WHY WE NEED EFFECTIVE GOVERNMENT REGULATION

The need for effective government regulation has been highlighted by recent events including the crash of an airliner in Africa and a mass shooting in New Zealand. We rely on federal regulators to keep us safe and to make informed and independent decisions about the safety of consumer products and services. Deregulation and privatization over the past 40 years, which have accelerated in recent years, have weakened federal regulation and increased risks for consumers and the public.

The Federal Aviation Administration’s (FAA) mission is to keep air travel safe. However, after the crash of a Boeing 737 in Africa, the second for that model airplane in four months, the FAA did not order this plane to be grounded, even though virtually every other airplane regulator in the world did. President Trump, of all people, overruled the FAA and ordered the plane to be temporarily grounded.

Because of the weakening of the FAA and privatization of some of its functions, the FAA relies on Boeing employees to certify that Boeing planes are safe. It’s hard to imagine a more obvious conflict of interest or lack of independent decision making, when the public’s safety should be the sole decision-making criterion.

The FAA’s regulatory mission has been compromised, at least in part, because Boeing is very active politically. It spent $15 million on lobbying in 2018. Its political action committee and employees have donated over $8 million to the election campaigns of members of Congress and presidential candidates since 2016. Trump’s decision was somewhat surprising because Boeing’s president and CEO frequently visits with Trump at his Mar-a-Lago resort and at the White House. He also gave $1 million to Trump’s inaugural committee. A former Boeing executive has also been appointed acting Secretary of Defense by Trump. [1] [2] All these activities by Boeing and its executives are meant to increase its influence over policy makers who oversee the FAA and its budget.

On a different front, Facebook allowed a mass shooting by a White supremacist in New Zealand to be live streamed and widely viewed over its platform. YouTube / Google and Twitter were guilty of allowing this shocking video to be broadly shared. Despite safeguards these companies claim to have in place to prevent this, it took them many hours to remove this video from their platforms. And this isn’t the first time violent, disturbing videos have been widely shared on these platforms. Furthermore, Facebook had been used by the shooter and other like-minded individuals to communicate and share ideas and plans. [3] [4]

Facebook has also faced strong criticism for its repeated failures to protect the privacy of individuals’ data – even after it had promised regulators that it would do so, including in a 2011 consent agreement with the Federal Trade Commission. [5] It has also faced criticism for allowing the spread of false information and inflammatory, racist, bigoted, and terrorist messaging by individuals and groups who were able to establish accounts on Facebook often with false identities or to hijack the accounts of legitimate Facebook users. It has also allowed groups that traffic in such mindsets and mis-information to flourish on its platform, exacerbating extremism and societal divisions, tensions, and hatred. [6]

Finally, Facebook blocked an advertisement by presidential candidate Elizabeth Warren that promoted her policy proposal to regulate and break up huge, monopolistic technology corporations, such as Facebook. Facebook relented and let the advertisement run after a firestorm of criticism.

Clearly, Facebook and other social media platforms need better and stronger government regulation. Government regulators need to figure out how to better protect citizens from mis-use of personal information; on-line sharing of violent videos, inflammatory content, and false information; discrimination by platform operators; and hackers, bullies, and trolls. Ultimately, if regulators can’t get these companies to correct these problems, the social media companies should be forced to shutdown services they can’t run responsibly, such as live-stream video sharing.

As a third example, the Consumer Financial Protection Bureau (CFPB) was created in the aftermath of the 2008 financial collapse in which millions of Americans lost their homes, their savings, and/or their jobs. The collapse occurred because Wall St. financial firms were weakly regulated and were able to engage in fraud and speculative investing that lost huge amounts of money. [7] The CFPB is an example of a federal regulator that was created in the wake of a huge scandal but is now being hampered and weakened by elected officials in response to campaign contributions and heavy lobbying from regulated industries. (See previous posts here, here, here, and here for more background.)

