THE DANGERS OF HUGE FOR-PROFIT NEWS AND MEDIA COMPANIES

The dramatic consolidation under billionaire owners in the news and media industry over the last 40 years includes TV, radio, print, and social media. Their profit motive drives them to promote divisive and culture war messages that they have found are most effective at attracting attention and viewers. It also pushes them to minimize local reporting and homogenize news to national topics. All of this undermines local civic engagement, perverts politics and politicians, and harms democracy.

(Note: If you find a post too long to read, please just skim the bolded portions. Thanks for reading my blog!)

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My previous post focused on the huge billionaire-owned companies in the news and media industry that dominate national information dissemination: in TV and streaming: Paramount (with CBS, etc.), Warner Brothers (with CNN, etc.), Fox, Netflix, and Amazon; in social media: Meta and X; and in print media: the Washington Post, The Wall Street Journal, and the New York Post. It noted the dangers of monopolistic power, particularly in the news and media industry, including resulting in news that is biased, including politically.

In the broadcast TV market, the three biggest companies (Sinclair, Nexstar, and Gray) own 40% of all local TV stations (about 100 each) and cover 80% of the U.S. [1] In the broadcast radio market, iHeartMedia is the country’s largest owner of radio stations, owning almost 900 AM and FM radio stations across the U.S. It was formerly Clear Channel Communications, which was founded in 1972 and taken private in 2008 by venture capital firms Bain Capital and Thomas H. Lee Partners in a leveraged buyout (i.e., one using substantial amounts of borrowed money). iHeart has gained its dominance through many acquisitions, mergers, and reorganizations over its 53 years.

The presence of huge billionaire-owned companies in the news and media industry goes much deeper than TV and radio. In the newspaper market, Gannett now owns one-sixth of all local daily papers. Venture capital firms like Alden Global Capital have been actively buying and consolidating (or closing) local print media. In some cases, the local newspapers have been struggling financially, but in any case, the purchasers typically slash jobs and the quality of the journalism. They often strip the papers of their assets (e.g., land and buildings), and then often close them or drive them into bankruptcy after collecting dividends and “management” fees. This is the standard venture capital business model (which I often refer to as vulture capitalism). (See this previous post for a summary of this business model and this post for an example of Alden Global Capital’s operation. Both posts are from 2018, so this has been an issue for quite some time.)

To minimize costs, outlets that remain in business typically run homogenized national or regional news instead of local reporting. The loss of local reporting means the loss of coverage of local community activities, events, and organizations, including local government and local candidates for local, state, and even national offices. This can be particularly damaging in rural communities. [2]

With the demise of local reporting, fewer Americans know who their local elected officials are and voter turnout in local elections declines. The ability to hold those in power accountable, especially in local offices, can be decimated and misinformation (or disinformation) often fills the void. This weakens local civic engagement and democracy.

Furthermore, research shows that while Americans are most affected by government policies and programs on economic and affordability of living issues, over the last 40 years the news and media industry’s coverage of government and politics has shifted to the so-called culture war issues, such as race, crime, immigration, LGBTQ+ rights, and guns.

The harms of huge billionaire-owned companies dominating the news and media industry are exacerbated by their single-minded focus on maximizing profits. Beginning in the 1980s, with talk radio, cable TV, and Fox News, coupled with a more competitive and profit-focused industry, news and media companies became more and more focused on attracting attention and audience at any cost. As a result, sensationalism and rapid, first-to-report became more important. These outlets also discovered that conflict and divisive culture war issues were most effective in getting attention and audiences, and even in attracting viewers who normally didn’t watch the news. They had discovered, as the advertising industry had too, that emotions are more easily aroused, are more powerful motivators, and are more malleable than rational, intellectual messages and attempts at persuasion.

Studies have found that audiences who watch more cable news give greater importance to culture war issues. This influences our politics and politicians, who have responded with more culture war focus and messaging. This makes culture war issues more salient in voters’ minds and in elections. Fox “News” has been found to be the most powerful contributor to this evolution to a focus on culture war issues. One analyst summed this up in these words: “the companies that abuse our attention for profit are the real winners of American politics.” [3]

President Trump and his administration, with the support of his allies in the “news” and media industry, are taking this strategy to new heights, or perhaps new depths would be more appropriate. The consolidation of news and media companies under billionaire ownership dangerously aids and abets this political perversion of the information delivered to the American public.

My next post will focus on what can be done about media consolidation under billionaire owners and alternative sources of news and information.

[1] Martin, G.J., Mastrorocco, N., McCrain, J., & Ornaghi, A., 9/6/24, “Media consolidation,” Stanford University (https://web.stanford.edu/~gjmartin/papers/media_consolidation.pdf)

[2] Agrawal, N., 3/3/25, “The fight against media consolidation: Uplifting local journalism to improve civic engagement,” The Lambert Post (https://thelambertpost.com/opinions/the-fight-against-media-consolidation-uplifting-local-journalism-to-improve-civic-engagement/)

[3] Cox Richardson, H., 12/9/25, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/december-9-2025) page 2

WHAT EVERYDAY AMERICANS WANT FROM GOVERNMENT Part 2

Many Americans are worried about the cost of living. Government policies can reduce or control the costs of everyday expenses. If Democrats or others want to garner support and votes, they should aggressively promote such policies. Some examples are presented below.

(Note: If you find a post too long to read, please just skim the bolded portions. Thanks for reading my blog!)

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Many Americans are worried about the cost of living. The affordability of the cost of living has two components: 1) the amount of money people make and the benefits they get from their employer, and 2) the costs of everyday expenses from food to housing to health care to utilities. If Democrats, or another party such as the Working Families Party, want to garner support and votes, they should focus on the affordability of day-to-day life. They need to promote a vision of and policies for a more economically secure future for working Americans. This means embracing economic populism, including reducing economic inequality. [1]

This previous post discussed the first component, workers’ compensation. This post discusses ways public policies and government action can reduce, or at least control increases in, the cost of living, i.e., inflation. Over the last 45 years, the cost of everyday necessities has increased faster than workers’ wages, including for food, housing, child care, utilities, health care, and medicine.

Here’s an overview of some government policies that would reduce or control the cost of living. [2]

Rescind Trump’s tariffs. As even President Trump is now acknowledging, his tariffs have and will drive up consumer prices. He recently rescinded some tariffs on beef, coffee, tea, fruit and fruit juice, cocoa, spices, tomatoes and other commodities. He acknowledged that his tariffs may have contributed to higher prices at the supermarket. Since the first day that Trump announced his intention to impose tariffs, every reputable economist has stated that tariffs increase prices for consumers. (Note: Tariffs can be good policies if implemented as part of well-planned, comprehensive jobs or national security policies. However, Trump’s tariffs clearly do not meet this criterion.)
Enforce antitrust laws. Forty-five years of failure by the federal government to enforce antitrust laws (except for efforts to revitalize them under President Biden) have allowed the emergence of huge companies with monopolistic powers. This has harmed everyday Americans in many ways as outlined below. If Democrats or others, such as the Working Families Party, want to attract support and voters, they should unequivocally call out these huge companies and their oligarchic executives and investors for their greed and monopolistic behavior. This does mean that Democrats will have to stop cozying up to the oligarchs to get campaign donations.

Stop price gouging. Monopolistic or near monopolistic size allows companies to raise prices on consumers who have few if any options. In the short term, governments should implement windfall profits taxes and/or price controls to stop price gouging. In the longer term, governments should enforce antitrust laws and break up or impose very large fines on companies that engage in price gouging and other unfair, monopolistic business practices. This applies to a wide range of consumer goods and services from food to rent to air travel to health care to drug prices. It also applies to the big tech companies, Amazon, Meta (Facebook, Instagram, etc.), Alphabet (Google), Microsoft, and Apple.

Restore competition. By stopping mergers and acquisitions that lead to monopolistic power, and by breaking up monopolistic companies, competition could be restored to consumer markets. Without competition, prices go up and quality goes down, and consumers suffer.

Restoring competition would also reduce employers’ power over workers. Although this wouldn’t reduce costs, it would improve workers’ compensation and therefore the affordability of the cost of living. Employers’ power over workers has grown in multiple ways. The huge and monopolistic size of many employers limits the options for employees and, along with globalization, has allowed employers to undermine unions and cut workers’ compensation. Furthermore, many employers, including some fast-food chains, require employees to sign non-compete employment contracts that limit their ability to move to other employers for better jobs and better pay. President Biden took steps to ban non-compete agreements, but President Trump stopped this effort.

Stop privatization of public services and public goods. Privatization is often sold to the public with claims that the private sector will deliver cheaper and better services or products. This rarely turns out to be true. Once the profit incentive is introduced, prices are likely to go up and quality is likely to go down.

Nowhere is this clearer than in our health care system. The privatized system in the U.S. is the costliest system in any of the well-off countries of the world and its outcomes are among the worst. All elements of the system are putting profits before patients. Medicare is much more efficient than any of the private health insurance companies. The health care industry vehemently resisted including a public, Medicare-like option in the Affordable Care Act (ACA) because it knew the public option would deliver better care at lower prices. (See this previous post for more information on the failures of for-profit health care.)

Numerous other examples exist. Rail transportation in the rest of the world is more efficient, dependable, and convenient than the privatized system in the U.S. Internet service is cheaper and faster in Europe than in the U.S. (I’ve been criticizing privatization since way back in 2012. See this previous post and this one for more information.)

Stop the abuse of patents. Pharmaceutical companies abuse patent laws to keep cheaper generic versions of drugs from being introduced to the market. Classic cases of this are insulin and EpiPens. (See this previous post for more information.)
Enhance regulation. Regulations and enforcement of regulations need to be strengthened to protect consumers from fraud, price gouging, and unsafe food and products. Particularly where large companies have monopolistic power, strong regulation is needed. For example, millions of homeowners lost their homes in the aftermath of the 2008 financial crisis because large financial institutions were pushing fraudulent mortgages. The Consumer Financial Protection Bureau (CFPB) was created to protect consumers from financial fraud and abusive practices, such as exorbitant late and overdraft fees. The Trump administration is trying to eliminate the CFPB so big financial institutions can maximize their profits by ripping off consumers. (See this previous post for more information on the Trump administration’s weakening of regulations and the scams that are likely to be the result.)

My next post will discuss economic insecurity and inequality and the government policies that are needed to address them.

[1] Reich, R., 11/3/25, “What the Democrats must do. Now!” (https://robertreich.substack.com/p/what-the-democrats-must-do-now) /

[2] Kuttner, R., 11/12/25, “A blessing in disguise?” Today on The American Prospect (https://americanprospect.bluelena.io/index.php?action=social&chash=9a32ff36c65e8ba30915a21b7bd76506.3779&s=6009966078bda0f5 056f960a346ead8a

STANDING UP TO TRUMP AND CORPORATE OLIGARCHS

Oligarchy Definition A small group of people having formal and informal power based on (1)wealth; (2) connections; and (3) privilege.

American oligarchs have spent 45 years and billions of dollars undermining democracy and skewing government policy in their favor. We need to stand up and make Trump and corporate CEOs understand that the long-term success of their companies and our country depend on the trust and support of us, their customers and voters. We did this in a big way with the reaction to media executives pulling the Jimmy Kimmel show off the air. We need to do it again and again.

SPECIAL NOTE: We need millions of Americans at the No Kings protests on October 18 in defense of democracy. Please support this however you can. You can find an event near you here.

(Note: If you find a post too long to read, please just skim the bolded portions. Thanks for reading my blog!)

(Note: Please follow me and get notices of my blog posts on Bluesky at: @jalippitt.bsky.social. Thanks!)

American oligarchs, i.e., wealthy individuals and their large corporations, have spent at least the last 45 years undermining democracy and skewing government policy in their favor by: (See this previous post for more details.)

Increasing, coordinating, refining, and hiding their spending of billions of dollars on election campaigns. They spent over $10 billion in the 2023-24 federal election cycle alone.
Spending billions of dollars on lobbying the federal government, currently to the tune of $4 billion a year.
Moving tens of thousands of people through the revolving door between jobs in their corporations and in the government agencies that regulate them.

These efforts have been very successful; their return on investment has been extraordinary. Trump and his anti-democratic, authoritarian, and fascist administration are the culmination of this work that has undermined our democracy and skewed government policies and our economy to favor the oligarchs. Examples of skewed government policies include the following.

The individual income tax rates on oligarchs’ incomes have been cut from 70% in 1980 and 92% in the 1950s to 37% today. Income taxes on income from wealth, i.e., long-term capital gains, have been cut from 28% in 1980 to 15% in 2012 but are back up to 24% today. Note that the tax rate on income from wealth (i.e., unearned income) has always been much lower than the tax rate on income from work (i.e., earned income). This benefits the oligarchs and entrenches and exacerbates wealth inequality. Furthermore, increases in wealth that aren’t cashed in aren’t taxed at all. As a result, the richest billionaires pay about 3.4% in income tax on their incomes while the average American pays 14.5%.

Corporate income tax rates have also been cut from 46% in 1980 to 21% today. Moreover, tax loopholes allow corporations many strategies to avoid taxes. In particular, multi-national corporations artificially shift profits to foreign countries with very low taxes. Corporations have also been allowed to move jobs to low-wage countries and to resist and undermine workers’ unions. Roughly one out of every three private sector workers was a union member in the 1950s; today it’s one out of every 15. [1]

Antitrust laws have basically been unenforced for the last 45 years. As a result, many sectors of the American economy are dominated by a few, large, monopolistic corporations. Reduced competition means corporations can raise prices, cut quality, and strong-arm employees. Deregulation has left consumers vulnerable to poor products and frustrating services.

All of this has led to 45 years of dramatically growing income and wealth inequality. The 50% of Americans with the least wealth now, collectively, have only 2.5% of national wealth (less than $23,000 each on average). The wealthiest 1% of Americans own 33% of national wealth (about $15 million each on average). Pay for CEOs is now 1,094% higher than in 1978, while a typical workers’ pay has only increased 26%. As a result, the CEO-to-worker pay ratio grew from 31 times a typical worker’s pay in 1978 to 281 times in 2024. [2] And CEOs now believe that their only responsibility is to maximize returns for shareholders; other stakeholders, including workers, customers, and communities, are not a matter for concern.

The oligarch’s successful assault on our democracy and public policies has resulted in many Americans losing their economic security, as well as their trust in government and democracy. Many of them don’t feel it’s worth voting because they don’t believe it’s going to make any difference. They believe government is controlled by special interests working to benefit themselves. These Americans are angry and fearful about the future. Therefore, they are willing to believe the lies that Trump tells them about bringing back their good jobs and wages. And they are willing to overlook his undermining of democracy.

We, American consumers, need to make corporate CEOs understand that the long-term success of their companies depends on the trust and support of us, their customers. We did this in a big way with the reaction to media executives pulling the Jimmy Kimmel show off the air in response to President Trump’s displeasure with him. We’ll need to do this again and again to wake up CEOs and to get them to focus on the long-term instead of pleasing the would-be dictator in the White House in the short-term.

The spinelessness of corporate CEOs in the face of Trump makes it clear that they “are poorly suited to be custodians of democracy or counterweights to presidential overreach.” [3] “Capitalism is compatible with democracy only if democracy is in the driver’s seat. … [Otherwise] It fuels despotism.” [4]

We, the American public, consumers and workers, must stand up for democracy and for its regulation of corporations and capitalism. Otherwise, we’ll continue down the slippery slope to oligarchy, authoritarianism, and fascism. We can stop this slide, as we did in the Jimmy Kimmel case.

I look forward to seeing millions of Americans engaged in the No Kings protests on October 18 and in many, many other smaller protests daily. Thank you for all you’re doing! Please keep up this great and important work to save our democracy!

Find an October 18^th No Kings event near you here and participate and support it in whatever way you can.

For lots of current good news see Jess Craven’s Chop Wood Carry Water blog here.

[1] Economic Policy Institute, retrieved from the Internet 9/29/25, “State of Working America: Unions,” (https://data.epi.org/unions/union_members_historical/line/year/national/percent_union_members_historical/overall)

[2] Gould, E., Bivens, J., & Kandra, J., 9/25/25, “CEO pay increased in 2024 and is now 281 times that of the typical worker,” Economic Policy Institute (https://www.epi.org/blog/ceo-pay-increased-in-2024-and-is-now-281-times-that-of-the-typical-worker-new-epi-landing-page-has-all-the-details/)

[3] Edelman, L., 9/23/25, “Why corporate leaders are appeasing Trump,” The Boston Globe

[4] Reich, R., 9/26/25, “Why are we so polarized? Why is democracy in such peril?” Blog post (https://robertreich.substack.com/p/why-are-we-so-polarized)

CORPORATE OLIGARCHS HAVE BEEN UNDERMINING DEMOCRACY FOR 45 YEARS

Trump is the culmination of decades of work by wealthy individuals and CEOs (America’s oligarchs) undermining democracy & skewing government policy. This has led to high income & wealth inequality. Many Americans have lost their economic security, as well as their faith in government & democracy.

Trump is the culmination of decades of work by wealthy individuals and corporate CEOs (i.e., America’s oligarchs) undermining democracy and skewing government policies. This has led to dramatic income and wealth inequality. Many Americans have lost their economic security, as well as their faith in government and democracy.

SPECIAL NOTE: We need millions of Americans at the No Kings protests on October 18 in defense of democracy. Please support this however you can. You can find an event near you at: https://www.mobilize.us/nokings/map/?tag_ids=27849.

(Note: If you find a post too long to read, please just skim the bolded portions. Thanks for reading my blog!)

(Note: Please follow me and get notices of my blog posts on Bluesky at: @jalippitt.bsky.social. Thanks!)

I’ve been surprised at how little spine corporate Chief Executive Officers (CEOs) (supposed “leaders”) have shown in the face of Trump’s behavior and attacks. They know that unpredictability and chaos in government, as well as uncertainty, polarization, and unrest in society (in America and globally), are bad for the economy and for their businesses, at least in the long run. They know that an autocrat’s lack of respect for the rule of law, for property rights, and for freedom of speech are bad for business.

However, the CEOs of large corporations (aka corporate oligarchs) tend to be pragmatic and short-sighted. They value having political power and influence to the point that they seem to care little about politicians’ ethics or actions on issues that don’t conflict with their corporate interests. They know their large corporations are dependent on the government for many things, e.g., approvals of mergers, government contracts, tax breaks and subsidies, and licenses to operate. And they know their corporations are affected by many other things government does, e.g., writing and enforcing regulations, tax laws, and export and import policies (e.g., tariffs). [1]

President Trump has been leveraging (generally illegally) these many interrelationships between the government and corporations to pressure CEOs to do what he wants them to do, to support his policies, and to support him personally (sometimes financially). CEOs know Trump is arbitrary, unpredictable, and vindictive. They know that if he is irritated by a company or its CEO that he will use the powers of the government in a punitive fashion against them. Therefore, they capitulate.

However, Trump and his anti-democratic, autocratic, and fascist behavior and administration are the culmination of decades of work by wealthy individuals and corporate CEOs (i.e., America’s oligarchs). They have been undermining democracy and skewing government policies and our economy in their favor for at least 45 years. They have quadrupled their political spending (after adjusting for inflation) over the last 40 years. [2] In the 2023-2024 federal election cycle, $5.3 billion was spent on the presidential race and $9.5 billion was spent on congressional races. The overwhelming majority of this money came from American oligarchs. One hundred billionaires alone spent $2.6 billion. The seven highest spending individuals spent $930 million, all for Republicans, with Elon Musk leading the way with $291 million in spending, almost exclusively for the Trump campaign.

In addition to spending on election campaigns, corporations are also spending over $4 billion a year lobbying the federal government. [3] Furthermore, they engage in an extensive “revolving door” cycle of personnel (tens of thousands of them) who move between government regulatory agencies and positions in corporations the agencies regulate. [4]

All of this is in the interest of skewing government policy to favor American oligarchs, i.e., wealthy individuals and their large corporations. They have been very successful; their return on investment has been extraordinary.

My next post will provide specific examples of their successes, along with the effects and implications of them.

In the meantime, please make plans to stand up for democracy and against the oligarchs. I hope you can participate in and/or support the No Kings protests on October 18 – and the many, many other smaller protests that are occurring daily. Thank you for all you are doing! Please keep up this great and important defense of democracy!

Find a No Kings October 18^th event near you here.

[1] Edelman, L., 9/23/25, “Why corporate leaders are appeasing Trump,” The Boston Globe

[2] Reich, R., 9/26/25, “Why are we so polarized? Why is democracy in such peril?” Blog post (https://robertreich.substack.com/p/why-are-we-so-polarized)

[3] Open Secrets, retrieved from the Internet 9/29/25, “Lobbying data summary,” (https://www.opensecrets.org/federal-lobbying/)

[4] Open Secrets, retrieved from the Internet 9/29/25, “Revolving door overview,” (https://www.opensecrets.org/revolving-door/)

STRONG REGULATION NEEDED TO PROTECT US FROM META AND FACEBOOK

The harm that Facebook and other social media do to children and youth, our society and politics, and people and countries around the world is well documented. Clearly, the social media companies are far more committed to maximizing profits than they are to minimizing harm.

The harm that Facebook, Meta’s other platforms, and other social media do to children and youth, our society and politics, as well as to people and countries around the world, is well documented. The evidence continues to mount as new whistleblowers emerge and share inside information. Clearly, Meta (and other social media companies) are far more committed to maximizing profits than they are to minimizing harm.

SPECIAL NOTE: Please plan to participate in the next nationwide No Kings Day protest on Sat., Oct. 18. Find an event near you at https://www.mobilize.us/nokings/map/?tag_ids=27849.

(Note: If you find a post too long to read, please just skim the bolded portions. Thanks for reading my blog!)

(Note: Please follow me and get notices of my blog posts on Bluesky at: @jalippitt.bsky.social. Thanks!)

The harm that Facebook, Meta’s other platforms, and other social media do to children and youth is well documented, as this previous post covered. However, the harm to our society and politics, as well as to people and countries around the world, goes well beyond that and is long-standing. (See previous posts from 2022 and 2020 on Facebook’s knowing spread of divisive disinformation and right-wing content.) It’s clear that Meta and other social media companies are far more interested in maximizing profits than minimizing harm, such as avoiding spreading misinformation while fostering social division and conflict that sometimes lead to violence.

Meta has been in the news recently because more whistleblowers and former employees have come forward to report (again) that Meta CEO and owner Mark Zuckerberg and other senior Meta executives have repeatedly lied about the negative effects of their platforms and their knowledge of the harms caused for children, from spreading misinformation, and from fostering social division.

Coincidentally, I just finished reading a book about Facebook, Careless People: A cautionary tale of power, greed, and lost idealism, by Sarah Wynn-Williams, who worked at Facebook from 2011 – 2018. Perhaps her most poignant revelation is that “most leaders at Facebook … severely limit [their] kids’ access to screens, let alone social media accounts. … which only underscores how well these executives understand the real damage their product inflicts on young minds.” (p. 103-104)

Wynn-Williams reports on sexual harassment in the largely male world of Facebook, which senior management ignores (to say the least). She also documents Facebook’s role in:

The 2016 Trump campaign when Facebook staff were embedded at the campaign, which some people credit with Trump’s winning the election. (p. 264)
The violence and undermining of democracy in Myanmar from 2014 – 2017 due to Facebook’s failure to monitor and moderate content. This culminated in tens of thousands of deaths, untold atrocities, and the slaughter of Muslims and particularly the Rohingya people. The U.N. report on these human rights violations devotes over twenty pages to the role Facebook played in spreading hate. (p. 357-358)
Working with the Chinese government on censorship and surveillance to get it to allow Facebook in China. So desperate was Zuckerberg to get into the Chinese market that he gave the Chinese government access to user data that he had refused to give to other governments and that Facebook “aggressively fought against providing to the US government, even after receiving National Security Letters demanding it in specific cases.” (p. 311) Furthermore, Wynn-Williams notes that “Facebook has said [many things] are simply impossible when Congress and its own government have asked – on content, data sharing, privacy, censorship, and encryption – and yet its leadership are handing them all to China on a silver platter.” (p. 313) Facebook was very concerned about all of this leaking because “if it leaks we [Facebook] won’t be able to keep doing what we’re doing. … [it would] highlight differences in what we say to the public vs what we do.” (p. 313) When preparing Zuckerberg for congressional testimony about Facebook’s plans for China, Wynn-Williams reports that “No one suggests telling the truth … There seems to be no compunction about misleading Congress. Presumably because the team assumes they’ll never be caught …”. (p. 319)
Censoring content in Russia, Indonesia, Mexico, and South Korea at the request of senior government officials, largely solely at Zuckerberg’s discretion. (p. 158-164)
Selling advertisers on Facebook’s capabilities to target emotionally vulnerable teens while publicly denying that it was doing so. Advertisers know that people buy more when they are feeling insecure, “and it’s seen as an asset that Facebook knows when that is and can target ads.” (p. 334) While “this sort of ad targeting is commonplace at Facebook … it pretends the opposite: ‘We have opened an investigation to understand the process failure and improve our oversight.’” A follow up statement was “a flat-out lie: ‘Facebook does not offer tools to target people based on their emotional state.’” (p. 336-337)

Wynn-Williams documents that time and again Zuckerberg and other Meta senior executives lie about and distort what Meta is doing, the harm it’s causing, and their knowledge of the harm. They lie to the media and the public, they lie in congressional testimony, and they lie internally to their own employees. They also attack government officials and human rights groups that oppose the expansion or advocate regulation of Facebook and Meta’s other platforms. (p. 206-212) She also writes that “Facebook’s leadership could be utterly indifferent to the consequences of their decisions.”, hence the book’s title Careless People. (p. 307) In 2017, one of the findings of worldwide consumer focus groups was that “The idea that Facebook cares about people’s privacy is not believable anywhere.” (p. 315)

In response to the recent murder of Charlie Kirk, Utah Governor Spencer Cox made the point that social media is designed to amplify hate and division. They do this because social media companies know that this is the most effective way to maximize profits. Social media algorithms are designed to feed you stories that alarm and upset you because that results in your spending more time on the social media platform. [1]

I encourage you to contact your Representative and Senators in Congress and ask them to support strong regulation of the social media platforms to stop them from continuing to harm our children and youth, our society, and our politics and elections.

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

[1] Hubbell, R., 9/15/25, “Leaning into resistance during troubled times,” Today’s Edition Newsletter (https://roberthubbell.substack.com/p/leaning-into-resistance-during-troubled)

CHILDREN AREN’T SAFE ON META’S VIRTUAL REALITY PLATFORMS

The harm that Meta Platforms’ Facebook and virtual reality programs do to children and youth is well documented. The evidence continues to grow as new whistleblowers come forward and share inside information. Clearly, Meta is far more committed to its profits than it is to protecting children.

The harm that Meta Platforms’ social media platforms, including Facebook and virtual reality programs, do to children and youth is well documented. The evidence continues to grow as new whistleblowers come forward and share inside information. Clearly, Meta (and other social media platforms) are far more committed to their profits than they are to protecting children.

(Note: If you find a post too long to read, please just skim the bolded portions. Thanks for reading my blog!)

(Note: Please follow me and get notices of my blog posts on Bluesky at: @jalippitt.bsky.social. Thanks!)

It’s been far too long since I wrote about Meta Platforms and its subsidiaries. Meta’s Facebook and virtual reality platforms are harming children. The harm that Facebook and other social media do to children and youth is well documented. It is equally clear that Meta and other social media companies are far more interested in maximizing profits than protecting children.

Three years ago, I wrote a blog post calling for federal legislation to protect children on social media. No legislation has been passed in those three years and no significant federal legislation regulating social media has been passed since the 1998 Children’s Online Privacy Protection Act (COPPA). A lot has changed since 1998 and new federal legislation is sorely needed. In my September 2022 blog post, I called on Congress to pass two bills to protect children on social media. (Previous posts here and here document the harms to children and beyond of Facebook and other social media platforms, as well as ways to respond.)

The Kids Online Safety and Privacy Act (KOSA) (a combined version of the two previous bills) passed the Senate with a strong, bipartisan vote (91 – 3) in July 2024. Heavy lobbying, led by Mark Zuckerberg, Chairman, Chief Executive Officer, and controlling stockholder of Meta, blocked action on it in the House. By the way, Europe has done a much better job than the U.S. of protecting everyone’s privacy and well-being on social media, including that of children.

The social media platforms’ business model is to hook kids at an early age, feed them addictive content to keep them engaged, amass extensive personal information about them and their online behavior, and then use these data to sell very targeted, personalized, and effective advertising. This is very lucrative for the social media platforms, however, the content and marketing to kids often presents toxic content that harms kids’ well-being and mental health. [1]

Advocates for children, including Fairplay, filed a request in May for the Federal Trade Commission (FTC) to investigate Meta for violating children’s safety and privacy on its virtual reality platform Horizon Worlds. Children, including ones under 13, are at risk for sexual predation, financial harm, bullying, and harassment on Horizon Worlds. Meta knows this, but it fails to protect children while it captures their data, in violation of the Children’s Online Privacy Protection Act, to sell to advertisers and to make their platform as addictive as possible. The FTC complaint was supported by a sworn statement from Kelly Stonelake, the former director of marketing for Horizon Worlds at Meta.

