THE PLUTOCRATS’ ECONOMIC CON

Since the late 1970s, a concerted effort has been made by right-wing, wealthy elites to promote a new brand of “free market” capitalism, which I refer to as plutocratic economics. [1] Their broad, well-funded initiative was successful in reversing and undermining the progressive, managed capitalism that was put in place in the 1930s and 40s in response to the failure of the largely unregulated markets that led to the Great Depression.

After 40 years of experience with these plutocratic policies, the results are in: they don’t work. Wealthy elites (the plutocrats) have benefited substantially, but the consequences for the economy, workers, and the middle class have been very negative.

The plutocrats’ basic argument is that markets work and government doesn’t. They assert that government is inherently incompetent, in part because it and its regulators have been “captured” by the special interests they were supposed to regulate. [2]

The wealthy individuals and large, often multi-national, corporations pushing plutocratic economics invested in politicians, academicians, think tanks, and advocacy organizations to promote their theories, rationales, and policies. Academicians and think tanks were hired and funded to give a scholarly veneer and rationale to what otherwise would have been seen for what it was – a raw power grab. The resultant public policies greatly benefited the self-interest of the wealthy elites and corporate executives.

On the political front, the plutocrats use multiple strategies to achieve their policy goals. They employ lobbyists who work to convince policy makers to support their policies. They place supporters (often former corporate employees) within the government bureaucracy (a.k.a. the revolving door). They make campaign contributions and “independent” expenditures on behalf of candidates to elect supportive individuals and to buy access to elected officials. They promote trade policies and a type of globalization that undermines American workers. They got U.S. policy makers to choose trade policy options that put the interests of multi-national corporations and investors first and those of workers last. [3]

Proponents of the plutocratic economics promised that markets and businesses would regulate themselves for the good of all, that markets would be more efficient without government regulation, and that social goals could be more effectively achieved by using market forces. They also argued that social programs that supported low income workers and families were inefficient, unnecessary, and provided disincentives to work hard and make positive contributions to our economy.

In concert with their economic and political theories, the plutocrats pushed to reduce progressive taxation, eliminate government regulation and anti-trust enforcement (which had limited the size and marketplace power of corporations), and dramatically weaken public programs that provide support for workers and a safety net (including the minimum wage, unemployment benefits, unions, and welfare payments to the poor). Their trade policies allowed U.S. multi-national corporations to ship five million jobs overseas over the last 20 years. As a result, multi-national corporations now have a smaller portion of their global workforce in the U.S. than the portion of their sales that are in the U.S. [4]

The plutocrats and their hired experts developed rationales for their policies based on economic theories and assumptions about markets that were not supported by actual experience (and have since been disproved by actual experience). For example, they assumed ideal and efficient markets where perfect information was available to buyers and sellers, where prices were set solely by supply and demand, where sellers and buyers were numerous and no one had any marketplace power, and where there were no significant externalities, such as pollution. Supply-side economics is a classic case of an economic theory with no actual evidence for it and with substantial evidence refuting it today. It claims that cutting taxes, particularly on the wealthy and businesses, will 1) stimulate economic growth and 2) do so to such an extent that government tax revenue will actually increase. Despite multiple experiences where tax cuts have been enacted and have not produced the promised effects, the plutocrats still use supply-side theory to justify tax cuts, as they did successfully with the December 2017 $150 billion a year tax cut.

It is important to note, that despite the rhetoric, markets under plutocratic economics are NOT actually free markets. All markets require rules to function, such as rules about ownership of property including patents, copyrights, and other protections for intellectual property; laws governing contracts and courts to enforce them; standards for what constitutes unfair competitive practices; laws and courts to determine liability for accidents and harm from products; and standards for credit, debt, bankruptcy, financial transactions, and investments.

The issue for policy makers is how the markets’ rules balance the power and interests of various parties. The bottom-line questions are who makes the rules and who benefits. For 40 years, plutocratic economic policies have put returns to shareholders (i.e., primarily wealthy investors) and, by implication, corporate executives, ahead of the interests of workers and also of investment in a company’s future. As a result, compensation for workers has been flat while their productivity has continued to grow. Overall, the result of these plutocratic policies has been dramatic growth in income and wealth inequality, leaving the U.S. with the most unequal income distribution of any rich democracy. [5]

Future posts will 1) summarize the evidence that plutocratic economic policy has failed, 2) discuss the politics of plutocratic economics and how the plutocrats have reacted as the failure of their policies has become clear, 3) review the harm that plutocratic economics has done to our democracy, and 4) identify progressive policies that are needed to reverse the harmful effects of plutocracy.

[1]      Technically, among policy wonks and economists, this form of capitalism has been labeled neoliberal economics. This is confusing because liberal in the economic world means something quite different than liberal means in common political usage. Although this is a bit of an oversimplification, liberal in economics refers to individualism – an every person for him or herself approach.

[2]      Kuttner, R., 6/25/19, “Neoliberalism: Political success, economic failure,” The American Prospect (https://prospect.org/article/neoliberalism-political-success-economic-failure)

[3]      Kuttner, R., 6/4/19, “Warren’s astonishing plan for economic patriotism,” The American Prospect (https://prospect.org/article/warrens-astonishing-plan-economic-patriotism)

[4]      Tyler, G., 1/10/19, “The codetermination difference,” The American Prospect (https://prospect.org/article/codetermination-difference)

[5]      Tyler, G., 1/10/19, see above

DRUG COMPANY PRICE GOUGING: THE INSULIN CASE

A quintessential case of price gouging by drug companies, with serious and sometimes fatal consequences, is that of insulin. Roughly 30 million Americans have diabetes, a chronic disease where the body’s mechanism for controlling blood sugar levels isn’t working properly. About 7 million of them must take multiple doses of insulin daily to control blood sugar. Those with Type 1 diabetes, formerly referred to as early-onset or juvenile diabetes, suffer from a pancreas that doesn’t produced adequate amounts of natural insulin so they must use three to four 20-milliliter vials of manufactured insulin a month (or other equivalent forms of insulin). Failure to use insulin regularly to control blood sugar levels can be fatal or have serious long-term impacts on health, including on vision and mobility.

Insulin is a 100-year-old drug whose three developers at the University of Toronto in 1922 sold their patent rights to the University for $1 apiece. They thought this would guarantee affordable access to those needing it in perpetuity. They sold manufacturing and distribution rights to Lilly in the U.S. and Nordisk in Europe. After a year, competitors were free to enter the market.

Today, three big pharmaceutical corporations make the worldwide supply of insulin: Lilly, Novo Nordisk, and Sanofi. Their prices for insulin have skyrocketed, tripling from 2007 to 2017, resulting in their making billions of dollars in profits from their insulin sales.

The U.S. market has 15% of global insulin users but generates 50% of worldwide revenue because prices here are so much higher than they are elsewhere. [1] For example, vials of insulin that sell for close to $300 in the U.S. sell for $30 in Canada.

Insulin for a Type 1 diabetic costs about $1,300 a month in the U.S. Because the U.S. does not regulate drug prices as other countries do, insulin’s manufacturers have increased U.S. prices dramatically in recent years. For example, a 20-milliliter vial of insulin that cost $175 fifteen years ago costs $1,487 today, eight and a half times as much. Because Medicare, the U.S. health insurance for seniors, is prohibited by law from negotiating drug prices (a gift to the industry from friendly Congress people and a friendly President), Medicare spending on insulin grew from $1.4 billion in 2007 to $13.3 billion in 2017. While some of this increase is due to increased numbers of patients using it, per patient Medicare spending on insulin increased 358% from $862 to $3,949. Out-of-pocket spending by Medicare patients themselves also increased, going from $236 million to $968 million. [2]

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, [3] so the $300 retail cost represents a huge mark-up and huge profits for the drug makers. Until the 1970s, the price of insulin stayed relatively low. In the 1940s the U.S. Department of Justice leveled small anti-trust fines on entities in the Lilly supply chain, indicating the U.S. regulators would intervene if prices were jacked up. [4]

Starting in the late 1970s, changes in politics and laws created increased opportunities for drug makers to profit from the exclusive rights granted by patents on drugs and to effectively extend the longevity of patent protections by tweaking a drug or its delivery mechanism. This set the stage for the pharmaceutical industry to become the most profitable industry in America. For example, Sanofi filed for 74 different patents on its version of insulin, which meant that it could go 37 years without any competition. As of 2014, the three big insulin makers held 19 active patents on their insulin products.

Often the new, patented versions of insulin provide limited benefits to patients, despite their significantly higher prices. However, aggressive marketing campaigns and partnerships with improved delivery devices lead to prescriptions for the new more expensive, and more profitable, products.

A study published in the Internal Medicine edition of the Journal of the American Medical Association found that one in four insulin users (26%) in the U.S. had rationed their insulin use due to high costs; in other high-income countries the rate was only 6.5%. [5] Diabetics who couldn’t afford their insulin have died when they tried to do without or to ration their supply. Many others have endured financial hardships that have required them to use retirement savings, move to cheaper housing, sell possessions, or limit purchases of food and other drugs.

Even for individuals with health insurance, the high price of insulin is problematic because of increased co-payments for drugs and because deductibles they must pay before insurance coverage kicks in have, on average, quadrupled over the last 10 years.

The grassroots organizers of the #insulin4all campaign are working to change U.S. policies and make insulin affordable. Their campaign may prove to be the spark that leads to regulation and negotiation of all drug prices in the U.S. Advocacy is increasing in energy and urgency because diabetics are literally fighting for their lives as insulin makers jack up the price and they don’t see government standing up for them.

The issue of drug prices and particularly insulin prices is, finally, getting increased attention. Congress is holding hearings on insulin prices. Federal and state legislation is being considered. Colorado has passed legislation capping co-payments for insulin. Some advocates have called for nationalizing the insulin market and public manufacturing of generic drugs, including insulin.

I urge you to contact your state and federal elected representatives and to ask them to pass legislation to control the price of insulin and stop price gouging by the drug industry.

[1]      Shure, N., 6/24/19, “The insulin racket,” The American Prospect (https://prospect.org/article/insulin-racket)

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

[3]      Silverman, E., 6/22/19, see above

[4]      Shure, N., 6/24/19, see above

[5]      Silverman, E., 6/22/19, see above

THE U.S. SHOULD HAVE A WEALTH TAX SAY THE WEALTHY

A group of wealthy Americans who would be taxed by a wealth tax have written a letter supporting such as tax. It is a very persuasive letter explaining their reasoning. Here is a summary of it.

They call on all the presidential candidates (making it clear they are not endorsing any candidate) to support a modest wealth tax on people like them – the 19 signers of the letter who are among the richest 1/10 of 1% of Americans. By increasing taxes on the one-out-of-a-thousand wealthiest households, or about 75,000 families, our country could address many important challenges that it is facing and would, thereby, provide millions of Americans a better life and a better shot at the American dream.

They state that the U.S. has a moral, ethical, and economic responsibility to tax wealth more heavily. They note that middle income Americans already pay a wealth tax on their primary form of wealth, namely the property taxes they pay on their homes. A broader wealth tax would ask the richest Americans to pay a similar wealth tax on the primary sources of their wealth, namely stocks, bonds, and other financial investments.

The letter notes that a moderate tax on so few people raises so much money (about $300 billion a year) because the wealthiest Americans have extremely high levels of wealth. These 75,000 households have as much wealth as the least wealthy 90% of Americans. In other words, these 75,000 families have as much combined wealth as that of the 67,500,000 families with the least wealth.

The letter highlights six key reasons the signers support a wealth tax, which could do all of the following:

  • Tackle the climate crisis: The wealth tax revenue could be used to invest in accelerating innovation and implementation of a clean-energy, low-carbon economy. A wealth tax would mean that those who have benefited the most from our economic system would be helping to pay for fixing one of its most devastating flaws.
  • Strengthen our economy: The revenue could be used to invest in aging infrastructure, child care, education, and easing student debt. This would increase productivity, entrepreneurship, and homeownership, thereby promoting broad-based economic growth and prosperity. Wealth tax revenue could support innovation and job creation, strengthening our economy in ways that would benefit everyone.
  • Improve health: High economic inequality is linked to disparities in health outcomes and longevity; the wealthiest individuals have a life expectancy 15 years longer than the poorest individuals. The wealth tax revenue could be used to invest in addressing major public health challenges such as cardiovascular disease and opioid addiction.
  • Increase fairness: A wealth tax would help close the gap between the low effective tax rates paid by the wealthy and those paid by everyone else. The wealthiest 1/10 of 1% of Americans are estimated to pay 3.2% of their wealth in taxes annually, while the bottom 99% pay an estimated 7.2%. The letter states that “Taxing extraordinary wealth should be a greater priority than taxing hard work. The most fortunate should contribute more.” (p. 4)
  • Strengthen freedom and democracy: The growing concentration of wealth undermines the stability and integrity of our democracy. High levels of economic inequality have tended to concentrate political power and lead to plutocratic governments in other countries. In the U.S., major policies seldom become law without the support of wealthy interests, leading to division, dissatisfaction, and distrust of democratic institutions among the public. The wealthy signers of the letter state that “We believe instituting a wealth tax would lead to political, social, and economic stability, strengthening and safeguarding America’s democratic freedoms.” (p. 4)
  • Reflect patriotic duty: It is the patriotic duty of every American to contribute what they can to the success of the country. The letter states that the richest Americans should be proud to pay a bit more to strengthen America’s future; it’s the least they can do for the country they love.

The letter discusses the arguments against a wealth tax and concludes that they are often overstated and are mostly technical, implementation details.

The signers of the letter conclude by noting that while a wealth tax does not further their narrow economic interests, it is in their interests as Americans. Due to the strong rationale for a moderate wealth tax, they join the majority of Americans in supporting it and call on all the presidential candidates to do so as well. (For more information on a wealth tax and the rationale for it, see this previous post.)

PROGRESSIVE POLICIES #1: UNIVERSAL CHILD CARE AND EARLY LEARNING

Access to affordable, high quality early care and education (ECE) for children under school age is essential for allowing parents to be productive members of the workforce and for putting young children, especially those from families facing economic or other challenges, on a trajectory for success. Therefore, providing universal ECE is an important progressive policy priority.

For 65% of children under age six, all parents are working. The lack of affordable ECE means that some parents can’t afford to work, reducing the labor force participation of parents – a loss to our economy. In addition, reduced productivity due to employees’ inadequate or undependable ECE costs businesses billions of dollars a year because of absenteeism and other impacts on parents’ ability to work productively.

Low-income families spend, on average, over 17% of their incomes for ECE. The federal government’s benchmark for affordability is that ECE should cost no more than 7% of income. With two or more children, ECE often costs more than a parent can earn. Therefore, it can make economic sense for a parent to drop out of the workforce and care for the children.

Because providers of ECE must make their services affordable for parents, in many cases they cannot afford to provide high quality services. In particular, they cannot afford to pay ECE teachers enough to consistently attract and retain top notch staff. ECE teachers are paid much less than what they would make in other positions, for example as a public school teacher. Despite the push to have ECE teachers have a Bachelor’s degree, as public-school teachers do, their pay is about half that of public school teachers.

ECE teachers make less than $24,000 on average; pay so low that roughly half of them require public assistance, such as Food Stamps, to make ends meet. Therefore, turnover is high – which does not provide the stability of consistent relationships that children need or the quality of services that an experienced, stable workforce can deliver.

Investments in young children and their families can produce a high return on investment (ROI) – up to $17 for every dollar spent – according to numerous studies. High quality ECE for children, coupled with support for low-income parents, reduces the need for special education and grade retention in schools, reduces high school dropout rates and involvement with the criminal justice system, and increases children’s educational attainment and their future earnings. More recent studies have identified long-term improvements in health and mental health, as well as benefits for the next generation of children. These more recently identified outcomes have not yet been factored into the ROI calculations; they will undoubtedly increase the ROI for investments in young children and their families, probably substantially above the 17 to 1 return calculated by the Perry Preschool Study.

Current federal ECE programs serve only a fraction of eligible children because funding is limited. Head Start serves fewer than 50% of eligible 3 and 4 year olds (i.e., those in families below the poverty line, which is only $21,000 for a family of three that not infrequently consists of a single parent with two young children). Early Head Start, for families with a child from birth to three, serves fewer than 10% of those eligible. Finally, the Child Care and Development Fund, which subsidizes ECE for all other families, serves only about 16% of the eligible families (1 in 6).

Senator (and presidential candidate) Elizabeth Warren has made a detailed policy proposal for universally accessible ECE. Her Universal Child Care and Early Learning plan would:

  • Provide universal access to locally run ECE in centers, homes, or other settings so every family can choose the ECE it would prefer and every child has the opportunity to reach his or her full potential.
  • Ensure affordability by providing ECE free to families below twice the poverty line (about $51,500 for a family of 4) and on a sliding fee basis to other families so no family pays more than 7% of its income for ECE.
  • Guarantee high quality services, including comprehensive support for children’s growth and development, such as health, dental, and other services to ensure a safe, nurturing early childhood experience.
  • Compensate ECE teachers at the same level as public school teachers and provide them with professional development opportunities, which will improve quality and reduce turnover.

An independent economic analysis estimates that such a program of universal, affordable, high quality ECE would cost about $70 billion per year. Senator Warren proposes paying for this with a wealth tax that would generate $275 billion per year. (See my previous post for more details and options on how to pay for progressive policies like this one.)

Universal, affordable ECE would increase labor force participation and productivity, thereby stimulating economic growth and increasing tax revenue. Therefore, universal ECE would, at least in part, pay for itself in the short-term, and over the long-term the return on investment due to improved outcomes for the children would more than pay for this investment in our young children and their families.

CAN THE U.S. AFFORD PROGRESSIVE POLICIES?

Many in Congress and the Trump Administration, along with many in the media and many pundits, assert that the U.S. can’t afford the progressive policies being proposed by some Democrats in Congress and some of the Democratic presidential candidates.

This is a matter of priorities not affordability. For example, in 2017, Congress and the Trump Administration were able to afford $150 billion a year in tax cuts primarily for wealthy individuals and corporations. They also propose spending over $700 billion in 2020 on the military and foreign wars, a $34 billion increase from 2019. And the country has had no problem spending hundreds of billions of dollars building prisons and paying for a huge increase in the number of people in prison.

To fund her progressive policy proposals, Senator (and candidate for president) Elizabeth Warren has proposed a wealth tax on American citizens with over $50 million in wealth. It would generate about $275 billion per year to spend on progressive programs. (See my previous post for details and background on her proposed wealth tax.)

A recent report called the Poor People’s Moral Budget puts forth a vision for a set of progressive polices for the U.S. including ways to pay for them. [1] Their definition of “poor people” includes low-income households up to twice the federal poverty line or “one emergency away from being poor.” This includes 43.5% of the U.S. population or 140 million people. Many of these people are on the edge of being middle class and many of them were middle class before the loss of a good job, a health care emergency, or some other crisis pushed them over the edge and into economic hardship.

The Poor People’s Moral Budget identifies three categories of policy changes that could provide the federal government with the funds to pay for progressive policies:

  • $886 billion a year from fairer taxes on wealthy individuals, businesses, and the financial industry (see detail below),
  • $350 billion a year in cuts to military spending (see detail below), and
  • Billions of dollars in savings from reducing incarceration and other sources.

The proposals for fairer taxes on wealthy individuals would bring in an estimated $628 billion per year:

  • An annual wealth tax: $275 billion per year. (This is the same as Sen. Warren’s proposal. See my previous post for details.)
  • Increase the income tax rate on income (e.g., dividends and interest) and gains from assets (e.g., stocks and bonds) so they are taxed at the same rate as income from work: $150 billion per year.
  • Apply the capital gains tax to the increased value of assets prior to any transfer, such as through a gift or inheritance: $78 billion per year.
  • Impose a 5.5% income tax surtax on income above $500,000 per person: $50 billion per year.
  • Increase the inheritance tax by closing loopholes and applying it on inheritances of over $3.5 million per person (instead of the current $11 million per person): $40 billion per year.
  • Increase the income tax rate on income over $10 million to 70% (which is what it was in the 1970s and before): $35 billion per year.

The proposals for fairer taxes on businesses would bring in an estimated $170 billion per year:

  • Restore the corporate tax rate to 35% (instead of 21%) as it was before the 2017 tax cut law: $130 billion per year.
  • Repeal the 2017 tax cut that provides individuals with a 20% deduction for income from un-incorporated businesses: $39 billion per year. (More than 80% of this tax cut goes to the richest 5% of individuals, such as hedge fund managers and partners in law firms.)
  • Repeal tax breaks for fossil fuel companies: $1 billion per year.

The proposals for fairer taxes on the financial industry would bring in an estimated $88 billion per year:

  • Place a small “sales” tax on financial transactions ($1 for every $1,000 of value): $78 billion per year. (This would discourage speculative, short-term trading, which is destabilizing to financial markets and has no productive value for the economy. See my earlier post for more details.)
  • Place a small tax on big banks ($1.50 for every $1,000 of liabilities): $10 billion per year. (This would discourage risky investments and reduce the likelihood that banks fail and must be bailed out.)

The proposals for cutting military spending would save $350 billion per year and cut military spending roughly in half. The savings in military spending include:

  • Close 480 of the 800 overseas military bases in 90 countries: $90 billion per year. (The U.S. would still have four times as many overseas bases as all other countries combined.)
  • End the foreign wars the U.S. is currently fighting: $66 billion per year.
  • Reduce purchases of weapons that are obsolete, ineffective, or unneeded: $58 billion per year.
  • Eliminate nuclear weapons and delivery systems, and cancel planned upgrades: $43 billion per year. (This would be a huge step toward eliminating the threat of nuclear war and allow the U.S. to join the 70 countries that have signed the U.N. ban on nuclear weapons.)
  • A variety of other cuts and improvements in efficiency: $93 billion per year.

These new revenues and spending cuts would allow the federal government to spend over $1,250 billion per year (roughly one-third of the current federal budget) on progressive policies that would increase opportunity and fairness in our society. The new progressive policies would create jobs, strengthen our economy, address climate change, rebuild infrastructure, invest in education and human capital, and provide other short-term and long-term benefits.

With progressive policies in place, the rising tide of a growing economy would once again lift up all people as it did in the 1950s, 1960s, and 1970s. The middle class would be revived and re-invigorated.

Future posts will discuss some of the specific progressive policies that could be implemented with the $1.25 trillion in annual funding made available by the changes in revenue and spending policies identified above.

[1]      Barnes, S.G., Koshgarian, L., & Siddique, A., June 2019, “Poor people’s moral budget: Everybody has the right to live,” Poor People’s Campaign, Institute for Policy Studies, and Kairos Center (https://www.poorpeoplescampaign.org/budget/)

SHOULD THE U.S. HAVE A WEALTH TAX?

Economic inequality has been growing rapidly in the U.S. over the last 40 years. The wealthiest 10% of households now have roughly 80% of all wealth in the U.S. and 50% of all income. The richest 130,000 households now have almost as much wealth as the poorest 117 million households combined. The top 0.1% of households have seen their share of all wealth nearly triple, from 7% to 20%, in the last 40 years. Changes in tax laws since the 1980s have dramatically reduced taxes on the wealthy, even though they are the ones who receive the greatest benefit from the U.S. economic system and our public infrastructure. Economic disparities in the U.S. are greater than in any of the other 36 countries with advanced economies that make up the Organisation for Economic Co-operation and Development (OECD). [1]

One way to slow the growth of inequality, and perhaps reverse it, would be to tax wealth annually, like income taxation. Income is taxed because it is one way to determine how much someone has benefited from our economic system and public infrastructure, how much they can afford to pay in taxes, and how much it would be fair for them to contribute to the maintenance of our public infrastructure and the smooth functioning of our society – our education system, our transportation systems, our public safety systems, our legal system of laws and courts, etc. As with the income tax, a wealth tax would have a standard deduction or exemption so that low-wealth households would not pay any wealth tax. For example, the current exemption in Switzerland is about $75,000 per person in wealth (i.e., savings), in Spain it’s around $800,000 per person, and Senator Warren has proposed $50 million per household for the U.S. (See below.)

Under our current tax system (including federal, state, and local taxes), wealthy households pay a smaller portion of their financial resources in taxes than poorer households. This is true whether the calculation is done based on income or wealth. For example, the 0.1% wealthiest households are estimated to pay 3.2% of their wealth in all taxes, while the bottom 99% of households are estimated to pay 7.2%. U.S. tax laws no longer reflect the core principle of fairness – that what one pays in taxes reflects his or her ability to pay.

Some current taxes share some characteristics of a wealth tax but are limited in scope or scale. At the state and local levels, the ownership of real estate is typically taxed and in some places some forms of tangible property, such as cars or business assets, are taxed. However, ownership of financial assets (e.g., stocks, bonds, etc.), of boats and planes, of jewelry and art, of collectibles, and of other forms of wealth are generally not taxed. Income from wealth held as financial assets and the profits from the sales of assets are taxed. Transfers of assets through gifts and inheritance are taxed.

For every one of the wealth-related taxes – on property, on income and gains from assets, and on inheritance – the wealthy and well-connected (often due to their campaign spending) have gotten policy makers to change and write loopholes into our tax laws that reduce the taxes wealthy individuals pay. For property ownership, real estate taxes and interest payments on mortgages are deductible when calculating federal income taxes (although the 2017 tax bill has surprisingly put some limits on these deductions). Income from wealth held as financial assets and the profits from the sales of assets are taxed at a lower rate that income earned from working. If assets are transferred to another person, through inheritance, gifts, or other means, the gain or profit on the assets is typically NOT taxed, allowing the wealthy to pass on their wealth tax-free. Furthermore, the inheritance tax has been cut and serious efforts have been made to eliminate it. Currently, it is applied only on assets over $11 million per person. In addition, loopholes in tax laws allow wealthy families and their tax experts to avoid or reduce their payment of inheritance taxes. If an asset is given to a charity, the gain or profit on it is not taxed, even though the donor can deduct the full, current value of the asset to reduce the income tax they would otherwise owe. This is a double tax avoidance scheme that provides huge benefits to the wealthy.

Four European countries have a wealth tax and back in 1990 twelve of them did. The wealth tax has been dropped in eight countries for a variety of reasons, but one was that wealthy individuals in Europe can relatively easily designate a tax-free location as their official residence to avoid the wealth tax. In addition, the wealth taxes were not generating much revenue because the tax rate was low (e.g., 1% to 2%), because exemptions for certain assets or circumstances have been written into the laws, and because of tax avoidance. Furthermore, other wealth-related taxes were viewed as preferable, e.g., taxes on gains or profits when assets are sold, inheritance taxes, property taxes, and taxes on inter-generational gifts. [2]

Senator Elizabeth Warren, as part of her presidential campaign, has proposed a wealth tax for the U.S. that she calls the Ultra-Millionaire Tax. It would apply only to the 0.1% richest households – about 75,000 households – with net wealth (i.e., assets minus debts and other liabilities) of over $50 million. They would pay an annual tax of 2% on net worth over $50 million up to $1 billion and 3% on net worth over $1 billion. This tax is estimated to generate $275 billion per year and, thereby, increase federal government revenue by about 7%. [3]

Warren’s proposed wealth tax would apply to all assets held anywhere in the world by a U.S. citizen. The IRS would be able to grant deferments (i.e., a postponement or delay) in the payment of the tax in extenuating circumstances. To calculate someone’s wealth, Warren notes that the IRS already has rules for valuing most assets for inheritance tax purposes. These rules could be used or they could be improved, and the IRS would be authorized to use cutting-edge valuation techniques for hard-to-value assets. Her proposal includes an increase in the IRS’s enforcement budget to oversee taxpayers subject to the Ultra-Millionaire Tax. A 40% exit tax would be charged on net worth above $50 million for anyone renouncing their U.S. citizenship to avoid the tax. The revenue this proposal would generate is what Senator Warren would use to pay for the programs she has proposed in other policy areas.

Economic inequality in the U.S. is spiraling to unprecedented levels because the wealthy have been using their wealth to skew public policies, such as tax policies, to their benefit. For example, some Republicans in Congress acknowledged that the 2017 tax bill, with its huge tax cuts for the wealthy, was passed to satisfy and reward donors to their campaigns, who were demanding a return on their “investment”. [4]

A wealth tax could be one strategy to address the huge and growing economic inequality in the U.S. It would ask those who have benefited tremendously from the U.S. economic system and our public infrastructure to pay something back to maintain this business environment so that the next generation has the same opportunity to succeed as they did.

[1]      Thornton, A., & Hendricks, G., 6/4/19, “Ending special tax treatment for the very wealthy,” Center for American Progress (https://www.americanprogress.org/issues/economy/reports/2019/06/04/470621/ending-special-tax-treatment-wealthy/)

[2]      Taylor, T., 2/4/19, “Why have other countries been dropping their wealth taxes?” Conversable Economist (http://conversableeconomist.blogspot.com/2019/02/why-have-other-countries-been-dropping.html)

[3]      Warren, E., retrieved 6/12/19, “Ultra-Millionaire Tax,” (https://elizabethwarren.com/ultra-millionaire-tax/)

[4]      Thornton, A., & Hendricks, G., 6/4/19, see above

FUTURE SUPREME COURT CASES WILL TELL A TALE

The following upcoming Supreme Court cases should be watched to see if the “conservative” majority continues to make partisan or ideologically-driven decisions that reflect judicial activism (i.e., they disregard precedents and established law): (See my previous post on why the “conservative” justices are really radical, right-wing activists.)

  • Department of Commerce vs. New York State, where the Court will decide whether to prohibit the addition to the 2020 Census of a question on citizenship status. The Constitution mandates a census to count all people living in the U.S. The Census Bureau itself (which is part of the Department of Commerce) estimates that adding a citizenship question would mean that 5.8% of households with a non-citizen would not respond to the Census, resulting in 6.5 million people not being counted.

    An acknowledged undercount (due to a citizenship question or anything else) would violate the intent of the Constitution. Furthermore, the undercounting of households with a non-citizen, who disproportionately live in states and districts represented by Democrats, will result in billions of dollars of reduced federal financial assistance to those areas due to funding allocations based on population. It might also result in Democratic leaning states losing seats in the U.S. House of Representatives and the loss of Democratic leaning seats in state legislatures.

    A citizenship question has been added to the Census 1) in violation of the law for modifying the Census, 2) over the objections of experienced Census Bureau employees and six former directors of the Bureau under both Democratic and Republican presidents, and 3) based on a rationale that has been lied about by Commerce Secretary Ross and other Trump Administration officials. [1]

    A recently uncovered 2015 report by a Republican redistricting strategist, Thomas Hofeller, concluded that a citizenship question would provide data to facilitate drawing political districts that would benefit Republicans. Hofeller also suggested using the rationale for the question that the Trump Administration has put forward: that the question would help protect minority voters under the Voting Right Act. The Justice Department letter to the Commerce Department requesting the addition of a citizenship question, uses, word-for-word, a paragraph from Hofeller, despite denials from the Justice and the Commerce Departments that they were aware of Hofeller’s work. [2]

    Therefore, if the Court rules that a citizenship question can be included on the Census, the decision will reek of partisanship.

  • Rucho vs. Common Cause and Benisek vs. Lamone are cases where the Court will rule on the constitutionality of partisan gerrymandering of congressional districts to benefit Republicans in North Carolina and Democrats in Maryland. [3] Although these two cases reflect gerrymandering by each party, the bulk of and the most extreme partisan gerrymandering that is in place today has been done to benefit Republicans. (See my previous posts on gerrymandering here and here.)

    If the Court refuses to ban extreme partisan gerrymandering, the decision will clearly benefit Republicans and, therefore, appear to be partisan.

  • The Court has decided to rule on three cases involving employment discrimination against gay, lesbian, bisexual, or transgendered (LGBT) individuals. Courts, including the Supreme Court, have ruled since the 1980s that the Civil Rights Act of 1964’s prohibition on discrimination based on sex protected LGBT people from discrimination in employment, housing, and public accommodations. The Equal Employment Opportunity Commission, which enforces non-discrimination in the workplace, has interpreted the Civil Rights Act to apply to sexual orientation and gender identity. Protection for LGBT people in federal law is important because 30 states do not have laws protecting them from discrimination. Many in the LGBT community are concerned that the Supreme Court will overturn these precedents in its rulings on these cases. It is even possible that its rulings in these cases could undermine protections for women. [4]

    If the Supreme Court’s rulings in these cases overturn protections for LGBT individuals, the Court’s decisions will be viewed by many as radical, right-wing ideological and partisan decisions by activist justices.

  • Although no case is expected to reach the Supreme Court for a while, anti-abortion activists in Alabama and a number of other states clearly intend to engender a Supreme Court case that will give the Court an opportunity to reverse the Roe vs. Wade decision guaranteeing women the right to terminate a pregnancy. Anti-abortion activists are pushing these laws now because they believe the current “conservative” Supreme Court justices will overturn the settled law and precedent that Roe vs. Wade represents and that has been in place for over 45 years.

    A Supreme Court ruling overturning Roe vs. Wade will be viewed by many as a radical, right-wing ideological and partisan decision of judicial activism.

If the Court makes radical, right-wing, partisan, activist decisions in some or all of these cases, Congressional action to reverse them is possible, with the possible exception of the inclusion of a citizenship question on the 2020 Census. Even there, Congress could ameliorate the effects of the inclusion of the question. (See my previous post on reversing the effects of Supreme Court decisions.)

These Supreme Court cases will be closely watched. A series of radical, right-wing, partisan, activist decisions will, unfortunately, continue to undermine the faith of the public that the Supreme Court – and our court system in general – is impartial and non-partisan. They would also undermine a foundational element of our democracy: its system of supposedly independent checks and balances.

[1]      Liptak, A., 4/15/19, “The Supreme Court will soon consider whether the Census will include a citizenship question,” The New York Times

[2]      Wang, H. L., 5/30/19, “GOP redistricting strategist played role in push for Census citizenship question,” National Public Radio (https://www.npr.org/2019/05/30/728232221/gop-redistricting-strategist-played-role-in-push-for-census-citizenship-question)

[3]      Stohr, G., & Robinson, K., 3/26/19, “Supreme Court Justices question suits over partisan gerrymandering,” Bloomberg Law (https://www.bloomberg.com/news/articles/2019-03-26/top-court-justices-question-suits-over-partisan-gerrymandering)

[4]      Arana, G., 5/22/19, “Does the Civil Rights Act protect gay employees? The Court will decide,” The American Prospect (https://prospect.org/article/does-civil-rights-act-protect-gay-employees-court-will-decide)

REVERSING SUPREME COURT DECISIONS

Congress could reverse the effects of many of the Supreme Court’s decisions by changing relevant laws. Many of the Court’s 5 to 4 rulings by the “conservative” justices (who I argue in a previous post would be more accurately described as radical, right-wing, activists justices) are politically or ideologically driven. Congressional action to reverse them is possible and in many cases would restore long-standing precedents and established law that the “conservative” justices have chosen to ignore or overturn.

One prominent example of a Supreme Court ruling that congressional action could reverse is the Court’s decision that gutted the effectiveness of the Voting Rights Act. (See my previous post on this case here.) By updating the criteria for determining which local jurisdictions are subject to federal oversight, Congress could reinstitute federal review of states’ election practices. The proposed Voting Rights Advancement Act in Congress would accomplish this. [1]

As another example, Congress could reverse recent Supreme Court decisions that allow businesses to force harmed consumers and workers to settle their claims in a privatized arbitration system that overwhelmingly favors business interests. These Court decisions selectively interpret legal language or fabricate legal reasoning to allow a business to require consumers and workers to sign mandatory arbitration agreements that prohibit them from suing the business if they are injured or harmed. For example, the Court has read into the Federal Arbitration Act, which says nothing about class action lawsuits, that a corporation can require a consumer to sign away his or her right to join a class action lawsuit. [2] Congress could pass a law that establishes a right for consumers and workers to sue a business if they are harmed.

Additional examples of legislatively correctible Supreme Court decisions where established law and/or precedent have been ignored or overturned include:

  • Congress could pass a law reinstituting long-standing anti-trust laws that the Court has overturned. The Court’s decisions have changed anti-trust laws to:
    • 1) allow price fixing between manufacturers and distributors, and
    • 2) define a theoretical promise of short-term consumer price reduction as the sole criterion for deciding whether to permit corporate mergers and aggregations of marketplace power.
  • Congress could reverse the Court’s overturning of executive branch agency regulations, which the “conservative” justices did by developing a rationale for ignoring a 35-year-old precedent that had been repeatedly cited as established law. The Court has rejected agency regulations based on its own re-interpretation of underlying laws, rather than deferring to agencies’ expertise and interpretation of the law as had been the precedent. This effectively shifts regulatory power from executive branch agencies with long-standing experience and expertise to the five right-wing, male justices of the Supreme Court. Congress could pass a law prohibiting the courts from overturning a regulation if it is based on a permissible interpretation of the underlying law (which was the old precedent).
  • Congress could reverse the Supreme Court’s dramatic weakening of protections from discrimination based on race, age, religion, sexual orientation, and gender-identity. In race and age discrimination cases, the Court has ruled, contrary to precedent, that discrimination must be proven to be the sole cause of negative treatment. It has defined the term “supervisor” so narrowly that almost no one can be found guilty of sexually or racially harassing a subordinate. It has ruled that an employer or business owner can, based on his or her personal religious beliefs, eliminate coverage for birth control from an employer-sponsored health insurance plan. [3] Congress could pass laws defining the term “supervisor” and the standard for a finding of discrimination. It could also pass a law requiring all employer health insurance to meet the standards of the Affordable Care Act (Obama Care), which would mean including coverage for contraception.

Congressional action to overturn these and other Supreme Court decisions is not only possible, and would not only reverse bad legal precedents and harmful effects, but would send a message that power resides with Congress, not with five, unelected “conservative” men. Even if legislation to reverse these decisions can only be passed by the House, doing so would be beneficial. It would highlight the harm and lack of impartiality behind these politically or ideologically driven decisions, as well as the “conservative” justices’ ignoring of precedents and established law. House passage of such laws might temper future decisions by the Court and highlight important issues for future hearings on the confirmation of Supreme Court justices.

My next post will identify some upcoming Supreme Court decisions that should be closely watched to see if the trend of politically or ideologically driven decisions continues.

[1]      Millhiser, I., 2/13/19, “Not so Supreme? Congress actually has a lot of power, mostly unused, to rein in the Roberts Court by clarifying the intent of the law,” The American Prospect (https://prospect.org/article/not-so-supreme)

[2]      Millhiser, I., 2/13/19, see above

[3]      Millhiser, I., 2/13/19, see above

THE NOT CONSERVATIVE AND NOT IMPARTIAL SUPREME COURT

“Conservative” is not the right term to use to describe the Supreme Court Justices who have been the “conservative” majority in many 5 to 4 decisions going back to at least 2000. This applies in particular to the current five “conservative” justices who will be the deciding majority in many future decisions.

Chief Justice Roberts and Justices Alito, Gorsuch, Kavanaugh, and Thomas are probably better described as “radical, right-wing” justices. They could also be described as Republicans, small government ideologues, corporatists (supporters of large corporations and businesses), and/or plutocrats (supporters of the wealthy elites). Predecessors Rehnquist and Scalia also fit this mold; Kennedy, Souter, and O’Connor were a little harder to categorize.

These “conservative” justices are frequently making decisions that are not impartial decisions based on the law – despite their claims at confirmation hearings that they are just umpires calling balls and strikes based on the law (or some variation on this theme). One expert commentator states that “many of the Roberts Court’s decisions are so poorly reasoned that they appear to be straight-up dishonest.” (p. 52) [1] Despite nominees’ statements at confirmation hearings they respect precedents and established law (or something to that effect), their decisions frequently do not do so.

The “conservative” justices are also not strict constitutionalists – committed to following the original intent of those who wrote the Constitution and the Bill of Rights – despite their claims to be. Trying to apply laws and principles written back in the late 1700s to today’s world without interpretation and adjustment is ridiculous on the face of it, even if they did consistently try to do this (which they don’t). For example, corporations barely existed in the 1700s and they were nothing like the huge, multi-national corporations we have today. Also, the guns that existed then took many seconds, if not a minute or so to reload, while today we have guns that fire multiple bullets per second. Not to mention transportation and electronic communications that today happen at speeds that couldn’t have even been imagined in the 1700s, let alone the ability to store and have ready access to information on the scale we do today. Even if the relevant intent of those constitutional authors could be determined, there is no reason, over 200 years later, to give such deified status to their pronouncements.

And the “conservative” justices have sometimes made decisions that simply contradict reality, as in their decision to effectively overturn the Voting Rights Act. (See my previous post on that decision here.)

The Supreme Court, in the years since the Bush vs. Gore decision in 2000, has frequently ruled in ways that serve Republican partisan purposes, without apparent concern about overturning settled law or precedents, or violating their own stated principles. [2] In Bush vs. Gore, the Supreme Court ordered Florida to stop recounting ballots in the presidential election, when the recount might have shifted the victory from Republican George W. Bush to Democrat Al Gore. It overruled Florida’s Supreme Court and election officials despite the “conservative” justices’ frequently stated belief in “states’ rights,” which means that the states have the power to conduct their business, such as elections, without interference from federal authorities.

Other Supreme Court decisions that have clearly benefited Republican partisan interests and that were 5 to 4 decisions include: [3]

  • Janus in 2018, which ruled that workers in a unionized workplace do not have to pay union dues even though the union is still required to represent and advocate for them in collective bargaining and in grievances. This is expected to result in a drop in union membership and in the financial resources available to unions. The Justices were well aware that unions register and mobilize more voters, particularly minorities, than any other organizations and that these voters tend to support Democratic candidates.
  • Shelby County in 2013, which effectively overturned the Voting Rights Act and allowed Republican state governments and election officials to make it difficult for minorities, low-income citizens, and other Democratic-leaning voters to register and vote. (See my previous post on this decision here.) Without this decision and the voter suppression it allowed, Democrat Stacey Abrams and not Republican Brian Kemp would almost certainly have been elected Governor of Georgia in 2018, for example.
  • Citizens United in 2010, which, along with other rulings, allows corporations and wealthy individuals to spend unlimited sums of money in our elections. This money clearly works to the benefit of Republicans and, in general, those who support the power and political influence of corporations and wealthy individuals in our political system and policy making.
  • Vieth vs. Jubelirer in 2004, which ruled that gerrymandering of electoral districts to favor one party over the other is not unconstitutional. The great majority of such gerrymandering, and by far the most extreme partisan gerrymandering, has been done to favor Republicans. Absent partisan gerrymandering, Democrats would likely have 15 to 20 more seats in the U.S. House. (See my previous posts on gerrymandering here and here.)