Recently, President Trump and many members of Congress, especially Republicans but including some Democrats, have been working to roll back regulation of payday lenders that the CFPB spent five years carefully crafting. These lenders exploit financially stressed individuals who need a short-term loan until their next payday. The lenders charge annual interest rates as high as 400% and make loans they know the individual is unlikely to be able to pay back on time. When the borrower defaults, the lender then renews the loan (often again and again), typically with additional fees each time, capturing the borrower as a perpetual revenue stream. The payday lending industry makes most of its profits from these financially distressed and desperate repeat borrowers. [8] [9]

Clearly, we need the CFPB to protect consumers from abusive, predatory, and fraudulent behavior by financial companies and to protect our economy from the likelihood of another financial collapse like the one in 2008.

We rely on, or perhaps at this point in time I should say that we should be able to rely on, these and other regulators, such as the Consumer Product Safety Commission, the Environmental Protection Agency, and the Department of Education, to protect us. However, due to regulatory failures, we are increasingly experiencing dangerous consumer products from manufacturers and importers, serious pollutants in our air and water, and fraudulent, for-profit colleges. Weakened federal regulators and increased influence of regulated industries over the regulators are to blame.

We, as citizens and voters in a democracy, and our elected representatives need to realize how important strong, independent regulation is to our health and safety. This is important to us individually and to the functioning of our economy. Regulators’ sole focus must be to protect the health and safety of consumers, workers, and the public. They must be truly independent of the industries they regulate and must have the necessary resources to effectively carry out their responsibilities.

[1] Robinson, M. S., 3/15/19, “We shouldn’t depend on Boeing to tell us whether Boeing planes are safe to fly,” The Boston Globe

[2] Lardner, R., & Lemire, J., 3/14/19, “Boeing packs massive lobbying arm,” The Boston Globe from the Associated Press

[3] Editorial, 3/15/19, “New Zealand mosque attack should be a wake up call for big tech,” The Boston Globe

[4] Pham, S., 3/15/19, “New Zealand shooting video,” CNN Business

[5] LaForgia, M., & Rosenberg, M., 3/14/19, “US aims probe at Facebook’s data-sharing,” The Boston Globe from The New York Times

[6] Schiffrin, A., Winter 2019, “The digital destruction of democracy,” The American Prospect

[7] Warren, E., 9/17/18, “10 years after Lehman collapse, Washington is back to its old tricks,” The Boston Globe

[8] Sweet, K., 10/27/18, “Federal agency eyes looser payday loan rules,” The Boston Globe from the Associated Press

[9] Gordon, M., 3/8/19, “Fresh scrutiny for consumer watchdog,” The Boston Globe from t/he Associated Press

PRIVATE WEALTH IS MADE ON PUBLIC INVESTMENTS

Private companies and individuals benefit from public investments in many ways. You may remember Senator Elizabeth Warren saying back in 2014 that “Nobody got rich on their own. Nobody. People worked hard, they built a business, God bless, but they moved their goods on roads the rest of us helped build, they hired employees the rest of us helped educate, they plugged into a power grid the rest of us helped build,” they are protected by police and firefighters that we all pay for, and so forth. [1]

Clearly, successful companies and individuals owe their success in part to public infrastructure and investments. Therefore, they should pay their fair share in taxes to support public spending on both the infrastructure they depend on and also to invest in the future so other individuals and companies can succeed as they did.

Another way that public investment supports and benefits private individuals and companies is that the federal government invests heavily in basic research that is then used by the private sector to develop products and services.

One example of this is that the National Institutes of Health (NIH) spends $30 billion each year on drug research and development (R&D). The pharmaceutical industry routinely justifies the high prices of drugs by citing the high cost of R&D to bring new drugs to market. This rationale is overstated from many perspectives (see my previous blog on drug pricing), but Representative Ocasio-Cortez shed new light on this overblown claim in a hearing in Congress earlier this year.

Rep. Ocasio-Cortez asked Dr. Aaron Kesselheim [2] whether the public was receiving any return on the investments in drug R&D made by the NIH when they led to highly profitable drugs. His answer, “No, … when those products are … handed off to a for-profit company, there aren’t licensing deals that bring money back into the coffers of the NIH.” [3]

Every one of the 210 new drugs approved by the Food and Drug Administration (FDA) between 2010 and 2016 benefited from NIH funded R&D.