Meta has been in the news this week because six whistleblowers and former employees have come forward to report (again) that Meta has been covering up and ignoring the harm they know their platforms are doing to children. The focus this week was on the virtual reality platforms that Meta offers. Current and former employees revealed that Meta is suppressing internal research on child and youth safety and is also turning a blind eye to children under 13 illegally using these platforms. Furthermore, Meta’s legal and communications teams work to communicate plausible deniable for its executives on company knowledge of negative effects on children. Zuckerberg and Meta have previously lied about the harmful effects of their platforms and their knowledge of those harmful effects on children. (Meta whistleblowers previously revealed similar misbehavior in congressional testimony in 2023 (Arturo Beja) and 2021 (Frances Haugen).)

Not surprisingly, therefore, the Kids Online Safety and Privacy Act (KOSA) is again being considered in the U.S. Senate (S.1748) and there’s also a push to pass it in the House: It would:

Provide privacy protections for children and youth,
- Extend to 13 to 16-year-olds the prohibition on social media platforms capturing children’s personal information without their consent and require the platforms to delete any such information they collect if requested to do so,
- Limit individually targeted advertising (referred to as surveillance advertising),
- Require the social media platforms to put the interests of young people first,
Provide families with the tools and safeguards to protect children’s well-being and mental health,
Require transparency from the social media platforms about the data they are capturing and the algorithms they are using for promoting content and advertising, and
Establish accountability for harms caused by social media.

I encourage you to contact your Representative and Senators in Congress and ask them to support strong regulation of social media platforms to prevent them from harming our children and youth. Urge them to support the Kids Online Safety Act (KOSA, Senate bill 1748) and similar legislation in the House.

SPECIAL NOTES:

Please plan to participate in the next nationwide No Kings Day protests on Saturday, Oct. 18.
Here’s a link to the most recent Jess Craven Chop Wood Carry Water post of good news: https://chopwoodcarrywaterdailyactions.substack.com/p/extra-extra-914

[1] Corbett, J., 7/27/22. “ ‘Critical’ online privacy protections for children advance to Senate floor,” Common Dreams (https://www.commondreams.org/news/2022/07/27/critical-online-privacy-protections-children-advance-senate-floor-vote)

THE PERVERSION OF CAPITALISM BY TRUMP

President Trump is perverting capitalism and the free market by asserting unprecedented influence over the private sector. His actions are not a coherent economic policy and make the U.S. economy look like China’s. They’re all about centralizing power and control, while undermining the rule of law and democracy. This is what fascism and oligarchy look like.

(Note: If you find a post too long to read, please just skim the bolded portions. Thanks for reading my blog!)

(Note: Please follow me and get notices of my blog posts on Bluesky at: @jalippitt.bsky.social. Thanks!)

President Trump is perverting capitalism and the free market by asserting unprecedented personal influence over and taking government ownership in private sector companies. His actions do not reflect a coherent economic policy. It is the power grabbing of a tyrant and bully who wants to control others and wants them to be subservient. Trump is using largely illegal financial (e.g., import tariffs and export fees), regulatory, and court-based actions to do this. He wants to influence the decisions of other countries and American businesses, including media corporations, financial institutions, law firms, and universities. He wants countries and companies to come to him begging for exemptions from his actions and threats. [1] This is, of course, a breeding ground for corruption and bribery.

Nothing even approaching this level of government interference in the private sector has occurred since the emergency mobilization of the private sector for World War II. This government interference in private companies, which is a type of state-controlled capitalism, has until now always been anathema to Republicans and the business community. If any president prior to Trump had attempted any of this, Republicans, business executives, and the mainstream media would be screaming about it being socialism or communism. The actions by Trump are making the U.S. economy look like that of China, where the government owns a stake in companies or has considerable influence over their decision making. [2] [3] Or like Leninist capitalism where the Communist Party controlled the state’s ownership of businesses. [4]

This alignment of an authoritarian leader and a nominally capitalist economy is classic fascism. While Republicans and business executives are supportive or mute, the Wall Street Journal simply calls it inefficient. The business executives and other wealthy investors that facilitate and participate in Trump’s actions are the American oligarchy.

Examples of Trump’s actions include:

Allowed Nvidia and Advanced Micro Devices, makers of artificial intelligence (AI) computer chips, to export them to China on the condition that the companies pay the United States 15% of their profits. This poses risks to the U.S. AI industry and to U.S. national security (in part due to the chips’ use by the Chinese military). These payments are, for all intents and purposes, an export fee, which is unprecedented in U.S. history. Moreover, the Constitution explicitly bans export taxes (Article I, Section 9, Clause 5). [5]
Demanded that Intel’s CEO resign and then negotiated 10% government ownership of the company. This makes the U.S. government one of Intel’s largest shareholders. [6]
Proposed that the Defense Department take a 15% ownership stake in MP Materials, which mines minerals critical for chips and electronics.
Allowed Nippon Steel of Japan to take over U.S. Steel on condition that Nippon pay a “golden share” of the proceeds to the government and give Trump control over elements of corporate governance.
Reserved the right to personally direct some the $1.5 trillion in promised investments in the U.S. to be made by America’s trading partners as part of tariff negotiations.
Sued media corporations and negotiated approval of media corporation mergers to get money and influence over media content.

The government ownership in and influence over the private sector asserted by Trump has nothing to do with promoting the public interest, the well-being of American workers, or protecting national security. In fact, they undermine all these principles. They’re all about centralizing power and control in Trump’s hands as part of his efforts to undermine the rule of law and democracy. [7] Moreover, who holds the ownership stakes and who exercises the related rights is unclear.

Despite Trump’s bluster about being tough on China, his actions have been quite favorable to China. He has illegally extended the deadline for the sale of Chinese ownership of TikTok if it wants to do business in the U.S. He has shut down Radio Free Asia, which countered Chinese propaganda. He’s allowed the export of artificial intelligence computer chips to China, which was a key request from China in trade negotiations.

Please contact your members of Congress and ask them to assert their oversight of these deals Trump is making. Ask them to clarify who holds the ownership stakes, who is exercising ownership rights, and where the funds received are going. Ask them to ensure that the Trump administration’s economic policies and actions further the public interest, benefit workers, promote national security, and comport with the rule of law and democratic principles.

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] Dayen, D., 8/11/25, “Tariffs to import and fees to export,” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/2025-08-11-tariffs-to-import-fees-to-export-nvidia-chips-china/)

[2] Reich, R., 8/12/25, “Trump’s ‘state capitalism’,” Blog post (https://robertreich.substack.com/p/trumps-state-capitalism)

[3] Cox Richardson, H., 8/11/25, Letters from an American blog post, (https://heathercoxrichardson.substack.com/p/august-11-2025)

[4] Meyerson, H., 8/18/25, “When l’etat c’est Trump, the U.S. goes in for state capitalism,” The American Prospect (https://prospect.org/economy/2025-08-18-when-letat-cest-trump-us-goes-in-for-state-capitalism/)

[5] Dayen, D., 8/11/25, see above

[6] Liedtke, M., & Kurtenbach, E., 8/20/25, “US vying to own a big stake in Intel,” The Boston Globe from the Associated Press

[7] Reich, R., 8/12/25, see above

BEWARE! SCAMS ARE COMING YOUR WAY! PART 2

Consumers beware; you’ll need to up your vigilance to avoid scams. The Trump administration is weakening consumer protections. From the cryptocurrency industry to cyber security to Social Security and health care, weak oversight and regulation will lead to consumer rip-offs and outright fraud.

Consumers beware; scams of all sorts are coming your way. The Trump administration is weakening or eliminating agencies and regulations that protect consumers. From the cryptocurrency industry to cyber security to Social Security and health care, weak oversight and regulation will lead to consumer rip-offs and outright fraud. You will need to up your level of vigilance to avoid getting scammed.

(Note: If you find a post too long to read, please just skim the bolded portions. Thanks for reading my blog!)

(Note: Please follow me and get notices of my blog posts on Bluesky at: @jalippitt.bsky.social. Thanks!)

Consumers beware; scams of all sorts are coming your way. The Trump administration is weakening or eliminating agencies and regulations that protect consumers, so it’s an open field for unscrupulous behavior by businesses and fraudsters. From the cryptocurrency industry to cyber security to Social Security and health care, weak oversight and regulation will lead to consumer rip-offs and outright fraud. (See this previous post focused on financial and other corporate scamming.)

The cryptocurrency industry is trying to transform its image from that of a scandal-ridden and crime-enabling financial technology (aka fintech) experiment into that of a mainstream financial and commercial investment and transaction vehicle. Don’t let yourself be fooled. For example, Coinbase, founded in 2012 and now the largest U.S.-based cryptocurrency exchange as well as the world’s biggest bitcoin custodian, has had over 8,000 consumer complaints filed against it with the Consumer Financial Protection Bureau (CFPB). [1]

The crypto industry spent well over $100 million in the last elections, including donations to Trump-affiliated entities, to elect pro-crypto politicians and to instill fear into others who might oppose the industry. It has also spent millions on a lobbying campaign to build bipartisan support for the Republican-led pro-crypto bills and to obtain a favorable regulatory environment.

Despite the crypto industry’s record of fraud, facilitating criminal activity, and extreme volatility, the Trump administration, through an executive order, is allowing investments in it by retirement plans, corporations (including banks!), and the government itself. [2] Furthermore, the Trump administration has eliminated crypto crime units at the Securities and Exchange Commission (SEC), the Department of Justice (DOJ), and in other government agencies. It has ended numerous investigations and criminal prosecutions of crypto industry entities. These actions effectively facilitate money laundering and criminal activity. [3]

Three bills have been introduced in Congress ostensibly to regulate the industry but appear more focused on giving it legitimacy and a government seal of approval. One of the three bills, the so-called Genius Act has passed and become law. It established a regulatory framework for a piece of the crypto industry called stablecoins. This type of cryptocurrency is linked to the value of the U.S. dollar which is supposed to prevent the volatility that occurs with other cryptocurrencies. Most, but not all, Democrats opposed this bill due to concerns that it lacked strong provisions to prevent fraud and money laundering. Furthermore, it does nothing to stop President Trump, his family, and his associates from profiting from cryptocurrency activities that allow other people and entities to effectively put money in Trump’s and his affiliates’ pockets. [4]

One of the other bills, the so-called Clarity Act would create a broader crypto regulatory framework. The third bill would ban the Federal Reserve from creating its own cryptocurrency that would compete with private cryptocurrencies and presumably reduce the profitability of the private crypto industry. So, beware of anything crypto industry related that comes your way.

In a variety of other arenas, the Trump administration is also weakening consumer protections.

Having effectively eliminated the Consumer Financial Protection Bureau (CFPB), the Trump administration is now considering weakening the Consumer Product Safety Commission (CPSC) that protects consumers from dangerous non-financial products.

The Trump administration has dramatically weakened some of the federal government’s cyber security agencies. So, be ever more alert for cyber crime and cyber scams. It is taking FBI agents away from their specialties such as combating hackers (as well as terrorism, espionage, public corruption, white-collar crime, civil rights, child sex crime, etc.) to have them patrol the streets of D.C. where crime is at its lowest level in years. Moreover, a map of where FBI agents and troops have been deployed makes it very clear they are not really there to combat crime; they are there to be seen and to make a statement. [5]

The Trump administration is cutting staffing and services at the Social Security Administration, while having it send out misleading information. (See this previous post for more detail.) This will make it harder for seniors and others to receive the benefits they’re owed and to get accurate information. This will create fertile ground for scammers to step in. Be on your guard.

Similarly, cuts to the health care system and weakened oversight of privatized Medicare Advantage Plans will open the door to scammers. For example, 17% of Americans now report they are using buy now, pay later (BNPL) programs to pay for medical or dental care. [6] BNPL programs not infrequently involve terms and costs that are not well explained to consumers and, therefore, result in financial abuse.

Please contact your members of Congress and tell them you support strong regulation of the crypto industry to protect consumers and to prevent crime and money laundering. Ask them to oppose the two crypto industry bills as they are currently written. Ask them to stand up for strong consumer protections from the CFPB, CPSC, and cyber security agencies. Ask them to protect seniors and others from the undermining of Social Security and our health care system.

By the way, there is lots of good news. See Jess Craven’s latest good news post. It includes California Governor Newsom fighting fire with fire on the gerrymandering front, numerous judges’ decisions, protests all across the country, conservative economists opposing Trump’s nominee to run the Bureau of Labor Statistics, Ohio’s Sherrod Brown deciding to run for U.S. Senate again in 2026, and much more.

[1] Silverman, J., 5/27/25, “Three coin monte,” The American Prospect (https://prospect.org/power/2025-05-27-three-coin-monte-crypto-regulation/)

[2] Johnson, J., 8/7/25, “‘Disaster in the making’: Trump to open 401(k)s to crypto, private equity vultures,” Common Dreams (https://www.commondreams.org/news/trump-private-equity-401k)

[3] Silverman, J., 5/27/25, see above

[4] Gold, M., 7/18/25, “Here’s how Congress is wading into crypto regulation,” The Boston Globe from the New York Times

[5] Cox Richardson, H., 8/19/25, “Letters from an American,” (https://heathercoxrichardson.substack.com/p/august-19-2025)

[6] Corbett, J., 8/6/25, “‘Gouging’: US health insurance giants raked in over $71 billion in profits last year,” Common Dreams (https://www.commondreams.org/news/health-insurance-profits)

BEWARE! SCAMS ARE COMING YOUR WAY!

Consumers beware; scams of all sorts are coming your way. The Trump administration is weakening or eliminating agencies and regulations that protect consumers. From financial services to the big tech companies a lack of oversight and regulation will lead to consumer rip-offs and outright fraud. You will need to up your level of vigilance to avoid getting scammed.

(Note: If you find a post too long to read, please just skim the bolded portions. Thanks for reading my blog!)

(Note: Please follow me and get notices of my blog posts on Bluesky at: @jalippitt.bsky.social. Thanks!)

Consumers beware; scams of all sorts are coming your way. The Trump administration is weakening or eliminating agencies and regulations that protect consumers, so it’s an open field for unscrupulous behavior by businesses and fraudsters. From financial services (including student loans) to the big tech companies, a lack of oversight and regulation will lead to consumer rip-offs and outright fraud.

Perhaps the most blatant of the Trump administration’s anti-consumer actions is the virtual elimination of the Consumer Financial Protection Bureau (CFPB). In its 14 years of existence, the CFPB has required over $20 billion to be returned to consumers who were defrauded by financial businesses. Last year, for example, it sent $1.8 billion in checks to 4.3 million customers who had been defrauded by two credit repair services. [1] It has saved consumers billions more by regulating late fees on credit cards, overdraft fees on bank accounts, and much more. If it had been in existence before the 2008 financial collapse, it might well have prevented the collapse, and it would have saved many home owners their homes and others billions of dollars lost to mortgage fraud.

Not surprisingly, in the absence of CFPB enforcement, the number of consumer complaints has already exploded with 2.5 million complaints filed in the last six months. This is over ten times the number of complaints filed in a typical six-month period over the last 13 years. A major source of complaints is inaccurate data on consumers’ credit reports. Two weeks before Trump took office, the CFPB had sued Experian (one of the three big credit reporting agencies) for basically ignoring consumers’ complaints about inaccurate information. This lawsuit is going nowhere under the Trump administration. The Trump administration also voided a ruling that would have forced the Navy Federal Credit Union to return $80 million in fraudulent overdraft fees to customers who had been told they had sufficient funds to cover a withdrawal. This just one example of Trump administration actions to take millions of dollars promised to fraud victims and give it back to corporate scammers.

The Trump administration is attempting to dodge requirements that the CFPB make consumer complaints public so consumers can know which companies are bad actors. It has also stopped actions to curb excessive credit card late fees, to remove medical debt from credit reports, and to regulate digital payment businesses, payday lenders, and credit repair services. It has permanently dropped at least 22 enforcement actions against companies accused of billions of dollars of consumer financial fraud, including one against Zelle, the electronic payment platform that was infested with fraud shortly after being launched.

Medical credit cards and abuses of them are likely to increase dramatically with the CFPB out of the way. For example, in 2023, Synchrony Bank made $3.7 billion in interest and fees on its 11.7 million CareCredit cards (the most widely used medical credit card). These are offered to patients, sometimes ones in a crisis. They are often interest-free up-front but have a balloon interest amount due if not fully paid off in a set period. There are frequently junk fees associated with them and users frequently report that the terms and rules of the credit card weren’t clearly explained to them. [2]

The emasculation of the CFPB will eliminate oversight and accountability in the financial industry. This will make consumers vulnerable to the multitude of financial scams in the marketplace, which will now grow and proliferate. You will need to up your level of vigilance to avoid getting scammed.

Consumers will also be harmed by the far-reaching business deregulation and lack of enforcement of regulations and laws governing business behavior that the Trump administration is undertaking. As economists have noted for literally hundreds of years, bad money drives out good money, or, in other words, honest companies have a tough time competing against dishonest companies. Therefore, bad business behavior is likely to proliferate. [3]

Over 165 enforcement actions against businesses have been dropped or put on hold in the first six month of the Trump administration. Not coincidentally, roughly $50 million in donations to Trump’s inauguration and untold millions to Trump via other vehicles have come from companies subject to federal investigations, lawsuits, enforcement actions, or antitrust cases. Technology companies, particularly the big three: Meta (Facebook’s parent company), Apple, and Google, have benefited by spending relatively small amounts of money for them (a few million dollars) on political spending and lobbying to get favorable actions from the Trump administration. Of the 140 investigations and enforcement actions targeting 104 tech corporations when Trump took office, at least 50 have already been stopped. Bank of America, Capital One, Coinbase, DuPont, and JPMorgan donated to Trump’s inauguration and then federal enforcement actions against them were dropped. Intuit, which makes tax preparation software, gave to the inauguration and then the IRS discontinued its free, Direct File tax return program. Apple supported the inauguration and was then exempted from most tariffs. These companies are getting a great return on their “investments”. This pattern is evidence of a pay-to-play scheme that would be criminal bribery under any other president and administration. [4] [5]

The Trump administration is weakening or stating it won’t enforce laws banning U.S. companies from bribing foreign officials, prohibiting workplace discrimination, or regulating loan shark lending and its usurious interest rates. It is also making life harder and loans more expensive for student borrowers by making federal government student lending much less helpful and more costly. This will force many students needing to borrow funds for college into the hands of private lenders, some of whom are financial predators that the CFPB won’t be around to regulate or hold accountable. [6]

More in my next post on scams to be on the lookout for, including from the cryptocurrency industry.

[1] Tkacik, M., & Baratta, J., 7/11/25, “Hardly workin’,” The American Prospect (https://prospect.org/economy/2025-07-11-hardly-workin-cfpb-doge-trump/)

[2] Covert, B., 5/28/25, “Predatory lenders in the operating room,” The American Prospect (https://prospect.org/health/2025-05-28-predatory-lenders-operating-room-medical-credit-cards/)

[3] Dayen, D., 5/27/25, “The golden age of scams,” The American Prospect (https://prospect.org/power/2025-05-27-golden-age-of-scams/)

[4] Johnson, J., 8/14/25, “‘Corporate crime pays’ under Trump as his agencies drop enforcement against 165 companies,” Common Dreams (https://www.commondreams.org/news/corporate-crime-donald-trump)

[5] Johnson, J., 4/22/25, “‘See how this works?’: Trump drops cases against corporations that funded his inauguration,” Common Dreams (https://www.commondreams.org/news/trump-corporations-inauguration)

[6] Dayen, D, 5/27/25, “Borrowers besieged,” The American Prospect (https://prospect.org/education/2025-05-27-borrowers-besieged-student-debt/)

EXTREME CAPITALISM OF PRIVATE EQUITY FIRMS DOES GREAT HARM Part 2

Illustration of a vulture sitting on a falling graph. Concept for vulture capitalists, economic crisis, recession, bankruptcy and insolvency.

This post provides an overview of how the private equity financial model works. It includes two examples of its detrimental effects, one in the chemical industry and the other in communications services for the 500,000 deaf people in the U.S.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog is here.)

My previous post provided a high-level summary of the harm being done by private equity (PE) firms. It then focused on the Stop Wall Street Looting Act in Congress as an important step to stop the harm being done to patients, consumers, employees, and communities by the PE financial model.

Here’s an overview of how the private equity financial model works. The PE firm, using mostly borrowed money, buys a company. The debt and interest of the borrowed money are then made the responsibility of (and often an overwhelming burden on) the purchased company. The PE owners also pay themselves exorbitant fees (usually for “management”) and pay large dividends to themselves and their other investors. They often sell the company’s assets, such as real estate, to raise money to pay for these payments or to make debt payments. Typically, the company’s real estate is leased back to it at an exorbitant cost.

All this forces the purchased company to engage in (often severe) cost-cutting to be able to make the payments on the debt, the lease, and to the PE owners and investors. This cost-cutting often involves major layoffs and cuts in compensation for employees. Abusive employment practices, union busting, and unsafe workplaces are not uncommon. The quality of the company’s products or services is often compromised to reduce costs. Despite all this cost cutting, the companies often go bankrupt, leaving employees without jobs and often without owed pay and benefits, including retirement benefits.

U.S. laws and policies aid and abet this process by granting tax and other benefits to elements of this model. PE firms are much more loosely regulated than publicly-owned companies or mutual funds that sell shares to the public. Given their private ownership, PE firms have basically no requirements for public disclosures or transparency. The Stop Wall Street Looting Act (see this previous post for an overview) would change this, regulating PE firms and holding them accountable.

Previous posts have reported on PE ownership and its effects in pet care, retail, and health care (here, here, here, and here). Here are two additional examples.

EXAMPLE #1: Centerbridge Partners, a PE firm, bought KIK Custom Products, the parent company of BioLab Inc., in 2015 for $1.6 billion. In late September, 2024, a BioLab chemical plant in Conyers, Georgia, had a massive explosion. Toxic clouds of smoke spread over the area and 17,000 residents had to be evacuated and another 90,000 were told to shelter-in-place. In 2020, an explosion at another BioLab plant in Georgia released a cloud of toxic chlorine gas and there was also a major fire at a plant in Louisiana. Under PE firm Centerbridge’s ownership, BioLab has a long history of explosions, fires, and workplace safety violations. [1]

Centerbridge and its investors have gotten at least $3.45 billion in dividends; a return of more than double their investment – in dividends alone. In the last four years, Centerbridge has added over $2.6 billion in debt to BioLab, primarily to pay for dividends paid to Centerbridge and its investors. In addition, in July, 2024, it sold off a separate subsidiary of KIK for $850 million, which was used to pay Centerbridge and its investors another large dividend and had the effect of increasing the debt load on BioLab. With interest rates rising, this significantly undermines BioLab’s financial stability and makes bankruptcy more likely.

If this most recent plant explosion pushes BioLab into bankruptcy, the company’s workers, including their pensions, as well as contractors and suppliers, will end up losing money that is owed to them. Furthermore, if BioLab goes bankrupt, anyone suing BioLab for personal or environmental harms from the toxic explosions will likely get nothing. It will be left up to the government and the taxpayers to pay for the harm and damage done, as well as the clean-up.

EXAMPLE #2: Two companies, Sorenson Communications and ZP Better Together, separately owned by PE firms, run the service that allows deaf people to communicate by phone using sign language via the Video Relay Service (VRS). The phone companies are required by the Americans with Disabilities Act to make the VRS available for free to the 500,000 deaf people in the U.S. A small fee on all phone calls pays for it and the funding is funneled through the Federal Communications Commission (FCC). The FCC pays a fixed rate per minute for the video calls. The VRS must be available 24 hours a day, seven days a week, and must answer 85% of calls within ten seconds.

The VRS companies were targeted for acquisition by the PE firms because of their steady cashflow with effectively guaranteed profits. [2] Furthermore, the two companies have pushed the FCC to increase reimbursement rates and, in 2023, it announced a new five-year deal with rate increases of 30% to 49%. The rate for the first million minutes of calls will now be $6.27, up from $3.92. After the first million minutes, the rate declines.

Sorenson’s annual revenue is projected to be $2.1 billion and ZP’s about $400 million. Nonetheless, the two PE-owned firms have presided over declining service quality and deteriorating working conditions for employees in their efforts to maximize profits. There have been layoffs, under staffing, and under-training of staff. For example, some staff are specially trained to handle difficult calls, such as notifying a deaf person of the death of a loved one. Some are specially trained to handle translation and communication of legal documents. However, because of staff and training shortages, interpreters are being asked to do work they are not trained for. Workers typically have quotas for the number of minutes per hour they must be on calls to get paid. In some call centers, quotas have been increased because of labor shortages.

The companies have engaged in unfair labor practices and have aggressively resisted efforts to unionize. Labor representatives report that the FCC has not responded to a request for a meeting to discuss working conditions for months, while FCC staff and Commission members have met with the companies’ executives 16 times in the last two years.

Most of the sign language interpreters are part-time employees, with lower pay and benefits than full-time employees, who are usually managers. Although the FCC said that pay for interpreters would increase 65% over five years due to the rate increase, interpreters haven’t received wage increases and therefore are pushing to unionize. Several months after the 2023 rate increase, ZP closed two call centers in Minnesota after workers tried to unionize. ZP also closed two centers in California after settling a case of wage theft and retaliation for $320,000.

Sorenson has laid off workers, including middle management, many of whom were deaf people who had started as interpreters and worked their way up. The middle managers are some of the few employees who are typically full-time workers with decent pay and benefits.

More examples of PE ownership and its detrimental effects, including the Steward Health Care fiasco, will be shared in future posts.

[1] Tkacik, M., & Goldstein, L., 10/2/24, “A toxic explosion in private equity payouts,” The American Prospect (https://prospect.org/power/2024-10-02-conyers-biolab-explosion-private-equity/)

[2] Goldstein, L., 9/30/24, “Private equity is taking your calls,” The American Prospect (https://prospect.org/power/2024-09-30-private-equity-is-taking-your-calls/)

EXTREME CAPITALISM OF PRIVATE EQUITY FIRMS DOES GREAT HARM Part 1

The extreme capitalism of private equity firms does great harm. These vulture capitalists use financial manipulation to extract big profits from companies without regard to their survival or the welfare of stakeholders. There’s a bill in Congress that will stop this. — Illustration of a vulture sitting on a falling graph. Concept for vulture capitalists, economic crisis, recession, bankruptcy and insolvency.

SUMMARY: The current brand of capitalism in the U.S. does lots of harm. Nowhere are the harms more evident than in the extreme capitalism of private equity (PE) firms. These vulture capitalists use financial manipulation to extract big profits from companies they buy without regard to the health or survival of the companies, or the welfare of their employees, customers, and communities. There’s a bill in Congress that will stop this vulture capitalism and all the damage it does.

The current brand of capitalism in the U.S. does lots of harm. Even “routine” corporate activity results in lots of bad behavior, some of it illegal or corrupt, all of which harms employees, consumers, and the public. I’ve cited examples of this in many previous posts and, in my most recent post, I highlighted three examples and also shared why it’s important to be aware of this. The profit motive of capitalism and the greed of capitalists result in harmful business behaviors unless they’re well-regulated and the penalties and punishments for businesses and their executives are sufficient to truly discourage bad behavior or to put them out of business.

Nowhere are the harms of capitalism more evident than in the extreme capitalism of private equity (PE) firms. PE firms (i.e., “vulture capitalists”) use financial manipulation to extract profits from companies without regard to the health or survival of the companies, or the welfare of their employees, customers, and communities. Vulture capitalism fails to produce benefits for anyone other than the rich private equity financiers. They are not investing in the companies they buy; they are looking to maximize their short-term profits and have no qualms about the companies going bankrupt – in some cases that’s their plan. (See this previous post from 2018 describing the private equity business model and why it deserves to be called vulture capitalism.)

PE firms have purchased companies in many sectors of the economy from health care (over $500 billion between 2018 and 2023) to child care to pet care, from housing to private colleges, and from retail store chains to newspapers. Everywhere they’ve gone they’ve left destruction in their wake, including decimating local newspapers, bankrupting long-standing retail store chains, and causing deaths and injuries in health care.

In my next post, I’ll give a description of the PE business model and some specific recent examples of the harm it’s done, but, for now, here’s what can be done to stop this vulture capitalism. The Stop Wall Street Looting Act has been introduced in Congress by Senators Elizabeth Warren (D-MA), Tammy Baldwin (D-WI), Sherrod Brown (D-OH), (all three are up for re-election, by the way) and others, along with over half a dozen Representatives. First introduced in 2019, the Act would: [1]

Make the PE owners and investors responsible for the debts and liabilities of the companies they own rather than allowing them to continue to avoid responsibility and liability by claiming to be an independent entity.
Change bankruptcy laws so that when PE-owned companies go bankrupt (as they often do) workers’ pay and benefits, including pensions, would be given a higher priority, rather than being the last party to get paid if there’s any money left over (which there usually isn’t).
Ban practices that allow PE owners to extract short-term profits that undermine the financial viability of a purchased company. For example, if a PE-owned company files for bankruptcy, the PE owners and investors could be forced to pay back the fees, dividends, and other payments they had received over the last 3 – 5 years.
Prohibit PE-owned firms that receive federal or state funds (as all health care providers do and as 611 PE-owned companies that received $5.3 billion in Covid relief funds did) from acquiring other companies or making payments to the PE owners or investors for two years.
Ban PE-owned health care companies from receiving federal money from Medicare or Medicaid if they sell property to or receive property-based loans from a real estate investment trust (REIT). REIT transactions are a standard, financial manipulation practice for PE-owned hospitals and were a key factor in Steward Health’s rapid expansion and then bankruptcy.
Subject PE firms to greater oversight and disclosure requirements. Cerberus Capital Management, the PE firm behind the Steward health care bankruptcy and debacle, would not have been able to withhold financial information from health care oversight agencies and from Congress – as it continues to do today.

