campaign. It spent over $200,000 on text messages on January 6.
  • The Trump Campaign: in the 2020 election cycle, the Trump campaign paid over $4 million to individuals and organizations that were organizers of the January 6 rally. Because the campaign funneled hundreds of millions of dollars through layers of shell companies and opaque firms, it is unknown when and for what purpose these payments were made. What’s known is that there was a significant overlap between people and organizations working for the campaign and organizing the January 6 rally.

Here’s some of the information that has been uncovered about some of the people involved in the January 6th rally that preceded and fomented the attack on the Capitol.

  • Caroline Wren: a major fundraiser for the Trump campaign, she was named on the permit for the rally and boasted that she’d raised $3 million for the rally. She funneled this money through two dark money groups and a super PAC. This served to obscure the links between the donors and the use of the funds. She was paid over $170,000 for her work for the Trump campaign. She has been subpoenaed by the House Committee.
  • Richard Uihlein: CEO of the Ulinebusiness supplies company, he has given over $1 million to Turning Point over the last few years, about $4.3 million to Tea Party Patriots since 2016, and an undetermined amount of money to Women for America First.
  • Megan Powers: was listed on the rally permit as one of two operations managers. She was paid roughly $300,000 by the Trump campaign as its director of operations. She has been subpoenaed by the House Committee.
  • Justin Caporale, Maggie Mulvaney, and Tim Unes: were all organizers of the January 6 rally and have also been paid by the Trump campaign. They have been subpoenaed by the House Committee.

The catch phrase of the Watergate investigation of the 1970s was “Follow the money.” That may well apply to the January 6 insurrection as well. Although the House investigation seems to be focused on the flow of communications, I hope it’s also looking at the flow of money. Despite the fact that the rally organizers and the Trump campaign have worked hard to obscure the flow of money, I hope it can be traced because its flow would shed a lot of light on the scale of the conspiracy and who was involved in it.

The cost of the rally was at least half a million dollars and the costs of people getting to Washington and their staying overnight was greater than that. Knowing where that money came from and who coordinated the expenditures would undoubtedly be a very telling and important tale.

[1]      Massoglia, A., 10/25/21, “Details of the money behind Jan. 6 protests continue to emerge,” OpenSecrets (https://www.opensecrets.org/news/2021/10/details-of-the-money-behind-jan-6-protests-continue-to-emerge)

[2]      Massoglia, A., 8/30/21, “Trump’s political operation paid more than $4.3 million to Jan. 6 organizers but questions remain about the full extent of its involvement,” OpenSecrets (https://www.opensecrets.org/news/2021/08/trumps-political-operation-paid-more-than-4-3-million-to-jan-6-organizers-questions-remain-about-full-involvement)

LET’S JUST SAY IT: THE REPUBLICAN PARTY DOES NOT BELIEVE IN DEMOCRACY OR THE CONSTITUTION

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

It’s long past time to stop the charade that the Republican Party has any commitment to making democracy work. Or that it supports the Constitution. Or that it is patriotic. There are people who identify as Republicans who are at odds with these statements (Rep. Liz Cheney jumps to mind), but they are few and far between and are not the ones who are setting the official Republican Party agenda or messaging.

The Republican Party supports freedom of speech only when it’s speech it likes. Threats, violent speech (and acts), and name calling are fine when they serve its purposes and when they are aligned with its goals. However, speech by others, including peaceful protests, should be severely limited and if those peaceful protesters are injured or killed by a vehicle, the vehicle driver, not the protesters, should be protected by laws. [1]

According to the Republican Party and its judges, freedom of religion is paramount when it is Christianity practiced by white people, but others don’t deserve this freedom, despite its inclusion in the Constitution. For example, Muslims are, by definition, terrorists and should be monitored and restricted.

Democracy and the electoral processes laid out in the Constitution are valid, according to Republicans, only if Republicans win elections. Otherwise, the results of voting are fraudulent and should be disregarded and overturned by any means necessary, including violence.

No American, let alone member of Congress, is a patriot if they are willing to aid and abet an undemocratic and unconstitutional overturning of election results, or if they are unwilling to denounce and reject such efforts. Yet the great majority of Republicans are doing or have done these things, particularly in relation to the Jan. 6, 2021, insurrection at the U.S. Capitol. [2]

No American can claim to be a patriot if they are working to make it harder for citizens who might disagree with them to vote. However, Republicans in many states and in Congress are doing just this.

No member of Congress can claim to support democracy or the Constitution if, based on partisanship, they simply refuse to work meaningfully to pass important legislation. Such a blatant undermining of the functioning of a democratic government is unpatriotic at best and treasonous at worst.

Yet most Republicans in Congress have no interest in actually governing and, instead, are doing everything they can to keep the Democrats from governing, i.e., from actually doing things that the people of the country support doing and that a democratic government should do. For example, Senate Republicans are blocking confirmations of nominees for dozens of ambassadorships, at least a dozen high-ranking jobs at the Treasury Department, and roughly 200 other executive branch positions. This is nothing other than an effort to keep the Biden Administration and our democracy from functioning effectively; this presents a clear and present danger to America’s national security. [3] Again, it is unpatriotic at best and treasonous at worst.

The Republican Party is claiming that modest policies that support working men and women, as well as their families, are unaffordable and are socialism that would destroy democracy. First of all, it is hypocritical to say it is unaffordable because the expenditures of the Build Back Better bill (at which it levels these charges) is somewhere between one-fifth and two-fifths (20% – 40%) of the Defense Department budget that it supports. The Build Back Better bill would spend an amount equal to roughly 1% (one-hundredth) of the U.S. Gross Domestic Product. This wouldn’t put the U.S. anywhere close to the government spending of European countries, let alone that of Scandinavian countries and their social democracies. And by the way, all of those countries, despite a greater degree of socialism than in the U.S., are democracies! So, second of all, socialism and democracy are NOT incompatible; they co-exist in all the other wealthy countries and to some degree in the U.S. in Social Security, Medicare, and the Veterans Administration, for example.

The Republican Party does not want to play by the rules established by our Constitution or our democratic traditions because if it did it would lose elections and power. It is out to win at all costs as it struggles to retain its power and that of its wealthy and generally white backers. It has given up on democracy because success for democracy means failure for it. [4]

Sadly, the current Republican Party’s rhetoric about supporting democracy, the Constitution, and patriotism is a sham. It is the language and lies of autocrats who are desperate to hang on to power and are willing to say and do anything to do so. Actions speak louder than words and the Republican Party’s actions, and the hypocrisy and lies it engages in to try to justify them, make its true beliefs and character crystal clear.

[1]      American Civil Liberties Union, retrieved from the Internet 1/7/22, “Anti-protest bills around the country,” (https://www.aclu.org/issues/free-speech/rights-protesters/anti-protest-bills-around-country)

[2]      Lehigh, S., 1/7/22, “What real America patriotism means,” The Boston Globe

[3]      Boston Globe Editorial Board, 10/22/21, “US ambassadors, State Department officials held hostage,” The Boston Globe

[4]      Blow, C. M., 6/20/21, “Stop hoping the G.O.P. will play ball,” The New York Times

SOCIALISM IS THE ANSWER FOR SAVING DEMOCRACY FROM CAPITALISM

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Bob Kuttner has written a powerful and poignant article raising the question of whether capitalism is compatible with democracy – or at least a version of democracy that lives up to the American ideals of equal opportunity and government of, by, and for the people. [1] The New Deal of the late 1930s and 1940s created a form of government-regulated capitalism that for 40 years (until 1980) produced a thriving working and middle class, as well as an economy where income and wealth inequality were stabilized, if not narrowed. However, in the last 40 years, the U.S. economy has evolved into a new form of hyper-capitalism (some call it vulture capitalism) that has destroyed the ability of many workers to thrive. (See my previous post for more detail.)

This post presents Kuttner’s thoughts on where we need to go from here to restore our democracy and create more equitable economic and political systems. It’s a bit long, so just read the bolded parts if it’s too much, but do read Kuttner’s conclusions at the end.

Kuttner writes that we need to reverse the deregulation and privatization of important public services and public goods. Health insurance is one example:

  • Deregulation allowed the transformation of health insurance from non-profit Blue Cross Blue Shield programs into for-profit insurance corporations. This is a key reason the U.S. health care system is the most expensive in the world with some of the worst outcomes.
  • Private insurers have been allowed to provide Medicare coverage. This has resulted in increased costs and a bewildering array of choices that often confuse and manipulate seniors. This privatization of Medicare ultimately makes health care more complex, confusing, and costly for seniors, thereby undermining confidence in Medicare and our government.

The overall result of this deregulation and privatization is that health insurance plans are so complex that it takes hundreds of pages to explain their benefits and limitations; no consumer fully understands what they are getting or can shop intelligently among plans.

Other examples of harmful deregulation and privatization include:

  • Drug companies that are allowed to charged exorbitant, unregulated prices in the U.S. that are almost always much higher than in Canada and other countries.
  • Deregulation of the airlines that allows fares and fees to fluctuate widely. It is also the reason it costs so much more to fly to closer but less frequent destinations than for longer trips to bigger cities.
  • Privatization of housing subsidies has resulted in the grafting of some incremental public objectives onto a capitalistic, for-profit system run by landlords, developers, and financiers. The results have been both totally inadequate and dramatically inefficient.

Weak regulation has allowed private sector capitalists to aggressively promote products that have caused serious harm to public health, often while lying about their ill effects. Examples include cigarettes and other tobacco products, oxycontin (the prescription, addictive opioid), and fossil fuels and other products that have polluted our air and water. The promotion of fossil fuels, of course, has far-reaching effects that go well beyond public health.

In summary, the privatization and deregulation promoted by capitalists are not improvements or solutions to problems, they are problems. They have provided windfall profits to private investors as evidenced by unprecedented and growing economic inequality. Meanwhile consumers pay added costs and get degraded services, while the values and principles our democracy was founded on are debased. Successful privatization requires strong, effective public oversight to ensure that public goals and values are met, but this rarely happens. Important public goods, such as water and sewer systems, roads and bridges, parking on public property, etc. should not be privatized – as they have been – without strong regulation and reasonable provisions for terminating the privatization contract if goals are not achieved.

Attempts to remedy or ameliorate the problems of capitalism with incremental reforms or weak regulations (some have even argued for self-regulation by private companies) are not only ineffective, they also make service systems, government programs, and even markets for consumer goods convoluted, complex, confusing, and unfair. They create enormous, expensive, administrative bureaucracies that attempt to implement regulations or remedies. The resulting complexities benefit the capitalists and not workers or consumers. Perhaps the classic example of complexity that benefits wealthy individuals and corporations is our tax code. The exemptions, deductions, special provisions, and other loopholes benefit the capitalists to such an extent that average workers and middle-class households are paying a much higher portion of their incomes in taxes than the wealthy.

Delivery of services by the public sector, i.e., government, is not only fairer and more compassionate than delivery by the private sector, it is also more efficient, effective, and streamlined. The profit motive adds costs (i.e., profits, advertising, and administrative overhead) and incentivizes cost-cutting through denying services and cutting corners on quality. The private sector has no incentive to treat customers equitably; its only goal is to maximize profits.

Kuttner notes that “the history of the past century proves again and again, when market forces [i.e., capitalism] overwhelm the security and livelihood of working people, they are far more likely to turn to ultra-nationalism and fascism” than to collective action through democratic advocacy or labor unions. (page 11) This is particularly likely if there are demagogic “leaders” or “information” sources pushing them in that direction. The result typically is a rise in racism and xenophobia, as well as plutocratic control of the economy and policy making by wealthy individuals and corporations through the politicians they buy with campaign spending or otherwise.

Kuttner writes that “The signal disgrace of our era is the ease with which the corporate center-right has gone along with Trump and the Republican efforts to destroy what remains of democracy.” (page 14) He also notes that since 1980 “much of the Democratic Party has been so compromised and bedded down with Wall Street that displaced middle- and working-class people are skeptical that Democrats and liberal remedies can make much of a difference in their lives.” (page 13)

To ameliorate the economic hardship and insecurity of working Americans, Kuttner recommends providing public supports for workers and families, while resisting and reversing privatization and deregulation. Public supports should include paid family leave, cash support for families with children, subsidies for child care, easier access to good health insurance, regulation of drug prices, and free tuition at community colleges – all parts of the original Build Back Better bill proposed by President Biden and most Democrats in Congress.

Republicans will try to brand these programs as socialism and they do have a socialistic flavor when compared to our current, very individualistic, hyper-capitalism. However, they are immensely popular with the U.S. public and exist in all other wealthy countries. Moreover, socialism doesn’t elicit the negative reaction that it used to; 70% of millennials (i.e., people born between 1980 and 1995 who are 26 to 40 years old now) have a positive view of socialism. While Republicans will try to conflate socialism with communism, keep in mind that in communism the government owns all property and businesses. Not even the most aggressive policy proposals of Senator Sanders (a socialist) take any step in that direction. Also keep in mind that the branding of public policies as socialism was used by white supremacists in the post-Civil War years as their rationale for keeping Blacks from voting. Therefore, calling Democrats’ proposals socialism has racist undertones. (See this previous post for more detail.)

To reverse the scourge that the current version of hyper-capitalism has clearly become, we need to assert strong public control of our economy. Strong oversight and regulation of employers to protect workers and of companies to protect consumers are essential.

Promotion of the public good as the primary goal of government will drive workplaces and the economy to be fairer and more efficient, and to treat people with decency and respect. Think about how different our health care system would be if the public good was foremost instead of maximizing profits. Think about how different our financial system would be if we had public banks (as North Dakota does) and basic banking functions through the post office (as we once did). Think about having public broadband Internet service, which Chattanooga and Europe have, that is cheaper and higher speed than what most of us get in the U.S. Think about patent-free drugs that aren’t controlled and priced by monopolies. Think about the original Health Maintenance Organizations (HMOs) of the early 1970s that were cooperatively owned and run. Think about Medicare for all, especially without the distortions of the private insurers who’ve been allowed to offer complicating alternatives to Medicare. Think about savings and loan banks and health and other insurance companies that were non-profit, mutually-owned (by customers), and prevalent up until the 1970s. Think about publicly-owned, high-quality, mixed-income housing that is a major part of the housing market in Vienna, Austria.

Kuttner concludes that “Saving democracy, the planet, and decent lives for regular people requires moving beyond capitalism. To be an effective liberal today, you need to be a socialist.” (page 2) He states, “I’ve come around to this view gradually, not because my values have changed but because reality has changed.” (page 4)

He notes that our history has shown that the social democracy [2] of the New Deal did not stand up to the test of time. It deteriorated into a capitalistic welfare system with a supposed safety net that was politically vulnerable and, therefore, eroded over time. This produced today’s grossly inequitable U.S. economy where many workers and their families simply cannot survive on the compensation they are given.

Therefore, he concludes that the U.S. must move to democratic socialism [3] where there is substantial public or social control or ownership of important functions in our society that serve the public and the public good. This is necessary to dethrone capitalism as the dominant system of our society. Otherwise, as we’ve experienced, capitalism in a democracy will evolve into hyper-capitalism that serves wealthy individuals and corporations but leaves everyone else behind.

[1]      Kuttner, R., 12/1/21, “Capitalism vs. liberty,” The American Prospect (https://prospect.org/politics/capitalism-vs-liberty/)

[2]      Social democracy is a system of government that attempts to assert values to similar socialism, but within a capitalist framework. The people have a say in government, but the capitalistic, money-based, competitive economy means that a public safety net is needed to help people whose low-paying jobs do not support subsistence.

[3]      Democratic socialism is defined as having a socialist economy in which the means of production are socially and collectively owned or controlled, alongside a liberal democratic political system of government.

IS CAPITALISM COMPATIBLE WITH DEMOCRACY?

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Bob Kuttner has written a powerful and poignant article raising the question of whether capitalism is compatible with democracy – or at least a version of democracy that lives up to the American ideals of equal opportunity and government of, by, and for the people. [1]

In the post-Depression and post-World War II era, the New Deal created a fundamental shift in ideology and power in American society and in our economy from laissez-faire capitalism to regulated and managed New Deal capitalism. It was based on a strong social contract that gave substantial power to government to regulate private companies and manage the economy. It gave substantial power to workers through collective bargaining over pay, benefits, and working conditions via their unions.

The results were a thriving working and middle class, where the rising tide of the economy did indeed lift all boats. Income and wealth inequality were stabilized, if not narrowed.

The era of New Deal capitalism lasted for 40 years until 1980. However, in the last 40 years, Kuttner argues, we’ve not just moved back toward the laissez-faire capitalism of pre-Depression days, but gone beyond it to a new form of hyper-capitalism that some call vulture capitalism. It has destroyed the ability of many workers to thrive by driving down wages, employment security, and benefits (including reducing retirement benefits and paid sick time). It has destroyed the ability of many working parents to provide their children with a safe, secure, and healthy childhood due to unaffordable and inaccessible child care, a lack of paid family and medical leave, unstable work hours, and poverty-level wages.

The life, liberty, and pursuit of happiness promised by the Declaration of Independence are a myth to many workers. They are unable to pursue any meaningful happiness for themselves due to their economic insecurity and low incomes, let alone provide happiness for their families. Any true feelings of liberty are constrained by their lack of the economic resources required to have meaningful freedom in making choices in our capitalist system. And life, literally in some cases, is at risk. Workers are getting injured, disabled, and killed in meat packing plants and other dangerous jobs, even without Covid. Sweatshop working conditions of the 1920s have returned in places like the meat packing industry and Amazon warehouses. When people have health problems or suffer injuries, many of them are bankrupted, and some die, because of our capitalistic health care system.

Deregulation at home and in global trade have produced giant corporations that often have monopolistic power nationally or regionally. These companies have the power as huge employers to strip workers of pay, benefits, and even their jobs, typically by moving jobs overseas (or threatening to do so). Similarly, consumers have limited choices and get reduced value in many important areas from health care to Internet service because of the monopolistic power of providers. These giant, monopolistic companies, particularly in technology-driven markets, have also stripped our economy of many small businesses and entrepreneurs through predatory acquisitions or market place practices that stifle competition.

Deregulation of financial practices has also fed these trends through venture capital, private equity, and hedge fund profiteers that aggressively minimize labor costs, strip companies of assets, and often drive companies into bankruptcy while they pocket huge profits. These vulture capitalists, as they have been called, are at the leading edge of the predatory, hyper-capitalism that Kuttner identifies as taking the laissez-faire capitalism of the early 1900s to a whole, new level of greed and economic inequality.

Kuttner states that rather than the theoretical “invisible hand” of capitalism creating efficient markets that work smoothly and produce high quality goods and services at competitive prices for consumers, the current U.S. version of capitalism creates inefficiency and market failure as its norm. It is efficient only from the perspective of profit and wealth maximization for large, wealthy companies and shareholders, including corporate executives.

Nonetheless, the capitalist market mentality is so deeply embedded in our collective psyche that we have allowed capitalistic values and market norms to overrule other norms and values, such as the importance of the public good, providing access to affordable health care, reducing child poverty, and addressing climate change.

Moreover, the incredible wealth of the giant companies and their shareholders has given them substantial power in our political system. Through their campaign spending, extensive lobbying of public officials, and the movement of senior company employees into and back from policy making positions in government (the revolving door), they have gotten public policies and regulation (or lack thereof) that work to their benefit.

We have seen the result of this political power in recent weeks in the opposition of many members of Congress (i.e., almost every Republican and a handful of Democrats) to the Build Back Better legislation that would support workers and their families in ways that are favored by over two-thirds of the country’s voters – for example, through paid family leave, support for families with children and for child care, and enhanced access and affordability for health care and drugs. Members of Congress have been weakening, undermining, and outright opposing these policies that their constituents overwhelmingly support. Congress is also opposing investments in human capital and in slowing climate change that have broad support among the public.

The Build Back Better opponents in Congress are reflecting the wishes of their wealthy campaign donors, not their constituents. This is emblematic of the power and influence of wealthy capitalists and a direct outgrowth of the hyper-capitalism of the last 40 years.

As a result of this hyper-capitalism in the U.S., many workers have had their economic security, their middle-class lifestyle, and their plans for retirement stripped from them. The frustrations of these workers, their feelings of helplessness and hopelessness, are what has led to the appeal of Senator Bernie Sanders and Donald Trump – both of whom promised to upset the current political system and restore economic security for workers.

In my next post, I will review Kuttner’s thoughts on where we need to go from here to restore our democracy and have fairer, more equitable economic and political systems.

[1]      Kuttner, R., 12/1/21, “Capitalism vs. liberty,” The American Prospect (https://prospect.org/politics/capitalism-vs-liberty/)

STOPPING CYBERCRIME AND CIVILIAN HARM FROM CYBERWARFARE

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

This is the final post of my nine-part series on computer hacking and cyberwarfare based on New York Times cybersecurity reporter Nicole Perlroth’s outstanding book, This Is How They Tell Me the World Ends. [1] These posts have summarized the book’s information on the scale of computer hacking, cybercrime, and cyberwarfare; and have shared a number of examples. The previous post provided an overview of steps that can be taken to counter cybercrime at the personal, organizational, and governmental levels. This post discusses steps that are being taken to counter ransomware and to stop cyberwarfare from harming civilians.

The Biden Administration is working to reduce the frequency and profitability of ransomware attacks. It is disrupting the infrastructure ransomware hackers use to collect their ransom. It has put sanctions on cryptocurrency exchanges that are frequently used for ransomware payments and warned U.S. companies not to pay ransomware. In June, it was able to recover over half of the $4.4 million in cryptocurrency that Colonial Pipeline had paid to its ransomware attacker. [2] The U.S. Department of Justice (DOJ) reports that ransomware attacks have cost the U.S. almost $600 million in the first six months of 2021.

In November, the DOJ announced that a Ukrainian hacker had been arrested and charged in connection with a group of ransomware attacks. It also announced the recovery of $6.1 million from ransomware attacks by a Russian who was charged separately and is listed as wanted by law enforcement. In December, the head of the U.S. Cyber Command and the Director of the National Security Agency announced that the military had taken offensive actions against ransomware attackers who had targeted critical infrastructure. [3] These actions represent the strongest U.S. government response to ransomware attacks to-date and reflect a marshalling of resources across multiple agencies. European law enforcement officials also announced that seven ransomware hackers have been arrested in Europe since February. [4] Recently, a multi-national effort succeeded in shutting down, at least temporarily, a major Russian ransomware entity. In October, the Biden Administration convened over 30 countries to develop plans to combat ransomware attacks around the globe. [5]

Back in April, the Biden Administration announced tough sanctions on Russia for previous cyberattacks and, in June, President Biden warned Russian President Putin that future Russian cyberattacks would be grounds for additional retaliation.

Three former U.S. cyber intelligence agency employees, who had been hired by the United Arab Emirates (UAE) to conduct cyberespionage, pleaded guilty in September to cyber hacking and violating export laws by transferring military cyber technology to a foreign government. The DOJ is deferring criminal prosecutions of them if they pay hundreds of thousands of dollars in fines and abide by the terms of a three-year settlement agreement. They are also prohibited from ever receiving a U.S. security clearance. [6] Numerous former U.S. cyber intelligence employees have been lured to work for private companies and foreign governments to do cybersecurity or cyberespionage. Many do legitimate cybersecurity work but more than a few have done illegal or at least unethical work for their new employers.

In October, Biden’s Commerce Department announced a rule that limits the export and sale of hacking software to authoritarian and repressive governments. This effort is difficult for many reasons, in part because it needs to avoid inhibiting cybersecurity collaboration among countries and among companies located in different countries. Furthermore, some private companies and some other countries don’t share this goal of keeping hacking tools out of the hands of such governments. For example, the Israeli company NSO Group (with suspected but unproven connections to the Israeli government) sells spyware that can be hacked onto an individual’s phone, allowing the hacker to track the person’s location and monitor their communications. Governments and others have used it to track dissidents, activists, lawyers, politicians, and journalists. Saudi Arabia used it to track associates of Jamal Khashoggi, the journalist that it murdered. Most recently, it was identified as being used to spy on Palestinians. [7]

For 25 years, the U.S. and 42 other countries have blocked the sale of weapons and military technology to authoritarian and repressive governments. The Wassenaar Agreement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, originally signed in 1996, sets voluntary export controls on a list of weaponry. The list of controlled products is updated every December and cyber hacking and surveillance products were added to the list in 2013. However, the U.S. did not adopt controls on these products until now. This new Commerce Department rule will allow the U.S. to coordinate efforts to control the export of hacking tools with the 42 other countries that are part of the Wassenaar Agreement. [8]

Also on the international front, there have been calls for a treaty banning cyberwarfare from targeting civilians and civilian infrastructure, similar to the Geneva Convention for traditional warfare. Brad Smith, Microsoft’s president, called for such a treaty in 2017 after vulnerabilities in Microsoft software had been the vehicle for Russia’s devastating cyberattack on Ukraine’s civilian infrastructure and for North Korea’s worldwide ransomware attacks. Noting that the 1949 Geneva Convention protects civilians during traditional warfare, he called for a new convention to protect civilians from cyberwarfare – from attacks on hospitals, electric power grids, elections, and the intellectual property of private parties. Previously, after the 2010 U.S. attack on Iran’s uranium enrichment facility, European, Russian, and some U.S. officials had also called for such a treaty.

However, the U.S. has not pursued such a treaty, at least in part because it has been the world’s dominant cyber superpower. Nonetheless, U.S. businesses and civilians, as the most Internet-dependent ones in the world, are bearing the brunt of escalating cybercrime and cyberwarfare. Furthermore, the U.S. has continued to engage in its own cyberwarfare, including building its capacity to attack civilian infrastructure such as the Russian electric power grid.

I urge you to contact President Biden and thank him for his efforts to stop ransomware attacks and to keep cyber hacking tools out of the hands of authoritarian and repressive governments. Ask him to continue this work and to do more to protect civilians from cyberwarfare. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

I also urge you to let your U.S. Representative and Senators know that you support strong steps to reduce ransomware attacks and the potential harm to civilians from cyberwarfare. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021.

[2]      Perlroth, N., 10/25/21, “A rare win for the good guys in cat-and-mouse game of ransomware,” The Boston Globe from the New York Times

[3]      Barnes, J. E., 12/6/21, “US military has acted against ransomware groups, NSA chief says,” The Boston Globe from the New York Times

[4]      Tucker, E., & Suderman, A., 11/9/21, “US charges 2 suspected ransomware operators,” The Boston Globe from the Associated Press

[5]      McLaughlin, J., 10/13/21, “White House brings together 30 nations to combat ransomware,” National Public Radio (https://www.npr.org/2021/10/13/1045248842/white-house-brings-together-30-nations-to-combat-ransomware)

[6]      Mazzetti, M., & Goldman, A., 9/15/21, “Former intelligence officers admit crimes,” The Boston Globe from the New York Times

[7]      Kingsley, P., & Bergman, R., 11/9/21, “Spyware aimed at activists, group says,” The Boston Globe from the New York Times

[8]      Nakashima, E., 10/21/21, “US aims to limit sale of hack tools to dictators,” The Boston Globe from the Washington Post

STOPPING CYBERCRIME AT THE PERSONAL, ORGANIZATIONAL, AND GOVERNMENTAL LEVELS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

This is the first of my final two posts (out of nine total) on computer hacking and cyberwarfare. These two posts discuss steps that can be taken to counter cybercrime at the personal, organizational, and governmental levels, as well as efforts to stop cyberwarfare from harming civilians. This series of posts presents my overview of New York Times cybersecurity reporter Nicole Perlroth’s outstanding book, This Is How They Tell Me the World Ends. [1] These posts have summarized the book’s information on the scale of computer hacking, cybercrime, and cyberwarfare; shared a number of examples; and the previous post provided an overview of Russia’s continuing attacks on the U.S., including on the 2018 and 2020 elections.

It is clear today that passwords, antivirus software, and firewalls will not protect a computer from reasonably sophisticated cyber hacking. With entities willing to pay over a million dollars for a vulnerability in a widespread piece of basic software, such as Microsoft Windows, Apple operating systems, Adobe, Java, and countless others, cybersecurity needs to be designed into these basic pieces of software and to have many layers of protection. Traditionally, basic software has only been tested to make sure it works, not to identify and eliminate vulnerabilities that hackers could use. This needs to change. When complex software is everywhere, even in cars, software vulnerabilities are ubiquitous and our whole mindset about cybersecurity must change to include preventing vulnerabilities, as well as protecting computers when they are attacked.

Individuals and businesses should assume that passwords alone are no longer effective protection from serious hackers because passwords are likely to have been stolen in one of the hacks of a large customer database or some other way. Two-factor or multi-factor authorization (2FA or MFA) is the best basic defense against cyber hacking and cybercrime. This is the process where when one logs into a system, a one-time code is sent by phone text or email that has to be entered to gain access. Turn on 2FA wherever it’s available and for any function where security is important, such as banking and financial transactions.

Voting simply cannot be safely conducted on-line according to Perlroth. She notes that as-of the date of her book, there was not a single on-line voting system that hackers had not been able to penetrate – often quite quickly and easily. [2] Voter registration databases and other election support systems need to be rigorously protected and audited to ensure their security.

While the Trump Administration largely ignored cybercrime and civilian harm from cyberwarfare, the Biden Administration has already been aggressive in tackling them. The U.S. Cybersecurity and Infrastructure Security Agency has recently announced that it is working to develop a national cybersecurity strategy. It noted that public-private collaboration will be essential as critical infrastructure must be secured whether it is in private or public hands.