Congress could act in all these cases (as well as others) to reverse the effects of the Supreme Court’s decisions by clarifying the legislative intent and goals of underlying laws. One clear example is the Court’s decision that gutted the effectiveness of the Voting Rights Act. This decision is considered by some to be one of the mostly egregiously reasoned cases of the Roberts court. (See my previous post on this case here.) Congress could reinstitute the Voting Rights Act’s control over states’ election practices by updating the criteria for identifying jurisdictions that would be subject to federal oversight. The proposed Voting Rights Advancement Act in Congress would do this. [4]

Congressional action to reverse these politically or ideologically driven decisions is not only possible, and would not only reverse harmful effects and overturn bad legal precedents, but would also send a message that power resides with the people and Congress, not with five, unelected “conservative” men. Even if legislation to reverse these decisions or their effects can only be passed by the House, it could potentially temper future Supreme Court decisions. At the least, it would highlight the harm and lack of impartiality behind these decisions.

A subsequent post will identify other Supreme Court decisions where congressional action could negate the effects of the Court’s rulings. Another future post will identify future Supreme Court decisions that should be closely watched to see if the partisan, rather than impartial, decision making continues.

[1]      Millhiser, I., 2/13/19, “Not so Supreme? Congress actually has a lot of power, mostly unused, to rein in the Roberts Court by clarifying the intent of the law,” The American Prospect (https://prospect.org/article/not-so-supreme)

[2]      Kuttner, R., 5/15/19, “Over to you, John Roberts,” The American Prospect Today (https://prospect.org/blog/on-tap)

[3]      Meyerson, H., 4/23/19, “The GOP Justices: Republicans first, white guys second, Constitutionalists third,” The American Prospect Today (https://prospect.org/blog/on-tap?page=1)

[4]      Millhiser, A., 2/13/19, see above

ON-GOING RUSSIAN ELECTION INTERFERENCE MUST BE STOPPED

Since the release of the Mueller report, the focus has been on obstruction of justice by and possible impeachment of President Trump. The report’s documentation of Russian election interference has gotten little attention. Concomitantly, there has been little attention to the need to protect our future elections from on-going Russian meddling.

Based on the Mueller team’s finding of “sweeping and systematic” interference by Russia in the 2016 presidential campaign, it indicted 25 Russians. Russian operatives used every major social media platform, and used them extensively, to spread false information, exacerbate social divisions, and influence the election.

The Mueller report spells out in detail the blatant and illegal efforts by Russia to affect the 2016 presidential election specifically to benefit Donald Trump and to undermine Hillary Clinton. It presents substantial evidence “that the Russian government perceived it would benefit from a Trump presidency and worked to secure that outcome, and that the [Trump] Campaign expected it would benefit electorally from information stolen and released through Russian efforts.” [1] [2]

Highlights from a much longer list of events related to Russian interference in the election include the following: [3]

  • September 2015: The FBI warns the Democratic National Committee (DNC) that at least one of its computers has been hacked by Russians.
  • June 2016: The Washington Post and others report that hackers working for the Russian government have stolen DNC emails and other information. Wikileaks announces that it has Clinton and DNC emails and documents. It begins publishing them in July.
  • July 2016: Russian intelligence agency hackers target Hillary Clinton’s home office.
  • October 2016: The Department of Homeland Security and the Office of National Intelligence on Election Security officially state that the U.S. intelligence community is “confident that the Russian Government directed the recent compromises of emails from U.S. persons and institutions” and are behind the releases of stolen documents by Wikileaks and DCLeaks. DCLeaks is later identified as a front for Russian military intelligence.
  • Late November and December 2016: Various media outlets report that the CIA has determined that Russia’s goal in interfering with the election wasn’t just to undermine confidence in the election and the U.S. government, but was also to support Trump and hurt Clinton. They also report that this intelligence has been shared with Congress.
  • Late December 2016: President Obama issues an executive order naming six Russians who took part in the presidential election hacking and imposing sanctions on Russia.
  • June 2017: A Department of Homeland Security official testifies before the Senate that hackers linked to the Russian government targeted voting systems in up to 21 states and compromised at least one email account at an American voting machine company. Although no evidence of effects on vote counting were found, voter information may have been accessed.
  • July 2018: The Justice Department, as part of Mueller’s investigation, indicts 12 members of Russian intelligence for persistent efforts to hack emails and computer networks associated with the Democratic Party.
  • September 2018: Facebook announces that more than 3,000 ads posted between June 2015 and May 2017 had undisclosed links to Russia. CNN reports that these ads targeted voters in Michigan and Wisconsin, two states Trump won narrowly and that were key to his victory.

In January 2017, the Office of the Director of National Intelligence issued an Intelligence Community Assessment entitled, “Assessing Russian activities and intentions in recent US elections.” [4] It states that it is a “declassified version of a highly classified assessment; its conclusions are identical to those in the highly classified assessment.” It concludes that Russian interference in the 2016 presidential election was the most recent example of Russia’s longstanding efforts to undermine US democracy but represented a significant escalation of their efforts.

It finds with “high confidence” that Russian President Putin ordered the efforts with goals of aiding Trump and hurting Clinton. It also concludes with “high confidence” that Russian military intelligence was behind the release of hacked information. It states that “Russian intelligence obtained and maintained access to elements of multiple US state or local electoral boards. … We assess Moscow will apply lessons learned from its Putin-ordered campaign aimed at the US presidential election to future influence efforts.” (p. iii)

The Trump campaign was happy to accept the help of the Russians, apparently without actively conspiring (i.e., colluding) with them. It nonetheless engaged in a variety of contacts with Russian agents and did not report offers of help from them to the FBI or others. Members of the Trump campaign and family, including the President himself, lied to the FBI and others on multiple occasions about their contacts with Russians.

To respond to the evidence of on-going Russian attempts to influence our elections, the House and the Senate should continue the investigation and identify remedies. Based on their findings, they should formulate legislation and allocate resources to ensure the integrity of our future elections.

One would think that any American president and any Members of Congress, regardless of party or ideology, would support a thorough investigation of Russian interference to determine how to block future threats to our elections, and ultimately our national sovereignty and security. The Republican-controlled Senate and the formerly Republican-controlled House have refused to do so. The Republicans in Congress have abandoned their oath of office and American democracy in the interests of their re-election and political power.

President Trump, as the Mueller report spells out in detail, has repeatedly tried to terminate, limit, or impede the investigation of Russian interference in our elections. Trump’s actions make it clear that his concern is not for American democracy, but reflects three things: [5]

  • Acknowledgement of Russian meddling on his behalf undermines the credibility of his election in 2016,
  • On-going Russian efforts benefit his presidency, and
  • Russia’s activities improve his likelihood of re-election in 2020.

Former President Ronald Reagan, who branded Russia the “evil empire” and worked assiduously to win the Cold War with Russia, must be turning over in his grave to see his Republican party failing to protect America’s elections from Russian interference.

Despite President Trump’s resistance to an investigation, the FBI, intelligence agencies, and the Department of Homeland Security have made their task forces on election interference permanent. The FBI recently moved 40 agents and analysts to its Foreign Influence Task Force. [6] However, without leadership from the President, and the cross-agency coordination and support that would provide, the efforts by these agencies will be less effective.

I urge you to contact your U.S. Representative and your Senators and urge them to take action to protect our elections from meddling by Russia or other foreign actors.

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]      Cole, D., 4/23/19, “An indictment in all but name,” The New York Review of Books (https://www.nybooks.com/articles/2019/05/23/robert-mueller-report-trump-indictment/)

[2]      Mueller, R. S., III, May 2019, “Report on the Investigation into Russian Interference in the 2016 Presidential Election,” U.S. Department of Justice (www.justice.gov/storage/report.pdf)

[3]      CNN, 4/18/19, “2016 presidential campaign hacking fast facts,” CNN Library

[4]      Office of the Director of National Intelligence, January 2017, “Intelligence Community Assessment: Assessing Russian activities and intentions in recent US elections,” (https://assets.documentcloud.org/documents/3719492/Read-the-declassified-report-on-Russian.pdf)

[5]      Cole, D., 4/23/19, see above

[6]      Barnes, J. E., & Goldman, A., 4/26/19, “F.B.I. warns of Russian interference in 2020 race and boosts counterintelligence operations,” The New York Times

WHO WAS BAILED OUT AFTER THE 2008 FINANCIAL CRASH?

The 2008 financial crash and resultant bailout have been in the news recently for two reasons: 1) some critiques have been leveled at Sen. Bernie Sanders’ statement on the presidential campaign trail that no Wall St. executives went to jail and that they got a trillion-dollar bailout, and 2) a new book has come out: Crashed: How a decade of financial crises changed the world by Adam Tooze. The book has been described as insightful and telling a story that is both “opaquely complex and dazzlingly simple.” [1] In terms of Sen. Sanders’ statement, it takes a real spin doctor to dispute the truth of it (see below).

In the aftermath of the 2008 implosion of the huge Wall St. corporations, the U.S. government and Federal Reserve Bank came to the rescue. The government quickly made $700 billion available to bailout the Wall St. firms. Otherwise, twelve of the 13 largest ones probably would have gone bankrupt in late September or October of 2008 (as Lehman Brothers did before the rescue was in place and the scale of the disaster was clear). The government also bailed out the auto industry, insurance companies (e.g., AIG), and the quasi-public mortgage-purchasers Fannie Mae and Freddie Mac.

In addition, the Federal Reserve Bank (Fed) made unprecedented purchases of assets from the technically bankrupt financial corporations under the innocuous-sounding banner of “quantitative easing”, to the tune of over $4 trillion. The six largest firms alone (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley) also borrowed about $500 billion from the Federal Reserve Bank in peak periods of need. [2] Furthermore, the Fed extended what were effectively loans to the central banks of other countries of an also unprecedented $10 trillion. Estimates of the overall contribution of the Fed to the bailout range from $7.7 trillion to $29 trillion.

In addition, the U.S. government supported the big financial corporations in a variety of other ways. For example, short-selling of 799 financial stocks was banned in 2008 to protect these companies from free market speculation, which boosted their stock prices. Emergency bank charters were given to Goldman Sachs and Morgan Stanley on Sept. 21, 2008, so they could borrow from the Fed as only banks can do. In October, the Fed, for the first time in history, paid interest to the banks on required reserve deposits. Shortfalls in required reserves and failed stress tests were effectively ignored. And except for one relatively low-level officer at Credit Suisse, no one and no company was criminally prosecuted or went to jail. The value of all these benefits is truly incalculable.

Therefore, pinning down a single figure for the total bailout is impossible because there were so many different pieces and the amounts in some of them fluctuated daily, given that banks borrow money from the Fed daily to meet their reserve requirements. However, to state that it was a trillion-dollar bailout is definitely true and to say that no Wall St. executives went to jail is also true for all meaningful purposes.

With all this bailout money and support for the financial corporations and the financial system, one might think that some significant money or support would have been made available to bailout out the workers and homeowners caught in the maelstrom of Wall St. malfeasance. However, precious little assistance was made available to the millions of homeowners trying to pay mortgages on homes where the mortgage was now greater than the value of the home, given that many homes had lost half their value. Very little was done for the millions of homeowners who suffered foreclosure. And it was not only individuals who suffered; whole communities – usually minority and low-income communities – were underwater due to predatory and discriminatory mortgage lending by the big financial corporations and their agents. Moreover, millions were unemployed as the economy went into a severe recession due to the malfeasance on Wall St. [3]

Two things make all this truly galling. The first is that despite the massive intervention of the U.S. government and the Fed, the rescued financial corporations were not required to change their basic mode of operation. The instability of speculative financial transactions that is endemic in their model of profitability and the huge financial rewards for employees, especially executives, was left intact, along with public insurance against losses that threaten consumers’ deposits.

The second galling outcome is that no executives of the financial corporations were punished, either through significant loss of compensation or criminal prosecution, let alone jail time. Remember, that in the 1980s Savings and Loan crisis, which was much smaller in scale, nearly 900 executives of Savings and Loan banks went to jail.

“The contrast between the solicitous care shown the culpable financial sector and the negligence shown to the innocent homeowner was startling.” [4] As a result, class-based economic inequality in the U.S. was exacerbated and economic gaps in income and wealth between Whites and Blacks grew dramatically.

The bailed out financial corporations were expected to make loans available to help households and businesses, as well as to avoid foreclosures whenever possible. When foreclosure was unavoidable, it was expected that the financial corporations would promptly resell those homes. These actions would have helped individuals, businesses, and communities recover. However, no requirements were placed on bailed out banks to do these things and, therefore, they did not happen.

The programs that were supposed to assist homeowners typically had draconian rules to prevent “undeserving” homeowners from benefiting. The story line from Wall St. and its backers on Capitol Hill was that home buyers were the ones at fault; they should have known better than to be duped by the predatory practices of the mortgage brokers or that the home buyers were simply trying to live above their means. This concern about benefiting undeserving individuals clearly did not extend to the undeserving bank and financial sector executives responsible for perpetrating fraud in the mortgage business and crashing their companies and the economy.

Similar opposition blocked the expansion of unemployment benefits and job training for workers who had lost their jobs. On the other hand, there were no significant limits put on the pay of executives whose corporations were bankrupt without the bailout, let alone requirements that executives pay back compensation they had received based on profits generated by fraudulent activities.

As the Great Recession lingered on and jobs, homes, and economic security did not return (still true today for many people), the deep anger and discontent that set in was the breeding ground for support for Trump.

The 2008 financial crisis and the bailout of the financial corporations and their executives, but not the homeowners and workers who suffered from the resultant crash, are exhibit one in the indictment of the corporate takeover of U.S. policy making. I urge you to contact your elected officials and ask them to stand up against corporatocracy and demand democracy back. Our government should work for the people, the workers and homeowners of America, not the big corporations.

[1]      Bloom Raskin, S., Winter 2019, “Whose recovery was it?” The American Prospect (This article is a review and commentary on Tooze’s book.)

[2]      Taibbi, M., 3/18/19, “Turns out that trillion-dollar bailout was, in fact, real,” RollingStone

[3]      Bloom Raskin, S., Winter 2019, see above

[4]      Bloom Raskin, S., Winter 2019, see above, page 86

U.S. CAPITALISM KILLS COMPETITION

The theory of capitalism says that free market competition will ensure quality products and services at competitive prices. Unfortunately, that theory is not the reality of U.S. capitalism today.

Deregulation and our business laws and practices, from anti-trust to financing to patent protections, have destroyed competition. Without competition, businesses have no incentives to restrain price increases, to ensure quality, or to provide consumers the choices that free market theories assume. Furthermore, monopolistic employers and business owners have little incentive to fairly compensate workers or even invest in the future of their businesses. Instead, they can and have been keeping profits high and lining their own pockets.

Rather than free markets, the U.S. economy is sea of monopoly or, at least, oligopoly, where a small group of sellers or producers control a market. For example: [1]

  • Four airlines control the bulk of air travel
  • Two corporations produce the bulk of beer
  • Six enormous banks / financial institutions hold over 40% of deposits and 50% of assets
  • Drug companies find ways to extend patents or otherwise restrict competition so they can jack up prices and make huge profits (see previous posts here, here, and here)
  • Two corporations control all on-line travel bookings
  • Two companies make nearly all the intravenous saline solution used in hospitals
  • Two firms control the majority of on-line advertising
  • Three companies control the agricultural markets for seeds and pesticides
  • Four firms make 89% of baby formula
  • Two companies make 76% of coffins
  • The supermarket and media industries are continuing to consolidate so that a handful of corporations control these markets
  • Two companies control the mobile app market

Furthermore, the oligopolists find ways, such as carving up geography or colluding (for example, generic drug makers) to make themselves effectively monopolists and charge exorbitant prices and/or deliver low quality goods and services. For example, there are many Internet service providers (ISPs) in the U.S., but three dominant providers (Comcast, Charter Communications, and AT&T, each with over 15 million subscribers) and six midsize providers (with between 3.5 and 7 million subscribers). Every other provider has under 1.3 million users. The nine dominant and midsized companies have carved up the country so that 76% of households have only one choice of Internet provider making the ISPs effectively monopolies.

The monopolists and oligopolists have used political and market place power to restrict new entrants to their markets. The rate of new business formation today is half of what it was in the late 1970s. When competition does emerge, the big, dominant companies often simply buy up the competition, sometimes to use its technology or innovations, and other times simply to eliminate it as competition.

Our anti-trust laws and regulators have failed to stop anti-competitive acquisitions. In the last ten years, Amazon, Apple, Facebook, Google, and Microsoft have purchase 436 companies and startups without a single challenge from anti-trust regulators. [2] As a result, with almost every purchase consumers make, we are paying a toll, an excessive price, to one or another of the many monopolies or sets of oligopolies.

This trend of business and economic concentration, which allows companies to build high levels of market share and power, began in the 1980s under President Reagan and supposedly “conservative” Republicans. An important symbolic step in this trend was when the Federal Trade Commission stopped collecting data on market concentration in 1981.

Capitalism without real competition is not capitalism; it’s monopoly or oligopoly. The monopolists and oligopolists have very strong incentives to preserve their dominant status. Until the American public responds forcefully, and demands that its elected representatives do so as well, the number and size of monopolies and oligopolies are likely to grow.

Unfortunately, the mass media, which could provide the information to the public on the growing economic concentration, lack of competition, and harm to consumers and our politics, are highly concentrated corporations themselves. Therefore, our mass media have a vested interest in not telling us this story.

In the early 1900s, when the U.S. government fought back against the giant trusts such as Standard Oil and U.S. Steel, anti-trust laws and anti-monopoly regulatory actions were viewed as a check on excessive private power, and competition was seen as necessary to preserve opportunity, as well as human freedom and liberty. We need to fight back against the excessive private power of economic concentration again today.

An important piece of reclaiming our democracy from the plutocrats is reclaiming our economy from the monopolists and oligopolists. Some of the 2020 presidential candidates, especially Senator Elizabeth Warren, are talking about this and presenting policy proposals (e.g., here and here) to do so.

I encourage you to follow the presidential candidates’ proposals and the discussion of America’s Winner-Take-All, anti-competitive, faux free market, monopolistic capitalist economic system.

 

P.S. Sorry for the recent lack of posts to this blog. I was managing a campaign for the local Select Board (i.e., town council). The election was April 2 and we were successful! Over the last 3 years, we’ve replaced 4 of the 5 Select Board members with strong progressives, including two young mothers. A real turnaround!! All politics is local and political change does start at the grassroots.

[1]      Dayen, D., Winter 2019, “The new economic concentration,” The American Prospect

[2]      Dayen, D., Winter 2019, see above

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)

EFFECTS OF THE 2017 CORPORATE TAX CUTS

There are new data on the effects of the federal tax cuts enacted in December 2017 by the Tax Cuts and Jobs Act (TCJA). They are not what their Republican proponents promised. They promised that corporations would use their big tax cuts to create new jobs, hire new workers, and improve workers’ pay and benefits. And they promised the tax cuts would pay for themselves and not increase the federal debt. (See this previous post for some background information.)

The tax cuts did dramatically increase profits for corporations. Corporate profits for the biggest 500 corporations (the S&P 500) grew by almost 21% in 2018. At the six biggest U.S. banks, profits grew almost 30% to a record $120 billion. [1] AT&T projects profits will be up $3 billion in 2018 and Amazon doubled its profits to $11.2 billion.

So, what did corporations do with their record profits?

Corporations have rewarded shareholders, first and foremost. In 2018, they spent $1 trillion buying up their own shares of stock and paid out $500 billion in dividends to shareholders. Both figures are records. Because of foreign ownership of stock in US corporations and of corporations or subsidiaries in the US, a third of the money spent on stock buybacks and dividends goes to foreign nationals. Because this money doesn’t get spent in the US economy, the tax cuts probably made America poorer, not richer. [2] US corporations also spent a record $400 billion on cash acquisitions of other companies, which doesn’t add to the economy or benefit workers.  [3]

Stock buybacks boost a stock’s prices, rewarding shareholders (not workers) and corporate executives, whose pay is almost always tied to the price of the stock. Senators Sanders and Schumer have proposed a law that would ban stock buybacks for any corporation that pays workers less than $15 per hour. [4]

Stock buybacks were illegal until 1982, which is roughly (and probably not wholly coincidentally) the same time wages stopped rising for most Americans. Before then, a bigger share of corporate profits was used to increase workers’ wages, rewarding them for their increased productivity. [5]

Given that the great bulk of the corporate tax cuts have been passed through to stockholders via dividends and stock buybacks, and given that 84% of stocks are owned by the wealthiest 10% of the population, the other 90% of residents will see little if any benefit from the corporate tax cuts. Therefore, these corporate tax cuts contribute to growing income and wealth inequality.

The creation of new jobs and the growth in wages have been modest. There certainly hasn’t been the boom in the economy or wages that Trump and the Republicans claimed would happen. Moreover, the largest corporations, which benefited the most from the tax cuts, have NOT been creating jobs or boosting workers’ wages.

The 1,000 largest public corporations in the U.S. have CUT nearly 140,000 jobs since the passage of the tax cut law. For example, General Motors recently announced plans to close several plants and cut 15,000 jobs, despite receiving a roughly $500 million benefit from the tax cuts.

AT&T cut over 10,000 jobs in 2018 and is closing three U.S. call centers, despite an estimated $3 billion annual increase in profits due to the tax cut. Although AT&T’s CEO had promised to create jobs and bolster its workforce with the benefits of the tax cuts, AT&T has only paid a one-time, $1,000 bonus to its employees at a cost of $200 million, which is only 7% of one year’s increase in profits. Meanwhile, three-quarters of its overall 2018 profits were spent on dividends and stock buybacks that benefit shareholders, including executives, and not its workforce. [6]

For the Wall Street financial corporations, profits for the first half of 2018 were up 11% at $13.7 billion, after rising 42% in 2017. The average salary in these firms jumped 13% to $422,500. Jobs in the financial industry account for less then 5% of private sector jobs in New York City, but 21% of private sector wages. [7] Wages for these highly-paid workers are rising, but not for most workers.

Due to the tax cut, federal tax revenue on corporate income plunged $130 billion (45%) from 2017 to 2018, from $290 billion to $160 billion. [8] Furthermore, Amazon, for example, paid no federal income taxes for the second year in a row despite having profits of $17 billion over those two years. [9]

The federal deficit is increasing and is estimated to be $830 billion for 2018 and to climb to $1,000 billion next year (i.e., $1 trillion) and remain at that level for subsequent years. The annual deficit had been declining under President Obama both in terms of dollars ($585 billion in 2016) and as a portion of the overall economy (i.e., 3.1% percent of Gross Domestic Product [GDP]). Under President Trump, it has jumped in dollars ($830 billion) and to 4.0% percent of GDP. [10] So, clearly the tax cuts are not paying for themselves.

Moreover, the increase in the federal deficit and the cost of interest on the growing federal debt will result in future cuts to government programs or increases in other taxes. These cuts or increases are much more likely to fall on the less wealthy 90% of the population.

Therefore, it’s a near certainty that the great majority of Americans will be worse off due to the Trump and Republican corporate tax cuts of 2017.

[1]      Levitt, H., & Abelson, M., 1/16/19, “It’s official: Wall Street topped $100 billion in profit,” The Wall Street Journal

[2]      Krugman, P., 1/1/19, “The Trump tax cut: Even worse than you’ve heard,” The New York Times

[3]      Wursthorn, M., 12/16/18, “The rocky stock market stills pays dividends to investors,” The Wall Street Journal

[4]      Inequality Weekly newsletter, 2/18/19, Inequality.org (https://inequality.org/resources/inequality-weekly/)

[5]      Reich, R., 3/21/18, “The buyback boondoggle is beggaring America,” The American Prospect (http://prospect.org/article/buyback-boondoggle-beggaring-america)

[6]      Johnson, J., 1/7/19, “After promising more jobs from Trump tax cut, report shows AT&T has ‘done just the opposite’ by slashing over 10,000 jobs in 2018,” Common Dreams (https://www.commondreams.org/news/2019/01/07/after-promising-more-jobs-trump-tax-cuts-report-shows-att-has-done-just-opposite)

[7]      Talking Points, 9/18/18, “Wall Street salaries at highest level since 2008,” The Boston Globe

[8]      Krugman, P., 1/1/19, see above

[9]      Inequality Weekly newsletter, 2/18/19, see above

[10]     Amadeo, K., 2/12/19, “US budget deficit by year, compared to GDP, debt increase, and events,” The Balance (https://www.thebalance.com/us-deficit-by-year-3306306)

THE DEPARTMENT OF DEFENSE’S MASSIVE FINANCIAL FRAUD

The Department of Defense (DOD) has been engaging in massive financial fraud for years. It has inflated its expenditures and budget requests repeatedly while stashing hundreds of billions of dollars into hidden slush funds.

In 1990, Congress passed and President George H. W. Bush signed into law the Chief Financial Officers Act. It requires 24 federal agencies to submit to annual audits – something every publicly-owned, private, for-profit corporation and every not-for-profit organization are required to do.

Only one of the 24 agencies has failed to comply with the requirement for an annual audit: the Department of Defense. It has only had one audit conducted and it failed the audit miserably. The private firms that were hired to perform the audit concluded that DOD’s financial records were so deficient and full of errors and irregularities that a reliable audit was impossible to perform.

The unsuccessful audit identified at least $21 TRILLION in financial transactions at DOD since 1999 that can’t be traced, documented, or explained. The DOD has the largest discretionary budget in the federal government, $716 billion in 2019, representing 54% of all appropriations. So, the financial problems uncovered and its failure to perform annual audits are extremely significant.

The attempted audit documented that the DOD’s leaders and accountants have been falsifying accounting records for decades. This has been done to deliberately mislead Congress (and the public) and to justify ever increasing budgets, regardless of actual need. The DOD was found to be literally making up numbers and financial transactions in its reports to Congress. [1] It’s important to note that higher DOD budgets mean more money for military contractors, including Boeing, Lockheed Martin, Raytheon, BAE Systems, Northrop Grumman, and General Dynamics.

One of DOD’s strategies was that rather than returning the money to the Treasury, as is required by law, when it didn’t spend all the money in its annual budget, it would create phony transactions to shift the money to a slush fund where it could hide the money and keep it.

Another DOD strategy was to create phony figures to cover up accounting errors and mismanagement. These made it look like its financial reports were accurate and that spending was in alignment with appropriations in the budget. These figures are referred to as “plugs” because they plug holes in DOD’s financial reporting. For example, in the 2015 Army’s budget alone, $6.5 trillion of plugs were found; a truly astonishing figure given the Army’s budget for the year was $122 billion.

DOD also frequently shifts money from the purposes officially authorized in its budget to other uses. Sometimes money is shifted multiple times making the ultimate use of the funds virtually untraceable.

Part of the reason for the 1990 Chief Financial Officers Act and its requirement for annual audits was that whistle-blowers in the 1980s had exposed wildly inflated DOD spending. Cost over-runs on weapons, enormous amounts of waste (such as $1,200 mugs [2]), financial mismanagement, and out-right fraud were evident at DOD then as they are today. The 1980s whistle-blowers estimated that DOD had accumulated roughly $50 billion in a slush fund by not returning unspent funds to the Treasury. However, this story line goes back at least to 1968 when another whistle-blower, A. Ernest Fitzgerald, testified before Congress and Senator Proxmire about cost overruns at DOD. He was demoted and his position eliminated as a result. In 1973, he was reinstated by order of the Civil Service Commission, but DOD marginalized him. In 1981, he was a founder of the organization that became the Project on Government Oversight (POGO), a private government watchdog that helps other whistle-blowers share information without having to be publicly identified. [3]

On September 10, 2001, Donald Rumsfeld, President G.W. Bush’s Secretary of Defense, held a press conference and made the startling announcement that “According to some estimates we cannot track $2.3 trillion in [DOD] transactions.” [4] This amount was over seven times the total DOD budget of $313 billion for 2001. No other Secretary of Defense, before or after Rumsfeld, has been anywhere near this forthright about DOD’s accounting shenanigans. Unfortunately, the attention this revelation was due got completely overshadowed and lost due to the terrorist attack the next day on the World Trade Centers in New York.

The Office of the Inspector General (OIG) within DOD has criticized DOD’s accounting practices for years but has never advocated for punitive action against DOD accountants or anyone else. After the recent increased attention to the problems highlighted by the unsuccessful audit, OIG began removing previous reports from its website. In addition, while OIG audit reports have always been made available on-line and in full, a recent report on the Navy’s 2017 financial statement was heavily redacted when it was made publicly available. Despite requests from the media and Congress for an unredacted version of the report, OIG has refused to release one. A Freedom of Information Act (FOIA) request by The Nation magazine for the unredacted version is currently pending. [5]

The scale and consistency of DOD’s financial manipulation and misreporting make it clear that this has been an intentional strategy to mislead Congress and pad its budget year after year after year. If this happened in the private sector (think Enron) people would be fired and prosecuted; and companies would go out of business.

If we want to make government more efficient and to save money by reducing waste and fraud, there’s more money and efficiency to be found at DOD than all other federal agencies combined. We need members of Congress now and a future President to demand that DOD clean-up its finances. They will need to counter the huge and powerful bureaucracy that is the DOD and the power of the military contractors (and their campaign contributions and lobbyists). They will have to overcome the sacrosanct nature of DOD spending and the political dogma that anyone who criticizes DOD spending is weak on defense and unpatriotic. Of course, nothing could be further from the truth. Having an efficient, effective, well-managed DOD is what being strong on defense is really all about.

[1]      Lindorff, D., 11/27/18, “Exclusive: The Pentagon’s massive accounting fraud exposed,” The Nation (https://www.thenation.com/article/pentagon-audit-budget-fraud/)

[2]      Gelardi, C., Week of 12/3/18, “A mugs’ game,” The Nation

[3]      Sandomir, R., 2/14/19 “A. Ernest Fitzgerald, exposer of waste at the Pentagon, dies at 92” The New York Times

[4]      As reported in Lindorff, D., 11/27/18, see above

[5]      Lindorff, D., 11/27/18, see above

ARE THE DEMOCRATS’ IDEAS RADICAL?

The mainstream media’s frequent characterization of ideas put forth by Democratic members of Congress and Democratic presidential candidates as “radical” or “far left” or “out of the mainstream” is simply inaccurate. Most of the ideas so labeled are policies that:

  • Have previously been in place in the U.S.,
  • Are broadly supported by the American public,
  • Have been seriously considered in the U.S. in the past, and/or
  • Are widely in place in other wealthy countries.

For example, Representative Ocasio-Cortez’s recent suggestion that the income tax rate on income over $10 million be raised to 70% was called “insane.” In addition, it was stated that it would kill our economy.

However, in the 1950s, the top income tax rate was over 90% and our economy did just fine. The top tax rate was 70% on income over $216,000 up until 1980 and the economy continued to do well. In the 1980s, President Reagan slashed the top tax rate. The economy didn’t boom as a result, rather the growth and prosperity of the middle class stalled, workers’ wages became stagnant, and income and wealth inequality in the country began to explode. [1]

The 1950s, 60s, and 70s were a 30-year period with top income tax rates of 70% or more, on incomes of roughly $200,000 and up. This period also had strong economic growth, a growing middle class, and increasing equality. Therefore, a proposal to restore such a rate on incomes over $10 million represents a partial return to a policy with a proven track record of success. It is not “radical” or “insane” to say the least.

Ocasio-Cortez’s idea, therefore, is a sensible proposal to address growing inequality and an economy that is working for the rich (and especially the super-rich), but for no one else. What is out of the mainstream is President Trump’s and Congressional Republicans’ 2018 tax cut for the wealthy, given that 43% of voters say they want taxes raised on incomes over $250,000 (not just $10 million) and 60% say they don’t feel millionaires are paying their fair share of taxes. Furthermore, since 2003, the Gallup Poll has annually asked the public whether taxes on the rich were too high, just right, or too low. Every year, 60% to 70% of respondents have said “too low.” Yet, the mainstream media refer to supporters of the tax cut for millionaires as “moderates” and those who propose doing what a clear majority of Americans support as “radicals.” [2] [3]

Polls of the public also indicate that several other proposals reported as “radical” or “out of the mainstream” by the media are supported by majorities of Americans. Proposals for universal health insurance or Medicare for All are called radical, yet 70% of Americans support this, including a majority of Republicans. Proposals for tuition-free public college are called radical, but 79% of Democrats and 41% of Republicans support this.

In the 1950s and 1960s, tuition at public colleges and universities was free or minimal. Universal health insurance has been a topic of serious discussion in the U.S. on and off since President Franklin Roosevelt proposed it in 1944 as part of his Economic Bill of Rights, which included “the right to adequate medical care.” (See this previous post on FDR’s Economic Bill of Rights for more information.) Former Representative John Dingell, who just passed away at age 92, filed a bill, “The United States National Health Insurance Act,” in the U.S. House every session from 1955 to 2013; it would have created a single-payer health care system. [4]

Multiple polls have found that most Americans (including a majority or near-majority of Republicans) support Senator and presidential candidate Elizabeth Warren’s proposal for an annual wealth tax of 2% on wealth above $50 million, rising to 3% on assets over $1 billion. [5] Yet, the mainstream media and most pundits are calling her proposal radical.

We currently have a wealth tax; but it’s only on the main form of middle-class wealth – people’s homes. Homeowners pay a property tax, which is typically used to fund local government and schools. Nonetheless, the suggestion that other forms of wealth, ones that are typically owned by the very wealthy, be taxed at a similar rate is branded as radical.

Internationally, of course, the U.S. is the country that’s out of the mainstream. Most other wealthy nations have higher income tax rates than the U.S., have universal health insurance, and have free or near-free post-secondary education. A number of these countries also have a wealth tax – and more would have one if it were established as an international standard so the wealthy couldn’t so easily hide or shift their wealth to another country to escape a wealth tax. (But that’s a whole other topic for another post.)

Here in the U.S., these and many other policy proposals being put forth by Democrats are being labeled as radical, when they are actually anything but radical. They are supported by majorities of Americans (see this previous post for more information) and, in many cases, have been mainstream ideas for generations. Many of them have been pushed out for the mainstream by radical “conservatives” over the last 20 years, building on efforts that began over 40 years ago.

These ideas and policies – for higher income and wealth taxes, for universal health insurance, and for free public college – are being brought back into the mainstream by these Democratic politicians and their grassroots supporters. The election results of 2016 have brought them new levels of attention. Broad public support for the politicians proposing them, along with probable future election results, appear likely to put them squarely back in the mainstream. Resistance from the mainstream media and some politicians will have to be overcome, but it’s becoming clear who the real radicals are and who’s truly in the mainstream.

[1]      Eagan, M., 1/11/19, “There’s nothing ‘extremist’ about social welfare,” The Boston Globe

[2]      Eagan, M., 1/11/19, see above

[3]      Meyerson, H., 1/24/19, “AOC’s achievement: Making American’s progressive beliefs politically acceptable,” The American Prospect Blog (https://prospect.org/blog/on-tap)

[4]      Nichols, J. 2/8/19, “John Dingell kept the faith, from the New Deal to ‘Medicare for All’,” The Nation (https://www.thenation.com/article/john-dingell-obit-medicare-for-all/)

[5]      Kapur, S., 2/9/19, “Warren starts 2020 bid, vows to end system ‘rigged’ by rich,” Bloomberg (https://www.bloomberg.com/news/articles/2019-02-09/pushing-a-wealth-tax-elizabeth-warren-to-launch-white-house-bid)

CONTROLLING DRUG PRICES

Clearly, we need better regulation of drug prices and the drug industry in the U.S. Unwarranted, steep increases in drugs’ prices and higher prices than in other countries are key indicators of the need for better regulation to lower prices. And, as recent investigations have uncovered, this applies to the generic drug makers as well as the brand name drug makers. It is estimated that if there were a truly free market for prescription drugs in the U.S., they would cost $80 billion instead of $430 billion, an annual savings of $350 billion. (See my previous post for more information.)

Three bills have been introduced in Congress to address the high and rapidly rising costs of prescription drugs in the U.S. They have been introduced in the Senate by Senator Sanders of Vermont and in the House by Representatives Khanna of California and Cummings of Maryland.

First, the Prescription Drug Price Relief Act would terminate patents, ending monopoly rights, for any drug whose price exceeded the median (middle) price among five comparable countries: Canada, the United Kingdom, France, Germany, and Japan. Drug prices in these countries are roughly half of what they are in the U.S., so our drug prices would come down substantially under this law. It is expected that drug companies would lower prices voluntarily if this law is passed; they wouldn’t want to lose their patent protections because, if they did, competition would likely drive prices even lower.

Second, the Medicare Drug Price Negotiation Act would allow Medicare to negotiate the prices it pays for drugs. Given that it spends roughly $100 billion a year on drugs, almost a quarter of all drug purchasing, it has substantial negotiating power. When the Medicare drug benefit was created, the Republicans in control of Congress and President George W. Bush did the pharmaceutical industry a huge favor by prohibiting Medicare from negotiating drug prices and also prohibiting the importation of drugs. The Veterans’ Administration and every private health insurance company, as well as every other country, save substantial amounts of money by negotiating drug prices with the drug manufacturers.

(In a classic case of the revolving door between government and industry, Representative Tauzin, chair of the committee that wrote the Medicare prescription drug law, resigned two months after the bill was signed into law to become the head of the pharmaceutical industry’s trade association at an estimated salary of $2 million. His pay would increase to $11.6 million five years later.)

Third, the Affordable and Safe Prescription Drug Importation Act would allow the importation of drugs from other countries with safety standards comparable to those in the U.S., such as Canada and Germany. This would be a step toward a truly free market, something our business community rhetorically supports, and would significantly reduce drug prices given that prices in these countries are roughly half of what they are in the U.S. The charge by opponents that this would let unsafe drugs into the country rings hollow because many of our drug companies themselves import the drugs they sell or ingredients for them – largely from China.

I urge you to contact your U.S. Representative and Senators to ask them to support these three bills. It is time to reduce the exorbitant profits of the drug makers by reducing the exorbitant prices of the drugs they sell. Furthermore, reducing their high profit margins would reduce the incentive to engage in fraudulent practices to promote additional sales of their drugs.

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.

BAD BEHAVIOR IS PERVASIVE IN THE DRUG INDUSTRY

The bad behavior in the drug industry that has gotten the most attention is price gouging on brand name drugs. However, the bad behavior is more pervasive than just that.

The solution to price gouging on brand name drugs has typically been to wait for their patents to expire and assume that competition from generic drug makers would then drive prices down. The pharmaceutical industry has fought back against this by finding ways to extend their patents, for example by tweaking their drugs or the way they are delivered (e.g., pill, gel, slow-release formulation, etc.). The brand name drug makers have also paid generic drug companies not to release generic versions of their drugs. (See my previous posts on 1/2/18 and 1/13/18 for more detail.)

Recently, it’s come to light that generic drug makers have apparently been engaged in “illegal price-fixing schemes of massive proportion.” [1] An anti-trust lawsuit based on two drugs began in 2016 and has now grown to include 300 drugs and 16 generic drug makers. Consumers, health insurers, hospitals, and taxpayers have been paying illegally set high prices for antibiotics and medications for diabetes, asthma, high blood pressure, arthritis, anxiety, and much more.

The alleged collusion appears to have transformed the generic drug industry from a highly competitive and price-driven business into one where coordinated price increases occur regularly for identical or similar drugs. These price increases occur for no reason (other than greed) and are reminiscent of price hikes by brand name drug makers. However, in the case of generic drugs, claims of high research and development costs are irrelevant and big price increases shouldn’t be possible because they aren’t protected by drug patents.

For example, the cost of insulin, the life-saving drug used to manage diabetes, doubled between 2012 and 2016. Price increases occurred in a near lockstep manner across different manufacturers and different types of insulin. In January 2019, one drug maker’s prices on its insulin products increased by between 4.4% and 5.2%, while another manufacturer, simultaneously, raised its insulin prices by 5.2%. [2] In another example, Albuterol, a decades-old generic asthma medication sold by drug makers Mylan and Sun, saw its price from both manufacturers jump simultaneously from 13 cents a tablet to $4.70. (Price spikes in other generic drugs, such as the EpiPen, were highlighted in previous posts on 9/22/16 and 10/16/16.)

Generic drugs are a $100 billion a year business and represent 90% of all prescriptions. Therefore, the costs of this price fixing are undoubtedly in the billions of dollars. Forty-seven states are now plaintiffs in the expanding civil lawsuit, where new information keeps emerging and defendants are being added. Two former executives of Heritage Pharmaceuticals have pled guilty and are cooperating with prosecutors in a parallel federal criminal case.

On a different front, bad behavior in the marketing of brand name opioids is the target of increasing legal action. Executives of Insys Therapeutics are facing federal charges of racketeering, conspiracy, and mail fraud for their tactics in selling highly addictive fentanyl spray. They are charged with conspiracy to bribe and incentivize doctors, clinicians, pharmacists, and other medical professionals to prescribe the powerful opioid, including to patients who did not need it. Insys employees also contacted insurers, fraudulently claiming to be employees of medical practitioners, to lie about patients’ conditions so the insurer would pay for their fentanyl. Two executives, the former CEO and the head of sales, have pled guilty and are cooperating with prosecutors. Several doctors, a physician’s assistant, a nurse, and a former Insys sales representative (the CEO’s wife) have already been convicted. Insys has agreed to pay $150 million to settle civil and criminal charges. [3]

Purdue Pharma, the maker of OxyContin, misled prescribers and patients about the risk of addiction to OxyContin and worked to blame patients for becoming addicted. It engaged in a sophisticated and extensive marketing campaign that “educated” doctors about undertreatment of pain. It failed to report illegal activity, including blatant over-prescribing of OxyContin that clearly indicated sales in the black market. The company and three executives pled guilty in 2007 to federal charges of fraudulent marketing, with the company paying $600 million in fines.

There are scores of on-going lawsuits by states, local officials, and individuals against Purdue and other opioid makers. The Massachusetts Attorney General’s lawsuit and investigative reporting by the media are publicly revealing evidence against Purdue that was previously kept secret under plea deals engineered by Purdue and its executives. [4]

Learning the full truth about the marketing of opioids by U.S. drug makers still has a long way to go. We know enough to conclude that tens of thousands of lives could have been saved if our drug makers had not engaged in fraudulent practices or if information from earlier court cases had been made public instead of being kept secret under the terms of plea deals. [5] (See previous posts on the opioid crisis and drug makers here, here, here, and here, with a post on solutions here.)

