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

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

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 6^th 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 6^th, 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

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/)