The U.S. government is the biggest venture capital investor in the world. Examples outside of pharmaceuticals abound. The Internet grew out of the 1960s ARAPNET program funded by the Defense Department. Touchscreen technology was developed at a publicly-funded university using National Science Foundation grants. GPS technology began as a 1970s Defense Department program. Voice recognition technology came out of a project of the Defense Advanced Research Projects Agency (DARPA). Every one of the 12 key technologies of smart phones grew out of government-funded research projects. The Department of Energy has made over $35 billion in loans to high-risk clean technology projects, including Tesla’s development of electric cars. [4]

Unfortunately, the U.S. public is not getting the return it deserves on these investments. One way to get a public return is to tax the profits of companies using technologies in which the government has invested. Currently however, some of these companies pay very little or nothing in taxes. Furthermore, the 2017 tax cuts reduced corporate taxes to a near-record low. In addition to taxes, in countries such as Germany and Finland, the government obtains partial ownership or royalty payments from companies that benefit from public investments.

Part of the reason the public does not get a return on public investments in the U.S. is that our political system has been skewed to favor the interests of the private sector through our campaign finance system, lobbying, and the revolving door between government and private sector jobs. For example, over the last ten years, the pharmaceutical industry has spent almost $2.5 billion lobbying Congress. This includes hundreds of millions of dollars spent to influence the drug coverage provisions of the Affordable Care Act, which produce about $35 billion in additional profits for the pharmaceutical corporations.

Our elected officials and government regulators need to begin insisting that private companies and individuals provide the public – the taxpayers – with a reasonable return on public investments, including everything from roads, bridges, and air transportation, to our education system, to research and development. Fair taxation is one way to do this, but other avenues, such as partial ownership and royalty payments, should be explored as well.

[1] Senator Elizabeth Warren, August 2012, campaign event https://www.youtube.com/watch?v=AHFHznu-N-M (30 seconds in)

[2] Dr. Kesselheim is a doctor and a lawyer. He is an Associate Professor of Medicine at Harvard Medical School. He is an expert on the effects of intellectual property laws and regulatory policies on pharmaceutical development, the drug approval process, the costs, availability, and use of prescription drugs, and bioethics. (https://bioethics.hms.harvard.edu/person/faculty-members/aaron-kesselheim)

[3] Karma, R., 3/6/19, “Alexandria Ocasio-Cortez and the myth of American innovation,” The American Prospect (https://prospect.org/article/alexandria-ocasio-cortez-and-myth-american-innovation)

[4] Karma, R., 3/6/19, see above

RACISM ON THE SUPREME COURT?

On June 25, 2013, the U.S. Supreme Court ruled, in a 5 to 4 decision, that key provisions of the Voting Rights Act (VRA) were unconstitutional. The case was formally known as Shelby County, Alabama v. Eric H. Holder, Jr., Attorney General. Chief Justice Roberts wrote for the majority (which included Justices Scalia, Kennedy, Thomas, and Alito) that “Our country has changed” and claimed that it had done so so dramatically since the initial passage of the VRA in 1965 that the VRA was now not only unneeded but unconstitutional.

This decision was shocking to many, in part because the Act had been reauthorized in 2006 by overwhelming majorities in Congress and signed into law without controversy by President George W. Bush. The Congressional vote, with Republicans in control of both the House and the Senate, was 390 to 33 in the House and 98 to 0 in the Senate in favor of reauthorizing, i.e., extending, the Voting Rights Act.

The over 15,000 pages of evidence compiled by Congress in its review of the VRA in 2006 indicated that it was still badly needed. The Chair of the House Judiciary Committee, Republican Representative James Sensenbrenner of Wisconsin, a conservative, noted that evidence had been “assembled to show the need for the reauthorization of the Voting Rights Act” and that it documented “the extensive record of continued abuse” of voting rights. [1]

This extensive evidence clearly established that the country hadn’t changed much since the VRA’s enactment in 1965 with respect to efforts to impede voting by Blacks in some areas, particularly the South. It documented relentless efforts in some states to counter the effects of the VRA. The on-going nature of these efforts was confirmed by actions taken almost immediately after the Court’s ruling overturning the VRA. (See some specifics below.)