Patients in the U.S. bought $430 billion of prescriptions drugs in 2018 that probably would have cost less than $80 billion in a truly free market, without patents and other constraints. This $350 billion difference is five times what we spend on food stamps, over eight times what the federal government spends on K-12 education and two-thirds of all state and local spending on K-12 education, and over 20 times what the federal government spends on Head Start and child care combined. [6]

Clearly, the prescription drug market in the U.S. is ineffectively regulated. Drug manufacturers have such huge profit margins that there are enormous incentives to use fraudulent methods to increase drug sales. These methods include bribing those who write prescriptions, misrepresenting the safety and effectiveness of drugs, pushing their inappropriate use, and more. This type of inappropriate, aggressive marketing is a major cause of the opioid epidemic and thousands of deaths. Predatory price increases and illegal price fixing by drug manufacturers are costing consumers, health insurers, and others billions of dollars a year that are pure profit for the pharmaceutical industry.

My next post will present steps that can be taken to control drug costs.

[1]      Rowland, C., 12/10/18, “Price-fixing probes on drugs expand,” The Boston Globe from The Washington Post

[2]      Silverman, E., 1/25/19, “Feeling the needle,” The Boston Globe

[3]      Cramer, M., 1/10/19, “Former CEO pleads guilty to conspiracy in fentanyl marketing,” The Boston Globe

[4]      Joseph, A., 1/16/19, “Opioid maker sought to put blame on addicted,” The Boston Globe

[5]      Meier, B., 12/26/18, “Opioid makers are the big winners in lawsuit settlements,” The New York Times

[6]      Baker, D., 1/14/19, “Three Bernie Sanders bills to arrest the highway robbery in the prescription drug market,” The American Prospect (https://prospect.org/article/three-bernie-sanders-bills-arrest-highway-robbery-prescription-drug-market)

RAISE THE MINIMUM WAGE? FEDS: NO! VOTERS: YES!

The bad news is that Congress and the President have not raised the federal minimum wage since July 2009 when it was set to $7.25 (about $14,500 per year for a full-time worker). After adjusting for inflation, it is now worth only $6.19. At its peak in 1968, the minimum wage was worth $11.39 in today’s dollars. If it isn’t raised by this July, which seems unlikely, it will have been 10 years that low-income workers governed by the federal minimum wage have gone without a raise; the longest period without an increase since it was first establish in 1938. [1]

Failing to raise the minimum wage as inflation increases prices shifts money from low-income workers’ pockets and the local economies where they spend their earnings to the pockets of their employers’ executives and shareholders. This is borne out by the fact that executive pay and corporate profits are at record levels. The minimum wage does not get increased because employers are greedy and politicians cater to wealthy campaign supporters rather than regular voters and workers. By the way, the best data available show that increasing the minimum wage does NOT reduce overall employment.

The good news is that some states and communities, often driven by grassroots activists, are increasing the minimum wage. On January 1, 2019, the minimum wage in 20 states and 24 communities went up, increasing pay for over 5 million workers. Over the course of the year, workers will earn over $5 billion more as a result. In eight states, the minimum wage is linked to inflation and is automatically adjusted each year. Alaska is one; there the minimum wage will go up, but by just $0.05 per hour, the smallest of the increases. [2]

The minimum wage increases were set by legislative action in six states and by local governing bodies in the communities where the wage increased. In New York City, for example, the minimum wage went up by $2.00 per hour.

In six states, increases in the minimum wage were the result of ballot measures that voters approved. Increasingly, as the federal government and some state governments (Arkansas and Missouri for example) are refusing to increase the minimum wage, grassroots activists are taking matters into their own hands and putting increases on the ballot.

The bad news is that in Michigan and the District of Columbia (D.C.) legislators blocked, reduced, and/or delayed increases in the minimum wage that had been put forth by voters! In D.C., city councilors overturned a law approved by 55% of voters that would have increased the minimum wage of tipped workers so that over time it would be the same as the minimum wage for other workers. [3]

In Michigan, the Republican legislature and Governor went out of their way to deny the will of the voters. Over 300,000 citizens had signed a petition to put a minimum wage increase on the November ballot, where its approval seemed certain. The ballot measure would have increased the minimum wage from $9.25 to $10 on January 1, 2019, to $12 by 2022, and then had it increase automatically based on inflation.

In September, the Michigan legislature and Governor, in an effort to circumvent the proposed minimum wage increase, adopted the language of the ballot initiative. This meant it would not appear on the ballot, thereby denying voters the opportunity to approve it. Then, the legislature voted for (and the Governor signed) a delay in the minimum wage increases with the increase to $12 delayed from 2022 to 2030! They also eliminated the automatic increases based on inflation. This would likely mean that minimum wage workers would see their real wages (after adjusting for inflation) decline over this period.

The good news is that the Michigan law that allows the legislature and Governor to intercept a ballot measure and prevent it from appearing on the ballot by approving it, states that the approved measure cannot be amended in the same legislative session. However, this is exactly what they did. Therefore, a lawsuit to the state’s Supreme Court is likely and would appear to have a good chance of succeeding. [4]

Given the almost 10 years since the federal minimum wage was increased and the 40 years of other policies that have left workers’ wages stagnant, raising the minimum wage at the state or local level is perhaps the most effective way to lift the incomes of our lowest-paid workers. Unfortunately, 21 states still rely on the federal minimum wage of $7.25.

The resistance of our elected officials to increasing the minimum wage reflects the extent to which many Republican and some Democratic elected representatives are more responsive to large employers and their wealthy executives and shareholders than to every day workers. The fact that every minimum wage increase that’s appeared on the ballot has been approved by voters shows the strength of support for a higher minimum wage among the voting public.

[1]      Ingraham, C., 12/27/18, “Here’s how much the federal minimum wage fell this year,” The Washington Post

[2]      Cooper, D., 12/28/18, “Over 5 million workers will have higher pay on January 1 thanks to state minimum wage increases,” Common Dreams (https://www.commondreams.org/views/2018/12/28/over-5-million-workers-will-have-higher-pay-january-1-thanks-state-minimum-wage) or Economic Policy Institute (https://www.epi.org/blog/over-5-million-workers-will-have-higher-pay-on-january-1-thanks-to-state-minimum-wage-increases/)

[3]      Cooper, D., 12/28/18, see above

[4]      Anzilotti, E., 12/6/18, “Michigan Republicans decide that people can live on $9.25 an hour for the next decade,” Fast Company (https://www.fastcompany.com/90277788/michigan-republicans-decide-that-people-can-live-on-925-an-hour-for-the-next-decade)

ELIMINATING NUCLEAR WEAPONS

Many Americans are concerned that the belligerent and impulsive behavior of President Trump could lead us into war and, in a worst-case scenario, into nuclear war. The President can independently order the launch of nuclear weapons at any time and for any reason. Furthermore, Trump’s announced intention to withdraw from the Intermediate-Range Nuclear Forces Treaty (which has been in force for over 30 years) and to spend $1.7 trillion to update the U.S.’s new nuclear arsenal increase the likelihood of nuclear war.

With these and other factors in mind, the Bulletin of the Atomic Scientists has moved its Doomsday Clock to 2 minutes from midnight (i.e., doomsday). The clock had been at 17 minutes from midnight in 1991 but has been moving closer since then and has moved from 3 minutes away in 2016 to 2 minutes today.

Any nuclear war would have catastrophic consequences for human beings and our planet. Detonation of one-tenth of the 15,000 nuclear weapons that exist (with all but about 1,000 of them in the hands of the U.S. and Russia) would almost certainly kill all humans on the planet via the huge radioactive cloud that would circle the Earth and rain down everywhere.

Even the detonation of a single nuclear weapon would, of course, be locally devastating. Today’s nuclear weapons are up to 100 times more powerful than the two bombs the U.S. dropped on Japan at the end of World War II, each of which destroyed an entire city and killed roughly 100,000 people.

The U.S. should reduce the likelihood of accidentally launching a nuclear weapon, many of which are still on a quick-launch protocol that dates from the Cold War with the Soviet Union. We could change our policies on the initial use of nuclear weapons, re-evaluate missile defense, and strengthen diplomacy. We could also do more to reduce the possible use of a nuclear weapon by terrorists or other countries around the world. The Union of Concerned Scientists has excellent information on all of this on their website.

The most encouraging news on the nuclear weapons front is the Treaty on the Prohibition of Nuclear Weapons (TPNW), which is now in the ratification process around the world. On July 7, 2017, a United Nations conference adopted this Treaty by a vote of 122 countries in favor, one opposed, and one abstention. The conference met for over 40 days in 2017 with all U.N. member countries, along with non-governmental organizations, encouraged to participate.

The Treaty will go into effect 90 days after the 50th country ratifies it. The Treaty includes comprehensive prohibitions on developing, producing, testing, possessing, or threatening to use nuclear weapons. [1] The Treaty’s introduction states that given “the catastrophic humanitarian consequences … from any use of nuclear weapons, … the only way to guarantee … [they] are never used again” is to “eliminate such weapons.” It notes that “any use of nuclear weapons would be contrary to the rules of international law … abhorrent to the principles of humanity and the dictates of public conscience. … Concerned by the slow pace of disarmament … and the waste of economic and human resources on … the production, maintenance and modernization of nuclear weapons” the conference participants agreed that the elimination of nuclear weapons was necessary and appropriate. [2]

The International Campaign to Abolish Nuclear Weapons (ICAN), a coalition of over 500 organizations in over 100 countries and the winner of the 2017 Nobel Peace Prize, is working to get the Treaty ratified. So far, 69 countries have signed it and 19 have ratified it. Once 50 countries ratify it, nuclear weapons will be banned under international law. [3]

The U.S. has not ratified the Treaty, but California, the U.S. Conference of Mayors, and several cities and towns, including Los Angeles and Baltimore, have endorsed it. Raising the issue of unnecessary, expensive, and dangerous nuclear weapons may serve as a vehicle to more broadly address the U.S.’s militarism, which is harmful geopolitically and economically.

I urge you to contact your local, state, and national elected officials and to ask them to endorse the Treaty on the Prohibition of Nuclear Weapons. These weapons serve no rational purpose and their existence is an existential threat to humankind. The costs and dangers of simply having and maintaining them, of terrorists capturing and using a nuclear weapon, and of working with and disposing of the radioactive material involved are not justifiable. A world free of nuclear weapons would be a safer and saner planet to live on.

[1]      United Nations Office for Disarmament Affairs, Retrieved from the Internet on 1/5/19, “Treaty on the prohibition of nuclear weapons” (https://www.un.org/disarmament/wmd/nuclear/tpnw/)

[2]      United Nations Conference to Negotiate a Legally Binding Instrument to Prohibit Nuclear Weapons, Leading Towards their Total Elimination, 7/7/2017, “Treaty on the Prohibition of Nuclear Weapons” (https://www.un.org/disarmament/tpnw/)

[3]      Fihn, B., 11/8/18, “The fate of the earth depends on women,” The Nation (https://www.thenation.com/article/nuclear-prohibition-beatrice-fihn/)

INVESTING IN INFRASTRUCTURE AND A GREEN ECONOMY: THE PROPOSALS

My previous post outlined the need for investing in our infrastructure while simultaneously taking advantage of opportunities to make our economy more environmentally friendly and fairer for workers. Here are overviews of some of the infrastructure investment proposals that various groups have developed to address these issues.

The Democrats have proposed “A Better Deal to Rebuild America” which calls for a $1 trillion federal investment in infrastructure that would create more than 16 million jobs. It would invest in green infrastructure and ensure opportunities for small businesses. It would incorporate strong environmental protections and labor standards. It proposes investing in roads, bridges, rail, and public transit; high-speed internet; schools; airports, ports, and waterways; and water and energy systems.

The infrastructure proposals from the Congressional Progressive Caucus, [1] the Campaign for America’s Future, [2] and Demos [3] have much in common and share similar underlying visions. The Campaign for America’s Future’s proposal is put forth as a “pledge to fight for good jobs, sustainable prosperity, and economic justice.” It incorporates investment in traditional and green infrastructure along with ensuring that workers can form unions to bargain collectively for better wages and benefits. It supports a living wage, affordable health care and child care, and paid family leave, sick and vacation time for workers. It advocates for full employment with particular attention to helping individuals and communities harmed by discrimination, de-industrialization, and privatization.

Demos proposes an economic agenda that addresses issues of race and class, while motivating working people to “engage in the civic life of their communities and our nation.” Its 25 policies mirror the goals of the Campaign for America’s Future’s pledge. They also call for investment in affordable housing and for guaranteed employment for everyone who wants to work, with the federal government as the employer of last resort (as was done during the Great Depression).

In an article in The American Prospect, Jon Rynn recommends considering health care, education, and financial infrastructure as part of the infrastructure investment paradigm. This reflects the inclusion of human capital and public goods, not just physical capital, as important components of overall infrastructure. Universal health insurance, such as Medicare for All, would expand health care infrastructure and support the productivity of human capital. Affordable public college and early care and education (aka child care) are both pieces of educational infrastructure and are investments in the current and future workforce’s human capital. Finally, regulating the financial industry and creating public banks would be ways of strengthening and democratizing financial infrastructure. [4]

A recent addition to the infrastructure proposals being promoted in Congress is the Green New Deal. It isn’t as detailed as the proposals mentioned above; it’s more of a vision statement. It envisions a substantial investment in infrastructure and the green economy. It would transform our economy by decarbonizing it to address climate change, while also making it fairer. [5]

After the October release of the Intergovernmental Panel on Climate Change (IPCC) report that presented ominous data and predictions about global warming, a series of events occurred that have pushed the Green New Deal into the spotlight. After the November election, Representative (and soon-to-be House Speaker) Pelosi announced that she planned to revive the Select Committee on Energy Independence and Global Warming to pursue bipartisan action. However, climate change activists viewed the Committee and a bipartisan approach as likely to continue to be fruitless.

So, the youth-led Sunrise Movement organized a sit-in in Rep. Pelosi’s office, calling for a committee charged with developing a plan to meet the goals deemed essential by the IPCC report. Sunrise approached Representative-elect Ocasio-Cortez, who had campaigned in support of a Green New Deal, and asked her to help publicize the sit-in. She not only agreed to do so and to reach out to other new representatives, but agreed to attend the sit-in. Roughly 200 activists occupied Pelosi’s office on November 13 with significant media attention.

Sunrise, Rep. Ocasio-Cortez, and others in or coming into Congress developed a proposal for a Select Committee on a Green New Deal. By December 10, forty members of Congress had endorsed the proposed committee and an even larger occupation of Pelosi’s office occurred.

While the specifics of a Green New Deal are to be determined, its four core elements are:

  • Decarbonizing the economy
  • Large-scale public infrastructure investment
  • Federally-guaranteed employment for everyone who wants to work
  • A just transition to a green economy with remediation for those most negatively affected by historical discrimination, climate change, and the shift to a green economy

For any infrastructure investment program, the first question usually is, can we afford it? Many people would argue that we can’t afford not to make these investments and that the cost of climate change will be much larger than these costs if we don’t take aggressive steps to green our economy.

To put the suggested costs of roughly $500 billion per year for a significant infrastructure program in perspective, the Works Progress Administration’s budget in the 1930s was roughly 2.2% of Gross Domestic Product (GDP, the size of the overall economy). This would be about $450 billion per year today with U.S. GDP at $20.66 trillion. The tax cuts passed in 2017 cost roughly $200 billion per year. Congress and President G.W. Bush approved, on short notice, a $700 billion bailout of the financial sector after the 2008 crash and, in addition, by March 2009, the Federal Reserve had committed $7.8 trillion, more than 50% of GDP at the time, to rescuing the financial system. So, the answer to whether we can afford the proposed infrastructure investments is YES; we can afford it if we have the public and political will to make the commitment to repairing and modernizing our infrastructure while greening our economy and making it work fairly for the benefit of all.

If Democrats are willing to commit to a Green New Deal (GND), which means standing up for a fair economy and taking aggressive steps to address climate change, they could reap the benefits of the current grassroots energy behind these issues. Some Democrats will resist endorsing a GND, fearing the loss of campaign donations and support from wealthy individuals and corporations. However, not supporting a GND would risk squandering a tremendous opportunity, both politically and to do what’s good for our people, our democracy, our country, and our planet.

I encourage you to communicate with your U.S. Senators and Representative about infrastructure investment and the Green New Deal. Nothing is more likely to persuade them to support a GND than hearing from constituents who care about climate change, well-maintained infrastructure, and an economy that works for everyone. I welcome your comments and feedback on steps you feel are needed to make our economy fairer and more responsive to regular Americans, as well as to tackle global warming and climate change.

[1]      Blair, H., 7/24/18, “‘The People’s Budget’: Analysis of the Congressional Progressive Caucus budget for fiscal year 2019,” Economic Policy Institute (https://www.epi.org/publication/the-peoples-budget-analysis-of-the-congressional-progressive-caucus-budget-for-fiscal-year-2019/)

[2]      Campaign for America’s Future, 2018, “The Pledge” (http://campaignforamericasfuture.org/pledge/)

[3]      Demos, 1/31/18, “Everyone’s economy: 25 policies to lift up working people” (https://www.demos.org/publication/everyones-economy)

[4]      Rynn, J., 6/28/18, “What else we could do with $1.9 trillion,” The American Prospect (https://prospect.org/article/what-else-could-we-do-19-trillion)

[5]      Roberts, D., 12/26/18, “The Green New Deal explained,” Vox (https://www.vox.com/energy-and-environment/2018/12/21/18144138/green-new-deal-alexandria-ocasio-cortez)

INVESTING IN INFRASTRUCTURE AND A GREEN ECONOMY

In previous posts, I’ve noted that with Democrats taking over control of the U.S. House in January, there’s a wide range of issues they might tackle. Even if many of the bills they propose, and hopefully pass, don’t become law (because they aren’t passed by the Senate or are vetoed by President Trump), they will frame the debate going forward and into the 2020 elections. Raising substantive issues will shift the political discussion to meaningful policies to address important problems rather than tweets and meaningless bluster.

Readers’ feedback on the list of topics in a previous post identified infrastructure investment and environmental policy issues as the two top priorities. Coincidentally, these two issues have become linked. They were described in my post as follows:

  • Infrastructure: repair roads and bridges; repair and improve mass transit including railways and airports; provide quality school buildings for all children; repair and enhance water, sewer, and energy systems; provide universal, high speed, affordable Internet access; restore and enhance public parks; provide good jobs with good wages and benefits through work on infrastructure projects.
  • The environment: move forward with the Green New Deal, which supports the development of renewable energy and green jobs while aggressively addressing climate change.

The American Society of Civil Engineers’ (ASCE) 2013 Report Card for America’s Infrastructure gave the U.S. a grade of D+ and estimated that an investment of $3.6 trillion was needed by 2020. No significant improvement has occurred since the report card was issued. (A new report card, which is done every four years, will be out on March 9, 2019.) ASCE describes infrastructure as the backbone of our economy and notes that there’s a significant backlog of maintenance and a pressing need for modernization. The overall grade is a summary of grades in 16 areas from schools to water and waste systems to transportation and energy systems.

Large portions of our deteriorating infrastructure were built in the 1930s under the New Deal’s Works Progress Administration (WPA). The WPA built electricity generation and distribution systems, constructed dams and water distribution systems, restored ecosystems, built national parks, and rescued the Midwest from the Dust Bowl. During World War II, the government built factories that produced military equipment and supplies, which after the war produced consumer goods. After WWII, the government subsidized housing construction and invested in human capital through the GI bill, which subsidized education for veterans. In the 1950s, public money built the Interstate Highway System and our aviation system. [1]

By the late 1960s, public infrastructure investment began to slow and by the 1980s, with privatization, deregulation, cutting taxes, and shrinking government at the top of the political agenda, the decline in infrastructure investment accelerated. The public seems to have quickly forgotten that it was public investments that built the infrastructure everyone takes for granted in their everyday lives.

Today, recognition is growing that our failure to invest in maintaining and modernizing infrastructure is hurting our global competitiveness and inconveniencing our everyday lives. A growing number of voices are noting that infrastructure investment is needed and would be a much better use of public funds than spending $5 billion on a wall to prevent immigration from Mexico or $1.9 trillion over 10 years on tax cuts (largely for wealthy individuals and corporations) as was done in December 2017.

Investing in green industries, particularly clean and renewable energy, thereby addressing climate change, is one component of infrastructure investment. This is also an opportunity to revitalize the U.S. economy and to foster our ability to compete in the growing international market for green technology.

Infrastructure investment can also be a means to address under-employment and inequality. Although overall unemployment figures are low, many people who lost good, blue collar, union jobs to global trade are still earning less and are less secure economically than they used to be. Many recent college graduates are struggling to find good jobs and unemployment is still high for people without college degrees, especially those who are not white. Ensuring that the many jobs created by infrastructure investment are full-time jobs with good wages and benefits would be an important step toward reducing economic inequality and insecurity.

Although President Trump has expressed support for infrastructure investment, his approach would privatize public infrastructure, unfairly enrich private developers, and fail to build much of the infrastructure that’s need. (See my earlier post, Trump’s Infrastructure Plan: A Boondoggle, for more details.) Furthermore, it would not promote the greening of our economy or reducing inequality.

My next post will review some infrastructure investment proposals, including the Green New Deal, which has been getting a lot of attention lately.

[1]      Rynn, J., 6/28/18, “What else we could do with $1.9 trillion,” The American Prospect (https://prospect.org/article/what-else-could-we-do-19-trillion)

THE DOWNSIDE OF PHILANTHROPY

Philanthropy, particularly at this time of year, is typically viewed as the ideal expression of caring for others and contributing to amelioration of social problems. However, philanthropy, particularly when tax-subsidized and done by the super-rich, has a significant downside.

Philanthropy in the U.S. is subsidized for those who itemize deductions on their income tax returns. Deducting charitable donations from taxable income means that the donation costs the donor less than its full amount. For a high-income tax payer paying roughly 40% of income in taxes, the donation only costs 60 cents for every dollar donated. For a lower-income taxpayer paying a 15% tax rate, a donation costs 85 cents for every dollar donated. Furthermore, it’s primarily high-income taxpayers and home owners who itemize deductions. So, both of these factors skew the financial benefits of philanthropy to those with high incomes and provide lower or no benefit to those with lower incomes.

Therefore, our current system of tax-subsidized philanthropy favors the giving preferences of the wealthy over those of low income or poor people. This problem was exacerbated by the 2017 tax cut. It raised the standard deduction for income tax calculation, which means that only the top 10% or so of incomes will still find it worthwhile to itemized deductions. Therefore, our tax system will now subsidize the philanthropy of only the top 10%.

Poor and middle-class people give away as high a percentage of their incomes as the wealthy, which suggests that the tax subsidies for philanthropy are rewarding the wealthy for behavior they would most likely engage in anyway. Charitable activities have occurred for centuries, but we have provided tax benefits for them only for the last 100 years. Therefore, these tax subsidies may well just be a benefit, a pat on the back, for high income people. If this is the case, it makes no sense to give away the tax revenue or to allow the wealthy to avoid paying their fair share in taxes by giving them a tax break for their charitable giving. [1]

Because of the growth of income and wealth inequality, and the huge amounts of money the super-rich can easily afford to give away, increasingly the philanthropic preferences of the wealthy are shaping our society. However, the giving preferences of the wealthy do not reflect the philanthropic preferences of the rest of society. [2]

Rob Reich, the author of “Just Giving,” would prefer to see society pursue democratically identified goals rather than private projects selected by wealthy philanthropists. The big splash that big philanthropy makes, such as Amazon’s Bezos’s recent announcement of a $2 billion commitment to address homelessness and improve early childhood education, distracts us from crafting policy solutions that will systematically address problems and help everyone who is facing a challenge rather than the subset who fall within the purview of a philanthropic project.

When the super-rich decide which institutions to support (e.g., universities, museums, hospitals) and which social problems to tackle (e.g., homelessness in the U.S., hunger and health in poor countries), they are usurping the role of public decision-making and priority setting that should be done by democratically run organizations, particularly governments. [3]

Charitable donations have been increasing since the 2008 recession, exceeding $400 billion for the first time in 2017. However, fewer households are giving, dropping from 66% in 2000 to 55% in 2014. While Giving Tuesday this year set a record with $380 million raised from 4 million individuals (an average of about $100 each), this represents only 0.1% (one tenth of one percent or one thousandth of overall giving).

Non-profit organizations are relying on fewer, larger donations. This means their support is less reliable from year to year and that they may tweak their missions to fit the interests of large donors. Overall, it means the favored institutions, causes, and projects of the wealthy are funded, while others struggle to survive. For example, it may mean that there is one awesome charter school for a hundred or so children, but that quality public education for all gets left behind.

Large-scale philanthropy can cause public organizations, such as public schools, to alter policies and procedures to qualify for philanthropic funding. For example, billionaire Bill Gates’s foundation’s grants for public schools have pushed school systems and states to adopt the Common Core learning standards and to internally subdivide schools into “schools-within-a-school” in accordance with grant requirements.

Super-sized philanthropy can’t replace broad-based public programs and investments that improve overall public well-being. An irony is that the super-rich may oppose public policies that would address issues they tackle through their philanthropy. The most dramatic and recent example is that of Amazon’s Bezos. He announced $2 billion in philanthropy to tackle homelessness and early education, but vehemently opposed, successfully, a per person tax on employment in Seattle to address the growing homelessness there. [4] Seattle’s homelessness problem is exacerbated by escalating housing prices driven in significant part by the need for housing for the growing number of Amazon employees in the Seattle area.

A more equitable and democratic system would stop providing a tax benefit for the philanthropy of the rich and more fairly tax the high incomes and wealth of individuals and corporations. The increased public revenue could be used to broadly and equitably improve societal well-being. For example, if we had increased the minimum wage to keep up with inflation and productivity since the 1960s, if we had reduced executive salaries and shareholder rewards in order to benefit employees, and if we provided affordable, quality health care for all, maybe we wouldn’t need super-sized philanthropy to help people afford a place to live or child care.

Charitable giving is not a bad thing, although giving of one’s time can be as valuable and more rewarding than giving money. However, our current system of tax-subsidized charitable giving and super-sized philanthropy based on great disparities in wealth is not good for democracy nor the best way to maximize social welfare.

[1]      Ortiz, A., 12/2/18, “The price of philanthropy,” The Boston Globe (This article is an interview with Rob Reich, the author of the new book “Just Giving.”)

[2]      Ortiz, A., 12/2/18, see above

[3]      Loth, R., 12/10/18, “We can’t privatize our way out of poverty,” The Boston Globe

[4]      Loth, R., 12/10/18, see above

ELECTION AND ETHICS REFORM

With Democrats taking over control of the U.S. House in January, there’s a wide range of issues they might tackle. Even if many of the bills they propose, and hopefully pass, don’t become law (because they aren’t passed by the Senate or are vetoed by President Trump), they will frame the debate going forward and into the 2020 elections. Furthermore, policies can become law by attaching bills or provisions to must-pass bills such as those funding the government. This is a tactic that has been used for many, many years and has been used frequently by Republicans over the last 12 years. Talking about substantive issues will shift the discussion to ideas from personalities and to meaningful, long-term policies to address important problems rather than short-term, idiosyncratic, one-off deal making.

Two key topics will be the focus of the first bill in the new House in January. They were the first two topics on my previous post’s list of possible issues for House Democrats to address. They are:

  • Elections: stop voter suppression, encourage voting, stop gerrymandering, and reform campaign financing (e.g., limit contributions, provide matching public funds, and require full disclosure of spending and donors)
  • Ethics: address conflicts of interest for Congress and all federal workers; stop the undue influence of special interests obtained through lobbying, the revolving door, and campaign expenditures

Rep. Nancy Pelosi, the current leader of the House Democrats (and likely Speaker of the House come January), has stated that the first bill in the new House in January, known as H.R. 1, will address the restoration of democratic principles and procedures. It will address election and integrity issues where government of, by, and for the people has been undermined by wealthy individuals and corporations. The overall goal of the bill will be to end the ability of special interests to bend public policies to their benefit and against the interests of hard-working Americans and our democracy. This will restore Congress’s and the federal government’s abilities to enact policies that address the problems of average Americans. This is essential to renew the public’s faith in our democracy. [1]

Pelosi’s bill would do many of the things President Trump promised to do during his campaign when he stated he would “drain the swamp” in Washington, D.C. His actions and appointments have done nothing to drain the swamp and have probably made things worse.

This bill will address the huge amounts of money in our elections and the significant portion of that money that is “dark money” – money where the identity and interests of the true donor are hidden. The bill would require all organizations making donations to or expenditures on campaigns to disclose who their donors are. [2]

The proposed legislation would also take steps to increase the impact and number of small-dollar campaign donors. Incentives would be provided for individuals to make small campaign donations and the impact of those donations would be multiplied by matching them with public funds. Candidates who agree to accept these matching funds would have to limit the size of donations they accept and, perhaps, their overall spending.

The Pelosi bill would re-establish the Voting Rights Act’s protections of every citizen’s right to vote and would stop voter suppression. It would make it easier to vote through automatic and on-line voter registration while strengthening election infrastructure to prevent hacking and ensure accurate, auditable, tabulations of votes. To ensure that everyone’s vote has a fair chance of being meaningful, it would end gerrymandering, probably by requiring that an independent redistricting commission in each state draw congressional district boundaries.

The bill would strengthen ethics and conflict of interest laws governing Congress and federal government workers. It would ban members of Congress from serving on the boards of for-profit companies, which presents a clear conflict of interest. It would also enhance disclosure of who’s lobbying the federal government, so these efforts would be publicly known and not hidden in the shadows. And it would require Presidents to disclose their tax returns.

Pelosi’s bill would implement a code of ethics for Supreme Court Justices, who are currently exempt from the code of ethics that applies to other federal judges. [3]

It would close the revolving door of personnel between government positions and private sector jobs, which creates major conflicts of interest and is a major avenue for undue influence by special interests. It would prohibit employers from giving bonuses to reward employees for moving into public sector positions (as Wall St. has done repeatedly in the past). These individuals often go back to the same private sector employers later. The bonuses present the individuals with a significant conflict of interest from day one in their public sector job, particularly if the bonus is being paid out over time and, therefore, is being received when they are in their public sector role.

Tackling elections and ethics reform as a top priority makes sense for several reasons. First, these issues are very much on voters’ minds. Voters passed several ballot measures addressing them at the state and local levels in November, as was summarized in a previous blog post. Publicity about voting and ethical scandals in the Georgia election, as well as in Florida and North Carolina, have heightened the public’s awareness and concern about these issues. [4] In addition, candidates who refused corporate and PAC money fared very well in November. Noting incumbents’ acceptance of special interest money and linking it to specific votes was an effective tactic for beating them. [5]

Second, over the longer-term, addressing elections and ethics issues is critical to restoring democratic decision-making to government by ending the undue influence of wealthy individuals and corporations. This is essential to making progress on every other issue that would advance the public good. A fairer political process, where government is truly of, by, and for the people, is necessary to eliminate the system-rigging power of wealthy individuals and corporations. This will actually drain the Washington swamp. [6] Restoring faith in the fairness and integrity of our elections and policy making is a necessary first step toward restoring trust in our government.

If Democrats are willing to commit to a new code of conduct and to stand up for true democracy, they could reap the benefits of the current backlash against corrupt behavior by elected officials and the overall corruption of our political processes. There’s an opportunity to lead on re-establishing fairness and integrity in our politics. Some Democrats will resist this, fearing the loss of campaign donations and spending by wealthy individuals and corporations, but not doing so will risk losing a tremendous opportunity, both politically and for the good of our democracy.

I encourage you to communicate with your elected officials at the national and state levels about these issues. Nothing is more likely to persuade them than hearing from constituents who care about fair and ethical elections and behavior by government officials. I welcome your comments and feedback on steps you feel are needed to make our elections and policy making fairer and more responsive to regular Americans.

Thank you for your feedback on the list of topics in my previous post. In upcoming posts, I will delve into infrastructure investment and environmental policy issues since these were the two topics that were most frequently identified as priorities.

[1]      Pelosi, N., & Sarbanes, J., 11/25/18, “The Democratic majority’s first order of business: Restore democracy,” The Washington Post

[2]      Wertheimer, F., 10/10/18, “House Democratic challengers demand campaign-finance reforms,” The American Prospect (http://prospect.org/article/house-democratic-challengers-demand-campaign-finance-reforms)

[3]      Mascaro, L., 12/1/18, “House Democrats’ bill seeks reforms,” The Boston Globe from the Associated Press

[4]      Carney, E. N., 11/29/18, “Read it and weep: Georgia lawsuit paints stark portrait of voter suppression,” The American Prospect (http://prospect.org/article/read-it-and-weep-georgia-lawsuit-paints-stark-portrait-voter-suppression)

[5]      Lardner, J., 11/30/18, “What the Democrats must do first,” The American Prospect (http://prospect.org/article/what-democrats-must-do-first)

[6]      Lardner, J., 11/30/18, see above

DEVELOPING AN AGENDA FOR THE DEMOCRATIC HOUSE

With Democrats taking over control of the U.S. House in January, there’s a wide range of issues they might tackle. Even if many of the bills they propose, and hopefully pass, don’t become law because they aren’t passed by the Senate or are vetoed by President Trump, they will serve an important purpose. The bills will make it clear where the parties and candidates stand on issues and make the 2020 election, at least in part, a referendum on these issues. Furthermore, issues can be successfully addressed by attaching bills or provisions to must-pass bills such as those funding the government. This is a tactic that has been used for many, many years and has been used frequently by Republicans over the last 12 years.

A backlog of issues needs to be addressed given the decade-long gridlock in Congress and the federal government. A stalemate has prevailed ever since the Republican Congress declared in 2010 that it would not pass anything President Obama supported. It’s hard to set priorities and focus because there’s so much that needs to be done and many areas warrant urgent attention. I look forward to your comments on priorities among the following long list of topics:

  • Elections: stop voter suppression, make voting and voter registration easy, reform campaign financing (e.g., limit contributions, provide matching public funds, and require full disclosure of spending and donors), stop gerrymandering
  • Ethics: address conflicts of interest for Congress, as well as all federal employees in the executive and judicial branches; stop the undue influence of special interests through lobbying, the revolving door, and campaign expenditures
  • Health care: expand and strengthen Medicare and move toward Medicare for All; strengthen the Affordable Care Act (aka Obama Care); expand and strengthen Medicaid; improve health care access (including to women’s and reproductive health services); improve quality while controlling costs (including drug costs); move toward an efficient single-payer health insurance system; undertake a comprehensive and well-funded effort to address the opioid crisis
  • Retirement security: expand and strengthen Social Security, encourage individuals’ saving for retirement
  • Infrastructure: repair roads and bridges; repair and improve mass transit including railways and airports; provide quality school buildings for all children; repair and enhance water, sewer, and energy systems; provide universal, high speed, affordable Internet access; restore and enhance public parks; provide good jobs with good wages and benefits through work on infrastructure projects
  • Criminal justice system: eliminate racism, make the system more effective and efficient, eliminate for-profit prisons
  • Workers’ rights: strengthen the right to organize into unions and bargain collectively with employers; enhance domestic workers’ rights; guarantee meaningful work; raise the minimum wage; regulate part-time and contingent work
  • Family and child support: provide economic security by paying a living wage and providing family and medical leave, paid sick and vacation time, affordable, high quality early education and care, and an effective safety net; value and reward work in the home particularly caring for children and seniors
  • Education: provide high quality, affordable education from birth through career
  • Safety net: rebuild an efficient, effective economic support system including unemployment benefits, as well as food and housing assistance
  • Civil and economic rights and justice for all: protect and provide fair treatment for Blacks and people of color, women, immigrants, the LGBTQ community, and the otherwise-abled
  • Gun violence reduction: require a background check for the purchase of any gun; ban automatic and semi-automatic guns, as well as high capacity magazines for bullets
  • Immigration: stop the separation of children from parents at the border and reunite families that have been separated; ensure that all children and other immigrants who are detained are treated humanely and have their cases processed expeditiously; define a path to legal residency and citizenship for Dreamers and other long-time, law abiding immigrants; create a guest worker program to allow immigrants to legally work temporarily in the U.S.; address the underlying conditions that lead to refugees, asylum seekers, and immigration
  • The environment: move forward with the Green New Deal, which supports the development of renewable energy and green jobs while aggressively addressing climate change
  • Tax policy: reform the Republican tax cut bill, make our tax system fair (for all people and businesses) and a vehicle to reduce income and wealth inequality, generate the revenue needed to provide the programs the public wants
  • Corporate and the financial sector regulation: ensure corporations and financial firms serve the public good; stop privatization of public goods and services; stop financial manipulation that enriches private interests while undermining workers’ jobs and retirement benefits; enforce and enhance anti-trust laws so corporations aren’t so big that they present risks to our economy if they fail or have the economic and political power to unfairly benefit themselves
  • Fair trade: ensure trade agreements protect workers, consumers, and the environment; control international financial manipulation by eliminating tax havens and ensuring all individuals and businesses pay their fair share of taxes
  • Balance military spending and actions with diplomacy and humanitarian actions

I will do future posts on some of these issues to provide more detail on the related problems and policy solutions.

In the meantime, I welcome your comments on priorities among these issues, details about them, and any other issues you think should be on this list.

BALLOT MEASURES IN THE 2018 ELECTIONS

For a variety of reasons, but often because the established policy-making process has been unresponsive to citizens’ desires, proposed laws are put on election ballots for direct voter approval. This occurs both at the state and the local levels. In 2018, there were many such ballot measures on a great variety of topics from election reforms to energy and financial regulations to health care and financial matters to ethics and criminal justice issues to marijuana legalization to abortion and government administrative issues.

In the 2018 election, voters in 37 states decided 155 statewide ballot measures. Of those where a final result is available, 107 were approved and 47 were defeated. Of the 64 citizen-initiated measures, 32 were approved and 32 were defeated, for a 50% approval rate. For the 89 ballot measures initiated by legislative action or a commission, about 82 percent were approved. [1]

A number of these ballot measures addressed issues related to elections. To reduce gerrymandering, four states’ voters approved ballot initiatives that establish independent redistricting commissions to draw lines for congressional and state legislative districts after the 2020 Census. In Missouri, voters approved the establishment of the first ever state demographer position and enacted some unique competitiveness and partisan fairness criteria for state legislative districts. Ohio voters approved a ballot measure back in June that created a new redistricting system requiring super-majority, bi-partisan votes to approve new congressional districts. [2]

Automatic voter registration was approved through ballot measures in two states and two states’ voters approved same day registration. In Florida, a ballot measure passed that will restore voting rights to roughly 1.4 million citizens who have completed their sentences for felony convictions. Six states and more than a dozen local jurisdictions passed ballot measures strengthening ethics laws, requiring greater disclosure of campaign contributions, or regulating money in politics. [3] On the downside for access to voting, two states approved ballot measures establishing voter ID requirements.

Voters in Idaho, Nebraska, and Utah approved ballot measures expanding Medicaid eligibility, a state option under the Affordable Care Act (aka Obamacare). Some Republican Governors and legislatures have opposed this expansion of Medicaid simply because it was part of Obamacare, even though it was very low cost to the states and would have provided health insurance to tens of thousands of low-income residents. A ballot measure to extend Montana’s Medicaid expansion beyond June 2019 failed, although the legislature and Governor could still extend it. Recreational marijuana sales were legalized in Michigan and Missouri but defeated in North Dakota, while medical marijuana was approved in Utah.

Some of these ballot measure had large amounts of money spent on campaigns for and against them. In general, state laws do not restrict spending on ballot questions, so where corporate interests are at issue, corporations often spend large amounts of money on ballot measure campaigns. For example, a California ballot measure to limit dialysis clinic’s revenue had over $130 million spent on it, of which $110 million was spent in opposition to the measure, which failed. A California local rent control measure had over $100 million spent on it, three-quarters in opposition, and it failed. An energy market-related measure in Nevada had almost $100 million spent on it, with two-thirds in opposition, and it failed. In Arizona, an energy market-related measure with over $50 million in spending failed with 57% spent in opposition.

Among the 10 ballot measures in 2018 with the most spending (all had over $30 million in spending), the side spending more money won in every case.

So, although the results varied, there were a number of distinctly progressive ballot measures that were approved as part of the 2018 election. In several cases, they were approved by margins of over 60% even when the state’s partisan candidates’ races were very close. This was true, for example, for Florida’s restoration of voting rights to those with felony convictions and in Michigan for voting and redistricting reform.

In my next post, I will share some thoughts on policy issues that should be high on the House Democrats’ agenda when they take over control in January.

[1]      Ballotpedia, retrieved 11/23/18, “2018 election analysis: Notable ballot measure results,” (https://ballotpedia.org/2018_election_analysis:_Notable_Ballot_Measure_Results)

[2]      Rapoport, M., 11/9/18, “Tuesday’s verdict on voter suppression and gerrymandering,” The American Prospect (http://prospect.org/article/tuesday%E2%80%99s-verdict-on-voter-suppression-and-gerrymandering)

[3]      Weiser, W., & Weiner, D. I., 11/9/18, “Voters are hungry for democracy reform,” Brennan Center for Justice (https://www.brennancenter.org/blog/voters-are-hungry-democracy-reform)

THE TRUE STORY OF THE 2018 ELECTION

The dominant narrative of the 2018 election from our mainstream (corporate) media had congealed even before the polls on the west coast had closed. As it turns out, their narrative was wrong.

The narrative goes something like this: there was no blue wave for Democrats; Trump and the Republicans won the election. Furthermore, there was no progressive shift among voters, because even where Democrats won, it was moderates who won; progressive Democrats, like Beto O’Rourke in Texas, lost.

In an attempt to correct the narrative and provide updates on the many races that were not determined by the end of election night coverage, CNN did a novel thing: it held a night of programming a full week after the election that it called “Election Night in America Continued.”

Because of the expansion of mail-in ballots, absentee voting, and early voting, as well as the new use of ranked choice voting in Maine and some very close races, final results have taken longer to tabulate than in the past. A week and a half after the election, two US Senate seats are still up in the air (Florida and Mississippi), as are seven US House seats and two governorships (Florida and Georgia). [1]

The inaccurate story of Democrats losing the election was based on early results from the east coast. Democrats lost a US House seat in Kentucky that had received a lot of attention only because of a scrappy fight in a long-shot race by a woman combat veteran with some advertising that went viral on social media. Democrats also lost a high-visibility US Senate race in Indiana early in the evening. Close races for Governor in Georgia and Florida, and a close Senate race in Florida, all of which are still counting votes but which some pundits prematurely called Republican wins, fueled the Democrats-are-losing story.