The U.S. needs to establish strong mandates for cybersecurity for public entities and private companies that are part of critical infrastructure. The U.S. lags far behind other countries in doing this. Norway in 2003 and Japan in 2005, for example, implemented national cybersecurity strategies that have made them among the safest countries in the world in terms of cyberattacks.  [3]

However, Congress has repeatedly failed to pass legislation that would establish even basic standards for companies operating critical infrastructure such as hospitals, fuel pipelines, the electric power grid, dams, and nuclear power plants. Such standards would, for instance, require operators of critical infrastructure to use up-to-date, well-maintained software; to change passwords regularly; to use two-factor authorization for system access; and to conduct regular, sophisticated tests of their protections against hackers.

The U.S. Chamber of Commerce and other business leaders have argued against even voluntary standards, claiming they are too onerous. Current events are proving that NOT having such standards and NOT having solid cybersecurity in place are far too dangerous and too costly for businesses and customers.

The Biden Administration is urging all companies to enhance their cybersecurity practices, including requiring two-factor authorization for employees to log in to computer systems. [4] It also needs to educate the American public about cybersecurity and about on-line disinformation campaigns; these need to be part of our national consciousness.

Public and private entities should be required to report and make public successful cyberattacks so:

  • Customers and the public can be appropriately warned and protected,
  • The entities have an incentive to fix problems and prevent successful future attacks, and
  • Appropriate law enforcement and national security responses can occur.

On the flip side, when U.S. intelligence agencies become aware of a vulnerability in computer software or hardware, they should be required to inform the product’s vendor and work with it to eliminate the vulnerability.

The private sector is not only stepping up its defensive measures against hacking but also going after hackers directly, rather than leaving this work to law enforcement as has been the practice. Google is suing two Russia-based individuals for using a massive network of hacked computers for a range of criminal activity. It is also working with other private companies to disable the computers used by the hackers. The hacked network has been tracked by law enforcement and cybersecurity experts for years and is estimated to include about a million Microsoft Windows-based computers around the globe. In cleaning up the damage that has been done and the vehicles the hackers used to spread their harmful software, Google has removed from the Internet about 63 million Google Docs, more than 1,000 Google accounts, and over 900 Google Cloud projects. Microsoft has also been active in this direct action, deleting from the Internet websites used by a China-based hacking group. [5]

I urge you to contact President Biden and thank him for his work to improve cybersecurity, including his efforts to create and implement a national cybersecurity plan. Ask him to continue this work and to do more to require private entities operating critical infrastructure to strengthen their cybersecurity. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

I also urge you to let your U.S. Representative and Senators know that you support strong steps to improve cybersecurity, including requiring private businesses, especially those operating critical infrastructure or large aggregations of consumer data, to take meaningful steps to improve their cybersecurity. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

My next post will provide an overview of the Biden Administration’s efforts to combat ransomware attacks, address cybersecurity internationally, and protect civilians from harm from cyberwarfare.

[1]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021.

[2]      Perlroth, N., 2021, see above, page 397

[3]      Perlroth, N., 2021, see above, page 398-399

[4]      De Vynck, G., 9/22/21, “Treasury’s fight against hackers targets crypto payments,” The Boston Globe from the Washington Post

[5]      De Vynck, G., 12/8/21, “Google sues hackers tied to vast ring of infected devices,” The Boston Globe from the Washington Post

CYBERWARFARE: RUSSIA’S ATTACKS ON THE 2018 AND 2020 ELECTIONS AND THE TRUMP ADMINISTRATION’S RESPONSE

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

This is my seventh post on computer hacking and cyberwarfare and part of my overview of New York Times cybersecurity reporter Nicole Perlroth’s outstanding book, This Is How They Tell Me the World Ends. [1] My first post summarized the book’s information on the scale of computer hacking, cybercrime, and cyberwarfare; the 2017 North Korean ransomware attack; and the 2009 U.S. National Security Agency (NSA) cyberwarfare attack on Iran. My second post covered the leaks from the NSA, electronic surveillance in the U.S., and the use of encryption to protect privacy. My third post described Russia’s cyberattacks on Ukraine. The fourth and fifth posts described China’s cyberattack on Google and Google’s response. The sixth post described Russia’s cyberattack on the 2016 U.S. election.

This post summarizes Russia’s attacks on the 2018 and 2020 U.S. elections and the responses of the Trump and Biden administrations.

Under the Trump Administration, concern for cyberwarfare and cybercrime seemed absent. For example, the Obama Administration had reached an agreement with China to stop its industrial espionage, however this ended when Trump began his very public trade war with China. Similarly, the Iran nuclear agreement worked to keep Iranian hackers at bay. Trump’s voiding of the nuclear deal resulted in levels of Iranian cyberattacks that were unprecedented. Furthermore, as Trump backed off both sanctions and rhetoric against Russia for its hacking and election interference, Russia continued to hack our election systems and infrastructure, as well as to spread division, distrust, and chaos through social and other media. Even Saudi Arabia, with no sanctions from the Trump Administration for its murder of Washington Post journalist Khashoggi, was emboldened to engage in cyber espionage targeting the U.S. Cybercriminals engaged in ransomware attacks on cities, towns, and other infrastructure with regularity – and with little response from the Trump Administration.

By 2018, Trump had eliminated the position of White House cybersecurity coordinator and had made it clear that he never wanted to hear anyone in his administration, including the director of Homeland Security, mention election interference or election security. As the 2018 elections approached, the Russian social media propaganda agency, the Internet Research Agency (IRA), was engaging in sophisticated election disinformation on social media. In the six months before the elections, it spent at least $10 million on its efforts to influence the U.S. elections and to sow division, distrust, and chaos.

Fortunately, in September 2018, Trump had ceded decision-making for offensive cyberattacks to the new director of the NSA, General Paul Nakasone, who also served as the head of the Pentagon’s Cyber Command. John Bolton, in his brief tenure as Trump’s national security advisor, had developed a new cyber strategy that gave the Cyber Command increased flexibility. So, in October, the Cyber Command posted warnings directly to the IRA’s computers threatening indictments and sanctions if Russia continued to meddle in the 2018 elections. Then, on Election Day, the Cyber Command shut down the Russian hackers’ computer servers and kept them offline for several days as votes were tabulated and certified. No one knows what might have happened if the Cyber Command had not done this, but the 2018 election results were processed without any serious glitches.

“By 2020, the U.S. was in the most precarious position it had ever been in the digital realm,” according to Perlroth. [2] More than 1,000 local governments had been hit with ransomware attacks over the previous year. Russian cybercriminals were getting billions of dollars because local governments and their insurers calculated that it was cheaper to pay the ransom than to have to recreate computer systems and data. Cybersecurity experts worried that the ransomware attacks were a smokescreen to probe municipal computers and develop the capability to disrupt voter and election related systems during the 2020 election. Some of these experts also thought the election hacking and interference in 2016 and 2018 might be trial runs for more extensive efforts planned for the 2020 elections. Apart from the elections, in September 2020, over 400 hospitals were the subject of ransomware attacks, coming, of course, at the worst possible time – in the middle of the pandemic.

In Congress, a number of efforts were made to address concerns about election security, including bills requiring paper trails for every ballot and rigorous post-election audits, banning voting machines from being connected to the Internet, and mandating that campaigns report contacts with foreign entities. These were largely uncontroversial security measures that generally had bipartisan support and were deemed critical by election integrity experts. However, Senator Mitch McConnell, the Republican Majority Leader, refused to let any election security bill move forward toward passage. Only after critics took to calling him “Moscow Mitch” did he relent and begrudgingly allow approval of $250 million to help states protect election infrastructure – a tiny amount of money when split among the 50 states (only $5 million each on average), especially given the seriousness of the threats their election systems were facing.

In early 2020, U.S. intelligence officials warned the White House and Congress that Russian hacking and election interference were working hard at promoting Trump’s re-election. Trump was so incensed that this information had been shared with Democrats that he fired his acting director of national intelligence and publicly dismissed the intelligence findings as misinformation. Beginning in August, Trump’s new head of intelligence refused to provide in-person briefings on election interference to Congress. The U.S. intelligence agencies had always been non-partisan, but the Trump administration increasingly manipulated their actions and statements to serve their political interests. Meanwhile, Microsoft revealed that in one two-week period Russian hackers had attempted to access 6,900 personal email accounts of politicians, campaign workers, and consultants of both parties.

During the 2020 election cycle, the Russians didn’t have to create “fake news” to foster distrust, division, and chaos; Americans, including President Trump, were providing plenty of such content on a daily basis. The Russian trolls simply worked to amplify, among other things, the vaccination debate, the lockdown protests, the misinformation about the benefits of mask wearing, and the blaming of the racial justice protests and any violence that occurred on violent, left-wing radicals.

As the 2020 election approached, the Cyber Command, the Cybersecurity and Infrastructure Security Agency (CISA) in the Department of Homeland Security, the NSA, and the FBI worked diligently to protect election infrastructure in the states and nationally, as well as to actively counterattack. Many of the officials involved figured it was likely that Trump would fire them for their hard work as soon as the election was over, but they persisted in doing their jobs. On Election Day, CISA officials briefed reporters every three hours and, in the end, Election Day came and went with no evidence of fraud, outside efforts to alter vote tallies, or even a ransomware attack.

Perlroth notes that while she would like to credit the work of our cybersecurity agencies for the uneventful Election Day, she feels that the 2020 election went as smoothly as it did, not because the Russians were deterred, but because they (and specifically Russian President Putin) concluded that their work here was done and had been successful. Discord, distrust, and chaos were being created by American actors without the need for Russian interference. If Putin’s goal, in the U.S. elections and otherwise, was to undermine American democracy and American influence in world diplomacy, he had probably succeeded beyond his wildest dreams.

Nonetheless, Russian cyber hacking continues. In 2020, Russia’s premier intelligence agency, SVR was responsible for the cyberattack via the Solar Winds security software, a highly sophisticated attack that affected many government agencies and large companies. It gave the Russians access to tens of thousands of users’ computer systems. (By the way, SVR was also the first hacker to gain access to the Democratic National Committee’s computers in 2016.)

In October 2021, the Russians engaged in another massive campaign to hack into computer networks in the U.S. Microsoft announced that it had notified 600 organizations that they had been targeted by SVR with about 23,000 attempts to illegally access their computer systems in October alone. It noted that the attacks were relatively unsophisticated and were or could have been blocked by basic cybersecurity practices. It also stated that, for comparison, there had been only 20,500 such attempts by all other international governmental actors over the past three years. [3]

This Russian cyberattack occurred only six months after President Biden imposed sanctions on Russian financial and technology companies in April 2021 as punishment for previous cyberattacks. At the time, he noted that the sanctions could have been more severe but that he was trying to de-escalate confrontation between the two superpowers.

My next post will review things that can be done to counter cybercrime and warfare at the individual and governmental levels.

[1]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021.

[2]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021. page 347

[3]      Sanger, D.E., 10/26/21, “Russia tests US again with broad cybersurveillance,” The Boston Globe from The New York Times

CYBERWARFARE: RUSSIA’S ATTACK ON THE 2016 ELECTION

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

This is my sixth post on computer hacking and cyberwarfare and part of my overview of New York Times cybersecurity reporter Nicole Perlroth’s outstanding book, This Is How They Tell Me the World Ends. [1] My first post summarized the book’s information on the scale of computer hacking, cybercrime, and cyberwarfare; the 2017 North Korean ransomware attack; and the 2009 U.S. National Security Agency (NSA) cyberwarfare attack on Iran. My second post covered the leaks from the NSA, electronic surveillance in the U.S., and the use of encryption to protect privacy. My third post described Russia’s cyberattacks on Ukraine. The fourth and fifth posts described China’s cyberattack on Google and Google’s response.

This post summarizes Russia’s attack on the 2016 U.S. election which began in June 2014 when Russia sent two agents to the U.S. for a three-week reconnaissance tour to gather intelligence on U.S. politics and elections. Their report became the field guide for Russia’s interference in the 2016 election. Starting in 2014, the Russians tried to hack into voter registration and election systems in all 50 states. They are known to have succeed in accessing Arizona’s and Illinois’s voter databases. In 2015 (and probably before then), the Russians aggressively hacked into computer networks at the State Department, White House, and Joint Chiefs of Staff of the Defense Department, although this was probably unrelated to the election and was just “routine” espionage. Occurring in the midst of the unprecedented and mind-boggling presidential campaign that was ongoing at the time, these cyberattacks got little coverage in the mainstream media.

Russia’s social media propaganda agency, known as the Internet Research Agency (IRA), had as its goal for the U.S. election in 2016 to “spread distrust toward the candidates and the political system in general. … [to create] division, distrust, and mayhem.” [2] In September 2014, the IRA created a Facebook group, Heart of Texas, focused on right-wing Texans that generated 5.5 million likes within a year. It also created another Facebook group, United Muslims of America. Then, among other things, it used these two Facebook groups to promote rallies and counter-rallies at the Islamic Center in Houston that led to real-world confrontations. The IRA used the stolen identities of Americans to make their work more credible, but nonetheless its cyber manipulators were surprised at how gullible and susceptible the Americans were to their Facebook disinformation.

Based on its success in Texas, the IRA began replicating this approach across the country, focusing on purple states. Its staffing grew to more than 80 people who were directed to “Use any opportunity to criticize Hillary and the rest (except Sanders and Trump – we support them)” according to leaked memos. [3] The IRA:

  • Communicated with Trump campaign volunteers.
  • Bought Facebook ads promoting Trump and attacking Clinton.
  • Promoted race-baiting and xenophobic messages.
  • Worked to suppress minority voter turnout and to encourage voting for third party candidates instead of for Clinton.
  • Paid an unwitting Florida Trump supporter to put a cage on a flatbed truck and paid an actress to dress up as Clinton and sit in the cage as Trump rally goers chanted “Lock her up!” Based on this success, they promoted similar rallies in other states.
  • Reached 126 million Facebook users and generated 288 million Twitter actions, which are staggering numbers given that 139 million people voted in the 2016 election.

In June 2016, it was discovered that two other Russian groups had hacked into the Democratic National Committee’s computer network months earlier, extracting and releasing embarrassing emails, among other things.

The Obama Administration, facing multi-faceted and snowballing Russian interference in the election, finally decided in the fall of 2016 that a strong bipartisan statement (so it wouldn’t appear political) was necessary. Top Homeland Security and FBI officials were sent to brief Congress. But the response from the Republicans was completely partisan. Republican Senate Majority Leader Mitch McConnell refused to warn Americans about Russia’s efforts to influence and undermine the 2016 elections. He refused to sign any bipartisan statement, argued (falsely) that the intelligence on the cyberattacks was wrong, and claimed (falsely) that this was all just Democratic partisan politics.

After the election, the Obama Administration imposed significant sanctions on the Russians, but they were too little and too late. Although there’s some argument over the ultimate impact of the Russian’s efforts, Perlroth concludes that the Russian actions may well have tipped the election to Trump. Black voter turnout declined sharply in 2016 for the first time in 20 years, which was a constituency and an outcome that the Russians had aggressively targeted. Black voter turnout fell from 66.6% in 2012 to 59.6% in 2016, its lowest level since 2000. This represented a decline of 765,000 votes when less than 80,000 votes in three key states determined the outcome of the election. Furthermore, Trump’s margin in each of these three key states – Wisconsin (22,800 votes, a 0.8% margin), Pennsylvania (44,300 votes, a 0.7% margin), and Michigan (10,700 votes, a 0.2% margin) – was less in each state than the vote for the Green Party candidate. This voting for third party candidates instead of Clinton was another outcome that the Russians had aggressively targeted. Given the closeness of the election, a relatively small change in either (let alone both) of Black voter turnout or the number of votes for the Green Party instead of for Clinton would have changed the outcome of the election – and both of these were factors that the Russians specifically worked to influence.

Subsequent posts will outline the Perlroth book’s reporting on:

  • Russia’s continuing cyberattacks on the 2018 and 2020 U.S. elections and the Trump administration’s response, and
  • What can be done to counter cybercrime and warfare at the individual and governmental levels.

[1]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021.

[2]      Perlroth, N., see above, page 310

[3]      Perlroth, N., see above, page 311

CYBERWARFARE: GOOGLE’S RESPONSE TO CHINA’S ATTACK

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

This is my fifth post on computer hacking and cyberwarfare, all of which are part of my overview of New York Times cybersecurity reporter Nicole Perlroth’s outstanding book, This Is How They Tell Me the World Ends. [1] My first post summarized the book’s information on the scale of computer hacking, cybercrime, and cyberwarfare; the 2017 worldwide ransomware attack by North Korea; and the 2009 cyberwarfare attack by the NSA on Iran’s uranium enrichment plant. My second post provided an overview of the book’s reporting on leaks from the NSA, electronic surveillance in the U.S., and the use of encryption to protect privacy. My third post described Russia’s cyberattacks on Ukraine and the fourth post  described China’s cyberattack on Google.

Google had begun doing business in China in 2006, agreeing to the censorship of search results that the government demanded. In 2009, it was still struggling to accommodate China’s increasingly draconian censorship rules. Nonetheless, China waged a cyberattack on Google in 2009 in an effort to make Google an unwitting accomplice in Chinese surveillance of dissidents. (See my previous post for more details about this cyberattack.)

In response, on January 12, 2010, Google publicly revealed the Chinese cyberattack and its decision to pull out of China, despite its being the largest and most sought-after market in the world. Fearing for its employees’ safety, it had briefed the State Department and the U.S. embassy in Beijing was prepared to undertake a mass evacuation of Google’s Chinese employees and their families. Google shut down its Chinese operation and routed all Chinese Internet traffic to Hong Kong. In response, the Chinese government scrambled to censor and block Internet content flowing from Hong Kong, lambasted Google, denied involvement in the cyberattack, and accused the U.S. government of conducting an anti-China propaganda campaign. It permanently blocked Internet access to Google and three years later, under new President Xi Jinping, took over total control of the Internet in China.

The Chinese hackers who had executed the attack, having been outed, unplugged their Internet computer servers and abandoned their hacking tools. They abstained from hacking in the U.S. for a number months, but one year later engaged in a sophisticated attack on RSA, the cybersecurity company that sold security services to, among others, high profile defense contractors. Based on this successful attack, the Chinese hackers were able to infiltrate Lockheed Martin and thousands of other western companies including banks, automakers, chemical companies, law firms, non-profit organizations, and more. They stole billions of dollars-worth of proprietary information, including military and trade secrets.

Back at Google, less than a year after the 2010 pullout, some executives began pushing to go back to doing business in China. As Google diversified its businesses and re-organized under the over-arching corporation Alphabet in 2015, re-entry into the Chinese market, with its 750 million Internet users, became a hot topic of debate. Ultimately, human rights, ethical considerations, and Google’s motto of “Don’t be evil” were overwhelmed by a focus on profits.

In 2016, Google established a new, artificial intelligence research center in Beijing and released some small-scale products, e.g., an app and a mobile game, into the Chinese market. Simultaneously, it was working on a search engine for the Chinese market, code-named Dragonfly, that met government censorship requirements. In August 2018, an employee leaked information about the work on Dragonfly. After protests by Google employees and others, the Dragonfly project was terminated in July 2019. Google does not offer a search engine in China at this time.

Google’s business ethics have been questioned not just for doing business in China, but for its behavior in the U.S. and elsewhere. It profits off sites that spread disinformation and conspiracy theories, and its YouTube subsidiary allows the spread of videos that harm the well-being of children. In Saudi Arabia, it hosted an app that allowed men to track and, thereby, control the movements of female family members.

In subsequent posts, I will outline the Perlroth book’s reporting on:

  • The cyberattacks on U.S. elections and the Trump administration’s response, and
  • What can be done to counter cybercrime and warfare at the individual and governmental levels.

[1]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021.

CORPORATE CRIMINALS GET OFF SCOT-FREE

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Corporate criminals in the U.S. almost always get off scot-free regardless of how serious their crimes or how many offenses they have committed. Federal prosecutions of white-collar crime have been rare over the last 40 years and, nonetheless, dropped dramatically during the Trump administration to a 25-year low in 2020.

The Department of Justice (DOJ) announced last week that it would take a new, more aggressive approach to corporate crime. A similar statement was made in 2015 by the Obama administration, but nothing of substance changed. Therefore, this current announcement won’t be taken seriously until the DOJ begins taking significant actions. [1]

Typically, corporate crime has been settled with fines and signed agreements with the DOJ promising not to engage in the same illegal behavior again for a specified period of time, typically only three years. These agreements are called deferred prosecution agreements (DPAs) or non-prosecution agreements (NPAs). The corporations typically do not admit to being guilty of any crimes.

Furthermore, these settlement agreements have rarely been enforced and there are numerous examples of corporations engaging in prohibited behavior again without penalties being imposed. The watchdog group Public Citizen reviewed 500 of these settlement agreements and found only seven cases where the corporation had even been notified that they had violated the agreement and only three where any prosecutorial action was taken.

Public Citizen recently issued a report identifying 20 major corporations with current settlement agreements. [2] In an indication that the DOJ may be stepping up enforcement of such agreements, two corporations were recently notified that they were in violation of their agreements: Ericsson, a Swedish telecom company, and NatWest, a British bank.

The 20 corporations with active settlement agreements ALL had previous violations; in 16 cases over ten violations and in five cases over 90 violations. The list includes seven banks and financial corporations, including Merrill Lynch (a subsidiary of Bank of America) with 97 total violations, JP Morgan Chase with 92 violations, Wells Fargo with 92, Deutsche Bank with 41, and Goldman Sachs with 38. Also included are United Airlines with 533 violations (464 of them from the Federal Aviation Administration), Walmart with 330 (292 from the Labor Department), Boeing with 84, and the pharmaceutical company Novartis with 18.

The DOJ announcement included a statement that when determining penalties for violations it will consider the corporation’s overall record, not only previous violations of the same type as had been the practice. It also stated that the DOJ will require corporations to disclose the individuals involved in corporate crime. In the last 30 years, it has been very rare that individuals at corporations have been held personally accountable for corporate crime.

The non-prosecution of corporate, white-collar crime stands in stark contrast to the aggressive prosecution of non-corporate, non-white-collar crime by individuals. For crimes by individuals, the U.S. has had a tough-on-crime approach for 40 years, which includes mandatory sentences and three strikes you’re out laws. Clearly, anything approaching this type of tough-on-crime prosecution of corporate criminal behavior would have put corporations out of business, i.e., their corporate charters would have been revoked, and would have put their executives in jail. Similarly, the practice of ignoring corporate violations of different types when determining penalties for a crime is unlike individual sentencing when all types of crimes are considered, e.g., theft, assault, drug crimes, and gun violations. Finally, individuals (with the exception of juveniles) don’t get a clean slate after three or so years as corporations do when their non-prosecution agreements expire.

I urge you to contact President Biden to let him know that you support strong action by the Department of Justice to hold corporate criminals accountable, both the corporations themselves and their executives.  You can email President Biden at https://www.whitehouse.gov/contact/ or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can also send letters to the White House; details are here: http://www.whitehouse.gov/contact/submit-questions-and-comments.

[1]      Dayen, D., 11/12/21, “The corporate most-wanted list,” The American Prospect (https://prospect.org/power/corporate-most-wanted-list/)

[2]      Claypool, R., 11/12/21, “The usual corporate suspects,” Public Citizen (https://www.citizen.org/article/usual-corporate-suspects-report/)

CYBERWARFARE: CHINA’S ATTACK ON GOOGLE

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

This is my fourth post on computer hacking and cyberwarfare and part of my overview of New York Times cybersecurity reporter Nicole Perlroth’s outstanding book, This Is How They Tell Me the World Ends. [1] My first post summarized the book’s information on the scale of computer hacking, cybercrime, and cyberwarfare; the 2017 worldwide ransomware attack by North Korea; and the 2009 cyberwarfare attack by the U.S. National Security Agency (NSA) on Iran’s uranium enrichment plant. My second post provided an overview of the book’s reporting on leaks from the NSA, electronic surveillance in the U.S., and the use of encryption to protect privacy. My third post described Russia’s cyberattacks on Ukraine.

This post summarizes China’s cyberwarfare and, in particular, its attack on Google. The Chinese government’s cyberwarfare initiatives use both army personnel and contracts with non-government hackers at Chinese universities and technology companies. This contracting with private hackers is similar to President Putin’s strategy in Russia, where cyberattacks had been outsourced to cybercriminals for years to give the government some marginally credible deniability of responsibility. As in Russia, many of the private hackers in China are likely to have been conscripted, rather than hired in the private market.

For years, the Chinese have been hacking into defense companies where they focus on stealing aerospace, missile, space, and satellite technologies, as well as nuclear propulsion and weapon information. They have also been hacking into a broad range of U.S. businesses  and stealing intellectual property. A former Director of the NSA, Keith Alexander, called Chinese cyber theft the “greatest transfer of wealth in history.” [2]

In December 2009, now ancient history in the annals of cyber hacking, Google’s digital security team noticed an electronic intruder in their computer network. It was moving from computer to computer in what they called the fastest cyberattack they had ever seen. It had managed to breach what was one of the toughest digital security systems in existence at the time and was conducting a very sophisticated search across Google’s extensive computer network. As is often the case, the intruder’s access had been initiated by unsuspecting Google employees who had clicked on a link in a hacker’s phishing message. The link went to a website in Taiwan that put the hacker’s computer program, i.e., malware, onto the employee’s computer via a vulnerability in Microsoft’s Internet Explorer browser. The malware allowed the hacker to access the employee’s computer and Google’s network.

The attack was very sophisticated – the work of highly skilled, well-resourced hackers, not a small-time, individual cybercriminal. This was made clear by the hackers’ encrypting of their attacking computer program and obfuscating of their tracks, along with the expertise needed to use the Internet Explorer vulnerability.

Over a couple of weeks, Google assembled a team of 250 inside and outside security experts to counter the attack, and then determine who had attacked and what they were trying to accomplish. Team members worked 24/7 and December holiday vacations were canceled.

Eventually, the team’s work identified the attacker as a group contracted with by the Chinese government. It was being monitored by the NSA, which had code-named it “Legion Yankee.” It was one of the most active of the more than two dozen Chinese hacking groups that the NSA monitored. These groups had attacked U.S. government agencies, technology companies, think tanks, and universities in attempts to steal intellectual property, military secrets, and correspondence.

As Google and outside security experts dug into the attack, they traced it back to Legion Yankee’s computer server and discovered that dozens of other U.S. companies had been attacked as well, including Adobe, Intel, Northrop Grumman, Dow Chemical, and Morgan Stanley. As Google tried to warn these other companies, they found it was hard to reach someone who would take their warning seriously and understand its implications. Many of the companies refused to acknowledge that their computer systems had been breached – not wanting the bad publicity.

Google and its outside experts also eventually figured out what the attacker was after: Google’s source code. This is the computer programming that runs the Google application – it’s what displays its screens when you access Google, it’s what runs the search engine and displays the results, it’s what determines what ads to show you and what to do when you click on an ad or search result, etc. Microsoft’s Windows computer operating system, which runs many of our computers, is probably the best-known example of source code, along with Apple’s Operating System (OS) or the Android software that runs your phone.

This kind of attack wasn’t about short-term gain, e.g., theft of money or information, this was a long-term strategy that could bear fruit immediately but also for years to come. The hackers would insert code into or change the programming of Goggle’s source code to allow them access to the information that was flowing through Google, to Gmail accounts, and also to the computers and networks that were using Google.

Ultimately, Google determined that Chinese government wanted to change Google’s source code so it would have long-term access to any Gmail account and that its interest was in accessing the Gmail accounts of Chinese dissidents, including pro-democracy activists in Hong Kong, Tibetan and Uighur Muslim dissidents, pro-independence Taiwanese, the Dalai Lama, and others. In other words, China’s goal for its most sophisticated cyberattack capabilities was to be able to monitor, threaten, and thereby control its own people.

U.S. State Department officials would eventually connect Legion Yankee and the Google attack to the Chinese government’s top security official, Zhou Yongkang, and to Li Changchun, a member of China’s top ruling body (the Politburo Standing Committee) and China’s top propaganda official. Li had reportedly googled himself and was not happy with what he found and, therefore, ordered the attack on Google.

My next post will summarize Google’s response to the Chinese attack: it made a big splash by publicizing China’s attack and pulling out of the Chinese market completely in 2010 – only to re-enter the Chinese market in 2016. Subsequent posts will outline the Perlroth book’s reporting on:

  • The cyberattacks on U.S. elections and the Trump administration’s response, and
  • What can be done to counter cybercrime and warfare at the individual and governmental levels.

[1]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021.

[2]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021. page xix

CYBERWARFARE: RUSSIA’S ATTACKS ON UKRAINE AND USE OF NSA’S CYBER WEAPONS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

This is my third post on computer hacking and cyberwarfare, part of my overview of New York Times cybersecurity reporter Nicole Perlroth’s outstanding book, This Is How They Tell Me the World Ends. [1] My first post summarized the book’s information on:

  • The scale of computer hacking, cybercrime, and cyberwarfare,
  • The 2017 worldwide ransomware attack by North Korea using a Microsoft Windows vulnerability stolen from the U.S. National Security Agency (NSA), and
  • The 2009 cyberwarfare attack by the NSA on Iran’s uranium enrichment plant.

My second post provided an overview of the book’s reporting on:

  • Electronic surveillance in the U.S. and the use of encryption to protect privacy, and
  • Leaks from the NSA, including of its cyberwarfare weapons.