I urge you to contact your U.S. Representative and Senators to ask them to support the Stop Wall Street Looting Act. Private equity’s model of vulture capitalism needs to be reined in before more patients, customers, employees, and communities are harmed. 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.

The PE industry and its allies will, of course, strenuously oppose this legislation, as they have since it was first introduced in Congress in 2019. For example, during the 2021-2022 election cycle, the PE industry donated almost $350 million to federal election candidates and committees.

If you need any convincing of the need to stop the vulture capitalism of the PE model of business financial manipulation, my next post will present some recent examples of PE ownership and the detrimental effects it’s had. It will also share an overview of the PE model.

[1] Office of Senator Warren, 10/10/24, “Warren, lawmakers renew legislative push to stop private equity looting,” Press release (U.S. Senator Elizabeth Warren | Warren, Lawmakers Renew L…) and (Stop Wall Street Looting Act One Pager)

SHORT TAKES #16: MORE CORPORATE BAD BEHAVIOR

Here are summaries of three important stories that have gotten little attention in the mainstream media. These stories include corporations engaging in fraud and bribery, blocking competition to rip off businesses and consumers, and running unsafe prisons.

I share these stories of corporate bad behavior – and there are many more than I have time and space to share – for multiple reasons, including:

To puncture the prevalent myth that the private sector does no wrong and that it is efficient and effective in meeting needs and solving problems.
To demonstrate that the profit motive, coupled with the greed of corporate executives and investors, is so powerful that for many individuals it will corrupt their behavior in ways both small and large (e.g., de la Torre of Steward Health, Kenneth Lay and Jeffrey Skilling of Enron, and many others).
To make it clear that the private sector needs regulation to protect consumers, workers, and the public.
To show that the public shouldn’t trust what corporations say because they have a huge financial interest in hiding harms they may be causing (e.g., tobacco, global warming, toxicity of pesticides and other chemicals, etc.).
To document that the current punishments and penalties are too little to change corporate executives’ behavior. Often, the punishments and penalties are simply considered a cost of doing business.
To demonstrate that privatization of public functions and public goods (e.g., health care, drinking water systems, etc.) is not a wise idea.
To document that corporations are relentless over time and across multiple strategies (campaign spending, lobbying, the revolving door of personnel in and out of government regulatory positions, etc.) in their efforts to bend policy (taxes, regulation, punishments, etc.) and enforcement to their benefit. They are immortal, after all, and can and do outwait and out persevere most individuals and government agencies who try to rein in their power and misbehavior.

If you want to get a sense of the overall scale of corporate bad behavior visit this Violation Tracker database compiled by Good Jobs First.

STORY #1: RTX Corporation, formerly Raytheon, has agreed to pay $950 million in penalties for defrauding the government and paying foreign bribes. RTX entered into three-year deferred prosecution agreements (DPAs) with federal authorities in MA and NY. These mean the corporation won’t be prosecuted if it exhibits good conduct (i.e., complies with anticorruption and antifraud laws) for the next three years. [1] It also means the corporation doesn’t have to plead guilty and that its records and executives are not the subject of depositions and court testimony, which keeps the detailed information on the violations and investigations from being made public.

RTX inflated its revenue from government contracts by at least $111 million by lying about labor and materials costs, as well as double-billing. RTX paid bribes to a high-ranking Qatari military official to get lucrative contracts with the Qatari military. This violated the Foreign Corrupt Practices Act and the Arms Export Control Act.

RTX and its subsidiaries are repeat violators. Most recently, in August the corporation agreed to a $200 million penalty for more than two dozen violations of the Arms Export Control Act and International Traffic in Arms Regulations. The violations included the corporation providing classified military aircraft data to China and employees taking classified information on company laptops into Russia, Iran, and Lebanon.

Here’s Good Jobs First’s documentation of the violations of RTX and its subsidiaries since 2000. Prior to this latest $950 million settlement, there were 133 violations that resulted in penalties totaling $550 million.

STORY #2: The U.S. Justice Department has filed an antitrust lawsuit against Visa for stifling competition in the debit card business. The suit alleges that Visa penalizes banks and businesses that don’t use Visa’s payment processing system to process debit transactions. Visa’s processing system handles 60% of debit transactions in the U.S. and charges over $7 billion in fees. The suit alleges that Visa uses its dominance to stifle competition and extract billions of dollars in excessive fees from businesses and consumers. [2]

The Justice Department’s complaint relies heavily on Visa’s own statements of corporate strategy. For example, Visa’s stated strategy is to “partner with emerging players before they become disruptors.” As a result, it offers big incentives (up to hundreds of millions of dollars annually) to financial system innovators like Apple Pay and PayPal for NOT competing and NOT disrupting Visa’s dominance. [3]

Visa and its allies have spent over $80 million lobbying against the Credit Card Competition Act, which would save consumers and businesses an estimated $15 billion annually.

STORY #3: The U.S. Justice Department has announced an investigation into reports of recurring and sometimes deadly violence at the privately run Trousdale Prison in Tennessee; reports which have been endemic since it was opened in 2016 by CoreCivic. CoreCivic is the largest private prison corporation in the U.S. with a value of over $1.4 billion. It has four prisons and two jails in TN and, since 2016, has spent more than $4.4 million on nearly 80 settlements over 22 deaths of inmates and dozens of other mistreatment complaints. TN has fined CoreCivic $38 million since 2016 for contract violations and the state comptroller has released scathing audit reports three times. But CoreCivic is active with its political spending and state leaders downplay the problems and renew the state’s contracts with it. [4]

There have been over 300 deaths at the four CoreCivic prisons in TN since 2016; some due to natural causes, but some due to violence and some appear to be due to medical neglect. Inmate complaints allege murders, brutal beatings, physical and sexual assaults, medical neglect, and cruelty. In its settlements, CoreCivic does not admit guilt and typically requires the other parties to a settlement to agree to refrain from talking about their complaint or the settlement.

Severe staffing shortages and unchecked flows of contraband contribute to the problems at the CoreCivic facilities. Even the prison guards report that they feel unsafe because of the understaffing.

[1] Offenhartz, J., & Sisak, M. R., 10/17/24, “RTX to pay $950m to resolve fraud allegations,” The Boston Globe from the Associated Press

[2] Associated Press, 9/25/24, “Business Talking Points – Financial,” The Boston Globe

[3] Kuttner, R., 9/25/24, “The Justice Department challenges Visa’s predatory power,” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/2024-09-25-justice-department-challenges-visas-predatory-power/)

[4] Mattise, J., Loller, T., & Hall, K. M., 10/14/24, “Tenn. prison operator under US scrutiny,” The Boston Globe from the Associated Press

CORPORATIONS ARE NOT PAYING THEIR FAIR SHARE IN TAXES

Large, profitable corporations are NOT paying their fair share in federal income tax. President Trump and the Republicans passed a huge tax cut for corporations in 2017 that exacerbated this problem. It cut the stated corporate tax rate from 35% to 21% (a 40% cut) and created new loopholes that let them reduce what they actually pay.

President Biden and Democrats in Congress are working to get big corporations to pay their fair share of taxes. The 2022 Inflation Reduction Act established a 15% minimum corporate tax and funded expanded tax enforcement. In addition, in 2021, the Biden administration negotiated a global minimum tax treaty with other nations but its approval has been blocked in Congress. [1] More on this later.

A study of the effects of the 2017 Tax Cut and Jobs Act found that the 342 large corporations that were profitable in every year from 2018 to 2022 – so it would be reasonable to expect that they would be paying significant taxes – actually paid just 14.1% of their profits in taxes (i.e., their “effective” tax rate). [2] This is only two-thirds of the tax rate stated in the law. In other words, these 342 corporations, as a group, paid an average of $55 billion less per year in taxes than the stated tax rate would require. [3] So, while big, profitable corporations were paying 14.1% of their profits in taxes, the average household was paying 13.6% of its income in federal income taxes in 2020. [4]

Moreover, 23 of these 342 profitable corporations paid NOTHING in federal taxes for the whole five-year period, despite being profitable in every one of those years! Even with $131 billion in profits over this period, these 23 big corporations (as a group) received tax refunds totaling almost $4 billion.

Another 109 of the 342 profitable corporations paid no federal tax in at least one year of the 2018 – 2022 period. In the years when they paid no tax, they, as a group, had $258 billion in profits but received over $14 billion in tax refunds.

Fifty-five of the 342 profitable corporations had effective tax rates of under 5% for the five-year period, including:

Bank of America: $139 billion in profits $5.3 billion in taxes 8% rate
AT&T: $ 96 billion in profits $2.5 billion in taxes 6% rate
Citigroup: $ 35 billion in profits $1.5 billion in taxes 3% rate
General Motors: $ 33 billion in profits $0.4 billion in taxes 3% rate
Nike: $ 19 billion in profits $1.0 billion in taxes 9% rate
T-Mobile: $ 18 billion in profits $-0.0 billion in taxes -0.4% rate
FedEx: $ 16 billion in profits $0.7 billion in taxes 6% rate
Net Flix: $ 15 billion in profits $0.2 billion in taxes 6% rate
Molson Coors: $ 7 billion in profits $0.3 billion in taxes 8% rate
Voya Financial: $ 4 billion in profits $-0.3 billion in taxes -8.0% rate
Darden Restaurants: $ 4 billion in profits $0.0 billion in taxes 8% rate
Office Depot: $ 7 billion in profits $-0.0 billion in taxes -4.6% rate

Also notable was that in an analysis by industry, the oil, gas, and pipeline industry had the second lowest effective tax rate of just 2.0%. Our tax policy has a long way to go if we want to use it to incentivize movement away from fossil fuels!

Here are some key statistics that make the case that corporations are not paying their fair share of taxes currently: [5]

The overall tax rate actually paid by corporations has fallen steadily from over 50% in the early 1950s to well under 20% today. (This is the cumulative effective tax rate for federal, state, and local taxes.)
In the 1950s, corporate taxes provided between 25% and 33% of federal revenue. For the past 40 years, corporate taxes have provided less than 15% of federal revenue.
As a share of the U.S. economy (GDP), corporate profits have risen from 8% in 1980 to 12% in 2022, a 50% increase. Meanwhile, corporate taxes have fallen from roughly 3% to 2% of GDP.

President Biden and Democrats are working to get big corporations to pay their fair share of taxes. The 2022 Inflation Reduction Act, passed by Democrats in Congress and signed by President Biden, established a 15% minimum corporate tax. More than half of the 342 corporations in the study cited above would have paid more in taxes with a 15% minimum tax rate. It’s estimated that it will generate over $200 billion in revenue over ten years from billion-dollar corporations. The Inflation Reduction Act also increased funding for enforcement of tax laws, which will reduce tax dodging by big corporations. [6]

In 2021, the Biden administration negotiated a global minimum tax treaty with other nations, but Congress has blocked approval of it. It would require multinational corporations to pay at least 15% of their profits in taxes. This would prevent corporations from avoiding taxes by shifting profits on paper to low tax countries. [7]

Note that Trump and the Republicans are stating in the presidential campaign that they will make the 2017 tax cuts permanent (they expire in 2025) and add on even more tax cuts. Among other things, they want to further cut the corporate tax rate from 21% to 15%. This would give the 100 largest, U.S. corporations, as a group, an estimated $50 billion a year in additional profits.

[1] Johnson, J., 9/27/24, “Dems name and shame companies paying executives more than they pay in federal taxes,” Common Dreams (https://www.commondreams.org/news/executive-pay-federal-taxes)

[2] Gardner, M., Wamhoff, S., & Marasini, S., Feb. 2024, “Corporate tax avoidance in the first five years of the Trump tax law,” Institute on Taxation and Economic Policy (https://itep.org/corporate-tax-avoidance-trump-tax-law/)

[3] Johnson, J., 2/29/24, “Corporate tax avoidance rampant during first five years of Trump-GOP law: Study,” Common Dreams (https://www.commondreams.org/news/trump-corporate-tax-avoidance)

[4] Anderson, S., Tashman, Z., & Rice, W., March 2024, “More for them, less for us,” Institute for Policy Studies and Americans for Tax Fairness (https://ips-dc.org/report-corporations-that-pay-their-executives-more-than-uncle-sam/)

[5] Anderson, S., Tashman, Z., & Rice, W., March 2024, see above

[6] Johnson, J., 9/27/24, see above

[7] Johnson, J., 2/29/24, see above

CORRUPT MANAGEMENT OF PRESCRIPTION DRUG INSURANCE

The Federal Trade Commission is suing the three dominant prescription drug insurance managers for practices that it alleges have spiked the price of insulin in the U.S. The suit claims these drug insurance managers have been “engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs and impaired patients’ access to lower” cost alternatives. Drug insurance management was originally a cost-control effort that morphed into a profit center by getting rebates (i.e., kickbacks) from drug makers.

The Federal Trade Commission (FTC) is suing the three largest pharmacy benefit managers (PBMs) for practices that it alleges have spiked the price of insulin in the U.S. to over 12 times what it was 20 years ago. PBMs are middlemen that manage the costs of prescription drug coverage for health insurers. They determine which drugs an insurance plan will pay for, what the co-pay for patients will be, and how much pharmaceutical manufacturers will be paid for their drugs. [1]

The FTC is suing Caremark Rx, Express Scripts, and Optum Rx, which process 80% of all prescription drug purchases in the U.S., for “engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs and impaired patients’ access to lower” cost alternatives. Each of these PBMs has roughly $100 billion in annual revenue and is tied to a large insurance corporation: Caremark Rx to CVS, Express Scripts to Cigna, and Optum Rx to UnitedHealth.

The FTC’s suit does not come as a surprise. Last year, numerous local governments sued these three PBMs and the three large insulin manufacturers alleging they had conspired to increase the price of insulin. [2]

PBMs were originally created by insurance corporations to manage the growing costs of prescription drugs. The initial intent was to save insurance corporations and patients money by negotiating lower prices with the drug makers and incentivizing patients to use lower cost drugs, particularly generic drugs as opposed to brand name drugs. A key part of these efforts was the creation of lists of drugs the PBM and insurer would pay for along with a tiered set of co-pays for patients to incentivize the use of lower cost drugs. These lists are known as “formularies.” [3]

The PBMs discovered they could turn this cost-control effort into a profit center by getting rebates (i.e., kickbacks) from the pharmaceutical manufacturers by paying them well for their drugs and incentivizing patients to use those drugs.

This created all sorts of perverse incentives. The PBMs could increase their profits by steering patients to brand name drugs with higher prices and co-pays (as opposed to cheaper generic drugs) because the PBMs got bigger rebates on the higher priced drugs. The PBMs could also increase their profits and rebates by paying the drug makers inflated prices for their drugs, because that allowed the drug makers to give them bigger rebates (also sometimes referred to as discounts). However, this drove up the “list prices” of these drugs so that people without health insurance (or with health insurers other than those linked to these PBMs) paid more.

The FTC suit focuses on insulin, although the illegal practices it charges the PBMs with apply to all prescription drugs. In the case of insulin, the PBMs’ formularies (i.e., list of approved drugs) include only certain types or brands of insulin. These are typically NOT the lowest price insulin products but the ones that give the PBMs the highest rebates and profits. Their collusion with the insulin product makers to maximize their rebates and profits, drives up the price of these insulin products for all users. The FTC has warned drug manufacturers that their complicity in the PBMs’ practices raises serious concerns and that they may be named as defendants in future FTC actions.

As background, insulin was invented in the 1920s and the inventors refused to patent it to make it as readily and cheaply available as possible. Today, three pharmaceutical corporations control the market for insulin: Eli Lilly, Novo Nordisk, and Sanofi. They’ve used their market power to unjustifiably increase the price of insulin. For example, Eli Lilly’s leading insulin product, Humalog, costs 13 times more now, $274 a dose, than it did in 1999 when it was $21.

Two interesting notes: First, Express Scripts has sued the FTC for defamation over the findings of its study of the PBMs’ behaviors. These findings were a precursor to the FTC’s lawsuit. Second, the FTC is also looking at the PBMs’ practices that favor certain, often affiliated pharmacy chains (such as CVS in the case of Caremark) and harm other pharmacies, particularly independent (i.e., non-chain) pharmacies. These, probably illegal, practices reduce competition in the pharmacy business.

As noted, these practices of the PBMs and the pharmaceutical corporations are by no means limited to insulin. The City of Baltimore is suing drug maker Biogen alleging illegal collusion with the three big PBMs to block competition for its brand name multiple sclerosis (MS) drug, Tecfidera. Biogen has regularly increased the price of the drug from $52,500 for a year’s supply in 2013 to $90,000 in 2019, so the drug now provides almost half of Biogen’s revenue. [4] Biogen’s patent on the drug was expiring and it was desperate to maintain the revenue stream and its profits. The suit alleges that Biogen paid the three PBMs to structure their drug formularies to promote the use of its drug rather than lower-cost generic drugs. Biogen calls the payments “rebates” or “fees,” but, in reality, they are good, old-fashioned kickbacks.

Kentucky is suing Express Scripts alleging that it colluded with opioid makers to increase opioid sales through deceptive marketing and other strategies. The result was a deadly, on-going opioid addiction crisis that was linked to roughly 75,000 deaths nationwide in the last year. [5]

There are bills in Congress and in state legislatures that would tackle various elements of PBMs’ corrupt practices. I’ll keep you posted if any of the bills in Congress look like they may move forward. In the meantime, you might want to raise this issue with your state representative or senator, or your state’s public health agency, to learn if they are taking steps to stop the anti-competitive practices of PBMs.

[1] Dayen, D., 9/20/24, “FTC sues PBMs for jacking up insulin prices,” The American Prospect (https://prospect.org/health/2024-09-20-ftc-sues-pbms-jacking-up-insulin-prices/)

[2] Silverman, E. 9/26/24, “Baltimore sues Biogen, accusing it of blocking generic MS drugs,” The Boston Globe from Stat News

[3] Editorial, 7/30/24, “Reining in pharmacy benefit managers,” The Boston Globe

[4] Silverman, E. 9/26/24, see above

[5] Schreiner, B., 9/28/24, “Kentucky sues Express Scripts,” The Boston Globe from the Associated Press

SHORT TAKES #14: MORE EXAMPLES OF CORPORATE BAD BEHAVIOR

Here are short takes on three important stories that have gotten little attention in the mainstream media. Each provides a quick summary of the story, a hint as to why it’s important, and a link to more information. They range from irresponsible and dangerous behavior by the owners and operators of a cargo ship to corrupt behavior by a student loan servicer to illegal behavior by Apple and Goggle in Europe.

STORY #1: The cargo ship that crashed into and collapsed the bridge in Baltimore (killing six people who were working on the bridge) has asked a court to limit its liability to $44 million! The U.S. Justice Department, the U.S. attorney in Maryland, the State of Maryland, the City of Baltimore, business owners in the area, and the families of those who died are all opposing this effort. More realistically and fairly, the liability for this incident could be billions of dollars. [1]

Justice Department lawyers have asserted in court documents that the owners and operators of the ship prioritized profits over safety and knowingly allowed a dangerous, unseaworthy ship to set sail. Their court filing identified mechanical problems on the ship and described the owners’ “Band-Aid approach” to fixing some of them. It described the crew as “ill-prepared” and the owners as “cutting corners in ways that risked lives and infrastructure so that they could save time and money.”

Due to the “negligence” and “egregious facts” of the case, the Justice Department is seeking $100 million in economic damages and unspecified punitive damages. The economic damages could escalate as the cost of rebuilding the bridge is factored in and, along with the claims of other entities, including the families of those who died, the liability is likely to be in the billions. Unfortunately, the litigation to settle all this will likely drag on for years.

The FBI has opened an investigation into whether the ship’s owners’ and crew’s actions, in allowing the ship to sail with known problems, rise to the level of a crime. No criminal charges have yet been filed.

STORY #2: Navient Corp. has been banned from servicing federal student loans and will pay $100 million to harmed borrowers, as well as a $20 million penalty. This settlement with the Consumer Financial Protection Bureau (CFPB) comes after an investigation found that Navient had denied borrowers access to more affordable, income-based repayment plans, while channeling them into more expensive (and profitable) repayment plans. [2]

Navient is a repeat offender. In 2022, it paid $1.85 billion and canceled 66,000 student loans in a settlement with 39 states over its use of predatory lending practices. It has failed to report borrower complaints as is required by the U.S. Department of Education and has ranked dead last in borrower satisfaction according to surveys by the department. It has made it difficult for students who attended fraudulent for-profit schools to get debt relief.

Navient still services non-federal student loans for more than 12 million borrowers totaling nearly $300 billion in debt. If you or someone you know has a loan serviced by Navient, keep a close eye on the payment plan and options.

STORY #3: The European Union’s top court has ruled that Apple must pay over $14 billion in back taxes to Ireland. It concluded that two Apple subsidiaries got illegal, selective tax breaks from Ireland between 1991 and 2014 and that these tax breaks were illegal state aid that harmed competition. Apple’s taxes in Ireland, the base of its European operations since 1980, have been as low as 0.005% of profits. Ireland hosts the headquarters of many multinational corporations because of its special tax breaks. [3]

The current system for taxing multinational corporations is complex and unfair. Coordination and reform of tax policies across countries is badly needed. The United Nations is working to establish a global tax standard that fairly taxes a multinational corporation’s economic activity and appropriately distributes taxes among the countries where the corporation does business.

The European Union court also ruled that Google had illegally used its search engine dominance to favor its own shopping service. Google was fined $2.65 billion.

[1] Mettler, K., 9/19/24, “US: Ship that hit bridge deficient,” The Boston Globe from the Washington Post

[2] Bloomberg, 9/13/24, “Navient banned from servicing federal student loans, to pay $120 million,” Business Talking Points, The Boston Globe

[3] Carver, E., 9/10/24, “ ‘Long-overdue justice: EU court rules Ireland let Apple avoid $14.4 billion in taxes,” Common Dreams (https://www.commondreams.org/news/ireland-apple-tax)

HOW EXECUTIVES USE CORPORATE PROFITS

Executives at large, low-wage corporations are using profits and cash for exorbitant CEO compensation and stock buybacks, rather than increasing workers’ pay, contributing to workers’ retirement accounts, or investing in their corporations’ futures.

The 30^th annual report on how executives at large, low-wage corporations use the company’s profits has just been issued. It examines the 100 big U.S. corporations with the lowest median worker pay out of the 500 largest corporations in the U.S. (aka, the S&P 500). (Median pay is the middle of the distribution of the pay of all the workers at the corporation.) The corporations are referred to in the report as the “Low-Wage 100.” Note that women and people of color make up a disproportionately large share of the workers at these low-wage corporations. [1]

The report documents how profits were used among the following categories of spending:

Chief Executive Officer (CEO) pay ($14.7 million on average or 538 times the average of median worker’s pay),
Workers’ median pay ($34,522 or $17 per hour on average for a full-time worker),
Buying back the corporation’s own stock (over $1 billion per year per company on average for a total of $522 billion from 2019 – 2023),
Contributing to workers’ retirement savings, and
Investing in the future of the corporation.

For example, Ross Stores had the lowest median worker wage at $8,618 and a CEO making 2,100 times worker pay ($18.1 million in 2023), the highest ratio of CEO pay to worker pay among the Low-Wage 100. Nike’s CEO had the highest compensation among the Low-Wage 100 in 2023 at $32.8 million. This was 975 times the median worker’s pay at Nike.

From 2019 to 2023, 93 of the Low-Wage 100 corporations bought back their own stock. These buybacks artificially inflate the corporation’s stock price. This uses the corporation’s profits and cash to reward shareholders, including executives (who typically get a big chunk of their compensation in stock options), rather than compensating workers or investing in the business. For example, from 2019 to 2023, Lowe’s spent the most among the Low-Wage 100 on stock buybacks at $42.6 billion. This money could instead have been used to give an annual bonus for each of these five years of almost $30,000 to each of Lowe’s 285,000 workers, whose median pay is $32,626. Home Depot was second in buyback spending at $37.2 billion, which could have given its 463,100 workers five bonuses of $16,071 each year to augment their median pay of $35,131. Walmart spent $30.8 billion on buybacks, which could have given its 2.1 million workers five annual bonuses of almost $3,000 each to augment their median pay of just $27,642.

Another perspective on the stock buyback versus worker tradeoff is to compare the amount these corporations spent on buybacks versus contributions to workers’ retirement plans. Autozone had the largest imbalance, spending 92 times as much on buybacks as it contributed to workers’ retirement savings. Chipotle was second, spending 48 times as much on buybacks as on workers’ retirement benefits.

Another alternative to using profits and cash for stock buybacks would be to use them for internal capital investments that could, for example, improve efficiency, expand capacity, or upgrade equipment and technology. One might think that executives would prioritize such investments in the longer-term success of their corporations. However, from 2019 to 2023, 47 of the Low-Wage 100 spent more on buybacks than capital investments. Lowe’s led the way spending $33.6 billion more on buybacks than capital investments. Surprisingly, even hi-tech corporations like semiconductor maker Analog Devices spent $6.2 billion more on buybacks than capital investments and Johnson Controls, a maker of smart building technologies, spent $8.8 billion more on buybacks than investments.

Here are some highlights from the report (see the report for a list of all 100 corporations and related statistics):

Corporation	CEO pay	Median worker pay	CEO pay as multiple of worker pay	Stock buybacks	Investments in business
Bath & Body	$11.7 million	$ 9,834	1,189	$ 3.4 billion	$ 1.6 billion
Coca-Cola	$24.7 million	$13,752	1,799	$ 5.0 billion	$ 7.9 billion
Hilton	$26.6 million	$48,435	549	$ 5.8 billion	$ 0.7 billion
Lululemon	$16.5 million	$19,518	845	$ 2.1 billion	$ 2.2 billion
McDonald’s	$19.2 million	$15,802	1,212	$13.7 billion	$10.3 billion
Nike	$32.8 million	$33,646	975	$17.5 billion	$ 4.6 billion
Starbucks	$14.6 million	$14,209	1,028	$16.9 billion	$ 8.9 billion
Target	$19.2 million	$26,696	719	$12.5 billion	$19.6 billion
TJX Cos.	$22.2 million	$14,857	1,496	$ 8.7 billion	$ 6.0 billion
Yum! Brands	$21.2 million	$17,628	1,205	$ 3.9 billion	$ 1.2 billion

There are policies that would incentivize corporations and their executives to cut exorbitant CEO pay, to reduce stock buybacks (which used to be illegal manipulation of stock prices [see this previous post for more detail]), and to invest in workers and the future of their businesses. For example:

Higher tax rates on corporations with large gaps between CEO and worker pay,
Limits on the inclusion of extremely high compensation as a business expense and cost that reduces profits and, therefore, taxes owed,
Allowing recoupment of executive compensation from previous years when a corporation files for bankruptcy or gets a bailout,
Increasing taxes and/or restrictions on stock buybacks,
Closing tax loopholes, such as for “carried interest” income of investment managers and unlimited tax-deferred retirement contributions, and
Putting restrictions on CEO-worker pay gaps and stock buybacks in federal government contracts.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to reduce exorbitant CEO pay and stock buybacks, while encouraging investments in workers and a business’s future. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your 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] Anderson, S., 8/29/24, “Executive excess 2024: The ‘Low-Wage 100’ large corporations are enriching CEOs at the expense of workers and long-term investment,” Institute for Policy Studies (https://ips-dc.org/report-executive-excess-2024/) This post is a summary of this report.

SHORT TAKES #13: STOPPING CORPORATE CORRUPTION: GUNS AND MONEY

Short takes on two important stories: Updates on 1) holding gun manufacturers accountable for illegal gun sales and 2) efforts to stop multi-billion-dollar, international, corrupt money laundering via the U.S. financial system.

Here are short takes on two important stories that have gotten little attention in the mainstream media. Each provides a quick summary of the story, a hint as to why it’s important, and a link to more information. The first is an update on an effort to hold gun manufacturers accountable for illegal gun sales. The second is an update on efforts to stop international, corrupt money laundering via the U.S. financial system, which is a multi-billion-dollar issue.

STORY #1: You may remember that earlier this year the Indiana legislature passed a bill that retroactively banned Gary Indiana’s 1999 lawsuit against gun manufacturers for illegal gun sales. Good news! In August, an Indiana Superior Court judge ruled that the retroactive ban was unconstitutional!