Beto O’Rourke’s close loss in the Texas US Senate race, which had received so much attention only because it was so amazing that this race was anywhere near close in deep red Texas, cemented the narrative that the Democrats were losing.

The premature claims of Republican wins are now being used to fuel Republicans’ and Trump’s demand that vote counting stop with claims that these elections are being “stolen.” These false claims are dangerous as they undermine voters’ faith in our democracy and in our voting systems, as well as the commitment to accurately count every vote.

However, as more votes are counted and more results are finalized, especially from the west coast, the blue wave for Democrats is becoming clearer and larger. The Democrats flipped at least 38 seats in the US House. They will have at least 30 more seats than the Republicans. In the US Senate, the Democrats were defending ten seats in states that Trump won but lost only three of them. Meanwhile, Democrats won two Senate seats from Republicans (Arizona and Nevada). [2]

Furthermore, without the gerrymandering and voter suppression done by Republicans, Democrats would likely have won at least a dozen more seats in the US House. For example, in North Carolina, Democratic candidates for the US House got 50% of the overall vote, but only 3 out of 13 seats. With fairly drawn districts, the Democrats would have gotten 3 or 4 more seats in North Carolina alone.

With votes still being counted, it seems certain that in the overall popular vote for US House candidates, Democrats will have at least 7% more votes than Republicans. This would make the 2018 blue wave bigger than the Republicans’ waves in 2010 (President Obama’s first mid-term election) and in 1994 (President Clinton’s first mid-term election). [3]

The mainstream (corporate) media and others who fear a resurgence of progressive values and policies (such as universal health insurance, a $15 minimum wage, and free public higher education) have inaccurately characterized the Democrats’ successes as coming from moderates. They claim that where Democrats ran progressive candidates, they lost. However, to make this argument, they have had to define as moderates many candidates who support progressive policies. [4] For example, of the 60 new incoming Democratic House members, 45 have publicly supported expanding Medicare (including 20 who support Medicare for All), 42 have publicly supported increasing the minimum wage, 49 support campaign finance reform, 48 support reducing prescription drug prices, and 41 support unions.

Overall, 65% of new House members support expanding Medicare or Social Security, while 82% rejected corporate PAC money for their campaigns and / or support campaign finance reform. (Even before the election, the House’s Expand Social Security Caucus had 150 members and the Medicare for All Caucus had over 70 members.) [5]

The Democratic blue wave was also clearly present in state election results. Democrats picked up at least seven governorships (with Florida and Georgia still undecided), three Attorneys General, 50 state Senate seats, and 200 state House seats. There are now 14 states where Democrats hold the governorship and control of both houses of the legislature, up from 8. Republicans hold similar control in 21 states, down from 26. In fourteen states, the parties share control of state government. [6]

Even in deep red Texas, where O’Rourke lost the US Senate race, Democrats picked up two US House seats, two state Senate seats, 11 seats in the state House, and four appeals court judges. In addition, a slate of 17 black women was swept into offices in Harris County. [7]

So, although Democrats and progressives did not win everything they tried for, there was a strong blue wave for Democrats and it had a strong progressive tint to it.

In my next posts, I will provide an overview of the results of the many ballot initiatives that were voted on and then share some thoughts on policy changes that should be high on the House Democrats’ agenda.

[1]      Ballotpedia, retrieved 11/15/128, “Election results, 2018,” https://ballotpedia.org/Election_results,_2018

[2]      Walsh, J., 11/13/18, “Yes, there was a big blue wave last week,” The Nation (https://www.thenation.com/article/midterm-elections-democrats-left/)

[3]      Yglesias, M., 11/13/18, “Democrats’ blue wave was much larger than early takes suggested,” Vox (https://www.vox.com/policy-and-politics/2018/11/13/18082490/blue-wave)

[4]      Walsh, J., 11/13/18, see above

[5]      Green, A., 11/15/18, “The midterms prove it: Progressive ideas are now mainstream,” The Washington Post

[6]      Ballotpedia, see above

[7]      Yglesias, M., 11/13/18, see above

STOPPING VULTURE CAPITALISM

The term vulture capitalism is used to refer to financial manipulation techniques used to extract profits from companies without regard to their health or survival. [1] Workers, consumers, suppliers, and the communities where a company is based, as well as taxpayers, typically end up getting the short end of the stick while the vulture capitalists realize significant financial gains. In previous posts, I outlined the vulture capitalist business model and highlighted several examples of vulture capitalism in action.

Vulture capitalism is allowed and facilitated by existing laws and regulations. These need to be changed to restrict private financial gain at the expense of our society and economy. Vulture capitalism is like pollution, it harms the public good while private interests benefit.

Here are some steps that should be taken to rein in vulture capitalism:

  • Reduce the amount of debt (i.e., loans) a company is allowed to have. Pass laws setting limits or institute bank regulations limiting lending to companies with high levels of debt.
  • Limit the payment of dividends to vulture capitalists in the period right after they buy a company. Dividends could be banned for two years after the acquisition of a company, which is what Europe does.
  • Require increased transparency from vulture capitalists, including the disclosure of all fees and expenses they charge to companies they control, as well as the share of profits they take.
  • Stop the favorable tax treatment of the income of vulture capitalists (aka the carried interest loophole). Currently, their income is taxed at only 15% while other high-income individuals typically pay 35% to 40%. Vulture capitalists’ income should simply be treated the same way as everyone else’s earned income.
  • Reduce the tax benefit of companies’ large interest payments by reducing the deductibility of interest expenses when debt exceeds a certain level. (Note: The 2017 Tax Cuts and Jobs Act took a step in this direction by limiting the deductibility of interest when calculating corporate income tax. Businesses with revenues over $25 million are only able to deduct interest expenses of up to 30 percent of adjusted taxable income. This targets the biggest leveraged buyout deals and was included in the tax bill because it raises $253 billion in government revenue over ten years.) [2]
  • End the favorable tax treatment of commercial real estate ownership so that sale / lease back deals are not profitable.
  • Make stock buybacks, which artificially boost the price of a stock, illegal, as they were before 1982, especially if borrowed money is used to pay for them.
  • Treat vulture capitalists as owners of companies (which they are) instead of passive investors (which is how they are typically treated in court today). This would make them liable for unsafe working conditions and illegal treatment of workers, such as wage theft. They could also be held responsible for worker retraining and pension liabilities, for example, instead of being able to avoid these responsibilities when they put companies through bankruptcy.
  • Establish strict rules about conflicts of interest for vulture capitalists, so they can’t engage in self-dealing that enriches them while the company they own is stripped of assets and stability. Prohibit them from being both a shareholder (e.g., owner) and a creditor who has made loans to the company. Prohibit them from buying assets sold by the company. Prohibit them from keeping or reacquiring control of the company after it has gone through bankruptcy.
  • Change bankruptcy laws so that lenders to a company are not the first ones to get paid in a bankruptcy. Workers (and their pension benefits), suppliers and other business partners, and even communities that are harmed should not have to wait in line behind those who have loaned a company money, which usually means they get nothing in a vulture capitalism bankruptcy. The priority for paying lenders first in bankruptcy provides too great an incentive to provide big loans to companies for leveraged buyouts, dividend payouts, and acquisitions of other companies.
  • Give workers voting representation (or increased representation) on the Board of Directors of a company in return for concessions workers make in pay, benefits, working conditions, or workforce levels. This would reflect the fact that the workers have made a major investment in the viability of the company. In Europe, it is routine for workers to have voting representation on companies’ Boards. A strong argument can be made that US companies would be more equitably run if this were the case here.

I urge you to ask your elected officials to take action to stop vulture capitalism. It undermines our economy and society, contributes to economic inequality, and does substantial harm to workers, suppliers, consumers, communities, and taxpayers. The only people who benefit are the greedy vulture capitalists.

[1]      Wikipedia, retrieved 10/24/18, “Vulture capitalist,” https://en.wikipedia.org/wiki/Vulture_capitalist

[2]      Dayen, D., 3/20/18, “Private equity: Looting ‘R’ us,” The American Prospect (http://prospect.org/article/private-equity-looting-r-us)

VULTURE CAPITALISM IN ACTION

The term vulture capitalism refers to techniques of financial manipulation (aka financial engineering) used to extract profits from companies without regard to the health or survival of the companies. [1] Workers, consumers, suppliers, and the communities where a company is based, as well as taxpayers in general, typically end up getting the short end of the stick while the vulture capitalists realize significant financial gains. In my previous post, I outlined the vulture capitalist business model.

Recent examples of vulture capitalism include the bankruptcies of Sears, Toys R Us, the Hostess confectionery company (maker of Twinkies), and seven grocery store chains.

The bankruptcy of Sears is a classic case of vulture capitalism. In addition, there are conflicts of interest and self-dealing by the vulture capitalist that are even worse than usual. The vulture capitalist who bought Sears is Eddie Lampert. He is a hedge fund operator and used his ESL Investments fund (ESL) as a partner in the deal. He and ESL bought Sears in 2005 and he installed himself as CEO and board chairman. Lampert became Sears’ largest shareholder (31%) and ESL owned another 18%. What is unusual is that Lampert’s ESL and a related fund are also the biggest lenders to Sears, having loaned it roughly $3 billion. Sears was paying roughly $250 million per year in interest to these Lampert-affiliated entities. Also unusual is Lampert’s claim on Sears’ real estate. In 2015, Lampert, as Sears’ CEO, sold many of Sears’ real estate holdings for $2.7 billion in a sale / leaseback deal to a real estate investment trust that is 43.5% owned by ESL and where Lampert is the chairman. Sears has paid roughly $400 million to this REIT in rent and other payments since 2015. Therefore, Sears was paying Lampert and his affiliated funds over $600 million per year in interest and rent, while he served as Sears’ CEO and board chairman. [2]

In 2014, Lampert, as Sears CEO, sold the Land’s End clothing brand to a consortium that was two-thirds controlled by his ESL fund. In 2016, he sold Sears’ Craftsman tool brand to pay down debt that was largely held by him and his funds. He has proposed selling of other Sears assets and has made bids himself to buy some of them. Sears’ other stockholders have already won a $40 million settlement over Lampert’s self-dealing and selling of assets at bargain prices to entities in which Lampert holds a large stake. As Sears’ largest lenders, Lampert and affiliated entities are in position to control whatever entity and assets may emerge from the bankruptcy process, in what may be the ultimate conflict of interest in this story filled with such conflicts. [3]

Over the last decade, 175,000 workers at Sears and its subsidiary Kmart have lost their jobs and another 68,000 jobs are at risk due to the recent bankruptcy filing.

In the newspaper business, a vulture capitalist hedge fund, Alden Global Capital (AGC), has aggressively pulled cash and other assets out of newspaper companies while radically cutting staff (i.e., costs) and loading debt on the companies. AGC owns the Denver Post and hundreds of other newspapers through Digital First Media (DFM). AGC took control of DFM in 2011 and since then has eliminated two-thirds of the staff at the newspapers. Meanwhile, AGC has pulled $241 million in cash and millions more in real estate from the newspapers. It has loaded the newspapers up with $200 million in debt and “borrowed” almost $250 million from the workers’ pension funds. [4]

Earlier this year, 70-year-old Toys R Us filed for bankruptcy and closed all its U.S. stores with 33,000 people losing their jobs. In 2005, it was bought by vulture capitalists Bain Capital, KKR, and Vornado Realty Trust. They loaded up the chain with $6.6 billion in debt, extracted windfall profits, and then filed for bankruptcy. Forty percent of all retail chain bankruptcies between January 2015 and April 2017 were by companies owned by vulture capitalists. Sixty-one percent of all retail job losses over this period were due to vulture capitalism. [5]

You may remember the 2012 bankruptcy of the Hostess confectionery company, which made Twinkies. The company had filed for bankruptcy in 2004 and its unions agreed to massive pay and benefit cuts worth at least $150 million annually in an attempt to help the company survive. A vulture capitalist fund, Ripplewood Holdings, bought the bankrupt company for $130 million, saddling it with debt approaching $1 billion. Ripplewood installed new management who received big pay checks as the company struggled – CEO Brian J. Driscoll had his pay tripled to $2.55 million before he was pushed out after failing to turn the company around. The next CEO got a pay raise as the company was again headed for bankruptcy and while it was demanding 30 percent salary and benefit cuts from its employees. The company had also stopped contributing to the union’s pension fund, ignoring its obligations under collective bargaining agreements. Nonetheless, it filed for bankruptcy, eliminated 18,000 jobs, and asked the bankruptcy judge to permit it to pay executives $1.75 million in bonuses to oversee the dissolution of the company. [6] [7]

Since 2015, seven major grocery store chains, including A&P, have filed for bankruptcy. All seven bankruptcies were driven by vulture capitalists. More than 125,000 workers’ jobs are at-risk as a result. The case of Southeastern Grocers is a classic example of vulture capitalism. It was owned by Lone Star Funds, whose billionaire owner, John Grayken, renounced his US citizenship to avoid taxes. Lone Star sold $145 million of the company’s real estate – stores and a distribution center – that the company then had to pay rent to use in a classic sale / leaseback vulture capital deal. Between 2011 and 2018, Lone Star received $980 million in dividends, much of it paid for by loans that cost Southeastern Grocers tens of millions of dollars a year in interest. By March 2018, when the company filed for bankruptcy its debt was $1.1 billion. [8]

By way of comparison, Kroger, a conventionally owned company that is one of the largest supermarket chains in the country, whose stock is traded on the New York Stock Exchange, is doing just fine. It has low debt and, because of low interest and rent expenses, can afford to invest roughly $3 billion per year in its facilities and operations. It is also investing in its workers through workforce development, increased pay and benefits, and pension benefits. These are things vulture capital-owned competitors are unable to do due to the interest and rent expenses foisted on them.

These are just a few examples among many of how vulture capitalism is hurting workers and our economy, enriching a few financial engineers, i.e., vulture capitalists, without producing any benefits for the companies, society, or anyone but themselves.

In my next post, I will identify policy changes that would rein in vulture capitalists.

[1]      Wikipedia, retrieved 10/24/18, “Vulture capitalist,” https://en.wikipedia.org/wiki/Vulture_capitalist

[2]      Dayen, D., 10/17/18, “How Sears was gutted by its own CEO,” The American Prospect (http://prospect.org/article/how-sears-was-gutted-its-own-ceo)

[3]      Cohan, W. D., 10/16/18, “The billionaire who led Sears into bankruptcy court,” The New York Times

[4]      Reynolds, J., 4/13/18, “Meet the vulture capitalists who savaged ‘The Denver Post’,” The Nation (https://www.thenation.com/article/meet-the-vulture-capitalists-who-savaged-the-denver-post/)

[5]      Dayen, D., 3/20/18, “Private equity: Looting ‘R’ us,” The American Prospect (http://prospect.org/article/private-equity-looting-r-us)

[6]      Adams, S., 11/21/12, “Why Hostess had to die,” Forbes (https://www.forbes.com/sites/susanadams/2012/11/21/why-hostess-had-to-die/#41e34edb6dfe)

[7]      Blumgart, J., 11/20/12, “Vulture capitalism – not unions – killed Twinkies,” Salon (https://www.salon.com/2012/11/20/vulture_capitalism_not_unions_killed_twinkies/)

[8]      Appelbaum, E., & Batt, R., Fall 2018, “Private equity pillage: Grocery stores and workers at risk,” The American Prospect (https://read.nxtbook.com/tap/theamericanprospect/theamericanprospectfall2018/private_equity_pillage_grocer.html)

VULTURE CAPITALISM

The term vulture capitalism is used to refer to techniques used to extract profits from companies without regard to the health or survival of the companies. The term has come into widespread use to differentiate these financial strategies from venture capitalism, which refers to funding provided to new and innovative companies that are too small or new to get bank loans or other forms of investment (e.g., from the stock market). Although risky, venture capital investments can have very high returns if the companies become successful.

Vulture capitalists acquire companies in the hope of making profits from them through financial manipulation (aka financial engineering) without regard to the ultimate success of the companies. [1] Sometimes they work to increase the company’s value by aggressively cutting costs and then selling it for a profit. Sometimes they split the company into pieces, hoping they can sell the pieces for more than their purchase price.

Often, vulture capitalists extract profits from companies and then have the companies file for bankruptcy. Due to their aggressive techniques and methods, workers, customers, suppliers, and the communities where a company is based, as well as taxpayers in general, typically end up getting the short end of the stick while the vulture capitalists realize significant financial gains.

Companies that are destroyed – run into bankruptcy – by vulture capitalists are no longer available to consumers, so consumer choice is reduced. This plays into the hands of big corporations, such as Walmart and Amazon, when, for example, vulture capitalists buy supermarket chains and drive them out of business. Consumer choice and competition suffer while vulture capitalists get rich.

Recent examples of vulture capitalism include the bankruptcies of Sears, Toys R Us, the Hostess confectionery company (maker of Twinkies), and seven grocery store chains. Vulture capitalists have also targeted newspapers from the Denver Post and Boston Herald to small community papers. Vulture capitalists typically use hedge funds or private equity funds to raise money for their acquisitions. These funds pool money from large investors and, because they are not open to the public or publicly traded on a stock exchange, they are exempt from most regulations and oversight.

The vulture capitalist business model is an example of hyper-capitalism. It destroys viable companies and hurts our economy. [2] The vulture capital model typically works like this [3]:

  1. Buy all or a controlling share of a company by borrowing most of the money (typically 70%) you pay for it (which is why these acquisitions are called leveraged buyouts (LBOs): the borrowed money leverages the relatively small amount of money the vulture capitalist and/or his fund are spending).
  2. Assign the debt to the acquired company, requiring it to pay all the interest on the large loan. An advantage to this strategy is that interest payments are a deductible business expense for tax purposes. Therefore, the high level of debt and high interest payments reduce what the company must pay in federal and state income taxes.
  3. Sell off the company’s valuable assets such as real estate. Often a company’s real estate (e.g., store sites, factories, operational facilities) is sold to a real estate investment trust (REIT), an investment fund, often run by the venture capitalist, which is eligible for favorable tax schemes. The company typically leases back the facilities from the REIT in what is called a “sale / leaseback” arrangement that requires to company to pay rent for the facilities it used to own.
  4. Pay high levels of dividends to shareholders, including the vulture capitalist and his fund. This often requires the company to take out more loans (i.e., more debt and more interest payments).
  5. Buy back shares of company stock to boost its value for shareholders, including the vulture capitalist and his fund. This often requires the company to take out more loans (i.e., more debt and more interest payments).
  6. Charge the company for expenses and a wide range of fees (e.g., management, transaction, advisory, and monitoring fees) that often add up to millions or tens of millions of dollars a year. In addition, take a share of any profits the company earns.

    Note: Items 2 – 6 all result in mandatory expenses, primarily interest and rent, for the company. These use up most, if not all (sometimes more than all), of the revenue and cash flow the company generates. This reduces the financial stability and resilience of the company, which is further hurt by the removal of assets such as real estate that could serve as a buffer in hard times. The company is strangled by these new expenses and doesn’t have the resources to invest in innovation or other steps that would keep or make it competitive.

  7. With the company under financial stress, extract concessions from workers (e.g., cutting their pay and benefits) telling them that this is necessary to avoid shutting the company down or filing for bankruptcy. Similarly, extract price cuts from suppliers.
  8. Sell the company or file for bankruptcy. Filing for bankruptcy voids union contracts and responsibility to pay past and present workers the pensions and retirement benefits they were promised – and earned. (Note: The federal government and we as taxpayers often end up paying some or all of earned pension benefits after a bankruptcy through the Pension Benefit Guaranty Corporation.)

The mainstream (corporate) media and vulture capitalists typically and inaccurately report that the bankruptcies were due to factors such as greedy unions and a changing business environment. However, other companies in the same industries survive, some very successfully and some with difficulty.

In my next posts, I will share specific examples of how the vulture capitalism model has played out and then identify policy changes that would rein in vulture capitalists.

[1]      Wikipedia, retrieved 10/24/18, “Vulture capitalist,” https://en.wikipedia.org/wiki/Vulture_capitalist

[2]      Kuttner, R., 10/16/18, “It was vulture capitalism that killed Sears,” The American Prospect (http://prospect.org/article/it-was-vulture-capitalism-killed-sears)

[3]      Appelbaum, E., & Batt, R., Fall 2018, “Private equity pillage: Grocery stores and workers at risk,” The American Prospect (https://read.nxtbook.com/tap/theamericanprospect/theamericanprospectfall2018/private_equity_pillage_grocer.html)

WHY WE NEED A POLITICAL REVOLUTION

Bill Moyers – one of the most savvy and respected commentators on US politics and society over the last 40+ years – just published an interview with the author of a book Moyers describes as the best political book of the year. [1] The author is Ben Fountain and the book is Beautiful Country Burn Again.

Fountain, an acclaimed novelist, was hired by The Guardian (a respected British daily newspaper with a US edition) to cover the 2016 US presidential race. His reflections on and analysis of the current US political environment are poignant and very relevant to this fall’s election.

Fountain found that millions of Americans are experiencing significant confusion, frustration, and anger. Working and middle-class people are finding it harder and harder to make ends meet and, therefore, are feeling more and more beleaguered. Their financial and psychological security has been undermined by the shredding of the social contract of the 1950s – 1970s, which promised that if they worked hard and played by the rules, they would have a secure middle class life. They are working harder than ever but, nonetheless, are falling further behind in their efforts to have a decent life, provide for their children, and have a secure retirement. Meanwhile, they see the wealthy doing better and better, getting richer and richer.

Fountain states that this is “not a situation that can be sustained long-term in a genuine democracy.” (p. 3 of the interview transcript). The tremendous increase in the inequality in income and wealth over the last 40 years has led many Americans to have a “basic, pervasive sense that the system is not fair.” (p. 4) Given this legitimate sense of grievance among the millions living economically precarious lives, the declaration by candidate Trump, Senators Bernie Sanders and Elizabeth Warren, and others that “The system is rigged” resonated strongly.

These beleaguered, aggrieved Americans are resentful and looking for an explanation for why they are experiencing such hard times. This makes them vulnerable to false narratives and scapegoating from politicians. This resentment is exacerbated by the fact that for many white Americans their position of power and privilege has been (rightfully) challenged over the last 50 years. The uncomfortable truths of the racism of America have presented “a challenge to some people’s identity and sense of personal integrity.” (p. 4)

Trump was a master at playing on this resentment, vulnerability, and discomfort. He gave many white Americans “psychological, emotional affirmation as an antidote for all the anxiety, all the resentment they’d been feeling.” (p. 5) Despite the obvious contradictions of Trump’s wealth, New York background, and anti-worker business practices, he provided easy-to-digest explanations and solutions for beleaguered white, working people (especially men). Fountain describes this as the “classic con man dynamic” that shows “how easily we’re taken in when we’re hearing what we want to hear … [which has] more to do with emotion and raw attraction than anything that might be called rational thought.” (p. 7)

Fountain says that the gullibility of the American public is in part due to what he calls the “Fantasy Industrial Complex.” The public believes in the possibility of the fantasy lifestyle we see in the advertisements and commercial propaganda that bombard us day and night from our screens in movies, TV, celebrity news, and social media. The cumulative effect is that this “numbs us out and dumbs us down.” (p. 8) As a result, “it takes a supreme effort of will on the individual’s part to distinguish advertising and propaganda from facts,” (p. 8) lies from truth, and fantasy from reality.

Fountain states that both of our political parties have lost their way. Trump, with the help and acquiescence of many others, has taken the Republican Party’s “politics of paranoia and racism, cultural resentment, xenophobia, misogyny and all the rest” to new extremes. The Democrats, during the 1990s with leadership from the Clintons, maintained their commitment to civil rights and diversity, including based on sexual orientation, but abandoned their commitment to workers, the poor, and Main Street for financial support from Wall Street and the wealthy. They stopped making the case for the important roles of government in maintaining a safety net and regulating business and the economy. As a result, the economic security of working and middle-class people collapsed, while income and wealth inequality skyrocketed.

The political power of the wealthy has been super-charged by changes in laws governing the financing of our political campaigns. Unlimited amounts of money can now be spent on campaigns and the sources of much of it may be kept secret. Without wealth, everyday citizens are left speechless in our elections and, therefore, underrepresented in the halls of government. The big campaign spenders have unprecedented access to and influence on policy makers, resulting in policy outcomes they favor and that benefit them further.

Democracy is overwhelmed by the hyper-capitalism in the US today with its great concentrations of wealth and power, both in our economy and in our political system and government. This is the result of the deregulation of business and the economy over the last 40 years, which has been supported by both political parties. The big corporations and the capitalists will overreach if they are unregulated and unrestrained. The 2008 crash demonstrated this again, as the savings and loan crash of the 1980s had, along with the dot com bubble crash and the crash that led to the Great Depression. Today, the system is indeed rigged, and the result is plutocracy – where the wealthy elites rule.

The American identity, and the exceptionalism of the US that the right-wing asserts, are based on democracy and the foundational principles of equality and representative government that is responsive to all the people. This is not the America we have today. Citizens can’t be equal with corporate CEOs and wealthy investors if they can’t earn enough to support a family and don’t have time to devote to public civic and political responsibilities, often because they are working multiple jobs or long hours.

Fountain concludes that “corporate power and concentrations of wealth have such a hold over our economic system that for the country to wrest some of that power from them, it can’t be incremental. It will take a political revolution.” (p. 12) The New Deal, responding to the 1929 financial crash and the Great Depression, was, in fact, a bloodless political revolution. It saved capitalism from itself, building the regulatory infrastructure that we relied on with great success for 50 years. It also built the physical infrastructure of sewers and water mains, parks, libraries, public buildings, the power grid, and many of the roads and bridges that we rely on to this day. We take all this largely for granted today, forgetting about the trauma that triggered it and the public sector response that turned the country around and built the foundation for the future.

Fountain notes that the American commitment to and understanding of the importance of public civic, political, and physical infrastructure “has been stunted the last 40 years by a very aggressive sales program on behalf of free-market fundamentalism and hard-core capitalism.” (p. 13) The subtitle of his book, Democracy, Rebellion, and Revolution, highlights his belief that we need a political revolution to save our democracy – and to save capitalism from itself.

You can be part of the political revolution:

  • By being an informed voter in this fall’s election, and
  • By encouraging and helping everyone you know to also be an informed voter this fall.

As I’ve written about previously, voter participation in the US is dismally low and higher voter turnout will produce different election and policy results. This is how the political revolution must happen.

[1]      Moyers, B., 10/12/18, “The bold bravery of ‘Beautiful Country Burn Again’”, Common Dreams (https://www.commondreams.org/views/2018/10/12/bold-bravery-beautiful-country-burn-again)

EVEN THE RICH RECOMMEND TAXING THE RICH

There are many arguments for increasing taxes on the rich. It’s interesting and noteworthy when the rich themselves argue for higher taxes on themselves and others like them. Warren Buffet, one of the richest men on the planet and an investor without peers, has been stating since 2011 that he pays a lower income tax rate than his secretary and that this isn’t fair. [1]

Other wealthy individuals also argue that the rich should pay more. First, there’s Douglas Durst, a billionaire New York City real estate magnate, who recently stated that he supports “higher taxes on people like me.” He noted that the US “has more of a revenue problem than a spending problem.” His father, also a real estate man, created the National Debt Clock (that displays the federal government’s overall debt) and put it on a building he owned near Times Square in New York in 1989. Durst, the son, maintains it today as the US government’s debt is growing by almost $1 trillion per year. Republicans, who campaigned on balancing the budget, have increased the annual deficit to this level (and even higher in the future) by cutting taxes and increasing spending. The US hasn’t had this high a debt level in comparison to the size of the overall economy (i.e., Gross Domestic Product [GDP]) since World War II.

Durst is baffled that President Trump and the Republicans in Congress would give a tax cut to wealthy people like him. “We’re mortgaging our children’s future. … The tax cut was an overall step in the wrong direction. Nobody who has any background in economics thought the tax bill was a good idea.” [2]

Over the last 40 years, President Clinton is the only President who has balanced the federal budget and reduced the overall debt.

Second, there’s Nick Hanauer, a billionaire, venture capitalist, and serial entrepreneur, who recorded a 6-minute TED Talk in 2012 and this summer wrote an article in The American Prospect magazine, both of which argue that taxes on the rich should be increased. [3] He argues that “taxing the rich is the only plan that would increase investment, boost productivity, grow the economy, and create more and better jobs.” He states (correctly) that there is no observable evidence or plausible economic mechanism to support the claim that cutting taxes for the rich will spur economic growth. This did not happen when President Reagan cut taxes on the rich; it did not happen when President G. W. Bush did it. However, when President Clinton raised taxes on the rich, the economy boomed and the federal government balanced the budget. President Trump and the Republicans cut taxes on the rich in December 2017 and the economy has not boomed; it has continued its slow growth that began under President Obama. Furthermore, well over 90% of the benefits of current economic growth are going to the wealthy.

In Kansas in 2012, Governor Brownback and Republicans in the state legislature dramatically cut taxes on the rich, promising unprecedented economic growth. The reality has been that Kansas’s economy has under-performed neighboring states and the country. Because of the loss of state revenue, spending on schools (and everything else) has been cut dramatically and the state’s courts stepped in and ordered the state to spend more on K-12 education. The legislators have now overridden a gubernatorial veto and reversed some of the tax cuts.

Many (if not all) credible studies of the interaction between tax rates for the wealthy and economic outcomes show either that 1) increasing taxes on the rich increases economic growth and other indicators of economic success and well-being or 2) there is no link between top tax rates and the economic benefits the proponents of tax cuts and trickle-down economics claim.

In the 1950s, the top tax rate was 91% – and the economy was booming. It was 70% in 1980 when President Reagan took office and he cut it to 50%. The 2017 tax cut cut the top rate to 37%! As Hanauer states in his TED Talk, if cutting tax rates on the rich led to economic growth and job creation, our economy would be exploding and everyone would have great jobs given that today’s top rate is only 37%.

Finally, Hanauer notes (accurately) that consumer spending is what drive the US economy; it accounts for 70% of GDP. Current levels of inequality mean that rich people (and corporations) literally have more money than they know what to do with. With income and wealthy that is over 1,000 times that of the average American, they can’t buy 1,000 houses, or 1,000 times as many cars, clothes, and food items.

Therefore, putting more money in the hands of the middle class, workers, and low-income people will boost the economy because they will spend it in the local economy. They will also invest some of the money in human capital development, i.e., education and training, for themselves and their children. These investments in human capital are key to spurring future growth and success for our economy.

Hanauer states that anything governments spend money on will pump more money into our economy that what the rich do with their excessive amounts of money. Low wages and high levels of inequality cause slow growth. Therefore, increasing inequality by cutting taxes on the rich will not spur economic growth. A 2014 report from the Organisation for Economic Cooperation and Development (OECD) concluded that growing economic inequality in the US had reduced its economic growth by 9% over the previous 20 years.

In conclusion, we need to reduce economic inequality in the US as a matter of fairness and to live up to our ideals of equal opportunity and that all people are created equal. We also need to reduce inequality to spur economic growth today and in the future.

To reduce economic inequality, we need to increase taxes on the rich and invest the revenue in good jobs (e.g., rebuilding our infrastructure), in human capital (e.g., education and training from birth and throughout careers), and in a safety net (e.g., unemployment insurance and guaranteed healthcare) to support people who fall on hard times.

These steps will allow the United States to live up to its ideals and principles of equal opportunity, will boost our economy, and will contribute to creating a fairer, more just society that supports all children and families.

[1]      Isidore, C., 3/4/13, “Buffet says he’s still paying lower tax rate than his secretary,” CNNMoney (https://money.cnn.com/2013/03/04/news/economy/buffett-secretary-taxes/index.html)

[2]      Long, H., 9/17/18, “‘I support higher taxes’: the billionaire behind the National Debt Clock has had it with Trump,” The Washington Post

[3]      Hanauer, N., Summer 2018, “Want to expand the economy? Tax the rich!” The American Prospect (http://prospect.org/article/want-expand-economy-tax-rich)

OUR DEMOCRACY NEEDS MORE VOTERS

The United States has very low rates of participation in our “democracy,” which is perhaps most dramatically evident in our very low voter turnout. In our last presidential election – a very visible and hotly contested race – only a bit over one-half (roughly 56%) of those eligible voted. In the upcoming 2018 elections for Congress and state offices, it is likely that only a bit over one-third of those eligible will vote.

This low voter participation is not healthy for a democracy and is inconsistent with our democratic ideals and principles of government of, by, and for the people. Worldwide, most other democracies have higher voter participation; Belgium leads among the 34 advanced democracies at 87% with the US’s 56% in 27th place. [1]

Our voting system, with most voting procedures determined by the states, does little to encourage voter participation. For example, voting on Tuesdays, a work day, has never been convenient for working people. Moving election day to a weekend or making it a holiday would make voting more convenient and almost certainly increase participation. The voter registration rules set by the states have historically set deadlines to register to vote well before election day and required residents to appear in a government office to register, neither of which encourages voting.

In the 2016 presidential election, voter participation varied among the states from 74% in Minnesota and 71% in New Hampshire and Maine, to 42% in Hawaii and 50% in West Virginia. [2] Some states have encouraged voter participation by allowing early and expanded absentee voting, as well as same-day registration.

Many states are putting hurdles in front of potential voters rather than encouraging participation. In most cases, these efforts to restrict or discourage voting have political motivations, usually to reduce voting by groups that tend to vote for Democrats. Some states have reduced early or absentee voting. Some have reduced the number of voting locations, making it more difficult for some voters to get to the polls or resulting in waiting lines to vote, sometimes waits of over an hour.

Thirteen states have imposed more restrictive identification requirements for voting since 2010, typically requiring voters to produce a government-issued ID. It is estimated that 21 million eligible voters do not have a such an ID. So, in the states that require them, voting becomes much more difficult, requiring these potential voters to obtain a government ID in advance of the election. This and other policies that suppress voting are profoundly anti-democratic and have no valid, non-political rationale. [3]

Four states have laws that prohibit Americans who have been convicted of a felony crime from ever voting, even after they have completed their sentences. It is estimated that over 6 million Americans cannot vote because of this felony disenfranchisement.

In general, people who are better-off economically, have more education, and are older are more likely to vote and those who are low-income, young, and non-white are less likely to vote. For example, 41% of registered voters over 70 vote regularly while only 1% of those between 18 and 29 vote regularly.

Research has found that voters and non-voters support different economic policies. Not surprisingly, given their demographics, non-voters are more supportive of policies that promote economic equality and provide a safety net for those experiencing economic hardship. [4] Therefore, getting significant numbers of non-voters to vote would likely change election results and policies.

Some eligible voters don’t vote because they feel that their vote doesn’t matter. Gerrymandering of district boundaries means that indeed some voters don’t matter because the district they live in is overwhelming tilted to a party or ideology that they don’t support. In primary elections, some states require that you be registered in a party to vote in that party’s election. This means that the large number of voters who are independent or unenrolled in a party have no say in deciding which Democrat or Republican will appear on the ballot for the final election.

Some eligible voters feel, with good reason, that our electoral and political systems are rigged in favor of large corporations and employers, as well as the wealthy individuals who are typically the executives or investors in those corporations. Because our election campaigns are almost exclusively funded by wealthy individuals and corporations, and backed up with lobbying and the revolving door of personnel moving between corporations and positions in government, these alienated voters see no difference between the two political parties and feel their voices are inevitably drowned out at the ballot box and in policy debates.

Some analysts make the case that the lack of participation in our democracy and voting reflects not just a loss of faith in government and the efficacy of participation, but also a loss of experience with civic activity more broadly. A decline in volunteer participation in civic organizations and groups in the US has been documented since the 1960s. One study found that from 1994 to 2004 memberships in civic organizations and groups fell by 21%. This trend is likely accelerating. A 2010 census survey found that only 11% of respondents had served on a committee or as an officer of any group or organization in the previous year. Voluntary participation in churches, clubs, fraternal organizations, and labor unions, for example, provide individuals with experience with self-governance, democratic decision making, and participation in civic life focused on building community and working together for a greater good. As participation in local civic life has withered, the orientation to and understanding of the importance of participating in our democratic political process has declined as well. [5]

Higher voter participation would produce elected representatives that more accurately reflect the priorities of the public and, if participation were consistently high, would result in less partisanship and more stable policies. Currently, the Republicans in particular, but the Democrats too, are focused on low turnout elections where they pander to their hardcore supporters, known as their “base.” Therefore, their candidates and those who get elected tend to be focused on appealing to this small group of supporters who often have relatively extreme views. Higher voter participation would require the parties and their candidates to work to appeal to a broader set of voters. This would make a big difference in election results.

I encourage you to ask candidates and elected officials what they are doing to increase voter participation. This is a core issue that we must address if our democracy is to live up to its promise and potential.

[1]      The Sanders Institute, May 2018, “Why don’t Americans vote?” (https://www.sandersinstitute.com/blog/why-dont-americans-vote)

[2]      Khalid, A., Gonyea, D., & Fadel, L., 9/10/18, “On the sidelines of democracy: Exploring why so many Americans don’t vote,” National Public Radio (https://www.npr.org/2018/09/10/645223716/on-the-sidelines-of-democracy-exploring-why-so-many-americans-dont-vote)

[3]      Brennan Center for Justice, retrieved 9/18/18, “New voting restrictions in America,” (https://www.brennancenter.org/new-voting-restrictions-america)

[4]      Khalid, Gonyea, & Fadel, 9/10/18, see above

[5]      Appelbaum, Y., Oct. 2018, “Americans aren’t practicing democracy anymore,” The Atlantic (https://www.theatlantic.com/magazine/archive/2018/10/losing-the-democratic-habit/568336/)

A BETTER DEAL: A WIDE-RANGING POLICY AGENDA FROM THE DEMOCRATS

The Democratic National Party has been rolling out a series of policy proposals it calls A Better Deal. Its goal is to provide a campaign message that will win the votes of middle-income workers, many of whom voted for Trump because they felt they’d been forgotten by the Democratic Party. [1]

The first piece, presented in July 2017, focused on the economic well-being of workers and the middle class. It was subtitled: Better Jobs, Better Wages, Better Future. It’s three major components are:

  • Higher wages and better jobs. Raise the minimum wage to $15 an hour by 2024. Create 15 million good jobs by spending $1 trillion on infrastructure and supporting small businesses. Ensure that workers can retire with dignity by protecting Social Security, pensions, and Medicare. Fight the loss of jobs to other countries.
  • Lower the cost of living for families. Lower the costs of drugs, post-secondary education, child care, cable TV and Internet service, and credit cards. Curtail the monopolistic practices of large corporations that lead to higher prices and reduced consumer choice. Provide paid leave for a new child or a family member’s illness.
  • Tools workers need to succeed in the 21st century. Expand public investment in education, training, and other tools workers need to succeed in the 21st Provides incentives to employers to invest in their workers’ skills and knowledge, including through apprenticeships.

(See a more detail summary these policy proposals in my previous post and my post critiquing them.)

The second piece, unveiled on May 8, 2018, focused on housing and communities and was subtitled: Public Housing & Ladders of Opportunity for American Families. It has four major components:

  • Repair America’s aging public housing. Invest $6 billion a year for five years to eliminate the deferred maintenance in public housing, including eliminating all major lead and mold hazards, improving energy efficiency, and making units accessible for residents with disabilities. Provide $9 billion a year in ongoing operations and maintenance funding.
  • Empower residents to fully participate in governance of their public housing. Facilitate the active involvement and participation of public housing residents in governance and increase tenant protections during relocation for renovations.
  • Ensure public housing agencies have the tools to connect residents to opportunity. Provide resources and tools to improve employment opportunities, earnings potential, and health outcomes for public housing residents by investing in job training and counseling services; educational programs; after-school enrichment programs; and access to other services.
  • Provide comprehensive solutions for the communities surrounding public housing. Invest $2 billion annually to rehabilitate and transform neighborhoods where public housing is located, while leveraging private resources as well.

The third piece, unveiled on May 21, 2018, focused on elections and ethics and was subtitled: Fixing our broken political system and returning to a government of, by, and for the people. Its three major components are:

  • Empower the American voter. Protect every citizen’s right to vote and the security and accuracy of our voting systems. End partisan gerrymandering.
  • Strengthen our nation’s ethics laws. End the influence of big money in election campaigns and of lobbyists. Close the revolving door between government jobs and positions working for private sector special interests.
  • Fix our broken campaign finance system. Break the stranglehold of wealthy campaign donors on our democracy. Pass a constitutional amendment to overturn Citizens United and end the undue influence of big money in our elections, especially of unaccountable “dark” money from undisclosed donors. Increase and multiply the power of small campaign donors, while supporting new and diverse candidates. Improve enforcement of existing campaign finance laws.

The most recent piece, unveiled on May 22, 2018, focused on education and was subtitled: A Better Deal for Teachers and Students. It had five components, which it proposes paying for by rescinding the recent tax cuts for wealthy individuals and corporations:

  • Dedicate $50 billion over 10 years to increasing teachers’ compensation. Recruit and retain a strong, diverse workforce.
  • Establish a $50 billion fund for school infrastructure. Invest in up-to-date buildings and classrooms, as well as educational technology and materials, for all students.
  • Provide additional support to schools serving children from low-income families. Ensure all students have access to academic opportunities and a rich curriculum, including computer science, music, and civics.
  • Protect teachers’ right to join a union. Ensure that teachers can collectively negotiate for better pay and conditions.
  • Fulfill the federal promise to fund 40% of the cost of special education.

While A Better Deal’s four proposals present a wide-range of policy proposals and are fairly specific about some of them, they do not present a vision or comprehensive policy agenda in the way An Economic Agenda for America’s Future does. (See my previous post on this proposal from the Campaign for America’s Future.)

While A Better Deal’s proposals could excite some voters and increase voter turnout by addressing issues that matter to working Americans, they are less inspiring and more policy wonkish than An Economic Agenda for America’s Future. They present a set of nuts-and-bolts, pragmatic, and sometimes bold steps, rather than a vision.

There are gaps in A Better Deal. For example, it doesn’t address climate change and greening the economy; support for unions (other than for teachers); a more progressive, fairer tax system to address economic inequality; reducing the power of the huge corporations including on Wall Street; and reforming our health care system.