This post provides an overview of Russia’s cyberattacks on Ukraine. Russia is and has been a formidable and active player in espionage and international warfare since the 1950s Cold War, which Perlroth touches on as background for her reporting on cyberwarfare.

Not surprisingly then, Russia has been an early, active, and formidable participant in cyberwarfare. It has attacked Ukraine both to demonstrate its capabilities to the world and to display its ongoing displeasure with independence in Ukraine, which threw out the Russian puppet government in 2014. Russia’s cyberwarfare has interfered with Ukraine’s elections and its everyday life. In 2014, Russia planted disinformation during Ukraine’s election and engaged in serious cyber hacking of its election infrastructure. Ukrainian election officials discovered the hacking just before manipulated results would have been announced to the media. It was the most brazen cyberattack on a national election ever at the time.

For its next attack, on Christmas Eve in 2015, Russia’s cyber warriors flipped off circuit breakers in the Ukrainian power grid, turning off electricity for hundreds of thousands of people. They also shut off backup power in many locations and shut down emergency phone lines. Things were turned back on roughly six hours later, but the message and the capabilities were clear. This represented an escalation of cyberwarfare; no country had ever shutdown another country’s civilian power grid before. A year later, Russia did it again, this time shutting down the power and heat in the Ukrainian capital of Kyiv.

On June 27, 2017, Russia launched another, much more devastating cyberattack on the Ukraine, this time using weapons from the U.S. National Security Administration (NSA) that had been stolen and leaked in 2016 and 2017. (See my previous post for more details on this leak.) Russia specifically timed its attack to occur on Ukraine’s independence day to underscore its political message. The attack shutdown government offices, trains, ATMs, the postal service, and almost all financial systems so people couldn’t get paid and electronic cash registers didn’t work so people couldn’t buy anything, even food and gas. Even the radiation monitors at the Chernobyl nuclear disaster site were shutdown. The attack destroyed the data on 80% of the computers in Ukraine. The damage was so severe that it took over two years for Ukraine to recover from this Russian cyberattack.

Not unexpectedly, the cyberweapons (i.e., malicious computer programming) that Russia used in the attack on Ukraine self-propagated through the Internet and other computer networks so that any company doing business in Ukraine was vulnerable. The cyberweapons shutdown factories in Tasmania, destroyed vaccines at pharmaceutical companies Pfizer and Merck, infected FedEx’s computer systems, and brought the world’s biggest shipping company, Maersk, to a halt. The cyberweapons even spread back to Russia, destroying data at the giant, Russian government-owned oil company, Rosneft, and at the Russian steelmaker, Evraz.

When author Perlroth visited Ukraine in the winter of 2019, a year and a half after the attack, the damage estimate there was $10 billion and climbing, and significant disruption of daily life was still evident. Railroad and shipping systems were still not back to normal, pension checks still hadn’t been received, and people were still trying to find packages that had gone missing when shipment tracking data was lost, for example. It was also estimated that the attack cost just Merck, Fed Ex, and all the other companies that were affected billions of dollars. Some insurers refused to pay for damages from this cyberattack, claiming it was an act of war and therefore fell under a war exemption clause in their policies.

This Russian cyberattack made it clear that cyberweapons are weapons of mass destruction. Russia could have done much worse. It could have crashed trains and planes instead of just disabling scheduling, ticketing, and payment systems. It could have created explosions or toxic incidents at manufacturing plants or nuclear power plants.

Some experts believe Russia used the NSA’s tools in this attack to discredit and expose the NSA and the U.S. government.  Others believe Russia was just using this attack, and the earlier ones in the Ukraine, to test its capabilities and prepare or signal its capability to execute even more devastating attacks in the future. By the way, Russia has continued to harass Ukraine. For example, in 2019, it inundated Ukrainian Facebook accounts with anti-vaccination propaganda as the worst measles outbreak of recent times spread there.

In subsequent posts, I will outline the Perlroth book’s reporting on:

  • The Chinese attack on Google and Google’s response,
  • The cyberattacks on U.S. elections and the Trump administration’s response, and
  • What can be done to counter cybercrime and warfare at the individual and governmental levels.

[1]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021.

CYBERSECURITY AND THE DEVASTATING LEAK OF THE NSA’S CYBER TOOLS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

My previous post on computer hacking and cyberwarfare began my overview of New York Times cybersecurity reporter Nicole Perlroth’s book, This Is How They Tell Me the World Ends. [1] My post summarized the book’s information on the scale of computer hacking, cybercrime, and cyberwarfare, while also outlining two examples from the book:

  • The 2017 worldwide ransomware attack by North Korea using a Microsoft Windows vulnerability stolen from the U.S. National Security Agency (NSA), and
  • The 2009 cyberwarfare attack by the NSA on Iran’s uranium enrichment plant.

This post provides an overview of the book’s reporting on:

  • Electronic surveillance in the U.S. and the use of encryption technology to protect privacy, and
  • Leaks from the NSA, including of its cyberwarfare tools.

After the September 11, 2001, attacks, the U.S. greatly expanded its electronic surveillance within the U.S. In 2013, Edward Snowden, a consultant for the NSA and a former CIA employee, released thousands of classified NSA documents. They described activities the NSA was engaged in, including mass surveillance of Americans. Among many other things, the documents revealed that the NSA was secretly surveilling users of Microsoft, Facebook, Google, and Yahoo and that in a single day it had collected roughly 445,000 Yahoo email address books, 105,000 from Hotmail, 83,000 from Facebook, 34,000 from Gmail, and 23,000 from other providers.

Snowden was charged with espionage. He left the country prior to releasing the NSA documents and is living in Russia under a grant of asylum. In 2020, a U.S. federal court ruled that the NSA’s mass surveillance program exposed by Snowden was illegal and possibly unconstitutional.

As a response to U.S. government surveillance and cyber hacking, software and hardware providers started offering users’ the ability to encrypt their data. Initially, intelligence agencies and law enforcement had ways to overcome the encryption and access the data, typically with the assistance of the product’s provider. Then in 2014, in the wake of the Snowden revelations, Apple announced that the iPhone 6 would automatically encrypt everything on the phone using the phone user’s unique password, making the data impossible to unencrypt by anyone else. Previously, Apple had a key that could unencrypt a user’s data when requested by law enforcement. The FBI and those running government surveillance programs were upset and concerned about this truly secure encryption, but there was strong support from users because they valued their privacy.

A year later, two terrorists, who had sworn allegiance to ISIS, shot and killed 14 people and injured 22 at the San Bernadino, CA, health department. The terrorists fled and were killed in a shootout within hours. One piece of evidence recovered was an encrypted iPhone. The FBI demanded that Apple unencrypt the phone, which apparently it could not, and also demanded that Apple change its software to allow the FBI to unencrypt data in the future. Apple refused, pointing out that if there was such a capability others would want access to it too and that hackers would be able to find it as well.

The FBI initiated a court case to force Apple to allow it access to iPhone data, but four months after the shooting it abruptly dropped the case. It turned out that an unidentified hacker had sold the FBI a way to overcome the encryption. Surprisingly, the FBI Director, Comey, admitted that it had paid the hacker at least $1.3 million for this capability. This was the first time the U.S. government had admitted to paying a hacker a large sum to give it access to a vulnerability in a widely used electronic device or piece of software. The FBI claimed that it did not know what the underlying flaw was and that it had no intention of letting Apple know so it could fix it.

Apple was correct, of course, in stating that any ability of the FBI or U.S. intelligence agencies to circumvent the encryption of users’ data would eventually be available to others, including those with less scrupulous intentions (assuming you believe U.S. intelligence agencies and the FBI always have scrupulous intentions). International adversaries and individual computer hackers are constantly uncovering computer software and hardware vulnerabilities. They use or sell these vulnerabilities to obtain unauthorized access to data, for use in international cyberwarfare, or for use for private gain through theft of money, trade secrets, or other valuable information. These computer vulnerabilities can also be used in ransomware attacks, where computer systems are disabled or data stolen for nefarious use unless a ransom is paid.

Probably the worst piece of news for the U.S. intelligence agencies in the history of cyberwarfare was the leak of the NSA’s tools and techniques in 2016 and 2017. While Snowden’s leaks revealed what the NSA was doing, these leaks revealed, in detail, specifically how it was doing its cyber espionage and cyberwarfare.

Over a nine-month period, an unknown individual or individuals leaked specific software vulnerabilities and the computer code the NSA was using to exploit them. These NSA hacking tools had been stolen and were now being released publicly on the Internet, sharing the world’s most powerful cyber arsenal with anyone and everyone who might want to use it. These NSA cyber weapons were used, for example, by North Korea in its global ransomware attack (described in my previous post) and by Russia in its devastating attack on the Ukraine in 2017 (to be described in my next post).

The leak of the NSA’s cyber weapons exposed what was probably the biggest federal program the public had never heard of, a cyber espionage and warfare effort so classified it was invisible: hidden through blacked out budgets, large cash transactions, shell companies, contractors, and nondisclosure agreements required of everyone involved in it.

In subsequent posts, I will outline the Perlroth book’s reporting on:

  • Russia’s cyberattacks on Ukraine,
  • The Chinese attack on Google and Google’s response,
  • The cyberattacks on U.S. elections and the Trump administration’s response, and
  • What can be done to counter cybercrime and warfare at the individual and governmental levels.

[1]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021.

THE COST, DAMAGE, AND THREAT OF CYBERCRIME AND WARFARE

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The lines between computer hacking, cybercrime, and cyberwarfare are blurry. They are threats to our national security and also to you. At risk is not only your financial welfare and identity, but also your health and well-being. Cyberwarfare is at a level of threat that has similarities to nuclear weapons in that it can inflict major societal harm and is restrained or deterred only by the threat of retaliatory harm and damage, similar to the mutual assured destruction that deters nuclear war.

This is not an exaggeration, as the book by New York Times cybersecurity reporter, Nicole Perlroth, This Is How They Tell Me the World Ends, [1] makes clear in great detail. She presents the development and evolution of cyber hacking, crime, and warfare since she began reporting on it for the Times in 2013. She also puts it in an historical context of espionage going back to the Cold War and the 1950s and then outlines its transition from human agents to cyber capabilities over the last 40 years. I encourage you to read her 406-page, revealing, convincing, and downright scary book if you are so motivated. I will attempt to summarize it in this and subsequent blog posts.

The scale of computer hacking, cybercrime, and cyberwarfare is much greater than I had any idea it was. The costs to individuals, businesses, governments, and other organizations (such as hospitals) are enormous. A 2018 RAND Corporation report, the most comprehensive study of cyberattacks at the time, estimated that the worldwide losses for the year from cyberattacks were hundreds of billions of dollars. By comparison, the estimated cost of terrorist attacks in 2018 was just $33 billion. Some current estimates put the costs of cyberattacks at over $2 trillion a year and growing.

The number of ransomware attacks, where hackers prevent an organization from accessing its computer systems and data until a ransom is paid, more than doubled from 2019 to 2020, for example. [2] Much of this is done by cyber criminals looking to make money. However, back in May 2017, one of the cyber hacking tools stolen from the U.S. National Security Agency (NSA) (more on this in a subsequent post) was put to use by North Korea in ransomware attacks all around the globe. Within 24 hours, 200,000 organizations in 150 countries were attacked. For example, nearly 50 British hospitals were incapacitated as were Russian railroads and banks, Indian airlines, Germany’s railroads, Spain’s largest telecommunications company, Japanese police, South Korean movie theaters, many gas stations and universities in China, and small electric utilities and Fed Ex in the U.S. Russia and China suffered the most, partially because vulnerable, pirated software was widely used there.

The attack used a vulnerability in Microsoft’s Windows operating system that the NSA had discovered and exploited for years. When knowledge of it was stolen from the NSA and released publicly, the NSA notified Microsoft, but, needless to say, there was not enough time to fix the vulnerability (aka bug) and get the fix onto millions of customers’ computers before the vulnerability was exploited by North Korea and others. Exacerbating the problem, many customers are not always quick to install Microsoft’s Windows updates, particularly at companies using it on computers performing critical functions where software updates must be closely managed to minimize downtime. Making matters worse, many computers, including ones controlling critical infrastructure, were running an old version of Windows that Microsoft had stopped updating three years earlier. Now, Microsoft had to go back and update this software so its users wouldn’t be held hostage by cyberattacks from North Korea or run-of-the-mill cyber criminals.

Microsoft’s President, Brad Smith, was angry; this was not the first time the NSA had put Microsoft in this position. He publicly criticized the NSA for withholding the Windows vulnerability from Microsoft and then, when it became a problem, dumping it in Microsoft’s lap to fix on short notice. At the time, this story got short shrift in the U.S. media because of all the focus on the new Trump administration and the controversies it was generating. The administration was, however, quick to identify North Korea as the culprit, in stark contrast to its failure to out Russia for its cyberattacks, including its meddling in the 2016 U.S. election. (More on this in a subsequent post.)

Initially, government-sponsored cyber hacking, with the U.S. leading the pack, was used for espionage and surveillance of foreign governments and agents. The U.S. has multiple agencies spending billions of dollars developing and using cyber hacking capabilities. It has large teams of computer experts identifying vulnerabilities in computer software. Rather than alerting companies to the vulnerabilities in their products, U.S. intelligence agencies developed the software vulnerabilities into weapons for spying on adversaries (e.g., by stealing data from their computers). This use of cyber hacking is considered defensive as it is used to protect the U.S. and not to harm others.

The U.S. government also bought software vulnerabilities from private hackers who had discovered them, sometimes paying millions of dollars for them. Private computer hackers’ uncovering and selling of software vulnerabilities is a worldwide entrepreneurial business, given that any computer-savvy individual with a computer can do this.

However, as was probably inevitable, computer hacking shifted to being used offensively, to harm adversaries, given that it has the inherent capability to disrupt computer-controlled equipment and communications. In 2008 and 2009, the U.S. government, led by the NSA, probably with Israel’s participation, successfully executed a cyberwarfare attack on Iran’s nuclear enrichment plant. It damaged the centrifuges used to enrich uranium in order to delay Iran’s ability to generate enough, sufficiently enriched uranium to build an atomic bomb. Many experts view this attack as marking the shift of cyberwarfare from espionage and defensive uses to offensive uses.

After a cyberattack, given time, effort, and expertise, the target can almost always identify the source of the attack. So, when U.S. intelligence agencies say they “think” a cyberattack came from say Russia, they know that it came from Russia. Furthermore, they usually know what organization was behind the attack, although sometimes it can be difficult to ascertain whether it was a government-sponsored attack or private hackers physically located say in Russia (or China, Iran, or North Korea, etc.).

After the successful attack on its nuclear enrichment plant, Iran, not surprisingly, was looking for revenge. When it discovered the cyberattack, it also then had possession of the weapon – the software that had been used – and could turn it back on the attacker.

Furthermore, the weapon, as cyber weapons often do, spread itself out from the Iranian centrifuge plant over the Internet and around the globe, eventually reaching the U.S. and infecting computers at Chevron. Fortunately, because it was designed to specifically attack the Iranian centrifuges, it didn’t do a lot of damage at Chevron or at other sites it infected.

Despite this experience, the U.S. government continued to focus on its offensive cyberwarfare programs and largely ignored building cyber defenses. Surprisingly, it ignored the clear vulnerability of U.S. computers and systems to the types of attacks it was undertaking, despite the fact that the U.S. is more dependent on computers and the Internet than other countries, making the U.S. more vulnerable to a cyberattack than anyone else.

In subsequent posts, I will outline the Perlroth book’s reporting on:

  • Electronic surveillance in the U.S. and the use of encryption technology to protect privacy,
  • Leaks from the NSA, including of its cyberwarfare tools,
  • Russia’s cyberattacks on Ukraine,
  • The Chinese attack on Google and Google’s response,
  • The cyberattacks on U.S. elections and the Trump administration’s response, and
  • What can be done to counter cybercrime and warfare at the individual and governmental levels.

[1]      Perlroth, N. This Is How They Tell Me the World Ends. Bloomsbury Publishing, NY, NY. 2021.

[2]      De Vynck, G., 9/22/21, “Treasury’s fight against hackers targets crypto payments,” The Boston Globe from the Washington Post

HOW TO REIN IN FACEBOOK’S THREATS TO OUR CHILDREN, OUR DEMOCRACY, AND ALL OF US

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Facebook IS a serious threat to our children, our democracy, and all of us, as my previous post documented. Facebook is finally getting the attention and scrutiny it deserves, with a former insider turned whistleblower being the catalyst. Without government regulation Facebook and other social media sites will facilitate a race to the bottom driven by our basest proclivities and instincts. This will occur because there is greater profit in spurring anger, encouraging extremism and violence, promoting false information, and triggering emotional responses than there is in creating a safe place for people to have healthy relationships and to engage in civil discourse based on facts. [1] Facebook has consistently chosen profits over the health and safety of children, the sharing of factual information, and the public good, so it isn’t going to fix itself. Meaningful action by Congress will take time, so regulatory action by the executive branch is needed now. [2]

Here are possible actions that could be taken to address the problems with Facebook and its harmful behaviors: [3]

  • Require Facebook to publicly share its internal data and algorithms. This transparency would allow independent experts to analyze how its algorithms prioritize and promote content so we would know what messages they are amplifying and if they have toxic effects and bias. This would also allow monitoring of Facebook’s use of consumer data and its adherence to privacy standards. These data are also necessary to be able to design effective regulation. [4] They are also important for monitoring and ameliorating toxic effects on children and for the protection of children’s privacy – areas where Facebook does not have a good track record.
  • Break up Facebook through use of antitrust laws, forcing it to spin off Instagram, WhatsApp, and perhaps other business units, while prohibiting it from making acquisitions of other companies. (See rationale for this below.)
  • Institute a fairness or balance standard requiring Facebook to show users content with opposing views. (Prior to deregulation in the 1980s, there was a “fairness doctrine” that applied such standards to TV and radio stations.)
  • Investigate Facebook for withholding or distorting significant financial information provided to investors.
  • Require Facebook to substantially expand its efforts and meet standards for success in blocking harmful and inaccurate content (i.e., engage in effective content moderation).
  • Strengthen or pass laws regulating Facebook’s pushing of inappropriate content and inappropriate marketing on children, e.g., strengthen the Children’s Online Privacy Protection Act (COPPA) and pass the KIDS Act.
  • Make Facebook and other social media sites liable for promoting, and perhaps even for allowing users to post, hateful, threatening, violence-promoting, and other harmful content.
  • Create and invest in public Internet sites that provide news and human interaction opportunities as an alternative to Facebook. These public sites would not have profit-driven motives and, therefore, would adhere to consumer and ethical standards, as well as a commitment to serving the public good.

Regulating Facebook and other social media will not be easy and multiple iterations of regulatory steps and efforts will be needed as regulators learn what works and adjust to changes by Facebook and other social media. Given Facebook’s tremendous financial resources, its fight against efforts to control and regulate it will go on in the courts, in regulatory agencies, and in Congress for years.

Breaking up Facebook (and other huge corporations) is necessary to:

  • Reduce monopolistic power and allow the power of the marketplace and competition to rein in harmful practices on privacy, misinformation, manipulation of users, etc.
  • Reduce the almost limitless financial resources of huge corporations, which are used to overwhelm (or buy) our policymaking, regulatory, and judicial processes.
  • Reduce the massive aggregation of consumer data that allows the manipulation of users, including children.

I encourage you to pay at least some attention to the unfolding expose of how Facebook (and social media generally) works and what its effects are, because it has a significant impact on each of us and our families, as well as broad impacts on our society and democracy.

Government regulation of social media is needed to protect children, our democracy, and all of us. Facebook and its CEO Mark Zuckerberg have been skillful at ducking accountability. This must end. For example, Facebook knows of the harm it does to children and how to mitigate it, but it has chosen not to take action because it prioritizes profits over the safety of children (and everything else). Moreover, internal documents disclosed by the whistleblower reveal that in 2020 Facebook studied better ways to market products to preteens, even though it supposedly bars anyone under 13 from having an account. [5]

I encourage you to sign up for the Facebook boycott on November 10 here. Staying off of Facebook and Instagram for a day or two is probably the best way to send the message that we’re not happy with their behavior.

I also urge you to let your U.S. Representative and Senators, along with President Biden, know that you support strong regulation of Facebook (and other social media) to reduce the harm it is doing to us, our children, our society, and our democracy.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Hubbell, R., 10/6/21, “Today’s edition: Progress, at last” (https://roberthubbell.substack.com/p/todays-edition-progress-at-last)

[2]      Verma, P., 10/8/21, “What’s next for Facebook,” The Boston Globe

[3]      Bernoff, J., 10/7/21, “Facebook must be stopped,” The Boston Globe

[4]      Ghaffary, S., 10/5/21, “Facebook’s whistleblower tells Congress how to regulate tech,” Vox (https://www.vox.com/recode/22711551/facebook-whistleblower-congress-hearing-regulation-mark-zuckerberg-frances-haugen-senator-blumenthal)

[5]      Boston Globe Editorial Board, 10/12/21, “If Facebook won’t protect kids, Congress should force the company’s hand,” The Boston Globe

FACEBOOK IS AN EXISTENTIAL THREAT TO ALL OF US, OUR CHILDREN, AND OUR DEMOCRACY

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

This title is NOT an exaggeration: Facebook IS an existential threat to all of us, our children, and our democracy. I’ve been meaning to write a series of blog posts about Facebook and social media in general – and the harm they are doing – for almost a year. I recommend that you watch the award-winning documentary, “The Social Dilemma” (which is free on YouTube until October 31st). It’s produced by the Center for Humane Technology and was an eye-opener for me. (The documentary is 1 hour 34 minutes; there’s also a 2 ½ minute trailer.) The Center provides great resources for parents, teachers, and all of us on how to be intelligent users of social media – and how to protect our children from social media’s potential negative influences.

Facebook is finally getting the attention and scrutiny it has warranted for some time, with a former insider turned whistleblower being the catalyst. The whistleblower, Frances Haugen, had been a product manager at the Civic Integrity unit at Facebook. The unit was dissolved after the 2020 election. She subsequently left Facebook and has shared documents and her personal experiences with the Wall Street Journal, which has done a series of articles based on her information that are called The Facebook Files. She appeared on the 60 Minutes TV show on October 3, 2021. A blog post by Whitney Tilson, an investment professional, includes a series of links to segments of Haugen’s interview on 60 Minutes, links to the Wall Street Journal articles (which are behind a paywall unless you have a subscription or can access them through a library), and a letter from Tilson, as an investor, to Facebook COO Sheryl Sandberg. [1]

I hope you’ve been following, at least at some level, the recent revelations that have laid bare the incredible influence Facebook has on us, including on what we believe and how we feel. We are both the product that Facebook is selling and the customers who are being influenced by the most sophisticated and manipulative marketing strategies and capabilities humankind has ever experienced. [2]

I provide here a very high-level overview of the information about Facebook that’s been uncovered and reported lately, while providing links to the detail. I have written previously about the intentional promotion of disinformation by Facebook, but that is just the tip of the iceberg, as current revelations are making starkly clear.

Facebook is single-handedly controlled by Mark Zuckerberg, who owns the majority of the controlling stock of the corporation. It seems clear that his commitment to generating profits (and increasing his wealth of $134 billion) outweighs everything else. Actions (e.g., likes and shares) and time on Facebook are money in his pocket and the recent revelations indicate that every time a decision was made where accuracy or any other social good was pitted against more clicks and money, Zuckerberg went for the money – despite knowing the  downsides. Facebook’s revenue has soared to $119 billion and the corporation’s market value is up to almost $1 trillion.

Facebook has internal studies and statistics that show, for example, that misinformation gets six times more clicks than factual news and that right-leaning sites produce more misinformation than any other sites. Facebook and Zuckerberg have been promoting misinformation and right-wing sites because more clicks mean more money in their pockets.

Facebook also knows how to elicit emotional responses and how its users respond to likes, shares, clicks on emoji buttons, and other actions on its site. It’s happy to use this knowledge to manipulate its users. Its internal research has concluded that its algorithms, which determine what to promote and show to whom, contribute to mental health and emotional problems among teens, particularly girls. However, it has done nothing to ameliorate this harm. [3]

Facebook seems to be immune to any sense of civic obligation to its roughly 3 billion users. It appears to have no qualms about helping undermine elections and democracies, the free and factual media, and accurate information about Covid and vaccination, which has literally deadly consequences. Zuckerberg has allowed terrorist recruitment, human trafficking, abuses by authoritarian governments, and promotion of hate, violence, genocide, and racism on Facebook. Is it any wonder that in the Russians’ efforts to disrupt U.S. elections and sow discord in our society that Facebook was their most frequently employed tool? [4] Facebook’s negative effects are probably even greater in countries other than the U.S., particularly in authoritarian ones, where the effects may be literally deadly for regime opponents.

Although the concerns that have been raised about Facebook are relevant to all of social media, Facebook is the dominant entity. Its algorithms govern the news we receive and what is promoted and prioritized, which shapes our society and affects our well-being and our democracy. Without government regulation Facebook and other social media will facilitate a race to the bottom driven by our basest proclivities and instincts. This will occur because there is greater profit in spurring anger, encouraging extremism, promoting false information, and triggering emotional responses than there is in creating a safe place for civil discourse and human interactions based on facts and healthy relationships. [5]

My next post will present some options for reining in Facebook, as well as social media in general.

[1]      Tilson, W., 10/5/21, “Facebook whistleblower Frances Haugen; An open letter to Sheryl Sandberg,” (https://empirefinancialresearch.com/articles/facebook-whistleblower-frances-haugen-an-open-letter-to-sheryl-sandberg-come-work-with-enrique-barcelona-pictures)

[2]      Hubbell, R., 10/7/21, “Today’s edition: Nine months of silence,” (https://roberthubbell.substack.com/p/todays-edition-nine-months-of-silence)

[3]      Bauder, D., and Liedtke, M., 10/4/21, “Facebook fed Capitol riot, former manager alleges,” The Boston Globe from the Associate Press

[4]      Alterman, E., 10/1/21, “Altercation: The Facebook threat to democracy – and us all,” The American Prospect (https://prospect.org/politics/altercation-facebook-threat-to-democracy-and-us-all/)

[5]      Hubbell, R., 10/6/21, “Today’s edition: Progress, at last” (https://roberthubbell.substack.com/p/todays-edition-progress-at-last)

THE DAMAGE THE RADICAL REACTIONARIES ARE DOING TO THE SUPREME COURT AND OUR DEMOCRACY AND HOW TO FIX IT

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The radical, reactionary decisions of the Supreme Court’s six-justice majority not only affect society (see my previous post), they have implications for our democracy and the future of the Court itself. Their decisions undermine the credibility of the Court, the rule of law, and American democracy. They mean that government will not be able to regulate businesses, protect workers, or protect people’s civil rights. They mean that our government will not be able to provide a safety net for individuals when they fall on hard times and will not be able to promote public health and infrastructure.

The way the Supreme Court is making decisions is undermining its credibility and eroding respect for it among the public. The majority of the Court’s decisions since 2017 have been on the “shadow docket,” i.e., decisions made without the benefit of written or oral arguments. These decisions are often made and released in the dead of night, and often with an unsigned written statement (aka opinion). These opinions are typically short and fail to present a rationale for the decision. They almost exclusively advance a right-wing political agenda. Prior to 2017, such emergency rulings were rare and were used for uncontroversial decisions or when time was of the essence, such as death penalty executions. In less than three years, the Trump administration filed for at least 28 such rulings (an average of almost 9 per year), while there were only eight in the previous 16 years (an average of one every other year). [1]

The Court is emasculating the rule of law and degrading American democracy. It is failing to enforce federal laws, making decisions without considering the merits of cases, and allowing states to do as they please, even when they violate the Constitution and people’s rights. As Justice Sotomayor wrote in her dissent on the case on the Texas law limiting pregnancy terminations, “The Court should not be so content to ignore its constitutional obligations to protect not only the rights of women, but also the sanctity of its precedents and of the rule of law.” [2]

Justice Kagan, in her dissent on the Texas case, noted that the Court’s recent actions, “which every day becomes more unreasoned,  inconsistent, and impossible to defend,” are undermining the legitimacy of the Court. She noted, by way of example, that the Court failed to intervene to protect the rights of millions of Texas women, despite having intervened aggressively to protect alleged religious rights, such as when a California church had been prohibited from meeting in-person by Covid restrictions. Since Justice Barrett was seated in October 2020, the Court has issued seven emergency injunctions (e.g., blocking state coronavirus restrictions), while only four such injunctions had been issued during the previous 15 years of Justice Robert’s tenure. [3]

Making things even worse, the Supreme Court is treating its shadow docket decisions, promulgated without any reasoning to back them up, as creating new legal precedents that lower courts must follow. According to precedent, shadow docket cases do not establish new law, in part because the merits of the case have not been argued and considered. However, the current Court has had no problem asserting that its shadow docket decisions establish new law and legal precedents, particularly when infringements of religious rights have been alleged.

Given that the Court is ruling inconsistently, ignoring even its own recent precedents, making decisions without hearing or considering the merits of a cases, and promulgating its decisions without justifications, it is clear that the Court is advancing an ideological and partisan political agenda and not a legal one. This dramatically undermines the legitimacy of the Court and powerfully supports the case for Court reform.