The judge ruled that banning lawsuits by cities against gun manufacturers was legal. However, he ruled that the retroactive ban on Gary Indiana’s suit would “violate years of vested rights and constitutional guarantees” and that the city’s rights should be protected and upheld. The gun manufacturers have announced they will appeal, but for now the suit will go forward. The discovery phase of the trial was nearing completion earlier this year before the legislature attempted to block the suit. The gun manufacturers want to stop the suit from moving forward now so the thousands of documents they have had to share as part of the suit’s pre-trial discovery process won’t be made public. The documents will presumably reveal embarrassing, if not illegal, decisions, actions, and polices of the gun makers. [1]

STORY #2: The U.S. financial system is probably the largest vehicle for money laundering in the world. Hundreds of billions of dollars flow through the U.S. financial system each year from terrorists, international criminals and gangs, corrupt government and business officials, and drug and human traffickers. [2]

A major step to crack down on money laundering and the corruption it enables was taken recently by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). New regulations were issued that will stop money laundering via residential real estate and private investment firms, such as private equity firms and hedge funds. [3]

Currently, money is laundered through cash purchases of expensive residential real estate and large cash investments with private investment firms. These transactions receive little, if any scrutiny. The new regulations will require reporting and scrutiny of these large cash transactions. For example, since the collapse of the Soviet Union in 1991, Russian oligarchs have moved billions of dollars of their ill-gotten wealth into the U.S., where they knew it could be laundered through the U.S.’s deregulated financial system and would be protected by the U.S. legal system.

After the September 11, 2001, terrorist attacks on the World Trade Centers in New York, the U.S. did crack down on money laundering and funding for terrorists by requiring financial institutions to report and scrutinize large cash transactions. However, most real estate transactions and investments in private, largely unregulated, investment firms were exempted.

In 2011, then-FBI Director Mueller noted that organized crime had changed with globalization and technology. It had become a multi-national, multi-billion-dollar enterprise involving cooperation among criminals, corrupt government officials, and corrupt business leaders. It was a significant national security threat and engaged in widely diverse activities including computer hacking, copyright infringement, human trafficking, health care fraud, and manipulation of prices for commodities such as oil, natural gas, and precious metals. The perpetrators also work to corrupt officials at the highest levels of governments and businesses to aid and abet their illegal activities.

In 2021, President Biden declared that the fight against such criminal and corrupt activity was a core national security priority. As a first step, Congress passed and Biden signed the Corporate Transparency Act. It requires shell companies (i.e., business entities that have no real business activities and are used as passthroughs for financial transactions) to provide detailed identification of all persons who own 25% of more of the company or exercise substantial control of it. The Act also increases penalties for money laundering and enhances cooperation between U.S. and foreign financial and law enforcement authorities. (For more detail see this previous post.)

In 2023, the U.S. Treasury Department announced that money laundering by Russian entities, including the government, state-owned enterprises, organized crime, and oligarchs posed a significant threat to our national security and to the international financial system. This concern was an important factor driving the new anti-money laundering and anti-corruption regulations.

[1] Coleman, V., 8/13/24, “Historic gun suit survives serious legal threat engineered by Indiana Republicans,” (https://www.propublica.org/article/gary-indiana-lawsuit-guns-gunmakers-gop-glock-smith-wesson)

[2] Richardson, H. C., 8/29/24, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/august-29-2024)

[3] U.S. Treasury Department, 8/28/24, “FinCEN issues final rules to safeguard residential real estate, investment advisor sectors from illicit finance,” (https://www.fincen.gov/news/news-releases/fincen-issues-final-rules-safeguard-residential-real-estate-investment-adviser)

SHORT TAKES #12: BIG BUSINESS RIP-OFFS: DRUGS AND PET CARE

Private equity firms are invading the pet care business and ripping off pet owners. The big pharmaceutical corporations are ripping off U.S. customers with high drug prices.

Here are short takes on three important stories that have gotten little attention in the mainstream media. Each provides a quick summary of the story, a hint as to why it’s important, and a link to more information. The first item describes the invasion of private equity firms into the pet care business. The other two describe U.S. drug pricing by the big pharmaceutical corporations.

STORY #1: Some private equity, vulture capitalism firms (see this previous post for why this terminology is appropriate) have targeted the pet care sector because they know that pet owners are willing to spend lots of money on their pets, especially when pets have medical or health issues. Over the past decade, private equity firms have spent billions buying up veterinary practices and now own almost 30% of them. The private equity firms make big and quick profits by increasing prices, reducing quality of care, and making working conditions onerous for veterinarians. (This mimics what private equity firms have done in the health care system for humans. See previous posts here and here.) Since 2014, prices for veterinary services have risen by 60%. At least one of the private equity firms is also buying up pet insurance companies. [1]

Veterinarians at private equity-owned practices have reported being overworked and pressured to sell pet owners expensive tests and procedures that may, in some cases, not be needed or appropriate. Some of the private equity managers tie veterinarians’ pay to the amount of revenue they generate.

I urge you to contact President Biden and ask him to direct the Federal Trade Commission (FTC) to take strong action to stop private equity acquisitions in the pet care industry and to rein in private equity firms and their practices in general. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

I also urge you to contact your U.S. Representative and Senators to ask them to support the Stop Wall Street Looting Act, which would rein in the private equity industry’s vulture capitalism. 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.

STORY #2: The huge pharmaceutical corporation, Novo Nordisk, has been spending millions on lobbying and campaign contributions seeking to increase coverage of its weight-loss drugs, Ozempic and Wegovy, by Medicare and Medicaid, as well as to block regulation of their prices. Both drugs have the same active ingredient, semaglutide. In 2017, Ozempic was approved for adults with Type 2 diabetes (aka late onset or adult diabetes) to aid in appetite and weight control. In 2021, Wegovy was approved for weight loss. (Interestingly, neither of these drugs has been approved for use by people with Type 1 diabetes, the chronic life-long version of diabetes (aka juvenile or insulin-dependent diabetes.) Medicare and Medicaid only cover Ozempic for Type 2 diabetes patients and Wegovy only for patients with cardiovascular risks. Novo Nordisk is lobbying for expanded coverage that would include other patients.

Novo Nordisk has been spending about $4 million per year on lobbying since 2017. In 2023, it spent over $5 million on lobbying, hiring 77 lobbyists from 13 firms, 54 of whom had come through the revolving door, i.e., had previously been in government jobs. [2]

Since the 2013-2014 election cycle, Novo Nordisk-affiliated entities have averaged over $600,000 in campaign contributions in each of the five two-year election cycles. In the current 2023-2024 election cycle, its political action committee (PAC), executives, and employees had already made $500,000 in campaign contributions by June 30. This adds up to more than $3.5 million over 12 years.

Novo Nordisk has also engaged in aggressive marketing to increase the use of the Ozempic and Wegovy, spending $471 million on marketing them in 2023 alone. Their marketing campaign has been very successful and it’s estimated that 15.5 million Americans (6% of the population) have now used one of these injectable weight-loss drugs. This has led to shortages for the diabetics who need them the most.

Novo Nordisk charges about $1,000 per month for Ozempic injections in the U.S. In Canada, this costs about $150 and in Germany around $60, because prices there are regulated.

STORY #3: On the issue of drug prices in general, a 2021 RAND Corporation study found that drug prices in the U.S. average 2.56 times the prices in 32 comparable nations. For name brand drugs, it’s 3.44 times as much. In August 2022, President Biden signed the Inflation Reduction Act that allows Medicare to negotiate drug prices. (Price negotiation had been prohibited by the Medicare drug benefit law signed by President G. W. Bush.) Every Republican in Congress voted against the Inflation Reduction Act and Vice President Kamala Harris cast the tie-breaking vote that allowed the bill to pass in the Senate and go to Biden to be signed into law.

Medicare recently announced agreements with pharmaceutical companies for negotiated prices on ten drugs. The new prices are from 38% to 79% less than the current list prices. These prices would have saved the government about $6 billion last year if they had been in effect. About 9 million people use these ten drugs and will save about $1.5 billion a year in out-of-pocket costs after the new prices go into effect on January 1, 2026. [3]

[1] Perez, A., 8/7/24, “‘Life and death’ for pets: Elizabeth Warren targets firm buying veterinary offices,” Rolling Stone (https://www.rollingstone.com/politics/politics-news/elizabeth-warren-targets-private-equity-firm-veterinary-offices-1235075465/)

[2] Cook, M., 7/25/24, “Ozempic-producer Novo Nordisk on track for record spending on lobbying in 2024,” Open Secrets (https://www.opensecrets.org/news/2024/07/ozempic-producer-novo-nordisk-on-track-for-record-spending-on-lobbying-in-2024/)

[3] Richardson, H. C., 8/15/24, “Letters from an American blog,” https://heathercoxrichardson.substack.com/p/august-15-2024

SHORT TAKES #11: CORPORATIONS AND THE FEDERAL GOVERNMENT

Here are short takes on three important stories that have gotten little attention in the mainstream media. Each provides a quick summary of the story, a hint as to why it’s important, and a link to more information. These three highlight the relationships between corporations and the federal government.

STORY #1: In 2023, $2,974 of the average taxpayer’s federal taxes went to the Defense Department. Of that amount, $705 went to salaries for the troops, while 2 ½ times that, over $1,700, went to for-profit corporate defense contractors. Among others, $87 went to Boeing, whose V-22 Osprey military aircraft has crashed multiple times, most recently last November, killing eight service members. The $2,974 to Defense is more than two months of rent for the average renter with well over a month’s rent going to defense contractors. Another $112 from the average taxpayer went to support for foreign militaries.

For the sake of comparison, the federal government spent, from the average taxpayer, $516 for food assistance for low-income Americans, $346 for K-12 education, $110 for the Child Tax Credit which lifts poor children out of poverty, and $58 for diplomacy. These data come from the Institute for Policy Studies’ annual receipt for the American taxpayer.

STORY #2: To penalize the greed of large corporations that have made record profits by increasing prices, the Ending Corporate Greed Act has been introduced in Congress. It would put a 95% tax on the profits of large corporations (over $500 million in yearly revenue) that exceed their average profits in 2015 – 2019. The goal is to heavily tax the windfall profits large corporations have made in the pandemic and post-pandemic years by hiking prices on gas, food, rent, drugs, and other products. Large corporations have used the smoke screen of supply chain problems and other effects of the pandemic to create price “inflation” that did not reflect increased costs but was simply greed, using a catastrophe as a pretext for raising prices and profits. [1]

In 2023, corporate profits rose to record highs due to price gouging. If the 95% windfall profits tax had been in place in 2023, just ten large corporations would have had to pay $300 billion on their excess profits. For example, Amazon’s profits were $37.6 billion, a 444% increase from its average profits from 2015 to 2019. It would have paid $19 billion if a 95% windfall profits tax had been in place. Other notable increases in profits occurred at Marathon Petroleum (up 325%), Chevron (up 289%), Exxon Mobil (up 165%), Google (up 195%), and Microsoft (up 190%).

STORY #3: Large chemical corporations, such as ones that produce pesticides, routinely work to influence the Environmental Protection Agency (EPA). For example, the EPA recently proposed easing restrictions on the pesticide, acephate. The European Union banned this pesticide over 20 years ago. It’s a type of chemical called an organophosphate. These chemicals are linked to detrimental effects on children’s brains including autism, hyperactivity, and poorer cognitive performance. [2]

Several studies suggest that even at currently allowable levels acephate may be causing learning disabilities in children exposed to it while in utero or during their first years of life. In 2017, researchers found that children of Californians who, while pregnant, lived within 1 kilometer of where the pesticide was applied had lower IQ scores and worse verbal comprehension on average than children of people who lived further away. Two years later, another group of scientists reported that mothers who lived near areas where acephate was used during their pregnancies had children who were at increased risk for autism.

In 2021, the EPA effectively banned another organophosphate pesticide, chlorpyrifos, based in part on evidence linking it to detrimental effects on children’s brains. (Based on a lawsuit by a company that sells chlorpyrifos and several agricultural groups, a court blocked the ban. This allows the use of chlorpyrifos on some crops, including cherries, strawberries, and wheat.) While some health and farmworker groups are petitioning the EPA to ban all organophosphate pesticides, the EPA is arguing that it can adequately protect children by limiting the amounts farmers can use.

The U.S. regulation of pesticides (and other chemicals) is weaker than in other well-off countries because it’s particularly vulnerable to industry influence in multiple ways. The chemical corporations are responsible for paying for research to establish the safety of their chemicals (because the U.S. government doesn’t want to pay for the testing itself). This, of course, creates huge conflicts of interest. There’s a lot of evidence that the testing research is biased in favor of the corporations and the (supposed) safety of their chemicals.

Furthermore, the corporations are pushing the EPA to allow a new type of toxicity testing that is quicker and cheaper. Rather than relying on the traditional animal testing, the industry wants to do testing just on disembodied cells. This type of testing is not as sensitive and, therefore, tends to find more chemicals and higher levels of chemicals to be safe. Scientists have warned the EPA not to use these new tests to loosen regulations.

In addition to doing the testing, the corporations also work to influence the EPA through lobbying, campaign contributions to elected officials, and the revolving door for personnel. People move back and forth between the chemical corporations and the EPA division that regulates them. If an EPA employee wants to get a job with a chemical corporation when they leave the EPA, they have an incentive to act in ways that don’t alienate prospective future employers.

The EPA’s Office of Pesticide Programs has been criticized for allowing pesticides to be sold without required toxicity testing. In 2018, staff members celebrated having waived 1,000 legally required tests for pesticides! It was noted that this had saved the chemical corporations more than $6 million.

[1] Johnson, J., 6/21/24, “Bowman, Sanders propose 95% tax on corporations exploiting inflation to jack up prices,” Common Dreams (https://www.commondreams.org/news/windfall-tax-inflation)

[2] Lerner, S., 4/24/24, “10 times as much of this toxic pesticide could end up on your tomatoes and celery under a new EPA proposal,” ProPublica (https://www.propublica.org/article/epa-acephate-pesticide-adhd-autism-regulations)

MICROSOFT PUTS PROFITS BEFORE CYBERSECURITY Part 2

Recent investigative reporting by ProPublica showed that Microsoft has put making profits, through securing a place as an industry leader in cloud computing, ahead of keeping its customers safe from cyberattacks – with very harmful results. [1] Punishments for corporations and their executives need to be increased to deter this type of corrupt extreme capitalism.

Microsoft failed for three years to address a known flaw in its software that allowed Russian hackers in the SolarWinds breach to gain access to the data and emails of its customers, including sensitive agencies of the federal government. Moreover, its president lied in testimony to Congress claiming first that Microsoft flaws had not contributed to the breaches and later that he and Microsoft had not been aware of the flaw. (See this previous post for more details.)

In 2016, when the flaw was discovered, Microsoft was in a major industry battle to be a leader in cloud computing services and was vying for a multi-billion-dollar Defense Department cloud computing contract. Admitting to a software vulnerability in a related product would have hurt Microsoft’s chances of winning the contract. The Microsoft employee who discovered and reported the flaw, Andrew Harris, was told the decision not to fix the software flaw was a business decision not a technical one.

As background, Microsoft’s new CEO in 2014, Satya Nadella, saw cloud computing as the future of the technology industry and staked Microsoft’s future on being a major player in this arena. Under pressure to catch up to industry-leader Amazon, Microsoft focused on new features and functionality for its cloud computing products to generate sales and profits and not on security fixes, which cost money and have no immediately visible benefit.

In 2024, Microsoft President Brad Smith was called back to testify before Congress again (see this previous post for information on his 2021 appearance) after a series of cyberattacks on the federal government linked to flaws in Microsoft products. For example, in 2023, Chinese hackers exploited a Microsoft security flaw to access the email accounts of senior government officials. In addition, ProPublica’s reporting on Microsoft’s culpability in the 2019 SolarWinds breach (see this previous post for more information) had been published the day of Smith’s testimony. ProPublica had contacted Microsoft two weeks before with detailed questions related to its investigation and a request for an interview with Smith. Nonetheless, Smith claimed in his testimony to be unaware of the role of a Microsoft software flaw in the SolarWinds breach. [2]

The Federal Cyber Safety Review Board, in reviewing the Microsoft-related security breaches, found that Microsoft’s “security culture was inadequate and requires an overhaul.”

Microsoft’s ignoring of cybersecurity issues to maximize profits has put its customers at risk. It has allowed Russian, Chinese, and other hackers to steal information and data from government agencies, businesses, and their customers.

Publicly traded corporations, like Microsoft, are beholden to profits, to the price of their stock, and to stockholders, not to customers or any sense of the public good. That’s the reality of the unregulated, extreme capitalism allowed by current U.S. laws. This and the extreme personal wealth accumulation it allows seem to have resulted in greed rising to new heights and ethics falling to new lows.

The frequency, pervasiveness, and repetitiveness of business scandals driven by putting profits first and foremost is astounding. If you want to see how pervasive corporate violations of the law are, look at the Violation Tracker database compiled by Good Jobs First.

An underlying theme of this corrupt corporate behavior is the loss of robust competition in the marketplace due to the emergence of a handful of huge, monopolistic corporations in many industries. This has occurred largely through mergers and acquisitions that have occurred due to little or no enforcement of antitrust laws since the 1980s (until very recently).

To stop corporate corruption and bad behavior, there must be more enforcement with greater penalties. Otherwise, corporations just treat the penalties they pay as a cost of doing business. The size of the penalties must be big enough that it significantly reduces a corporation’s profits and share price. This would impact stockholders, particularly big ones, including senior executives. The impact should be big enough to put senior executives’ jobs at-risk.

For substantial illegal behavior by their corporations, CEOs and other senior executives need to be held personally accountable with criminal charges, the ability to make them return compensation (especially bonuses for generating big profits), and the risk of being fired with no severance package.

The ultimate penalty would be to revoke the corporation’s charter to do business, forcing the liquidation of the corporation. This does not seem likely to happen, so when the illegal or corrupt behavior is serious enough or repetitive enough, the financial penalties must be big enough to potentially put the corporation into bankruptcy and out of business – if the goal is to truly stop corporate corruption and bad behavior. Furthermore, corporations with a track record of serious violations should be banned from doing business with the federal government.

I urge you to contact President Biden to ask him to have the Department of Justice and other agencies investigate and seriously punish Microsoft and its executives for allowing dangerous cybersecurity breaches. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

I urge you to contact your U.S. Representative and Senators to ask them to pass laws that place serious penalties and punishments on corporations and their executives when they put profits before the safety and security of their customers and the public. You can find contact information for your U.S. 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] ProPublica, 6/18/24, “Nine takeaways from our investigation into Microsoft’s cybersecurity failures” (https://www.propublica.org/article/microsoft-solarwinds-what-you-need-to-know-cybersecurity)

[2] Dudley, R., with Burke, D., 6/13/24, “Microsoft president grilled by Congress over cybersecurity failures,” ProPublica (https://www.propublica.org/article/microsoft-solarwinds-cybersecurity-house-homeland-security-hearing)

MICROSOFT PUTS PROFITS BEFORE CYBERSECURITY

Recent investigative reporting by ProPublica brought to light another example of a corporation putting profit before the well-being of its customers. Microsoft put making profits, through securing a place as an industry leader in cloud computing, ahead of keeping its customers safe from cyberattacks – with very detrimental results.

You may remember the “SolarWinds” cybersecurity breach by Russian hackers that was revealed in 2020. It was one of the largest cyberattacks on U.S. government agencies and private businesses ever. The hackers penetrated the SolarWinds corporation’s software in 2019 and used it to gain access to the computer systems of multiple companies and U.S. government agencies. They got sensitive data from the National Nuclear Security Administration, which oversees U.S. nuclear weapons. They accessed the National Institutes of Health (NIH) as it was working to contain the Covid virus and develop a vaccine for it. They gained access to the email accounts of senior officials at the Treasury Department.

In 2021, Microsoft President Brad Smith testified before Congress that although all the affected companies and government agencies used Microsoft software and cloud computing services, no Microsoft vulnerability or flaw had been exploited in the SolarWinds cybersecurity breach. He said the customers should have done more to protect themselves.

Recent investigative reporting by ProPublica has shown this to be a lie and, moreover, that Microsoft had been warned multiple times, years earlier, about a software flaw that was taken advantage of in the cyberattack. [1] In 2016, Microsoft engineer and cybersecurity expert, Andrew Harris, identified a flaw in a Microsoft software product. The flaw allowed a hacker who had gained access to an individual’s local computer at a Microsoft customer to steal the keys needed to access a broad range of programs and networks. These included Microsoft products that provided remote computing services and data storage to multiple customers, a service called “cloud computing.” Millions of users of these Microsoft products, including federal government agencies and employees, were vulnerable.

In 2016, Harris reported the flaw to Microsoft’s Security Response Center and to the product’s manager, who agreed it was a significant flaw but did not feel it was urgent to address it. Harris suggested a simple fix that would require users of the Microsoft product to logon a second time to access other programs and networks, including cloud computing systems. This was rejected because it would inconvenience customers and hurt marketing of the product, for which the single logon capability was a key selling point.

Harris personally contacted some sensitive Microsoft customers he worked with to inform them of the flaw and their vulnerability. For example, he worked with the New York Police Department to implement the fix he had recommended. [2]

In November 2017, a private cybersecurity firm, Cyber Ark, identified the same flaw. It reported it publicly after having notified Microsoft about it twice with no response. In 2018, another Microsoft engineer identified a related flaw that made the flaw Harris had identified even more serious.

In 2019, another private cybersecurity firm, Mandiant, after notifying Microsoft but getting no response, publicly demonstrated the use of the flaw to gain access to cloud computing services.

Nonetheless, in 2021, after the SolarWinds cyberattack had given Russian hackers access to Microsoft’s cloud computing services and customers’ data and emails, as noted above, Microsoft President Brad Smith testified (untruthfully) before Congress that no Microsoft vulnerability or flaw had been exploited in the SolarWinds cybersecurity breach.

Harris, frustrated by the failure of Microsoft to address the flaw he’d identified, left Microsoft in August 2020, before the SolarWinds cyberattack became publicly known. He publicly stated that Microsoft’s “decisions [were] not based on what’s best for Microsoft customers but on what’s best for Microsoft.”

Some context for Microsoft’s behavior, as well as steps that should be taken to stop the corporate practice of putting profits before all else, will be in my next post.

BOEING: A DANGER TO ALL?

As I imagine you know, there have been several problems with Boeing aircraft in the last six years. This has led to serious concerns about Boeing’s commitment to safety and quality in its manufacturing. There’s quite a bit of evidence that it’s been cutting corners to maximize profits. Among other things, several whistleblowers have come forward with solid evidence of Boeing management’s lack of concern about safety and quality. What you may not know is that two of those whistleblowers have died in the last two months in unusual circumstances that have raised questions about how far Boeing would go to cover up its culpability for the accidents with Boeing planes.

You probably remember the Boeing 737 Max airliner crashes in 2018 and 2019 that killed 346 people and the January 2024 Alaska Airlines 737 Max door plug blow out while in flight that left a gaping opening in the plane’s fuselage. There have been other incidents with Boeing planes that you may not have heard about including a jammed rudder on a 737 Max that caused a near miss in Newark in March, an emergency landing of a San Francisco to Boston flight after a report of a wing coming apart, and a malfunctioning de-icing system. Boeing has also failed 33 of 89 Federal Aviation Administration (FAA) audits.

As a result of all this, Boeing is under intense scrutiny for its apparent lack of commitment to safety and willingness to cut corners to reduce costs and increase profits. Over the past 10 years, Boeing’s profits have allowed it to buyback $39 billion of its own stock and pay another $20 billion to its shareholders in dividends. Boeing spent $26.6 million on lobbying with 17 lobbying firms in 2021 and 2022. Since 2010, it’s spent over $200 million on lobbying. It’s also spent $30 million on campaign contributions since 2010. So, it’s not like Boeing is running on a shoe string and can’t afford to pay attention to quality and safety.

But there’s no way that Boeing would murder a prominent whistleblower or two, is there? This question was first raised in March 2024 when a Boeing whistleblower died of an apparent suicide that was a total shock and unbelievable to everyone who knew him. [1] Then, in early May, a second Boeing whistleblower died after a short and unusual illness. Meanwhile, serious and potentially very damaging investigations of Boeing’s quality control and commitment to safety in building its aircraft are ongoing.

In the March case, John Barnett, who had worked at Boeing for 28 years when he retired in late 2016, was found dead of an apparent suicide. Friends and his lawyer find it impossible to believe that he committed suicide. Circumstances also make it incongruent. He had filed a whistleblower complaint against Boeing in 2017 asserting a lack of commitment to safety in the manufacturing of its 787 Dreamliner airplane. (What he saw was so bad that he now refuses to fly.) In March, the case was about to go to trial after seven years of work and there was every reason to believe his safety concerns would be substantiated. His lawyer stated, “He was in very good spirits and really looking forward to putting this phase of his life behind him. We didn’t see any indication that he would take his own life. … No one can believe it.” [2] A family friend told a Charleston, SC, TV station reporter that Barnett had said to her that if he died it wouldn’t be suicide. [3]

He spent the last seven years of his Boeing career supervising 10 to 12 quality assurance inspectors at the North Carolina plant where final assembly of the 787 Dreamliner aircraft was done. Boeing had relocated the plant to North Carolina to avoid unionization. However, skilled machinists were not readily available, so insufficiently skilled workers were hired instead. Therefore, quality problems were frequent.

Boeing management made it clear that they felt that quality assurance was unnecessary. Barnett described how his quality assurance team was taken off the job after finding 300 defects on a fuselage section. He also described how Boeing managers allowed the use of parts that had been identified as defective. In 2014, he was reprimanded for documenting violations in writing, which violated Boeing’s policy of non-documentation. (Note: In the National Transportation Safety Board (NTSB) investigation of the incident where a “door plug” blew out of an Alaska Airlines plane’s fuselage in flight, Boeing was accused of refusing to cooperate because it failed to produce requested documents. However, it stated it was cooperating but did not have the requested documents because it does not document the repairs and procedures about which the NTSB was asking.)

Barnett’s battles with Boeing management were so stressful that he retired early at 55 and filed a whistleblower complaint. What made Barnett a particularly effective whistleblower was that he had documentation of his concerns, totaling thousands of pages.

More recently, in early May, Joshua Dean, a 45-year-old former quality auditor at a Boeing supplier, Spirit AeroSystems in Wichita, KS, died after a short and unusual illness. He had filed a complaint with the FAA alleging “serious and gross misconduct by senior quality management of the [Boeing] 737 [Max] production line.” He was concerned about manufacturing defects in the construction of the planes. Dean was fired by the Boeing supplier last year and filed a complaint with the Labor Department alleging that his termination was retaliation for raising safety concerns. [4]

In April, another Boeing whistleblower, Sam Salehpour, testified before Congress that there was “no safety culture” at Boeing; that employees who raised safety concerns were “ignored, marginalized, threatened, sidelined and worse;” and that he feared “physical violence” after stating his concerns publicly.

I urge you to contact President Biden and urge him to order a thorough Department of Justice and FAA investigation into the quality and safety problems with Boeing’s aircraft and its culpability for them. Please tell him that any penalties need to be sufficient to deter such future behavior by Boeing (as well as by corporations in general). A slap on the wrist and penalties that can be considered a cost of doing business have not deterred corporate bad behavior in the past. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1] Tkacik, M., 3/14/24, “The strange death of a Boeing whistleblower,” The American Prospect (https://prospect.org/justice/2024-03-14-strange-death-boeing-whistleblower/)

[2] Tkacik, M., 3/14/24, see above

[3] Emerson, A., 3/14/24, “ ‘If anything happens, it’s not suicide’: Boeing whistleblower’s prediction before death,” ABC News 4, Charleston, SC (https://abcnews4.com/news/local/if-anything-happens-its-not-suicide-boeing-whistleblowers-prediction-before-death-south-carolina-abc-news-4-2024)

[4] Rushe, D., 5/2/24, “Second Boeing whistleblower dies after short illness,” The Guardian (https://www.theguardian.com/business/article/2024/may/02/second-boeing-whistleblower-dies)

SHORT TAKES #8: CORPORATE BAD BEHAVIOR

Here are short takes on three important stories that have gotten little attention in the mainstream media. Each provides a quick summary of the story, a hint as to why it’s important, and a link to more information. They range from profitable corporations that pay their executives more than they pay in federal taxes to corporate profit enhancement through shrinkflation to over a billion dollars in fraud enabled by Walmart.

STORY #1: A recent study found that for the period from 2018 to 2022 thirty-five profitable U.S. corporations paid their five top executives more than they paid in federal taxes. They include Tesla, T-Mobile, Netflix, Ford, Darden Restaurants, and MetLife. An additional 29 corporations paid their executives more than they paid in taxes in at least two or those five years. [1] Over this 5-year period, these 64 corporations had profits of $657 billion, paid their executives over $15 billion, and paid only $18.4 billion in federal taxes, just 2.8% of their profits. For decades, corporate profits and executive pay have been rising dramatically, while the amount corporations pay in taxes has been steadily declining.

The effective U.S. corporate tax rate has fallen from roughly 50% in the 1950s to 17% in 2022. Dodging taxes whenever possible and lobbying to reduce taxes are easy ways for corporate executives to increase profits and returns to themselves and shareholders. The low taxes paid by big corporations mean that other taxpayers have to pay more or get less in public services. [2]

A Tax Excessive CEO Pay Act has been introduced in Congress and would increase taxes on corporations where CEO pay is over 50 times that of their typical employee. The Act would gradually increase a corporation’s tax rate if the ratio of its CEO’s pay to that of its median worker is over 50 with up to a five-percentage-point increase in the tax rate if the ratio is over 500. The typical CEO-to-worker pay ratio today is about 350. For example, at McDonald’s the ratio is 1,224 and under this legislation its taxes last year would have been increased by $92 million. [3] I urge you to contact your U.S. Representative and Senators to ask them to support the Tax Excessive CEO Pay Act. 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.