A Better Deal is viewed by some as timid and underwhelming. It doesn’t clearly renounce growing economic inequality and the greed of corporate executives. It doesn’t provide a truly inspirational message such as the one Senator Bernie Sanders delivered in the 2016 primary.

The support for A Better Deal from Democratic members of Congress and the Party’s leadership isn’t strong and solid, and, therefore, the Party’s messaging is not consistent and effective. Similarly, Democratic candidates don’t yet appear to have widely, let alone enthusiastically, adopted A Better Deal for their campaign messaging.

I’m interested in your comments on this post. Do you think A Better Deal will motivate voters to vote for Democrats this fall?

[1]      Cottle, M., 7/31/17, “Democrats pitch a kinder, gentler populism,” The Atlantic (https://www.theatlantic.com/politics/archive/2017/07/the-struggle-to-sell-a-better-deal/535410/)

AN ECONOMIC AGENDA FOR AMERICA’S FUTURE

The policy agendas of progressive candidates (see my previous post for some examples) tend to be presented in a piecemeal fashion that makes it hard to grasp an overarching progressive vision or set of goals. In this post I will summarize the proposal from the Campaign for America’s Future for an overall progressive policy agenda for the US. This proposal highlights policies that could excite voters and increase voter turnout by addressing issues that truly matter to working Americans.

The Campaign for America’s Future calls its proposal An Economic Agenda for America’s Future. It consists of 11 components and at their website you can sign on and pledge to support their agenda. Here are its 11 components or planks:

  • Jobs of all. Provide jobs with good wages and benefits by investing in the rebuilding and modernization of our roads, railroads, water and sewer systems, energy systems, and public buildings including schools. These investments will make our economy more productive and reduce economic inequality. Public service jobs would also be a part of this initiative.
  • Invest in a green economy. Strategic public policies can support renewable energy and energy efficiency while moving us away from polluting, carbon-based fuels. The results will be good jobs in growing industries and sustainable energy sources that will reduce emissions linked to climate change.
  • Empower workers to reduce inequality. Workers need to be able to bargain collectively with employers through membership in unions. Otherwise, the power of employers overwhelms that of workers and the profits from workers’ labor are given to corporate executives and stockholders, not workers. As workers’ power has declined over the last 38 years, their wages have stagnated while executives pay has skyrocketed; their benefits have languished – pensions have disappeared, health insurance is more expensive if available, paid sick and vacation days are less common as part-time and contingent work has expanded – while perks for executives are ever more lavish. Policies that allow executives to benefit from short-changing workers need to be changed.
  • Opportunity and justice for all – with a focus on communities harmed by racism. Starting with Jobs for all (see above), targeted investments are needed to provide economic opportunity for all people and communities. Neglected urban and rural communities, along with workers victimized by trade policies and employment practices that benefit large corporate employers, should be targeted by policy changes and economic investments. Ending mass incarceration and racism in all phases of our criminal justice system, along with enhancing rehabilitation and re-entry for those incarcerated, are essential to providing justice for all. Fair and humane policies and treatment for all people regardless of immigration status, race or ethnicity, nationality, gender, or sexual orientation are required to live up to the promises of our democracy.
  • Guarantee women’s economic equality. Women should earn the same pay and have the same opportunities in the workplace as men. Women must have the supports necessary to balance motherhood, parenting, and work, including access to paid leave for childbirth and affordable, high quality child care. Women must be free from all forms of sexual harassment and must have the right to make their own choices about health and reproductive issues. Women should be able to look forward to a secure retirement, in part based on being awarded Social Security credit for work done in the home supporting a family.
  • High-quality public education – pre-k to university. Education is a public good that benefits all of society. Governments at the local, state, and federal level must together provide equitable financing so all children have access to high-quality public schools and educational opportunities across the age spectrum. Post-secondary education or skills development should be free at public institutions – as it was in many states in the 1950s and 1960s – and student debt should be canceled. This will stimulate economic growth and unleash the potential of students who are now restricted in their life choices by their education debt.
  • Medicare for all – and shared economic security. Health care is a right, which requires moving to a universal, Medicare for all health care system. Furthermore, everyone deserves a secure retirement and economic security in their working years through a publicly-funded safety net that supports them if they lose their job, have an accident, or suffer a medical problem. No one in America should be homeless, hungry, or without access to health care.
  • Make corporations and the wealthy pay their fair share. Large, often multinational, corporations and rich individuals are not paying their fair share in taxes. Nonetheless, they reap the greatest benefits from public investments. Their tax rates have been lowered time and again over the last 38 years and the portion of government revenue they provide has fallen dramatically. Furthermore, tax rates on income based on wealth – income from stocks and other investments – are lower than the tax rates on income earned through work, so the wealthy get wealthier and workers struggle to make ends meet. Closing tax loopholes and exemptions that benefit wealthy individual and corporations, along with a small sales tax on purchases of financial instruments, will make our tax system fairer, reduce economic inequality, and provide the revenue needed for public investments and a fair safety net.
  • A global economic strategy for working people. Our global trade and tax policies benefit multinational corporations. We need to change these policies to protect workers, consumers, and the environment. Our national security policies benefit the military-industrial complex and are biased toward military interventions. We need to change these policies to make war a last resort and to focus on diplomacy and the global threats of climate change, poverty, and inequality. We should reduce the military budget and support humanitarian programs at home and abroad instead.
  • Close Wall Street’s casino. Deregulation of Wall Street left us with huge financial corporations that devastate our economy when they fail, are too complex to manage, and are too powerful to seriously punish, as with jail time for executives. Their financial speculation presents risks to our economy and is economically unproductive. Meanwhile, workers and small businesses suffer from the financial corporations’ business practices and the volatility they create in the economy. We need to break up the giant financial corporations, institute a speculation tax, and provide safe, affordable banking services through local banks and the postal system. Payday lenders and others who exploit low-income and vulnerable working families should be shut down.
  • Rescue democracy from special interests. The great wealth and hence power of wealthy individuals and corporations are being used to corrupt our elected officials and public policies. Through campaign spending, lobbying, and other strategies, the wealthy have rigged our economy to their benefit, resulting in dramatically increasing economic inequality. We must reassert democratic values through 1) public financing for elections that rewards small contributions by large numbers of people, 2) banning huge expenditures by the wealthy, and 3) through voting procedures that encourage everyone to vote, not ones that place barriers in front of voters, particularly people of color, young people, and low-wage working people. We need progressive candidates who will work to take back our democracy and economy for everyday working people.

I’m interested in your comments on this post. Is there a particular plank of this proposal that would make you more inclined to vote for a candidate?

My next post will summarize the Democratic National Party’s A Better Deal proposal.

MUELLER’S INVESTIGATION RESULTS TO-DATE: 35 INDICTMENTS, 3 GUILTY PLEAS, AND MORE

I’m interrupting my series on a progressive policy agenda for the US, because I think it’s important to document the results of the Mueller investigation into Russian influence in the 2016 election, given that President Trump and his supporters are apparently ramping up their efforts to discredit the investigation. (Much of this post is a summary of an article in the Huffington Post.) [1]

In 15 months of a very complex investigation, Mueller has gotten 35 indictments, 3 guilty pleas, 1 incarceration, and 1 on-going trial. Here are some of the details:

  • The on-going trial is of Paul Manafort, Trump’s former campaign chairman. Although the charges he’s currently being tried on aren’t directly linked to the campaign, they involve work he did for Ukrainians with close ties to Putin and Russia. He also had close ties directly to Russians and attended the Trump Tower meeting with Don Jr., Jared Kushner, and a Kremlin-linked lawyer who supposedly had dirt on Hillary Clinton.
  • Rick Gates, who worked on the Trump campaign and on the Trump inauguration, pled guilty to lying to Mueller and FBI investigators, as well as to financial malfeasance. He was also Manafort’s business partner.
  • Michael Flynn, Trump’s former national security advisor, pled guilty to lying about his meeting with the Russian ambassador during the presidential transition.
  • George Papadopoulos, a young foreign policy adviser to the Trump campaign, was the first person to plead guilty in the Mueller probe. He pleaded guilty to lying to the FBI about his knowledge that Russians had thousands of apparently stolen emails that would embarrass Hillary Clinton. He had mentioned this to an Australian diplomat. When hacked Democratic emails began appearing online, Australian officials passed information about Papadopoulos on to their American counterparts. Alarmed American officials had the FBI open a counterintelligence investigation into the Trump campaign in the summer of 2016, months before the presidential election. In accordance with FBI protocol, this investigation was kept secret. Papadopoulos was apparently one of the contacts the Russians used to try to establish secret communications with the Trump campaign.
  • Alex van der Zwaan is the one person who’s gone to jail as a result of the Mueller investigation. He’s the son-in-law of a Russian oligarch and pleaded guilty to lying to the FBI about his work with two members of President Trump’s campaign team, Manafort and Gates. He served 30 days in a federal prison and has been deported to the Netherlands.
  • Thirteen Russians have been indicted for a multi-million dollar conspiracy to influence the 2016 election through social media. They pretended to be Americans and bought political ads and organized political events. Facebook acknowledges that these efforts reached at least 146 million people, almost half of the US population, through Facebook and Instagram.
  • Twelve Russian military officers, who work for Russia’s main intelligence agency, have been indicted for hacking into the email servers of Hillary Clinton and the Democratic National Committee. They stole and then released thousands of emails. The content of these emails, along with reporting on their theft and release, dominated the news for weeks and clearly had an impact on the election.

The Mueller investigation is clearly a serious probe of significant and successful efforts to affect the 2016 election. Over its 15 months, the Mueller investigation has cost $7.7 million (as-of 3/31/18), a tiny fraction of the Justice Department budget of $28 billion. By way of comparison, the Starr probe of President Clinton lasted four and a half years (over 3 times as long) and cost $39 million, or around $58 million in today’s dollars when adjusted for inflation (over 7 times as much). There were at least three other independent or special counsel investigations during the Clinton administration that cost more than Mueller’s probe has. [2]

This investigation is NOT partisan. Mueller and Rosenstein, who oversees Mueller’s investigation and is second in command at the Justice Department, are both Republicans. Mueller is a highly decorated Marine officer who has spent most of his career in the Justice Department. President Reagan appointed him the US Attorney for Massachusetts, and he later served as an assistant US Attorney in D.C.  and as US Attorney for Northern California. President George W. Bush appointed him second in command at the Justice Department and later as FBI Director. Congress unanimously extended his term as FBI Director in 2011. Rosenstein worked for the Starr investigation of President Clinton. President George W. Bush appointed him as US Attorney for Maryland and later nominated him to be a federal appeals court judge. President Trump appointed him as second in command at the Justice Department.

Before the election, in the early fall of 2016, the seriousness of foreign efforts to influence the election were becoming clear to US intelligence and criminal justice officials. President Obama convened a bipartisan meeting with members of Congress. His goal was to develop a bipartisan public statement on the Russian efforts to influence the election. He felt it was essential to have it be bipartisan so that it didn’t appear to be a partisan issue during the election. But the Republicans refused to go along, and no public statement was made.

Trump and his supporters have engaged in persistent, on-going efforts to discredit Mueller, Rosenstein, and the investigation. Their goal, according to Trump’s lawyer Giuliani, is to get the public to question the legitimacy of the investigation. The only reason I can think of that they would want to do that is because they are worried about the results of the investigation. From Trump’s personal perspective, which does seem to be all he really cares about, the most likely negative outcome of the investigation is evidence that would support impeachment.

The most likely impeachment charge against Trump is obstruction of justice, assuming no smoking gun of direct Russian collusion on his part is uncovered. So far the most likely obstruction of justice charges would be 1) his request that then-FBI director Comey stop the investigation of Michael Flynn’s meeting with the Russian ambassador, 2) his firing of FBI Director Comey, apparently in an effort to stop the investigation into Russian interference in the election, 3) his attempts to get Attorney General Sessions to rescind his recusal and take charge of the investigation (even though he met with the Russian ambassador during the campaign), and 4) his incessant efforts to discredit and undermine the investigation. As you think about whether this obstruction of justice might be grounds for impeachment, remember that President Clinton was impeached by the US House of Representatives (but the Senate failed to convict him) for obstruction of justice for lying to law enforcement about his affair with intern Monica Lewinsky. If lying about an affair is grounds for impeachment, President Trump is right to be worried.

(Note: The investigation of Trump’s former lawyer, Michael Cohen, is not part of Mueller’s investigation, although it is reportedly the result of a referral from the Mueller team. The investigation of Cohen is being undertaken by the US Attorney in New York.)

[1]      Reilly, R.J., 7/27/18, “The Mueller investigation, explained. Here’s your guide to the Trump-Russia probe,” HuffPost (https://www.huffingtonpost.com/entry/mueller-investigation-trump-russia-probe_us_5b4cdda5e4b0e7c958fe3141)

[2]      Kutner, M., 12/5/17, “Mueller’s Trump investigation cost slammed by Republican: ‘They must be having one hell of a Christmas party’,” Newsweek

PROGRESSIVE POLICIES BUILT ON FDR’S ECONOMIC BILL OF RIGHTS

The policy agendas of progressive candidates (see my previous post for some examples) tend to be presented in a piecemeal fashion that makes it hard to grasp an overarching progressive vision or set of goals. In this and my two next posts, I will summarize proposals for an overall progressive policy agenda for the US. These proposals highlight policies that could excite voters and increase voter turnout by addressing issues that truly matter to working Americans.

The American Prospect magazine, the premier journal for US progressive policy analysis and proposals, recently published an article entitled “An Economic Bill of Rights for the 21st century” by Paul, Darity, and Hamilton. [1] It builds on President Franklin D. Roosevelt’s 1944 proposal for a Second Bill of Rights, a set of economic rights that would complement the political rights guaranteed by the original Bill of Rights. FDR’s proposal was never adopted, of course, but the need for an economic bill of rights is as clear today as it ever was.

As FDR noted, people who struggle to make ends meet are not free to engage in the pursuit of happiness that our Declaration of Independence promises. He went on to say that “Necessitous men are not free men. People who are hungry and are out of a job are the stuff of which dictatorships are made.” True freedom, according to FDR, requires the following economic rights:

  • The right to a useful and remunerative job,
  • The right to earn enough to provide adequate food and clothing and recreation,
  • The right of every businessman … to … freedom from unfair competition and domination by monopolies,
  • The right of every family to a decent home,
  • The right to adequate medical care and the opportunity to achieve and enjoy good health,
  • The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment, and
  • The right to a good education. [2]

FDR died before he could enshrine these economic rights in policies let alone the Constitution. Moreover, his New Deal, which had rewritten many of the rules of our economy to increase economic fairness and security, was the result of a political deal with southern segregationists, probably out of necessity for getting the New Deal passed, that excluded Blacks. US government policies since then have often explicitly, and almost always at least implicitly, excluded Blacks from economic justice and opportunity. The Jim Crow policies in the south exacerbated the racial discrimination of federal policies.

The civil rights movement, Martin Luther King’s Poor People’s Campaign (which linked economic justice with civil rights), and President Johnson’s War on Poverty of the 1960s marked a resurgence of a focus on economic justice and security. Nonetheless, highly unequal economic outcomes are clearly evident today, especially by race and ethnicity but also to a growing degree by class.

For the past 40 years, our two major political parties have both embraced policies that rely on market forces and market-based solutions for meeting social and human needs, while reducing the role of government, deregulating business’s activities, and moving toward uncontrolled capitalism.

As a result, the middle class is under siege. Its incomes have stagnated for 40 years (when adjusted for inflation) and it is experiencing high levels of economic insecurity due to the instability of employment and reduced pay and benefits from the jobs that are available. Economic inequality has sky rocketed and economic mobility has declined. Poverty remains high, especially for children (who are most vulnerable to its long-term negative effects); 43 million Americans live below the official government poverty line, which is out-of-date and dramatically understates the cost of living in most, if not all areas, of the country.

This economic reality is the result of policy choices not inevitable economic evolution. FDR’s economic rights above are clearly still very relevant. Furthermore, the authors identify three additional economic rights that are necessary today to ensure an economy that provides opportunity and security for everyone:

  • The right to sound banking and financial services,
  • The right to a safe and clean environment, and
  • The right to a meaningful endowment of resources as a birthright.

This birthright endowment is an innovative proposal by the authors to address the high levels of economic inequality in both income and wealth. (Wealth is even more unevenly distributed, particularly across race and ethnicity, than income.) Wealth (i.e., savings or economic reserves) is an essential component of economic security and social well-being. The ability to be resilient when an economic shock occurs – a sudden loss of a job, a health emergency, an accident – is critical. Yet almost half of American households do not have $400 of wealth or savings to see them through an economic shock. Moreover, for every dollar of wealth or savings held by whites, Blacks and Latinos have only 5 cents and 6 cents respectively. In other words, white household wealth is, on average, 20 times that of Blacks and almost 17 times that of Latinos.

The authors’ proposal addresses this dramatic inequality by giving every American, at birth, an endowment that would be held in trust until he or she reaches adulthood. Then, the individual could spend the money on an asset building activity such as paying for higher education, buying a home, or starting a business.

The endowment would be universal, but its amount would vary: babies born into the wealthiest families would receive $500 and those born into families with no or minimal wealth would receive $50,000. This would attempt to level the playing field, given the implicit endowment that affluent families are able to provide to their children. Estimates indicate that the cost would be about 2% of the federal budget. The federal budget currently spends a similar amount on another policy that supports households in building wealth: the home mortgage interest deduction. By reducing this support for wealth building through home ownership, which provides its biggest benefits to already wealthy households, the federal government could pay for the proposed “baby bonds.” This would go a long way toward providing economic opportunity and security for every baby born in America, as well as reducing wealth inequality. As another option, the “baby bonds” could be paid for, in whole or in part, by cutting the budget of the Defense Department (which is about 15% of the federal budget), by up to 13%. (Many analysts believe the defense budget is bloated with unnecessary expenditures and waste that primarily benefits the wealthy corporations of the military-industrial complex.) Another option to pay for the “baby bonds” would be to reduce the tax cuts that were passed in December 2017; they will cost over twice as much as these “baby bonds” would and, rather than reducing economic inequality, the tax cuts will exacerbate inequality because they primarily benefit already wealthy corporations and individuals.

I’m interested in your comments on this post. What do you think of this proposal for “baby bonds” – a birthright endowment to give every new baby a more or less equal opportunity for success in life? In particular, would you be more inclined to vote for a candidate who supported “baby bonds”?

My next post will summarize the proposal of the Campaign for America’s Future, which it calls: An Economic Agenda for America’s Future.”

[1]      Paul, M., Darity, Jr., W., & Hamilton, D., 3/5/18, “An economic bill of rights for the 21st century,” The American Prospect (http://prospect.org/article/economic-bill-rights-21st-century)

[2]      Wikipedia, retrieved 7/28/18, “Second Bill of Rights,” (https://en.wikipedia.org/wiki/Second_Bill_of_Rights)

WINNING ELECTIONS BY EXCITING VOTERS WITH PROGRESSIVE POLICIES

We need to elect people to Congress in November who will stand up to vested and powerful interests (namely wealthy individuals and large corporations) on behalf of everyday working people and families. We need to do this to rescue our democracy from plutocracy. This will require a high voter turnout, which will happen only if voters are excited and enthusiastic about the candidates they are voting for. It does not happen if voters are just voting against the other candidate or party, or for the lesser of two evils; that is not enough to motivate many voters to get out and vote.

In the last presidential election, despite all the attention it got, less than 56% – barely half – of eligible citizens actually voted. Although Trump and Clinton each excited a relatively small segment of voters, the electorate at large was not excited by either of these two candidates. Senator Sanders in his run for the Democratic nomination excited more voters and had more voters enthusiastically voting for him than either Trump or Clinton. President Obama excited enough voters, particularly Blacks, in his 2008 run for president that 62% of eligible voters went to the polls, which is the highest turnout since 1970, but still well below voter turnout among most of the other relatively wealthy democracies. (I’ll do a subsequent post on low voter participation in the US and reasons for it.).

If Democrats want to win in November, they need to put forward a clear, progressive agenda that will excite and motivate a broad swath of the electorate. Such a strategy has the potential to increase turnout substantially by getting people who vote irregularly or who have never voted excited and wanting to go vote. This is particularly important in non-presidential elections when typically, only 40% of eligible voters go to the polls. Some Democrats think that running against President Trump and the Republicans who are enabling his behavior and policies will lead them to electoral success. This is a risky strategy; it’s much better to be running for something than against something.

Exciting and motivating voters is what Senator Sanders did in his surprisingly successful and almost victorious campaign for the Democratic presidential nomination. This is what Alexandria Ocasio-Cortez did in winning a shocking upset in her recent primary election victory for a US House seat in New York. This is what Senators Merkley and Warren and others are doing in their re-election bids. And what a wide range of candidates for local, state, and national offices are doing across the country. It is why Sanders and Ocasio-Cortez were in Kansas supporting two candidates for Congress, James Thompson and Brent Wilder. Overflow crowds of thousands enthusiastically rallied for these progressive candidates in Republican Kansas. [1]

An emerging progressive movement is evident in at least four candidates for Governor (in Florida, Maryland, Michigan, and New York), at least 53 congressional candidates, and too-numerous-to-count candidates for state legislatures and local government posts. [ 2] These candidates are listening to the grassroots and to polls that show what Americans want from their government – good jobs with fair pay, good K-12 public education, affordable higher education, support for balancing work and family, a health care system that works (with many specifically supporting a single-payer system or Medicare-for-all), and economic security. Unfortunately, many of the leaders of the Democratic party are resisting this progressive ground swell of energy, fighting against it by supporting centrist and corporate-leaning candidates rather than progressive, grassroots candidates.

Many in the media and some political pundits are describing this progressive movement as “far left.” That may be true in today’s political climate, but it is not true historically. Many of the progressive policies being espoused by the current progressive movement were mainstream Democratic policies in the 1960s and a surprising number of them were supported by Republicans then as well. As a more recent example, believe it or not, the individual mandate of the Affordable Care Act (ACA) – the requirement that everyone buy health insurance – was a conservative, Republican think tank policy proposal. Despite the vehement Republican attacks on the individual mandate ever since the ACA was proposed – and Democrats’ unwillingness to defend it with any vigor – the individual mandate was proposed by the very conservative and Republican Heritage Foundation as part of its plan for comprehensive national legislation to provide universal “quality, affordable health care.” The plan was introduced in a 1989 book, “A National Health System for America,” by Butler and Haislmaier. [3]

In labeling current progressive policy proposals as “far left,” people are forgetting that President Clinton and other Democrats in the late 1980s and 1990s moved the Democratic Party a long way to the right and toward the political center in their efforts to win the presidency after 12 years of Republican presidents and then to win Clinton’s re-election.

The emerging progressive movement is getting short shrift from our mainstream media. A dramatic example is the lack of media coverage of the Poor People’s Campaign. From late May through June, it sponsored 40 days of action including multiple rallies and civil disobedience actions in Washington, D.C., and 30 state capitals but it got almost no coverage in the mainstream media. Thousands of people demonstrated, and hundreds were arrested for civil disobedience, but coverage was minimal. It was organized to commemorate the 50th anniversary of Martin Luther King’s original Poor People’s Campaign that linked the issues of civil rights and economic justice for all. [4] [5]

A number of groups have been organized to support progressive, grassroots candidates including Our Revolution (the spinoff from Senator Sanders presidential campaign), the Progressive Change Campaign Committee (which describes itself as the Senator Elizabeth Warren wing of the Democratic Party), the Working Families Party, Indivisible, Justice Democrats, and Brand New Congress. They provide numerous opportunities to support progressive candidates and activities, if you’re so motivated.

These organizations and the candidates they support are putting forth a progressive policy agenda. However, they tend to do so in a piecemeal fashion that makes it hard to grasp or summarize overall goals. In my next posts, I will summarize various proposals for an overall progressive policy agenda for the US that would excite voters by addressing issues that truly matter to working Americans.

[1]      Nichols, J., 7/20/18, “Sander and Ocasio-Cortez rally Kansas for a working-class politics that stands up to the Kochs,” The Nation (https://www.thenation.com/article/sanders-ocasio-cortez-rally-kansas-working-class-politics-stands-kochs/)

[2]      Burns, A., 7/21/18, “There is a revolution on the left. Democrats are bracing,” The New York Times

[3]      Roy, A., 10/20/11, “How the Heritage Foundation, a conservative think tank, promoted the individual mandate,” Forbes (https://www.forbes.com/sites/theapothecary/2011/10/20/how-a-conservative-think-tank-invented-the-individual-mandate/#720de15a6187)

[4]      Sarkar, S., 5/23/18, “Hundreds of Poor People’s Campaign activists got themselves arrested for racial justice,” Common Dreams (https://www.commondreams.org/views/2018/05/23/hundreds-poor-peoples-campaign-activists-got-themselves-arrested-racial-justice)

[5]      Corbett, J., 6/21/18, “‘Stop the war! Feed the poor!’: March by Poor People’s Campaign ends with arrests in DC,” Common Dreams (https://www.commondreams.org/news/2018/06/21/stop-war-feed-poor-march-poor-peoples-campaign-ends-arrests-dc)

CORPORATE PROFITS MORE IMPORTANT THAN BABIES’ SURVIVAL

The influence of large corporations on federal policy is nothing new, although the Trump administration seems to be even more unabashedly aligned with corporate interests than previous administrations. Meanwhile, the Trump administration’s callousness and inhumanity on issues having to do with families and children is clear, most notably in its policy of separating immigrant parents and children – despite the First Lady’s “Be Best” campaign that promotes good child outcomes.

Nonetheless, the Trump administration’s efforts to undermine a World Health Organization (WHO) resolution in support of breastfeeding shocked medical professionals, diplomats, and public health officials around the world. In case you haven’t heard, the US delegation to a WHO meeting in May attempted to block and then succeeded in somewhat watering down a resolution that called on governments to “protect, promote and support breastfeeding” and to put limits on misleading and dangerous marketing of breast-milk substitutes, such as infant formula, and other food products harmful to young children.

This effort by US officials promoted the interests of the $70 billion infant formula industry, despite decades of evidence of the benefits of breastfeeding over the use of infant formula. [1] Lobbyists for the industry were present at the meeting to support the Trump administration’s efforts. [2] The American Academy of Pediatrics recommends breastfeeding exclusively for a baby’s first 6 months whenever possible, as well as for the next 6 months or longer as other foods are appropriately introduced. [3]

Some of you may remember the boycott of Nestle in the 1970s when it was aggressively promoting infant formula in developing countries where clean water for preparing infant formula was often not available. Babies died because infant formula was contaminated with bad water and because mothers couldn’t afford to the continue with the formula but couldn’t breast-feed because they had stopped lactating. Abbott Laboratories, based in Chicago, is one of the biggest corporations in the infant formula industry, along with Nestle, which is based in Switzerland but has a significant presence in the US.

Breastfeeding is the cheapest, easiest, and safest form of nutrition for infants in most cases, especially for low-income mothers and where clean, safe water is not reliably available. A 2016 study found that universal breastfeeding would save 800,000 infants’ lives annually around the world, while saving $300 billion as well. Breast milk provides not only nutrition, but hormones and antibodies that protect babies from diseases. Breast-fed infants have significantly fewer respiratory tract, ear, and gastrointestinal infections. Breast-feeding is also associated with lower risks of sudden infant death syndrome, allergies, asthma, eczema, celiac disease, bowel disease, diabetes, obesity, and leukemia. Mothers who breast-feed have lower risks of breast and ovarian cancers, diabetes, arthritis, heart disease, and high blood pressure. [4]

As part of its efforts to block the breastfeeding resolution, the US delegation threatened to cut its funding for the World Health Organization. The US is the biggest funder of the WHO, providing about 15% of its budget or $845 million. The WHO is essential to public health globally and in the US, as it provides, for example, the first response to flu and Ebola epidemics wherever they occur. It also plays a leading role in addressing the rising death toll from diabetes and cardiovascular disease around the world.

Ecuador, the original sponsor of the breastfeeding resolution, withdrew its sponsorship after the US threatened it with trade sanctions and withdrawal of military assistance, which helps it deal with violence spilling over its border with Columbia. Health advocates scrambled to find another sponsor, but at least a dozen other countries refused citing fear of retaliation from the US. Russia finally agreed to sponsor the resolution, and apparently the US did not threaten it. [5]

Nonetheless, the US succeeded in weakening parts of the resolution. It insisted on adding the words “evidence-based” to references to long-standing practices that promote breastfeeding, despite public health experts pointing out that doing random assignment studies (where some children would be denied breast milk) to establish “evidence-based” outcomes would be ethically and morally unacceptable. The US unfortunately succeeded in getting language removed from the resolution that called on the WHO to support governments in their efforts to block the “inappropriate promotion of foods to infants and young children.”

In another part of the resolution, the US succeeded, unfortunately, in removing language that supported taxing sugar-laden soft drinks as a strategy for addressing soaring rates of obesity around the world. Fortunately, however, the US was unsuccessfully in its attempts to block a WHO program that helps poor countries obtain life-saving medicines at an affordable cost; opposition to this program comes, not surprisingly, from the pharmaceutical corporations.

It is appalling to me that the US government is making corporate profits a higher priority than the lives, health, and well-being of children and adults around the world, including in the US. These examples from the WHO meeting are some of the more dramatic and appalling ones, but there are plenty of other ones.

Corporate profits have been prioritized over the well-being of workers and the middle class in the US, in a variety of ways, for almost 40 years now. This is why US voters were so angry with the status quo in the federal government that in 2016 almost half of eligible voters did not vote in the presidential election and why almost half of those that did vote, voted for Trump. (He won in the Electoral College even though he lacked a majority of the actual votes.)

We need to change our policy priorities and put people first and regulate corporations so they serve the public good. The whole point of allowing the creation of corporations and other limited liability organizations was to more efficiently promote the public good and an economy where everyone could pursue life, liberty, and the pursuit of happiness. The purpose for corporations and the priorities of our public policies have gotten turned upside down. Particularly in the US., but elsewhere as well, the priorities of government and the role of corporations in our economy need to be returned to those of the late 1940s through the 1970s when income inequality was much lower and economic security was much higher.

[1]      Khazan, O., 7/10/18, “The epic battle between breast milk and infant-formula companies,” The Atlantic

[2]      Jacobs, A., 7/8/18, “U.S. opposition to breast-feeding resolution stuns world health officials,” The New York Times

[3]      Williams, E., 7/10/18, “Breastfeeding: The benefits,” The Boston Globe

[4]      Rabin, R. C., 7/9/18, “Trump stance on breast-feeding and formula criticized by medical experts,” The New York Times

[5]      Jacobs, A., 7/8/18, see above

CONSUMER FINANCE PROTECTIONS UNDER ATTACK

Many in Congress and the Trump administration are openly working to weaken the Consumer Financial Protection Bureau (CFPB). It was created as part of the Dodd-Frank Law, the major piece of legislation passed to reform the financial industry after the 2008 crash. The CFPB protects consumers from abusive and fraudulent practices of financial corporations, such as mortgage loans that consumers can’t afford (which were a major element of the 2008 crash and the foreclosures that destroyed many families’ savings), abusive and discriminatory practices on student and auto loans, usury by payday lenders, and deceptive marketing. The CFPB also reduces the risk of future financial industry crashes by stopping the marketing of financial products that can create financial bubbles and lead to high rates of loan defaults and bankruptcies. These can threaten the stability of financial corporations, as happened with mortgages in 2008.

The CFPB’s role is to protect consumers from unsafe financial products and practices in the same way that the Consumer Product Safety Commission protects consumers from unsafe physical products – from appliances to toys. The financial industry has opposed the CFPB from when it was first included in drafts of the Dodd-Frank legislation. The financial industry does not want to be held accountable. It wants to be able to make profits with no holds barred. It has been lobbying hard to have the CFPB emasculated.

Despite the valuable roles the CFPB can and has been playing, Congress and the Trump administration, at the urging of the financial industry, have been working to keep the CFPB from being an effective advocate for consumers by:

  • Blocking or repealing its consumer protection regulations
  • Stopping its enforcement actions
  • Weakening its independence and effectiveness

For example, in April Congress passed and the President signed a law repealing a Consumer Financial Protection Bureau (CFPB) regulation that prevented car dealers and corporations making car loans from discriminating based on race. The CFPB had fined several lenders and dealers millions of dollars for charging higher interest rates to Black and Hispanic borrowers, even when they had the same credit scores as White borrowers. Consumer advocacy groups note that this discriminatory behavior is pervasive and repeal of this regulation will allow it to continue. [1]

In October, a law was passed repealing a CFPB regulation that allowed consumers to band together in class action lawsuits against financial corporations and prohibited financial corporations from forcing consumers into arbitration. Many financial institutions include mandatory arbitration clauses in the agreements consumers sign when they open a bank account, take out a loan, or get a credit card. This legal language, buried in the fine print, requires the consumer to pursue any claim against the company only through arbitration and not through the courts or a class action lawsuit. The arbitration process is skewed in favor of the financial institution and a typical consumer doesn’t have the time and resources to pursue their claim on their own. [2]

Forced arbitration language initially protected Wells Fargo and Equifax by preventing large-scale consumer scandals from coming to light. Forcing consumers to pursue claims individually in arbitration hid Wells Fargo’s opening of and charging millions of customers for unauthorized accounts. Only after many months did the authorities and the public become aware of the scandal and its scale, and force Wells Fargo to compensate customers. The same pattern occurred with Wells Fargo’s requirement that auto loan borrowers buy insurance they didn’t need and with Equifax’s huge data breach.

To respond to these problems, the CFPB issued a regulation banning the use of mandatory arbitration clauses by financial corporations in individual consumer agreements. However, at the behest of the financial industry, Republicans in Congress pushed through a bill repealing the regulation; Vice President Pence cast the tie-breaking vote in the Senate.

Separate from Congressional action, Mick Mulvaney, the acting director of the CFPB appointed by President Trump in November 2017, has delayed regulation of payday lenders, who charge usurious interest rates and often trap customers into loans they can never repay, while the lender collects huge amounts of interest and fees.

Mulvaney has also stalled the CFPB’s investigation of the Equifax data breach, which allowed hackers to obtain the personal information, including Social Security numbers and birth dates, of 145 million people. Equifax’s breach was particularly egregious because it was preventable: Equifax did not install a software patch that had been available for months. Equifax failed to disclose the breach for months while people’s identities and accounts were at-risk. And Equifax executives sold $2 million of stock in the months between the breach and its becoming public knowledge. [3]

Not content to just attack the regulations and enforcement actions of the CFPB, Mulvaney, the Trump administration, and members of Congress (mainly Republicans) have worked to weaken the CFPB’s organizational effectiveness and independence. In June, Mulvaney fired the agency’s 25-member advisory board which included consumer advocates, experts, and industry executives. It had played, and was created to play, an influential role in advising CFPB’s leadership on regulations and policies. Two days before their firing, eleven of the 25 members held a press conference to criticize Mulvaney for canceling legally required meetings of the advisory board, ignoring them and their advice, and making unwise changes at the CFPB. [4]

Mulvaney has stripped enforcement powers from the CFPB unit pursuing discrimination cases. He has undermined the consumer complaint system. [5] He has asked Congress to weaken CFPB’s power and independence by giving Congress and the executive branch more control over its budget and regulations. [6]

The reasons we need a strong and independent Consumer Financial Protection Bureau are clear. Its enforcement actions have led to a $1 billion fine on Wells Fargo for a series of misdeeds in consumer banking, lending, compliance with regulations, and overall management, [7] [8] as well as to a $335 million settlement with Citigroup for overcharging 1.75 million credit card customers over eight years. [9]

Since its creation, the CFPB has protected consumers from financial corporations that violate the law. It has gotten compensation of over $12 billion for more than 31 million victimized consumers. In less than 8 years, it has responded to over 1.5 million consumer complaints and issued, for example, new standards that make home mortgage documents clearer and easier to understand. At CFPB’s website, you can find information that will help you understand your credit score and make a good decision about a car or student loan. (See my earlier post about the CFPB here for more information.)

I urge you to contact your U.S. Representative and Senators and to ask them to support the Consumer Financial Protection Bureau and the very valuable work it does. The efforts to weaken the CFPB and regulation of the big financial corporations are putting consumers at-risk and increasing the likelihood of another collapse of the financial sector and our economy. You can find your US Representative’s name and contact information here and your Senators’ information here.

[1]      Merle, R., 4/18/18, “The Senate just voted to kill a policy warning auto lenders about discrimination against minority borrowers,” Washington Post

[2]      Freking, K., 10/25/17, “Senate votes to end consumer credit rule,” The Boston Globe from the Associated Press

[3]      Rucker, P., 2/4/18, “Exclusive: U.S. consumer protection official puts Equifax probe on ice – sources,” Reuters (https://www.reuters.com/article/us-usa-equifax-cfpb/exclusive-u-s-consumer-protection-official-puts-equifax-probe-on-ice-sources-idUSKBN1FP0IZ)

[4]      Merle, R., 6/7/18, “Consumer bureau chief fires advisers,” The Boston Globe from the Washington Post

[5]      Singletary, M., 4/8/18, “Switching from watchdog to lapdog,” The Boston Globe

[6]      Merle, R., 4/3/18, “Trump-appointed head of consumer watchdog asks Congress to hamstring his agency,” Washington Post

[7]      Dreier, P., 2/7/18, “Wells Fargo gets what it deserves – and just in time,” The American Prospect (http://prospect.org/article/wells-fargo-gets-what-it-deserves-and-just-time)

[8]      Flitter, E., & Thrush, G., 4/20/18, “US to slap $1b fine on Wells Fargo,” The Boston Globe from the New York Times

[9]      Hamilton, J., 6/30/18, “Citigroup will repay $335 million to customers,” The Boston Globe from Bloomberg

THE DISMANTLING OF POST-CRASH FINANCIAL INDUSTRY REFORMS

Many in Congress and the Trump administration have either forgotten or don’t care about protecting us from the risky and corrupt behavior of Wall St. financial corporations that caused the 2008 economic collapse and Great Recession. They are repealing, weakening, or failing to implement the policies that were put in place to reduce the likelihood that such behavior and events would happen again. Keep in mind that those policies didn’t go far enough to prevent such as event from happening again – such as breaking up to too-big-too-fail financial corporations or separating risky financial trading activity from federally-insured consumer banking.

The Dodd-Frank Law was the major piece of legislation passed to reform the financial industry and reduce the likelihood of another meltdown. It included the creation of the Consumer Financial Protection Bureau (CFPB) to protect consumers from unsavory practices by financial corporations, such as the making of mortgage loans that were highly likely, if not certain, to be unaffordable for the home owners.

The financial industry has fought the implementation of these new safeguards; industry-friendly regulators have moved so slowly that some of the provisions of the Dodd-Frank Law are just finally getting implemented eight years later. For example, the simple requirement that corporations disclose the ratio of the pay of the corporation’s Chief Executive Officer (CEO) to that of the midpoint of workers’ pay is just now being implemented. Honeywell Corporation just reported that its CEO made 333 times what it’s median employee earns. And it didn’t include the pay of employees in developing countries, which undoubtedly would have increased the ratio. Most measures of the CEO-to-worker pay ratio have found CEO pay to be between 200 and 350 times the pay of the median worker. Fifty years ago, the ratio was roughly 20 and even Harvard Business School gurus felt at the time that this ratio should be a ceiling on CEO pay. [1]

Meanwhile, Congress and the Trump administration, at the urging of Wall St. lobbyists, have been dismantling the Dodd-Frank financial reforms, including:

  • Weakening regulations that reduce the risk of big financial corporations going bankrupt
  • Blocking or repealing consumer protection regulations from the Consumer Financial Protection Bureau (CFPB)
  • Stopping enforcement actions of the CFPB
  • Weakening the CFPB’s independence and effectiveness

Regulations that limit the risks from speculative financial transactions by big financial corporations are being weakened. Industry-friendly regulators plan to weaken the so-called Volcker Rule, thereby giving banks more flexibility to engage in financial trading activity that can be highly profitable but also vulnerable to big losses. Given that these banks also have consumer deposits that are federally insured, big losses could lead to the need for taxpayer bailouts (again). [2] Paul Volcker, the former head of the Federal Reserve banking and oversight system, had recommended this regulation to limit financial corporations from engaging in financial risk-taking when government-funded-insurance would end up covering any big losses. The six largest US financial corporations have spent millions of dollars lobbying for this change. (They are Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo.)

Federal regulators are also proposing to reduce that amount of a financial corporation’s own money that must be available to cover any losses from lending, trading, speculating, and other activities. Currently, financial corporations must have only 6 cents of their own money (reserves) for every dollar of potential financial liability. This would mean that if the corporation sustained losses of just 6% on the tens of trillions of dollars of loans, trades, speculative investments, etc. that it has, that it would be bankrupt and looking for a government (i.e., taxpayer) bailout.

In 2008, the reserve requirement was only 3 cents on every dollar and the big financial corporations had losses of twice that amount. Therefore, the government and taxpayers had to provide trillions of dollars to bail them out and prevent bankruptcies that would have caused a much more severe economic collapse.

Given the experiences of 2008, it seems foolish to be reducing the reserves that financial corporations must hold to cover losses. However, reducing reserves and increasing leverage (as it is referred to) allows the financial corporations to make more and bigger financial transactions, which, if all goes well, can increase their profits. However, it also increases the risk that a bailout will be needed. [3]

The financial corporations claim that a reduction in reserve requirements will allow them to make more loans to spur business growth and the economy. However, there is no evidence of unmet demand for loans and experience indicates that the financial corporations will actually use the reduction in reserves to pay more to shareholders and executives, buyback stock, and engage in speculation and non-banking activities.

Note that the big financial corporations are all reporting record profits even before any of these changes goes into effect. Banks, overall, reported $56 billion in profits during the first quarter of 2018, up 28% from a year earlier. [4]

In May, Congress passed, and the President signed, a law reducing the stringency of the oversight of banks, weakening the oversight that the Dodd-Frank Law put in place to reduce the risk of bankruptcies and government bailouts. The 26 banks with between $50 billion and $250 billion in assets (including American Express and Ally Financial) are now exempt from the strictest oversight. The 12 biggest banks will still be subject to the strictest oversight, although they can probably take advantage of some of the weakening of oversight in the law.