In addition to the behavior of the radical, reactionary majority on the Court, the way two of the justices got on the Court also argues for reform. As you probably remember, in the spring of 2016, Senate Majority Leader McConnell (Republican of Kentucky) refused to even consider President Obama’s nomination of Merrick Garland for an open seat on the Supreme Court, supposedly because it was an election year and the decision should be left to the new president. This reduced the size of the Court from nine to eight justice for roughly a year. However, when an opening occurred in September, 2020, also an election year, McConnell and the Republicans were happy to rush through the nomination of Amy Barrett, literally days before the election. So, the Republicans stole two seats on the Court and filled them with radical reactionaries.

These appointments raised issues about the appointment process and the lifetime terms of justices, given that it was the deaths of two sitting justices that led to these openings. However, there are other long-term issues with the Supreme Court. For example, there is no Code of Ethics that covers Supreme Court justices; they are exempt from the ethics rules that apply to other federal judges.

President Biden has appointed a Presidential Commission on the Supreme Court of the United States to study the issues with the Court and the need for reform. Testimony was received from a long list of people, including Harvard Law Professor Michael J. Klarman, who has written a 260-page Harvard Law Review article on the degradation of American democracy and the Supreme Court’s role in it. In his testimony to the Commission, Klarman recommends and provides a strong rationale for: [4]

  • 18-year, non-renewable, staggered terms for justices, so that a seat is filled every two years, and
  • Expanding the Court by four seats immediately.

Others have recommended adding two seats to the Court to make up for the two that were stolen by Republican shenanigans. Robert Hubbell, a retired lawyer, recommends: [5]

  • Expanding the Court, noting that this would require bypassing the filibuster,
  • Limiting the terms of justices,
  • Implementing a code of judicial ethics for the justices, and
  • Limiting the Court’s ability to decide substantive issues on the shadow docket.

I urge you to let your U.S. Representative and Senators, along with President Biden, know that you support reform of the Supreme Court to restore its legitimacy and non-partisan operation. Urge them to push for a strong, substantive report and set of recommendations from the Presidential Commission on the Supreme Court to achieve these goals. Then, we will all need to work to ensure that needed changes in the Supreme Court are implemented.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Richardson, H. C., 9/1/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/september-1-2021)

[2]      Sotomayor, S., 9/3/21, “Sotomayor’s defiant dissent,” The Nation (https://www.thenation.com/article/society/sotomayor-abortion-dissent/)

[3]      Vladeck, S., 9/3/21, “The Supreme Court doesn’t just abuse its shadow docket. It does so inconsistently,” The Washington Post

[4]      Klarman, M. J., 7/20/21, “Court expansion and other changes to the Court’s composition,” Written statement to the Presidential Commission on the Supreme Court of the United States (https://www.whitehouse.gov/wp-content/uploads/2021/07/Klarman-Testimony.pdf)

[5]      Hubbell, R., 9/2/21, “Today’s Edition: Susan Collins should resign in disgrace,” (https://roberthubbell.substack.com/p/todays-edition-susan-collins-should)

THE IMPLICATIONS OF RADICAL, REACTIONARY RULINGS BY THE SUPREME COURT

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

My previous post made the case that six of the nine Supreme Court justices (Alito, Barrett, Gorsuch, Kavanaugh, Roberts, and Thomas) are radical reactionaries both in the content of their rulings and in their decision-making process. This post will outline some of the societal implications of their rulings, particularly the ruling on the Texas law prohibiting most pregnancy terminations.

As you’re probably aware, the Supreme Court blocked a lower court from delaying the implementation of a Texas law restricting pregnancy termination (aka abortion) that is clearly unconstitutional and uses a highly unusual and fraught enforcement mechanism. The Court did so without hearing any arguments on the merits of the case. Implementation of the Texas law, even temporarily, will allow nuisance lawsuits that will probably bankrupt or otherwise put out of business all abortion providers in Texas. The Supreme Court, in an unprecedent action, has allowed immediate implementation of this law despite the facts that it clearly violates a constitutional right and does immediate harm by stopping 85% of pregnancy terminations that happen in Texas.

 The Texas law allows any citizen to sue anyone or any organization that is in any way involved in a pregnancy termination that occurs roughly six weeks or more into a pregnancy. (At six weeks, most women don’t even know they are pregnant yet.) The citizen would get a $10,000 reward or bounty plus reimbursement for legal costs if they win the suit. If the defendant wins the suit, they are not eligible to recover legal costs. This makes a pregnant woman who would like to terminate her pregnancy prey for bounty hunters.

The Texas law encourages and rewards vigilantism, where neighbors sue neighbors. This is the type of “justice” system – with neighbors incriminating neighbors – that totalitarian regimes use to control people. It was used in pre-WWII Germany, in the Soviet Union, and in Iraq under Saddam Hussein, for instance.

This citizen enforcement mechanism was used – as opposed to the normal use of public law enforcement agencies – specifically to bypass federal judicial oversight and inhibit federal enforcement of a woman’s constitutional right to terminate a pregnancy as established by the 1973 Roe vs. Wade Supreme Court decision. As Justice Sotomayor wrote in her dissent, “Because the Court’s failure to act rewards tactics designed to avoid judicial review and inflicts significant harm on the applicants and on women seeking abortions in Texas, I dissent. … This is untenable. It cannot be that a state can evade federal judicial scrutiny by outsourcing the enforcement of unconstitutional laws to its citizenry.” [1]

As historian Heather Cox Richardson wrote in her blog, “The Republican Party is empowering vigilantes to enforce their beliefs against their neighbors.” [2] With vigilantism already escalating in our country, it needs no encouragement. It is occurring at school board meetings discussing mask mandates, it is being used to intimidate election and public health officials, and it was the foundation of the January 6 attack on the Capitol.

Vigilante “justice” and states’ rights (to ignore federal constitutional rights) are what was used to maintain white supremacy in the post-Civil War south. For eighty years, law enforcement in the south depended on your skin color, your gender, and whom you knew. Vigilantes kept Blacks from voting and kept education separate and unequal. Southern vigilantes could literally get away with murder up until the 1960s. [3]

The Supreme Court decision on the Texas pregnancy termination case and decisions on other cases related to religious beliefs and practices are allowing white, Christian religious beliefs to function as civil law. These decisions allow private organizations (e.g., employers and health care providers) and state governments to engage in discrimination and oppression based on religious beliefs in providing (or not providing) women’s health care and services to LGBTQ people, for example. The Texas law encourages and rewards citizens who act based on their religious beliefs about pregnancy termination and sue fellow citizens. [4]

In allowing Texas to implement unconstitutional pregnancy termination restrictions and to avoid federal enforcement of civil rights by empowering citizen enforcement of state laws, the Supreme Court has opened a barn door. This strategy, having been successful at least temporarily in Texas, will almost undoubtedly now be used by other states on this and other issues in ways that violate people’s civil rights. [5]

In summary, the Supreme Court is failing to enforce federal law and uphold civil rights, giving states free rein to ignore the due process and equal protection provisions of the 14th amendment. These are the provisions that allow the federal government to ensure the protections of the Bill of Rights for people, even when a state government tries to undermine them. These Supreme Court decisions mean the federal government cannot protect the rights of people of color, women, religious minorities, or otherwise-abled people. The Supreme Court has handed power over civil rights back to the states and the vigilantes, as it was in the 80 years after the civil war. [6]

It is unclear how this door, now opened, will be closed, but it is clear that reform of the Supreme Court to disempower its radical, reactionary, and ill-gotten majority is an essential part of that process.

In my next post, I will discuss the implications of the behavior of the Court’s radical reactionaries for the legitimacy and future of the Court. I’ll also present possible solutions to the current unprecedented and undemocratic actions of the Court.

[1]      Sotomayor, S., 9/3/21, “Sotomayor’s defiant dissent,” The Nation (https://www.thenation.com/article/society/sotomayor-abortion-dissent/)

[2]      Richardson, H. C., 9/1/21, “Letters from an American blog,” page 2, (https://heathercoxrichardson.substack.com/p/september-1-2021)

[3]      Richardson, H. C., 9/1/21, see above.

[4]      Hubbell, R., 9/2/21, “Today’s Edition: Susan Collins should resign in disgrace,” (https://roberthubbell.substack.com/p/todays-edition-susan-collins-should)

[5]      Hubbell, R., 8/31/21, “Today’s Edition: The U.S. war in Afghanistan is over,” (https://roberthubbell.substack.com/p/todays-edition-the-us-war-in-afghanistan)

[6]      Richardson, H. C., 9/3/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/september-3-2021)

REPUBLICAN HYPOCRISY ON THE FEDERAL DEFICIT

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The Republican Party is guilty of lots of hypocrisy these days, some of it new and some of it old. One of the older elements that’s resurfacing today is concern about the federal government’s annual budget deficit and its overall accumulated debt. One of my real frustrations with the mainstream media is that they rarely call out Republican hypocrisy. They typically report the Democratic and Republican rhetoric as a he said / she said conflict without any historical or factual context.

Therefore, I was pleased to see a front-page story in the Boston Globe on 9/17/21 explicitly calling out the Republicans’ current hypocrisy on the federal deficit. The title and subtitle, no less, highlighted the hypocrisy: “Democrat in office, GOP focuses on the debt; But true to form, Republicans were silent as Trump ran up spending.” [1] What follows is a summary of the article.

Republicans are trying to build support for their opposition to President Biden’s and congressional Democrats’ infrastructure investment bills by saying they’re concerned about the federal budget deficit and overall debt. This is hypocritical because congressional Republicans remained largely silent as the debt grew by $8 trillion (40%) under President Trump in just four years. It’s also inaccurate because the Democrats are planning to pay for most if not all of the costs of the bills with tax increases on wealthy individuals and corporations, along with other revenue increases, so the deficit and debt would not grow as a result.

The hypocrisy is quite blatant because congressional Republicans pushed through a tax cut in 2017 that increased the debt by about $200 billion a year. Trump’s hypocrisy was stunning, given that he had promised during his campaign to balance the federal budget in four or five years. Instead, his four budgets ran deficits of an average of $2 trillion per year! Voters appeared to believe his campaign promise, in part because the mainstream media didn’t provide the context that would have shown it was a lie, particularly in the context of his other promises.

Republicans are saying they won’t vote to increase the federal government’s ceiling on its total amount of debt. However, they raised or suspended the debt ceiling three times when Trump was president. Moreover, most of the increase in the federal debt that has occurred since the debt ceiling was last raised in 2019, occurred under President Trump. Republicans are resurrecting their opposition to increasing the debt ceiling that they exhibited when Obama (a Democrat) was president. Then, they pushed the government to the brink of defaulting on its debt, which would create an unprecedented economic crisis.

This hypocritical opposition to increasing the debt ceiling and to increased spending because it might increase the annual budget deficit reflects a 40-year pattern of Republican presidents and congresspeople creating large budget deficits and then leaving a fiscal and economic mess for Democratic presidents to deal with and clean up. Brian Riedl, a senior fellow at the Manhattan Institute (a conservative, free-market think tank) and a Republican economic and tax policy expert, is quoted in the article as saying, “Republicans are absolutely guilty of hypocrisy in that they focus on the debt during Democratic presidents and then run up spending during Republican presidents.”

[1]      Puzzanghera, J., 9/17/21, “Democrat in office, GOP focuses on the debt,” The Boston Globe

THE RADICAL, REACTIONARY MAJORITY ON THE SUPREME COURT

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

You’ve almost certainly heard about the Texas law prohibiting most pregnancy terminations (aka abortions). It’s blatantly unconstitutional and also radical in multiple ways. I’m not going to discuss the law itself in any detail, rather I want to focus on the behavior of the Supreme Court’s six radical, reactionary justices on this case and others.

Many people refer to the five Supreme Court justices (Alito, Barrett, Gorsuch, Kavanagh, and Thomas) who allowed the Texas law to go into effect and Chief Justice Roberts (who dissented in the Texas case for procedural reasons) as “conservative.” This is not accurate. Although they do fit with political conservatives in favoring free enterprise and private ownership, they do so in a way that ignores the whole post-Depression and post-WWII form of managed capitalism. Somewhat similarly, they only uphold traditional values and social norms if one turns back the clock at least 50 year and probably closer to 100 years. Finally, they are not conservative in terms of being averse to change or innovation, rather they are radical, judicial activists ignoring longstanding precedents and creating wholly new judicial theory and reasoning.

A number of court observers and journalists have taken to calling them “reactionary.” A reactionary holds political views that favor a return to a previous state of society, which they believe possessed positive characteristics that are absent from contemporary society. For example, these justices apparently want to return to the days when:

  • Abortion was banned and women’s roles and decisions were controlled by husbands, restrictive societal norms, and, in some cases, laws.
  • State governments were much more powerful and the federal government couldn’t enforce national laws protecting individuals’ rights, including the rights of people of color, women’s rights, immigrants’ rights, and others’ civil rights.

To call those six justices “radical” also seems appropriate as they are clearly upending fundamental principles, precedents, and processes of the Supreme Court and our system of jurisprudence. They have repeatedly shown a lack of respect for precedents that don’t fit their ideology.

Their radicalism isn’t limited to the Texas case or the substance of their decisions, but is also evident in the processes they have used to make numerous significant rulings. For example, rulings in three recent cases were made without hearing the merits of the cases:

  • The Texas pregnancy termination case: failed to stop implementation of a clearly unconstitutional law with a highly unusual enforcement mechanism – deputizing private citizens to sue – that is intended to evade federal judicial oversight.
  • The case on forcing asylum seekers to stay in Mexico: required the Biden administration to enter into an agreement with Mexico on asylum seekers, despite the fact that the Court has no jurisdiction or way to enforce Mexico’s participation. In addition, for the Court to direct the foreign policy of the U.S. is completely unprecedented and does violence to the separation of powers in the Constitution.
  • The termination of the eviction moratorium case: overturned a CDC-driven executive order that will impact the housing and health of millions of people in the face of a pandemic.

In these three cases, and in numerous others, the Supreme Court has issued rulings with significant effects based on procedural matters without the normal full briefing and arguments, which would provide them vital information needed to make an appropriately considered decision. This seems to be the Court’s new strategy for deciding major cases – ruling on procedural motions without hearing the merits of the cases. These rulings are typically unsigned, which is also unusual. Even Chief Justice Roberts, normally part of the radical, reactionary cabal, criticized the rush to judgement in the Texas case without consideration of the merits of the case, writing in his dissenting opinion, “We are at this point asked to resolve these novel questions … in the course of two days, without the benefit of consideration by the District Court or Court of Appeals. We are also asked to do so without ordinary merits briefing and without oral argument.” [1]

The lack of hearings also avoids a public airing of the issues, arguments, facts, and implications of a case and the Court’s decision. This and the fact that a number of the rulings have been issued outside of normal business hours seem to indicate a desire to minimize news coverage, public awareness, and public discussion of cases.

Both the substance of these rulings (and numerous others) and the Court’s failure to hold hearings make it appear that these decisions are based on ideology and politics, not legal precedents, the law, or the merits of the cases. As Robert Hubbell, a retired lawyer writes: “the Supreme Court has dropped all pretense of due process or respect for precedent … to implement the conservative social agenda … without regard to logic, precedent, or the Constitution.” [2]

Another indication that these decisions are partisan is that the Court had no problem with President Trump’s dramatic and sweeping executive orders but finds President Biden’s less dramatic orders unconstitutional. In the Mexico asylees case, the Court ordered Biden to reinstate an agreement with Mexico that had expired in 2020 before Biden was elected. However, the Court didn’t order Trump to reinstate it. [3] The six radical, reactionary justices appear to be acting aggressively to exert their power in support of a partisan, ideological agenda.

All six of these justices, unless I’m much mistaken, pledged at their confirmation hearings to abide by legal precedents, including previous Supreme Court decisions such as the Roe v. Wade decision, which made it a constitutional right to be able to terminate a pregnancy before fetal viability at about 22 – 24 weeks of pregnancy. It now seems clear that they all lied, meaning they committed perjury given that they were testifying under oath.

In a future post, I’ll review the implications of the radical Texas pregnancy termination law and the Supreme Court’s failure to delay its implementation to allow time for judicial review. I’ll also discuss ways to respond to the Court’s radical, reactionary behavior.

[1]      Hubbell, R., 9/3/21, “Today’s Edition: A judicial coup d’état,” (https://roberthubbell.substack.com/p/todays-edition-a-judicial-coup-detat)

[2]      Hubbell, R., 9/2/21, “Today’s Edition: Susan Collins should resign in disgrace,” (https://roberthubbell.substack.com/p/todays-edition-susan-collins-should)

[3]      Hubbell, R., 8/27/21, “Today’s Edition: The backbone of America,” (https://roberthubbell.substack.com/p/todays-edition-the-backbone-of-america)

HOW THE GOVERNMENT CAN SUPPORT THE ECONOMY AND WORKERS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Effective governments are critical components of our societal infrastructure. They are needed to combat public health threats such as the coronavirus, to keep people safe, and to provide a safety net for workers and families in economic hard times, among other things. Government programs and actions can provide important supports for our economy and its workers. Economic growth and workers’ pay and employment are inextricably linked as consumer spending, i.e., workers spending their pay, is what drives our economy, representing about two-thirds of all economic activity.

My previous two posts (here and here) focused on efforts to undermine and weaken government. They outlined negative effects of weak government infrastructure and of privatization of public sector work. This post highlights the benefits of government action.

The “Biden Plan,” as the President calls it, uses aggressive federal government action to combat the coronavirus and to stimulate the economy. The first piece of it was an aggressive effort to get people vaccinated along with other steps to reduce the impact of Covid on people’s health. The second major piece, the American Rescue Plan (ARP), was passed in March 2021 and provides $1.9 trillion to combat the pandemic and its harmful effects on workers, businesses, and the economy. It strengthens our healthcare system; provides funding for schools, housing, small businesses, and local governments; and supports low- and middle-income workers by extending unemployment benefits and providing monthly support checks for families with children.

Given the popularity of the American Rescue Plan (75% of voters like it) and support from local and state governments (including a number of Republican governors), it wouldn’t seem to be a partisan issue, but every Republican member of Congress voted against it. Every President, Democrat or Republican, from WWII to 1980 used government actions to support the economy and workers, and to ensure that the rising tide did indeed lift all boats somewhat equitably. [1]

However, since 1980, Republican ideology has opposed such government action, taking the position that government action is unnecessary because the private sector, stimulated by tax cuts, will meet society’s needs even in the face of crises and economic recessions. This ideology claims that cutting taxes, particularly for wealthy individuals and corporations, will stimulate the economy, generate growth that will more than make up for the revenue lost due to the tax cuts, and that benefits will “trickle down” to workers.

Republican Presidents Reagan, George W. Bush, and Trump all cut taxes and in every case the economy did NOT boom, tax revenue did NOT grow, and workers did NOT benefit, but the deficit DID grow substantially. Republicans’ concern about the federal government’s deficit seems to only apply to Democratic initiatives. Moreover, Republican President George H. W. Bush promised not to raise taxes when he ran in 1988, but when the previous Reagan tax cuts led to dramatic growth of the  deficit, Bush raised taxes to reduce the deficit – for which he was basically disowned by the Republican Party.

According to Republicans, the American Rescue Plan and any government actions like it will (supposedly) kill economic growth and job creation, leading to high unemployment and growing deficits.

However, recent economic data show that Republican predictions have NOT come true. Rather, the data show growth in the number of jobs, falling unemployment, increased pay for workers, a growing economy, and a falling deficit. This provides solid validation for the government actions President Biden and Democrats in Congress have taken in response to the pandemic and its negative effects on workers and the economy. By the way, economic and job growth also occurred after Democratic President Clinton raised taxes. Moreover, the resultant increase in revenue and economic growth made the deficit disappear! Both the current experience and that under President Clinton clearly debunk Republican fear mongering about tax increases, a strong safety net, and government intervention in the economy.

Perhaps convinced by these data, 19 Republicans in the U.S. Senate (out of 50) along with all 50 Democrats voted for a $1 trillion infrastructure bill that will make major government investments in roads, bridges, railroads, mass transit, water systems, pollution clean-up, and high-speed Internet access among other things. This spending over the next ten years is projected to create 3 million jobs.

However, Republicans are still unified in opposition to an additional $3.5 trillion infrastructure bill that would address climate change and more directly support workers and their families through funding for education, health care, housing, paid family leave, elder care, early education and child care, and making the temporary child tax credit of the ARP permanent. This last provision alone is projected to cut child poverty in half – disproportionately benefiting children of color – and would keep families with children from slipping back into poverty if the temporary ARP child tax credit were allowed to expire. The climate change investments in clean energy and reduction of carbon emissions are likely to save trillions of dollars in damages and mitigation measures that would occur if climate change continues unabated.

In response to Republicans’ concerns about the costs for the infrastructure bills, Treasury Secretary and former Chair of the Federal Reserve Janet Yellen said: “My largest concern is not: What are the risks if we make these big investments? It is: What is the cost if we don’t?” [2]

I encourage you to let your U.S. Representative and Senators, along with President Biden, know that you support government investments in our infrastructure to support a strong economy, and workers and their families as well.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Richardson, H. C., 8/10/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/august-10-2021)

[2]      Richardson, H. C., 8/10/21, see above

WE NEED SOLID GOVERNMENT INFRASTRUCTURE Part 2

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Governments are critical components of our societal infrastructure. Effective governments are needed to deliver the services, supports, and public amenities that Americans want and need. For 40 years, small government advocates – led by Republicans but with the acquiescence or assistance of many Democrats – have successfully shrunk and weakened government infrastructure and capacity. (My previous post focused on the targeting of public employees.)

One reason for the attacks on government infrastructure has been to privatize government functions so the private sector can make profits by performing work previously done by public employees. This has always been justified by the claim that the private sector will do things more efficiently and save taxpayers money. However, numerous real-life experiences have shown that this is often not the case.

The Internal Revenue Service (IRS), the nation’s tax collector, is a classic example of the harm that results from privatizing and weakening public infrastructure. In 2004, President G. W. Bush privatized the efforts to collect hundreds of billions of dollars owed to the IRS, claiming the private sector would do a better job. The private collectors brought in $86 million from the easy to win cases. The IRS then brought the work back in-house and its agents collected about $140 million in just a few months from more difficult cases that the private collectors had skipped over. This experience demonstrated that privatizing the collection of owed taxes was inefficient and a waste of money. [1]

Nonetheless, the Republicans persisted in slashing the budget, staff, and enforcement capacity of the IRS. From 2010 to 2018, the Republicans slashed the IRS’s budget by 20% and its staff by 22%. The number of audits of taxpayers with over $1 million in income dropped by 72% and money collected from audits dropped by 40%. Now, President Biden is proposing increasing funding for the IRS and its enforcement activities, which will more than pay for itself in increased tax collections. (See my previous post on the IRS for more details.)

Other examples of privatization that have been problematic include:

  • Privatized prisons and detention centers are less safe, less secure, and more costly than government-run facilities. (See my previous posts on this here and here.)
  • Disaster response to hurricanes Irma and Maria in Puerto Rico was privatized by the Federal Emergency Management Administration because of insufficient staff. The results were substantial delays in the delivery of critical supplies, cost overruns of $179 million, and another $50 million in questionable costs.
  • Paying bills, monitoring quality of care, and transmission of funds to states for Medicaid and Medicare have been privatized leading to a labyrinthian maze that is challenging to navigate when problems or questions arise.
  • Housing for refugees arriving at the Mexican border has been privatized resulting in an unresponsive amalgamation of contractor-run shelters.

With privatized services, quality problems and cost overruns are frequent, but it’s the government that gets blamed. A classic example is the problem with the Affordable Care Act (aka Obama Care) website rollout. The problems stemmed from the 62 contracts with private firms that were hired to build the website. The government’s failing, beyond perhaps the decision to privatize this work, was that it didn’t have the capacity to effectively manage this complex set of private contractors.

Good management and oversight of contractors requires time and skill, which costs money. Privatization deals rarely provide for this because the focus is on cutting costs. So, the government can end up with private contractors managing other contractors. Contractors also end up writing policies – that sometimes benefit themselves. Private employees under long-term contracts end up sitting in the same offices and doing the same work as government employees, often at significantly greater cost. Members of the public dealing with the government have no idea whether they are interacting with a government employee or a contractor, but if things don’t go well the government gets the blame.

The number and complexity of privatization arrangements and a lack of transparency about some of them (often very intentional) mean that the number of private, contracted personnel and their cost to taxpayers are impossible to accurately aggregate. The effectiveness and efficiency of their performance is also often impossible to determine.

Reversing the trend toward privatization will be difficult for multiple reasons, but partly because companies with federal contracts are active lobbyists and campaign contributors. A 2011 study found that of the 41 companies making the most in campaign contributions over the previous 20 years, 33 had federal contracts.

I encourage you to let your elected officials at all levels, particularly the federal and state levels, know that you support strong government infrastructure as an essential component of a well-functioning society. We need President Biden and Members of Congress to support the rebuilding of government infrastructure and capacity, and to oppose privatization of core government responsibilities. The importance of this has become particularly evident during the pandemic, when the capacity of government public health agencies was essential to keeping people safe, through everything from economic assistance to eviction moratoriums to the distribution of vaccines and personal protective equipment. As Bob Kutner wrote in a recent blog from The American Prospect, “Face it, the only way to keep relatively safe is to elect people to run the government who believe in the government, and who operate it competently and relatively free of corruption.” [2] In other words, the only way to have the effective government that we need is to have solid, well-run government infrastructure.

You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Kettl, D. F., & Glastris, P., 7/1/21, “Memo to AOC: Only you can save the government,” Washington Monthly (https://washingtonmonthly.com/magazine/july-august-2021/memo-to-aoc-only-you-can-fix-the-federal-government/) This blog post is primarily a summary of this article.

[2]      Kuttner, R., 7/2/21, “The Condo, the Inspector, the Market, and the Government,” Today on The American Prospect blog (http://americanprospect.activehosted.com/index.php?action=social&chash=61b4a64be663682e8cb037d9719ad8cd.839&s=6009966078bda0f5056f960a346ead8a)

WE NEED STRONG GOVERNMENT INFRASTRUCTURE

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Governments are critical components of our societal infrastructure. Effective governments are needed to deliver the services, supports, and public amenities that Americans want and need. As I noted in my last post, an important reason that massive unemployment insurance fraud occurred during the pandemic was that government infrastructure wasn’t up to the task of effectively administering expanded benefits. State computer systems and personnel didn’t have the capacity to accurately enroll and pay the wave of new beneficiaries. And law enforcement lacked the capacity to identify and punish fraudulent applicants.

For 40 years, small government advocates – mostly Republicans but with the acquiescence or assistance of many Democrats – have successfully pushed to shrink government infrastructure and capacity. President Reagan (a Republican) asserted in 1980 that government was the problem and not the solution – a claim that went unanswered by Democrats. This marked the beginning of a concerted effort by Republicans to downsize the federal government – except for the Defense Department – in terms of number of personnel, regulatory capacity and responsibility, provision of a safety net, emergency response and public health capacity, scientific and policy analysis expertise and data, etc. President Clinton (a Democrat) in 1992 declared the end of the era of big government and of welfare as we’d known it – supporting and furthering the weakening of government infrastructure.

One component of this attack on government infrastructure has targeted public employees, both to reduce their numbers and to denigrate them. One reason for this has been to discredit government by claiming that its employees are inefficient, incompetent, and overpaid. Another reason has been to undermine unions, which today are strongest in the public sector given the very successful efforts by corporatists and oligarchs to undermine private sector unions. (The percentage of private sector workers represented by a union has fallen to 20% of what it was 60 years ago – from over 30% to under 7%.)

Federal civilian employment is a little over 2 million, roughly the same as it was in 1966, despite a quintupling of federal spending and a population that has grown by 68%. The government has added agencies in that time such as the Environmental Protection Agency, the Department of Homeland Security, and the Department of Energy. In these new agencies and others, the government’s roles and responsibilities have grown and have also become much more complex. Nonetheless, the number of federal employees has not grown to meet these needs. Moreover, under the Trump administration, employment at the Department of Labor declined 11%, 9% at the State Department, and 8% at the Education Department, although their workloads were not declining. Scientists were a particular target of the Trump administration. For example, the Agriculture Department had 50% of its research jobs vacant under Trump. [1]

To maintain the services that Americans want and the functions government must perform (such as tax collection) with a limited number of federal employees has required a dramatic increase in the number of consultants and contractors working for the government. This has become big business for many companies including some of the well-known consulting companies such as McKinsey and Booz Allen. Booz Allen now gets 96% of its revenue from federal government contracts.

There are now over twice as many private contractors working for the federal government as there are employees. The Government Accountability Office has warned for years that the extensive use of contractors was eroding the government’s ability to govern, including the making of important policy decisions. President Obama worked diligently to reduce the number of contractors, having noted that they are “often unaccountable and often less efficient than government workers.” His administration succeeded in reducing the ratio of contractors to employees from 3.38 to 2.34. Trump reversed this trend and the contractor workforce grew by about 1.4 million people in his four years as President.

A 2010 study by the Project on Government Oversight examined 35 government job categories and found that for 33 of them government employees were less expensive than private contractors even when federal fringe benefits were included. For one job category, contractors were almost five times more expensive.

As a result of the weakening of the federal government’s infrastructure and the extensive use of privatization and contractors, the rate of highly visible failures of government services as risen from 1.6 per year in the 1980s to 4.3 during the Trump administration.

My next post will more closely examine the privatization of government functions and its effects.

Note: In addition to personnel, computer systems are another essential component of government infrastructure. Many government computer systems, at the federal and state levels, are out-of-date, if not antiquated, due to a lack of investment over the last 40 years. As a result, many government computer systems can barely perform essential functions, are difficult to update, and are unable to share data with other systems. This is a story for another day and another post or two.