Exorbitant CEO pay and high corporate profits are key factors leading to the growing numbers and wealth of billionaires. Forbes magazine just released its updated worldwide billionaires list. The number of individuals with wealth of over $1 billion grew by 141 last year to 2,781. Together, they own combined wealth of over $14 trillion. Fourteen of them have wealth of over $100 billion. Many of them oppose fair taxation of themselves and their businesses, and many of them also oppose fair treatment of workers by opposing unionization and imposing low pay and poor working conditions. Elon Musk of Tesla and Jeff Bezos of Amazon are classic examples. [4]

STORY #2: As if price gouging under the guise of “inflation” hadn’t boosted profits enough, corporations have also been engaging in another form of profit maximization at consumers’ expense: shrinkflation. First, corporations increased prices using their monopolistic power, blaming it on Covid-related “inflation” – but they’re not dropping prices now even though all the rationales for this “inflation” have dissipated. Now, they’re shrinking the amount of food or goods, such as snacks and paper products, in packages without reducing prices. For example, paper towels and toilet paper are 34.9% more expensive than in January 2019 and almost a third of that increase is due to shrinkage in the amount of product in packages. As a result, corporate profits are skyrocketing. [5] [6]

The Biden administration is attacking the monopoly power that lets corporations engage in consumer price gouging. It’s suing meat processors for price fixing and it’s blocking the merger of two huge grocery store chains, Kroger and Albertson’s. Biden and members of Congress are promoting the Shrinkflation Protection Act and the Price Gouging Protection Act. Both bills would empower the Federal Trade Commission to protect consumers from these unfair and deceptive corporate practices. I encourage you to contact President Biden and your Members of Congress to let them know you support these bills.

STORY #3: Since 1999, Walmart has been expanding its business into financial services. However, over the last decade, its gift card and money transfer services have enabled over $1 billion in fraud. Walmart has pushed back against efforts to require improvements in its oversight and fraud prevention, has failed to perform necessary employee training, and has failed to live up to promises made to regulators and business partners to prevent fraud.

Walmart has a financial incentive not to crack down on this fraud because it earns fees on each transaction – every Walmart gift card used, every sale of another company’s gift card, and every money transfer. These activities produce hundreds of millions of dollars in annual profits. [7]

In 2017, for example, the New York and Pennsylvania attorneys general investigated Walmart for profiting off gift card fraud. As a result, Walmart promised to ban or restrict the purchase of other companies’ gift cards with Walmart gift cards, a favorite scheme of scammers. However, it let the practice continue until 2022, even though it knew millions of dollars of fraud were occurring. At least 28 people have been convicted in state or federal courts of stealing tens of millions of dollars through gift card transactions at Walmart stores.

Walmart has ignored repeated warnings that up to 75% of the money transfers at some of its stores were fraudulent. Its money transfer partner, MoneyGram, reported at one point that of all the partners it worked with nationally Walmart stores were all of its top 20 fraud locations. In one week in March 2017, there were 610 complaints of money transfer fraud at Walmart, far more than anywhere else. (CVS was second with 47 complaints.) In 2022, the Federal Trade Commission sued Walmart for ignoring fraud in its money transfer service while it made millions in fees. In public statements, Walmart touts its anti-fraud efforts while in private filings in court cases it claims it has “no responsibility to protect against the criminal conduct of third parties.”

Despite these problems, Walmart continues to expand its financial services.

[1] Institute for Policy Studies and Americans for Tax Fairness, March 2024, “More for them, less of us,” (https://ips-dc.org/report-corporations-that-pay-their-executives-more-than-uncle-sam/)

[2] Johnson, J., 3/13/24, “Report exposes US corporations that pay their execs more than they pay in taxes,” Common Dreams (https://www.commondreams.org/news/ceo-pay-taxes)

[3] Johnson, J., 6/22/24, “Progressive lawmakers unveil bill to attack ‘disease’ of corporate greed,” Common Dreams (https://www.commondreams.org/news/sanders-corporate-tax)

[4] Conley, J., 4/2/24, “Forbes billionaires list shows ‘utterly unconscionable’ wealth growth of world’s richest,” Common Dreams (https://www.commondreams.org/news/forbes-list-billionaires)

[5] Reich, R., 3/30/24, “Record corporate profits from your thinning wallet,” Robert Reich’s daily blog (https://robertreich.substack.com/p/record-corporate-profits-coming-from)

[6] McCloskey, E., 2/22/24, “You’re not imagining it,” Patriotic Millionaires (https://patrioticmillionaires.org/2024/02/22/youre-not-imagining-it/)

[7] Silverman, C., & Elkind, P., 1/17/24, “How Walmart’s financial services became a fraud magnet,” ProPublica (https://www.propublica.org/article/walmart-financial-services-became-fraud-magnet-gift-cards-money-laundering)

PLEASE SIGN THIS PETITION TO REDUCE THE MEDICARE ADVANTAGE RIP OFF

Please join me in signing this petition (sponsored by Social Security Works) calling on the Biden administration to take steps to stop the undermining of Medicare by the Medicare Advantage plans offered by for-profit insurance corporations. They maximize their generous profits by denying and delaying care for seniors, as well as through fraudulent billing.

The Biden administration will be finalizing the annual increase in payments to Medicare Advantage plans in early April. As you probably know, Medicare Advantage plans are the privatized alternative to regular Medicare. They are very profitable for the for-profit insurance corporations that run them. They cost more per enrollee than regular, public Medicare, even though their enrollees are younger and healthier than the population on regular Medicare. Medicare Advantage plans also deliver poor treatment when enrollees get sick. (More on this below.)

The Biden administration is proposing a 3.7% increase, but the insurance corporations and their lobbyists are pushing hard for a bigger increase. Medicare needs to start holding these insurance corporations accountable for their greed and poor performance. If anything, this proposed increase should be decreased, and certainly not increased. [1]

Therefore, I urge you to join me in signing this petition (sponsored by Social Security Works) calling on the Biden administration to reclaim Medicare from the for-profit Medicare Advantage insurance corporations. As a start, it should stop overpaying them and work to recoup past overpayments.

If you have a minute, I urge you to also contact President Biden to ask him to stop the undermining of Medicare by for-profit insurance corporations whose Medicare Advantage plans are overbilling Medicare while underserving their patients. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

Here are some of the negative attributes of the for-profit Medicare Advantage (M.A.) plans:

10,000 lives could be saved each year if Medicare eliminated the worst performing 5% of M.A. plans.
M.A. patients are 1.5 times more likely to die within a month after complex cancer surgery than regular Medicare patients.
M.A. patients cost Medicare roughly 6% more per patient than patients in regular Medicare, despite worse outcomes with younger, healthier patients.
M.A. insurance corporations cost Medicare between $88 billion and $140 billion extra every year over what it would cost if their patients were in regular Medicare. [2]
Almost every major M.A. plan sponsor has been found guilty of fraudulent billing of Medicare, many of them multiple times. They claim their patients are sicker than they really are and game the payment system in other ways despite repeated attempts to stop this.
M.A. plans regularly deny or delay coverage of treatment through complex prior authorization procedures. They want to pay out as little as possible to maximize their profits. (See more on this below.)
M.A. plans limit patients to the doctors and health care facilities in their networks (while regular Medicare lets you pick any doctor and medical facility that you want).
M.A. plans attract younger, healthier seniors through aggressive (and sometimes misleading) marketing and by offering coverage for services (such as dental and eye care) that they lobby to keep regular Medicare from being able to offer.
M.A. plans have high overhead costs for profits, advertising, executive pay, and complex administration, such as prior authorization procedures. They spend 15% – 25% less on medical services than regular Medicare, because their overhead is so much higher.

A very important strategy for maximizing profits is to minimize how much the M.A. plan pays for medical care. Therefore, they impose complex prior authorization procedures, particularly for expensive care. A recent study of prior authorizations estimated that there were 35 million prior authorization requests in 2021 (the most recent data available) and that 2 million were denied. Roughly 220,000 of these denials were appealed and in 82% of those cases the denial was overturned. The researchers estimated that, overall, there are 1.5 million unfounded denials of care by M.A. plans each year. If more patients went through the complex and time-consuming process of appealing denials, up to 75% of denials would be overturned. Surveys in 2023 found that 94% of doctors reported that the prior authorization process had delayed needed medical care, 89% reported that prior authorization requirements had negative effects on patients’ outcomes, and 33% of doctors reported that the need for a prior authorization had led to an avoidable serious medical event, such as hospitalization, a permanent disability, or death. [3]

The privatization of Medicare through Medicare Advantage plans only benefits for-profit insurance corporations, while patients, Medicare, and, ultimately, taxpayers pay the costs. In 2022, the seven large health care corporations that cover 70% of M.A. patients had over $1 trillion in revenue and over $69 billion in profits. They spent more than $26 billion buying back their own stock, which artificially boosts the stock price rewarding big stockholders, including their corporate executives. [4] For example, in 2023, giant M.A. plan sponsor UnitedHealth spent $8 billion buying back its own stock and another $7 billion on dividends to stockholders. Its CEO was paid nearly $21 million in 2022 (the 2023 figure isn’t available yet), it spent almost $11 million lobbying Congress, and paid $10 million for memberships in industry associations that also lobby and engage in political activity to its benefit. However, it claims that if the Biden administration doesn’t give its M.A. plans a bigger increase it will have to reduce patient benefits and make them pay more! [5]

I’ve been writing about the problems with Medicare Advantage and how this privatization undermines Medicare for over four years. See previous posts here, here, here, here, here, and here if you’re interested.

[1] Rhodes, C., 3/28/24, “Ady Barkan’s legacy: Reclaiming Medicare from for-profit corporations,” Common Dreams (https://www.commondreams.org/opinion/ady-barkan-medicare-advantage)

[2] Physicians for a National Health Program, 2023, “Our payments their profits,” (https://pnhp.org/system/assets/uploads/2023/09/MAOverpaymentReport_Final.pdf)

[3] Cunningham-Cook, M., 3/6/24, “Between you and your doctor: How Medicare Advantage care denials affect patients,” The American Prospect (https://prospect.org/health/2024-03-06-how-medicare-advantage-care-denials-affect-patients/)

[4] Johnson, J., 3/15/24, “Patients, advocates push Biden to ‘reclaim Medicare’ from privatized Medicare Advantage,” (https://www.commondreams.org/news/medicare-advantage-action)

[5] Cunningham-Cook, M., 3/6/24, see above

SHORT TAKES ON IMPORTANT STORIES #5: CORPORATE POWER AND STOCK BUYBACKS

Corporate greed and power are evident in stock buybacks and international actions by the U.S. government. Here are short takes on four important stories that have gotten little attention in the mainstream media. Each provides a quick summary of the story, a hint as to why it’s important, and a link to more information.

STORY #1: Corporations’ purchases of their own stock, known as stock buybacks, have increased dramatically over the last 40 years. Between 2010 and 2020, U.S. corporations bought back $6.3 trillion of their own stock. Stock buybacks were outlawed or severely restricted as illegal stock price manipulation until they were deregulated in 1982. Buybacks use profits to enrich stockholders and executives rather than investing in the business or in its workers (e.g., through research and development, upgrading equipment, expanding manufacturing capacity, better pay for workers, better working conditions, or improved safety). [1]

Furthermore, corporate executives use their inside, non-public knowledge of when and how these buybacks will happen to buy or sell stock to further and unfairly maximize their personal benefit. (This is one way the rich get richer.) The Securities and Exchange Commission (SEC) drafted a new regulation requiring corporations to disclose when executives had bought or sold their company’s stock shortly before or after the announcement of a buyback in an effort to control this unfair insider trading. However, the courts struck down the regulation before it could be implemented. Rather than rewriting the regulation to overcome the judge’s concerns, the SEC, under pressure from Wall St. and corporate executives, gave up on the new regulation.

Spending profits on buybacks rather than investments in the corporation’s business has serious consequences. For example, over the past ten years, Boeing has spent $39 billion on buybacks (and an additional $20 billion on dividends to shareholders). Over that period, Boeing’s planes have had two major accidents and numerous less serious accidents and safety issues. It has repeatedly failed to follow through effectively on promised safety improvements and insiders have reported numerous situations where safety was shortchanged to reduce costs. Norfolk Southern Railroad spent $18 billion on buybacks and dividends in the five years before the disastrous derailment in East Palestine, OH. Employees reported many cost saving strategies that reduced safety. Abbott Labs spent $5 billion on buybacks while allowing manufacturing conditions to deteriorate until its infant formula became contaminated resulting in infant deaths and a national shortage of formula when its manufacturing had to be shut down due to safety problems. Bed Bath and Beyond actually went into debt to buyback $12 billion of its stock, which caused it to go bankrupt.

STORY #2: Intel, the biggest U.S. computer chip maker, has been using huge amounts of its profits ($152 billion since 1990 or an average of $4.6 billion each year for 33 years) to buy back its own stock. Intel’s CEO’s compensation was $179 million in 2021, most of it linked to the price of the corporation’s stock, which is artificially boosted by the stock buybacks. [2]

What makes Intel’s stock buybacks particularly concerning is that Intel, rather than spending its own profits on expanding manufacturing capacity, is getting an $8 billion grant from the federal government along with $11 billion in loans on favorable terms. The government funding is from the CHIPS and Science Act and its goal is to incentivize corporations to expand chip manufacturing capacity in the U.S. and to create American jobs. However, there is no prohibition on Intel continuing to buy back its own stock or on it laying off workers. Intel has refused to pledge that it won’t buy back its own stock and that it won’t lay off workers while receiving federal money under the CHIPS Act. So, while it may create 10,000 jobs at a new manufacturing facility, it may be laying off workers elsewhere.

STORY #3: For decades, the $47 billion infant formula industry, led by Mead Johnson and Abbott Labs, has gotten the U.S. government to use its muscle around the world to support sales of formula. U.S. agencies have intervened with at least 17 countries. They have opposed those countries’ efforts to limit marketing of formula or require additional safety precautions, despite the well-documented benefits of breast feeding and links to obesity of feeding formula to toddlers. The countries range from those in the European Union, to Canada, Israel, China, and multiple countries in Africa, Southeast Asia, and Central and South America. U.S. agencies have complained about restrictions on formula advertising in bilateral meetings with other countries as well as before the World Trade Organization (WTO). The implicit threat is a formal WTO complaint that can lead to costly litigation. In 2018, officials in the Trump Administration were accused of threatening to withhold military aid to Ecuador over its support for breastfeeding. [3]

Formula obviously costs more than breast milk and requires clean water to prepare, which is not always available. It typically costs more than cow’s milk. However, aggressive marketing by the formula industry, often claiming unfounded benefits for formula, persuades parents to buy it even when they can barely afford it. The U.S. actions in support of the infant formula corporations have even undermined the work of other U.S. foreign aid and health agencies that have promoted breastfeeding for many years.

STORY #4: At the behest of the genetically engineered crop industry, led by Bayer (due to its acquisition of Monsanto), the U.S. government is challenging Mexico’s ban on using genetically modified (GM) corn for human consumption. Mexico’s president announced back in 2020 that he planned to phase out the use of GM corn for human food (as opposed to animal feed) and to ban the use of the glyphosate-based herbicides (very profitable Monsanto products) that are essential to growing GM corn. The U.S. objected and after negotiations failed to reach an agreement, the U.S. has submitted the dispute to the dispute resolution process established by the U.S.-Mexico-Canada Trade Agreement. GM corn was introduced commercially in 1996 and its safety assessments were done by the corporations working to grow and sell it. The heavy and increasing use of pesticides and herbicides to grow GM corn is also a concern, especially given the lack of systematic monitoring of human exposure to them. Bayer has paid billions of dollars to settle lawsuits over the health effects (especially cancer) of exposure to glyphosate-based herbicides sold under Monsanto’s Roundup brand name. [4]

[1] Reich, R., 3/13/24, “Disclose executive stock buyback manipulations,” Robert Reich blogpost

[2] Leopold, L., 3/27/24, “Intel brags of $152 billion in stock buybacks over last 35 years. So why does it need an $8 billion subsidy?” Common Dreams (https://www.commondreams.org/opinion/intel-subsidy-chips-act-stock-buyback)

[3] Vogell, H., 3/21/24, “The U.S. government defended the overseas business interests of baby formula makers. Kids paid the price.” ProPublica (https://www.propublica.org/article/how-america-waged-global-campaign-against-baby-formula-regulation-thailand)

[4] Corbett, J., 3/26/24, “Experts warn of toxins in GM corn amid US-Mexico trade dispute,” Common Dreams (https://www.commondreams.org/news/genetically-modified-corn)

CORPORATIONS ARE GIVING BIG MONEY TO ELECTION DENIERS

America’s biggest corporations are giving tens of millions of dollars to the 147 members of Congress who voted to deny the 2020 election results. They are making campaign donations to these election deniers, also known as the Sedition Caucus, both directly and indirectly through political action committees (PACs) and business groups. Despite concerns expressed by some corporate leaders about political and business or economic upheaval if Trump were to be re-elected, if one follows the money, it’s clear that these corporations and their leaders care more about their profits and political influence than they care about democracy.

The billions of dollars flooding candidates’ campaigns for the 2024 elections are not just corrupting policy making and the enforcement of our laws (see this previous post for more detail), they are also undermining our democracy.

In January, senior executives of America’s biggest corporations and other wealthy individuals attended the annual World Economic Forum in Davos, Switzerland, where the theme for the year was “Rebuilding Trust.” However, their hypocrisy was hard to miss. Some of them expressed fear of what a Trump re-election might mean in terms of political unrest and potential risks for businesses. However, they are providing substantial campaign funding for Trump and his acolytes in the Republican Party.

Since the January 6, 2021, Capitol Hill insurrection, 228 of the 300 largest American corporations that have political action committees (PACs) have given over $26 million to the 147 members of Congress who voted to deny the 2020 election results. In the immediate aftermath of the insurrection, numerous corporations announced to great fanfare that they would stop making political contributions to members of Congress who were election deniers. However, many of them have quietly resumed making donations to the election deniers, also known as members of the Sedition Caucus.

For example, Boeing suspended contributions but resumed making them four months later and has since given over $650,000 to 85 election deniers. The list of corporations suspending but then resuming contributions to election deniers includes Amazon, FedEx, Home Depot, Johnson & Johnson, McDonald’s, UPS, Verizon, Walmart, and Wells Fargo. In addition to contributing directly to the election deniers, they are also contributing to Republican Party PACs that support the election deniers. Furthermore, the known contributions are only the ones the corporations’ PACs are making openly and directly; many of them are also contributing to election deniers through vehicles that obscure donors’ identities such as business groups (like the Chamber of Commerce and industry-based associations), super PACs, and dark money groups that do not have to disclose their donors. [1]

If you’d like more detail, check out ProPublica’s database of contributions by Fortune 500 corporations to election deniers. It includes how much they’ve given, what percentage of their total giving it represents, who they’ve given to, and how long they kept their promise not to contribute to election deniers.

If business groups, like the Chamber of Commerce, are added into the calculations, these groups and corporate PACs have given over $108 million to election deniers since the January 6 insurrection. Over 1,400 such entities have given over $91 million directly to election deniers and another $17 million to PACs affiliated with them. The top ten contributors to the election deniers in 2023 are: [2]

American Bankers Assoc. $430,500
National Assoc. of Realtors $370,000
Nat’l Rural Electric Coop Assoc. $272,000
UPS $269,500
Boeing $257,500
Nat’l Multifamily Housing Council $255,000
Honeywell $251,000
AT&T $248,000
Lockheed Martin $239,500
Nat’l Auto Dealers Assoc. $236,000

The election deniers who received the largest amounts from these business entities in the first three quarters of 2023 are:

Jason Smith (R-MO) $2,007,185 Chair of the Ways & Means Comm.
(which oversees the budget & all fiscal matters)
Kevin McCarthy (R-CA) $1,740,000 Former House Speaker
Steve Scalise (R-LA) $1,549,300 House Majority Leader (2^nd in command to the Speaker)

The efforts by wealthy individuals and corporations to skew our policies, laws (and enforcement of them), economy, and society to their benefit are nowhere more obvious than in their huge contributions to political candidates. Apparently, they don’t even have qualms about donating to those who voted to block the democratic transfer of power. Needless to say, major reforms of our campaign finance laws are needed, along with the reversal of the 2010 Citizens United U.S. Supreme Court decision (and related ones). Those decisions equated the spending of money in political campaigns with the right to free speech and have given corporations free speech rights like those granted to human beings.

We must reform campaign financing, which is currently dominated by individuals and corporations with great wealth and, therefore, great power. Supreme Court Justice Louis Brandeis tackled those issues roughly a century ago. As a lawyer, often doing pro bono work in the public’s interests, he successfully took on Boston’s street car and light monopolies and got lower rates and better service. He challenged the power of big railroads, life insurance companies, and banks, as well as their wealthy owners.

Brandeis was a fervent supporter of democracy, saying “The end for which we must strive is the attainment of rule by the people.” He believed that democracy had to include economic freedom, not just political and religious freedom. He supported policies and actions that promoted the general welfare and opposed monopolistic power and special privileges or power for the wealthy.

Brandeis summed it all up by saying, “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.” How true these words ring today, almost 100 years later. [3]

[1] Reich, R., 1/18/24, “Davos duplicity,” Robert Reich’s Daily Blog (https://robertreich.substack.com/p/corporate-enablers-of-dictatorship)

[2] Massoglia, A., 1/11/24, “Corporate PACs and industry trade groups steered over $108 million to election objectors since Jan. 6,” Open Secrets (https://www.opensecrets.org/news/2024/01/corporate-pacs-and-industry-trade-groups-steered-over-108-million-to-election-objectors-since-jan-6/)

[3] Dilliard, I., editor, 1941, “Mr. Justice Brandeis: Great American,” with quotes from Lonergan, R., 10/14/41, “A steadfast friend of labor,” Labor (pages 42 – 43) (https://babel.hathitrust.org/cgi/pt?id=mdp.39015009170443&seq=9)

SHORT TAKES ON IMPORTANT STORIES #3: CORPORATE GREED

STORY #1: Corporate profits have skyrocketed. They were roughly $12 trillion per year in 2022 and 2023. This is up from about $8.5 trillion a year in 2019 and 2020; a 50% increase in just three years. [1] (The graph linked to in this footnote is worth a thousand words.) This in large part reflects the price gouging large corporations engaged in in the post-pandemic years, claiming it was inflation. Their ability to inflate their prices and profits is due to the presence of just a few large corporations with monopolistic power in many markets in the U.S. economy. It also reflects squeezing workers to keep their pay low. [2]

This trend of high marketplace concentration, monopolistic power, and growing profits for large corporations has been going on for 40 years largely because of the failure to enforce antitrust laws. Corporate profits were $2.2 trillion per year in 2000, $1.1 billion in 1990, and $0.8 billion in the early 1980s. In other words, they are now over five times what they were in 2000, over ten times what they were in 1990, and 15 times what they were in the early 1980s.

In the last 20 years, marketplace concentration has increased in three-quarters of the U.S. economy with fewer corporations controlling more of the market than ever before. The good news is that the Biden administration is reviving enforcement of antitrust laws. It’s tackling price fixing in the meat industry – where four corporations control roughly 70% of the market. It’s suing Amazon for its monopolistic practices. It’s blocked the merger of JetBlue and Spirit Airlines as well as other mergers that would have increased concentration and monopolistic power.

Notably, the Biden administration initiated the first major antitrust case in 25 years that targets monopoly power. It charges Google with monopolizing the search engine market. The U.S. Department of Justice has been joined by 50 states’ attorneys general in the case. As the trial began, Google asked to keep the proceedings and evidence confidential and the judge was quite compliant. Google typically claimed the information represented business secrets that would harm the company if made public. In particular, Google tried to keep secret the dollar figure central to the whole case: how much it paid smart phone and computer companies to make its search engine the default on their devices. Six weeks into the trial, media representatives and transparency advocates filed a motion challenging the unprecedented secrecy and obstruction of public access to the trial’s proceedings and evidence. The judge responded by making much more information publicly available, including the amount Google was paying to have its search engine be the default on a wide range of phone and computer products and, therefore, effectively the default search engine across most of the Internet. It was a stunning $26.3 billion in 2021 alone. [3]

STORY #2: Chief executive officers’ (CEO) compensation is exorbitant and does not reflect their skills, their productivity, or competition for good candidates for the CEO position. Rather, it reflects CEOs’ power over their Boards of Directors and the lack of any counter weight to such unwarranted influence. CEO compensation declined slightly in 2022 because of weak stock market performance, which reduced the value of stock-based compensation. However, over the last 45 years, CEOs’ compensation is up over 1,200% (adjusted for inflation) while a typical workers’ pay is up 15%. CEOs are now paid 344 times as much as a typical worker, up from 21 times worker pay in 1965. [4]

The most egregious example of exorbitant CEO pay is the 10-year compensation agreement for Elon Musk approved in 2018 by Tesla’s Board of Directors. It’s potentially worth $56 billion. A shareholder sued and a judge just ruled that this level of compensation was unfair to shareholders. Tesla’s Board has only eight members and many have close personal ties to Musk (such as his brother) and therefore don’t have the degree of independence required for a publicly traded company. The compensation package would have allowed Musk to buy 304 million shares of Tesla stock for about $23 each. Over the last 3 ½ years, the stock’s price on the market has always been over $100, hit a high of $400, and has generally been around $200 per share – far above the purchase price of just over $23 given to Musk. [5] [6]

STORY #3: Our tax system needs to require wealthy CEOs and other wealthy individuals to pay their fair share in taxes. To achieve this, fair taxes are needed on income, including capital gains (i.e., the profit from selling stock). Without a fair and well-enforced national tax system, the wealthy play games to avoid national and state taxes. Recently, Amazon founder Jeff Bezos announced that he’s moving his official residence from Washington state to Florida. (He just bought two mansions for almost $150 million on a literally gated island near Miami.) It appears that his motivation for the move was to avoid a new 7% capital gains tax that Washington state has enacted on the sales of stock worth over $250,000. Bezos has been selling about 50 million shares of Amazon stock each year generating roughly $8 billion a year in income that was previously untaxed in Washington. He will save roughly $600 million a year by moving his legal residence to Florida, which has no income tax and no tax on capital gains. Washington enacted its capital gains tax to make its tax system fairer. Prior to its enactment, Washington’s state tax system was rated as the most regressive in the country. With this new, fairer tax system in place, Florida is now the state in the country with the most regressive state tax system. [7]

[1] Federal Reserve Economic Data, 12/21/23, “Corporate profits after tax,” St. Louis Federal Reserve Bank (https://fred.stlouisfed.org/series/CP)

[2] Reich, R., 2/16/24, “Where are record corporate profits coming from? Your thinning wallets,” Reich’s daily blog (https://robertreich.substack.com/p/corporate-soaring-profits-are-from)

[3] Goldstein, L., 11/28/23, “The secret trial,” The American Prospect (https://prospect.org/justice/2023-11-28-google-secret-trial/)

[4] Bivens, J., & Kandra, J., 9/21/23, “CEO pay slightly declined in 2022,” Economic Policy Institute, (https://www.epi.org/publication/ceo-pay-in-2022/)

[5] Chase, R., 1/31/24, “Elon Musk cannot keep Tesla pay package worth more than $55 billion, judge rules,” The Boston Globe from The Associated Press

[6] Hals, T., 1/31/24, “Judge voids Elon Musk’s ‘unfathomable’ $56 billion Tesla pay package,” Reuters

[7] Johnson, J., 2/13/24, “Tax-dodging Jeff Bezos to save $610 million with move to ‘Billionaire Bunker’ in Florida,” Common Dreams (https://www.commondreams.org/news/jeff-bezos-billionaire-bunker)

RESULTS OF FOR-PROFIT HEALTH CARE Part 2

Here are some current examples of the results of for-profit health care: lack of availability and use of generic drugs, huge bills for ambulance services, doctors unionizing, and illegal and unethical health care for prison inmates from a private equity-owned provider.

This is the eleventh post in a series on how the U.S. health care system is a high-cost, low-quality, profit-driven system. The tenth post provides some other examples of the results of for-profit health care and links to the previous posts. Those posts cover the negative effects of vertical integration and private equity-owned health care providers. They also describe illegal and unethical behavior by nursing home operators as well as anti-competitive and often illegal practices by drug companies. And one post highlights how doctors are pushing back against for-profit health care.

Generic drugs that are just as effective as and cheaper than brand name drugs are sometimes unavailable in the U.S. or are underused because they don’t produce enough profit. For example, there’s a generic cold medicine, ambroxol, that’s been available in Europe since 1978. It’s cheap (a few euros), available over the counter, and Americans who have used it describe it as miraculous. However, no drugmaker has ever sought Food and Drug Administration (FDA) approval to sell it in the U.S. FDA approval is costly and time-consuming and the profits of a generic drug aren’t sufficient to warrant the expense, so it’s not available in the U.S. [1]

The Biden Administration should direct the FDA to establish a new, expedited approval process for drugs approved for sale in Europe. The European Medicines Agency, Europe’s equivalent of the FDA, has a proven track record as an effective drug regulator and the FDA could simply review its records on a drug and quickly approve the drug for use in the U.S.