One result of the law is expected to be mergers of small and medium size banks because they can get bigger without triggering stricter oversight. The law also exempts “small” banks (under $10 billion in assets) from the Volcker Rule banning risky financial speculation and from reporting detailed data on borrowers that was targeted at preventing discrimination. [5]

I urge you to contact your U.S. Representative and Senators and to ask them to support strong regulation of the big financial corporations. Encourage them not only to oppose efforts to weaken the regulations and oversight put in place by the post-collapse Dodd-Frank Law, but to strengthen regulations and oversight to prevent, not just reduce the likelihood of, another financial industry collapse and crisis for the economy. The weakening of the regulations and oversight of the big financial corporations is increasing the likelihood of another financial sector collapse that would do serious damage to our economy and require a government, taxpayer-funded bailout.

You can find your US Representative’s name and contact information at: http://www.house.gov/representatives/find/. You can find your US Senators’ names and contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Meyerson, H., 2/22/18, The American Prospect blog (http://prospect.org/blog/on-tap?page=6)

[2]      Flitter, E., & Rappeport, A., 5/30/18, “Big banks to get a break from limits on risky trading,” The New York Times

[3]      Hoenig, T.M., & Bair, S.C., 4/26/18, “Relaxing bank capital requirements would risk another crisis,” Wall Street Journal

[4]      Thomhave, K., 5/25/18, “A Great Deal for Banks, Not So Much for American Jobs,” The American Prospect (http://prospect.org/blog/tapped/great-deal-banks-not-so-much-american-jobs)

[5]      Werner, E., 5/25/18, “Trump signs bill easing banking rules passed after crisis,” The Boston Globe from the Washington Post

STOPPING GERRYMANDERING; RESTORING DEMOCRACY

Gerrymandering, the manipulation of the boundaries of electoral districts to predetermine outcomes, has become more blatant, dramatic, and effective in the 21st century. Please see my previous post for a discussion of how extreme partisan gerrymandering is undermining our democracy. The redrawing of electoral districts is done every ten years after new population data is available from the Census. Typically, state legislatures do the redistricting, and these partisan, elected officials have a built-in incentive to engage in partisan and other types of gerrymandering.

Gerrymandering can be stopped through multiple strategies:

  • Challenging gerrymandered districts in court,
  • Establishing standards for districts and the redistricting process, and
  • Creating non-partisan commissions to do the redistricting.

Districts that appear to be gerrymandered are being challenged in state and federal courts. In Pennsylvania, state courts ruled that the districts drawn after the 2010 Census were illegally gerrymandered and the US Supreme Court upheld this finding. There are currently two other cases before the US Supreme Court, one from Wisconsin challenging Republican gerrymandering and one from Maryland challenging Democratic gerrymandering. Decisions are expected to be announced this month. Unfortunately, these decisions will probably be too late to allow the gerrymandering to be fixed before the 2018 elections. [1]

Another solution to gerrymandering is to write standards into state or federal laws that govern how districts are drawn and the redistricting process used to draw them. There are several statistical tests that can be done of historical election results to identify whether gerrymandering is likely to have played a role in the outcomes. These tests can also be applied to projected results based on party enrollment and past voting patterns in proposed districts. [2] [3] These tests are valuable because they can be used during the redistricting process or by courts afterwards to determine if districts are being drawn fairly.

Perhaps, most promising is the creation by states of truly non-partisan, independent redistricting commissions that remove redistricting from the hands of partisan legislatures. Currently, twenty-one states use some form of redistricting commission for redrawing either or both of state legislative districts and congressional districts. Some are more independent of partisan political influence than others. [4]

The use of and interest in redistricting commissions is growing. In 2017, 29 state legislatures considered bills related to creating redistricting commissions. In the Pennsylvania legislature, a bill to create a redistricting commission is gaining significant support. In other states, citizens are putting measures to create redistricting commissions on the ballot. In Ohio, a badly gerrymandered state, 75% of voters recently approved a proposal on the ballot to extend the role of their independent redistricting commission to include congressional districts, in addition to state legislative districts. This was forced on elected officials by a grassroots campaign that collected nearly 250,000 signatures. Michigan is likely to have a proposal on its November 2018 ballot to create such a commission because of a grassroots organization that collected 425,000 signatures. Redistricting reforms are likely to appear on the ballot this fall in Arkansas, Colorado, Missouri, and Utah. These redistricting reform efforts are backed by strong bipartisan coalitions. [5] [6]

Gerrymandering is a significant threat to representative democracy as it undermines the basic tenet that every voter has an equal voice. It distorts democracy and lets the voices of a small subset of voters, often those with extreme views, dominate elections. The elected representatives, therefore, tend to reflect these minority and often extreme views, leading to extreme partisanship and gridlock in our legislative bodies.

In gerrymandered districts, many voters, with good reason, don’t feel they have a voice and that their elected officials don’t represent their interests and points of view. The broad support for ending extreme partisan gerrymandering is bipartisan: 80% of Democrats, 68% of independents, and 65% of Republicans back efforts to end it.

I urge you to contact your representatives in your state legislature and ask them to ensure fair redistricting after the 2020 Census. If you’re in one of the states mentioned above as likely to have a relevant ballot question in November, I encourage you to find information on the effort to reform redistricting and then get involved if you can. To learn more about the redistricting process in your state, the National Conference of State Legislatures has information here, and if you’re interested in knowing if there was a bill filed in your state legislature relative to the creation of a redistricting commission look here. For more information on ending gerrymandering and other reforms to our voting systems in general, Fair Vote has lots of information on its website.

[1]      Wheeler, R., 2/28/18, “The Supreme Court and partisan gerrymandering cases,” The Brookings Institution (https://www.brookings.edu/blog/unpacked/2018/02/28/the-supreme-court-and-partisan-gerrymandering-cases/)

[2]      Wang, S., & Remlinger, B., 9/25/17, “Slaying the partisan gerrymander,” The American Prospect (http://prospect.org/article/slaying-partisan-gerrymander)

[3]      Royden, L., Li, M., & Rudensky, Y., 3/23/18, “Extreme Gerrymandering & the 2018 midterm,” Brennan Center for Justice (https://www.brennancenter.org/publication/extreme-gerrymandering-2018-midterm)

[4]      Wikipedia, Retrieved from the Internet 6/4/18, “Redistricting commission” (https://en.wikipedia.org/wiki/Redistricting_commission)

[5]      Rapoport, M., 12/7/17, “Prospects brightening for redistricting reform,” The American Prospect (http://prospect.org/article/prospects-brightening-redistricting-reform)

[6]      Daley, D., 6/14/18, “Voters take charge in making elections more fair,” The Boston Globe

GERRYMANDERING IS UNDERMINING OUR DEMOCRACY

Gerrymandering, the manipulation of the boundaries of an electoral district to predetermine the outcome based on party, race, incumbency, or other factors, has been happening for a long time. Traditionally, it was used to protect individual incumbents or to limit black and minority representation.

Typically, the state legislature redraws the boundaries of its state’s electoral districts with the new Census data available every ten years. With the 2020 Census coming up soon, there are efforts that some believe are meant to undercount hard-to-reach populations such as low-income households, minorities, and immigrants. (See my previous post for more detail.) If this occurs, it would mean that these residents will be under-represented when electoral districts are drawn, and, therefore, their voice and representation in state and federal legislative bodies would be diminished.

Gerrymandering has become more blatant, dramatic, and effective in the 21st century. It has been both fueled and exacerbated by partisanship and extremism in our state and national legislative bodies. It has been facilitated by increasingly sophisticated computer technology for mapping, analyzing, and tracking voters’ preferences and history. Historically, both Democrats and Republicans have engaged in gerrymandering.

Independent analyses find that in the redrawing of districts for the US House of Representatives following the decennial Censuses from 1970 to 2000, Democrats engaged in what’s called extreme partisan gerrymandering in one state after each of these four redistricting cycles. This occurred most dramatically in California in 1980. At its peak in the 1980s and 1990s, the best estimates are that through gerrymandering Democrats gained 3 – 5 seats in the House (out of 435 seats) above what would have otherwise been expected. After the 2010 Census, the Democrats did not engage in extreme partisan gerrymandering in any state. [1]

In redistricting after the 2000 and 2010 Censuses, independent analyses of the redrawing of districts for the US House find that Republicans engaged in extreme partisan gerrymandering in four states and seven states, respectively. The best estimates are that Republicans currently gain, through gerrymandering, between 15 and 20 seats in the House (out of 435 seats) above what would have otherwise been expected. A shift of 22 seats would change control from Republicans to Democrats.

For example, North Carolina is one of the states with extreme partisan gerrymandering of its Congressional districts. As a result, in 2012, Democrats got 51% of the votes for Congress statewide, but only won 4 of 13 seats in the House. In Pennsylvania, another state with extreme partisan gerrymandering, Democrats received just over half of the votes in 2012 but only 5 of 18 Congressional seats. [2] (This previous post has more information on the 2012 election results and on gerrymandering.)

Partisan gerrymandering has also dramatically affected thousands of seats in state legislatures. In Wisconsin, for example, in the 2012 election, Republicans received 49% of the statewide vote but got 60% of the seats in the Assembly of the state legislature. [3]

Extreme partisan gerrymandering has another, more insidious, effect. Nationwide, almost 100 of the 435 seats in the US House have been gerrymandered so only one of the two parties can win the seat. This means that the final election in November is meaningless for these seats. It also means that the voters of the party not in control of the district are effectively disenfranchised – their votes don’t matter (at least in terms of the election of their US Representative). Hence, tens of millions of voters effectively have no say in who is elected as their congressional representative.

In these congressional districts, gerrymandered to allow only one of the parties to win, the only election that matters is that party’s primary. Given the low voter participation in primary elections, a small number of voters, often ones with relatively extreme political views, determines who the US Representative will be. This is a significant contributing factor to the extreme partisanship and gridlock in Congress.

Extreme partisan gerrymandering insulates elected officials from all but a small handful of their constituents – those that vote for them in primary elections. Therefore, these congressional representatives do not need to worry about representing the interests of most of their constituents. When elected representatives redraw legislative districts after the Censuses and engage in gerrymandering, essentially the elected officials are picking their voters, rather than voters choosing their elected representatives.

This is clearly undermining democracy and the democratic principle of one person, one vote, i.e., that each voter has an equal voice in our democracy.

Partisan gerrymandering is accomplished by packing as many supporters of the opposition party into as few districts as possible. The opponents will win these seats overwhelmingly. Meanwhile, supporters of your party are spread more evenly across the other districts, so your party will comfortably win as many seats as possible. For example, in Pennsylvania in 2012, as the result of Republican gerrymandering, the Democrats won 5 congressional districts by an average margin of 76% to 24% (a 52 percentage point margin). The Republicans won 13 districts by an average of 59% to 41% (an 18 percentage point margin). [4] Clearly, if the Democratic voters had been spread out more evenly, the Democrats would have won more seats but by smaller margins. Overall, Democrats got about 350,000 votes and Republicans got about 250,000, but the Republicans won 13 of 18 seats. With fair districts, Democrats would have gotten 10 or 11 seats and Republicans 7 or 8 seats. So, extreme partisan gerrymandering produced a swing of 5 or 6 seats to the Republicans in Pennsylvania.

My next post will discuss what can be done to stop gerrymandering.

[1]      Wang, S., & Remlinger, B., 9/25/17, “Slaying the partisan gerrymander,” The American Prospect (http://prospect.org/article/slaying-partisan-gerrymander)

[2]      Li, M., 2/6/18, “What Pennsylvania’s landmark partisan gerrymandering ruling means,” Brennan Center for Justice (https://www.brennancenter.org/blog/what-pennsylvania-landmark-partisan-gerrymandering-ruling-means)

[3]      Fried, C., 7/10/17, “Gerrymandering is unfair and unjust,” The Boston Globe

[4]      Ballotpedia, retrieved from the Internet on 6/4/18, “United States House of Representatives elections in Pennsylvania, 2012” (https://ballotpedia.org/United_States_House_of_Representatives_elections_in_Pennsylvania,_2012)

THE UNDERMINING OF THE INDEPENDENCE OF OUR JUDICIARY

There is widespread acknowledgement that fair and impartial courts and judges are essential to public trust in our court system and our democracy. A key role of the judiciary is to ensure that the legislative and executive branches of government do not overstep their authority or violate individuals’ rights. This is one of the key checks and balances that is part of the Constitution. Members of the legislative and executive branches should respect judges’ independence even when they disagree with their decisions.

In recent years, the judicial appointment process at the federal and state levels, elections of judges in some states, and court decisions themselves have gotten increasingly politicized. This is not a positive trend for our democracy and the politicization of the judiciary only seems to be accelerating.

President Trump on multiple occasions has criticized judicial decisions and demeaned individual judges. This is unprecedented and unhealthy for our courts and our democracy.

The President’s attacks on the judiciary seem to have emboldened others in their efforts to politicize our judicial system. In 2018, at least 14 states are considering at least 42 legislative proposals that would reduce the independence of judges and court systems. These proposals include giving legislators more control over the selection of judges, putting political or financial pressure on judges to rule the “right” way, and giving legislatures the power to override court decisions, including deciding the constitutionality of laws they themselves wrote. [1]

The attacks on judicial independence are coming from right-wing, wealthy interests in efforts to:

  • Have unlimited ability to sell guns and ammunition, as well as to carry guns, (Note: This is not really about Second Amendment rights; it’s about the ability of gun manufacturers to sell guns and ammunition to make big profits.)
  • Limit women’s ability to make decisions about their reproductive health,
  • Limit the rights of LGBTQ individuals,
  • Block every citizen’s right to an equal voice in our democracy through 1) restrictions on voting rights, 2) gerrymandered voting districts, and 3) unlimited campaign funding by wealthy special interests,
  • Expand the use of the death penalty and maintain an inequitable criminal justice system,
  • Block funding for public schools that ensures that every child receives a free and appropriate education as required by state constitutions,
  • Block fair taxes and fair employment and business practices necessary to stop spiraling economic inequality, and
  • Promote policies based on religious beliefs rather than the interests of the public.

For example, in Pennsylvania, legislators unhappy with a state Supreme Court ruling that a Republican gerrymandering of congressional districts was illegal, at first refused to comply with the court’s order and then threatened to remove the judges who had ruled against them. [2]

In Washington state, where judges are elected, legislators have proposed requiring analysis of how much each state Supreme Court decision will cost taxpayers. In decisions about individuals’ rights, cost should not be a factor and using the cost of a judge’s decisions should not be a factor in an election campaign. In North Carolina, legislators have proposed giving themselves more power in the selection of judges and in gerrymandering judicial districts. They have also proposed making judges run for election every two years. In Iowa, legislators unhappy with a judge’s decision to ban guns from courthouses have threatened to cut judges’ salaries and to require the courts to pay rent, using their control of the purse strings to try to affect judges’ rulings.

The impartiality and integrity of our state courts is critical because they handle the vast majority of criminal and civil cases in the U.S. For example, 94% of felony convictions occur in state courts, including 99% of rape cases and 98% of murder cases. In criminal cases, there is compelling evidence that the pressures of election campaigns and negative campaign ads affect judicial decision-making. (See this previous post for more detail.)

In summary, judges are facing unprecedented challenges to their ability to deliver fair, impartial justice free from partisan pressure. Not only are partisan elected officials trying to put their thumbs on the scales of justice, but in addition the rapid increase in spending on judicial campaigns has exacerbated the challenges to judicial fairness and integrity. (See this previous post for more detail.) We need to oppose efforts to undermine the independence of the judiciary whenever and wherever they arise.

We need to support policies and practices that protect the independence of the judiciary. Two key policies related to the selection of judges are for states to use an effective, non-partisan appointment process or to have effective regulation of judicial elections and spending on them. Partial public financing systems, which match individuals’ small contributions with public money, can legally limit spending and the size of contributions. These are important steps in controlling the influence of campaign money on judicial decisions. (See this previous post for more detail.)

Eroding the checks and balances between our branches of government, and in particular the courts’ independence in making decisions fundamental to our democratic principles, is unpatriotic and antithetical to the Constitution. Increasing politicization of the courts is likely to further increase divisive partisanship. Reduced independence and power in the courts could be extremely difficult to reverse after the fact; this may well be a snowball that will roll uncontrollably downhill. Politicizing the judiciary would make its decisions subject to the whims of the current political environment rather than based on long-term constitutional, legal, and democratic principles.

[1]      Brennan Center for Justice, 2/6/18, “Legislative assaults on courts – 2018,” New York University Law School, (https://www.brennancenter.org/analysis/legislative-assaults-state-courts-2018)

[2]      Keith, D., 2/21/18, “Democracy unchecked: Trump spurs state lawmakers to curb judges’ powers,” The American Prospect (http://prospect.org/article/democracy-unchecked-trump-spurs-state-lawmakers-curb-judges%E2%80%99-powers)

LOCAL POLICIES SERVING RESIDENTS BLOCKED BY RIGHT WING CONSERVATIVES

Right wing conservatives supposedly, ideologically, support local political control. Their actions, however, are first and foremost, designed to benefit the special interests that provide their financial support. They are using their political power at the state and federal levels to block and preempt progressive policies at the local level. Policies that benefit workers and the public good are blocked if they are opposed by the large corporations and wealthy executives who provide campaign funding. Right wing conservatives loudly proclaim their support and allegiance to the Constitution and democracy, but willingly undermine both when it serves the interests of their plutocratic backers. [1]

Right wing conservatives block the will of the majority using multiple strategies:

  • Passing laws or taking executive actions that block progressive policies of local communities,
  • Limiting the ability of judges and the courts to uphold the Constitution and laws that protect political, social, economic, and civil rights, and
  • Manipulating voting and representation through gerrymandering, voter suppression, and rigging of the Census.

This post will focus on laws and executive actions that block progressive policies. Subsequent posts will cover efforts to limit the independence of judges and the courts, as well as gerrymandering. Previous posts have discussed the rigging of the Census and voter suppression.

The plutocrats (i.e., those who have power due to their wealth) have used their money over a period of 40 years to buy political influence and elections. The resultant political shift to the right in Congress and the White House, and in many state legislatures and governorships, has meant that local communities are more frequently finding themselves at odds with policies established by right wing conservatives at the state and federal levels. In particular, large cities, which are substantially more diverse and politically progressive than the non-urban population, are having their progressive policies blocked by conservative, elected officials in state and federal offices.

One of the more notable conflicts between the Trump administration and local communities is over the treatment of immigrants, particularly undocumented immigrants. Over 150 cities or counties have directed their police forces not to arrest or hold residents based solely on federal immigration law violations. Local law enforcement needs to have positive relationships with all residents, including undocumented immigrants, so it can keep everyone safe and ensure that everyone is comfortable interacting with the police for their own and others’ safety.

The Trump administration uses multiple tactics (e.g., threats to cut off funding and engaging in aggressive actions by federal immigration enforcement forces in those communities) to attempt to discourage and punish local initiatives to maintain good relationships between undocumented immigrants and police. The Trump administration is trying to coerce local communities into undermining local law enforcement and public safety.

At the state level, there are many examples of state governments blocking local policies that serve residents. These have gotten little attention in the mass media. For example, states have passed laws that prohibit municipalities from:

  • Raising their minimum wage (25 states, including almost every Southern state),
  • Requiring local employers to provide paid sick time and / or establishing a paid family and medical leave program (at least 17 states),
  • Providing local Internet service (typically at lower cost or higher speed than available from private providers) (at least 17 states),
  • Regulating ride-sharing services such as Uber and Lyft (at least 37 states),
  • Implementing local taxes to meet local needs (at least 42 states),
  • Regulating consumer and public health safety (e.g., tobacco products, food labeling, plastic bag bans, and fracking and other environmental threats),
  • Removing or altering Confederate monuments (at least 6 states),
  • Regulating short-term home rentals such as Airbnb (at least 3 states),
  • Protecting the rights of gay and lesbian people (at least 3 states), and
  • Taking steps to reduce gun violence by regulating guns and ammunition. [2] [3] [4] [5]

Nonetheless, local communities are asserting their progressive values. For example, 21 states and 32 localities have raised their minimum wage above the federal level since 2014. In response, the corporate-funded and run American Legislative Exchange Council (ALEC) has drafted and provided to state legislators across the country model legislation called the “Living Wage Preemption Act” designed to block local increases in the minimum wage.

In some cases, states have overridden and reversed policies and programs after they have been established at the local level. For example, in Austin, Texas, the state struck down a local ordinance requiring fingerprinting of Uber and Lyft drivers. And Texas legislators have promised to introduce legislation to repeal Austin’s recently passed paid sick time law. In Ohio, the state retroactively canceled Cleveland’s increase in its minimum wage.

These efforts at preemption of local progressive policies are occurring because right wing conservatives and their wealthy backers know that the successes of these policies and programs represent a powerful refutation of their ideology and political arguments. The right wing also knows it is outnumbered if there is broad participation in elections and political activity. Therefore, one of their goals is to suppress voting and political engagement. Limiting the success of grassroots initiatives is key to preventing the building of a truly powerful, larger and broader progressive movement.

State and federal preemption of local policies usurps communities’ power and right to control their own destinies. Although preemption can play a positive role in setting a floor or minimum standard for policies on safety, environmental standards, human rights, and labor standards, its current use by right wing conservatives is anti-democratic because it is pushing the interests of the plutocracy – wealthy individuals and large corporations – and undermining democratic self-determination.

[1]      Doonan, M., 12/14/17, “Opportunistic federalism and a liberal resurgence,” The American Prospect (http://prospect.org/article/opportunistic-federalism-and-liberal-resurgence)

[2]      Miller, J., 2/21/18, “In the face of preemption threats, Austin passes paid sick leave,” The American Prospect (http://prospect.org/article/face-preemption-threats-austin-passes-paid-sick-leave)

[3]      Miller, J., 8/22/17, “On monuments and minimum wages,” The American Prospect (http://prospect.org/article/monuments-and-minimum-wages)

[4]      Von Wilpert, M., 3/13/18, “Preemption laws prevent cities from acting on everything from labor and employment to gun safety,” Economic Policy Institute (https://www.epi.org/blog/preemption-laws-prevent-cities-from-acting-on-everything-from-labor-and-employment-to-gun-safety/)

[5]      Hightower, J., May 2017, “GOP state legislatures are attacking local democracy,” The Hightower Lowdown (https://hightowerlowdown.org/article/gop-state-legislatures-are-attacking-local-democracy/)

THE EFFECTS OF THE FEDERAL TAX CUT

The initial effects of the federal tax cuts enacted in December 2017 by the Tax Cuts and Jobs Act (TCJA) are now visible; they are not what their Republican architects promised.

Although it’s too early to know definitively if the tax cuts will have an effect on the overall economy, growth in the first quarter of 2018 was steady but not noteworthy. There is no evidence of the tax-cut-fueled acceleration of economic growth the Republicans promised. [1] The latest projections, as well as experiences elsewhere, strongly suggest that the effects on economic growth will be small at best.

The effects of the tax cut on the deficit are becoming clearer. The latest projections from the non-partisan Congressional Budget Office (CBO) are that the federal government’s revenue will be reduced by $1.3 trillion over the next 10 years. When the costs of paying interest on the growing debt are included, the CBO projects that the cumulative deficit will increase by $1.9 trillion over the period from 2018 to 2028 due to the tax cuts, despite the Republicans’ promise of no increase in the deficit. [2] Furthermore, the growth in the deficit will be exacerbated by the spending bill that was enacted in early 2018, which increases spending by $300 million over the next two years.

The CBO projects the federal government’s deficit will be $804 billion for fiscal year 2018, up 21% from 2017. Furthermore, it projects the deficit will be over $1 trillion a year by 2020, despite President Trump’s campaign promise to eliminate the deficit. From 2021 to 2028, the CBO estimates the deficits will average 4.9% of Gross Domestic Product (GDP), the total of all economic activity in the U.S. This is higher than at any time since World War II, except during the Great Recession of 2008 – 2009 when tax revenue slumped with the collapsing economy and spending was high to bail out Wall St. and to stimulate the economy.

The growing deficit reflects the gap between what the Republicans who control the federal government want to spend and their unwillingness to enact the taxes necessary to pay for it. This is blatant fiscal irresponsibility. Moreover, growing deficits are of serious concern when the economy is doing well and unemployment is low. In this situation, many economists and responsible officials recommend reducing the deficit and even generating a surplus, as President Clinton did, so that the country has the capacity to weather the next economic downturn.

Analysis of the individual tax cuts finds that the wealthiest households will receive the biggest tax cuts, both in terms of dollars and percentage increase in after-tax income. Households with incomes under $25,000 will receive an average tax cut of $40. Meanwhile, those with incomes from $49,000 to $86,000 will receive an average tax cut of about $800, those with incomes of $308,000 to $733,000 will get about $11,200, and those with incomes over $733,000 will get a tax cut of about $33,000. [3]

As an example of the benefits of the corporate tax cuts, the six biggest, multi-national banking corporations (JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley, and Bank of America) together paid at least $3.6 billion less in taxes for the first quarter of 2018 than they would have without the 2017 tax cut law. Before the tax cut, these corporations had paid 28% to 31% of their income in taxes; for the first quarter of 2018 they paid between 17.2% and 23.7%. Their tax rate is estimated to be 20% – 22% for the full year, meaning they will receive a tax cut of $19 billion for this year. [4] By the way, the tax cut law also provides benefits, and therefore incentives, to corporations to move jobs and profits overseas to dodge U.S. income taxes. [5]

The Economic Policy Institute projects that roughly 80% of the benefits of the corporate tax cuts will be passed on to shareholders and executives, and not used to pay employees or re-invest in the business. Although some corporations gave small raises or bonuses to their workers – thanks to intense public visibility and pressure – a huge chunk of the tax cut has been used to buy back company stock.

In just the four months since the tax cuts were enacted in December, corporations have announced more than $250 billion in stock buybacks. This rewards stockholders and executives as it pushes up the price of the corporation’s stock. These buyback announcements are an acceleration from an already record-high, $5.1 trillion of buybacks over the previous decade. Virtually all the profits of the country’s 500 largest corporations from 2005 to 2015 went to share buybacks and dividends, and not to workers’ wages or investments that would increase productivity, both of which have stagnated. [6]

Stock buybacks give huge rewards to corporate executives because much of their compensation is paid in shares of stock. For example, the CEO of Wells Fargo bank got a $4.6 million raise for the year due to the increase in the corporation’s stock price from stock buybacks.

Stock buybacks were illegal until 1982, which is roughly (and probably not wholly coincidentally) the same time wages stopped rising for most Americans. Before then, a bigger share of corporate profits was used to increase workers’ wages and re-invest in the business, rather than for less economically productive stock buybacks. [7]

Some corporations have announced bonuses or pay increases for workers. However, so far these announcements have applied to only 4.1% of workers and roughly 80% of them are one-time bonuses not on-going pay increases, even though the corporations’ tax cuts are permanent and on-going. [8] In some cases, the workers have not received (and may never receive) actual increases in pay. For example, some corporations have made the pay increases the subject of negotiations with unions. Corporations have announced spending 42 times as much on stock buybacks as on increases in employees’ pay. [9]

To put all this in some perspective, it is estimated that the Koch brothers, extremely wealthy corporate executives, will see their incomes increase by about $27 million per week or $1.4 billion per year. Not coincidentally, they have pumped hundreds of millions of dollars into Republican election campaigns over the last four years. Meanwhile, the few workers lucky enough to get a pay increase are typically getting, at most, a one-time bonus of a few hundred or maybe a thousand dollars for the year. [10]

I encourage you to contact your U.S. Representative and Senators and to ask them to support the Reward Work Act. This bill would significantly limit stock buybacks, give employees of publicly traded corporations the power to elect one-third of the corporation’s Board of Directors, and force corporations to use their tax cuts to reward their workers, instead of executives and stockholders.

You can find your US Representative’s name and contact information at: http://www.house.gov/representatives/find/. You can find your US Senators’ names and contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Horowitz, E., 4/28/18, “So far, tax cuts aren’t noticeably driving growth,” The Boston Globe

[2]      Stein, J., 4/9/18, “Deficit to top $1 trillion per year by 2020, CBO says,” The Washington Post

[3]      Sammartino, F., Stallworth, P., & Weiner, D., 3/28/18, “The effect of the Tax Cuts and Jobs Act individual income tax provisions across income groups and across the states,” Tax Policy Center (http://www.taxpolicycenter.org/publications/effect-tcja-individual-income-tax-provisions-across-income-groups-and-across-states/full)

[4]      Sweet, K., 4/20/18, “Big banks saved $3.6 billion in taxes last quarter under new law,” Associated Press

[5]      Thomhave, K., “Even the CBO says the GOP tax reform will incentivize corporate offshoring,” The American Prospect (http://prospect.org/article/even-cbo-says-gop-tax-reform-will-incentivize-corporate-offshoring)

[6]      Heath, T., 4/13/18, “America’s biggest companies are announcing buybacks. But whose cash is it, anyway?” The Washington Post

[7]      Reich, R., 3/21/18, “The buyback boondoggle is beggaring America,” The American Prospect (http://prospect.org/article/buyback-boondoggle-beggaring-america)

[8]      Madrid, M., 4/13/18, “Waiting — and waiting– for corporate tax cuts to deliver those wage hikes,” The American Prospect (http://prospect.org/article/waiting-and-waiting-corporate-tax-cuts-deliver-those-wage-hikes)

[9]      Americans for Tax Fairness, retrieved 4/28/18, “Trump tax cut truths,” (https://americansfortaxfairness.org/trumptaxcuttruths/)

[10]     Hoxie, J., 4/18/18, “Five tax myths debunked,” Institute for Policy Studies (http://otherwords.org/five-tax-myths-debunked/)

THE UNDERMINING OF THE 2020 CENSUS

The 2020 Census is coming up soon and preparations for it are underway. You’ve probably heard about the controversy over the Trump administration’s effort to add a question on citizenship to the Census. Unfortunately, the politicization and undermining of the Census runs much deeper than just this question.

The Census is supposed to enumerate every person living in the U.S., regardless of whether they are a citizen or not. This is the Constitutional mandate of the Census. It’s used to determine boundaries for Congressional Districts and state legislative districts, as well as votes in the Electoral College (which, of course, elects the President). It’s also used every year to apportion $675 billion in federal funding for health care, schools, housing, and roads. Essentially every major U.S. institution uses Census data, from businesses analyzing markets to countless researchers analyzing demographics and driving policy decisions.

The 2010 Census was the most accurate one in history, but it over-counted white residents by almost 1% (e.g., people with more than one home) and under-counted Blacks by 2%, Hispanics by 1.5%, and Native Americans by 5% – failing to count 1.5 million residents of color. [1] The fairness and accuracy of the Census, as well as trust in it and its process, are essential elements of the core infrastructure of our democracy.

The undermining of an accurate count in the 2020 Census began in 2012 and has accelerated more recently. In 2012, Congress directed the Census Bureau, over the objections of the Obama White House, to spend less on the 2020 Census than it had on the 2010 Census, despite inflation and a population that was expected to grow by 25 million residents (about 8%). After Trump’s election in 2016, the Bureau’s budget was cut by another 10%, although some of that funding was just restored last month.

The Census Bureau’s Director resigned in June 2017 after Congressional budget cuts. The Deputy Director position was already vacant; however, the Trump administration has not yet nominated anyone to fill either of these posts. A rumored nominee was an academic without any Census experience who had supported racial and partisan gerrymandering of Congressional Districts. Meanwhile, the Trump administration has installed a “special adviser” at the Census Bureau who is from a partisan polling firm and who reports directly to the White House. These personnel issues undermine the Bureau’s ability to effectively run the 2020 Census.

Budget cuts have forced the Census Bureau to cancel crucial testing of the Census process. These tests are particularly important because for the first time the Census will be conducted primarily through on-line responses. Rather than mailing Census forms to every household, a postcard will be sent with instructions on how to fill out the on-line form. As in the past, Census workers, called enumerators, will visit households that don’t respond to the initial Census mailing to ensure the counting of those residents. Even though the initial response rate is likely to fall because of low-income or elders’ households that lack the technological capability to respond on-line, the number of enumerators has been cut by about 200,000, from 500,000 to 300,000. (Roughly a third of low-income households and a third of Black and Hispanic households lack Internet access and a computer.) The enumerators are also charged with finding and obtaining Census responses from residents who did not receive the mailing.

Budget cuts also forced the Census Bureau to cancel trial runs specifically designed to help it figure out how to reach hard-to-count populations. It also canceled two of three “dress rehearsals.” It has half as many field offices as it had in 2010. The development of the Bureau’s technology systems is behind schedule and the launch of its website is not scheduled until April 2020. Cybersecurity for the new on-line Census is a major concern as well. A group of 51 economists from across the country and across the political spectrum have written a letter to Congress supporting “robust funding of the 2020 Census sufficient to ensure a fair and accurate count of the U.S. population.” [2]

The budget cuts mean that the outreach and publicity the Census Bureau will do to encourage responding to the Census have been reduced substantially. Currently, the Bureau has only 40 employees working on outreach, compared with 120 at this point 10 years ago. States, cities, and private foundations are already working to fill this void, but they will be hard pressed to match the 2010 effort where the Census Bureau spent $340 million on promotional advertising.

As if these challenges to accurately counting every resident weren’t enough, the Trump administration recently announced its intention to add a question to the Census that would ask whether the respondent is a citizen. The Census Bureau was already concerned that the Trump administration’s anti-immigrant actions and rhetoric were going to make it harder to get an accurate count of immigrant residents, both documented and undocumented ones. A citizenship question will only exacerbate this challenge. Not only will non-citizens be less likely to respond to the Census, but citizens in the 16 million households with some undocumented members may refuse to respond out of fear of exposing their undocumented family members. [3]

The Trump administration says that getting citizenship data in the Census is necessary to enforce the Voting Rights Act and prevent discrimination against minorities. This claim would be laughable if its implications weren’t so serious. There hasn’t been a question on citizenship on the Census for 70 years. [4] Furthermore, the American Community Survey, which is done annually with a statistically accurate sample that consists of 3.5 million residents, does have a question on citizenship that provides the data needed to analyze issues where citizenship information is needed.

The opposition to adding a question on citizenship has been swift and broad. Six former Census Bureau Directors who served under both Republicans and Democrats wrote a letter in opposition. Two dozen states and cities have announced a lawsuit aimed at blocking the inclusion of this question. [5] Normally, adding a question to the Census is a careful process with testing to determine effects on response rate and other factors. In this case, there is no opportunity to test the effect of adding this question given that very limited field testing is being done and that it is already underway.

An under-count of immigrants and people of color would shift economic and political power to rural, white, conservative populations. These effects would last for at least the next 10 years until the 2030 Census. California estimates that each resident who is not counted will cost the state $1,900 in federal funding each year. It receives about $77 billion annually in federal funding and could lose about $2 billion each year for the next 10 years if its low-income and immigrant populations are significantly under-counted. This could also cost the state one or two seats in the House of Representatives and in the Electoral College.

A significant under-count in the 2020 Census would undermine the commitment of our democracy to treat each resident fairly. The Trump administration and the Republicans in Congress, by significantly under-funding the Census, by adding a question on citizenship, through their anti-immigrant actions and rhetoric, and by refusing to use more accurate statistical techniques, seem to be working hard to under-count hard-to-reach populations. Not surprisingly, these low-income, minority, young, and student populations are the same ones they are trying to keep from voting through ID requirements and other steps that make voting more difficult. They appear to be more than happy to undermine the 2020 Census and our democracy to achieve political goals.

The Census has an extraordinary reputation for counting all residents regardless of income, race, ethnicity, or immigrant status. Undermining confidence in the integrity of the Census by politicizing the process will erode trust that is essential to a functioning democracy. [6]

I urge you to contact your members of Congress and urge them to support adequate funding for the Census, to oppose a question on citizenship, and to strongly advocate for as accurate a count of all residents as is possible. You can find your US Representative’s name and contact information at: http://www.house.gov/representatives/find/. You can find your US Senators’ names and contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Berman, A., May/June 2018, “Hidden figures: How Donald Trump is rigging the Census,” Mother Jones (https://www.motherjones.com/politics/2018/03/donald-trump-rigging-2020-census-undercounting-minorities-1/#)

[2]      Economic Policy Institute, 4/2/18, “An open letter from 51 economists to Congress urging robust funding of the 2020 Census” (https://www.epi.org/publication/an-open-letter-from-51-economists-to-congress-urging-robust-funding-of-the-2020-census/)

[3]      Loth, R., 4/9/18, “Turning the apolitical Census into an anti-immigrant tool,” The Boston Globe

[4]      Cerbin, C. M., 3/27/18, “Citizenship question to be put back on the 2020 Census for first time in 70 years,” USA Today

[5]      Kamp, J., & Adamy, J., 4/13/18, “Citizenship question rankles in trial run of 2020 Census,” Wall Street Journal

[6]      Wines, M., 12/9/17, “With 2020 Census looming, worries about fairness and accuracy,” The New York Times

ICE IS ENGAGING IN TERRORISM

Terrorism is defined as the unlawful use or threat of violence or intimidation, especially against civilians, in the pursuit of political aims. The Immigration and Customs Enforcement (ICE) agency is using tactics that fit the definition of terrorism.

ICE agents are making arrests that are designed to create fear among immigrants, including legal immigrants, and to intimidate and traumatize them. For example, ICE agents are arresting immigrants at hearings where they are applying for legal status, at courthouses where immigrants are engaged with our criminal justice system, near schools, and even in hospitals.

ICE’s practice of separating children and parents is designed to instill fear and anxiety in parents. [1] It also traumatizes children, who are likely to have already been traumatized by the experiences that have led their parents to flee their home countries.

For parents seeking asylum, separating children from parents clearly violates US and international laws on the treatment of asylum-seekers. (See my previous post for examples.) For others, suits have been filed to have this practice declared illegal because it fails to provide due process for parents and children, and constitutes cruel and unusual punishment, among other things.

The resultant fear and intimidation are causing immigrant parents to avoid enrolling children in school or preschool programs (such as Head Start) and to avoid public programs that provide access to health care and healthy nutrition, including for pregnant women and infants.

In Massachusetts, ICE’s actions have inhibited immigrants’ participation in our criminal justice system, as victims, witnesses, and defendants. Arrests by ICE at courthouses and ICE’s treatment of immigrants in their custody have intimidated immigrants and prevented them from exercising their constitutional rights. As a result, victims are afraid to appear in court to seek relief or protection, and witnesses are reluctant to testify. [2]

Two lawsuits have been filed asking the Massachusetts Supreme Judicial Court to bar ICE from making arrests in or near courthouses. Such arrests are happening on a weekly basis and have occurred at 24 courthouses around the state.

Furthermore, ICE has refused, even when ordered by a state judge, to bring immigrants in its custody to criminal proceedings where they are a defendant, a clear violation of a defendant’s rights. Because of ICE’s refusal to transport immigrants in its custody to court hearings or to meet court-ordered obligations, these immigrants have been denied access to our justice system, have been put in violation of their terms of probation, and have failed to receive court-ordered drug and mental health treatment.

These actions by ICE fit the definition of terrorism: the unlawful use or threat of violence or intimidation, especially against civilians, in the pursuit of political aims.

  • ICE’s actions are clearly unlawful,
  • Its actions and the threat of them clearly intimidate civilians, and
  • The reason the Trump Administration is engaging in these actions is clearly the pursuit of political aims – to win the political support of a certain segment of the population and to meet campaign promises – because these actions don’t achieve meaningful policy goals in any significant or effective way.

[1]      Hing, J., 3/15/18, “For Trump, cruelty is the point,” The Nation (https://www.thenation.com/article/for-trump-cruelty-is-the-point/)

[2]      Johnson, A., 3/16/18, “ICE arrests at courts decried,” The Boston Globe

CRUELTY BY ICE

The Immigration and Customs Enforcement (ICE) agency’s practice of detaining and often deporting undocumented immigrants who are leading up-standing, productive lives and have no criminal record is disturbing. However, even more disturbing is ICE’s practice of separating law abiding – and in some cases asylum-seeking – parents from their children, including quite young children.

In one case, four months ago, a mother and her seven-year-old daughter from the Congo, fleeing threats to their safety, crossed the U.S.-Mexico border near San Diego and asked for asylum. Four days later, the mother was in a Southern California detention center, while her seven-year-old daughter was sent, without explanation, to a children’s detention center in Chicago. The government has filed no charges against them, nor alleged that they pose any kind of threat, nor contended that the mother was in any way unfit to take care of her young daughter. They have been permitted only infrequent phone calls and the girl is reported to have sobbed throughout each of the calls.

In another case, a Brazilian woman with a 14-year-old son sought asylum back in August. She was detained in Texas while her son was taken to a detention center in Chicago. In a third example, in November, a 30-year-old El Salvadoran arrived at the U.S. border with his infant son and asked for asylum. After a short detention, ICE officials took the 1-year-old son away from his father. The father remained in detention and for weeks he had no idea where his son had been taken. His son was subsequently released to the mother, while the father remained in custody. [1] This practice is not only inhumane, it violates US and international laws on the treatment of asylum-seekers.

The ACLU has filed a class-action lawsuit to compel ICE to reunite hundreds of parents and children, and to enjoin it from continuing the practice of separating children and parents. [2] No formal policy of separating parents from their children has been announced. However, administration officials have said that efforts are made to deter people from trying to enter the US and that one strategy is to separate children from their parents.

A complaint against the practice of separating children from parents has been filed with the Department of Homeland Security’s Inspector General. [3] Separating children from their parents when there are no allegations of abuse or neglect or of parent criminality is cruel and unusual punishment. It is also traumatizing for children, especially young children, in the best of situations – and these are often families fleeing violence in their home countries, which is likely to have traumatized children already. Further traumatizing these children by separating them from their parents will probably harm these children – and perhaps their parents – for life with symptoms akin to post-traumatic stress disorder. To intentionally do this to any child is unthinkable; it is truly an affront to basic humanity.

Perhaps not quite as horrible, but nonetheless inhumane, is the detention, and deportation in some cases, of undocumented parents who are here in the US pursuing legalization, who have no criminal record, and who are long-time, productive members of their communities. For example, in January, a Providence mother of a 2-year-old and a 4-year-old was detained when she met with immigration officials to pursue permanent resident status because she is married to a US citizen – the father of her two children. Totally without warning, she was detained for nearly a month. This 30-year-old mother has been in the US since she was brought here by her parents when she was 3 years old. [4]

In the last year, at least 14 immigrants in Massachusetts, Connecticut, and Rhode Island, who had applied for permanent residency, i.e., they were playing by the rules and were doing the right thing, have been detained. They are typically detained when they come to ICE for a scheduled appointment to pursue their residency application. Many are married to US citizens, which has traditionally been a common, straight-forward path to being granted permanent resident status. Arresting undocumented immigrants who are working with authorities on obtaining legal status is a new and aggressive tactic by ICE.