[1]      Kettl, D. F., & Glastris, P., 7/1/21, “Memo to AOC: Only you can save the government,” Washington Monthly (https://washingtonmonthly.com/magazine/july-august-2021/memo-to-aoc-only-you-can-fix-the-federal-government/) This blog post is primarily a summary of this article.

CAUSES OF MASSIVE UNEMPLOYMENT INSURANCE FRAUD

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The massive unemployment insurance (UI) fraud that occurred during the pandemic was caused by a failure to invest in public infrastructure (broadly defined). Three types of public infrastructure were not adequate to accurately perform and police the distribution of enhanced unemployment benefits that were put in place due to the high job losses of the pandemic.

  1. States’ unemployment computer systems that pay out UI benefits are, in general, antiquated.
  2. Law enforcement capacity to detect and punish UI fraud is inadequate.
  3. Government regulation and oversight of Internet platforms, as well as detection and punishment of Internet-based criminals, has lagged far behind their explosive growth and sophistication.

The convergence of these three failures to invest in public infrastructure allowed as much as $400 billion in fraudulent UI claims to be paid – a staggering loss for taxpayers. This is perhaps the largest wave of fraud in U.S. history. Fraudulent claims for UI benefits occurred through:

  • The use of stolen identities,
  • The use of false identities, and
  • The filing of multiple claims for the same identity, usually in multiple states.

Warnings of weaknesses in states’ UI systems, which often use aging or obsolete technology, have been on-going since a 1998 federal Labor Department’s Inspector General’s report about the proliferation of UI fraud. In 2002, a subsequent report highlighted the use of stolen or fake identities to apply for UI benefits and the repetitious use of an identity across multiple states. A 2015 report, detailed systemic weaknesses that made states’ systems vulnerable to fraud. Both the Obama and Trump administrations proposed efforts to boost information sharing among states and with the federal government to reduce fraud, but Congress failed to enact their proposals. [1] Despite over 20 years of warnings, needed investments in this public infrastructure haven’t been made.

State funding for UI administration has fallen in recent years, in part because unemployment was low. At the start of 2020, as the pandemic hit, states’ funding for UI administration was at a 30-year low and states had cut funding to detect fraud. Federal regulations require states to cross-check UI benefit applicants against other state and federal databases to determine eligibility and to detect fraud. However, many of the states’ systems do not have the technological capability to do those cross-checks efficiently and electronically. Furthermore, the surge of UI claims during the pandemic overwhelmed the capacity of state systems from both a technological and a human resources perspective. As a result, 20 states did not perform all of the required cross-checks and 44 states did not perform all the recommended ones.

Budget cuts have also occurred at the federal level. Between 2012 and 2020, the number of criminal investigators at the Labor Department declined by 28%.

It is projected that from March 2020 to September 2021 (when enhanced federal UI benefits expire) roughly $1 trillion in UI benefits will have been paid out – which is done through state UI systems using state and federal funds. A very conservative estimate is that $100 billion of this will represent fraudulent payments and some experts think the number could be as high as $400 billion.

Multiple Internet platforms host forums and ads explicitly offering tips and techniques, often for a price, for obtaining UI benefits fraudulently. For example, the messaging app Telegram, hosted dozens of chat forums, some of which had thousands of participants, that provided state-specific instructions on how to file fake UI claims and how to avoid fraud detection efforts. These guides provided lengthy step-by-step instructions, with screenshots, on how to enter information. One Telegram user, with the handle “VerifiedFraud,” provided regular updates to his 1,300 chat room participants on how to file state-specific claims and avoid fraud detection as states enhanced their anti-fraud efforts.

In addition, these Internet sites also regularly offer stolen identities for sale. Ads would offer an identity for sale for $70 along with $200 for detailed instructions on how to use the information to defraud a specific state’s UI system. (Incidentally, the chats also reflected serious concerns about fraud by the sites, e.g., that the instructions purchased might not work.)

This UI fraud represents part of an explosion of Internet-based crime that has occurred over the past 25 years. Much of this criminal activity is based on the use of stolen or fraudulent identities, which are often used to file claims for public benefits. From 2010 to 2019, over 2,000 large-scale data breaches of business and government sites have occurred that have accessed 6.9 billion records with personal identities. In 2020, nearly 400,000 complaints of identity theft were reported, up from 13,000 in 2019. Law enforcement needs to be beefed up, both in capacity and sophistication, to reduce identity theft and Internet-based crime.

The scale of the UI fraud is truly mind-boggling. During the pandemic, the number of UI claims far exceeded the number of jobs lost. From March to December of 2020, the number of UI benefit claims was over 110 million while 38 million workers were out of a job or underemployed at the peak of the pandemic. (A small piece of this discrepancy is explained by the fact that if a person lost more than one job during this period, they could legitimately claim UI more than once.) In five states, the number of UI claims was larger than the entire civilian workforce. Maryland reported detecting 508,000 fraudulent UI claims in the six weeks from the beginning of May through mid-June of 2021. In Vermont, 90% of claims in some months were determined to be fraudulent. In Rhode Island, 43% of claims in March were suspected cases of fraud. California confirmed that 10% of its UI payments were fraudulent and it is investigating another 17%. In Washington State, auditors have identified 250,000 potentially fraudulent claims costing $1.1 billion.

The most fraud-prone piece of UI benefits was the federally funded Pandemic Unemployment Assistance (PUA) program, which funded 39 weeks of benefits for workers typically outside of UI systems such as self-employed individuals, “temporary” contractors, and gig workers. Congress did not require the normal verification of prior income and employment for the PUA program, so it was ripe for fraud. Pennsylvania estimated that 84% of its PUA claims were fraudulent and California found that 95% of its confirmed cases of fraud were PUA claims.

The Biden Administration is taking steps to reduce fraud in UI claims. The Labor Department’s Inspector General’s office is getting increased access to states’ UI payment date so they can more quickly and efficiently look for fraud. The $1.9 trillion coronavirus stimulus bill passed in March contains $2 billion to help states modernize their UI systems. There have been some prosecutions of individuals who are repeat offenders, often not just of UI fraud but also of tax and other fraud. Furthermore, a company called ID.me, which verifies claimants by having them submit pictures to match to those in identifying documents, has been hired by 27 states since mid-2020 and the Biden Administration is providing $1 billion to expand its services to other states. The experience with ID.me has highlighted the degree of fraud. In New York, new claims under the PUA program fell by 89% after ID.me was implemented in late March. Data from five states indicated that 50% of UI claimants did not respond when asked by ID.me to submit a picture to confirm their identity.

So, investments in this public infrastructure are being made – better late than never – to improve fraud detection and reduction in state UI systems and to enhance law enforcement. However, the regulation and oversight of Internet-based entities seems to be largely unaddressed. Although some platforms and sites have been shamed into taking some steps and shutting down some users by unfavorable publicity, this is not a long-term or efficient solution. The federal government needs to enhance its regulation and oversight of Internet-based entities whose explosive growth and sophistication resulted in massive fraud in the UI system during the pandemic.

[1]      Podkul, C., 7/26/21, “How unemployment insurance fraud exploded during the pandemic,” ProPublica (https://www.propublica.org/article/how-unemployment-insurance-fraud-exploded-during-the-pandemic) This blog post is primarily a summary of this article.

THE RADICALS ON THE SUPREME COURT STRIKE AGAIN

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The current “conservative” majority on the Supreme Court is actually a group of ideologically-driven, radical, judicial activists who have no intention of honoring precedents, despite their promises during confirmation hearings to do so. Although some of their radical precedent-breaking decisions get covered by the mainstream media, such as the recent voting rights case and the upcoming decision on pregnancy termination, many of them do not.

A recent Supreme Court case, known as Cedar Point Nursery vs. Hassid, involves the ability of union organizers to visit farms to talk to farm workers (as allowed under a 1975 California regulation). It’s a very significant decision that got very little attention in the mainstream media. A 1975 California regulation has required corporate farmers like Cedar Point (a 300-acre strawberry farm) to allow union organizers on its property to talk to workers for up to three one-hour periods on up to 120 days out of a year (one hour each before work, at lunch time, and after work to avoid interrupting work). Cedar Point sued claiming this was a government seizure of their property without compensation and was a violation of the Fifth Amendment (which states that “No person shall be … deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use without just compensation.”). Cedar Point claimed that this was a “taking” of its property because it is deprived of the “right to exclude” trespassers from its property, which, it claimed, is fundamental to true property ownership rights.

A lower court had ruled against Cedar Point, but it appealed to the Supreme Court. The Supreme Court ruled 6 to 3 in favor of Cedar Point, finding that the regulation was a “taking” of private property and therefore Cedar Point was entitled to compensation. The six radical “conservative” justices were the majority.

This ruling overturns important elements of a 1978 Supreme Court precedent. That ruling established a framework for evaluating whether a governmental restriction on personal property rises to the level of a “taking”. The framework’s criteria include the economic impact of the law or regulation and the extent of its interference with a business. The requirements of the California regulation specifically minimized these impacts and had been in place and operating since 1975.

This ruling has potentially far-reaching implications. For example, a property owner’s “right to exclude” is the argument segregationists used to defend their exclusion of Blacks from places of business and other private venues. By giving new life to this argument (which the Supreme Court rejected in 1964), Roberts and his six-justice majority are opening the door to a whole range of lawsuits against anti-discrimination laws. Sooner or later the argument will probably be made that preventing a business, a private club, or an employer from excluding men or women, pregnant women, people of color (POC), or LGBTQ+ people is a “taking” of property rights. Also, it may well be argued that fair housing laws are a “taking” because they limit landlords’ “right to exclude” people, such as POC, LGBTQ+ people, families with children, or renters with a low-income governmental housing subsidy. [1]

Furthermore, worker safety inspectors from the Occupational Safety and Health Administration (OSHA), food safety inspectors from the Department of Agriculture, and pollution inspectors from the Environmental Protection Agency could be banned from companies’ property unless the companies are compensated. Although some language in the decision written by Chief Justice Roberts would appear to allow these inspections without compensation, challenges to them are likely. The possibility of challenging endangered species laws that require landowners to protect a species’ habitat has already been raised and a challenge to anti-pollution regulations would seem to be possible as well under the Supreme Court’s redefinition of what constitutes a “taking”.

In the Cedar Point decision, the six radical “conservative” justices on the Supreme Court have again shown their willingness to toss aside well-established precedents and to prioritize the rights of property owners over the civil rights of individuals. This decision may well lead to a variety of challenges from property owners – including landowners, landlords, employers, and businesses – to laws and regulations that protect civil rights, the safety of workers and consumers, and the environment, including initiatives to counter global warming and climate change.

[1]      Mystal, E., 6/24/21, “Yesterday’s union-busting Supreme Court decision was a segregationist throwback,” The Nation (https://www.thenation.com/article/society/cedar-point-court/)

HOW THE RICH GET RICHER #4

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The inability of the Internal Revenue Service (IRS) to enforce tax laws has resulted in a high level of tax evasion by wealthy individuals and corporations. Some experts estimate that as much as $1 billion a year in taxes owed are not paid.

As the country’s tax collector and tax enforcer, the IRS has never been a popular agency among the public or politicians. However, the importance of the IRS’s work in enforcing tax laws, maintaining a fair and functional tax system, and collecting the revenue the government needs to operate had been broadly respected.

This changed when Republicans gained control of the U.S. House of Representatives and Newt Gingrich became the House leader in 1994. Republicans began vilifying the IRS and using “abolish the IRS” as a sound bite. Republican presidential candidates, including Sen. Lugar in 1996 and Sen. Cruz in 2016, made abolishing the IRS a central policy proposal. In 1998, Republicans introduced a bill in Congress to repeal the Internal Revenue Code (the country’s tax laws) and abolish the IRS. [1]

The Republicans have held congressional hearings on alleged abuses by the IRS. Despite the fact that in most cases investigations by the Government Accountability Office (GAO) and others have debunked the alleged abuses, the IRS’s reputation has been seriously undermined. This gave Republicans cover for passing laws weakening the IRS and its tax enforcement.

Beginning in 2010, Republicans in Congress undertook a multi-year initiative to cut the IRS’s budget and enforcement capacity. Since 2010 when its budget peaked at $14 billion, the IRS’s budget has been cut by about 20% (adjusted for inflation). Its staff has been cut by nearly one-quarter to 76,000 full-time employees and the number doing enforcement has fallen from 23,500 to 6,500, a 72% reduction. [2] It has the fewest auditors it has had since the 1940s and it has the oldest computer technology in the federal government.

The IRS recently announced a backlog of 35 million unprocessed tax returns, three times the number from a year ago and four times what it was in 2019. This means taxpayers have to wait longer for their refunds, payments from the Earned Income Tax Credit to low-income families will be delayed, and some transactions, like mortgage approvals, that require current income tax documentation will be delayed. It also revealed that only 3% of the calls to its most popular, toll-free hotline reach a real person. Despite its challenges, it has processed 137 million individual tax returns and sent refunds of more than $281 billion.

Tax obligations expire (i.e., become uncollectible) after ten years if the IRS doesn’t pursue them. In 2017, $8.3 billion of tax obligations expired, up from $482 million in 2010 (a 17-fold increase). Investigations of people who didn’t file a tax return have fallen from 2.4 million in 2011 to 362,000 in 2018 (down 85%). Similarly, collections from people who file but don’t pay have dropped dramatically. In 2017, the IRS conducted 675,000 fewer audits than in 2010, a 42% drop in the audit rate. The audit rate has dropped roughly 70% on those with incomes over $200,000 and but only about 40% for those with incomes under $200,000. This is a key contributor to increased tax evasion by the wealthy.

The impact of the IRS’s budget cuts has been exacerbated by substantial new responsibilities that it has been given under the Affordable Care Act and the response to the pandemic. In responding to the pandemic, the IRS has been tasked with distributing three rounds of relief payments, implementing changed rules on unemployment benefits and tax credits, and, most recently, sending out monthly checks to most families with children. With a significantly reduced budget and staff, it has been expected to do all of these things while trying to maintain its core business of processing tax returns. [3]

President Biden has proposed increasing the budget of the IRS by $40 billion over ten years to reduce tax evasion and generate revenue to help pay for infrastructure investments. He estimates that this increased IRS funding would raise government revenue by $140 billion over those ten years. The Congressional Budget Office (CBO) estimates added revenue of $103 billion and others have other estimates, but everyone agrees that increased enforcement would generate significant revenue. It would also make our tax system fairer by reducing tax evasion, which is largely done by wealthy individuals and corporations. However, it might well take five years to make the upgrades to the IRS’s computer systems and to hire and train the new staff needed to achieve these results.

Initially, the Republicans who were part of the bipartisan group of 21 Senators working on the infrastructure investment bill endorsed the increased funding for the IRS, but now they are backing away from it after hearing opposition from some of their wealthy backers.

Support for increased funding for the IRS has come from five former Secretaries of the Treasury, from both Republican and Democratic administrations. They state that increased funding for the IRS would “raise significant revenue and create a fairer, more efficient” tax system. [4]

The IRS and our income tax system depend, in large part, on the voluntary compliance and honesty of taxpayers. If taxpayers’ come to believe that the tax system is not fairly administered, voluntary and honest tax compliance is likely to decline. This could have dire implications for government revenue and for the IRS’s ability to do its job. It is important that the public believe that people pay the taxes the law says they owe. This encourages compliance with tax laws even if the overall perception is that the wealthy are not paying their fair share under our current tax laws. Then, the focus can be on making our tax laws fairer.

I urge you to contact your U.S. Representative and Senators and to ask them to support additional funding for the IRS so it can effectively enforce our tax laws. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

Please also contact President Biden and thank him for proposing increased funding for the IRS because this will mean it can more effectively implement our tax laws. You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Kiel, P., & Eisinger, J., 12/11/18, “How the IRS was gutted,” ProPublica and The Atlantic (https://www.propublica.org/article/how-the-irs-was-gutted)

[2]      Puzzanghera, J., 7/5/21, “Aggressive IRS could help with roads bill,” The Boston Globe

[3]      Stein, J., 6/30/21, “IRS faces 35 million unprocessed tax returns as backlog swells, watchdog says,” The Washington Post

[4]      Puzzanghera, J., 7/5/21, see above

TODAY’S VOTER SUPPRESSION IS HISTORY REPEATING ITSELF

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The efforts of states to suppress voting of Blacks (and other targeted groups that tend to vote for Democrats) are an historical repeat of what happened after the Civil War. These and other efforts that assert states’ power to restrict individuals’ rights are confronting the 14th Amendments’ provisions (from 1868) that give the federal government the power to protect individuals’ rights in the face of state efforts to deny them. Historian Heather Cox Richardson’s daily blog puts these current events in the perspective of our history, which is a very valuable insight to have.

The Declaration of Independence, when it stated “that all men are created equal,” meant white men. Nonetheless, this was a radical concept at the time – that no man’s birthright made him better than any other man. The Civil War was fought, in effect, to maintain a system that elevated America’s white men above African Americans, Native Americans, other men of color, and even Irishmen. As in the mid-1800s, we are now facing efforts that reject the principle of the equality of all human beings and seek to recast America as a country where certain people are better than others. These efforts are being led by white men for the most part, and are empowered by a relatively small group of wealthy white men (and a few women). [1]

In 1865, the 13th Amendment to the U.S. Constitution banned slavery in an important step toward equality. However, this did not stop white men in the South from working to establish systems that continued to make African Americans unequal and subservient to whites. These white men worked to deny African Americans the right to vote, to testify in court, and to sit on a jury. The infamous 1857 Dred Scott Supreme Court decision furthered this effort by denying citizenship to African Americans. The contorted opinion for the 7 to 2 decision was poorly reasoned and written by Chief Justice Roger Taney. These steps to institutionalize inequality occurred despite the fact that the 1870 Census would count African Americans as whole persons for the first time. Ironically, this would give the southern states more representation and power in Congress and in the Electoral College. [2]

To counter efforts to keep African Americans subservient, in July 1868, the 14th Amendment was passed, declaring that “All persons born or naturalized in the United States … are citizens of the United States and of the State wherein they reside.” It guaranteed all citizens due process and equal protection under the law. To counter white southern men’s and the Dred Scott case’s assertion of states’ rights to write laws that determined who could vote, among other things, the 14th Amendment gave the federal government the power to protect individuals’ rights when state legislatures passed laws that were discriminatory and infringed on those rights.

Nonetheless, two months later in September 1868, the Georgia legislature voted to expel the 33 newly elected African American state legislators. In 1870, with African American voting reduced by the terrorism of the Ku Klux Klan, African Americans were not elected. Similar events took place in other southern states. [3]

In response, the federal Department of Justice was created in 1870 with a primary mission of stopping the Ku Klux Klan (KKK) and its suppression of the rights and voting of African Americans. The KKK was a domestic terrorist group then as it is today.

In February 2021, Black legislators in Georgia opposed proposed voting restrictions noting that they reminded them of the 1870s when Jim Crow laws and lynching were used to deter African Americans from voting. Nonetheless, Georgia legislators passed the voting restrictions. Although the means have changed, they are still presented as supposedly race-blind restrictions. However, the fact that white men (for the most part) are rewriting the rules of our democracy to protect white power is unchanged. Similar actions are taking place in other states, not all of which are in the South.

There are striking similarities between the voting suppression efforts of the late 1800s and what’s happening today. For example, in 1890, the U.S. House of Representatives passed a bill empowering the federal government to oversee voter registration, voting, and ballot counting in the South. Then, Senate Democrats blocked its passage by staging the first of many southern-led filibusters that killed civil rights legislation.

The civil rights laws and court decisions of the 1950s, 1960s, and 1970s are based on the 14th Amendment giving the federal government the power to protect individuals’ rights. For example, the Brown vs. Board of Education decision that outlawed public school segregation and separate but supposedly equal treatment of Blacks, and the Loving vs. Virginia decision legalizing inter-racial marriage, were possible because of the 14th Amendment.

Opponents of civil rights laws and decisions revived the post-Civil War states’ rights arguments in the 1960s and 1970s. They began advocating for “originalism” in interpreting the Constitution when making court decisions. “Originalism” asserts that the Constitution should be interpreted as its writers envisioned it at the time they wrote it and that this would mean much stronger state governments and a weaker federal government, including in the establishment and enforcement of individuals’ rights.

In 1987, President Reagan nominated an “originalist,” Robert Bork, to become a Supreme Court Justice. He was rejected on a bipartisan basis. Bork had advocated for a rollback of Supreme Court civil rights decisions and of federal protections of individuals’ rights under the 14th Amendment. As Senator Ted Kennedy pointed out, rolling back such protections would not only raise the specter of re-segregation, but also the reduction of women’s rights to reproductive health services, citizens’ protections from rogue police officers, the teaching of evolution in schools, protection from censorship, and other individual rights.

Nonetheless, today’s Supreme Court is dominated by “originalists” and the individual rights protections of the 14th Amendment for voting, women’s and LGBTQ people’s health services, and the teaching of factual material, for example, are again being challenged by state governments, led mostly by white men.

On July 1, 2021, by a 6 to 3 vote, the Supreme Court decided that the state of Arizona did not violate the 1965 Voting Rights Act or the 14th or 15th Amendments with voting restrictions that disproportionately affect non-white racial or ethnic groups. President Biden stated that this “decision by the Supreme Court undercuts voting rights in this country and makes it all the more crucial to pass the For the People Act and the John Lewis Voting Rights Advancement Act to restore and expand voting protections. … Our democracy depends on it.” [4] However, to pass these bills, which have already passed in the House, the Senate will have to either eliminate or limit the use of the filibuster to block them. The Republicans have made it clear that they have no intention of providing any support for these bills.

I urge you to contact your U.S. Senators and ask them to support the For the People Act and the John Lewis Voting Rights Advancement Act, and to support eliminating or limiting the filibuster as the only way to pass these bills. The protections for voting rights in these bills are critically important to our democracy. You can find contact information for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

Please also contact President Biden and ask him to support eliminating or limiting the filibuster as the only way to pass these bills that he’s said our democracy depends on. You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Cox Richardson, H., 7/3/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/july-3-2020-bad)

[2]      Cox Richardson, H., 7/9/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/july-9-2021)

[3]      Berman, A., 6/2/21, “Jim Crow killed voting rights for generations. Now the GOP is repeating history,” Mother Jones (https://www.motherjones.com/politics/2021/06/jim-crow-killed-voting-rights-for-generations-now-the-gop-is-repeating-history/)

[4]      Cox Richardson, H., 7/1/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/july-1-2021)

HOW THE RICH GET RICHER #3

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The Internal Revenue Service’s webpage on Individual Retirement Accounts (IRAs) says, “IRAs allow you to make tax-deferred investments to provide financial security when you retire.” However, they allow the wealthy to do much more.

When IRAs were first created in 1974 and then expanded to all workers in 1981, the goal was to encourage saving for retirement by offering a tax incentive, given that Americans were notoriously bad at saving. Initially, the maximum annual contribution was $2,000. It’s now $6,000 or $7,000 if one is over 50. The contribution can be deducted from one’s income, so it isn’t taxed up-front. Tax on the increased value of the investments in the IRA is deferred until the money is removed from the IRA. Money had to be taken out of the IRA starting at 70 ½ years of age (now 72) at a rate the would be expected to deplete it within the lifespan of the owner of the IRA. All earnings and any contributions that had been deducted from income up-front are subject to income tax, which for most taxpayers will probably be at a low rate due to lower income in retirement than when working. This all made good sense and was good policy.

Then came the Roth IRA in 1997. Contribution limits were the same as for the traditional IRA, but the contributions were subject to income tax up-front. However, when money is taken out of a Roth IRA there is NO income tax due on the increased value of investments nor on the contributions. There also is no requirement that money be taken out in one’s lifetime.

The wealthy and their tax / financial advisers quickly recognized that this was a huge opportunity for tax avoidance. It’s clear that some policy makers were aware of this and had no problem with it; in some cases, it may have been their intent. As a further example of how tax policy in general and Roth IRA policies specifically favor the wealthy, if a U.S. citizen renounces their citizenship they are taxed on the value of their assets, including ones that have increased in value even if they have not been sold. However, there are exemptions from the tax for certain kinds of assets, one of which is assets in a Roth IRA! [1]

ProPublica’s investigative reporting on how the wealthy pay very little in income taxes, perfectly legally, while their wealth is growing by leaps and bounds, [2] has also revealed how extensively Roth IRAs are being used for tax avoidance. Their reporting reveals that, among others, investors Warren Buffett and Ted Wechsler of the Berkshire Hathaway fund, Randall Smith of the Alden Capital hedge fund, Robert Mercer of the Renaissance Technologies hedge fund, and Peter Thiel and Max Levchin of PayPal all have Roth IRAs with hundreds of millions of dollars in them. [3]

Clearly, these mega-million-dollar Roth IRAs have nothing to do with saving for retirement and everything to do with avoiding taxes. Thiel has $5 billion in his Roth IRA. He and all the others will pay NO taxes on any money they take out of their Roth IRAs. Keep in mind that these huge IRA balances have supposedly come from contributions of a few thousand dollars a year. The huge gains on the investment of those small contributions will be subject to NO income (or other) tax when they are removed from the Roth IRAs. By the way, Thiel renounced his U.S. citizenship in 2011, allowing him to take advantage of this exemption from taxation for Roth IRA assets. (He became a citizen of New Zealand, which happens to have no estate tax.)

Recognition of the abuse of Roth IRAs for tax avoidance is not new. Forbes magazine and others have written about it since at least 2012. Senator Wyden proposed legislation to reform Roth IRAs in 2016, but it went nowhere in the Republican-controlled Senate. Simple policy changes could address the problem. For example, the dollar amount of investment gains in Roth IRAs that are exempt from taxation could be limited, to say a few million dollars. And the exemption of these gains from taxation could end when the account owner dies instead of allowing them to be passed on tax-free to heirs. [4]

One strategy for creating huge IRA balances is to put knowingly under-valued assets into them. When Thiel contributed 1.7 million shares of the company that would become PayPal into his Roth IRA in 1999, he claimed that they were only worth one-tenth of a cent per share ($0.001 per share). (They were not publicly traded at the time so a fair market value was subject to interpretation.) This meant that his contribution was under the $2,000 limit in place at the time. PayPal later admitted that this per share value was “below market value.” The shares are now worth billions.

Senator Wyden’s 2016 Roth IRA reform proposal would have addressed the problem of under-valuing assets contributed to an IRA by removing the tax exemption of any IRA that received an asset for less than fair market value. Others have proposed requiring IRAs to only receive assets that are traded on a public market so their true value is clearly established.

The financial industry opposes reforms to Roth IRAs because they make significant money from them by acting as custodians for IRAs (and other retirement accounts) and by processing the transactions that these accounts generate.

The IRA was originally designed to enhance the retirement security of working Americans, but it has become another way for the wealthy to avoid paying taxes, even when passing their wealth on to their heirs. Note that there are other types of retirement savings vehicles that also provide tax avoidance and other benefits to the wealthy. “Retirement” savings policies are one example of how the wealthy have gotten elected policy makers to tip the economic playing field in their favor. This is oligarchy in America. (Oligarchy “refers to a government of and by a few exceedingly rich people or families who control the major institutions of society and therefore have power … no one should be fooled. Oligarchs wield power for their own benefit” as Robert Reich writes in his latest book, The System: Who rigged it, how we fix it. (See my previous posts summarizing the book starting here.)

I urge you to contact your U.S. Representative and Senators and to ask them to support reforms that would end the abuse of retirement savings accounts by the wealthy. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

Please also contact President Biden and ask him to support reform of retirement savings accounts. You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Elliott, J., Callahan, P., & Bandler, J. 6/25/21, “The ultrawealthy have hijacked Roth IRAs. The Senate Finance Chair is eyeing a crackdown,” ProPublica (https://www.propublica.org/article/the-ultrawealthy-have-hijacked-roth-iras-the-senate-finance-chair-is-eyeing-a-crackdown)

[2]      Eisinger, J., Ernsthausen, J., & Kiel, P. 6/8/21, “The secret IRS files: Trove of never-before-seen records reveal how the wealthiest avoid income tax,” ProPublica (https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax)

[3]      Lord, B., 6/29/21, “Peter Thiel will pay zero in federal income tax on his $5 billion in gains,” Common Dreams (https://www.commondreams.org/views/2021/06/29/peter-thiel-will-pay-zero-federal-income-tax-his-5-billion-gains)

[4]      Elliott et al., 6/25/21, see above

THE CASE FOR A WEALTH TAX

Note: I apologize for the infrequent blog posting. I’m on sabbatical with out-of-town grandchildren visiting.

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Recent revelations about how little federal income tax the ultrawealthy pay and how they legally avoid income tax liability make the case that a wealth tax is essential for a fair tax system. A fair tax system is necessary a) to provide sufficient funds for the public programs needed to serve the public and the public good, and b) to preserve public support for the tax system.

ProPublica, an independent, nonprofit newsroom that does investigative journalism in the public interest, has obtain and analyzed 15 years of data on the tax returns of thousands of the country’s wealthiest households. Its analyses show the wealthy pay very little in income taxes, perfectly legally, despite the fact that their wealth is growing by leaps and bounds. [1] (This post is largely a summary of this ProPublica reporting.)