Another example is anastrozole, a generic drug that works to prevent breast cancer in post-menopausal women with risk factors for breast cancer. Many women and even some doctors are unaware of this because, as a generic drug, it would not produce enough profit to warrant a marketing campaign by a drugmaker. A one-year supply costs only about $100. Anastrozole is FDA approved for treating breast cancer but not for preventing breast cancer. A definitive clinical trial showing its benefit in preventing breast cancer was completed in 2014 in the United Kingdom (UK). Because the UK has a single-payer health care system that is motivated to decrease costs as well as promote health, it promotes the use of anastrozole for preventing breast cancer, while no one is promoting that here in the U.S. [2]

On a different front, exorbitant bills for ambulance transportation are still widespread, despite the federal No Surprises Act passed in 2022. It eliminated surprise billing for most medical services but excluded ambulance services because of the complexities involved. An advisory committee charged with studying this issue recently recommended capping patients’ out-of-pocket costs at $100. At least ten states have banned surprise billing (aka balance billing) to patients of the difference between what a service provider charges and what the patient’s insurance will pay. In the absence of such a state law, patients are receiving ambulance bills that often are $1,000 and sometimes as high as $3,300. People who need an ambulance shouldn’t have second thoughts about calling one due to fear of an unaffordable bill. [3]

Doctors are pushing back against for-profit health care by unionizing (which was the topic of this previous post). The 145 doctors at Salem Hospital in Massachusetts have announced they are unionizing in order to improve patient care. Citing budget cuts, lack of sufficient beds, and decision-making without their input, they are joining Council 93 of the American Federation of State, County, and Municipal Employees (AFSCME), which represents roughly 3,000 doctors nationwide. Salem Hospital is part of the Mass General Brigham, Boston-based conglomerate, which employs about 7,500 doctors. Some of its nurses, medical residents and fellows, and other staff are already unionized. [4]

Another example of problems with private equity (PE) owned health care providers is Wellpath (owned by H.I.G. Capital). (See previous posts here and here for other examples.) Wellpath provides prison health care in 34 states for 300,000 patients, generating an estimated $2 billion in revenue. It is a defendant in over 1,000 lawsuits filed by prisoners, their families, and civil rights advocates. A survey of inmates it serves found that 80% reported delayed health care and 79% reported a medical condition that had been ignored. In its six years servicing 6,000 inmates in Massachusetts’s Department of Correction, it has been accused of chronic understaffing, denials of care, and failures to follow doctors’ treatment plans, as well as inappropriate treatment of inmates with mental health issues, including the inappropriate use of solitary confinement and chemical and physical restraints. In November 2020, an investigation by the Massachusetts U.S. Attorney and the U.S. Department of Justice’s Civil Rights Division found numerous problems and accused Wellpath of exposing inmates having a mental health crisis “to conditions that harm them or place them at serious risk of harm.” [5] [6]

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to:

Implement an expedited FDA approval process for drugs approved in Europe,
Fund the FDA to promote generic drug use, and
Ban private equity firms from our healthcare system. Furthermore, ask them to regulate the private equity business generally to eliminate its harmful and unproductive extreme capitalism practices throughout our economy.

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your 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] Kuttner, R., 9/15/23, “How do you spell relief?” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/2023-09-15-how-do-you-spell-relief/)

[2] Kleiman, L., 12/27/23, “Cheap, effective treatments for cancer already exist, so why don’t we know about them?” The Boston Globe

[3] Editorial Board, 11/20/23, “Ban expensive surprise bills for ambulance rides,” The Boston Globe

[4] Johnston, K., 1/10/24, “Hospital doctors forming a union,” The Boston Globe

[5] Piore, A., 1/3/24, “Company seeking new contract faces more scrutiny over prisoner treatment,” The Boston Globe

[6] Editorial Board, 12/27/23, “Warren, Markey shine a much-needed light on prison health care,” The Boston Globe

RESULTS OF FOR-PROFIT HEALTH CARE

Here are some current examples of the results of for-profit health care. First, serious medical errors and complications increase in hospitals after they’ve been bought by private equity firms. Second, acquisitions, consolidations, and vertical integration are rampant throughout the U.S. health care system leading to monopolistic power and behaviors.

This is the tenth post in a series on how the U.S. health care system is a profit-driven system. The first post presented an overview of the system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described large-scale vertical integration and the related problems and illegal behavior. The sixth post describes egregious illegal and unethical behavior that is all too common among nursing home operators. The seventh post highlighted how doctors are pushing back. The eighth and ninth posts described anti-competitive and often illegal practices by drug companies that are jacking up drug prices in the U.S. and what can be done about it.

The rate of serious medical errors and complications increased by 25% or more in some hospitals after they were bought by private equity (PE) firms. A recent study of 51 hospitals between 2009 and 2019 found that in the three years after a hospital was bought by a private equity firm, infections, bed sores, and falls all increased by 25% or more. Reduced staffing is likely to be a major contributor to this increase in adverse outcomes. [1] [2]

Over the last 20 years, private equity firms have been major buyers of hospitals and other pieces of our health care system. For example, two PE-owned companies now dominate the motorized wheelchair business. To reduce costs and maximize profits, they a) use lower quality parts, which lead to more breakdowns and malfunctions; and b) have reduced the number of repair technicians so there are long waits for repairs. [3] [4]

The private equity model is to buy a business, saddle it with high levels of debt and/or rent (after profiting from selling its real estate), take (often excessive) fees and dividends, maximize short-term profits, and then sell what’s left of the business or file for bankruptcy. The PE model has led to monopolistic consolidations, staffing cuts (often compromising quality and safety), financial manipulation, disruptive bankruptcies, and reduced quality, access, and affordability of health care for many Americans. (See previous posts here and here for more details.)

In addition to private equity firms’ activities, acquisitions and consolidations are rampant throughout the U.S. health care system. Although large health care providers and vertical integration can, in theory, lead to efficiencies and lower costs, the extreme-concentration and vertical integration that’s occurring is leading to higher costs, along with reduced quality and access. (See previous posts here and here for more details on vertical integration in the health care system.)

A recent example of an acquisition creating increased consolidation and vertical integration is CVS’s purchase of Oak Street Health and its 169 clinics for $22 billion. Oak Street serves patients over 65 who are on Medicare and “its lucrative privatized cousin, Medicare Advantage.” So, another health system giant gets bigger by adding to the 11% of Medicare Advantage patients already covered by its Aetna subsidiary. [5] This increases CVS’s opportunities for profit growth through monopolistic power and vertical integration.

In another recent example, UnitedHealth, already the largest health care conglomerate, purchased Amedisys, a provider of home health and hospice care, in June 2023 for $3.3 billion. This gives UnitedHealth the ability to direct more of its Medicare patients (it runs the country’s largest Medicare Advantage plan) to itself, keeping the money and profits in-house. Home health and hospice care have some of the largest Medicare profit margins, 22% and 17% respectively, based on the latest data from the Medicare Payment Advisory Commission. [6]

As another example, local drug stores and pharmacies have been replaced by giant chains like CVS and Walgreens. Having gained large degrees of local market domination, they are now closing hundreds of stores to maximize profits, leaving some customers with long and inconvenient trips to get their medications. In a 1933 U.S. Supreme Court decision that stopped states from charging higher fees to chain store retailers in an effort to protect local businesses, Justice Louis Brandeis wrote a famous and prescient dissent. He wrote that opposition to the growth of chain stores was occurring because “furthering the concentration of wealth and of power and … promoting absentee ownership, is thwarting American ideals; that it is making impossible equality of opportunity; that it is converting independent tradesmen into clerks; and that it is sapping the resources, the vigor and the hope of the smaller cities and towns.” France, in contrast to U.S. policies, requires that a pharmacy must be owned by a licensed pharmacist, who is limited to having only one store! [7]

In addition to the large multi-state, billion-dollar acquisitions, many local and regional acquisitions occurred in 2023. Local or regional hospitals, physicians’ practices, and other health care providers are consolidating to boost their market share, which increases their negotiating leverage with insurers, allowing them to charge higher prices. These regional consolidations that provide monopolistic power to providers are occurring all over the country from Florida to Colorado and from Massachusetts to California.

[1] Abelson, R., & Sanger-Katz, M., 12/27/23, “JAMA study notes rise in medical errors: Increase seen in hospitals bought by private equity,” The Boston Globe from the New York Times

[2] Kannan S., Bruch, J. D., & Song, Z., 12/26/23, “Changes in hospital adverse events and patient outcomes associated with private equity acquisition,” Journal of the American Medical Association (https://jamanetwork.com/journals/jama/article-abstract/2813379)

[3] Editorial Board, 1/17/24, “Scrutinize private equity’s involvement in health care,” The Boston Globe

[4] Roberts, P., May-June 2022, “Two behemoths dominate the motorized wheelchair industry. Disabled customers pay the price,” Mother Jones (https://www.motherjones.com/politics/2022/05/motorized-wheelchairs-numotion-national-seating-mobility/)

[5] Herman, B., & Bannow, T., 12/30/23, “2023 saw several health care deals that changed the landscape,” The Boston Globe

[6] Herman, B., & Bannow, T., 12/30/23, see above

[7] Kuttner R., 1/19/24, “Saving local retail,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2024-01-19-saving-local-retail/)

SHORT TAKES ON IMPORTANT STORIES 2/1/24

These short takes highlight important stories that have gotten little attention in the mainstream media. They provide a quick summary of the story, a hint as to why it’s important, and a link to more information.

The U.S. economy is performing better than any other major economy in the world. Workers’ wages have grown 2.8% over the last four years after adjusting for inflation. The overall economy is 7% larger than before the pandemic and unemployment has been at record lows. Inflation is down to a benign 2% and consumer spending, which drives the U.S. economy, is growing. This isn’t just happenstance; it’s been fueled by pandemic relief measures and economy-stimulating legislation passed by Democrats in Congress and the Biden Administration. The success of these policies suggests that in future economic downturns, stimulative spending (i.e., fiscal policy) may well be more effective in reviving the economy than the Federal Reserve’s adjustment of interest rates (i.e., monetary policy). (Lynch, D. J., 1/28/24, “You don’t have to look far for the world’s best economic recovery because it’s happening here. What is going on in the US?” The Boston Globe from The Washington Post)

In February 2023, a train derailed in East Palestine, OH, and created a toxic nightmare. The railroads promised to operate more safely and Congress promised to pass legislation to prevent future accidents. However, derailments have increased and no legislation has been passed. Congressional legislation, the Railway Safety Act, has been opposed by lobbyists for the railroads. (Eavis, P., 1/28/24, “Since Ohio train derailment, accidents have gone up,” The Boston Globe from the New York Times)

The Consumer Financial Protection Bureau (CFPB) has proposed limiting the overdraft fees big banks can charge. The proposal, which will probably take a year or two to finalize and go into effect, would reduce the $35 overdraft fee that’s the current standard to between $3 and $14 or just enough to cover banks’ costs. The proposal would only apply to the 175 largest banks (out of about 9,000), but those banks collect about 2/3 of all overdraft fees. In 2022, consumers paid $7.7 billion in overdraft fees; the CFPB’s proposal would save bank customers about $3.5 billion a year. CFPB will be accepting public comments until April 1. (Crowley, S., 1/17/24, “Consumer bureau proposes overdraft fee limits for large banks,” The Boston Globe from the New York Times; The CFPB website: CFPB Proposes Rule to Close Bank Overdraft Loophole that Costs Americans Billions Each Year in Junk Fees)

Republicans in 15 states are refusing to provide federally-funded food to 8 million very low-income children this summer when they don’t get free meals at school. In 2022, roughly one out of every six households with children did not have enough food (17.3%). This was up almost 50% from 2021 due to the end of emergency food assistance, which was a response to the pandemic. The states refusing the federal funding are: Alabama, Alaska, Florida, Georgia, Idaho, Iowa, Louisiana, Mississippi, Nebraska, Oklahoma, South Carolina, South Dakota, Texas, Vermont, and Wyoming. (Gowen, A., 1/10/24, “Republican governors in 15 states reject summer food money for kids,” The Boston Globe from the Washington Post)

A record 20 million people have enrolled in health insurance under the Affordable Care Act (aka Obama Care) this year. This is up 25% over last year’s record of 16 million and is at least in part due to increased subsidies for health insurance’s costs. The need for and popularity of federally subsidized health insurance grows, despite Republican attempts to reduce the subsidies and statements denigrating the Affordable Care Act. (Weiland, N., 1/22/24, “20m signed up for Obamacare for the new year,” The Boston Globe from the New York Times; Weiland, N., 12/21/23, “Americans are signing up for Obamacare in record numbers,” The Boston Globe from the New York Times)

Intuit Inc., the maker of the Turbo Tax software for doing income tax returns, has lobbied aggressively against the IRS creating an easy, free, on-line system for Americans to file their income tax returns. It has claimed such a system would be too expensive and not a good use of taxpayers’ money. The IRS has estimated that it would cost between $64 and $249 million annually for it to offer a free E-filing system. Intuit got a federal research tax credit of $94 million in 2022, which would roughly pay for the cost of the free IRS filing system. (Business Talking Points, 1/4/24, “Lawmakers say break for Intuit could have financed free government tax filing program,” The Boston Globe from Bloomberg News; Senator E. Warren, 1/3/24, “Warren, Blumenthal, Sanders, Porter probe massive tax breaks received by Intuit while company fights free tax filing for millions of Americans”)

U.S. DRUG PRICES ARE A RIP-OFF Part 2

U.S. drug prices are 1 ½ to 3 times higher than they are in other well-off countries. Here are five steps our federal government should take to stop the ubiquitous anti-competitive strategies used by the pharmaceutical industry to jack up drug prices and profits. Inflated drug prices have dramatic, negative effects on people’s health and financial well-being.

This is the ninth post in a series on how the U.S. health care system is a profit-driven system. The first post presented an overview of the system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described large-scale vertical integration and the related problems and illegal behavior. The sixth post describes egregious illegal and unethical behavior that is all too common among nursing home operators. The seventh post highlighted how doctors are pushing back against health care for profits rather than for patients. The eighth post presented an overview of how anti-competitive and often illegal practices by drug companies are jacking up drug prices in the U.S.

My previous post presented an overview of the anti-competitive and often illegal practices used by drug companies that result in U.S. drug prices being 1 ½ to 3 times higher than they are in other well-off countries. Importation of drugs from Canada could save consumers and governments hundreds of millions of dollars every year. Here are some specific examples of drug company rip-offs and some policies that could address the problem of exorbitant drug prices.

A classic example of the abuses of patents and monopolistic power is the EpiPen. The EpiPen injects a pre-loaded dose of epinephrine (which counteracts a potentially fatal allergic reaction) with the push of a button. Both this auto-injector technology and the drug are over 50 years old. However, Viatris Inc. (formerly Mylan) has maintained a patent-driven monopoly on the EpiPen and typically charges over $600 for one, although the cost to produce it is just a few dollars. It regularly files for new patents based on minor changes that allow it to block generics from the market. [1]

In 2022, Viatris paid $264 million to settle an antitrust lawsuit for illegally blocking generic competition for the EpiPen – a small penalty given Viatris’s $2 billion in profits in 2022. (I’ve previously written about high drug prices, including the EpiPen, in 2022 and 2016.)

Another abuse of the patent system is the filing of multiple patents on a particular drug. An investigation by the Initiative for Medicines, Access, and Knowledge (I-MAK) found that for the ten most frequently sold drugs in the U.S. companies had obtained an average of 74 patents on each of them! [2] Furthermore, there were an average 140 patent applications on each of these ten drugs and two-thirds of them were submitted after the drug was approved for sale by the FDA. One study found that 78% of drug patents are NOT for new drugs. [3]

Numerous patents on a drug are referred to as a “patent thicket” and its goal is to put a huge roadblock in front of any potential competitor even after the original patent expires. Cutting through this patent thicket to establish the legal right to market a generic version of the drug is likely to take years and to cost millions of dollars in legal fees.

Humira, an arthritis drug made by AbbVie Inc., is an example. AbbVie filed for 312 patents on the drug; 293 of them after it had gotten FDA approval! Of those, 166 were granted and extended the patent-based monopoly on the drug for seven years, from 2016 to 2023. About two-thirds of the money AbbVie got for selling Humira, or about $100 billion, came in the seven-year extension period. For sake of comparison, AbbVie got 6.4 times as many patents on Humira in the U.S. as it did in the European Union, where its 26 patents expired in 2018.

A report from the American Economic Liberties Project and the Initiative for Medicines, Access, and Knowledge (I-MAK) identified ten illegal, anti-competitive strategies used by the pharmaceutical industry to inflate drug prices (see this previous post for details) and also identified policy fixes, including: [4]

Prohibiting payments to potential competitors to NOT produce generic alternatives.
Tightening the U.S. patent office’s procedures and standards in order to eliminate fraud and abuse. Patents shouldn’t be issued for new products that are minor tweaks of existing products, as they are used simply to extend the life of the original patent and prevent generic alternatives from entering the market. Filings that simply delay the approval of generics should be prohibited or ignored. The patent office also needs more staff, resources, and medical expertise to deal with the barrage of patent applications from the pharmaceutical industry.
Streamlining the FDA’s approval of generics, including ignoring attempts by makers of patented drugs to slow or block approvals.
Strengthening antitrust enforcement, in part by increasing funding and personnel. For sake of comparison, the FDA has 14,000 employees to review and approve drugs, while antitrust enforcement has only a few dozen working on pharmaceutical industry cases.
Increasing penalties on violators. Clearly, current penalties have been insufficient to deter persistent and repetitive illegal behavior. Both companies and corporate executives need to be more harshly punished. Delaying generic competition and other illegal behaviors are very profitable, therefore significant penalties need to be levied to discourage them.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to take strong action to stop anti-competitive practices in the pharmaceutical industry and to rein in drug prices. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your 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] Kuttner, R., 8/7/23, “Eminent domain for overpriced drugs,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-08-07-eminent-domain-overpriced-drugs/)

[2] Initiative for Medicines, Access, and Knowledge, Sept. 2023, “Overpatented, overpriced,” (https://www.i-mak.org/wp-content/uploads/2022/09/Overpatented-Overpriced-2022-FINAL.pdf)

[3] Cooper, R., 6/6/23, “How Big Pharma rigged the patent system,” The American Prospect (https://prospect.org/health/2023-06-06-how-big-pharma-rigged-patent-system/)

[4] American Economic Liberties Project and the Initiative for Medicines, Access, and Knowledge, May 2023, “The costs of pharma cheating,” (https://www.economicliberties.us/wp-content/uploads/2023/05/AELP_052023_PharmaCheats_Report_FINAL.pdf)

U.S. DRUG PRICES ARE A RIP-OFF

U.S. drug prices have long been a classic example of the corporate, profit maximization mentality that puts profits before people. The lack of regulation and antitrust enforcement in the face of ubiquitous anti-competitive strategies by the pharmaceutical industry have allowed this rip-off to go on for far too long with horrible effects on people’s health and financial well-being.

This is the eighth post in a series on how the U.S. health care system is a profit-driven system. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described large-scale vertical integration and the problems and illegal behavior that have occurred with it. The sixth post describes an example of the egregious illegal and unethical behavior that is all too common among nursing home operators. The seventh post highlighted how doctors are pushing back against health care for profits rather than for patients.

Drug prices are far higher in the U.S. than in other well-off countries. Per person drug spending in the U.S. is over three times what it is in the Netherlands, Norway, and Sweden; it’s one and a half times what it is in Switzerland, the next highest among the nine high-income countries in this study. [1] This is largely due to higher prices and not other factors.

A recent and rather dramatic example of how high drug prices are in the U.S. is that the U.S. Food and Drug Administration (FDA) just allowed Florida to buy drugs in bulk from Canada for its public health programs including Medicaid and incarcerated people’s health care. It is estimated that this will save Florida $150 million a year! Eight other states have laws allowing state drug importation and have asked, or plan to ask, the FDA for approval for similar bulk purchasing plans. There is broad (80% in some polls) and bipartisan support for drug importation from Canada to reduce drug costs. [2]

Congress passed a law allowing drug importation 20 years ago but the federal government has delayed its implementation, supposedly because of safety concerns. However, in many cases, the drugs are from the same manufacturer, just sold through a Canadian distributor.

The pharmaceutical industry, through its lobbying organization, the Pharmaceutical Research and Manufacturers of America (PhRMA), has fiercely opposed drug importation and has sued multiple times to block bulk drug importation plans. It is expected to file a lawsuit to block, or at least delay, Florida’s program.

Some drug manufacturers have agreements with Canadian distributors that prevent the distributors from exporting their drugs to the U.S. The Canadian government has taken steps to block the exportation of drugs that are in short supply, as the U.S. market is, of course, much bigger than the Canadian market.

It is estimated that the pharmaceutical industry’s aggressive and sometimes illegal efforts to keep drug prices high and block competition cost U.S. consumers, insurers, and government health programs (i.e., taxpayers) at least $40 billion every year. [3] As a result, one of out every four Americans can’t afford their prescribed medications. [4]

A study by the American Economic Liberties Project and the Initiative for Medicines, Access, and Knowledge (I-MAK) identified ten illegal, anti-competitive strategies used by the pharmaceutical industry to inflate drug prices. Its examination of the 100 most-used drugs in Medicare and Medicaid in 2019 estimated that the programs’ costs for them were inflated by $15 billion (14%) and $3 billion (9%), respectively. These two public programs are responsible for 45% of drug expenditures in the U.S. Other drug purchasers paid $22 billion more for these drugs due to the illegal, anti-competitive practices of the pharmaceutical industry. For example, it was estimated that Medicare and Medicaid would have paid 50% less for insulin in the absence of illegal practices by the four major insulin manufacturers. [5]

The anti-competitive practices of the pharmaceutical industry include:

Paying potential competitors not to sell generic alternatives to drugs,
Patent fraud and abuse including false statements to the patent office and sham patent lawsuits,
Fraudulent tactics to delay approval of a competing drug, often a generic alternative,
Collusion among competitors to increase prices,
Mergers, acquisitions, and monopolistic behavior, and
Rebates to drug insurance plans to steer consumers to brand name drugs and away from cheaper generic drugs. (These rebates are indistinguishable from bribes or kickbacks.)

My next post will highlight some specific examples of these anti-competitive practices and will present some policy changes that would reduce these abuses.

[1] Sarnak, D. O., Squires, D., Kuzmak, G., & Bishop, S., Oct. 2017, “Paying for prescription drugs around the world: Why is the U.S. and outlier?” The Commonwealth Fund (https://www.commonwealthfund.org/sites/default/files/documents/___media_files_publications_issue_brief_2017_oct_sarnak_paying_for_rx_ib_v2.pdf)

[2] Jewett, C., & Stolberg, S. G., 1/6/24, “FDA issues first approval for mass drug imports to states from Canada,” The Boston Globe from The New York Times

[3] Johnson, J., 5/16/23, “Big Pharma’s ‘rampant corporate lawlessness’ cost Americans $40 billion in 2019: Report,” Common Dreams (https://www.commondreams.org/news/big-pharma-corporate-lawlessness)

[5] American Economic Liberties Project and the Initiative for Medicines, Access, and Knowledge, May 2023, see above

DOCTORS ARE FIGHTING FOR-PROFIT HEALTH CARE BY UNIONIZING

The U.S. health care system has been taken over by a corporate, big business mentality where profits rather than patients are the priority. The result is a system with very high costs, poor outcomes, and widespread fraud. It’s a system that doctors increasingly find unrewarding to work in and in violation of their ability and ethical desire to deliver quality care.

This is the seventh post in a series on how the U.S. health care system has become a profit-driven system. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described the large-scale vertical integration of UnitedHealth Group and the problems and illegal behavior that have occurred with it. The sixth post focused on a particularly egregious example of illegal and unethical behavior by a nursing home operator with a small degree of vertical integration.

With the takeover of the U.S. health care system by large, corporate, for-profit providers, doctors are increasingly becoming employees, rather than small business practitioners. In 2012, only 5.6% of doctors were direct hospital employees and 60% were in physician-owned practices. By 2022, 52.1% of doctors were direct hospital employees and another 21.8% were employed by other corporate entities, [1] a complete reversal of the employment pattern in just ten years.

Furthermore, health care providers’ monopolistic concentration has left doctors with only a few employment options in many geographic areas. In 2016, 90% of all metropolitan areas had highly concentrated hospital markets. For example, in Pittsburgh, 71% of hospital beds are owned by a single company. In a quarter of metropolitan areas, more than 30% of doctors are employed by a single private equity firm. In 2021, private equity firms bought 484 physician practices. It’s estimated that private equity firms control between 25% and 40% of the staffing in emergency rooms nationwide.

As my previous posts have highlighted, monopolistic consolidation and private equity ownership in the health care system have led to higher costs, reduced access, worse health outcomes, and significant illegal behavior. In this profit-driven health care system, doctors are frequently not allowed to spend the time with patients they need to to deliver quality care. It’s not unusual for a primary care doctor to have 2,500 to 3,000 patients. With this many patients, personalized care is practically impossible and the primary care doctor’s job has largely been reduced to five-minute time slots to make a diagnosis and a referral to a specialist. Insurance typically pays only $30 to $60 for a primary care visit and the doctor typically gets just half of that. [2]

Doctors are pushing back by unionizing. Currently only 5.9% of doctors are unionized. However, the Committee of Interns and Residents (CIR), an affiliate of the Service Employees International Union (SEIU), has grown from 19,000 to 30,000 members in the last two years. It has won union recognition elections by large margins in hospitals from Boston to California. A poll in November 2022 found that 51% of clinicians would be willing to join a union. Doctors are resorting to unionization as the only way to have a voice in the for-profit health care system and to push for more patient-centered, humane health care.

Health care employers have responded just like other corporate employers: they’ve hired big name, expensive law firms that specialize in blocking unions. In addition to opposing union organizing up-front, including unionization elections, these law firms are perhaps most effective after a successful election when they challenge the vote and delay the bargaining that establishes the initial contract.

Another way doctors are pushing back is by leaving the system and starting what are called direct primary care (DPC) practices. In DPC, doctors don’t accept any insurance, including Medicare and Medicaid. Patients pay an up-front cash subscription fee of $75 to $100 per month. The doctor typically has around 600 patients and they have direct access to the doctor and hour-long appointments. The doctors often serve as their own pharmacists and link patients to needed services at low, wholesale prices (with only a small processing fee added on) to allow patients to access services with less frustration and lower costs than dealing with the mainstream health care system on their own.

The doctors with DPC practices find it a more rewarding way to practice medicine both in terms of their patients’ health outcomes and experiences, as well as their own personal, professional lives. DPC is great for patients who can afford the out-of-pocket costs.

The fact that doctors are finding that they must unionize or leave the system to have some control over their ability to deliver quality health care says a lot about how bad the for-profit health care system is. More and more doctors are supporting a public, single-payer system as the viable and better alternative to the current for-profit health care system.

A single-payer system is the only way to both ensure quality and control costs, as Don Berwick, M.D., has stated. (Berwick is the former head of the Centers for Medicare and Medicaid Services, the federal agency that oversees those public health insurance programs.)

[1] Meyerson, H., 8/4/23, “When M.D.s go union,” The American Prospect (https://prospect.org/health/2023-08-04-when-mds-go-union/)

[2] Arnold, S., M.D., & Tkacik, M., 7/31/23, “My life in corporate medicine,” The American Prospect (https://prospect.org/health/2023-07-31-my-life-in-corporate-medicine/)

VERTICAL INTEGRATION AND ILLEGAL BEHAVIOR IN HEALTH CARE

Vertical integration in our health care system creates significant conflicts of interest and opportunities for illegal behavior – even when it’s at a relatively small scale (at least when compared to UnitedHealth Group as described in my previous posts here and here). It facilitates greed and putting profits before patients.

This is the fifth post in a series on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described the large-scale vertical integration of UnitedHealth Group and the problems and illegal behavior that have occurred there.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. Please click on the Subscribe Today button to continue receiving notification of my posts.)

Nursing homes became a growth industry in the late 1960s as people lived longer and the federal government began paying billions of dollars for nursing home care through Medicare and Medicaid. With lax oversight, nursing homes became a golden opportunity for greedy entrepreneurs willing to cut corners on patient care and engaged in other questionable business practices.

For example, beginning in the late 1960s, Morris Esformes founded and built a chain of nursing homes. By the 1990s, he was among the most successful (i.e., wealthy) nursing home operators in Chicago, and also owned nursing homes in Missouri and Florida. His son, Philip, joined the family business and eventually took it over. They added skilled nursing and assisted living facilities, as well as home health providers and a small hospital to their limited set of vertically integrated health care services. [1]

Morris always seemed to be pushing boundaries – cutting corners on patient care, allegedly bribing a state official, and billing for fictitious services. Until 2016, he and Philip always managed to avoid any significant consequences.