We must stop ICE’s inhumane separation of children from their parents. This practice traumatizes these children and has no humane rationale. Please sign this petition to the Secretary of Homeland Security, Kirstjen Nielsen, and ask her to stop ICE’s practice of separating children and parents: https://action.momsrising.org/sign/Separating_Children_from_Mothers_at_the_Border_Inhumane/?akid=10559.2198800.aG1I1P&t=19

I also urge you to call, email, and / or write your federal elected officials and ask them to do everything they can to stop ICE’s inhumane practice of separating children from their parents. You can find your US Representative’s name and contact information at: http://www.house.gov/representatives/find/. You can find your US Senators’ names and contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Harris, L.M., 12/21/17, “Our government must stop separating asylum-seeking families,” USA Today

[2]      Merchant, N., 3/10/18, “ACLU files suit over family breakups,” The Boston Globe from the Associated Press

[3]      LA Times Editorial Board, 3/5/18, “Separating children and parents at the border is cruel and unnecessary,” The LA Times

[4]      Cramer, M., 3/12/18, “Detained and bewildered,” The Boston Globe

GUN VIOLENCE PREVENTION POLICY CHANGES NOW!

In the wake of the tragic gun violence at a high school in Florida, surviving students have inspired the nation with their commitment to reduce gun violence in the US. They and many others are pushing states and the federal government to enact laws that will reduce gun violence. (See my previous post for ways to support this movement.)

Here are examples of policy changes that we should make at the state and federal levels to reduce gun violence. If you have any doubts about whether these policies would make a difference, please see the data on the results of the ban on semi-automatic weapons that Australia instituted after a mass shooting there in 1996 that are in this previous blog post. (Those statistics are from 2013 and I’m sure they would present an even more dramatic contrast today.)

  • Ban the sale of semi-automatic weapons. There was a federal ban on these weapons from 1994 to 2004, but Congress let it expire and has refused to re-enact it. Eight states have bans on semi-automatic weapons. At the very least, we should raise the age for purchasing a semi-automatic weapon from 18 to 21, which is the current requirement under federal law for the purchase of a handgun.
  • Ban the sale of high capacity magazines that often hold 30 bullets. Six or ten bullets are plenty for any reasonable civilian use. Again, at the very least, we should raise the age for purchasing a high capacity magazine from 18 to 21.
  • Institute a waiting period for the purchase of any gun. Florida, like many states, has a three-day waiting period (sometimes referred to as a cooling off period) for the purchase of a handgun but not for a semi-automatic weapon.
  • Institute a strong, effective background check requirement for ALL gun purchases.
  • Limit the number of guns and amount of ammunition an individual can buy in a given time period, such as a week or a month. At a minimum, require gun sellers to report to law enforcement any sales of multiple guns or large amounts of ammunition to a single buyer within a five-day (or longer) period. This is currently required for handguns but not for semi-automatic weapons or ammunition.
  • Enact Extreme Risk Protection Order (ERPO) laws that allow family members to petition a judge for an order to confiscate an individual’s firearms when it is determined that the individual’s access to a gun poses an extreme risk to him or herself or others.
  • Enact reasonable requirements for obtaining a gun, such as a license and training. We require a license and training to drive a car; there’s no reason we shouldn’t for the owning of a gun. Furthermore, we could require gun owners to have insurance, as we do car owners, to protect themselves and others from injuries, deaths, or property damage that occur due to gun usage.
  • Require gun owners to report to law enforcement the loss or theft of a gun.
  • Any gun or ammunition seller who violates the law and allows an individual to obtain a gun or ammunition illegally should be treated as an accomplice under criminal and civil law to murder or any other crimes committed with the gun or ammunition.

Gun violence, and the deaths and injuries that result, is a public health epidemic in the US. Keeping guns from killing our children and others at the rate of 30,000 deaths a year is ultimately about the right to life. This is not about balancing gun rights with other rights; it’s about keeping our children, our teachers, and everyone else safe and alive.

Clearly, all these policy changes aren’t going to happen quickly or all at once. But we must start taking meaningful steps to reduce gun violence.

I urge you to call, email, and / or write your federal and state elected officials and demand reasonable gun laws that will prevent future gun massacres. We must insist that our elected officials pass sensible gun violence prevention laws or, if they won’t, we must elect other candidates at the state and national level who will. You can find your US Representative’s name and contact information at: http://www.house.gov/representatives/find/. You can find your US Senators’ names and contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm.

I also encourage you to participate in on-line or local actions to express your support for the students from Parkland and the movement they have inspired, as well as for common-sense gun violence prevention laws. It’s past time to take serious steps to reduce gun deaths and violence, as well as hopefully, eventually, to eliminate the occurrence of gun massacres – as Australia successfully did in 1996.

GUN VIOLENCE PREVENTION NOW!

In the wake of the latest gun violence tragedy, surviving students from the high school in Florida where the incident occurred have inspired the nation with their commitment to reduce gun violence in the US. Here are four things we can all do to work to achieve that goal:

  • Support the students from Marjory Stoneman Douglas High School in Parkland, FL, and others who join their movement to change laws in states and federally on access to guns, particularly semi-automatic weapons and magazines with dozens of bullets.
  • Support organizations that are fighting to reduce gun violence.
  • Know how to refute the arguments of the National Rifle Association (NRA) and others that are opposing efforts to reduce gun violence.
  • Know what meaningful policy changes should and need to be made to reduce gun violence.

If you’d like some inspiration to act, please watch this short video of the new anthem for gun control written and performed by Stoneman Douglas High School students in response to the shooting at their school: https://www.facebook.com/justicechoir/videos/1677544419005142/.

Ways to support these students and the movement they have inspired are evolving, but here are three actions you can participate in or support in other ways:

  • Women’s March Youth EMPOWER is calling for students, teachers, school administrators, parents, and allies to take part in a #NationalSchoolWalkout for 17 minutes at 10 am on Wednesday, March 14, to protest inaction on gun violence prevention. More information is at: https://www.actionnetwork.org/event_campaigns/enough-national-school-walkout
  • Students from Stoneman Douglas High School are calling for people to join them on Saturday, March 24, in Washington, DC, and cities across the country for the March for Our Lives to demand legislation to stop gun violence. More information is at: https://www.marchforourlives.com/
  • Public rallies will be held nationwide on Friday, April 20, as part of a National Day of Action to Prevent Gun Violence in Schools. More information is at: https://networkforpubliceducation.org/national-day-action/

There are a number of organizations that you can join or support with contributions or volunteer activities that are on the front lines in working to prevent gun violence. Here are three major ones:

The NRA and others who oppose meaningful steps to reduce gun violence have crafted their arguments and media strategy over many years. Here are some responses to their arguments:

  • No civilian needs to have or should be allowed to have a semi-automatic weapon or a magazine with more than 6 bullets. Semi-automatic weapons are military weapons that are designed to kill human beings and to kill as many as possible as quickly as possible. There is absolutely no need for anyone other than law enforcement and military personnel to have one.
  • Some people will kill other people. But guns mean those people will kill many more people. And semi-automatic weapons and magazines that hold dozens of bullets mean they can kill LOTS of people very quickly.
  • Mental illness is NOT the issue; guns are. Every country has individuals with mental illness, but no other country has anywhere near the level of gun violence that we have in the US because no other country allows the level of civilian gun ownership that the US does. The great majority of people who experience mental illness – and there are many who experience some mental illness at some point in their lives – are not violent. Moreover, a violent person without a gun can do very limited harm. (See the bullet above.) By the way, the Republicans in Congress and President Trump in the budget he presented just days ago significantly cut federal spending to address mental illness. Furthermore, by reducing access to health care by cutting Medicaid and the Affordable Care Act, fewer people will have access to mental health services.
  • The Second Amendment to the US Constitution states: “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.” Beginning in the 1970s, the gun manufacturers, along with the NRA, undertook an extensive campaign to get activist judges to interpret the Second Amendment as giving civilian individuals the “right” to possess guns. The goal was to allow the gun industry to sell more guns and ammunition and, therefore, to make much bigger profits. Keep in mind that at the time the amendment was written, the arms referred to were muzzle loading weapons that took many seconds to reload, not weapons that fired multiple bullets per second. This individual “right” to have a gun represented a major change in interpretation of the Second Amendment, which for the first 200 years of this country’s existence was understood to apply only to arms for military purposes. Furthermore, until this re-interpretation, the power of state and local governments to regulate gun ownership had NOT been viewed as limited whatsoever by the Second Amendment. [1] The efforts to change the interpretation of the Second Amendment were so successful that by 1991 retired US Supreme Court Chief Justice Warren Burger stated that the Second Amendment “has been the subject of 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.”
  • Every serious piece of research on the presence of a gun in a home or elsewhere has found that the presence of a gun increases the chance of death or injury from gun usage. Having a gun does not make you safer, it makes it more likely that you, a family member, or someone else will be injured or killed by gun violence, accidental or intentional. (Some statistics on this are in my earlier blog post here.) (In response to this research, the gun industry and the NRA got a federal law passed that effectively bans federal agencies from doing or funding research on gun violence.)

I urge you to support the emerging movement to reduce gun violence through common-sense guns laws. Please participate in or provide financial or other support to one (or more) of the events and organizations listed above. In my next post, I’ll list some of the common-sense policies that should be enacted and would reduce gun violence.

[1]      Stevens, J.P., 4/11/14, “The five extra words that can fix the Second Amendment,” The Washington Post (The author, John Paul Stevens, was a judge on the US Supreme Court from 1975 to 2010.)

 

TAX CUTS FOR THE WEALTHY DON’T STIMULATE THE ECONOMY

Tax cuts for wealthy individuals and corporations don’t stimulate the economy, grow jobs and wages, or increase government revenue. The evidence for this comes not only from national experience under Presidents Reagan and G. W. Bush, but also from the recent, dramatic events in Kansas.

In 2012, in an effort led by newly elected Governor Sam Brownback, Kansas passed a tax bill like the one recently enacted by President Trump and the Republicans in Congress. The Kansas law slashed income tax rates (especially for the wealthy) and for privately-held companies, just like the recently enacted federal tax law. It also cut tax credits that helped low and moderate-income families, just like the recent federal tax law.

Governor Brownback and his supporters in the Kansas legislature promised that Kansas’s economy would boom and state tax revenue would grow as a result, just like the promises President Trump and the Republicans in Congress are making. [1]

In the almost six years since Kansas’s tax cuts, it has had one of the worst performing state economies in the country, the state’s tax revenues have been falling by hundreds of millions of dollars each year, and Kansas ranks among the top ten states for the percentage of people moving out-of-state. The big tax cut for privately-held companies appears to have fueled more tax evasion than job creation.

To deal with the dramatic decline in revenue for the state’s $6 billion budget, Governor Brownback and Republican Legislature have:

  • Cut hundreds of millions of dollars from spending, putting public schools (see more below) and other service providers into crisis
  • Cut payment rates for health care services, putting many of the state’s hospitals into crisis
  • Cut state administrative capacity, resulting in residents experience lengthy delays and waitlists when accessing state services (e.g., the delays in approving seniors’ eligibility for Medicaid so they could go into nursing homes became so bad that the federal government charged Kansas with violating federal law)
  • Increased regressive taxes, such as the sales tax and alcohol and tobacco taxes
  • Diverted over $100 million from the state’s highway fund and $40 million from the required contribution to the state employees’ retirement fund in 2015 alone
  • Increased state debt by over $1 billion, which, along with other fiscal issues, led to the downgrading of Kansas’s bond rating

The cuts in public school funding led to a lawsuit where the state’s Supreme Court ruled in 2015 that the state had to spend hundreds of millions of dollars more on K-12 public education. A previous, decades-long dispute between local school districts and the state over the levels and allocation of state funding for public education had been settled in 2006. That settlement required the state to increase funding for public education. However, the Great Recession of 2008 and then Governor Brownback’s tax cutting in 2012 had reduced state revenue so dramatically that, despite the settlement, the state cut funding for public schools by 16.5% (one-sixth) between 2008 and 2013.

In 2015, as state revenue continued its dramatic decline due to the tax cuts, Brownback cut another $28 million from K-12 public education funding. Two school districts were forced to end their school years early because they ran out of money. The cuts in state school funding disproportionately hurt low-income and urban school districts that couldn’t make up for lost state funding with increased local funding.

Some of the school districts sued and in 2015 the state’s Supreme Court ruled that the state had to provide $40 million immediately as a first step in correcting the under-funding of public education. In a further ruling in 2017, the courts required the state to come up with over $700 million for public education over the next several years.

In the 2016 elections, while Trump was winning 57% of the presidential vote in Kansas, Democrats and moderate Republicans were winning state legislative races due to concerns about the public schools and other issues. Facing a nearly $1 billion shortfall in the state’s two-year budget and a court requirement to significantly increase funding for K-12 education, the legislature voted in February 2017 to repeal most of the 2012 income tax cuts for individuals and privately held companies. Governor Brownback vetoed the bill and the legislature came up just short of overriding the veto.

In June 2017, the legislature again passed a repeal of most of the 2012 income tax cuts. Governor Brownback again vetoed the bill. This time the legislature overrode the veto by one vote in the Senate and four votes in the House. Although it will take Kansas many years to recover from the damage that has been done to the state’s schools, health care system, and economy, the state’s bond rating was lifted a step just two days later.

There are striking similarities between Governor Brownback’s tax cuts and those of President Trump and the congressional Republicans. There are also striking similarities in their promises of economic growth and increased government revenue. However, the great majority of economists and other knowledgeable observers believe the results of the federal tax cuts are very likely to be similar to Kansas’s experiences.

The major difference is that the federal government does not have to have a balanced budget. So, along with the recently passed budget bill, the result in the short-term will be federal budget deficits of roughly $1 trillion per year. This is not sustainable, financially or politically. Sooner or later, significant federal spending cuts and/or tax increases are highly likely to be necessary.

The only questions, in both Kansas and nationally, are how much damage will be done by the tax cuts and how long will it take to recover from them. Note that some individuals in Kansas, such as children whose schooling was compromised or people whose health was compromised by lack of access to health care or other services, will never recover all that they have lost. The harm on a national level will certainly be greater in scale – more people will be harmed. Only time will tell how great and long lasting the harm will be for individuals and for our society.

[1]      Miller, J., 6/28/17, “Kansas, Sam Brownback, and the trickle-down implosion,” The American Prospect (http://prospect.org/article/kansas-sam-brownback-and-trickle-down-implosion-0)

CORPORATE MEDIA THREATEN OUR DEMOCRACY Part 2

Senator Bernie Sanders’ book, Our Revolution: A Future to Believe In  [1] includes a chapter titled, Corporate Media and the Threat to Our Democracy. I summarized its information on the six huge media corporations that control 90% of what we see, hear, and read in my previous post.

Senator Sanders experienced firsthand the control and power the six huge media corporations have when he ran for President. Certainly initially, and probably throughout the whole campaign, his candidacy received less coverage than other candidates. Perhaps this was because many of the issues he raised and discussed were ones that made corporate executives uncomfortable. Senator Sanders summarized his experience as follows: “as a general rule of thumb, the more important an issue is to large numbers of working people, the less interesting it is to the corporate media. … Further, issues being pushed by the top 1 percent get a lot of attention.” (page 421)

As an example, Sanders cites the coverage of the assertion that Social Security’s benefits needed to be cut because, supposedly, money to pay them would soon run out. The financial challenges facing Social Security were exaggerated and solutions other than cutting benefits were largely ignored by the corporate media. Sanders and others organized a broad coalition in opposition to Social Security cuts that included AARP and virtually every other seniors’ organization in the country, the American Legion and every major veterans’ group, the AFL-CIO representing 13 million workers, the largest organizations in the country representing people with disabilities, the National Organization of Women (NOW), and others.

A press conference opposing cuts to Social Security benefits was held by this broad coalition, which represented tens of millions of Americans, along with U.S. Senators and Representatives. It received almost no coverage from the corporate media. Similarly, throughout the presidential campaign, many issues that Sanders raised got little to no coverage from the big media corporations, including economic inequality, poverty, Native American issues, the housing crisis, climate change, fracking, and a single-payer health care system. On the other hand, the topics of how much money each candidate had raised, when Sanders was going to formally announce his candidacy, and when he was going to drop out and endorse Clinton received lots of attention from the corporate media.

The corporate media view politics and elections as entertainment and a way to capture attention (and therefore revenue). They do not take responsibility for helping to build an informed American electorate. They are large corporations whose goal is to make as much money as they can for their shareholders and executives.

These media corporations rely on billions of dollars in advertising from the pharmaceutical, auto, financial, health insurance, and fossil fuel industries (among others). This advertising revenue presents conflicts of interest for the media corporations’ executives’ decisions on the reporting of news. Viewers and readers would be naïve to think that news coverage – or lack of coverage – is not influenced by the interests of large advertisers.

The media corporations have a perspective on what is important and worthy of coverage, and what is not. Few of the journalists who work for them cross the boundaries of the corporate perspective. As Senator Sanders writes:

“Over the course of my political life [roughly 45 years] I cannot recall a mainstream journalist coming up to me and asking what I was going to do to end the scourge of poverty in this country, or how I was going to combat the disgraceful level of income and wealth inequality, or what role I would play in ending the influence of big money in politics. Those, and many similar issues, are just not what the corporate media considers important. And my strong guess is that if by mistake, or in some state of confusion, a reporter for the corporate media started asking those types of questions, he or she would not last long with the company.” (page 436)

Concentrated, corporate ownership of the media limits the points of view and the information Americans receive. It limits cross-cultural and cross-class awareness and knowledge. It tends to break us into factions rather than building community in our diverse country. This is not good for democracy.

Furthermore, mergers are in various stages of consideration that could reduce the six corporate media giants to only three. Therefore, media concentration is likely to increase further in the near future, unless we and regulatory government agencies take a stand against it.

Meanwhile, the Federal Communications Commission (FCC) has eliminated net neutrality, which gives more market place power to the big media corporations through their control of Internet access.

I encourage you to take action to stop mergers among the giant media corporations and to work to ensure net neutrality. If you want more information about these issues, including how you can take action on them, go to freepress.net. There, you can join with hundreds of thousands of other engaged Americans to fight to save the free and open internet, curb runaway media consolidation, protect press freedom, and ensure diverse voices are represented in our media.

You can also review my earlier post, Our failing mainstream media, that encourages the support of not-for-profit, public or consumer-funded media as a better model for a democracy than the current giant, for-profit, advertising-funded corporations. It identifies six broadcast, on-line, and print media outlets you can patronize and support as good sources of information and good alternatives to the corporate media.

[1]      Sanders, B., 2016, Our Revolution: A Future to Believe In. St. Martin’s Press, NY, NY.

CORPORATE MEDIA THREATEN OUR DEMOCRACY Part 1

I’ve just finished reading Senator Bernie Sanders’ book, Our Revolution: A Future to Believe In. [1] The first part (6 chapters) is about the campaign and is interesting if you’re a political junkie.

The second part (10 chapters) is the policy platform that was the basis for his run for the presidency. It includes chapters on health care, education, climate change, criminal justice, immigration, the middle class, an economy that works for everyone, and reclaiming our democracy. These chapters are interesting if you’re interested in any of these issues or in knowing how we can get back to a society that is fair and just and provides equal opportunity for all.

The chapter that had the biggest effect on me was the one titled, Corporate Media and the Threat to Our Democracy. This chapter identifies the six huge corporations that control 90% of what we see, hear, and read. Combined, they have over $275 billion in revenues and are controlled by 15 billionaires. (In 1983, 50 corporations controlled 90% of our media and that was a high level of concentration.) Today’s 6 media corporations, and some key information about them, are:

  • Comcast (Revenue: $56 billion in 2011) It owns NBC, Telemundo, USA Network, New England Cable News, and a portion of A&E, the History Channel, Lifetime, PBS KIDS Sprout, and Hulu, as well as much, much more. It wants to merge with Time Warner (see below).
  • Disney (Revenue: $40 billion in 2011) It owns ABC; ESPN; Marvel; 277 radio stations; music and book publishers; Touchstone, Miramax, and Pixar production companies; and majority stakes in A&E, the History Channel, and Lifetime; as well as much, much more.
  • News Corp (Revenue: $33 billion in 2011) It owns Fox, National Geographic, Dow Jones (which includes The Wall Street Journal, Barron’s, and Smart Money), the New York Post, TV Guide, the book publisher HarperCollins, Blue Sky Studios, and a portion of ESPN and Hulu, as well as much, much more.
  • Time Warner (Revenue: $29 billion in 2011) It owns CNN, HBO, TMZ, TBS, TNT, Cartoon Network, 22 magazines (including Time, People, Sports Illustrated, Life, Entertainment Weekly, Fortune, etc.), and much, much more. It wants to merge with Comcast (see above).
  • Viacom (Revenue $15 billion) It owns MTV, Nickelodeon, Comedy Central, Spike TV, BET, Paramount Pictures, and over 160 cable networks that reach over 600 million people, as well as much, much more.
  • CBS (Revenue $14 billion) It owns Showtime; Smithsonian; Simon & Schuster, Scribner, and Free Press book publishing; 130 radio stations; and much, much more.

Currently, Comcast and Time Warner, two of these corporate media giants, are proposing to merge, while two others, Disney and News Corp, are discussing a possible merger, and some shareholders are pressing the final two, CBS and Viacom, to merge. Therefore, media concentration is likely to increase further in the near future, unless we and regulatory government agencies take a stand against it.

These media giants play a huge role in shaping public consciousness and knowledge, and, therefore, affect political beliefs, the public’s understanding (or lack thereof) of policy issues, and election outcomes. Note that there are multiple joint ventures among these media giants, which further limit the variety of content available and provide opportunities for collusion.

Realistically, freedom of the press is accessible only to those who own a press, a radio or TV station, or a cable network, or who produce content distributed by these media outlets. Concentrated ownership of our news media means that a very few human beings, who have significant conflicts of interest (e.g., with advertising revenue), make the decisions about what news is presented and how. More importantly, they make decisions about what is NOT covered or reported.

In my next post, I’ll share some examples that Sanders gives of what’s covered and not covered by the corporate media and why. I’ll also identify some opportunities for action on the power of the giant media corporations and their threat to our democracy.

[1]      Sanders, B., 2016, Our Revolution: A Future to Believe In. St. Martin’s Press, NY, NY.

FIGHTING TAX AVOIDANCE BY THE WEALTHY

A recent Op Ed in the Boston Globe caught my attention and I couldn’t resist sharing it. If you want to understand how wealthy individuals and corporations use off-shore tax havens to avoid paying their fair share of taxes and what we can do about it, this article provides answers. [1]

  • The best estimate is that 11.5% of personal wealth (i.e., $8.7 trillion), globally, is stashed in off-shore tax havens.
  • This costs the U.S. government an estimated $32 billion a year in lost tax revenue from individuals. (Other countries’ governments probably lose $140 billion a year in tax revenue.)
  • In addition, corporations dodge about $70 billion a year in U.S. taxes by using off-shore tax havens. This represents about 20% (one-fifth) of what the U.S. does collect in corporate income taxes each year. (Other countries’ governments probably lose $60 billion a year in tax revenue.)
  • The roughly $100 billion per year the U.S. is losing to off-shore tax dodging is what the federal government spends on Food Stamps, other nutrition programs (such as school lunches), the Children’s Health Insurance Program (CHIP), Head Start, child care subsidies, and welfare COMBINED.
  • Taxing corporate income based on what is called formulary apportionment would stop this tax avoidance. Under this approach, a corporation would pay U.S. taxes based on the portion of its sales that are in the U.S., regardless of any accounting gimmicks or other strategies that made it look like the income from those sales was in another country. This tax approach is in wide use today; many states use it to calculate state corporate income taxes. It is a tax approach that has been used since the days of multi-state railroad construction in the 1800s.
  • Stopping individuals from using offshore accounts to avoid paying taxes would require international cooperation. Today, the IRS has a comprehensive system for tracking earned income. Even if you move from state to state or out of the country, the income you earn is reported to the IRS and you pay income taxes based on your total income. States with income taxes track income that you earn out-of-state and require you to pay state income tax on it. A similar approach should be applied to tracking other kinds of income and ownership of financial securities or assets that produce income. The U.S. passed the Foreign Account Tax Compliance Act in 2010 that requires foreign banks, including the notoriously secretive Swiss and Cayman Island banks, to share information with the IRS on accounts held by American clients. This is a starting point for the international cooperation needed to reduce tax dodging by the wealthy that hurts the U.S. and many other countries.

Tax avoidance by the wealthy contributes to the astronomical and growing inequality of wealth and income. It also means that everyone else must pay more in taxes to make up for the lost taxes when wealthy individuals and corporations don’t pay their fair share.

[1]      Scharfenberg, D., 1/21/18, “A world without tax havens,” The Boston Globe

FIGHTING THE OPIOID EPIDEMIC

A recent Op Ed in the Boston Globe caught my attention and I couldn’t resist sharing. If you want to know what we can and should do to truly fight the opioid epidemic, it provides the answers.

Here’s a summary of its recommendations for fighting the opioid epidemic: [1]

  • To seriously tackle the opioid epidemic, the federal government needs to spend $4 – $5 billion a year on the effort for the next 10 years.
  • Laws and regulations at the state and federal levels must ensure that health insurance covers addiction treatment, mental health services, and other services that will reduce opioid addiction and successfully treat those who experience addiction.
  • Medicaid, the Affordable Care Act (aka Obama Care), and perhaps other initiatives need to ensure that as many Americans as possible have health insurance to pay for treatment.
  • Through oversight and research, addiction treatment must be as effective as possible.
  • Pharmaceutical corporations must be held accountable, financially and otherwise, for their significant role in creating the opioid addiction crisis. They should be required to make substantial contributions to treatment costs, including making addiction-related medications available and affordable.
  • Federal laws and regulations should prohibit direct-to-consumer marketing of prescription drugs. Only one other country in the world allows this and it is a relatively recent phenomenon in the U.S. The big pharmaceutical corporations spend over $5 billion a year advertising drugs, increasing sales but leading to inappropriate use and overuse of drugs.
  • Everyone, in the public sector and in private life, should address addiction as a health and public health problem, not a criminal justice issue, and should work to de-stigmatize it.
  • The federal government needs to increase the effectiveness of efforts to reduce the smuggling of opioids into the country, including diplomatic efforts with Mexico and China, particularly focused on stopping the flow of Fentanyl into the U.S.

[1]      Tamasi, R.V., 1/22/18, “How to fight the opioid epidemic,” The Boston Globe

THE GREED OF THE PHARMACEUTICAL INDUSTRY Part 2

The pharmaceutical industry can engage in the unethical and sometimes illegal practices that I’ve highlighted in previous posts [1] because they have:

  • Monopolistic power in the market place due to limited competition,
  • An absence of government regulation, and
  • Political power to block or weaken regulation and oversight due to campaign spending, lobbying, and the revolving door of personnel moving between these corporations and government regulatory positions.

The result is that the greed of the executives of these corporations is unconstrained by market place competition, government regulations, their ethics, or, in some cases, even legality. The examples presented in my previous posts have not been isolated incidents or past bad behavior that has been rectified. This behavior by the pharmaceutical corporations is an on-going pattern.

A 2010 study found that the U.S. prices of prescription drugs were, on average, double what those same drugs cost in Canada, Australia, and the United Kingdom. And things have only gotten worse since then. As a result, one out of five Americans was unable to afford medicines prescribed by their doctors, while the five largest drug corporations had profits of a combined $50 billion in 2015. As Bernie Sanders wrote, “people go to the doctor because they are sick, they get a diagnosis from their doctor, but they can’t afford the treatment. Then they get sicker. Does this make any sense to anyone?” [2]

As part of their price gouging strategies, drug companies will go to great lengths to block competition. For example, Allergan corporation has transferred six drug patents to the St. Regis Mohawk Indian tribe. Because the tribe is a sovereign entity, it is immune from a type of challenge to drug patents that low-cost generic drug makers sometimes use to get the right to produce a generic version of a drug. It is expected that this will become a popular strategy to delay the availability of cheaper, generic versions of drugs, unless Congress intervenes and changes the law. Allergan will pay the tribe only $15 million a year under the deal for the right to continue to sell the drugs, which had $1.4 billion in sales last year.

For a different drug, Allergan tried to avoid competition from a generic version by pulling the drug from the market and forcing patients to buy a new, more expensive version. This move was blocked by a federal appeals court. By the way, Allergan has also moved its headquarters to Ireland to avoid U.S. taxes. [3]

There is no reason to believe that the behavior of pharmaceutical corporations is going to change on its own. Clearly, the free market and competition are not going to stop it. Public outrage, negative publicity, and criticism from elected officials may blunt the worst of the behavior, but it will not stop it.

The behavior of the pharmaceutical industry (which is evident in other industries like the financial industry as well) is not the way the economy should work in a democracy. This behavior is that of a corporatocracy, where large corporations are in control of both our (supposedly free) market place and our (supposedly democratic) government.

Only strong legislation from Congress and strong leadership from regulatory agencies in the executive branch of government will stop these harmful and greedy business practices of the pharmaceutical corporations (and other large corporations). The opioid crisis and the fueling of it by illegal and irresponsible marketing of narcotic prescription drugs has made this absolutely clear.

I urge you to contact your U.S. Representative and Senators and ask them to:

  • Support strong legislation to regulate the pharmaceutical industry,
  • Only confirm executive branch appointees (include the Secretary of Health and Human Services) who have a clear track record of supporting strong regulation of the drug corporations, including their drug pricing and marketing of narcotics, and
  • Pass legislation that not only allows, but requires, Medicare and insurance companies participating in the Affordable Care Act to negotiate drug prices with suppliers to receive the best price based on what other countries pay. A good place to start would be to ask them if they support the Medicare Drug Price Negotiation Act of 2017, which would allow the government to negotiate directly with drug companies to lower drug prices for Medicare beneficiaries, much like the Veterans Health Administration and Medicaid do today.

As we approach the Congressional and state level elections of 2018, I encourage you to scrutinize and ask about candidates’ positions on these issues. Then we can elect candidates who support strong regulation of drug corporations, who will take meaningful steps to control drug prices, and who will seriously tackle the opioid crisis and the pharmaceutical industry practices that have led to it.

 

[1]      You can go to any of the blog posts on my site and click on the categories in the right hand column to find other posts on corporate behavior or corporate power and influence to read more about unethical and illegal practices by large corporations.

[2]      Sanders, B., 2016, “Our revolution: A future to believe in,” St. Martin’s Press, NY, NY. Page 327.

[3]      Silverman, E., 9/19/17, “This CEO’s latest move is raiding eyebrows,” The Boston Globe

THE GREED OF THE PHARMACEUTICAL INDUSTRY Part 1

The unconstrained greed of pharmaceutical corporations is abundantly clear on multiple fronts:

  • Huge price increases on existing drugs with no reasonable justification (See my previous posts on this here and here.)
  • Inhibiting competition however possible (See my previous posts that include this topic here and here.)
  • Blocking regulation and oversight (See my previous post here.)
  • Selling and distributing narcotics that are clearly being diverted to the black market (See my previous posts on this here, here, and here.)

Despite Trump’s campaign rhetoric about bringing down the cost of drugs, his administration has not taken any significant steps to make drugs more affordable. Roughly 45 million Americans don’t buy drugs that are prescribed for them because they can’t afford them.

President Trump has nominated Alex Azar to be Secretary of Health and Human Services. Azar was the CEO of the drug corporation Eli Lilly when it increased the price of an insulin product from $74 to $269. In Sweden, the same medicine is sold for the (still profitable) price of $18.38. Insulin is the life-saving drug needed by the 30 million Americans with diabetes. [1]

The production of insulin is effectively controlled by a cartel of three drug corporations, Eli Lilly, Novo Nordisk, and Sanofi, that produce more than 90% of the insulin products in the world. Because of the inflated prices in the U.S., the typical American with Type 1 diabetes spends about $571 each month on insulin. Many can’t afford the full amount they need, so they risk serious health consequences by stretching their supply and under-medicating their diabetes. Some die as a result. Worldwide, the leading cause of death for a child with Type 1 diabetes is lack of insulin.

The pharmaceutical corporations’ typical response to criticism of drug price increases is that they need the increases to pay for research and development (R&D). However, this is simply not true. [2] Insulin, for example, was developed at a publicly funded lab at the University of Toronto in 1921. Eli Lilly was a small company when it signed an agreement with the University for the right to sell insulin in 1922. Clearly, greed, not R&D costs, is fueling the insulin price increases.

Today, the U.S. National Institute of Health (NIH) annually spends $34 billion to fund university research. When researchers develop new drugs, corporate drug manufacturers typically purchase the rights to them, tweak them, patent them, and then market them to maximize their profits. The U.S. needs to legislate a new, public health-focused drug licensing system that prioritizes access and affordability, along with innovation, instead of profit.

Another example of price gouging by drug corporations comes from the response to the opioid crisis and the increased demand for the drug naloxone, the antidote for a narcotic overdose. With over 60,000 Americans dying of drug overdoses each year, emergency responders, not-for-profit human service organizations, and family members want to have naloxone readily available to save lives. However, the drug manufacturers have responded by jacking up the prices of naloxone and its various delivery systems. Kaleo corporation has raised the price of its easy-to-use, naloxone auto-injector from $690 in 2014 to $4,500 in 2016. Amphastar Pharmaceuticals has raised its wholesale price for naloxone from $20 to $40. Adapt Pharma’s new Narcan nasal spray came on the market in 2015 at $150. These prices and the opioid crisis have increased the drug corporations’ revenue from sales of naloxone from $12 million in 2011 to $274 million in 2016. Economics, specifically economies of scale, would suggest that the price should be going down with increased demand, not up.

As prices for naloxone have risen, first responders and community-based non-profits who provide services to people with drug problems, who are on the front-lines of the opioid crisis, are finding that their tight budgets do not allow them to have the number of naloxone doses they’d like to have. [3] Naloxone has been available since 1985, although new delivery vehicles, such as a nasal spray, have been developed recently. Public funding through the NIH has contributed to the development of and conducting of clinical trials for some of these products. Only five corporations make naloxone and they have been working to block competitors. One of them is Mylan Pharmaceuticals, infamous for its price gouging with its EpiPen product.

Some drug companies are simply investors, buying the rights to drugs, often life-saving ones, that they believe can deliver big profits, usually through dramatic price increases. A recent example is NextSource, a start-up with no research and development costs. In 2013, it bought the rights to a cancer treatment drug with low demand and therefore a single producer. It was priced at $50 per dose. In three years, NextSource has raised the price to $768 per dose.

Soaring cancer drug costs are driving the cost of treatment well over $100,000 a year in many cases. As a result, some patients delay treatment to figure out how they can get the treatments paid for. A study earlier this year found that 24 cancer drugs had, on average, quadrupled in price over the last 8 years. [4]

In an interesting example of how our corporate media sometimes cover increasing drug prices – putting a positive spin on outrageous corporate behavior – The Boston Globe recently had a big headline on the front page of its Business Section that read “Price hikes on top-selling drugs were a lot smaller this year.” The article began with “Average annual price increases have declined at least four years in a row for 20 of America’s top-selling brand-name prescription drugs.” Nowhere in the article does it mention that the 6.9% increase over the last year is three times the rate of inflation or that over the last 5 years the cost of these drugs is up 66%. On a subsequent page the article does note that “these drugs have increased by an average of 213 percent since their launch, well out-pacing inflation.” It also notes that many of these drugs are very expensive with seven having an average, annual cost per patient of between $59,000 and $92,000. [5]

In my next post, I’ll discuss why the pharmaceutical corporations can get away with this price gouging and what we can do about it.

[1]      Zaitchik, A., 11/28/17, “Beyond the planet of the pharma bros,” The American Prospect (http://prospect.org/article/beyond-planet-pharma-bros)

[2]      Kesselheim, A.S., Avorn, J., & Sarparwari, A., 8/23/16, “The high cost of prescription drugs in the United States: Origins and prospects for reform,” The Journal of the American Medical Association

[3]      Denvir, D., 12/15/17, “These pharmaceutical companies are making a killing off the opioid crisis,” The Nation (https://www.thenation.com/article/these-pharmaceutical-companies-are-making-a-killing-off-the-opioid-crisis/)

[4]      Berr, J., 12/26/17, “Price of 40-year-old cancer drug hiked 1,400% by new owners,” CBS News, MoneyWatch (https://www.cbsnews.com/news/cancer-drug-lomustine-price-hiked-1400-percent-by-new-owners/)

[5]      Robbins, R., 12/29/17, “Price hikes on top-selling drugs were a lot smaller this year,” The Boston Globe

U.S. FAILS TO PROSECUTE PRESCRIPTION OPIOID DISTRIBUTOR

After years of work by U.S. Drug Enforcement Agency (DEA) investigators building a case against a major drug distributor for fraudulently shipping millions of prescription opioid pills, high-ranking lawyers at the DEA and the US Department of Justice (DOJ) recently decided to settle the case and not pursue criminal charges. Instead, the lawyers settled for a $150 million fine (from a corporation with roughly $200 billion per year in revenue) and a temporary suspension of shipments of narcotics from four of its 30 distribution centers. The lenient settlement was agreed to despite the corporation having promised in a 2008 settlement to be diligent in preventing fraudulent shipments of controlled substances. However, rather than improving its oversight of narcotics shipments, its fraudulent shipments increased. [1]

The DEA team had compelling evidence that McKesson Corporation, the fifth largest public company in the U.S., had fulfilled and failed to report suspicious orders for millions of highly addictive painkillers from pharmacies, including Internet pharmacies. The nationwide DEA team, working with U.S. attorney’s offices in 11 states, wanted to fine the corporation over $1 billion and pursue criminal charges against the corporation and perhaps some of its executives. A senior DEA official stated that the corporation could have been put out of business through an indictment or a very large fine.

But when the team turned over the evidence to top lawyers at DEA and DOJ, the lawyers negotiated a settlement with the corporation and never even discussed possible criminal charges. They even allowed McKesson to keep its $31 billion federal government contract to supply drugs to the Veterans’ Administration, federal prisons, and the Indian Health Service.

Meanwhile, a pharmacy owner in a small town in Colorado that McKesson supplied was found guilty of drug trafficking and was sentenced to 15 years in prison. From 2008 (when McKesson had settled the first set of charges) to 2011, McKesson’s shipments of oxycodone (the narcotic drug that is OxyContin) to this small-town pharmacy had increased 15-fold.

The DEA team had convincing evidence that McKesson’s activities had fueled the nationwide opioid drug crisis. The $150 million fine was a slap on the wrist for a $200 billion corporation that paid its top executive $100 million last year, has 76,000 employees, and makes $100 million a week in profits. The DEA team felt insulted, undermined, and was demoralized.

This is another example of a powerful corporation, as well as its senior executives, getting off with a slap on the wrist for significant criminal activity that harmed hundreds of thousands of Americans. Purdue Pharma, the major player in the prescription opioid drug scandal, also has (so far) gotten off with a slap or two on the wrist, despite the deaths of over 200,000 Americans. (See my previous posts on Purdue Pharma here and here.) The Wall St. financial corporations and their executives have also gotten off with slaps on the wrist despite a long trail of criminal activity across many years and many business lines.

One must ask why this is happening today when in the late 1980s, during the savings and loan (S&L) bank scandal, 750 S&Ls were forced into bankruptcy and out-of-business and over 1,000 of their executives went to jail.

Since the 1980s, corporations have grown in size and power, while government regulation and oversight have been weakened. As corporations have grown, they have gained power in the economy and in the halls of government. In the economy, their size has led to monopolistic power, a lack of competition, and, therefore, the power to control prices and make huge profits.

In the halls of government, the deregulation of campaign financing now allows wealthy corporations and individuals (often business executives) to spend hundreds of millions of dollars on candidates’ campaigns for legislative, executive, and judicial branch offices. As a result, elected officials – legislators, governors, presidents, and judges – are indebted to wealthy donors. These wealthy special interests further influence government decision making by spending millions of dollars on lobbying and by having individuals move back and forth between government roles and private sector jobs, in what is referred to as the revolving door. An example of this is that one of McKesson’s lawyers negotiating the settlement with the DEA and DOJ was a former top DEA official.

Therefore, government decisions tend to favor the interests of wealthy corporations and individuals. Examples include the lack of meaningful punishment for serious wrong doing, favorable tax policies, a failure to protect the public from rip offs in the market place, and weak regulation of the safety of consumer products and our air and water.

In this environment of market place power and weak regulation, the greed of large corporations and their executives is unconstrained and ethics, morality, and often legality get pushed aside. The public interest is overwhelmed by the power of wealthy special interests. This power imbalance is exacerbated by the growing inequality of income and wealth.

We need to elect officials who will represent the public interest and not wealthy corporations and individuals. We also need to let our elected officials know that we are watching and that we know when they are doing the bidding of the wealthy interests, such as in the recent tax bill. And we need to hold them accountable by being informed and voting. That alone could create dramatic change in our country if more people did so.

Only 53% of eligible voters voted in the last presidential election. Many of them were understandably voting against the tilt in favor of the wealthy in Washington. However, they were hoodwinked by the promises of a con man who, now that he is in office, is tilting the scales even further in favor of the wealthy.

Hopefully, this election woke people up to the fact that democracy is NOT a spectator sport. We need a broad, informed, and engaged electorate for our democracy to deliver on its promise of government of, by, and for the people.

[1]      Bernstein, L., & Higham, S., 12/17/17, “‘We feel like our system was hijacked’: DEA agents say a huge opioid case ended in a whimper,” The Washington Post

PURDUE PHARMA AND OXYCONTIN CAUSED THE OPIOID EPIDEMIC Part 2

Purdue Pharma, a privately-owned corporation, and its narcotic pain-killer, OxyContin, caused the current opioid epidemic. My previous posts gave an overview of Purdue’s development and marketing of OxyContin, as well as of the complicity of Congress and the Executive Branch in allowing OxyContin to cause the national opioid epidemic.

This post describes Purdue’s efforts to conceal the harm that OxyContin is causing, while continuing to aggressively market – and profit – from it. The most detailed reporting of the role of Purdue and OxyContin in the opioid epidemic that I am aware of is the article that appeared in the October 30th issue of The New Yorker, “The family that built an empire of pain”. [1] This blog post is largely drawn from that article.