The median American household earns about $70,000 a year and pays about 15% of this in income taxes. For the period from 2014 to 2018, a typical middle class American household paid a total (for these five years) of about $62,000 in federal income tax on total earnings of around $350,000. Meanwhile, its wealth, primarily the value of its home, grew by $65,000. Its effective tax rate on the combine total of earned income and increase in wealth was about 15%.

ProPublica’s detailed analysis of the 25 wealthiest Americans found that collectively their wealth increased by $401 billion in the five-year period from 2014 to 2018. Their earned income was tiny by comparison. They paid an aggregate total of $13.6 billion in federal income taxes. Their effective tax rate on the combined total of their earned income and increase in wealth was about 3.4% (versus the 15% paid by a typical middle-income taxpayer).

Another analysis found that in 2018, in comparison to their wealth, a typical middle-income household paid 75 times as much in income tax as those 25 ultrawealthy Americans. At the end of 2018, the 25 wealthiest Americans had an estimated wealth of $1.1 trillion and in 2018 paid federal income taxes of $1.9 billion. It would take 14.3 million typical American households to have this much wealth and those 14.3 million households paid federal income taxes of $143 billion in 2018.

This disparity in income tax paid when wealth is factored in is the result of a 1920 Supreme Court decision where the Court ruled that the income tax laws as written apply only to income received in cash and not to an increase in wealth (i.e., the value of assets), unless assets are sold and cash (or other forms of proceeds) are received. Before this decision, the income tax had applied to increases in wealth.

This decision provided the wealthy with a huge loophole for tax avoidance. The ultrawealthy own billions of dollars worth of stock, often in companies they own or control. The 25 wealthiest Americans have seen the value of their stocks skyrocket in recent years. To minimize earned income (and income tax), they often take modest salaries from their companies; some take salaries of only $1.

Some of the ultrawealthy avoid having income (and therefore paying income tax) because they are able to pay their living expenses by borrowing large sums of money, sometimes billions of dollars, using their stock wealth as collateral for loans. These loans are not considered income and therefore are not subject to income tax. Furthermore, the interest on the loans is often tax deductible and can be used to offset (i.e., cancel out) income, reducing or eliminating taxable income and the amount of income tax owed.

The wealthy often avoid income tax by reducing taxable income with deductions. Deductions can be losses on various investments or business ventures, such as real estate or sports teams. Charitable contributions are another deduction that reduces taxable income. And, of course, if they do sell some of their stock or other assets, the profits on those sales, as well as the dividends and interest they get from their investments, are unearned income, which is taxed at a lower rate than earned income (if it isn’t eliminated by deductions).

The wealthy have gotten these tax breaks (and others) written into U.S. tax laws through their spending on and donations to the political campaigns of many of our elected officials, as well as through their lobbying of elected and appointed officials. (See my previous posts on how the U.S. tax system favors the rich and what can be done to make it fairer.)

The degree to which the wealthy control the debate on tax policy is reflected in the fact that the current tax reform proposals from President Biden would have little impact on the wealthy. Nonetheless, these tax reform proposals are reported as being big and controversial changes in our income tax laws. One proposal is to raise the income tax rate on high earned incomes back to 39.6% from 37%. (For perspective, it was over 90% in the 1950s and 70% in 1980.) This would have little effect on the wealthy because only a small portion of their income is earned income and this is a small percentage increase. A second proposal, would make the income tax rate on unearned income (e.g., dividends and the gain on the sale of assets) the same as the higher rate on earned income. This would have more of an effect on the wealthy, but little effect on the ultrawealthy that ProPublica analyzed in detail as they rarely sell their assets or they have deductions that reduce or eliminate their taxable income.

The failure of the wealthy in America to pay their fair share in taxes harms our country in two main ways. First, government is under-funded and can’t do the things we need it to do – from maintaining and building infrastructure, to investing in human capital, to maintaining a just and sufficient safety net for those who fall on hard times, to building and maintaining a public health system that can save lives during a pandemic or other health crisis. Second, taxes are citizens’ collective contributions to having a civil society and supporting the public good. Such a system is viable only if citizens believe it is fair and everyone is contributing their fair share.

ProPublica’s investigative reporting on the U.S. tax system is performing a valuable public service. An informed debate about our tax system and the design of policies for a fair system can only happen if there is good data and an accurate picture of how the tax system is working.

These data and the picture they paint make it clear that the only way to have a truly fair tax system is to tax wealth (as Senators Warren and Sanders have proposed) or to tax increases in wealth as income even if assets are not sold and no cash or other proceeds are received (i.e., to tax unrealized capital gains).

I urge you to contact your U.S. Representative and Senators and to ask them to support a tax on wealth or increases in wealth as the only way to make our tax system fair. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

Please also contact President Biden and ask him to support a tax on wealth or increases in wealth, in addition to his current proposals, as such a tax is essential to making our tax system truly fair. You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Eisinger, J., Ernsthausen, J., & Kiel, P. 6/8/21, “The secret IRS files: Trove of never-before-seen records reveal how the wealthiest avoid income tax,” ProPublica (https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax)

REGULATION OF THE FINANCIAL INDUSTRY IS BADLY NEEDED Part 2

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

My previous post made the case for strong regulation of the financial industry to protect consumers with a strong Consumer Financial Protection Bureau (CFPB). The financial industry needs strong regulation because it has repeatedly shown that without regulation it will rip off consumers and engage in practices that put our economy and our whole financial system at-risk.

In addition to the Trump administration’s weakening of the CFPB and other regulation of the financial industry, pro-business judicial decisions have also weakened consumer protections from abusive financial industry practices. However, Congress can restore these consumer protections through appropriate legislation.

First, the Supreme Court ruled that the Federal Trade Commission (FTC) cannot seek monetary compensation for consumers defrauded by payday or other short-term lenders. The Consumer Protection and Recovery Act has been introduced in Congress and would make it clear that the FTC can seek financial compensation for these consumers. [1]

Second, the Comprehensive Debt Collection Improvement Act would strengthen a variety of protections for borrowers that were weakened by judicial decisions. For example, it would limit email and other electronic harassment by debt collectors and restrict abusive practices by medical debt collectors.

Finally, the Non-judicial Foreclosure Debt Collection Clarification Act would regulate any business involved in home foreclosures without a judge’s authorization as a debt collector under the Fair Debt Collection Practices Act. In 30 states and D.C., lenders can foreclose and repossess a home without going to court and getting a judge’s ruling. A Supreme Court ruling limited home owners’ rights in these states. This legislation would give these home owners the protections of the Fair Debt Collection Practices Act.

The Securities and Exchange Commission (SEC) is an independent federal regulatory agency responsible for protecting investors and maintaining the fair and orderly functioning of securities markets. It works to ensure full public disclosure of information so all investors are on an equal footing. To that end, it works to prevent, identify, and punish insider trading, where some people have information that is not available to the general public and therefore have an unfair advantage in making decisions about buying and selling securities. [2]

Classic insider trading was in the news a year ago. Some members of Congress, who had received private, closed-door briefings on the coronavirus, made substantial stock market trades that appeared to be informed by this non-public information. Similarly, some executives of firms working on coronavirus vaccines, who had knowledge of the progress of their vaccine development that was not public, made substantial stock market trades that appeared to be informed by this non-public information. There were also situations where an insider shared non-public information with an outsider who then appears to have made investment transactions based on this non-public information.

However, there is another type of insider trading that may be more insidious – using sophisticated computers to make large trades moments before other trades that are in the pipeline are executed and become public knowledge. This is referred to as “front-running” and is a systemic problem in securities markets. It allows those with these sophisticated computer systems to make profits at the expense of everyone else who’s buying and selling securities.

Although the SEC has the power to address these problems under existing laws, it has failed to stop these practices which unfairly disadvantage run-of-the-mill buyers and sellers of securities.

The SEC is also charged with preventing large-scale speculation, particularly with borrowed money, that puts banks and financial corporations at-risk of bankruptcy if a large speculative investment goes bad. This is exactly what caused the 2008 financial collapse. This type of systemic risk is substantial today in large part because the financial industry has created “investments” that are called derivatives – financial instruments that are derived from or based on other financial instruments. In 2008, for example, the core problem was derivatives based on home mortgages. These were packages of home mortgages, and portions of them (e.g., the interest and principal portions of payments), and speculation on how interest rates would change, etc. These and many other derivatives are hard for most investors to understand, can be very volatile, are hard to put a value on, are hard to regulate, and it’s almost impossible to predict how they will perform as an investment. Therefore, investing in them is basically gambling and the securities market for them is basically a casino.

The laws and regulations that were put in place after the 2008 collapse to prevent a recurrence have been watered down or unenforced to the point that many experts believe we are likely to see a repeat of that collapse, and possibly a worse one. The largest 40 banks across the world are larger than ever and so interconnected through derivative “investments,” loans, and other financial transactions, that governments would have no choice but to bail them out again to prevent a total collapse of the financial system if any piece of this complex, opaque, and highly speculative financial casino were to crash in value.

I urge you to contact your U.S. Representative and Senators and to ask them to support strong, effective regulation of the financial industry through federal agencies such as the Federal Trade Commission and the Securities and Exchange Commission. Consumers and our financial markets need to be protected from the no-holds-barred greed and hubris of those in the financial industry. The consistent, aggressive, and risky practices across the financial industry, including by its largest corporations, require no less. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

Please also contact President Biden and ask him to appoint individuals who will implement strong regulation of the financial industry at the Federal Trade Commission, the Securities and Exchange Commission, and other federal agencies. This is important because Biden has not always supported strong regulation of corporations and the financial industry. He is from Delaware, which is the legal home of many U.S. corporations because of its lax regulation of corporations. You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Cohen, R. M., 4/27/21, “Congress looks to judicial overrides to strength consumer protections,” The Intercept and The American Prospect (https://theintercept.com/2021/04/27/supreme-court-ftc-consumer-debt/)

[2]      Turner, L., & Kuttner, R., 2/18/21, “The financial reforms we need,” The American Prospect (https://prospect.org/economy/financial-reforms-we-need-lynn-turner-interview/)

REGULATION OF THE FINANCIAL INDUSTRY IS BADLY NEEDED

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The financial industry needs strong regulation because it has shown time and time again that without regulation it will rip off consumers and engage in practices that put our economy at-risk. Apparently, greed and hubris are endemic in the financial industry – from the CEOs on down. However, many Members of Congress resist strong regulation because of the campaign money they get from the industry. In addition, some members of the Executive Branch have opposed strong regulation of the financial industry, particularly those who have come through the revolving door from the industry.

Enforcement of existing regulations was quite lax under President Trump’s administration and needs to be strengthened. Furthermore, new regulations are needed to rein in problems that weren’t previously addressed and ones that have newly cropped up. The industry is always inventing new ways to circumvent regulations and developing new, risky, financial transactions. It remains to be seen whether President Biden and the Democratically controlled Congress will implement strong regulation of the financial industry.

Federal regulators asked the financial industry to forego overdraft fees because of the financial hardships of the pandemic. Despite this, the industry collected $4 billion in overdraft fees from consumers during 2020. JPMorgan Chase alone collected almost $1.5 billion in overdraft fees, which contributed to its $29 billion in 2020 profits. Overall, the financial industry collected $17 billion in overdraft fees in 2019. Clearly, regulation is needed of overdraft fees and the circumstances in which they are charged. Both have been the subject of abuse by financial corporations.

To protect consumers from abusive financial industry practices, the Consumer Financial Protection Bureau (CFPB) needs to be powerful and aggressive. It was created in the aftermath of the 2008 financial collapse, which revealed huge fraud by the financial industry in the home mortgage market. The lack of any agency focused specifically on protecting the public from abusive financial practices was a key contributing factor. However, the financial industry has lobbied hard to weaken the CFPB. As a result, both Republicans and Democrats in Congress and many in the Executive Branch, particularly under President Trump, have worked to weaken the CFPB.

As an example of lax enforcement under President Trump, the CFPB recovered just $700 million for consumers in 2020, down from $5.6 billion in 2015. Meanwhile, consumer complaints to the CFPB rose to record levels in 2020. In the four years of the Trump administration, the CFPB recovered an annual average of less than $600 million for consumers, while under President Obama it had recovered an average of $2.1 billion a year, three and a half times as much. Furthermore, under Trump the focus was on small firms rather than the major financial industry corporations. [1]

Fortunately, the Consumer Financial Protection Bureau is being revitalized under President Biden and will:

  • Enforce legal protections for debtors, including renters behind on their rent and student borrowers, while limiting abusive debt collection practices,
  • Strengthen regulation of payday lenders, including requiring them to assess a borrower’s ability to repay a loan,
  • Strengthen regulation of overdraft fees, and
  • Seek systemic change in the industry not just penalties for individual cases.

Wells Fargo is one of the notoriously bad actors in the financial industry. For example, in 2016 it admitted to creating millions of unauthorized accounts for customers to meet high sales and revenue targets. This led to the resignation of CEO John Stumpf, who was replaced by Tim Sloan, the bank’s president and chief operating officer. Sloan, four months earlier, when the fake accounts scandal was well known and had been going on for years, said in an interview that Wells Fargo’s aggressive sales tactics were appropriate and were not going to change. After Sloan took over as CEO, the bogus accounts scandal worsened and Wells Fargo also admitted to fraud in other business areas from car insurance to mortgages, as well as using faked customer signatures to satisfy anti-money laundering rules. Regulators imposed fines and took the dramatic step of prohibiting Wells Fargo from growing its business. [2]

When CEO Sloan left Wells Fargo in March 2019, he had been paid $40 million in his 2 ½ scandal-laden years as CEO and tens of millions of dollars in his previous 30 years at Wells Fargo. Now, he wants to collect another $20 million in deferred compensation. Government regulators could block this compensation under a law allowing them to limit “golden parachute” payments to senior executives who were involved in illegal activity at a financial institution. Whether they will do so remains to be seen.

I urge you to contact your U.S. Representative and Senators and to ask them to support strong regulation of the financial industry and a strong Consumer Financial Protection Bureau. Consumers and our economy need to be protected from the no holds-barred greed and hubris of those in the financial industry. The consistent, repeated fraud and risky practices across the financial industry, including by its largest corporations, requires no less. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

Please also contact President Biden and ask him to appoint individuals who will implement strong regulation of the financial industry and to fully support Rohit Chopra, the strong regulator he has nominated to lead the Consumer Financial Protection Bureau. (Confirmation is pending in the Senate.) This is important because Biden has not always supported strong regulation of corporations and the financial industry. He is from Delaware, which is the legal home of many U.S. corporations because of its lax regulation of corporations. You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Newmyer, T., 1/28/21, “CFPB muzzled under Trump, prepares to renew tough industry oversight,” The Boston Globe from the Washington Post

[2]      Rucker, P. 3/10/21, “Bank regulator could block disgraced ex-Wells Fargo CEO from $20 million payout,” The American Prospect (https://prospect.org/power/bank-regulator-could-block-disgraced-ex-wells-fargo-ceo-from-payout/)

OPPOSITION TO “SOCIALISM” IS A DOG WHISTLE FOR RACISM

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

As I imagine you’ve heard, Republicans are attacking President Biden’s and Democrats’ policy proposals as “socialism.” I thought, naively, that Republicans were just trying foster opposition based on Cold War fears by conflating socialism with communism and identifying it as the existential threat to American democracy.

Heather Cox Richardson, with her historical perspective, has opened my eyes to the fact that the opposition to “socialism” has deeper roots in our history and is a dog whistle for racism. (If this use of the term dog whistle is new to you, please see this footnote. [1])

First, socialism is formally defined as an economic and political system where workers own the means of production (e.g., factories, farms, and organizations that provide services as well as the raw materials, machines, tools, and physical facilities used in producing goods and services). This is NOT, by any stretch of the truth, what Biden and Democrats are proposing. Socialism recognizes workers as the essential input to the economy and, therefore, posits that they should own the means of production and be the beneficiaries of the fruits of the economy.

Social democracy, on the other hand, is a political and economic system where a democratic government manages and regulates capitalism (i.e., private ownership of the means of production) to ensure social and economic justice. In our democracy, the government’s commitment to social and economic justice for all is stated in our founding documents – that all people are created equal, that all people should be guaranteed life, liberty, and the ability to pursue happiness, and that all people have the rights delineated in the Bill of Rights.

The explicit recognition that equal opportunity and true freedom require economic security was stated by President Franklin D. Roosevelt in his proposal for an economic bill of rights [2] and by Senator Bernie Sanders in his statements on what democratic socialism means to him (although technically speaking, he was describing social democracy and not democratic socialism). [3] [4] (See this footnote for a definition of democratic socialism and communism. [5])

Currently, Republicans are using “socialism” as a dog whistle to mean the use of government resources to promote racial equity and justice. Their dog whistle definition of “socialism” is the use of taxes paid by hardworking white men (and women) to benefit lazy people of color who are happy to live on government benefits. Today’s Republicans claim this “socialism” will undermine American democracy and freedom. The dog whistle is that these policies will undermine the “freedom” and privilege of white people.

This use of “socialism” goes back to 1871 when southern Democrats claimed they opposed voting by Blacks, not due to racism, but because Black voters would elect policy makers who would promote “socialism,” i.e., taxing white property owners to pay for roads, schools, and hospitals that would benefit Blacks. [6] They argued that Black voting would lead to “socialism” that would destroy America (namely the America of white supremacy). [7] [8]

After the Brown v. Board of Education decision in 1954, which found racial segregation in public schools unconstitutional, the use of government resources to enforce desegregation and civil rights was attacked as “socialism” because the costs of implementing desegregation and civil rights (for “undeserving” Black people) would be paid for by taxes on hardworking white men (and women). In 1958, Republican Senator Barry Goldwater accused his own party’s President Eisenhower of succumbing to “the siren song of socialism” for his use of government resources (troops) to enforce desegregation of Little Rock, Arkansas, High School. The irony was that the Goldwater family had made its money from government funding for dam construction in Arizona. [9]

Republican attacks on government, on a public safety net, and on beneficiaries of public assistance (inaccurately stereotyped as people of color) took on new strength and significance with the election of President Reagan in 1980. Remember Reagan’s attack on the mythical “welfare queen” with her Cadillac and mink coat? The attacks on “socialism” as a dog whistle for racism have only escalated since then.

Today, Republicans are vigorously charging that President Biden and Democrats are working to bring “socialism” to America. They claim that a no-holds-barred fight is necessary to save American from “socialism.” They are even willing to dispense with a commitment to democracy to “save” America. This disregard for democracy dates to at least 1980 when Republican strategist Paul Weyrich stated, “I don’t want everybody to vote …our leverage in the elections quite candidly goes up as the voting populace goes down.” That’s why Republicans have been and are actively engaged in voter suppression efforts. (Weyrich was a co-founder of the Heritage Foundation, which today is deeply involved in promoting state voting suppression laws and with the “audit” of voting in Arizona and elsewhere.) In October 2020, Utah Senator Mike Lee tweeted, “Democracy is not the objective … liberty, peace, and prosperity are. … democracy can thwart that.” [10]

Republicans are claiming today, as white southern Democrats did after the Civil War, that keeping “socialism” from coming to America requires keeping Black and other likely Democratic voters from voting; democracy, our Constitution, and our founding principles (which make America exceptional) be damned. The racism of the post-Civil War white Democrats’ attacks on “socialism” was made clear by the brutal Jim Crow laws they implemented to keep Blacks in their place and to prevent them from voting.

The implications of today’s Republicans’ claims of needing to prevent “socialism” in America aren’t completely clear, but civil rights, police reform, and social and economic justice are definitely targets. However, the racism behind their attacks on “socialism” is clear and these attacks should no longer be a dog whistle; every American should hear the racism in their attacks on “socialism” loudly and clearly.

[1]      The term dog whistle here is a political adaptation of the fact that a dog whistle can’t be heard by humans but can be heard by dogs. In politics, it refers to language that will be heard as supporting white privilege and supremacy by those people attuned to such sentiments, but won’t be heard by many other people as being racist and where the politician opposing “socialism” – or using other dog whistles – can deny racist intent.

[2]      President Franklin Delano Roosevelt, 1/11/44, “The economic bill of rights,” retrieved from the Internet 5/22/21 at https://www.ushistory.org/documents/economic_bill_of_rights.htm

[3]    Senator Bernie Sanders, 11/19/15, “Senator Sanders on Democratic Socialism and Defeating ISIS,” retrieved from the Internet 5/22/21 at https://www.c-span.org/video/?400961-1/senator-bernie-sanders-address-democratic-socialism (Sanders begins speaking at 8 mins., defines socialism at 12 mins., and presents his and FDR’s vision at 30 mins. into this 1 hr. 40 min. video)

[4]    Golshan, T., 6/12/19, “Bernie Sanders defines his vision for democratic socialism in the United States,” Vox (https://www.vox.com/2019/6/12/18663217/bernie-sanders-democratic-socialism-speech-transcript)

[5]     Democratic socialism is socialism where both the economy and society are governed democratically, with decision making by citizens with a focus on economic and social justice. Democratic socialism is not compatible with capitalism, which is based on private ownership of the means of production and, therefore, where the benefits, economic and also social and political power, flow to the owners of capital, i.e., the owners of physical and monetary assets.

Communism is formally defined as an economic and political system where the workers own the means of production and that is dedicated to equality for all, implemented through an authoritarian government. The main difference between communism and socialism is that socialism is compatible with democracy and liberty, while communism requires authoritarianism and denies basic individual liberties.

[6]      Cox Richardson, H., 4/19/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/april-19-2021)

[7]      Cox Richardson, H., 5/14/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/may-14-2021)

[8]      Cox Richardson, H., 1/16/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/january-16-2021

[9]      Cox Richardson, H., 4/19/21, see above

[10]     Cox Richardson, H., 5/14/21, see above

KEEPING THE RICH FROM GETTING EVEN RICHER

The rich have been getting dramatically richer, generally at the expense of the rest of us, for the last 40 years. My previous post identified four ways the U.S. tax system favors the rich:

  • Lower tax rates on the types of income (i.e., unearned income) that are prevalent among the wealthy,
  • Weak enforcement of tax laws that allows the wealthy to engage in substantial illegal tax evasion,
  • The lack of a wealth tax on anything other than one’s home, and
  • Tax loopholes that allow the wealthy to significantly reduce the amount of income tax they pay.

Federal tax laws and regulations are, obviously, the result of policy decisions made by elected officials (i.e., Congress and the President) and bureaucrats in the executive branch who report to the President. Therefore, these four ways that the tax system is tilted in favor of the wealthy can and should be changed.

First, the tax rates on unearned income should be raised. There’s a strong argument for making the tax rates on unearned income the same as on earned income and there’s no good reason to tax unearned income at a lower rate than earned income. It would be fairer to treat all kinds of income the same and this would eliminate the perverse incentive to manipulate income to have it fall into a category with a lower tax rate.

Tax rates in general, for both unearned and earned income, should be made more progressive. This would make our tax system fairer. The current top income tax rate is 37%. In the 1950s, the top tax rate was over 90% and in 1980, it was 70%. [1] So, the rich have gotten huge tax cuts over the last 70 years. And by the way, the economy was doing just fine in the 1950s with those higher tax rates. Raising the top rate by 1% would increase government revenue for needed programs and investments by about $12 billion per year. President Biden has proposed increasing the top rate to 39.6% (where it was before the 2017 Republican tax cut). This would generate about $31 billion in annual revenue.

Second, the budget of the IRS needs to be increased to strengthen enforcement of tax laws. It is estimated that every dollar spent on enforcement will reduce tax evasion by about $10. President Biden has proposed increasing IRS funding by about $8 billion per year and estimates that this would decrease tax evasion and increase government revenue by about $70 billion per year.

The IRS’s funding has been cut dramatically in recent years. This has reduced its ability to enforce tax laws and stop tax evasion. According to a Congressional Budget Office (CBO) report, from 2010 to 2018, the IRS’s annual budget declined by 20% and its staff decreased by 22%. Funding for enforcement fell by nearly 33%. Reviews of individual tax returns fell by 46%, while reviews of corporate tax returns fell by 37%. With less money and fewer staff, the IRS has had reduced capacity to enforce tax laws. [2] Nonetheless, the IRS is auditing low-income households, particularly those claiming the Earned Income Tax Credit for low-wage workers, at about twice the average rate that it audits the overall population.

The CBO estimated that $381 billion per year of taxes owed are not collected, mostly because of under-reporting of income by wealthy Americans. Because nearly all wage income is reported to the IRS by employers, unearned income and business income are far more likely to be under-reported. Wealthy Americans receive far more of these kinds of income than middle- and lower-income households. Therefore, the wealthy are the primary ones guilty of tax evasion by under-reporting income and are the beneficiaries of reduced IRS enforcement.

Third, a wealth tax would be an important step in making our tax system fairer, reducing economic inequality, and limiting the ability of families to perpetuate multi-million-dollar fortunes across generations, which is contributing to the emergence of an oligarchy in American society and politics. (See my previous posts on oligarchy in America here and here.) Senators Warren and Sanders have proposed a wealth tax that would place a 2% annual tax on wealth over $50 million, rising to 3% on wealth over $1 billion. It is estimated that such a wealth tax would raise $300 billion a year in revenue for the federal government.

Fourth, tax loopholes for the wealthy should be closed. There are too many of them to go into detail or provide an exhaustive list. As a starting point, we should:

  • Eliminate the “carried interest” loophole for managers of real estate, venture capital, private equity, and hedge funds that lets them pay the lower unearned income tax rates on the income they earn from their jobs,
  • Reduce the amount of money that can be given as tax-free gifts,
  • Reduce the amount of money that can be put tax-free into retirement accounts,
  • Reduce the amount of money that can be transferred tax-free in an estate, and
  • Eliminate the “stepped up basis” law that allows for tax-free transfers of assets that have increased in value. (See my previous post for more details on these tax loopholes.)

I encourage you to contact your U.S. Representative and Senators and tell them you support policy changes such as those above that would make our tax system fairer, stop the runaway increase in economic inequality, and generate revenue to pay for needed government programs, such as improving infrastructure and providing better supports for children and families. You can find contact information for your US Representative at  http://www.house.gov/representatives/find/ and for your Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

I also encourage you to contact President Biden and to tell him you support his policy changes and others that would make our tax system fairer, reduce economic inequality, and generate revenue to pay for needed government programs. Contact the White House at https://www.whitehouse.gov/contact.

[1]      Reich, R., 4/2/21, “Tax the rich. Here’s how,” Common Dreams (https://www.commondreams.org/views/2021/04/02/tax-rich-heres-how)

[2]      Congressional Budget Office, July 2020, “Trends in the Internal Revenue Service’s funding and enforcement,” https://www.cbo.gov/system/files/2020-07/56422-CBO-IRS-enforcement.pdf

HOW THE RICH GET RICHER #2

Here’s number 2 in a series of posts on how the rich get richer, generally at the expense of the rest of us. (See number 1 here.)

The U.S. tax system favors the rich with:

  • Lower tax rates on the types of income (i.e., unearned income) that are prevalent among the wealthy,
  • Tax loopholes that allow the wealthy to significantly reduce the amount of income tax they pay,
  • Weak enforcement of tax laws that allows the wealthy to engage in substantial illegal tax evasion, and
  • The lack of a wealth tax on anything other than one’s home.

First, unearned income (e.g., income from dividends and the increased value of investments, aka capital gains) is generally taxed at a lower rate than earned income (i.e., income from wages). The wealthy, of course, receive the lion’s share of unearned income.

The overall federal tax rate on earned income for a typical household is 29.65%. The income tax rate is 22% on middle income households. The tax for Social Security is 6.2% and is matched by one’s employer. The tax for Medicare is 1.45% and is also matched by one’s employer. Income tax rates on earned income begin at 10% for lower income households and increases to 37% (on income over $622,000). Social Security only taxes earnings up to $142,800, so the effective tax rate for those with higher incomes declines as income increases. Therefore, the highest overall federal tax rate on earned income today is just about 40%. (Historically, the maximum federal income tax rate was 70% in 1980 and over 90% in the 1950s, compared with 37% today.)

The federal tax rate on most unearned income is roughly half of that on earned income – 15% for middle income taxpayers and a maximum of 20% for high income taxpayers. The tax on long-term capital gains (i.e., the increase in value of investments owned for more than one year) is zero for lower income households and increases to 20% (on income over $434,550). Most dividend income is taxed at the same rates as long-term capital gains. Unearned income  is not subject to Social Security and Medicare taxes. By the way, billionaires in the U.S. gained about $1 trillion in wealth due to the increased values of their investments during the pandemic year from March 2020 to March 2021.

In early 2011, the very wealthy investor Warren Buffett publicly stated that he believed it was wrong that rich people, like himself, paid a smaller portion of their incomes in income taxes than  middle class people, like his secretary. President Obama and some in Congress proposed changes in income tax laws to ensure that the wealthy paid more in income tax, but these proposals were not enacted.

Second, the broad variety of tax loopholes that benefit the wealthy constitute a form of welfare for the wealthy that is rarely discussed using this terminology. One of the most egregious loopholes is the so-called “carried interest” loophole. It allows managers of real estate, venture capital, private equity, and hedge funds (who are invariably wealthy) to claim the income they earn from their jobs to be capital gains (i.e., unearned income), which cuts the income taxes they pay roughly in half. This loophole is estimated to cost the federal government about $1.4 billion a year in lost tax revenue. [1]

An individual can make a gift of up to $15,000 per year to anyone they want to (e.g., children and grandchildren) and to as many people as they want to. The recipient(s) do not have to pay any tax on the gift they receive. Only the wealthy can afford to make gifts of this magnitude, of course.