Keeping beds occupied, and therefore generating revenue, is key to making money from the facilities they owned. To this end, Esformes’ facilities accepted a growing number of patients with mental illnesses. They also accepted homeless people and those with drug addiction, including significant numbers of ex-convicts. Eventually, the Esformeses were paying kickbacks to doctors and others who would send patients to their facilities, sometimes on fictitious grounds.

Their facilities were under-staffed and under-equipped, especially for serving the especially challenged populations they courted to keep their beds occupied and generating revenue. They also fraudulently billed Medicare and Medicaid, and set up dozens of shell companies to launder money so it appeared their facilities were barely profitable. Meanwhile, they spent lavishly on building connections to politicians and others who helped them, hosting expensive parties that sometimes included prostitutes.

Their small-scale vertical integration nonetheless allowed them to cycle patients among their various facilities. For example, a 72-hour hospital stay made patients eligible for their skilled nursing facilities, which were a particularly profitable part of their businesses. Medicare would pay for up to 100 days at a skilled nursing facility. Then, the patient could be transferred to one of their assisted living facilities and after 60 days there, the patient would be eligible for another 100 days at their skilled nursing facility. In 2004, the Esformeses settled a civil fraud case with the Justice Department for $15 million and no admission of guilt over their practice of shuttling patients between their hospital and skilled nursing facilities.

Between 2013 and 2018, the Esformes’ facilities were the subjects of more than two dozen wrongful death complaints. Most were settled without any admission of guilt. Some of their nursing homes were among the lowest on the federal quality rating system, but no meaningful sanctions were imposed. In 2009, Philip Esformes was an unindicted co-conspirator in a federal bribery and kickback conspiracy case in which another Chicago facility owner was convicted.

In 2016, Philip Esformes was arrested and charged with health care fraud, giving and getting illegal kickbacks, money laundering, obstruction of justice, and other offenses. He was convicted after an eight-week trial in 2019 and sentenced to 20 years in prison. Prosecutors described him as the central figure in the “largest single criminal health care fraud case ever brought against individuals by the Department of Justice,” citing over $1 billion in false reimbursement claims.

However, this was not the end of the story. During Philip’s prosecution, his father, Morris, from whom Philip had inherited the businesses, made a $65,000 contribution to the Aleph Institute, one of Jared Kusher’s favorite charities. In 2020, after President Trump had been voted out of office, Kushner (Trump’s son-in-law) was actively involved in the clemency decisions Trump was making. In December 2020, Trump commuted Philip’s sentence and ordered him released from prison, in a very unorthodox clemency grant. Philip’s conviction remains on his record as does an order for $44 million in restitution and penalties. (Court records listed his net assets at $78 million.)

Justice Department officials, in an unprecedented move of their own, are planning to charge and try Philip again. Although the jury convicted him on over two dozen charges, they were unable to reach a verdict on others, including the very significant charge of conspiracy to commit health care and wire fraud. The prohibition on double jeopardy, i.e., on retrying a defendant on charges they were found innocent of, does not apply to charges on which no verdict was rendered. Apparently, these charges were also not included in the grant of clemency.

This is one example, albeit a very egregious one, of illegal behavior by a nursing home and skilled nursing facility operator. A simple on-line search will find multiple examples of such illegal behavior and lawsuits. It will also find multiple sources with information about how to avoid and report this illegal behavior.

[1] Pomorski, C., Nov. / Dec. 2023, “The untouchables: Donald Trump freed a convicted Medicare fraudster. The Justice Department wants him back,” Mother Jones (https://www.motherjones.com/politics/2023/11/philip-esformes-trial-morris-medicare-fraud-prosecution-donald-trump-clemency/)

VERTICAL INTEGRATION EXACERBATES PROFITEERING IN HEALTH CARE Part 2

UnitedHealth Group is a huge corporation that owns companies in every piece of the health care system. This vertical integration creates major conflicts of interest and opportunities for monopolistic behavior. It exacerbates the incentive to put profits before patients and tends to lead to illegal behavior. However, United’s vertical integration has created what amounts to a single-payer health care system.

This is the fifth post in a series on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth post described how vertical integration creates opportunities for monopolistic behavior and exacerbates the incentive to put profits before patients.

UnitedHealth Group (United) is a huge, vertically-integrated, health care corporation. My previous post described how this vertical integration creates opportunities for monopolistic behavior and exacerbates the incentive to put profits before patients. Vertical integration also tends to lead to illegal behavior.

In 2002, 700,000 physicians filed a class action lawsuit against United and nine other managed care insurance companies for fraud and racketeering. They claimed that these insurers systematically denied and delayed payment to physicians and profited by doing so. The lawsuit went on for years. Most insurers settled out of court, but United fought on and eventually, in 2006, got a judge to dismiss the charges. The judge ruled that the free market should be allowed to operate unless Congress stepped in to regulate the health care system. [1]

A 2011 lawsuit against United detailed how it was profiteering by gaming Medicare’s per patient payment rates. United reported that its Medicare Advantage insurees were sicker than they actually were, thereby qualifying it for higher payments. The lawsuit was based on information from a whistleblower – United’s former finance director.

Medicare also tried to control insurers’ profiteering by requiring insurers to spend 80% to 85% of premiums on patient care. However, United’s vertical integration allowed it meet this criterion by shifting money internally, increasing payments for patient care to its own health services subsidiary, Optum.

Since 2010, United’s Optum subsidiary has made 28 purchases of physicians’ group practices, including one that had 15,000 doctor’s offices. Typically, it bought small physicians’ groups one at a time to avoid requirements to report purchases to regulators. Optum’s revenue grew from $29 billion in 2011 to $183 billion in 2022.

United also bought companies that provided unbiased benchmarks on industry-wide health care billing rates, which determine how much it (and other insurers) must pay for health care services. After it acquired essentially every company that provided such billing data, it wasn’t long before the New York State Attorney General sued United for manipulating the published benchmark rates so that it (and other insurers) had to pay less than a fair rate for health services. United settled the case for $50 million and a commitment to set up a non-profit entity to provide billing data.

United’s vertical integration creates numerous conflicts of interest. For example, one lawsuit claimed that United nursing homes denied services, such as hospitalization, to patients on its Medicare Advantage insurance plan. This kept the patient and the associated revenue flowing to its nursing home, while saving its Medicare Advantage plan from having to pay for hospital care. During the lawsuit, it was revealed that its nursing home facilities and nurses received bonuses for low hospitalization rates. Nurses were also required to encourage patients to sign “do not resuscitate” agreements. A patient’s death, of course, eliminated the need for United’s Medicare Advantage insurance to pay for additional services. Clearly, profits are being put before patients’ needs and vertical integration increases the incentives for doing so.

Not only was United aggressive in the market place, its CEO was aggressive in putting money in his own pocket. In 2006, an outside review of employee stock options found that United executives were regularly and illegally backdating stock option transactions to maximize their benefits. CEO William McGuire was the chief beneficiary, having backdated most or all of his 44 million stock options over the previous decade. He also received $5 million in cash bonuses due to errors in calculating stock-based compensation. McGuire resigned in October 2006, was fined $7 million, returned $600 million of illegal gains to United, and was barred from being a director or officer of a public corporation for 10 years, but walked away with $800 million.

Nonetheless, the backdating of stock options appears to have continued at United. A shareholder lawsuit in 2008 alleged that the new CEO offered backdated options to new employees. Although United denied the allegations, it settled this subsequent case for $895 million.

United’s vertical integration has created what amounts to a single-payer health care system. Others in the health care business are emulating United’s vertical integration strategy. With strong, public utility-like regulation, these huge health care companies could become the country’s single-payer system. It might be far easier to get to a single-payer system by regulating these private entities than trying to create a Medicare for All single-payer system, especially given the significant privatization of Medicare through Medicare Advantage.

[1] Brown, K., & Sirota, S., 8/2/23, “Health care’s intertwined colossus,” The American Prospect (https://prospect.org/health/2023-08-02-health-cares-intertwined-colossus/) This post is, for the most part, a summary of this article.

VERTICAL INTEGRATION UNDERMINES QUALITY HEALTH CARE Part 1

UnitedHealth Group is a huge corporation that owns businesses in every part of the health care system. This is called vertical integration and creates major conflicts of interest along with opportunities for monopolistic behavior. It furthers the ability and incentives to put profits before patients.

This is the fourth post in a series on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms in the health care system.

UnitedHealth Group (United) is a huge corporation that owns an insurance company, primary care and mental health clinics, surgical and urgent care centers, pharmacies and a pharmacy benefit manager, home health and hospice agencies, a bank, and much more. It is the fifth largest publicly-traded corporation in the U.S., as well as the country’s largest and most powerful health care company. Its health services division, Optum, has 103 million patients (almost a third of the U.S. population), revenue of $186 billion a year, and profits of over $28 billion. It’s the country’s largest employer of doctors – 70,000 of them – across 2,200 locations. Its health insurance business covers 50 million people. [1]

This is called vertical integration – when a company owns multiple parts of a supply chain, i.e., when a company owns companies that supply goods or services to it. United owns so many companies (i.e., subsidiaries) that one quarter of its revenue comes from its subsidiaries.

Vertical integration creates opportunities for monopolistic behavior, although the more common horizontal integration (i.e., domination of the market for a particular good or service) is what’s typically monopolistic. United’s vertical integration is designed to maximize profits via monopolistic behavior, i.e., by exerting control over patients, providers, and payers, including the government. It also creates conflicts of interest.

United began in 1974 as Charter Med. Health Maintenance Organizations (HMOs) were being created in an effort to control rapidly rising health care cost. However, they were required to be non-profit organizations run by doctors. Charter Med, a for-profit, non-doctor run company, created a loophole by contracting with non-profit HMOs to provide management services. These HMO contracts were the beginning of managed care, where the power to control health care spending is in the hands of insurance companies rather than health care providers.

In 1982, United introduced the use of a list of approved prescription drugs with tiered co-payments that its insurance would pay for. This list, called a drug formulary, was a strategy for reducing spending on drugs. Two years later it introduced a new business model where the drugs on its formulary were linked to “rebates” (aka kickbacks) from drug manufacturers. This spawned a whole new industry – and opportunity to make profits – the creation of pharmacy benefit managers (PBMs). United marketed its PBM services to HMOs.

United grew rapidly from revenue of $13 million in 1984 to $606 million in 1990. Its growth was aided by states relaxing the requirement that HMOs be non-profits, which allowed United to buy several HMOs. United also bought a large, traditional, fee-for-service insurer.

In 1990, the federal government created an exemption to anti-kickback laws to allow pharmacy benefit managers to legally get “rebates” from drug manufacturers. Higher drug prices produce bigger rebates and bigger profits for PBMs. Therefore, this business model results in higher costs for patients because PBMs get more revenue and profit from the use of expensive brand-name drugs than from cheaper generic drugs. It also tends to put private pharmacies out of business by favoring the big chain drug stores’ pharmacies. By 2022, United’s PBM, Optum Rx, had almost $100 billion in revenue.

As early as the mid-1990s, United’s size and vertical integration gave it “critical mass,” as it wrote in an SEC filing. This meant it had monopolistic power to demand lower prices from doctors and hospitals, to undercut rival insurers, and to drive out competition. United’s implementation of aggressive managed care practices and their detrimental effects on patient care led to a powerful backlash. In the late 1990s, over 400 bills regulating managed care practices were introduced in state legislatures based on evidence that United and other health plans were denying treatment for patients and incentivizing doctors to limit services.

Nonetheless, United continued its expansion through acquisitions and contracts to manage government paid health care provided under Medicare and Medicaid. By 2002, it was overseeing the care of over 1 million Medicaid enrollees and 6 million Medicare beneficiaries in its Medicare Advantage plan.

By 2020, United had the largest Medicare Advantage plan in the country with 26% of the market and roughly $80 billion in revenue. I’ve written extensively about how Medicare Advantage plans undermine Medicare and how corrupt the Medicare Advantage plan providers are. (See previous posts here, here, and here.) United and other Medicare Advantage plan providers engaged in a multi-million dollar lobbying campaign to stop the federal government from reducing excessive payments to Medicare Advantage plans, as was required by the Affordable Care Act (aka Obama Care). They succeeded, and actually got the government to increase payments to Medicare Advantage plans.

The next post in my series on the U.S. health care system will further describe the problems created by vertical integration in health care and the corruption it engendered at United. It will also suggest that these huge, vertically integrated health care system companies could be used to move the U.S. to a single-payer health care system.

HOW PRIVATE EQUITY VULTURES HAVE CORRUPTED U.S. HEALTH CARE Part 1

This is the second in a series of posts on how the U.S. health care system has been privatized and financialized so that profits rather than patients have become the perverse and pervasive priority. The result is a system that has very high costs and poor outcomes because there is a fundamental conflict between caring for patients and delivering value to investors. The first post in this series presented an overview of the for-profit U.S. health care system. This one focuses on the role of the extreme capitalism of private equity firms.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org. Please click on the Subscribe Today button to continue receiving notification of my posts. I plan to retire this site at some point.)

An important piece of the for-profit privatization of the U.S. health care system is the role of private equity (PE) “investors.” “Investors” is in quotes because these financial manipulators aren’t investing in anything except their own short-term profits. They are not investing in the companies they buy; they are looking to maximize their short-term profits and have no qualms about the companies going bankrupt – in some cases that is their plan.

The private equity model involves using mostly borrowed money to buy a company. The debt and interest of the borrowed money are then made the responsibility of (and often an overwhelming burden for) the purchased company. This forces the purchased company to engage in (often severe) cost-cutting to be able to make the payments on the debt. This cost-cutting typically involves major cuts to the number of and compensation for employees, as well as reductions in the quality of the company’s products or services. In addition, the company’s assets, such as real estate, are often sold off to raise money to pay for the debt or provide payments to the private equity buyer. The success or failure of the company is largely irrelevant as long as the PE firm can extract a high return. PE firms regularly use bankruptcy to get rid of costs and liabilities while, nonetheless, holding onto their questionably acquired gains.

U.S. laws and policies aid and abet this process by granting tax benefits to having debt, including the very high levels of debt that private equity buyouts create. PE firms are also much more loosely regulated than publicly owned companies or mutual funds that sell shares to the public. Given their private ownership, PE firms have basically no requirements for public disclosures or transparency. And PE firms have learned how to expertly manipulate the bankruptcy laws to shortchange workers and customers (in the examples here doctors, nurses, and patients) while preserving benefits for themselves.

For the last 20 years, private equity firms have been buying health care companies. The PE model of maximizing profits with no regard for the purchased company or its customers or employees, means that this has undermined the quality, access, timeliness, and affordability of health care for many Americans. PE firms’ health care system purchases include hospitals, home care and hospice providers, diagnostic and imaging labs, pharmaceutical and medical device companies, dialysis and fertility clinics, physicians’ practices, and urgent and specialty care centers. In 2018, there were 800 PE health deals representing over $100 billion in value. The subsequent cost-cutting has led to the loss of 1.3 million jobs since 2009. [1] Many communities have lost their local hospital or other medical services providers creating health care deserts that require people to travel tens or hundreds of miles to get medical care, including emergency room services.

For example, in 2006, a consortium of three private equity firms bought Hospital Corporation of America (HCA). To maximize profits for its PE owners, HCA manipulated billing to garner unwarranted revenue and refused to serve patients who didn’t pay in advance. Physicians in other PE-owned hospitals or clinics have been pressured to maximize patient volume by, among other things, restricting the time they spend with each patient. They have also been pressured to push products and treatments, some of which were unnecessary, while being required to be parsimonious with medical and other supplies. This is all typical of the revenue maximization and cost cutting that occurs under PE firm ownership, maximizing profits at any cost. Emergency room (ER) physicians also report being pushed to inappropriately admit patients when hospital beds were open and being asked to meet quotas for the number of admissions.

Here’s how a not atypical acquisition, in June 2019, of a community hospital played out in Watsonville, California. A PE firm, Halsen Healthcare, bought the community hospital for around $40 million. The hospital’s real estate was immediately sold to an Alabama real estate investment trust called Medical Properties Trust for $55 million. The hospital then had to pay $5 million a year to rent back the property. Under PE ownership, the hospital immediately stopped paying vendors and quickly ran out of essential supplies from printer paper to hospital gowns to surgical supplies. Within six months, doctors at the hospital were not getting paid; some quit. Halsen also stopped paying nurses’ health insurance premiums and froze employee’s retirement savings accounts. Sometime in the spring of 2020 it stopped paying rent. Somehow, the hospital managed to limp along until it filed for bankruptcy in late 2021, when, among other things, it owed $40 million on unpaid rent and loans. [2]

Similarly, Steward Health Care and its private equity owner, Cerberus Capital Management, did several hospital real estate transactions with Medical Properties Trust using real estate investment trusts (REITs). REITs are specialized investment vehicles that receive tremendous tax advantages under U.S. tax laws. Their use by PE firms for hospitals’ real estate allows the PE firms to extract hundreds of millions of dollars from each hospital purchase, but typically leaves the hospitals financially crippled. Between 2015 and 2021, Medical Properties Trust did hospital REIT transactions with at least seven PE firms for over a dozen hospitals or hospital chains. Investigations have revealed schemes and scams, as well as outright criminality, that have enriched PE firms and friendly CEOs of the hospitals they own. The CEO of Medical Properties Trust itself is still making about $16 million a year even though the price of the company’s stock has declined nearly 75% since January 2022. Meanwhile, countless hospitals whose real estate is owned by Medical Properties Trust and its REITs have gone bankrupt or slashed services and employee pay to make rent payments.

My next post will describe some other parts of the health care system that PE firms have bought and the effects this has had on patients, doctors, nurses, and other health care workers.

[1] Feng, R., 6/3/22, “The pain profiteers,” The American Prospect (https://prospect.org/culture/books/pain-profiteers-mariner-olson-reviews/)

[2] Tkacik, M., 5/23/23, “Quackonomics: Medical Properties Trust spent billions buying community hospitals in bewildering deals that made private equity rich and working-class towns reel,” The American Prospect (https://prospect.org/health/2023-05-23-quackonomics-medical-properties-trust/)

THE U.S. HEALTH CARE SYSTEM IS MORE THAN BROKEN, IT’S TOTALLY CORRUPTED

This is the first in a series of posts on how the U.S. health care system has been totally corrupted by private, for-profit companies. The system has very high costs and poor outcomes. Profits rather than patients have become the perverse and pervasive priority because there is a fundamental conflict between caring for patients and delivering value to investors.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org. Please click on the Subscribe Today button to continue receiving notification of my posts. I plan to retire this site at some point.)

The U.S. health care system is more than broken; it’s truly dysfunctional. It’s been totally corrupted by private, for-profit companies. If you ever want to prove that private, for-profit businesses aren’t necessarily effective and efficient, the U.S. health care system should be exhibit 1.

The U.S. health care system has the highest costs by far of any comparable country, but also has by far the worst outcomes. [1]

The U.S. spent 17.8% of its Gross Domestic Product (GDP, the value of all goods and services the economy produces) on health care. This is almost twice as much of as the average of the other 38 comparable countries in the Organisation for Economic Co-operation and Development (OECD), which range from Germany at 12.8% to South Korea at 8.8%.
The U.S. spends $11,912 per person on health care versus $7,382 in Germany (the next highest) and, in the three lowest countries, $4,666 in Japan, $4,393 in New Zealand, and $3,914 in South Korea.
U.S. life expectancy is 77.0 years, the lowest of the OECD countries, which range from the United Kingdom at 80.4 to Japan at 84.7. Furthermore, for Black Americans life expectancy is only 74.8 years and 71.8 years for American Indians and Alaska Natives.
The U.S. rate of preventable or treatable deaths per 100,000 people is 336, far higher than the other OECD countries, which range from Germany at 195 to Switzerland at 130.
The U.S. rate of infant deaths per 1,000 live births is 5.4, far higher than the other OECD countries, which range from Canada at 4.5 to Norway at 1.6.
The U.S. rate of maternal deaths per 100,000 live births is 23.8, far higher than the other OECD countries, which range from New Zealand at 13.6 to the Netherlands at 1.2. These are deaths due to complications of pregnancy and childbirth.
The U.S. rate of death from physical assault per 100,000 people is 74, far higher than the other OECD countries, which range from New Zealand at 1.3 to Japan at 0.2.
The U.S. supply of physicians per 1,000 people is 2.6, lower than the OECD countries’ average of 3.7, which range from Germany at 4.5 to Korea at 2.5.

The U.S. health care system has been privatized and financialized so that profits rather than patients have become the perverse and pervasive priority. Mergers and acquisitions have created behemoth health care corporations that have an insatiable drive to increase profits. Through local monopolies and vertical integration (where one company owns and profits from everything from primary care doctors and nurses to end-of-life hospice care), they maximize profits rather than patient outcomes. Pharmaceutical companies manipulate patents and buy off generic drug makers to maximize profits. Private equity firms profit by buying health care providers and monopolizing niche markets, slashing costs, and manipulating real estate and other assets.

The portion of U.S. health care dollars that go to administrative overhead, waste, and fraud has grown to 30%, while the portion going to pay doctors and nurses has fallen. For example, the CEOs of the top seven health insurers got an average of $48 million last year. Experts estimate that one-tenth (10%) of what the federal government spends on health care is fraud.

Meanwhile, the supposedly efficient private sector health care system has shortages of doctors and nurses; shortages of frequently used drugs (e.g., antibiotics and common cancer treatments) and of commonly used and essential intravenous solutions; and medical deserts where emergency and acute services can’t be found, typically due to the closing of small, often rural hospitals and other service providers for the sake of profit maximization. [2]

In the 1980s, due to deregulation and supposed innovation, the U.S. health care system began a dramatic shift from a small business and not-for-profit model to a large corporate, for-profit model. The cost of health care in the U.S. began to skyrocket. And outcomes did not improve. (See above for some data on costs and outcomes.)

The government pays for a growing portion of health care in the U.S.; it’s about half today, having grown from less than a third in the 1990s. Much of this care has been privatized. Over 80% of Medicaid’s low-income families and individuals are enrolled in some type of privatized care. Over half of Medicare’s seniors are in privatized plans known by the misnomer Medicare Advantage plans. Medicare Advantage plans are such large and reliable generators of profits that every insurer, many private equity capitalists, and even retailers like Amazon, Walgreens, and Dollar General are anxious to tap into the it. The health care industry and Congresspeople whose campaigns it has funded are also working hard to privatize the Veterans Affairs health care system.

One example of a huge health care corporation built through mergers and acquisitions is HCA Healthcare, which has $60 billion in annual revenue. It owns roughly 180 hospitals and 2,300 ambulatory care sites, including surgery centers, freestanding ERs, urgent care centers, and physician clinics, in 20 states and the United Kingdom. It is effectively a monopoly in some areas.

HCA has engaged in fraud, billing Medicare and Medicaid for unnecessary and wasteful services and supplies, including repeat lab tests and redundant scans. Critics describe it as the epitome of the profits over patients mindset. More than two dozen doctors from 16 HCA hospitals have corroborated its use of a “vulnerability index” algorithm to identify patients most likely to die. HCA then pushes staff to persuade the patients’ caregivers to abandon less profitable life support and move the patient to more profitable hospice care. Since acquiring a hospice provider two years ago, HCA’s hospital to hospice discharge rate has jumped to twice the national average. Insurance reimbursement practices mean that profits can be maximized by moving these patients to hospice and freeing up hospital beds for other patients who use more billable services. Moreover, this gets a death off the hospital’s records, improving its mortality statistics, which are part of HCA’s calculation of executives’ bonuses.

For-profit health care dangerously incentivizes denials of care and actions not in patients’ best interests because there is a fundamental conflict between caring for patients and delivering profits for investors. Vertical integration of health care services (where one company owns and profits from everything from primary care doctors and nurses to end-of-life hospice care) exacerbates conflicts of interest between maximizing profits and patient well-being.

[1] The Commonwealth Fund, 1/31/23, “U.S. health care from a global perspective, 2022: Accelerating spending, worsening outcomes,” Issue Brief (https://www.commonwealthfund.org/publications/issue-briefs/2023/jan/us-health-care-global-perspective-2022)

[2] Tkacik, M., & Dayen, D., 7/31/23, “A sick system,” The American Prospect (https://prospect.org/health/2023-07-31-sick-system-business-health-care/)

FINANCIAL CORPORATIONS USE ANTI-LGBTQ+ CAMPAIGN TO FIGHT COMPETITION ON CREDIT CARD FEES

Corporations and their executives will do anything to protect their profits, wealth, and power. Visa, Mastercard, and their big bank partners are working with right-wing groups using an anti-LGBTQ+, anti-wokeness campaign in a fight to protect their monopolistic price-gouging on credit card transaction (“swipe”) fees.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Special Note: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org. Please click on the Subscribe Today button to continue receiving notification of my posts. I plan to retire the old site at some point. Thank you for reading my blog!)

Corporate executives are totally focused on the bottom line – on profits. When profits are on the line, no holds are barred. Visa, Mastercard, and their big bank partners are using an anti-LGBTQ+ campaign to fight competition that would reduce transaction fees (swipe fees) on credit card transactions. Despite websites and social media communications claiming sensitivity and a commitment to the LGBTQ+ individuals, and some token actions supporting the LGBTQ+ community, these big financial corporations are resorting to an anti-LGBTQ+, anti-wokeness campaign to fight legislation in Congress that would require competition in the processing of credit card transactions. [1] (Note: Many corporations that claim to support the LGBTQ+ community are, nonetheless, making significant political contributions to politicians promoting anti-LGBTQ+ legislation. See this previous post for details.)

To reduce monopolistic swipe fees by introducing competition, a bipartisan group in Congress is working to reduce the dominance of the credit card market by Mastercard and Visa (and their big bank partners). Mastercard and Visa currently control over 80% of the credit card market. Therefore, they effectively set the fees that retailers (and ultimately consumers) must pay them to process credit card transactions. Since 2020, these fees have increased by 40%, even though the cost of processing transactions has gone down as technology has improved and gotten cheaper.

Swipe fees on credit and debit card transactions cost retailers and consumers $161 billion in 2022. Credit card swipe fees are, on average, 2% of each transaction’s value, but can be more for on-line transactions and up to 4% on some cards. Total swipe fees in 2022 are about eight times as much as they were in 2001, when they were about $20 billion.

For most retailers, credit card swipe fees are their second biggest cost; second only to the cost of paying their workers. For small, low-margin businesses like mom-and-pop convenience stores and gas stations, swipe fees are a higher portion of their costs than they are for bigger businesses. [2]

Therefore, a bipartisan group in Congress is looking to reduce this burden on small businesses (and their customers) with the Credit Card Competition Act (CCCA). The bill would require Visa and Mastercard, and the big banks they work with, to allow competitors to process credit card transactions, introducing competition on swipe fees. If passed, it is estimated that this competition would save retailers and their customers $15 billion per year.

A similar law regulating debit cards was passed by Congress in 2010 It, and regulations from the Federal Reserve, cap debit card swipe fees at $0.21 per transaction and 0.05% of a transaction’s value. It also requires large banks’ debit cards to allow processing by two unaffiliated computer networks, eliminating monopolistic control by Visa, Mastercard, and their big bank partners. It is estimated that these regulations save retailers and their customers over $9 billion per year.

New regulations that took effect July 1, 2023, have confirmed that the fee cap and network processing rules apply to on-line and contactless debit card transactions, as well as to in-store transactions. Visa, Mastercard, and their partner banks had not been living up to these rules on transactions done in these alternative modes.

Visa, Mastercard, and their big bank partners are spending millions of dollars to fight the CCCA. For example, the Credit Union National Association spent $2 million in the last six months lobbying against swipe fee reform, Mastercard spent $200,000, and the American Bankers Association spent almost $5 million over the last year on issues including swipe fee reform.

Even though the support for the CCCA is being led by the National Association of Convenience Stores and the Merchants Payment Coalition (which spearheaded the effort to regulate debit cards through the 2010 law), the big financial corporations are claiming that the CCCA is a liberal effort to reward “woke” retailers. Their ads, mailings, and lobbying claim that the CCCA is meant to reward big “woke” retailers like Target. As you may remember, Target unveiled a Gay Pride product line for Gay Pride month in June this year with prominent displays in stores and on its website. In the face of right-wing extremists’ attacks, it pulled back on the displays in some stores and on products featured on its website.

The financial corporations are working with right-wing dark money groups (whose contributors are hidden from public disclosure) to send mailings and run advertisements claiming the CCCA is a liberal handout to “woke” retailers. They are focusing on the districts of Republican supporters of the CCCA, hoping to split the bipartisan coalition for the CCCA and to defeat it by making it a target in the Republican anti-LGBTQ+ culture war.

This tactic by the big financial corporations clashes with their efforts over the past several years to portray themselves as leaders in promoting diversity, equity, and inclusion. They routinely pledge to support LGBTQ+ inclusivity in hiring. Some held their own Pride Month celebrations this past June.