OxyContin is a large dose of oxycodone that can be taken all at once due to Purdue’s innovative time release formula, which means that the pain killer’s effect lasts for 12 hours (supposedly).

Purdue claimed that OxyContin’s time release formula made it virtually non-addicting and hard to abuse. However, ironically, the information sheet provided with it basically gave instructions on how to abuse it. The information sheet warned against crushing the pills and then ingesting them. Abusers quickly figured out that snorting the crushed pills gave a heroin-like high. The information sheet also warned against dissolving the OxyContin pills in liquids. Abusers quickly figured out how to dissolve the pills and inject the solution, which was just like shooting heroin.

Soon after OxyContin’s release, signs of abuse were evident in Maine and Appalachia. Purdue’s own sales data indicated that doctors were over-prescribing OxyContin and that some were engaged in writing large numbers of clearly fraudulent prescriptions. Evidence that patients were selling extra pills on the black market also surfaced.

Problems with the use of OxyContin as prescribed also quickly became evident. Some patients were displaying signs of addiction and withdrawal within the 12 hours between scheduled doses. Many patients were finding that the pain-killing effect didn’t last 12 hours, so they took the pills more often, which increased the likelihood of addiction. A 1999 study found that 13% of patients who used OxyContin for headaches became addicted.

Purdue said the concerns over addiction were overblown. It told sales reps to say that less than 1% of OxyContin patients became addicted. Purdue claimed that patients were not experiencing addiction and withdrawal symptoms, but were just feeling their underlying pain. It coined the term “pseudo addiction” to describe this supposed phenomenon. It claims there is no inherent problem with OxyContin, saying the problem is individuals who misuse it.

However, internal Purdue documents, which have emerged due to litigation, reveal that it knew, even before it got approval to market OxyContin, that not all patients achieved 12-hour pain relief and that more frequent use was a recipe for addiction. Purdue’s records show that in 1998 it was aware that taking OxyContin at 8-hour intervals was becoming more and more common. A Purdue employee called this “very scary.” It appeared that in some cases these more frequent doses were due to addiction and to keep the patient from going into withdrawal, rather than to treat pain.

In 2001, the Attorney General of Connecticut wrote to Purdue expressing his alarm over the growing abuse of OxyContin. Three years later, having received no response, he filed a lawsuit. In 2003, the Drug Enforcement Agency (DEA) found that Purdue’s aggressive marketing had “very much exacerbated OxyContin’s widespread abuse.” It concluded that Purdue had “deliberately minimized” the risks of OxyContin. The DEA sent Purdue a warning letter saying that its ads “grossly overstate the safety profile of OxyContin by not referring in the body of the advertisements to serious, potentially fatal risks”. Nonetheless, Purdue continued to aggressively market OxyContin and no government agency took steps to – or was allowed to – regulate its sale. (See my previous post for more detail on the lack of regulation.)

Purdue currently faces thousands of OxyContin-related lawsuits, including 10 from states and numerous ones from cities and counties. To-date, it has settled or pled guilty in the cases that have reached a conclusion. Many experts believe this is a strategy to avoid going to trial where it would have to disclose internal documents that would reveal very damaging information about what Purdue knew about the dangers and harm of OxyContin.

In 2006, Purdue paid $75 million to settle a case brought by 5,000 patients. In another case, it pled guilty to criminal misbranding and acknowledged marketing OxyContin “with intent to defraud or mislead.” Three senior officials pled guilty, but no one from the Sackler family that owns Purdue was punished. The 3 officials all got off with probation and fines totally $35 million. Purdue itself paid a $600 million fine.

The total of $700 million in fines and settlements to-date seems small and hardly a sufficient deterrent, let alone punishment, for Purdue’s blatantly irresponsible marketing and selling of OxyContin. It is only about 2% of the roughly $35 billion in revenue that Purdue has received from OxyContin. Furthermore, it is only about 1% of the $50 billion estimated cost of treatment for those with opioid addiction problems.

In 2010, Purdue reformulated its OxyContin pills, so they are harder to crush or dissolve and, therefore, to abuse. As a result, many of those who had become addicted to OxyContin have now turned to illegal drugs, such as heroin and fentanyl.

Many industry observers believe that an important motivation for the reformulation of OxyContin was not to make it safer, but to extend its patent, which would have run out in 2013. Purdue is now working to block sales of generic versions of the original OxyContin by claiming that they are unsafe.

Purdue continues to fight any restrictions on the prescribing of OxyContin, claiming that such steps would deny law-abiding patients needed pain medication. It has continued to spend heavily on lobbyists and campaign contributions to block enactment of restrictions by government regulators. And, taking a page from the tobacco industry, it is expanding its marketing of the original OxyContin overseas.

I urge you to contact your US Representative and Senators to ask them to support the regulation of prescriptions for opioid pain killers. The Centers for Disease Control (CDC) has introduced guidelines that would reduce the use of OxyContin and other opioid pain medicines. The guidelines state that “Opioids should not be considered first-line or routine therapy for chronic pain”. The guidelines recommend the use of non-drug pain treatment, such as physical therapy, and of non-opioid drugs as the first responses to pain.

Please urge your elected officials to support the implementation of the CDC guidelines on opioid pain killers and to fund opioid treatment, along with addiction prevention and education programs.

[1]      Keefe, P.R., 10/30/17, The family that built an empire of pain, The New Yorker (https://www.newyorker.com/magazine/2017/10/30/the-family-that-built-an-empire-of-pain)

PURDUE PHARMA AND OXYCONTIN CAUSED THE OPIOID EPIDEMIC Part 1

Purdue Pharma, a privately-owned corporation, and its narcotic pain-killer, OxyContin, caused the current opioid epidemic. The mainstream media have not provided much coverage of Purdue Pharma’s role in their reporting on the opioid epidemic, which is perhaps the worst health epidemic in US history. The most detailed coverage of the role of Purdue and OxyContin that I am aware of is the article that appeared in the October 30th issue of The New Yorker, “The family that built an empire of pain”. [1] This blog post is largely a summary of that article.

This story is a familiar, but particularly deadly one, of greed, the power of wealthy corporate executives, and the willingness of members of Congress and government to do the bidding of powerful, wealthy interests. Many facets of the story mirror that of the tobacco industry, such as denial of known deadly effects. However, the connection between OxyContin and death is much quicker and clearer.

Purdue Pharma developed OxyContin in 1995. It is oxycodone, a chemical cousin of heroin and twice as powerful a pain-killer as morphine. Purdue’s innovation was a time release formula that allowed a large dose of oxycodone to be taken all at once and whose effect would last for 12 hours (supposedly). This meant that a pill had to be taken only twice a day and that its effect would last through the night, so the patient could get a full night’s sleep. Other narcotic pain-killers come in pills with much smaller doses and must be taken more frequently.

Potent, narcotic pain-killers like OxyContin were, at the time, only used to treat the acute pain of cancer and end-of-life situations. However, Purdue’s marketing worked to broaden the use of OxyContin to less acute pain. It targeted both the public and prescribing doctors. It included hiring doctors, researchers, and other experts to downplay the risks of OxyContin and argue that pain was being under-treated.

Using this strategy, Purdue engaged in one of the most extensive marketing campaigns in the history of the drug industry. It built a salesforce of over 1,000 people who were strongly incentivized through commissions and bonuses to sell lots of OxyContin. Some salespeople made over $100,000 in commissions and in 2001 Purdue paid out over $40 million in bonuses. Within 5 years of its introduction, sales of OxyContin hit $1 billion.

Today, roughly 250 million opioid pain-killer prescriptions are being written each year. In Ohio, a state hard hit by the opioid epidemic, 2.3 million people, about 1 out of every 5 people in the state, received a prescription for an opioid in 2016.

It is estimated that 2.5 million Americans are addicted to opioids and over 300,000 people have died due to the opioid epidemic. An addicted baby is now born every 30 minutes in the US and 10% of newborns in Huntington, West Virginia, are born opioid addicted. According to the American Society of Addiction Medicine, 4 out of every 5 people who use heroin start opioid use with a prescription pain killer.

Purdue has realized about $35 billion in revenue from OxyContin and billions in profits. The Sackler family that owns Purdue is worth an estimated $13 billion.

In my next post, I’ll outline the fraudulent marketing Purdue engaged in to profit from OxyContin and its on-going efforts to block any restrictions on the prescribing of it.

[1]      Keefe, P.R., 10/30/17, The family that built an empire of pain, The New Yorker (https://www.newyorker.com/magazine/2017/10/30/the-family-that-built-an-empire-of-pain)

THE OPIOID CRISIS: SAVING LIVES VS. SAVING PROFITS

President Trump pledged months ago to declare the nationwide opioid crisis a national emergency. He now says he’ll do so this week. The crisis has claimed well over 200,000 lives and the death rate continues to climb.

Declaring opioid deaths a national emergency would be nice, but taking effective action is even more important. So far, the Trump administration and key Republicans in Congress have shown no interest in doing so.

Trump recently nominated Representative Tom Marino, a Pennsylvania Republican, to be his national drug czar. Marino withdrew his name from consideration last week after it was revealed that he had spearheaded a successful effort in Congress to block the Drug Enforcement Agency’s (DEA) efforts to stop fraudulent distribution of prescription opioids. [1]

In April 2016, as the deadliest drug epidemic in US history raged, Congress passed a bill stripping the DEA of its ability to stop the distribution of large quantities of prescription narcotics. Drug industry experts blame the origins of the opioid crisis on the over-prescribing, some of it fraudulent, of narcotic pain killers. [2] The pharmaceutical corporations’ marketing of these drugs has also come in for blame, as they downplayed the potential for addiction to the drugs and promoted the supposed under-treatment of pain.

At the behest of the drug industry, Representative Marino in the House and Senator Hatch in the Senate (a Utah Republican) led the efforts by a handful of members of Congress to undermine DEA enforcement efforts aimed at blocking the supply of narcotic pain killers to corrupt doctors and pharmacists who were selling them on the black market. They passed a law making it impossible for the DEA to freeze suspicious shipments of narcotics by drug distributors who had repeatedly ignored DEA warnings while selling millions of pills for billions of dollars. Marino had spent years working to pass such a law.

The drug industry contributed at least $1.5 million to the campaigns of the 23 members of Congress who sponsored the bill and spent over $100 million lobbying Congress.

Besides the sponsors of the bill and the drug industry, few members of Congress or others outside of Congress knew of the impact the bill would have. It was passed in Congress by “unanimous consent,” an expedited process supposedly reserved for non-controversial bills. Former White House officials say they and President Obama were unaware of the bill’s impact when it was signed into law. Requests for interviews with current and former officials, as well as dozens of Freedom of Information (FOI) Requests, have been submitted to the DEA and the Justice Department by the media to try and find out who knew what when. The interview requests have been declined or ignored, and the FOI requests have been denied or delayed; some have been pending for 18 months. [3]

This is a powerful example of the incredible influence and control our large corporations have over policy making in Washington, D.C. The large pharmaceutical corporations and their distributors have gotten Congress to make their profits from illegally selling narcotic painkillers more important than the 60,000 deaths that are occurring each year from opioid use. These deaths are roughly twice the number that occur due to gun violence or car accidents. The number of deaths last year was roughly 50% more than occurred at the peak of the HIV/AIDS crisis. Drug overdoses have become the leading cause of death among those under 50. [4]

I urge you to contact your US Representative and Senators and ask them to take real action to fight the opioid crisis. This includes spending money on addiction treatment and drug enforcement. And it requires repealing the 2016 legislation that undermined the DEA’s efforts to control the distribution of prescription, narcotic pain killers. We must assert that people’s lives, as well as recovery from and avoidance of addiction, are more important than profits for large pharmaceutical corporations.

[1]      Superville, D., & Daly, M., 10/18/17, “Marino pulls name from US drug czar consideration,” The Boston Globe from the Associated Press

[2]      Higham, S., & Bernstein, L., 10/16/17, “Drug industry quashed effort by DEA to cut opioid supply,” The Boston Globe from The Washington Post

[3]      Higham, S., & Bernstein, L., 10/16/17, see above

[4]      Katz, J., 6/5/17, “Drug deaths in America are rising faster than ever,” The New York Times (https://www.nytimes.com/interactive/2017/06/05/upshot/opioid-epidemic-drug-overdose-deaths-are-rising-faster-than-ever.html)

VOTER SUPPRESSION IS A REAL THREAT TO OUR DEMOCRACY

The biggest threat to the integrity of our elections is voter suppression. Our democracy is built on the principle of one person, one vote, and the right of every citizen to cast his or her vote and have it counted. However, in the 2016 presidential election, hundreds of thousands of citizens were kept from voting by new state laws and procedures that have made it harder to vote.

State laws and procedures that inhibit voting are part of a Republican strategy to win elections at any cost. (This strategy also includes the overturning of the Voting Rights Act by the Supreme Court, extreme gerrymandering of legislative and Congressional districts, as well as loosening campaign finance laws to allow wealthy individuals and corporations to spend freely and often anonymously on our elections.)

These voter suppression techniques are designed to reduce voting by low-income and minority citizens, who are more likely to vote for Democrats. The techniques include making it harder to register to vote, purging names of eligible voters from voting lists, permanently prohibiting those with felony convictions from voting even after they have served their time, and making it harder to actually vote.

States have made it harder to vote by reducing the number of polling places, reducing the days and hours for voting, and requiring specific personal identification – and sometimes making it difficult to obtain the required photo identification document. These actions often target communities or neighborhoods that are disproportionately low-income or minority.

For example, Wisconsin passed a restrictive voting law in 2011. Although state Republicans promised that not a single voter would be disenfranchised by the law, the best estimates are that 200,000 – 300,000 eligible voters lacked the photo ID necessary to vote in the 2016 presidential election. And Republican state legislators acknowledged in more candid moments that Democratic voter suppression was the goal. The law also cut early voting days, hours, and locations.

A judge struck down the law as clear voter suppression, but was overruled by a conservative appeals court. A judge overseeing the implementation of the law, repeatedly criticized the state for its failure to provide IDs in a timely fashion and for other actions that inhibited voting. [1] Overall, the result was that 91,000 fewer people voted in Wisconsin in 2016 than in 2012 and the turnout was the lowest since 2000. After the election, many eligible voters’ stories of being unable to vote were reported by the media. [2]

Trump won the election in Wisconsin by just 22,750 votes (less than 1%) and the Republicans’ voter suppression efforts may well have been the deciding factor. In Milwaukee, where 70% of the state’s African Americans live and Democratic voting is strong, 41,000 fewer people voted than in 2012, a 13% drop. [3] It’s possible that some of this may have been due to lowered interest without Obama on the ballot. However, a recent study found that in Milwaukee and Dane counties [4] 11% of registered voters (17,000 people) were deterred from voting by Wisconsin’s voter ID law and 6% (9,000) were prevented from voting by the ID law. Among low-income registered voters (household income under $25,000), 21% were deterred from voting, compared to 7% with incomes over $25,000 and 3% with incomes over $100,000. For white registered voters, 8% were deterred from voting, while for African Americans it was 28%. [5] Statewide it is estimated that 45,000 voters were deterred from voting by Wisconsin’s voter ID law. It is likely that this alone (not including the other voter suppression efforts) switched the Wisconsin presidential election outcome and its 10 electoral college votes from Clinton to Trump.

In Michigan, a Trump campaign official stated prior to the election that they had a three-pronged voter suppression effort underway. The Michigan voter ID law, as in Wisconsin, clearly prevented or discouraged many eligible voters from voting. Furthermore, 55,000 voters had been purged from the voter registration lists based on an error-prone process of matching their names with the names of registered voters in other states. Finally, in Detroit, a recount was cut short despite large numbers of ballots that voting machines failed to read properly, but where the voter’s intent was clear based on a visual examination of the ballot.

Given that Trump won the election in Michigan by 10,700 votes (less than ¼ of 1%), the Republicans’ voter suppression efforts are likely to have been the deciding factor in his victory there, which gained him 16 electoral college votes.

In Pennsylvania, a strict voter ID law was passed in 2012, but was overturned by the courts before the 2016 election. Other voter suppression efforts were identified in 2012 and responses to them lessened their impacts on the 2016 election. However, in 2016, a delay in processing valid voter registrations kept at least 26,000 voters off the list of registered voters on election day, and the number could go higher if further investigation is done. The majority of the identified disenfranchised voters were in the diverse city of Philadelphia.

Given that Trump won the election in Pennsylvania by 44,300 votes (less than 1%), the Republicans’ voter suppression efforts might have been the deciding factor in his victory there, which gained him 16 electoral college votes. [6]

A change in the winner in these three states with 46 electoral votes would have changed the outcome of the presidential election. So, the impact of voter suppression efforts is potentially very significant.

These three states are examples of a broad, decade-long attack on voting rights. Over 20 states have passed new restrictions on voting since 2010. [7] An analysis from the non-partisan General Accounting Office (GAO) examined the effect of voter ID laws in Kansas and Tennessee in 2012. It concluded that due to their new voter ID laws, voter turnout dropped 1.9% in Kansas and 2.2% in Tennessee. That would represent about 34,000 voters in Kansas and about 88,000 in Tennessee. The GAO’s analysis found that young people, Blacks, and newly registered voters were disproportionately impacted. [8]

The US Supreme Court overturned key portions of the Voting Rights Act in 2013, claiming that racial discrimination in voting was no longer a problem. However, subsequent events proved them wrong. Within months of this decision, states were passing voter suppression laws that federal courts have noted were “passed with racially discriminatory intent.” [9] A judge struck down a package of voter suppression laws in North Carolina last year, noting that they targeted Black voters “with almost surgical precision.” [10]

Nationally, it is estimated that 10% of eligible voters (13 million people) don’t have an ID that would comply with new state voter ID laws. And although some of the most egregious voter suppression laws have been struck down by the courts, this often doesn’t happen until after the election when the damage has been done.

Voter suppression is antithetical to the principles and integrity of our democracy. Not only does it distort and manipulate the outcomes of our elections, it violates the one person, one vote, foundational equity of democracy and undermines the trust of the electorate in our governments. It makes elected officials less accountable to the people they supposedly represent. It harms our credibility around the world as our elections are seen as illegitimate and rigged. We need to condemn and fight back against voter suppression efforts as undemocratic and truly un-American.

[1]      Berman, A., Nov. / Dec. 2017, “Rigged: How voter suppression threw Wisconsin to Trump and changed the election,” Mother Jones (http://www.motherjones.com/mag/2017/11/toc/)

[2]      Cassidy, C.A., & Moreno, I., 5/9/17, “In Wisconsin, ID law proved insurmountable for many voters,” Associated Press (http://www.apnewsarchive.com/2017/In_Wisconsin%2C_ID_law_proved_insurmountable_for_many_voters/id-624a00e48a444f2c8fbd2faa07d44ad5)

[3]      Rapoport, M., 8/7/17, “Voter suppression in the mirror and looking forward,” The American Prospect (http://prospect.org/article/voter-suppression-mirror-and-looking-forward)

[4]      These 2 counties account for almost 1.5 million of Wisconsin’s 5.8 million residents.

[5]      Mayer, K.R., 9/25/17, “Voter ID study shows turnout effects in 2016 presidential election,” University of Wisconsin at Madison (https://elections.wisc.edu/news/voter-id-study/Voter-ID-Study-Release.pdf)

[6]      Rapoport, M., 8/7/17, see above

[7]      Brennan Center for Justice, retrieved 10/13/17, “New voting restrictions in America,”  New York University of Law (https://www.brennancenter.org/new-voting-restrictions-america)

[8]      Bump, P., 10/9/14, “Voter ID laws in Kansas and Tennessee dropped voter turnout by over 100,000 votes,” The Washington Post (https://www.washingtonpost.com/news/the-fix/wp/2014/10/09/gao-voter-id-laws-in-kansas-and-tennessee-dropped-2012-turnout-by-over-100000-votes/?utm_term=.6f7fb4686bcf)

[9]      Coons, C., & Austin-Hillery, N., 6/30/17, “The threat to American elections you don’t know about but should,” Time (http://time.com/4837622/voter-suppression-democracy-senator-chris-coons/)

[10]     Cassidy & Moreno, 5/9/17, see above

THE ANTI-WORKER AGENDA OF THE TRUMP ADMINISTRATION

Despite Trump’s pro-American worker rhetoric, his administration’s anti-worker actions speak louder than his words. His administration’s rollback of regulations protecting workers’ health, safety, and pay has been called “stunning” and “staggering” by labor policy experts.

One example is the Trump Administration’s decision not to follow through and update the Overtime Rule as proposed by the Obama Administration. The Overtime Rule sets the minimum amount salaried employees can be paid and not be eligible for overtime pay when they work more than 40 hours in a week. The intent of the Overtime Rule was to identify employees who were managers or professionals who could reasonably be expected to work more than 40 hours in a week and not get additional pay for overtime. The current overtime cutoff amount is only $23,660 and has not been updated for over a decade. It’s actually below the poverty line for a family of four. This lets employers pay low-wage workers a salary, rather than on an hourly basis, and thereby avoid having to pay overtime. The failure to update this dollar amount is an important contributor to the stagnation of wages for low- and middle-income workers.

There appeared to be bi-partisan agreement that the dollar amount should be increased when the Obama administration proposed a new rule raising the threshold to $47,476. Over 4.2 million low-wage workers would have seen an increase in pay or possibly a reduction in work hours as a result. The Trump Administration has abandoned the implementation of the proposed rule. [1]

This will cost low- and middle-wage workers an estimated $1 billion a year in pay.

The Trump Administration has stopped collecting data from large corporations on pay by gender, race, and ethnic background. This data would have allowed the Equal Employment Opportunity Commission to examine pay patterns and look for discriminatory practices. The failure to collect this data will make it harder to document and reduce the stubborn inequities in pay in the US. [2]

Data collection on workplace injuries and deaths has been weakened and made less accessible to the public. This will make it harder for the Occupational Safety and Health Administration and others to identify and respond to unsafe working conditions.

The Trump Administration is rolling back regulation of the trucking industry. Driving a truck is one of the most dangerous jobs in the country; truck accidents account for more than a quarter of all workplace deaths. The Obama Administration had begun an effort to study sleep issues among truckers, given that falling asleep at the wheel is a major cause of accidents. The Trump Administration has halted the study.

The Trump Administration and Congress are also considering allowing federal regulations that require a 30-minute break after 8 hours of driving to override stricter state regulations. For example, California, Colorado, and Kentucky require a 30-minute break every 5 hours. [3]

(Please see my blog post, Repealing or delaying regulations harms workers and the public, here for more examples of the Trump Administration’s rollbacks of regulations that protect workers.)

Trump is nominating people who do not have records of protecting workers to key posts in his Administration that are responsible for worker protections. He has nominated Cheryl Stanton to be the administrator of the Department of Labor’s Wage and Hour Division, which is responsible for enforcing wage protection laws. In the past, she has represented corporations accused of under-paying workers. Stanton has also been sued for failing to pay her house cleaners. [4]

Trump has nominated David Zatezalo to be the head of the Mine Safety and Health Administration. Zatezalo is a former coal mining executive whose company was identified as having numerous health and safety violations.

Trump appears to be trying to hide or minimize attention to these nominations and some of his other anti-worker actions by announcing them on Friday afternoons when attention from the media and the public is at its low point for the week.

The Trump Administration’s actions are clearly anti-worker, despite his sometimes contradictory rhetoric. And actions do speak louder than words, even when you announce them at times when you hope people won’t be paying attention.

[1]      Block, S., 9/13/17, “The Trump Administration will always side with corporations over labor,” Moyers & Company (http://billmoyers.com/story/trump-corporations-over-labor/)

[2]      Olen, H., 9/1/17, “The rollback of pro-worker policies since Trump took office is staggering,” The Nation (https://www.thenation.com/article/the-rollback-of-pro-worker-policies-since-trump-took-office-is-staggering/)

[3]      Miller, K., 8/30/17, “Keep on truckin’ – No, seriously, Trump wants you to,” Moyers & Company (http://billmoyers.com/story/keep-truckin-no-seriously-trump-wants/)

[4]      McNicholas, C., & Sanders, S., 9/8/17, “Policy watch: Two more foxes nominated to run hen houses in the Trump administration,” Economic Policy Institute (http://www.epi.org/blog/policy-watch-two-more-foxes-nominated-to-run-hen-houses-in-the-trump-administration/)

IS THE DEMOCRATS’ “BETTER DEAL” A GOOD DEAL?

Congressional Democrats recently announced a package of policy proposals they are calling “A Better Deal.” It is apparently their policy platform for the 2018 Congressional elections and it seeks to re-establish Democrats as the party that stands up for working people. There is much in it for workers to like. (See my previous post here for a summary of it.)

However, some important pieces are missing from A Better Deal. [1] For example, it doesn’t clearly address:

  • Making it easier for workers to unionize and harder for employers to eliminate or prevent unionization. This would strengthen the collective bargaining power of workers so they could better balance the growing power of employers in negotiations over pay and benefits.
  • Creating a more progressive, fairer tax system to address economic inequality and provide the revenue needed for A Better Deal’s programs.
  • Reducing the power of the huge Wall Street financial corporations and the threat they represent to our economy. [2]
  • Reforming the health care system and its out-of-control costs. It doesn’t call for a Medicare-for-All type single-payer insurance system, despite strong evidence that this is the only way to both control costs and improve quality, and despite broad support for Medicare-for-All among the public and from over 100 members of Congress. (See my post here for why single-payer is the only way to address the problems with our health insurance system.)
  • Increasing the transparency of the process for developing trade agreements and eliminating the trade dispute resolution system that favors multi-national corporations and undermines workers, the public, and even national sovereignty. [3]

A Better Deal is viewed by many as timid and underwhelming. It doesn’t clearly renounce growing economic inequality and the greed of corporate executives. It could, for example, propose penalties and/or taxes on corporations where executive pay is over 20 times that of a corporation’s lowest-paid worker or over 20 times the national median wage. This is what the Labour Party in the United Kingdom has proposed. [4] In the US, this would mean penalties or taxes on corporations where an executive is paid over $290,000 and the corporation has a minimum wage employee, or where any executive is paid was over $605,000 (based on 20 times the national median personal income of $30,240). [5]

A Better Deal is a step toward counteracting the frustration of workers and the middle class and the resultant losses Democrats have sustained in recent state and national elections. However, it is not generating much grassroots enthusiasm. Although it is clearly targeting some of the issues raised by Senator Bernie Sanders in his presidential campaign, it is not generating anywhere near the groundswell of grassroots support that Senator Sanders, or for that matter President Trump’s campaign, stimulated. Part of the lack of excitement about A Better Deal has to do with the shortcomings of its policy content and part of it has to do with its presentation.

Calling the proposal “A Better Deal” is not inspiring or visionary, which is what the Democratic Party needs to be if it wants to win elections. Simply saying that its proposal is better than what the Republicans are proposing or than the current status quo is not saying much. “Better” is not enough to get voters excited and enthusiastic enough to turn out and vote. Hillary Clinton lost the presidency because she did not inspire and excite voters. Turnout in the 2016 presidential election was only 53% of eligible voters! If it wants to win the 2018 or subsequent elections, the Democratic Party needs a strong, inspiring message and a good media strategy that will energize people to get out and vote for its candidates.

I’m surprised the Democratic Party didn’t build A Better Deal and its 2018 election strategy on the People’s Budget that has been developed by its Progressive Caucus in the US House. (See my posts on the People’s Budget here and here.) The People’s Budget includes specific proposals for reforming our tax system to increase fairness and to generate the revenue needed to fund the programs it and A Better Deal recommend. The People’s Budget includes a larger program to build the infrastructure America needs and is specific about increases in domestic spending that are needed to support workers and the middle class, as well as to mend our safety net for people who fall on hard times. It also is specific about the need to strengthen workers’ ability to unionize and negotiate with employers for better pay and benefits.

On the other hand, A Better Deal has more specific proposals than the People’s Budget for rolling back provisions in trade treaties that favor multi-national corporations and undermine workers. It also is more specific about the need to restrict foreign countries’ currency manipulation and monopolistic behavior by large corporations (by strengthening anti-trust laws and their enforcement).

If the Democrats could unify in support of a proposal that combined the best elements of A Better Deal and the People’s Budget, and added an unequivocal call for a Medicare-for-All type, single-payer health insurance system, they would have a policy and election agenda that would be truly visionary and inspiring. The country needs leadership focused on a clear commitment to supporting workers and the middle class. The Democrats have a golden opportunity to provide it, but it isn’t yet clear whether they will seize the opportunity.

Clear, consistent promotion of A Better Deal is not yet evident. And actions will speak louder than its words. However, no action on its promises is yet evident in Washington. Its impact, both practically and politically, will depend on:

  • Clearly spelling out the details of its policy proposals and adding missing pieces,
  • Developing a strong message promoting its goals,
  • Taking definitive actions to move its agenda forward, and
  • Generating consistent and enthusiastic support for it from all Democratic members of Congress and the Party leadership.

[1]      Reich, R., 7/28/17, “How much better is the Democrats’ ‘Better Deal’?” Yahoo! News (2 min. video) (https://www.yahoo.com/news/robert-reich-democrats-better-deal-211752649.html)

[2]      Carney, E.N., 7/27/17, “Is the Democratic Party’s ‘Better Deal’ good enough?” The American Prospect (http://prospect.org/article/democratic-party%E2%80%99s-better-deal-good-enough)

[3]      Bernstein, J., & Spielberg, B., 8/17/17, “Democrats’ ‘Better Deal’ on trade is better than what we have now,” The American Prospect (http://prospect.org/article/democrats-better-deal-trade-better-what-we-have-now)

[4]      Pizzigati, S., 7/26/17, “Will Democrats in Congress go bolder or backwards?” Inequality.org (https://inequality.org/great-divide/democrats-congress-need-go-bolder-not-backwards/)

[5]      Wikipedia, retrieved 9/7/17, “Personal income in the United States” (https://en.wikipedia.org/wiki/Personal_income_in_the_United_States)

THE DEMOCRATS’ “A BETTER DEAL”

Congressional Democrats have announced a package of policy proposals they are calling “A Better Deal.” It’s apparently their policy platform for the 2018 Congressional elections and its focus is on re-establishing Democrats as the party that stands up for working people. It proclaims that too many American families feel that the rules of our economy are rigged against them. It notes that incomes and wages are not keeping up with the cost of living for many workers. It states that large corporations, the rich, and other special interests are avoiding paying taxes and meanwhile are spending huge sums of money to influence our elections. Democrats claim that A Better Deal will grow and strengthen the middle class and reverse the failure of so-called trickle-down economic policies (i.e., tax cuts for the wealthy) to do so.

A Better Deal has three overarching goals: [1]

  • Raise the wages and incomes of American workers and create millions of good-paying jobs,
  • Lower the costs of living for families, and
  • Build an economy that gives working Americans the tools to succeed in the 21st Century.

A Better Deal calls for raising the national minimum wage to $15 an hour by 2024 and then increasing it automatically so it keeps up with inflation. A Better Deal promises that Democrats will fight the offshoring of Americans’ jobs by penalizing corporations that move jobs overseas and by cracking down on unfair trade policies of other countries, including currency manipulation. It calls for renegotiating the NAFTA trade agreement with Canada and Mexico to increase US exports and jobs, while also improving wages. Federal contractors who move jobs to foreign countries would be penalized and there would be Buy American requirements in government purchasing.

The Democrat’s plan calls for $1 trillion in federal spending on the infrastructure, such as bridges, roads, railroads, airports, and waterways, that is the transportation backbone of our economy. The plan projects that 15 million good-paying jobs would be created by these investments. It would also support job creation by prioritizing support for small businesses and entrepreneurs over benefits for large corporations. It would invest in research and innovation, as well as making high-speed Internet service available to everyone. It pledges to ensure that workers will be able to “retire with dignity,” by protecting pensions, Social Security, and Medicare.

A Better Deal calls for lowering the costs of drugs, post-secondary education, child care, cable TV and Internet service, and credit cards. It promises a crackdown on big price increases by pharmaceutical corporations as well as their practices that drive up drug costs. Medicare would be allowed to negotiate drug prices (which it is currently barred by law from doing!).

A Better Deal would curtail the monopolistic practices of large corporations that lead to higher prices and reduced consumer choice. It notes that concentrated market power leads to great political power, which has been used by big corporations to obtain beneficial policies from government. Strengthening anti-trust laws and their enforcement are identified as key strategies for achieving these goals. A Better Deal calls for eliminating unlimited and/or undisclosed spending by corporations and the wealthy in our elections, as well as reducing the power and influence of lobbyists and special interests.

A Better Deal promises paid leave for workers when they are sick or when a family situation merits taking time off. Paid leave for a new child or a family member’s illness would be covered. It notes that this will keep families healthy, both medically and financially.

In A Better Deal, Democrats commit to expanding government investment in workers’ access to the education, training, and other tools they need to succeed in the 21st Century. In addition, employers would receive incentives to invest in their workers’ skills and knowledge. Apprenticeships would be expanded and training programs would be better coordinated with businesses’ needs for workers.

There is much in A Better Deal for workers to like. Democrats appear to be recommitting themselves to putting workers first, ahead of monied interests, reversing their mid-1990s decision to cozy up to those with big money to get the funding they needed for their campaigns. Despite its good points, there are notable weaknesses in A Better Deal and its presentation that I will outline in my next post.

[1]      Schumer, C., retrieved 8/20/17, “A better deal,” U.S. Senate Democrats (https://democrats.senate.gov/abetterdeal/#.WZydEbpFzIU)

PROTECTING CONSUMERS FROM WALL STREET

The collapse of the financial corporations in 2008 was due in large part to their predatory and illegal practices in pushing unaffordable home mortgages onto gullible home buyers. Congress and President Obama enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (known as Dodd-Frank) to help protect consumers from such abusive behavior.

Dodd-Frank’s most notable consumer protection provision was the creation of the Consumer Financial Protection Bureau (CFPB). The CFPB’s role is to protect consumers from illegal and predatory practices, as well as discrimination, by financial corporations and to work to ensure that consumers receive the information necessary to make good financial decisions and to avoid “unsafe” financial products and services.

Since its creation, the CFPB has been hard at work punishing financial corporations that violate the law, returning almost $12 billion to over 29 million victimized consumers. In less than 8 years, it has helped consumers by responding to over 1.2 million complaints and issuing, for example, new standards for home mortgage documents that are clearer and easier to understand. At CFPB’s website you can find information on understanding your credit score and to help you make a good decision about a car or student loan.

Given that financial products and services (such as bank accounts, credit cards, and car and student loans) are essential for individuals, families, and our economy, appropriate regulation of them is necessary. Before the creation of the CFPB, financial services regulation was spread among 6 federal agencies and state regulators. None of them had consumer protection as its sole or primary role nor had the power to establish a single set of regulations for the whole financial industry. The CFPB has this power and a sole focus on consumer protection, much as the Consumer Product Safety Commission does for non-financial products. [1]

In July, the CFPB finalized a rule prohibiting financial corporations from putting mandatory arbitration clauses in their customer contracts. These clauses, which are in most agreements consumers sign when they open a bank account or get a loan or credit card, prohibit customers from suing the financial corporation in court. (They are also in many contracts or agreements for other consumers products and services, such as cell phones and cable TV, Internet, and phone services.) They require the customer to submit any complaint, even one due to illegal activity, to an arbitrator, who is usually selected by the financial corporation. They eliminate the ability of customers to band together in a class action lawsuit, and require them to pursue any grievances only through individual arbitration cases.

In addition to preventing class action lawsuits, the mandatory arbitration clauses often prohibit customers from sharing their experiences with regulatory or law enforcement agencies and the media. Corporations know that consumers will rarely spend the time and money (the typical cost to file an arbitration claim is $161) to pursue arbitration, given that the amount of money at stake is usually small. The result is that corporations evade accountability and can hide illegal or unethical behavior. [2]

The CFPB rule banning mandatory arbitration clauses was put in place after 5 years of study and development pursuant to a Congressional directive to study mandatory arbitration clauses and restrict or ban them if they harm consumers. The CFPB study found that customers win only 1 out of 11 arbitration cases and when they win they receive an average of $5,389. However, when a financial corporation makes a claim or counterclaim against a customer, it wins 93% of the time and the customer is ordered to pay, on average, $7,725 to the financial corporation! [3]

The CFPB study also found that in an average year 6,800,000 consumers get cash awards due to class action lawsuits while only 16 do so in arbitration cases. Consumers in these lawsuits receive a total of $440,000,000 (after deducting lawyers’ and courts’ fees), while consumers across all arbitration cases receive a total of $86,216.

Three recent examples of practices by Wells Fargo & Company make clear the significance and importance of banning mandatory arbitration clauses and allowing class action lawsuits by customers. (By the way, Wells Fargo is the third largest US bank and a multi-national financial corporation headquartered in San Francisco with $22 billion in annual profits.) It recently paid $185 million to settle with the CFPB and other regulators for having illegally opened and charged customers for over 2 million unauthorized checking and credit card accounts. When customers tried to sue Wells Fargo for this starting back in 2013, it forced them to make their claims in individual arbitration cases. This allowed Wells Fargo to continue its illegal behavior and theft from customers for 3 more years (5 years in total) before its behavior came to the attention of regulators.

In July, another class action lawsuit was filed against Wells Fargo based on illegal behavior on car loans. Apparently, Wells Fargo was requiring customers with car loans to buy car insurance they didn’t need (it was typically redundant with insurance they already had). And Wells Fargo was getting kickbacks from the company selling the insurance. The extra cost of the unneeded insurance pushed 250,000 car loan customers into default on their loan payments and resulted in 25,000 cars being repossessed. If these customers are forced into arbitration and are unable to participate in a class action lawsuit, it’s likely that most of them will not receive any compensation from Wells Fargo for its illegal and harmful behavior.

Finally, Wells Fargo is the defendant in an on-going, 8-year-old case over overdraft fees and practices. It is arguing in court that these customers’ claims must be handled in individual arbitration cases rather than a class action lawsuit, despite complaints from customers in 49 states. [4]

Despite these examples, and the fact that Congress has banned mandatory arbitration in home mortgage agreements, members of Congress have quickly introduced legislation to repeal the Consumer Financial Protection Bureau’s new rule banning mandatory arbitration clauses in financial product and service agreements. [5] Weakening or eliminating the CFPB in general, not just its ban on mandatory arbitration, has been a goal of Wall St. corporations and their friends in Congress ever since its creation by the Dodd-Frank law.

I urge you to contact your US Representative and Senators and ask them to support the Consumer Financial Protection Bureau and its ban on mandatory arbitration clauses in consumer product and service agreements.

[1]      Servon, L.J., 7/17/17, “Will Trump kill the CFPB?” The American Prospect (http://prospect.org/article/will-trump-kill-cfpb)

[2]      Germanos, A., 7/12/17, “Serving Wall Street predators, GOP launches swift attack on new rule protecting consumers,” Common Dreams (https://www.commondreams.org/news/2017/07/12/serving-wall-street-predators-gop-launches-swift-attack-new-rule-protecting)

[3]      Shierholz, H., 8/1/17, “Correcting the record: Consumers fare better under class actions than arbitration,” Economic Policy Institute (http://www.epi.org/publication/correcting-the-record-consumers-fare-better-under-class-actions-than-arbitration/)

[4]      Brumback, K., 8/25/17, “Wells Fargo wants customer suits tossed,” The Boston Globe from the Associated Press

[5]      Germanos, A., 7/12/17, “Serving Wall Street predators, GOP launches swift attack on new rule protecting consumers,” Common Dreams (https://www.commondreams.org/news/2017/07/12/serving-wall-street-predators-gop-launches-swift-attack-new-rule-protecting)

PROTECTING OUR ECONOMY FROM WALL STREET SPECULATION

After the collapse of the financial corporations in 2008 due to their greed, predatory and illegal practices, and malfeasance, Congress and the President enacted legislation to try to prevent such a collapse in the future. This was the Dodd-Frank Wall Street Reform and Consumer Protection Act (known as Dodd-Frank).

The Dodd-Frank law is not as strong as many people thought it should be, because Wall St. executives, along with their lobbyists and friends in Congress, worked hard to weaken it as it was being written and passed. For example, it did not break up the “too-big-too-fail” financial corporations or limit their growth. (They are now all bigger than they were in 2008.)

A key provision of Dodd-Frank, known as the Volcker Rule, restricts banks from making certain kinds of speculative investments that do not benefit their customers and actually put customers’ deposits (and the banks and the economy) at risk if large investment losses result. Such speculative investments and big losses from them played a key role in causing the 2008 financial collapse. The Volcker Rule restricts but does not ban such investments, as many people thought it should and as had been the case from 1933 to 1999 under the Glass-Steagall Act. [1] In particular, many people believe that banks with deposits insured by the Federal Deposit Insurance Corporation (FDIC) should be prohibited from making such risky investments because these investments, which only benefit the bank’s executives and shareholders, are, in effect, insured against big losses by the FDIC, i.e., the federal government and taxpayers.

The Volcker Rule was supposed to be implemented in 2010, but continuing opposition from Wall St. and its supporters has continued to delay (and further weaken) the rule. It finally went into effect in 2015, but banks continue to be granted extensions for when they have to come into compliance with its provisions.

The Trump Administration, through the five agencies that regulate the financial industry, is currently working to rewrite and further weaken the Volcker Rule. They are moving to loosen the restrictions on risky investments, even though they were a major cause of the 2008 financial collapse. [2]

The Dodd-Frank law in general, not just its Volcker Rule, has been a target for weakening and delaying tactics ever since its original drafting and passage, as well as at every step in its implementation. The US House recently passed the so-called Financial Choice Act that would significantly weaken Dodd-Frank’s regulation of the financial industry.

I urge you to contact your US Representative and Senators and ask them to:

  • Oppose efforts to weaken the Volcker Rule and to support an outright ban on speculative investment activity by banks that have customer deposits and FDIC insurance, and
  • Oppose efforts to weaken the Dodd-Frank law in general and its regulations that reduce the likelihood of another financial industry collapse.

[1]      Wikipedia, retrieved 8/15/17, “Volcker Rule,” (https://en.wikipedia.org/wiki/Volcker_Rule)

[2]      Bain, B., & Hamilton, J., 8/1/17, “Wall Street regulators are set to rewrite the Volcker Rule,” Bloomberg News (https://www.bloomberg.com/news/articles/2017-08-01/volcker-rewrite-is-said-to-start-as-trump-regulators-grab-reins)