An individual can contribute up to $19,500 ($26,000 if over 50) to a 401k retirement savings account and reduce their taxable income by the amount of their contribution. In some cases, an individual could also contribute $6,000 ($7,000 if over 50) to an Individual Retirement Account (IRA) and reduce their taxable income by this amount as well. Clearly, only wealthy individuals can afford to make contributions of this magnitude to retirement accounts, so this is another way the rich can dodge income taxes.

When a wealthy individual dies, roughly $11 million of their estate can be passed on tax-free. As a result, only about 3,000 estates are subject to the federal estate tax each year. The maximum tax rate on the assets passed on by an estate is 40%. Some in Congress have proposed eliminating the estate tax completely.

If investments or assets are left to children when a wealthy parent dies, the children never have to pay any tax on the increased value of the investment during the parent’s lifetime. If they were to sell the investment or asset on the day they received it, they would owe no tax. So, for example, Bill Gates can leave his billions of dollars of Microsoft stock to his children and they can sell it when they receive it and owe no tax, so no tax would ever be paid on the billions of dollars of increase in its value from the day Bill Gates got the stock.

Any homeowner can deduct the interest paid on up to $1 million of mortgages to reduce the amount of income on which they owe tax. (This limit has been reduced to $750,000 for mortgages obtained after 2017.) This applies to mortgages on first and second homes. This tax break costs the federal government more than it spends helping poor families pay rent and avoid homelessness. Homeowners can also reduce their taxable income by up to $10,000 for property taxes they paid. [2] This $10,000 limit was imposed in 2017; the deduction used to be unlimited. These tax breaks have the greatest benefit for the wealthy, of course.

The cost to the federal government of lost revenue due to the various income tax breaks (aka loopholes) is huge – more than $1.5 trillion a year, which is more than the cost of Social Security or of Medicare and Medicaid combined. The bulk of the benefits from these income tax breaks or loopholes goes to wealthy individuals, of course.

Third, the wealthiest 1% of U.S. households don’t report over one-fifth of their income costing the federal government an estimated $175 billion every year. Some simply don’t report all their income, but many use complex tax strategies to dodge income taxes. Because the IRS rarely audits wealthy taxpayers (only 6% of those with income over $10 million), much of this tax avoidance is never subject to enforcement actions. Budget cuts and staff shortages at the IRS are partly to blame, but policy decisions have also contributed to the fact that the poor are audited at about twice the rate (roughly 0.7%) of the overall population. [3]

Finally, wealth is not taxed in the U.S., with the exception of the major asset or investment of the middle-class – one’s home. The property tax on one’s home, typically levied by local government, is the only wealth tax in America. It ranges from a high of 2% per year to a low of an effective rate of 0.3%. Ownership of all other wealth, other assets or investments (e.g., stocks, bonds, and other financial instruments), which are mostly owned by the wealthy, are not taxed.

The wealthy and their political supporters have lots of rationales for why they shouldn’t pay more taxes. Many of these rationales contradict ones they present to argue against public assistance for the poor or increased unemployment benefits or an increase in the minimum wage.

The bottom line is that by pretty much any measure and also from an historical perspective, the wealthy are not paying their fair share. The U.S. tax system is rigged in favor of the wealthy. When the wealthy and their political supporters say the country can’t afford to help low- and middle-income people with health care, child care, higher education, or housing costs, or that Social Security benefits need to be cut, remember that the wealthy are getting hundreds of millions of dollars of benefits each year from the provisions or loopholes of our tax laws. On top of this, there would be additional hundreds of millions of dollars of revenues for the federal government each year if the wealthy were paying their fair share.

My next post will present a variety of proposals and strategies to make our tax system fairer.

[1]      Reich, R., 4/2/21, “Tax the rich. Here’s how,” Common Dreams (https://www.commondreams.org/views/2021/04/02/tax-rich-heres-how)

[2]      Buchheit, P., 3/22/21, “The boundless advantages of the welfare state – for the rich,” Common Dreams (https://www.commondreams.org/views/2021/03/22/boundless-advantages-welfare-state-rich)

[3]      Johnson, J., 3/22/21, “ ‘This is tax evasion’: Richest 1% of US households don’t report 21% of their income, analysis finds,” Common Dreams (https://www.commondreams.org/news/2021/03/22/tax-evasion-richest-1-us-households-dont-report-21-their-income-analysis-finds)

THE GAMES OLIGARCHS PLAY

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

In three previous posts, I’ve summarized the three major systemic changes identified by Robert Reich in his latest book, The System. These systemic changes have occurred since 1980 and have shifted power, both economic and political, to a small group of very wealthy Americans. As a result, our democracy operates in many ways like an oligarchy. (Oligarchy “refers to a government of and by a few exceedingly rich people or families who … have power … . Oligarchs may try to hide their power … . But no one should be fooled. Oligarchs wield power for their own benefit.” pages 13-14) [1]

Reich’s three systemic changes have shifted power:

  • From a broad set of corporate stakeholders to shareholders (see this previous post for details),
  • From workers and their unions to large employers (see this previous post for details), and
  • From manufacturing and a broad set of stakeholders in our economy to the financial sector and Wall Street (see this previous post for details).

A dramatic result of these shifts in power has been rapidly growing inequality in income and wealth. A cause and symptom of this inequality is that a small number of wealthy people dominate as the sources of funding for the campaigns of elected officials. These are the oligarchs. In the 2016 election cycle, the wealthiest 25,000 people in America (0.01% of the population) made a record-breaking 40% of all campaign contributions – up from 15% in 1980. Over the period from 2009 through 2020, twelve very wealthy individuals and their spouses gave a total of $3.4 billion to federal candidates and political groups. This is over 7% of the total money raised. The 100 highest giving zip codes hold less than 1% of the U.S. population, but were responsible for 20% of the $45 billion that federal candidates and political groups raised from 2009 through 2020. The increasing amount and share of campaign money coming from oligarchs was accelerated by a series of U.S. Supreme Court decisions, including the 2010 Citizens United decision. [2]

This high level of campaign spending gives these oligarchs access to our elected officials that you and I don’t have. When one of them calls or requests a meeting, that call is answered or that meeting is scheduled. Because their voices are heard and elected officials want the money to keep flowing to them, these oligarchs generally get the policies they want and that benefit them.

Throughout the book, Reich uses Jamie Dimon, the CEO of JPMorgan, as an example or case study of how the oligarchs operate; how they have abandoned public responsibility and advance their self-interest. Dimon appears to believe that corporations do have social responsibilities and not just responsibility to maximize returns for shareholders (as pure shareholder capitalism asserts). Dimon touts JPMorgan’s financing of $2 billion in affordable housing annually, its lending in low- and moderate-income neighborhoods and to small businesses, its 5-year $350 million job training program, and its $500 million AdvancingCities initiative to help financially-strapped large cities.

Although JPMorgan’s social responsibility efforts are notable, they are small relative to the size of the problems they are tackling and small in comparison to JPMorgan’s yearly profits of $30 billion. Moreover, they are contradicted by other actions of JPMorgan and Dimon. Dimon has not supported raising the minimum wage or paying all JPMorgan workers a livable wage, which would do a lot to help many of the people targeted by JPMorgan’s philanthropy, despite his 2018 compensation package worth $31 million and his wealth of around $1.5 billion. In addition, JPMorgan paid $55 million in 2017 to settle charges that it discriminated against minority mortgage borrowers.

Furthermore, Dimon personally lobbied hard for the 2017 tax cut that reduced the corporate tax rate from 35% to 21% and increased JPMorgan’s profits by billions of dollars annually. The tax cut increased the federal deficit by $190 billion annually; a figure that has to be covered, sooner or later, by cuts in federal government programs or increased taxes on others.

JPMorgan, with Dimon in charge, paid $13 billion to settle claims that it defrauded borrowers and investors in the mortgage scandal that led to the 2008 economic collapse. In 2019, it required forced arbitration for credit card disputes, preventing aggrieved customers from suing in court or through a class action lawsuit.

Although Dimon publicly opposed President Trump pulling the U.S. out of the Paris Climate Agreement, JPMorgan is the biggest bank investor in fossil fuels, to the tune of $196 billion between 2016 and 2018. A 2019 report by an environmental coalition named Dimon the “world’s worst banker of climate change.” JPMorgan is also the largest U.S. bank providing financial services to the gun industry and loans to gun buyers.

So, a few hundred million dollars a year of philanthropy is a good investment in public relations for a wealthy Wall Street bank that has had numerous ethical lapses and that was a significant contributor to the economic collapse in 2008, resulting in millions of people losing their jobs, homes, and savings, while it got hundreds of millions of dollars in bailouts.

However, Dimon and JPMorgan are just one example. In 2019, the Business Roundtable, in an effort to counter unfavorable publicity about corporations being solely focused on benefiting shareholders, issued a highly publicized corporate responsibility statement signed by CEOs of 181 major U.S. corporations (including Dimon) stating they believed in “a fundamental commitment to all our stakeholders.” The statement included a commitment to treat employees fairly, support communities, and embrace sustainable practices. [3]

However, actions speak louder than words. Just weeks after the statement appeared, Whole Foods, a subsidiary of Amazon, announced it would cut health benefits for its part-time workers, despite multi-billionaire Jeff Bezos, CEO of Amazon, having signed the corporate responsibility statement. During the pandemic, billionaires did very well and big corporations did well (45 of the 50 biggest were profitable). Despite this, 27 of the 50 big corporations laid off workers, totaling more than 100,000 workers. For example, Walmart, whose CEO was a corporate responsibility statement signer, distributed $10 billion to shareholders while laying off over 1,200 workers. [4]

If the CEOs (i.e., oligarchs) signing the corporate responsibility statement were serious about their commitment to all stakeholders, they would support federal legislation to make those commitments laws (i.e., legally binding). Or, at least, they’d pay a fair share of taxes to the federal government so it could support workers, communities, and a sustainable economy. However, in 2020, 55 of the largest U.S. corporations paid no federal income tax on $40 billion in profits. Moreover, they received more than $3 billion in federal tax rebates, giving them an effective tax rate of negative 9%; a bit different than the stated tax rate of 21%. Twenty-six of them have paid no federal income tax since the 2017 tax cut (and received $5 billion in rebates) while generating $77 billion of profits.

In actuality, the corporate responsibility statement appears to be part of a PR campaign by oligarchs that, along with corporate philanthropy, is designed to slow or stop proposed legislation and regulations that would require oligarchs and their corporations to:

  • Share their power and wealth by treating workers and communities more fairly, and
  • Engage in sustainable business practices.

Reich quotes the theologian Reinhold Niebuhr as noting that “ The powerful are more inclined to be generous than to grant social justice.”

These are the games that oligarchs play to try to hide their power and to try to fool the rest of us into believing that they care about fairness and social responsibility.

[1]      Reich, R.B., 2020, The System: Who rigged it, how we fix it. NY, NY: Alfred A. Knopf.

[2]      Beckel, M., retrieved 4/21/21, “Outsized influence,” Issue One (https://www.issueone.org/wp-content/uploads/2021/04/Issue-One-Outsized-Influence-Report-final.pdf)

[3]      Business Roundtable, 8/19/19, “Statement on the Purpose of a Corporation,” https://system.businessroundtable.org/app/uploads/sites/5/2021/02/BRT-Statement-on-the-Purpose-of-a-Corporation-Feburary-2021-compressed.pdf

[4]      MacMillan, D., Whoriskey, P., & O’Connell, J., 12/16/20, “America’s biggest companies are flourishing during the pandemic and putting thousands of people out of work,” The Washington Post

OLIGARCHY OR DEMOCRACY: THE FINANCIAL INDUSTRY RULES OUR ECONOMY

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Robert Reich’s latest book, The System, presents his analysis of how our democracy is more like an oligarchy these days, how it got that way, and how to fix it. Oligarchy “refers to a government of and by a few exceedingly rich people or families who … have power … . Oligarchs may try to hide their power … . But no one should be fooled. Oligarchs wield power for their own benefit.” (pages 13-14) [1]

Reich identifies three major systemic changes that have occurred since 1980 that have shifted power, both economic and political, to a small group of very wealthy Americans. They are:

  • The shift of big corporations from stakeholder to shareholder capitalism (see this previous post for a summary of this shift),
  • The shift in bargaining power from unions to large employers and corporations (see this previous post for a summary of this shift), and
  • The shift in power in our economy and politics to the financial sector and Wall Street (see below).

The dramatic increase in power and influence of the financial sector and Wall Street began in the 1980s. It included two components:

  • The increased size and marketplace power of large financial corporations, and
  • The increased influence of these large financial corporations in our economy and politics.

The increased size and marketplace power of financial corporations, starting with banks, began in 1980 as the federal government began deregulating banking. After the financial crash of 1929, which was a significant contributor to the Great Depression, laws were enacted to prevent banks from crashing the financial system and the economy again. Laws and regulations banned banks from operating in more than one state and prohibited mergers of banks. A law named the Glass-Steagall Act separated consumer and commercial banking (i.e., taking deposits and making loans) from investment banking (i.e., making investments that were speculative with significant risks of losses).

In 1980, the ban on interstate banking and bank mergers was repealed and banks quickly began merging. This, of course, meant that there were fewer banks and bigger banks, and eventually we got the too-big-to-fail banks of 2008. As the banks and financial corporations increased in size and wealth, they also gained political power through campaign spending, lobbying, and the revolving door. The repeal of the Glass-Steagall Act under President Clinton in 1999 alone was the subject of $300 million of lobbying by the big financial corporations. Clinton’s Treasury Secretary from 1995 – 1999, by the way, was Robert Rubin, a former senior executive at Wall St. powerhouse Goldman Sachs, who returned to Wall St. at Citicorp in 1999.

Starting in the mid-1980s, federal regulators began easing the restrictions separating consumer and commercial banking (where customers’ deposits were insured by the federal government) from investment banking. The favorable policies and deregulation the financial sector was able to get led to the Savings and Loan crash of the late 1980s that cost taxpayers billions. The bursting of the dot.com stock market bubble and the collapse of various hedge funds were just bumps on the road to the huge financial collapse of 2008 which caused the Great Recession and cost homeowners trillions of dollars and taxpayers trillions more to rescue the too-big-to-fail financial institutions.

Between 1980 and 2008, $6.6 trillion in wealth was captured by the big financial corporations, sucked out of consumers and others, as the U.S. economy shifted from a focus on making things (i.e., manufacturing) to creating new, speculative financial instruments and from product entrepreneurship to financial entrepreneurship and vulture capitalism.

The big financial corporations’ control of our economy and politics was so profound that they, with an assist from their banker friends at the Federal Reserve, could tell President Clinton that he had to balance the federal budget and could not spend money on programs to benefit the American people as he had promised during his campaign. Today, the financial sector represents over 8% of our economy, while in the 1950s it was just 2.5% of the economy.

The big financial corporations made money funding corporate raiders and vulture capitalists. They made money aiding and abetting multi-national corporations as they moved jobs and facilities overseas, undermining U.S. workers. They made money providing debt to consumers on credit cards, student loans, and mortgages, while often not so secretly hoping that borrowers would fall behind on payments so they could collect big fees and escalated interest rates. Along the way, the financial corporations got bankruptcy laws written so that consumers could not escape mortgage or student debt in bankruptcy and had limited ability to reduce credit card debt. (Meanwhile, corporations can eliminate all debt and break contracts, including union contracts and retiree benefit contracts, when they file for bankruptcy and can be back on their feet in literally no time.)

The big financial corporations fueled the dramatic rise in home values – the average home cost $64,600 in 1980 and $246,500 in 2006 – by handing out more and more mortgages on more and more risk terms. They knew that the default rate on these riskier mortgages would be higher and, in some cases, very high because they made some of these loans using fraudulent lending practices. Nonetheless, they continued to sell securities backed by these mortgages as low risk investments.

In 2008, when homeowners started to default on their risky and sometimes fraudulent loans, the whole financial system built around these mortgages and securities based on them collapsed. This caused a collapse in home prices, causing many more homeowners to default on their mortgages. Millions of homeowners lost their homes and, as a result in many cases, lost all their savings – to the tune of trillions of dollars.

The federal government and we, the taxpayers, bailed out the too-big-to-fail financial institutions to the tune of trillions of dollars. For example, the financial giant Citigroup (parent of Citicorp and Citibank) received $45 billion in cash and a guarantee against any loss in value for an additional $300 billion of speculative investments.

The shift of wealth to the big financial corporations and their executives and traders (i.e., their high stakes gamblers using speculative financial instruments) has exacerbated economic inequality in America. For example, the typical bonus paid on Wall Street in 2020 was $184,000 and the total bonus pool was $31.7 billion for the roughly 170,000 people receiving bonuses. [2]

Huge and wealthy companies, as well as their extremely wealthy executives and shareholders, are a threat to workers, our economy, and our democracy. Policies that were put in place as part of the New Deal in the 1930s maintained a balance in our economy, including a reasonable level of economic inequality, and protected our democracy from oligarchy. Since 1980, these policies have been changed, economic and political power has shifted, and we are suffering for it. We need to reinstitute policies similar to those of the New Deal to preserve our democratic principles of equal opportunity and promotion of the general welfare.

The bottom line of Reich’s book is that, as Supreme Court Justice Louis Brandeis (1916-1939) said, “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.” Similarly, H.D. Lloyd, in his 1894 book, Wealth against Commonwealth, wrote, “Liberty produces wealth, and wealth destroys liberty.”

I urge you to read Reich’s book and/or check out his writing and videos at https://robertreich.org/ and/or https://www.inequalitymedia.org/. His analysis of the current economic and political landscape is always insightful and clear, and often entertaining as well.

[1]      Reich, R.B., 2020, The System: Who rigged it, how we fix it. NY, NY: Alfred A. Knopf.

[2]      Surane, J., 3/26/21, “Wall Street bonuses rose 10% in 2020, N.Y. Comptroller says,” Bloomberg News (https://www.bloomberg.com/news/articles/2021-03-26/wall-street-bonuses-rose-10-last-year-n-y-comptroller-says)

CORPORATE INVOLVEMENT IN POLITICS & VOTER SUPPRESSION

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The role of large, wealthy corporations in our political system is coming under scrutiny again, this time in relation to voter suppression laws in states. Advocates for democracy and its basic principle that all citizen should vote are urging corporations and their executives to speak out against states’ voter suppression efforts. Given that these voter suppression efforts target black, brown, and/or low-income citizens, advocates for racial and economic justice are also urging corporate opposition to these efforts.

As-of March 24, 361 bills that would suppress voting have been introduced in state legislatures in 47 states. Five bills have already passed, including, perhaps most notably, in Georgia. In 24 states, 55 bills are actively moving through the legislative process; 29 have passed in one chamber and 26 have seen action in a legislative committee. These bills would restrict absentee and by-mail voting, cut back on early voting, impose strict, onerous voter ID requirements, make registering to vote harder, and / or expand purges of voter rolls. [1]

The rationale for these efforts is, of course, the big lies that the 2020 presidential election was stolen from Trump and that there was extensive voter fraud. As I imagine you know, the number of cases of voter fraud is miniscule and totally insignificant in terms of election outcomes. Furthermore, the voting restrictions in these bills do NOT specifically address the kind of rare fraud that does occur.

After the January 6th attack on the capitol, at least 123 corporations and corporate trade associations announced a rethinking of their political spending – a pause in political spending by their corporate political action committees (PACs), a cutoff of donations to the 147 members of Congress who voted against certifying the presidential election results, or a review of their corporate PAC spending.

However, they did not announce a rethinking of their giving to politically active non-profits, including industry trade associations (such as the Chamber of Commerce). Twenty-four of the corporations that announced a rethinking their PAC spending have given more than $100 million to politically active non-profits since 2015. These “dark money” non-profits (so-called because they don’t have to disclose their donors) spent $750 million on the 2020 elections. [2] (Note: Tracking the money flowing to these non-profits is difficult and slow because they don’t have to report donors and only infrequently report any information at all.)

In 2019 alone (the latest data available), many of the corporations announcing a rethinking of their PAC spending gave more to politically active non-profits than their PACs spent in the whole two-year 2020 election cycle. For example, CVS Health spent less than $1 million through its corporate PAC in the 2020 elections but disclosed giving nearly $9.6 million to political non-profits in 2019 alone. From 2015 to 2019, CVS Health gave over $31 million to political non-profits, Intel gave $18 million, Anthem Blue Cross Blue Shield health insurance $16 million, Dow $16 million, AT&T $9 million, and Microsoft $6 million.

Corporations have also been active political spenders at the state level. An analysis of the legislators supporting 245 state voter suppression bills found, as of March 1, 2021, corporate campaign spending of over $22 million in the 2020 election cycle to benefit state legislators who supported voter suppression. These legislators wrote voter suppression bills, co-sponsored them, or voted for them. Of the 100 largest U.S. corporations, 81 gave money to these state legislators, and of the 500 largest corporations, 225 did so. In addition, corporate trade associations gave $16 million to these state legislators in the 2020 election cycle. Of the 123 corporations or corporate trade associations that announced a rethinking of corporate PAC spending after January 6th, 94 have given money to state legislators who supported voter suppression. Among the top 12 of these corporate spenders are Altria / Philip Morris, AT&T, United Health, Comcast / NBC, Walmart, Pfizer, Koch Industries, State Farm, and Verizon. [3]

By the way, when some corporations and their leaders made statements opposing voter suppression, Senator McConnell (Republican of KY and Senate minority leader) called on them to stay out of politics. This is beyond disingenuous as McConnell and his Republican colleagues have been the beneficiaries of hundreds of millions of dollars of corporate campaign contributions and spending. If the corporate leaders actually heeded McConnell’s call, the Republican Party would be bankrupt.

I urge you to speak out against voter suppression whenever and wherever you get the chance – with state-level elected officials, with national office holders, and with business leaders. Ask them to support efforts to make it simple and easy for every citizen to vote, and to oppose all efforts to make voting harder. Please also speak out in support of full disclosure of all political spending by corporations and others and in opposition to efforts to hide the identities of donors, particularly through the use of  “dark money” non-profits.

If you would like to email the CEOs of companies with a significant presence in Georgia to ask them to speak out against the voter suppression bill just passed in Georgia, here’s a list courtesy of Robert Hubbell’s daily newsletter of 4/5/21. (Sign up for his “Today’s Edition” newsletter here.)

  • The Home Depot               Craig Menear           craig_menear@homedepot.com
  • United Parcel Service         Carol B. Tomé           carol@ups.com
  • Delta Air Lines                    Ed Bastian                bastian@delta.com
  • Arby’s                                 Paul Brown               pbrown@inspirebrands.com
  • The Coca-Cola Company   James Quincey         asktheboard@coca-cola.com
  • Cox Media Group              Daniel York                york@cmg.com
  • Genuine Parts Company    Paul D. Donahue       paul_donahue@genpt.com
  • Georgia Pacific                   Christian Fischer       cfischer@gapac.com
  • Porsche                              Oliver Blume             blume@porsche.de

[1]      Brennan Center for Justice, 4/1/21, “Voting laws roundup: March 2021,” (https://www.brennancenter.org/our-work/research-reports/voting-laws-roundup-march-2021)

[2]      Massoglia, A., 1/15/21, “Corporations rethinking PACs leave the door to ‘dark money’ open,” OpenSecrets.org, Center for Responsive Politics (https://www.opensecrets.org/news/2021/01/corporations-rethinking-corporate-pacs-leave-dark-money-open/)

[3]      Tanglis, M., Lincoln, T., & Claypool, R., 4/5/21, “The corporate sponsors of voter suppression,” Public Citizen (https://www.citizen.org/article/corporate-sponsors-of-voter-suppression-state-lawmakers-50-million/)

SABOTAGE BY HOLDOVER TRUMP APPOINTEES

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Throughout his term, President Trump appointed some very political people to executive branch positions and worked to make them difficult for a successor to remove. He accelerated these efforts in his lame duck days in office after he’d lost the election. These appointments were across the whole executive branch from the Defense Department to the Justice Department, as well as in the Social Security Administration and the U.S. Postal Service.

In addition, in his final days in office, Trump did everything he could to sabotage President Biden and his administration. Some of Trump’s appointees continue this work to this day. Some of them and their actions have gotten a fair amount of attention and coverage in the media, notably some actions at Defense, Justice, and the Postal Service. However, many of these appointees and their sabotage have gotten little if any attention.

For example, Andrew Saul, Trump’s 2018 appointee for Commissioner of the Social Security Administration (SSA), delayed the $1,400 American Rescue Plan pandemic checks to 30 million of the country’s poorest and neediest people. Saul refused to send information on recipients of Social Security and Supplemental Security Income (SSI) to the IRS so checks could be sent to them. SSI recipients are people with disabilities or seniors with very low incomes. Two weeks after the Rescue Plan had passed, when many people had already received their $1,400 payments, Democratic Members of Congress wrote to Commissioner Saul demanding that he send the information to the IRS. He complied the next day. [1]

As another example, Commissioner Saul and his Trump appointed Deputy Commissioner David Black proposed a rule that would have required disabled SSI recipients to undergo more frequent and more stringent benefit eligibility reviews, which would have caused tens of thousands of people to lose benefits. This rule change was very similar to one enacted by the Reagan administration that led to a rash of suicides, among other harm, and was seen as so cruel that it was unanimously overturned by the Senate. In another example, Saul and Black tried to deny benefits for older and severely disabled non-English speakers that would have caused an estimated 100,000 people to lose $5 billion in benefits.

These are examples of Saul’s and Black’s consistent efforts to undermine the effective functioning of the SSA. They are emblematic of Republicans’ efforts to harm the credibility and effectiveness of government through sabotage from the inside. This makes their claims that government programs don’t work well and are a failure a self-fulling prophecy.

Saul and Black have terms that don’t expire until 2025. Many advocates for SSI recipients (and others) are calling on President Biden to fire them, but so far, he has not done so. If he does, Republicans will, of course, claim that partisanship is the reason rather than their failure to responsibly do their jobs. We’ve heard this before from Republicans and we will hear it again and again as Biden cleans house of Trump’s government saboteurs. Don’t fall for it. The politics and partisanship are on the Republican side in their work to undermine the functioning of our government.

In December, 88% of the members of the Association of Administrative Law Judges, who handle SSA disputes, voted no confidence in Saul and Black. Recently, the American Federation of Government Employees called on Biden to fire Saul and Black. It stated that they were sabotaging the SSA, undermining its mission, obstructing its operation, and asking employees to deny injured workers and veterans their rightful benefits, which would be a major ethical violation.

I urge you to contact President Biden and ask him to fire Commissioner Saul and Deputy Commissioner Black from the Social Security Administration. Tell him you support firing all the Trump appointees who are sabotaging the valuable work our government does. Contact President Biden at the White House at https://www.whitehouse.gov/contact.

[1]      Sammon, A., 3/26/21, “Trump appointees are sabotaging Biden’s stimulus checks,” The American Prospect (https://prospect.org/politics/trump-appointees-sabotaging-bidens-stimulus-checks/)

OLIGARCHY OR DEMOCRACY: CORPORATIONS VS. WORKERS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Robert Reich’s latest book, The System, presents his analysis of how our democracy is more like an oligarchy these days, how it got that way, and how to fix it. Oligarchy “refers to a government of and by a few exceedingly rich people or families who … have power … . Oligarchs may try to hide their power … . But no one should be fooled. Oligarchs wield power for their own benefit.” (page 13-14) [1]

Reich identifies three major systemic changes that have occurred since 1980 that have shifted power, both economic and political, to a small group of very wealthy Americans. They are:

  • The shift of big corporations from stakeholder to shareholder capitalism (see my previous post for a summary of this change),
  • The shift in bargaining power from unions to large employers and corporations (see below), and
  • The shift in power in our economy and politics to the financial sector and Wall Street.

The shift in power from workers and their unions to large employers and corporations began in the 1980s. It included three components:

  • The increased size and marketplace power of corporations,
  • The increased influence of large corporations and employers in policy making, and
  • The weakening of the power of workers and their unions.

The increased size, marketplace power, and political influence of corporations has occurred in large part because the federal government has, starting in the 1980s under President Reagan, basically abandoned enforcement of anti-trust laws limiting mergers and acquisitions. As a result, two-thirds of the business sectors of our economy have become more concentrated since the 1980s. This means that ever larger corporations have gained monopolistic power, allowing them to raise prices or reduce customer service or quality without losing business to the competition, because there is little or no competition in many local markets.

The resultant large companies have the resources to engage in extensive political activity including lobbying, making sizable campaign donations and expenditures, and moving employees through the revolving door to positions in government (and often back again). This has provided them with substantial political power and influence.

Because payroll costs are typically 70% of a business’s costs, reducing personnel costs is the quickest way to increase profits and share prices, the goals of shareholder capitalism. The increased size and reduced number of employers inherently suppress worker pay by leaving workers fewer choices of whom to work for in many locales. This means there is less competition among employers in hiring workers, and therefore less need to increase pay or benefits to attract workers.

On the policy front, a central focus of large companies’ political influence has been on undermining and weakening enforcement of laws supporting unionized workers. In addition, relaxed laws governing international trade have allowed employers to shift jobs overseas to cheaper labor markets. Finally, a bankruptcy filing, a technique frequently used by vulture capitalists (i.e., private equity investors and corporate raiders), allows employers to void union contracts, as well as benefits for retirees. Simply the threat of bankruptcy has become enough to get unions and workers to agree to cuts in pay and benefits. All of these factors mean that large employers have gained the ability to undermine and eliminate unionized workers, as well as to block the formation of new unions.