The Supreme Court in effect ruled that Congress had acted irrationally in 2006 in reauthorizing the VRA. Chief Justice Roberts’ and his colleagues’ decision was based on their version of reality, which was in contradiction to the evidence amassed by Congress. Roberts probably wouldn’t have been persuaded by any evidence, given that he had worked zealously in 1981, when he was at the Justice Department, to roll back the protections of the VRA.

At best, the Court’s decision was a failure of empathy or a triumph of ideology, but more likely it reflected racism.

Justice Scalia, in the oral arguments leading to the decision, described the VRA as being a “perpetuation of racial entitlement” and stated that he didn’t believe any legislator would vote to end such an entitlement once society had adopted it. Therefore, it was up to the Court to declare it unconstitutional, because this was the only way to end this racial entitlement. [2] Why the right to vote, which is a core principle of our democracy, would be considered a “racial entitlement” is hard to understand except from the perspective of racism.

The irony here, of course, is that the racial entitlement that exists in U.S. society is the entitlement of Whites. For most of the two hundred years of its existence, there were all White elected officials, police forces, corporate executives, judges and juries, as well as schools, colleges, and teachers, to list a few examples. And while our country has begun to change in this regard, there still is a long way to go to achieve anything close to equity.

What occurred after the elimination of the protections of the VRA has made it clear how virulent efforts to suppress voting, particularly of Blacks, are today. Within two hours after the Supreme Court issued its decision on the VRA, Texas took steps to reinstitute its strict photo ID law, which had previously been struck down by a federal court. The day after the decision, North Carolina amended a pending bill to make its voter ID law stricter and added other provisions eliminating or restricting opportunities to vote that targeted minority voters. Changes in voting procedures in other states, which had previously been blocked by the federal government under the VRA, were quickly implemented.

After years of litigation, federal courts have forced the reversal of the actions of Texas and North Carolina because their changes in voting laws were found to be intentionally racially discriminatory. However, in the intervening years, the discriminatory provisions were in effect. Overall, federal courts have now ruled that at least 10 of the new, state restrictions on voting were illegal.

In the five years since the Supreme Court’s overturning of the VRA, nearly 1,000 polling places have been closed, many of them in predominantly Black areas. Access to early voting has been cut, voters have been purged from the lists of eligible voters, and requirements to show a voter ID or provide proof of citizenship have been implemented. [3] Nine states had been subject on a statewide basis to VRA oversight of changes in voting procedures (Alabama, Alaska, Arizona, Georgia, Louisiana, Mississippi, South Carolina, Texas, and Virginia). In every one of them at least one of the above five impediments to voting has been implemented (the average was 2.3 impediments). Eight of the 9 moved or eliminated polling places and 8 of 9 implemented new voter ID requirements. Four of these impediments to voting were implemented in each of two other states, where only parts of the states had been subject to the VRA (Florida and North Carolina).

Clearly, the Supreme Court majority was in error when they concluded that the country had changed and the protections of the VRA were not only no longer needed, but had risen to the level of being unconstitutional oversight of states’ elections by the federal government. Given that the Court is extremely unlikely to reverse itself, it is up to Congress to pass a new VRA that will fill the gaps in the protection of voting rights created by the Court’s decision.

I urge you to contact your U.S. Representative and Senators to ask them to support a new Voting Rights Act. Our democracy should be encouraging and supporting voting by all eligible voters, and not allowing states or local jurisdictions to implement impediments to voting – especially when those impediments have disproportionate effects on Black Americans.

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] Fountain, B., 2018, Beautiful Country Burn Again, HarperCollins Publishers, NY, NY. Quotations from page 406.

[2] Fountain, B., 2018, see above. Quotation from page 409.

[3] U.S. Commission on Civil Rights, 2018, “An assessment of minority voting rights access in the U.S.: 2018 statutory report.” (https://www.usccr.gov/pubs/2018/Minority_Voting_Access_2018.pdf)