As a result, unionization of private sector U.S. workers has dropped precipitously from 35% in the 1950s to 6% today. Reduced unionization leaves employees with less power to bargain for good pay and benefits. It also means employers are able to effectively require workers to agree to disadvantageous employment conditions such as signing agreements prohibiting them from working for a competitor (i.e., non-compete agreements) and agreeing to engage in arbitration rather than going to court with a lawsuit when mistreatment or other grievances occur. Moreover, the economy-wide boost to pay and benefits due to employers having to compete against unionized jobs to attract workers, has effectively disappeared as unionization has dropped to today’s very low levels.

In addition, large employers have gotten states to enact so-called “right-to-work” laws. These laws allow workers at a unionized workplace to refuse to pay union dues, even though they benefit from the union’s negotiation of pay, benefits, working conditions, and grievance procedures. This undermines the financial resources and bargaining power of unions.

The increased size and reduced number of businesses has increased corporate profits and economic inequality. It has also stifled innovation as large companies block access to customers for newer companies and buy up smaller companies that are seen as threats to their monopolistic dominance. The rate of new business formation today is half of what it was in 1980.

The economic result is that today a greater share of businesses’ income goes to profits and a smaller share to workers’ compensation than at any time since World War II.

The societal result is that workers are economically insecure, frustrated, and angry. Therefore, they are susceptible to demagogues like Donald Trump selling racism, xenophobia, and oligarchic authoritarianism as the solution to their insecurity and anger.

The declining value of the minimum wage since 1968 is indicative of the decline of workers’ power and compensation. Increasing the federal minimum wage to $15 an hour in 2025, as is currently being proposed in Congress, would be a step in the right direction but would still not give workers the full value of their increases in productivity. Using 1968 as the reference point, today’s current federal minimum wage of $7.25 would be roughly:

  • $11.00 if it had kept up with inflation. (In other words, the minimum wage today has roughly 1/3 less purchasing power than it had in 1968.)
  • $22.00 if it had kept up with the increases in workers’ productivity, i.e., the increases in the value of the output of today’s workers over those in 1968. Instead, this increased value is going to profits and shareholders. [2]

I will summarize Reich’s book’s description of the shift in power in our economy and politics to the financial sector and Wall Street, the last of his three big systemic changes, in a subsequent post.

In the meantime, I urge you to read Reich’s book or check out his writing and videos at https://robertreich.org/ and/or https://www.inequalitymedia.org/. His analysis of the current economic and political landscape is always insightful and clear, and often entertaining as well.

[1]      Reich, R.B., 2020, The System: Who rigged it, how we fix it. NY, NY: Alfred A. Knopf.

[2]      Lee, T.M., 2/25/21, “Our deeply broken labor market needs a higher minimum wage,” Economic Policy Institute (https://www.epi.org/publication/our-deeply-broken-labor-market-needs-a-higher-minimum-wage-epi-testimony-for-the-senate-budget-committee/)

OLIGARCHY OR DEMOCRACY: THE SYSTEM BY ROBERT REICH

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Robert Reich’s latest book, The System: Who rigged it, how we fix it, presents his pointed, insightful, and relatively succinct analysis of how our democracy is more like an oligarchy these days, how it got that way, and how to get back to democracy. Oligarchy “refers to a government of and by a few exceedingly rich people or families who control the major institutions of society and therefore have power over other people’s lives. Oligarchs may try to hide their power behind those institutions, or … through philanthropy and ‘corporate social responsibility.’ But no one should be fooled. Oligarchs wield power for their own benefit.” (page 13-14) [1]

Reich identifies three major systemic changes that have occurred since 1980 that have shifted power, both economic and political, to a small group of very wealthy Americans. They are:

  • The shift of big corporations from stakeholder to shareholder capitalism,
  • The shift in bargaining power from unions to large employers and corporations, and
  • The shift in power in our economy and politics to the financial sector and Wall Street.

The shift of big corporations from stakeholder to shareholder capitalism began in the 1980s with “corporate raiders,” who were wealthy investors who would buy enough shares of a corporation’s stock to force the Chief Executive Officer (CEO) to make changes to increase the stock price or lose his job due to the raider taking control of the Board of Directors in what was called a hostile takeover. There were 13 hostile takeovers in the 1970s of corporations worth over $1 billion; there were 150 in the 1980s.

In addition, financial entrepreneurs or engineers, as they were referred to then and who more recently have been labeled vulture capitalists, developed the leveraged buyout technique that has been widely adopted by private equity funds. This technique, made possible by our tax and financial laws and regulations, allows the “investor” to borrow the huge sums of money needed to buy a corporation and then put the debt and risk on the corporation that was purchased, while receiving favorable tax treatment for the huge interest payments on the debt. In the 1980s, there were more than 2,000 leveraged buyouts of corporations worth over $250 million.

During the 1980s and 1990s, almost one out of every four U.S. corporations was the target of a hostile takeover and another quarter were the target of a takeover that was not deemed hostile because the CEO supported it (sometimes reluctantly).

As a result of all of this, CEOs shifted to focusing solely on maximizing the short-term price of the corporation’s stock and, therefore, the wealth of shareholders. Previously, the CEO’s job had been seen as having responsibility to a range of stakeholders, including employees, customers, the communities employees lived in, and the public, in addition to shareholders.

This shift from stakeholder to shareholder capitalism could not have occurred without tax and financial laws and regulations that allowed it or without lax enforcement of laws and regulations that could have stopped it. Some laws and regulations were changed to allow the corporate raiders’ practices. President Reagan’s administration in the 1980s failed to take enforcement actions that could have stopped or slowed corporate raiders and leverage buyouts, such as enforcement of anti-trust laws or a crackdown on large, risky loans by federally regulated and insured banks. Furthermore, the Reagan administration testified before Congress in opposition to laws that would have curbed the practices used by the corporate raiders.

Starting in the 1970s and growing in the 1980s, academic economists including Milton Friedman (University of Chicago) and Michael Jensen (Harvard Business School) gave academic and theoretical support to the takeovers (and threatened takeovers), asserting that they were increasing economic efficiency. They ignored the costs to workers and communities, focusing narrowly on the corporation, its profits, and its stock price. In other words, their focus was benefits to stockholders while ignoring costs to other stakeholders.

As a result, the mantra for CEOs, the business community, and many economists has become that the sole purpose of the corporation and its management is to maximize shareholder value at the expense of any and all other stakeholders.

Under the shift to shareholder capitalism, the “efficiency” gains go to shareholders, who are generally wealthy investors (including CEOs), while other stakeholders suffer the costs and burdens. This “efficiency” ignores any acknowledgement of a broader common good or the general welfare (which the preamble to the Constitution says our country was created to promote).

I will summarize Reich’s book’s description of the other two big systemic changes in subsequent posts:

  • The shift in bargaining power from unions to large employers and corporations, and
  • The shift in power in our economy and politics to the financial sector and Wall Street.

In the meantime, I urge you to read Reich’s book or check out his writing and videos at https://robertreich.org/ and/or https://www.inequalitymedia.org/. His analysis of the current economic and political landscape is always insightful and clear, and often entertaining as well.

[1]      Reich, R.B., 2020, The System: Who rigged it, how we fix it. NY, NY: Alfred A. Knopf.

PANDEMIC RELIEF, UNITY, AND BIPARTISANSHIP

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Passage of the American Rescue Plan (ARP), i.e., the pandemic relief package, is a milestone for unity because it fosters economic recovery and fairness for all Americans. Although it was a great opportunity for bipartisanship, unfortunately it has only been another milestone in the continuing, now decades-long, hyper-partisanship of Republicans.

President Biden had Republicans to the White House to try to obtain bipartisan support. He compromised by cutting unemployment benefits and reducing the number of Americans who qualified for relief payments by 17 million to address Republicans’ and conservative Democrats’ concerns about the costs of the bill and the targeting of benefits to those most in need. Nonetheless, the Republicans did everything they could to delay the bill, including demanding that the whole 628-page bill be read aloud in the Senate. And then, not one single Republican voted for it despite its overwhelming, bipartisan support for it among Americans. Roughly 75% of Americans supported the bill, including about 60% of Republicans.

Many in the media reported inaccurately that the passage of the ARP was also the death of bipartisanship because no Republican voted for it. The truth is that Republicans killed bipartisanship in the 1990s with their impeachment of President Clinton and put another nail in its coffin in 2008 with their pledge to make President Obama fail and to block every one of his legislative initiatives.

The ARP will cut the number of children living in poverty by one half. Child poverty in the U.S. is significantly higher than any other wealthy country and is incredibly harmful to children. Children in poverty in the U.S. are, of course, disproportionately children of color. The ARP will cut the overall number of Americans in poverty by 1/3. By the way, the official poverty line in the U.S. is well below any minimally realistic standard of living in many parts of the country at $26,500 for a family of four, which can be a single parent with three children.

The ARP provides a huge boost to middle-income families, increasing their after-tax incomes by an average of 5.5%, or about $2,750 for a family with a $50,000 income and $5,500 for a family with a $100,000 income.

Perhaps not surprisingly, Republicans’ calls for unity seem to have disappeared in the shadow of their blatantly partisan actions on the ARP. They have made it clear that their primary goal is obstruction of any initiative proposed by President Biden and supported by Democrats, even if it would do tremendous good for the country, its people and small businesses, as the ARP will. The Republicans will even obstruct policies that have broad bipartisan support among the public if somehow they believe that doing so will help them politically, i.e., in retaining their power and elected positions.

Perhaps not surprisingly as well, some Republicans are already trying to take credit for the benefits of the ARP, making it sound like they supported it. For example, Senator Wicker (R-MS) tweeted positively about the bill the same day that it passed, noting that it would help small businesses and restaurants, and giving the false impression that he had voted for it.

Republicans’ obstructionism has extended to President Biden’s nominees for his Cabinet and other positions. The precedent is that every President should be allowed to have whomever he wishes in his Cabinet, regardless of political differences. Unqualified and inappropriate nominees have been smoothly confirmed for President Trump and other Republican Presidents. Nonetheless, Senate Republicans have been dragging their feet and opposing some of Biden’s nominees solely for political reasons. They are even opposing nominees because of their partisan social media activity – a standard that would have disqualified a number of Trump nominees.

Looking ahead a bit, the For the People Act and the John Lewis Voting Rights Advancement Act were recently passed by the House and would take strong steps to guarantee the right to vote for all, a key step toward unifying America. (See this previous post for more details.) These bills have the broad, bipartisan support of about 70% of Americans. However, the Republicans plan to block them in the Senate with the filibuster. Meanwhile, Republicans in many state legislatures and Governors’ offices are pushing bills that would suppress voting, particularly of people of color and those with low-incomes. (See this previous post for more details.) The House has also passed the George Floyd Justice in Policing Act, which will presumably be blocked by a filibuster by Senate Republicans. Clearly, most Republicans in Congress and those in many states across the country have no interest in bipartisanship and no interest in unifying America.

The hypocrisy of Republicans in Congress was just highlighted by their filing of a bill to repeal the estate tax. Over the next ten years, this would give $350 billion to 2,000 very wealthy people (i.e., those with estates of over $11 million for an individual or $22 million for a couple). Yet, the Republicans pushed to stop 17 million middle class Americans from receiving the $1,400 pandemic relief payments to save $24 billion (7% of the estate tax giveaway) and also to reduce weekly unemployment benefits by $100. So, Republicans support a big tax cut for some of the wealthiest people in America but oppose a little help for those in the middle class. This makes it clear that their purported concern about government spending and the deficit is hypocritical. Clearly, their calls for unity are hypocritical as well.

On a personal note, I’m dismayed to be writing so negatively about most Republicans and the Republican Party. I believe in political competition and an honest debate over policies. I grew up in New York State when Nelson Rockefeller, a Republican, was a well-respected Governor for 16 years. Up until the 1980s, I was a proud Independent voter, not registered in either party. My first significant political involvement was in 1980 when I worked hard for John Anderson for President, a Republican running as an independent against Jimmy Carter and Ronald Reagan.

However, the 1980s made it clear to me that the Republicans had become wedded to an anti-government, anti-worker, anti-civil rights agenda. And their agenda has only gotten more extreme since then. In the 1990s, I became quite disillusioned with the national Democrats who adopted much of the Republican deregulation, pro-big business, pro-Wall Street agenda.

The Republican Party, for the most part, has now adopted an anti-democracy agenda that supports voter suppression, big corporations, and wealthy individuals without reservations. I hope President Biden can change the direction of the country and the Democratic national party while standing up to the radical revolutionaries of the Republican Party.

I urge you to contact the White House and let Biden know that you support his and the Democrats’ efforts to restore our democracy and its commitments to equal opportunity for all, the rule of law, and government of, by, and for ALL the people. You can contact the White House at https://www.whitehouse.gov/contact.

CRACKING DOWN ON CORPORATE CORRUPTION AND SHELL COMPANIES

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

There’s a piece of very good news in the battle against corporate corruption and the use of shell companies to engage in criminal and unsavory activity. You may recall the defense spending bill, called the National Defense Authorization Act, that Congress passed last December and then, on New Year’s Day, overrode President Trump’s veto of it. (Trump vetoed it because it renames military bases currently named for Confederate generals and because it doesn’t repeal the liability protection for social media platforms when third parties post offensive or libelous material.) Given that it was one of a very few pieces of legislation actual passed by Congress, a number of unrelated items (called riders) were attached to it as the only way to get them passed.

One of the riders attached to the recent defense spending bill was the Corporate Transparency Act (CTA), which will significantly inhibit the use of shell companies for money laundering and other illegal or unsavory activities. A shell company is a legal entity established without any actual business operation or significant assets that is typically used to obscure ownership and hide financial transactions from law enforcement and/or the public. The CTA is the most significant financial industry reform addressing money laundering since the Patriot Act, which was passed after the Sept. 11, 2001, terrorist attacks. [1]

The CTA will require a company to disclose the names of its owners, i.e., anyone with a 25% or greater ownership share or who exercises substantial control over the company. This information will be in a confidential registry maintained by the Financial Crimes Enforcement Network (FinCEN) at the U.S. Treasury Department. FinCEN captures and analyzes financial transactions in order to combat money laundering, terrorism financing, drug trafficking, and other illegal activity. Its data is available only to law enforcement and to financial institutions (that use it to scrutinize the entities involved in financial transactions). The CTA also increases penalties for money laundering, streamlines cooperation among banks and foreign law enforcement, and significantly expands the rewards for whistleblowers, allowing them to receive up to 30% of money seized by law enforcement. [2]

The CTA responded to a decade of disclosures of the abusive uses of shell companies led by the reporting of the International Consortium of Investigative Journalists (ICIJ). The ICIJ has repeatedly documented how criminals and the rich have used shell companies to hide their wealth and move their money. It investigated and reported on the use of shell companies based on the leaked Panama Papers in 2016, the 2017 Paradise Papers leak, and its Secrecy for Sale project, which began in 2012 and continues to today. ICIJ reporting has disclosed that Delaware, Wyoming, and Nevada are favorite locations to set up shell companies, in addition to offshore tax havens. [3] Its analysis in 2020 of leaked FinCEN reports of suspicious financial transactions identified shell companies transferring money through U.S. banks for criminals in Russia, China, Iran, and Syria.

ICIJ’s reporting has made it clear that the U.S. has been the country of choice for criminals and wealthy individuals to set up anonymous shell companies that, in addition to tax evasion, have facilitated bribery and other illegal payoff schemes, as well as money laundering for terrorism, political corruption, and a variety of criminal enterprises including drug, arms, and human trafficking.

The U.S. political system is a swamp of money and increasingly the true sources of political contributions and campaign spending are hidden, a trend exacerbated by the use of shell companies. While it is illegal for foreign individuals or entities to contribute to U.S. campaigns, a shell company makes the true source of campaign spending anonymous. Therefore, it is highly likely that illegal foreign money has been going into U.S. political campaigns via shell companies.

The Trump campaign created a shell company, American Made Media Consultants, that spent more than $759 million of Trump’s campaign funds (over 50% of the campaign’s spending). This obscured the flow of money including who was paid when and how much. Nonetheless, it is clear that at least eight individuals who were paid by the Trump campaign were also paid in connection with the January 6, 2021, rally that led to the storming of the Capitol. [4] Previously, Trump had personally used shell companies, including to pay off Stormy Daniels, the pornography actress who says Trump had an affair with her. [5]

The Corporate Transparency Act is an important step forward in increasing the transparency of financial transactions. It will, among other things, reduce corporate and political corruption, inhibit criminal and terrorism finances, and reduce tax evasion. This is a good step but there’s lots more to do, such as strengthening prosecution of white-collar crime. More on that in a future post.

[1]      Talking Points, 1/11/20, “New law cracks down on shell companies to combat corruption,” The Boston Globe from the Associated Press

[2]      Cox Richardson, H., 12/27/20, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/december-27-2020)

[3]      Mustufa, A., 12/11/20, “Advocates celebrate major US anti-money laundering victory,” International Consortium of Investigative Journalists (https://www.icij.org/investigations/paradise-papers/advocates-celebrate-major-us-anti-money-laundering-victory/)

[4]      Massoglia, A., 1/22/21, “Shell companies and ‘dark money’ may hide details of Trump ties to DC protests,” Center for Responsive Politics (https://www.opensecrets.org/news/2021/01/trump-tied-to-dc-protests-dark-money-and-shell-companies/)

[5]      Cox Richardson, H., 12/27/20, see above

UNITY MEANS VOTING FOR ALL: FEDERAL LEGISLATION

In a democracy built on the premise that all people are created equal and a commitment to one person, one vote, the electoral goal should be a guaranteed right to vote (which does not currently exist) and 100% voter participation. Work toward these goals would be a strong unifying force. Unfortunately, there are many Republicans who are working to restrict voting in ways that give them an electoral advantage. As my previous post documented, the good news is that at least 37 states are considering over 540 bills to expand or ease access to voting. This is almost three times as many such bills as had been introduced a year ago. The bad news is that 33 states are considering 165 bills that would restrict access to voting. This is almost five times as many such bills as were under consideration a year ago. [1]

There’s more good news at the federal level where there are  two important pieces of legislation that will protect and support every citizen’s right to vote: [2]

  • For the People Act (H.R. 1 in the House and S. 1 in the Senate) which addresses many issues related to making it easier to vote; promoting one person, one vote; controlling campaign spending; and enhancing ethical standards for public officials.
  • John Lewis Voting Rights Advancement Act which focuses on eliminating racial discrimination in states’ electoral systems and addresses election oversight shortcomings that the Supreme Court created when it gutted the Voting Rights Act in 2013.

The For the People Act was passed by the House in 2019 but ignored by Senate Republicans led by Senator McConnell (KY). It has been reintroduced in both the House and the Senate and would:

  • Improve access to voting by:
    • Streamlining voter registration
    • Expanding early voting and taking other steps to reduce waiting times at the polls
    • Expanding and simplifying voting by mail
    • Restoring voting rights to people who have completed their sentence for a felony
  • Promote one person, one vote, as well as voting integrity and security by:
    • Ending gerrymandering of districts
    • Regulating purges of voting rolls to prevent partisan voter suppression
    • Providing $1 billion for upgrading the security of state voting systems, including requiring auditable paper ballots
    • Increasing oversight of voting machine vendors
    • Restructuring the Federal Election Commission (FEC) to strengthen its enforcement of election laws
  • Increase disclosure of campaign spending by:
    • Requiring all organizations engaged in political activity to disclose large donors
    • Requiring disclosure of spending on on-line political ads
    • Eliminating the funneling of campaign spending through multiple entities in order to prevent donor identification
  • Enhance the value of small campaign donations and limit the influence of wealthy donors by:
    • Creating a 6 to 1 match for small donations to candidates who opt into a system that matches small donations with public funds (Note: This is a critically important strategy that is working in New York City and elsewhere to enlarge and diversify the pool of candidates who run, engage and amplify the voices of regular people, and limit the influence of wealthy donors. [3])
    • Raising the funds to match small donations through a surcharge on fines corporations pay for illegal activity and on tax cheating by the wealthy
    • Dramatically lowering the maximum campaign contribution limit for candidates who opt into the matching system
  • Enhance ethics laws governing public officials and strengthen their enforcement by:
    • Requiring Presidents to disclose their tax returns
    • Strengthening conflict of interest and financial divestment standards for public officials
    • Slowing the revolving door between related private and public sector jobs
    • Prohibiting Members of Congress from serving on corporate boards
    • Strengthening the Office of Government Ethics and its enforcement powers
    • Closing loopholes in the regulations governing lobbyists and foreign agents
    • Creating a code of ethics for Supreme Court Justices

The John Lewis Voting Rights Advancement Act is designed to respond to the Supreme Court’s 2013 decision that gutted the Voting Rights Act, fixing what the Court said made the law unconstitutional. The implementation of voting restrictions accelerated sharply immediately after the Supreme Court’s decision, with Republicans using them to target non-white and other voters who tend to vote for Democrats. The bill would also address other issues related to racial discrimination in voting systems. This bill was passed by the House in 2019 but was ignored by Senate Republicans led by Senator McConnell (KY). It has been reintroduced in both the House and the Senate and would:

  • Establish new criteria for determining which states and political subdivisions must obtain preclearance before changing voting procedures. (Preclearance means receiving approval from the Department of Justice before making changes to voting procedures.)
    • The new criteria focus on particular practices that have been problematic in the past because they restricted access to voting, often in a discriminatory way. These practices include onerous vote ID requirements and the changing of district boundaries, voting locations, early and mail-in voting opportunities, and voter registration list maintenance procedures.
    • All jurisdictions (e.g., counties, cities, and towns) would be required to obtain preapproval for implementing more stringent requirements for documentation to vote (such as IDs) than those established by federal law for vote by-mail registration or than those present in state law.
  • Require appropriate notification to the public of changes in voting procedures.
  • Clarify the circumstances under which a court must immediately block changes to voting procedures that have been challenged.
  • Establish standards and procedures for deploying federal election observers when problems with voting access are identified, particularly a serious threat of racial discrimination.

There is strong bipartisan support for the provisions of these bills that move toward guaranteeing the right to vote and making it easy to do so, as well as protecting the integrity of our elections. It is particularly noteworthy that this level of support exists despite all the Republican attacks on many of these aspects of our voting systems, especially voting by mail. For example: [4]

  • 86% support working to prevent foreign interference; 7% are opposed.
  • 84% want enhanced election security; 8% are opposed.
  • 74% support non-partisan determination of electoral districts; 11% are opposed.
  • 68% want 15 days of early voting; 19% are opposed.
  • 60% support same day voter registration; 29% are opposed.
  • 59% support automatic voter registration; 29% are opposed.
  • 58% want to vote by mail; 35% are opposed.

I encourage you to contact your U.S. Representative and Senators and urge them to support efforts to make it easier to vote, to encourage every citizen to vote, to end racial and partisan discrimination in states’ election systems, and to enhance the integrity and security of our elections.

You can find contact information for your US Representative at  http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Brennan Center for Justice, 2/8/21, “Voting laws roundup 2021,” (https://www.brennancenter.org/our-work/research-reports/voting-laws-roundup-2021-0)

[2]      Perez, M., & Lau, T., 1/28/21, “How to restore and strengthen the Voting Rights Act,” The Brennan Center for Justice (https://www.brennancenter.org/our-work/research-reports/how-to-restore-and-strengthen-voting-rights-act)

[3]      Vandewalker, I., 2/4/21, “How to change incentives for both politicians and donors,” The Brennan Center for Justice (https://www.brennancenter.org/our-work/analysis-opinion/how-change-incentives-both-politicians-and-donors)

[4]      Cox Richardson, H., 2/25/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/february-25-2021)

EXAMPLES OF CORRUPT CAPITALISTIC BEHAVIOR Part 4

Here are eight recent examples of corporate corruption and of the overall corruption of our current system of capitalism, in which a lack of regulation of large corporations and Wall Street allows greed to run rampant. The frequency of these incidents is astounding; they are reported on a daily basis. The varied examples below document a breadth of greed-driven corruption that puts lives in danger, destroys news reporting that is essential to a well-functioning democracy, and makes the stock market vulnerable to manipulation and our financial system vulnerable to criminal money laundering. (This previous post highlighted three other examples of corrupt capitalistic behavior.)

Example #1: The power outage in Texas has dramatically illustrated what happens when the private sector is not properly regulated. This is, of course, particularly important when we rely on the private sector to deliver a vital public service (e.g., electricity or water) or an essential public product (e.g., health care supplies or food). In Texas, the private electric power generation companies and the private electric grid manager decided in the 1930s to avoid federal regulation by refusing to participate in the national power grid. Then, they got Texas regulators to let them cut corners to maximize profits. The result is an electric power system that doesn’t have the capacity to respond in an emergency and, therefore, left millions of people in the dark and cold, jeopardizing their health, safety, and, indeed, their lives, during a recent mid-February cold snap. [1]

Example #2: The wild fluctuations in GameStop stock, a small, previously little-known company, have focused attention on weaknesses in the regulation of the stock market and of the companies that facilitate stock trading. GameStop stock shot up from $4 to $5 a share in August to $20 in mid-January to $483 in late January. It then fell back to $41 by mid-February. This roller coaster ride has highlighted the risks and often unfair environment that individual investors face in the stock market, which is dominated by sophisticated, powerful, and wealthy traders, who too often are further advantaged by access to inside, non-public information. [2]

Example #3: Three big drug distributors (Cardinal Health, AmerisourceBergen, and McKesson) and Johnson & Johnson are paying big fines (a total of $26 billion) as part of the settlement for fraudulently marketing and selling opioids, which led to drug addictions, overdoses, and tens of thousands of deaths. However, they are deducting these fines from their taxes, reducing what they owe the government by a combined $4.6 billion. Under the settlement, the four companies will avoid having to admit to any guilt, wrongdoing, or legal responsibility. Many people involved with this case feel that the fines are too low based on the damage that was done and that the tax deductions and the lack of any admission of guilt are insulting to the victims. [3]

Example #4: Tribune Publishing, one of the last newspaper chains not already owned and gutted by private equity or hedge fund vulture capitalists, is being bought by the Alden Global Capital (AGC) hedge fund. AGC, along with other vulture capital newspaper purchasers, has consistently maximized financial returns by cutting the newspapers’ staffs, selling their real estate, busting their unions, and eliminating their pension liabilities, while pocketing as much cash as possible and loading debt onto the newspaper companies, often pushing them toward bankruptcy. The Tribune papers that will almost certainly be similarly decimated are in Chicago, Baltimore, Hartford, Orlando FL, New York (the Daily News), Annapolis, Allentown, Newport News, and Norfolk VA. AGC now owns over 200 newspapers. This purchase (and the others like it) is possible because of a lack of antitrust enforcement and special tax law provisions that favor debt-financed acquisitions and payment of special dividends from companies operating at a loss. [4]

Example #5: An investor lawsuit against Boeing is moving forward based on claims that the Board of Directors and management failed to uphold their responsibilities to shareholders relative to the safety issues and crashes of the 737 Max airplanes. Two of the planes crashed in the spring of 2019 killing 346 people. The suit questions the Board’s and management’s roles both in the initial testing of the plane and its software, and their actions after the crash of the first plane, when they decided not to ground all the 737 Max planes. Boeing has already agreed to pay more than $2.5 billion to resolve criminal charges that it conspired to defraud the Federal Aviation Administration (FAA) during the plane’s safety review and certification. The Board did fire Boeing’s CEO in 2020, but gave him a $62 million severance package. [5]

Example #6: Bristol-Myers Squibb and Sanofi, who jointly market the blood-thinning drug Plavix, were ordered by a judge to pay the State of Hawaii over $834 million for illegally marketing the drug. For 12 years, they failed to properly warn consumers about health risks and didn’t disclose that the drug was ineffective for up to 30% of users, both of which put some users’ lives at risk. They engaged in these practices in order to maximize their profits. [6]

Example #7: Google has agreed to pay a $1.3 million fine to French fraud and competition regulators for displaying misleading rankings for French hotels on Google Maps and in Search results. [7]

Example #8: Citigroup, parent of Citibank, was fined $400 million for deficient financial controls and related technology. In an ironic example of its lack of controls, Citibank, in what it says was a mistake, transferred over $500 million to a client’s lenders while intending to make a much smaller interest payment. A judge recently ruled that the lenders do not have to return the money. [8]

[1]      Cox Richardson, H., 2/16/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/february-16-2021)

[2]      Rosen, A., 2/18/21, “Mass. Investor ‘Roaring Kitty’ says he wasn’t part of any coordinated effort to boost GameStop,” The Boston Globe

[3]      MacMillan, D., & Schaul, K., 2/12/21, “Drug companies seek billion-dollar deductions from opioid settlement,” The Washington Post

[4]      Kuttner, R., 2/17/21, “Private equity swallows up yet another newspaper group,” The American Prospect blog (https://prospect.org/blogs/tap/private-equity-swallows-up-yet-another-newspaper-group/)

[5]      MacMillan, D., 2/17/21, “Boeing directors misled on safety, investor lawsuit claims,” The Boston Globe from the Washington Post

[6]      Bloomberg News, 2/16/21, “Bristol-Myers, Sanofi must pay $834 million over Plavix,” The Boston Globe Talking Points

[7]      Associated Press, 2/16/21, “Google fined $1.3M for misleading French hotel rankings,” The Boston Globe Talking Points

[8]      Bloomberg News, 2/17/21, “Citigroup loses $500 million legal battle over transfer blunder,” The Boston Globe Talking Points