This current use of an anti-LGBTQ+ tactic underscores their hypocrisy and their willingness to use any tactic possible to protect their financial interests and profits. There’s no real commitment by corporations or their executives to moral or ethical principles. Their behaviors and rhetoric only reflect an interest in maximizing their profits, wealth, and power.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support the Credit Card Competition Act. The monopolistic control of swipe fees by Visa, Mastercard, and their big bank partners needs to end. Doing so will save small businesses and consumers billions of dollars every year. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your 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] Goldstein, L., 8/4/23, “Wall Street stokes culture war to fight swipe fee reform,” The American Prospect (https://prospect.org/power/2023-08-04-wall-street-culture-war-swipe-fee-reform/)

[2] National Retail Federation, retrieved from the Internet 8/11/23, “Swipe fees,” (https://nrf.com/advocacy/policy-issues/swipe-fees)

CORPORATIONS’ GOOD DEEDS ARE OFTEN JUST PR

Corporate good deeds and words are often just for public relations (PR) and do not represent any real commitment to good causes. Many corporations, despite statements and some token actions supporting the LGBTQ+ community, are making significant political contributions to politicians promoting anti-LGBTQ+ legislation. Combining state and federal level political giving, since Jan. 2022, 25 of these corporations have given $13.5 million to anti-LGBTQ+ politicians or their committees. Over 50 corporations that have actually signed the Human Rights Campaign’s LGBTQ+ pledge have, since Jan. 2020, contributed over $2.4 million to state legislators promoting bills deemed anti-LGBTQ+.

Corporate executives are totally focused on the bottom line – profits. Good deeds and words from them and their corporations are often just for public relations (PR). Actions speak louder than words and in terms of money, token spending on bits of PR is outweighed by significant money going elsewhere, such as to political contributions.

Recent examples relate to the LGBTQ+ community. Corporations, their executives, and their websites and social media communications claim sensitivity and a commitment to the LGBTQ+ community. Despite statements and some token actions supporting the LGBTQ+ community, many corporations, nonetheless, are making significant political contributions to politicians promoting anti-LGBTQ+ legislation. Here are two studies that document this.

First, a study by Popular Information of 25 corporations that had excellent ratings on the Human Rights Campaign’s (HRC) annual Corporate Equality Index (which rates over 1,200 companies on their treatment of LGBTQ+ employees and customers) found that, since Jan. 2022, they or their political action committees (PACs) have given $13.5 million to anti-LGBTQ+ politicians and their committees at the state and federal levels. HRC’s methodology for calculating its Corporate Equality Index has NOT to-date taken political donations into account. The top ten corporate contributors to state and federal anti-LGBTQ+ politicians are: [1]

AT&T $1,396,650
Charter Communications $1,167,000
UnitedHealth $1,139,050
Comcast/NBC Universal $1,046,000
Home Depot $ 784,200
General Motors $ 767,350
Deloitte $ 669,800
Walmart $ 650,250
Amazon $ 488,000
CVS Caremark $ 479,500

Other corporations in the top 25 are: UPS, Wells Fargo, Delta, Aflac, Verizon, Fed Ex, Cigna, Google, Toyota, T-Mobile, Microsoft, Visa, Anheuser Busch, American Airlines, and Capital One. Each of these gave $200,000 or more to anti-LGBTQ+ politicians.

Second, a study of state-level campaign finance reports by Open Secrets found that over 50 corporations that have signed the HRC LGBTQ+ pledge (or their political action committees) have, since Jan. 2020, contributed over $2.4 million to state lawmakers promoting bills deemed anti-LGBTQ+ by the American Civil Liberties Union. [2] As-of June 1, 2023, 323 corporations have signed the HRC pledge “stating their clear opposition to harmful legislation aimed at restricting … LGBTQ people in society.”

In the first six months of 2023, these state lawmakers have played key roles in passing 62 anti-LGBTQ+ bills in 18 states. There are at least another 270 anti-LGBTQ+ bills under consideration in 33 states.

Nine corporations accounted for 83% of the $2.4 million in contributions to anti-LGBTQ+ state politicians:

AT&T $517,550
Altria (tobacco) $362,260
Amazon $273,993
Union Pacific $188,750
Disney $166,991
Pfizer $163,525
CVS Caremark $137,550
Merck $105,800
General Motors $100,750

The state lawmakers receiving these contributions have passed bills that include bans or criminalization of gender-affirming medical care, requirements to use bathrooms and pronouns based on biological sex at birth, restrictions on transgender youth participating in sports, and banning events where people are dressed in drag.

Corporations that appear to have a real commitment to the LGBTQ+ community have often capitulated when faced with pushback from right-wing extremists. Target, for example, unveiled a Gay Pride product line for Gay Pride month in June this year with prominent displays in stores and on its website. It had signed the HRC pledge two years ago and had not contributed to any of the anti-LGBTQ+ state lawmakers. Nonetheless, in the face of right-wing extremists’ attacks, it pulled back on displays in some stores and on products featured on its website.

My next post will describe how financial corporations are using an anti-wokeness campaign to fight efforts to reduce credit card fees, despite their past pledges to support LGBTQ+ inclusion and diversity.

[1] Legum, J., Zekeria, T., & Crosby, R., 6/5/23, “These 25 rainbow flag-waving corporations donated $13.5 million to anti-gay politicians since 2022,” Popular Information (https://popular.info/p/these-25-major-corporations-donated)

[2] Ratanpal, H., & Giorno, T., 6/9/23, “Companies that publicly condemned legislation targeting the LGBTQ+ community send political contributions to state lawmakers who advanced anti-LGBTQ+ bills,” Open Secrets (https://www.opensecrets.org/news/2023/06/companies-that-publicly-condemned-legislation-targeting-lgbtq-community-send-political-contributions-to-state-lawmakers-who-advanced-anti-lgbtq-bills/)

CORPORATE GREED DRIVES BAD FAITH UNION NEGOTIATIONS

Corporate greed drives a range of bad behaviors including bad faith negotiations with workers’ unions. The quite profitable New York Times dragged out negotiations with its newsroom union for over two years before giving them modest raises that hardly keep up with inflation. Companies are frequently uncooperative in contract negotiations after workers have voted to form a new union. Typically, it takes over a year for a first contract to be signed and, in some cases, no contract is ever signed.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

SPECIAL NOTE: The new, more user-friendly website for my blog presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org. If you like the new site, please click on the Subscribe Today button. The old site will continue to be available.

You’ve probably heard about recent successful votes by workers to establish unions, including at an Amazon warehouse and hundreds of Starbucks stores. There was a 53% increase in the number of unionization votes in 2022 over 2021, and this trend is continuing. All told, 200,000 workers voted to unionize in 2022.

The successful votes to unionize are the good news for the workers. The bad news is that it typically takes more than a year after the successful vote to sign the first contract, and, in some cases, no contract is ever signed. In a study of 391 first-time union contracts signed in 2005 – 2022, the average time from the successful vote to unionize to the signing of the first contract was 465 days; in the last three years of this period, it was over 500 days. A separate study of 226 successful unionization votes in 2018 found that 63% had no contract one year later and that 43% had no contract two years later. In 2009, a study of over 1,000 successful unionization votes found that 52% had no contract one year later, 37% had no contract two years later, and 30% had no contract three years later. [1]

These delays in signing a contract indicate bad faith in employers’ negotiating and are troublesome for multiple reasons. First, if a contract isn’t signed within a year, the employer can challenge the validity of the union. Second, a delay in signing a contract tends to harm workers’ morale and their commitment to the union. The energy from the successful drive to vote for a union tends to dissipate and employee turnover tends to dilute the pool of workers committed to the union.

Labor laws are tilted in the favor of employers to begin with, but employers often also use illegal tactics to delay contract negotiations. Although both parties are required by law to bargain in good faith, there is no enforcement mechanism. Furthermore, there is no requirement to engage in mediation or binding arbitration if negotiations have not produced a contract.

Employers also drag their feet in negotiating new union contracts when one expires. A recent example is the New York Times (NYT), which dragged out contract negotiations for over two years after its newsroom union’s contract expired on March 30, 2021. The NYT engaged a high-powered law firm, Proskauer Rose, to guide its negotiations. It took seven months to respond to the union’s initial wage proposal and then five months to respond to the union’s counterproposal. In the meantime, the union employees worked for two years without a contract and without any increase in pay while inflation cut deeply into the value of their incomes. [2]

After 21 months of negotiation, the NYT and the union were roughly $15 million apart in their positions on aggregate annual wage costs. However, the NYT was not budging, so the workers held a one-day strike in December 2022. To put this in some perspective, the NYT had an average operating profit of $215 million in each year from 2020 to 2022. In 2022, it announced it would buy back $150 million of its own stock during the year. It has also increased the dividends it pays to shareholders by 83% from $0.82 per share in 2020 to a projected $1.50 in 2023. In 2021, compensation for the CEO was $5.75 million (a 32% increase) and $3.6 million for the publisher (a 49% increase). Clearly, the NYT is not a corporation that can’t afford to pay a few million dollars more to its employees, who are recognized around the world as top-notch.

Ultimately, after over two years of negotiating and workers going without any pay increase, the union and the NYT reached a five-year deal on May 23, 2023. The workers got a 7% bonus based on their 2020 wages instead of any retroactive wage increase for the two years they worked without a contract. They got an immediate increase of between 10.6% and 12.5% on their 2020 wages, their only raise over a three-year period, as well as future raises of 3.25% in 2024 and 3.0% in 2025. This was a long, hard-fought battle with a very profitable corporation where negotiations finally produced a contract in which the workers’ pay may not even be keeping up with inflation. [3]

The Protecting the Right to Organize (PRO) Act in Congress would address the problem of employers delaying contract negotiations. It would require an employer to start good faith negotiations within 10 days of a vote for a union or the end of a contract. If a contract is not agreed to within 90 days, either side could request federal mediation. If mediation fails to produce a contract in 30 days, binding arbitration would take place and put a two-year contract in place. [4]

I urge you to contact your U.S. Representative and Senators to ask them to support the PRO Act to ensure that union contracts are negotiated in a reasonable timeframe. 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] McNicholas, C., Poydock, M., & Schmitt, J., 5/1/23, “Workers are winning union elections, but it can take years to get their first contract,” Economic Policy Institute (https://www.epi.org/publication/union-first-contract-fact-sheet/)

[2] Greenhouse, S., 12/15/22, “What’s wrong at the Times,” The American Prospect (https://prospect.org/labor/new-york-times-union-contract-strike/)

[3] Robertson, K., 5/23/23, “The Times reaches a contract deal with newsroom union,” The New York Times

[4] McNicholas, C., Poydock, M., & Schmitt, J., 5/1/23, see above

CORPORATE BAD BEHAVIOR IS COMMONPLACE

Corporate greed drives a range of bad behaviors including the cheating of customers. Here are two examples: Wells Fargo and Citizens Banks have both recently paid settlements related to schemes that cheated customers. In addition, they, particularly Wells Fargo, have a history of illegal behaviors. Corporate bad behavior is frequent, varied, and often repetitive, i.e., commonplace, making it clear that corporations view paying penalties for bad behavior as simply an acceptable cost of doing business. If we want to stop corporate bad behavior, there must be more enforcement with greater penalties

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

Wells Fargo Bank has a long-running record of bad behavior. Most recently, it agreed to pay $1 billion to settle a class-action lawsuit. The suit was brought by shareholders who accused Wells Fargo of making false statements about its progress in implementing reforms in response to its 2016 fraudulent accounts scandal. As a result, when the truth about the failures of its reforms became public, the value of its stock took a dive. [1]

As you may remember, in 2016, Wells Fargo acknowledged opening millions of unauthorized accounts for customers. It fired over 5,000 employees who had opened the fraudulent accounts in order to keep their jobs or earn bonuses. Based on the fraudulent accounts, some customers were charged overdraft fees and some had their credit scores damaged. Wells Fargo’s CEO ultimately lost his job and another senior executive is being prosecuted. The Federal Reserve imposed a series of consent orders on Wells Fargo in 2018 requiring it to remedy its corporate governance and penalizing the company in multiple ways.

Between 2018 and 2020, Wells Fargo touted its progress on complying with the remedial consent orders in public statements and regulatory reports. In reality, it was failing to implement meaningful reforms, failing to develop adequate remediation plans, and failing to meet remediation deadlines.

Overall, since 2000, Wells Fargo has paid penalties of almost $26 billion for 236 offenses of a variety of kinds. [2]

Citizens Bank recently agreed to pay a $9 million penalty in response to a Consumer Financial Protection Bureau lawsuit over violations of consumer protection laws covering credit card customers. Over a five-year period, Citizens Bank made roughly 25,000 of its credit card customers who filed disputes or fraud claims jump through onerous and illegal hoops. In many cases, it failed to return the full amount due to customers and failed to communicate with customers in a timely fashion. It required some customers to file notarized fraud affidavits and some to agree to appear as a witness in court in order to pursue their complaints. Their complaints were automatically dismissed if they could not or refused to comply. Under the terms of the settlement, Citizens Bank, which had discontinued use of the fraud affidavits, agreed not reinstitute their use. [3]

Overall, since 2000, Citizens Bank has paid penalties of almost $150 million for 17 offenses of a variety of kinds. [4]

These, of course, are just examples of corporate bad behavior, which is frequent, varied, and often repetitive, i.e., commonplace. If you need any convincing of this, I encourage you to explore the Violation Tracker database compiled by Good Jobs First. Just put in the name of any corporation and see how many offenses they’ve had since 2000 and how much they’ve paid in penalties. This makes it clear that corporations view paying penalties for bad behavior as simply an acceptable cost of doing business.

Therefore, if we want to stop corporate bad behavior, there must be more enforcement with greater penalties. More on this in a future post.

[1] Gregg, A., 5/17/23, “Wells Fargo agrees to $1b shareholder settlement,” The Boston Globe from the Washington Post

[2] https://violationtracker.goodjobsfirst.org/parent/wells-fargo

[3] Murphy, S. P., 5/24/23, “Citizens Bank agrees to pay $9 million after suit on behalf of some customers,” The Boston Globe

[4] https://violationtracker.goodjobsfirst.org/parent/citizens-financial-group

STOCK BUYBACKS ARE HARMFUL AND SHOULD BE ILLEGAL AGAIN

The billions of dollars that corporate executives are spending to buy back their own companies’ stocks reduces safety for workers, consumers, and the public. Until 1982, stock buybacks were illegal. Making them legal has led to a dramatic change in corporate executives’ behavior. They now aggressively maximize profits and returns to stockholders, including themselves, while responsibilities to other stakeholders are left behind.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

My previous post discussed, in the aggregate, the aggressive profit maximization behavior by corporate executives and their use of stock buybacks and high dividends to maximize the returns to shareholders, including themselves. It documented the occurrence of such behavior, the reasons it’s occurring, and what it reflects in terms of the goals and ideology of corporate executives, i.e., that maximizing returns for shareholders (including themselves) is all that matters. This post will focus on the impacts at individual corporations and on-the-ground. These impacts include reduced safety and economic security for workers, as well as reduced safety for consumers and the public.

One part of aggressively maximizing profits is aggressively reducing costs, which can mean that corners get cut on quality and safety. For example, in 2012, Boeing rolled out what appeared to be the very successful and profitable 737 Max passenger jet. However, at the time, Boeing was engaged in a major drive to increase profits and returns to shareholders through big stock buybacks (tens of billions of dollars) and generous dividends. In 2018 and 2019, two of the 737 Max jets crashed, killing 346 people. It turned out that the crashes were due to the same malfunction in the autopilot system. The investigations of the 737 Max crashes strongly suggest that Boeing executives’ drive to increase profits and returns to shareholders led to management decisions that cut corners on safety and were a major – if not the major – contributor to the crashes. [1]

Norfolk Southern Railroad, whose train derailed and crashed in East Palestine, OH, with disastrous results, and whose trains have derailed elsewhere as well, has used cash from profits to buy back stock instead of investing in employees and infrastructure that would have made their trains safer. (See previous posts here and here for more detail on Norfolk Southern and the railroad industry’s profit maximization.) Nike bought back stock while cutting the poverty-level wages of Asian workers. Pharmaceutical corporations buy back stock instead of investing in research and development. Nonetheless, they claim high drug prices are needed to fund the development of new drugs. [2]

The U.S. response to the Covid pandemic was hampered by corporations whose executives had engaged in profit maximization strategies that undermined the availability of ventilators and high-quality masks, among other things needed to combat the corona virus. [3]

As became painfully clear during the pandemic, corporate executives, in order to cut payroll costs and aggressively maximize profits, had created fragile supply lines dependent on other countries and international shipping. They had also reduced inventories and production capacity to absolute minimums to reduce costs, leaving their companies without the capacity to respond to disruptions in supply chains or spikes in demand and need for their products. So, for example, baby formula manufacturers did not have the inventory or capacity to fill the gap when one of them (that had cut corners on quality controls) had to pull its tainted products off the market.

Although stock buybacks are only one piece of these problems, they are a blatant and significant one that can be relatively easily addressed by dramatically reducing or banning them.

The Biden administration has been taking steps to discourage stock buybacks. The 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act signed by President Trump prohibited corporations from using federal financial aid to buy back stock, but because cash is fungible, it had little effect. The Biden administration, as part of the 2022 Inflation Reduction Act, implemented a 1% tax on buybacks. However, corporations are treating this as a cost of doing business and are continuing to buy back shares. [4] Biden called for raising the tax to 4% in his State of the Union speech, but even this or a higher tax is likely to have little effect because of the huge size of the economic benefits to big shareholders, including executives.

The only thing that will really stop stock buybacks and the harms they cause is to ban them again. Recently, three House Democrats (Representatives Garcia [IL], Khanna [CA], and Van Hoyle [OR]) filed a bill, the Reward Work Act, that would ban stock buybacks. A version of this bill was filed in the Senate back in 2018 by Senators Baldwin (WI), Warren (MA), Schatz (HI), Gillibrand (NY), and Sanders (VT). [5]

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to ban stock buybacks and to take other steps to incentivize corporate executives to be more responsive to stakeholders other than shareholders. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your 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] Lazonick, W., & Sakinc, M. E., 5/31/19, “Make passengers safer? Boeing just made shareholders richer,” The American Prospect (https://prospect.org/environment/make-passengers-safer-boeing-just-made-shareholders-richer./)

[2] Lazonick, W., 6/25/18, “The curse of stock buybacks,” The American Prospect (https://prospect.org/power/curse-stock-buybacks/)

[3] Lazonick, W., & Hopkins, M., 7/27/20, “The $5.3 trillion question behind America’s COVID-19 failure,” The American Prospect (https://prospect.org/coronavirus/americas-covid-19-failure-corporate-stock-buybacks/)

[4] Kuttner, R., 5/17/23, “How Wall Street feeds itself,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-05-17-how-wall-street-feeds-itself/)

[5] Meyerson, H., 5/25/23, “The bill that would stop buybacks,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-05-25-bill-that-would-stop-buybacks/

STOCK BUYBACKS ARE UNPRODUCTIVE, SELF-ENRICHING, MARKET MANIPULATION

The billions of dollars that corporate executives are spending to buy back their own companies’ stocks have significant effects on the economy, on stock prices and stock markets, and on economic inequality. Stock buybacks, which benefit large stockholders, including corporate executives, set a new record in 2022. Until 1982, stock buybacks were illegal. Making them legal has led to a dramatic change in corporate executives’ behavior. Instead of retaining and reinvesting profits in their corporations, they are distributing them to shareholders, including themselves. They are also aggressively cutting (aka “downsizing”) costs to maximize profits.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

The billions of dollars that corporate executives are spending to buy back their own companies’ stocks have significant effects on the economy, on stock prices and stock markets, and on economic inequality. These buybacks use up corporate cash that therefore CANNOT be used to pay employees, to expand production or service delivery, to invest in research and development, nor to improve productivity and efficiency.

Stock buybacks set a new record in 2022. The world’s 1,200 largest corporations spent a total of $1.3 trillion (an average over $1 billion each) buying back their own stock. Buybacks reduce the number of the corporation’s shares that are available on the stock market, thus increasing the value and price of the shares that remain on the market.

The stock price increases generated by stock buybacks benefit large shareholders, who include corporate executives. One half of stocks are owned by the wealthiest 1% of Americans and the wealthiest 10% own 90% of stocks. Corporate executives are large shareholders because they receive large portions of their compensation as shares or stock options. In addition, a significant portion of their compensation is often determined by the performance of the stock’s price. Therefore, these executives are doubly rewarded if the price of their corporation’s stock goes up. Clearly, the decision to buy back stock presents a huge conflict of interest for corporate executives because it’s a use of corporate funds that results in substantial self-enrichment. [1]

Almost 80% of U.S. corporations have conducted stock buybacks, while only 45% of corporations headquartered elsewhere have. Corporations often borrow money to buy back stock – a kind of speculation that adds no value to the economy but enriches large shareholders.

Until 1982, stock buybacks were illegal; they were banned because they were considered market manipulation. President Reagan’s Securities and Exchange Commission (SEC) changed market regulations to allow them. It took a while, but before long corporate executives realized that this was a gold mine for self-enrichment, given the large amounts of company stock they owned. By the ten years from 2003 to 2012, they were spending 54% of profits ($2.4 trillion) on stock buybacks and another 37% of profits on dividends to shareholders.

All told, from 2003 to 2012, corporate executives used 91% of profits to enrich shareholders, including themselves. This behavior continues to today. This distribution of profits leaves little for employees, research and development, and other investments in their corporations. (These data are for the 449 corporations of the S&P 500 index whose shares were publicly traded on a stock market over that 10-year period.) [2]

This spending on buybacks and dividends represented a dramatic change in corporate executives’ use of cash from profits. Prior to 1982, much of profits was retained and reinvested in innovation, infrastructure, and employees. Since 1982, profits have been increasingly distributed to shareholders while the number of employees and their compensation, as well as other costs, have been aggressively reduced or downsized.

The focus of corporate executives has shifted from value creation to value extraction. [3] The 2017 cut in the corporate tax rate from 35% to 21% was supposed to give corporations more cash to use to create jobs, but instead they’ve used it for stock buybacks and dividends.

The retention and reinvestment of profits of the 1940s through the early 1980s was essential to the success of the U.S. economy, the growth of the middle class, the reduction of economic inequality, and America’s leadership in the global economy. These positive trends have been reversed by the “distribute-and-downsize” ideology that is now prevalent among corporate executives, having increasingly taken hold since 1982. [4]

This ideology is focused on extracting value from corporations for shareholders through profit distribution and through profit maximization by aggressive cost cutting, including downsizing the workforce. It reflects the ascendance of the economic and corporate ideology that maximizing returns for shareholders is the only goal for corporate executives; that it’s literally all that matters. This is a self-serving ideology for wealthy economic elites, including corporate executives.

This ideology overturned the previous (and perhaps resurgent) ideology that corporate decision-making should include responsibilities to serve a broad set of stakeholders including employees, customers, communities in which the corporation operates, and ultimately the overall society in which the corporation exists. These stakeholders have contributed knowledge, skills, and education; infrastructure such as roads, utilities, and public safety services; and a stable legal and societal environment in which to sell goods and services.

My next post will highlight some specific examples of the effects of prioritizing returns for shareholders over all other stakeholders. It will also identify efforts to reduce stock buybacks and move corporate decision-making back toward an ideology of value creation through the retention and reinvestment of a bigger share of profits, as well as of responsibilities to stakeholders other than shareholders.

[1] Kuttner, R., 5/17/23, “How Wall Street feeds itself,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-05-17-how-wall-street-feeds-itself/)

[2] Meyerson, H., 5/25/23, “The bill that would stop buybacks,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-05-25-bill-that-would-stop-buybacks/

[3] Lazonick, W., & Sakinc, M. E., 5/31/19, “Make passengers safer? Boeing just made shareholders richer,” The American Prospect (https://prospect.org/environment/make-passengers-safer-boeing-just-made-shareholders-richer./)

[4] Lazonick, W., 6/25/18, “The curse of stock buybacks,” The American Prospect (https://prospect.org/power/curse-stock-buybacks/)

CORRUPT CORPORATE BEHAVIOR IS EXTENSIVE

A new investigative report finds that large U.S. corporations frequently engage in illegal price fixing and other anti-competitive practices that violate antitrust laws. Since 2000, large corporations have paid almost $100 billion in fines and settlements for more than 2,000 cases of illegal price-fixing. Examining a wider range of illegal corporate activity, 557,000 civil and criminal cases have been prosecuted by over 400 government agencies with total penalties of $917 billion. Despite the billions of dollars paid in penalties, new corporate violations of the law are identified on a regular basis and many large corporations are repeat offenders. This strongly suggests that big corporations see these fines and settlements as a cost of doing business and are happy to break the law time after time and simply pay the penalties.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

SPECIAL NOTE: I’ve created a new website for my blog that’s more user-friendly. The Latest Posts are presented chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org/. If you like the new format, please click on the Subscribe Today button and subscribe. Any comments on the new site, or the posts themselves of course, are most welcome. The old site will continue to be available.

An investigative report, Conspiring against competition: Illegal corporate price-fixing in the U.S. economy,” from the Corporate Research Project of Good Jobs First, finds that since 2000, large corporations have paid over $96 billion in fines and settlements on 2,033 cases of illegal price-fixing. Price-fixing steals money from consumers and artificially increases inflation. [1]

Of the 2,033 documented cases, 357 were initiated by the U.S. Department of Justice or other federal agencies, 269 were initiated by state attorneys general, and 1,407 were class action lawsuits initiated by individuals. Cases that were settled out of court are not included in these numbers or the report as public records of them are hard if not impossible to find. (NOTE: Corporations have been working for years to significantly limit the number of class action lawsuits by requiring employees and customers to sign mandatory arbitration agreements in employment contracts and user agreements. These agreements require the use of arbitration to settle a dispute, prohibiting the filing of a lawsuit. The Biden administration is working to limit the use of mandatory arbitration agreements and to restore employees’ and customers’ rights to file lawsuits.)

Capitalism is supposedly an economic system where vigorous competition, coupled with the supply of and demand for goods and services, determines fair prices. This report documents that large corporations frequently avoid competition by colluding with one another to fix prices and control markets to unfairly increase prices and their profits.

The high degree of market concentration in the U.S. (i.e., where one or a few large corporations dominate a market) make it much easier for collusion and price fixing to occur. In the financial services and pharmaceutical sectors of the economy just about every major corporation (or a subsidiary) has been a defendant in one or more price-fixing cases. Nine of the top ten corporations in terms of financial penalties are banks, credit card companies, or other financial firms. Since 2000, the financial sector as a whole has paid $33 billion in fines and settlements, much of this for schemes to rig interest rates that determine the rates paid by consumers on loans and credit card balances. The pharmaceutical industry was the second most penalized sector at $11 billion, primarily for efforts by brand name drug manufacturers to illegally prevent the introductions of lower-priced, generic versions of their drugs. However, price-fixing collusion has occurred in a wide range of sectors from food retailing to auto parts to chemicals to electronic components.

Over the last 22 years, nineteen corporations (or their subsidiaries) have paid over $1 billion each in penalties for price-fixing and other violations of fair competition laws. At the top of the list are Visa ($6.2 billion), Deutsche Bank ($3.8 billion), Barclays Bank ($3.2 billion), MasterCard ($3.2 billion), and Citigroup bank and financial services ($2.7 billion). Price-fixing scandals continue to emerge on a regular basis, so this appears to be fairly common corporate behavior in the U.S.

Good Jobs First maintains a Violation Tracker website that tracks each corporations’ violations of the law, including laws on banking, finance, consumer protection, false claims, the environment, worker protection, discrimination, price-fixing, fair competition, and government contracting. It aggregates for each corporation the number of cases and the dollars in penalties imposed by federal agencies, state attorneys general, selected state and local regulatory agencies, and selected types of class action lawsuits brought by individuals. In all, the website has recorded 557,000 civil and criminal cases prosecuted by more than 400 agencies with total penalties of $917 billion.

Including all of the types of violations that are in the Violation Tracker database, most corporations had multiple violations including, for example, Walmart (497 cases, $5.5 billion in penalties), Home Depot (290 cases, $220 million), Wells Fargo Bank (236 cases, $25.9 billion), Verizon (219 cases, $2.3 billion), and Citigroup (170 cases, $26.7 billion). I urge you to visit the Violation Tracker website and select a corporation or a few from the pull-down list to see the shocking extent of corporate law-breaking.

Despite the billions of dollars corporations have paid in penalties, new corporate violations of the law are identified on a regular basis and many large corporations are repeat or frequent offenders, sometimes repeating the same offense multiple times. This strongly suggests that big corporations see these fines and settlements as a cost of doing business and are happy to break the law time after time and simply pay the penalties.

Larger penalties would probably reduce recidivism somewhat. To really change big corporations’ behavior on price fixing and other illegal anti-competitive behaviors, aggressive steps to reduce market concentration and power will be required. Vigorous enforcement of antitrust laws is needed and, where monopolistic market power exists, breaking up big corporations will probably be necessary to achieve a lasting, long-term remedy. Reducing market concentration, monopolistic power, and simply the size and power of huge multi-national corporations will not only create the real competition that capitalism promises, it will also reduce corporations’ threats to democracy and the growth of economic inequality.

The ultimate and definitely effective penalty would be to revoke a corporation’s charter to do business, putting it out of business. This has rarely been done and, to my knowledge, has never been done for a corporation of any significant size.

[1] Stancil, K., 4/19/23, “‘Illegal corporate price-fixing’ is rampant in the US economy: Report,” Common Dreams (https://www.commondreams.org/news/corporate-price-fixing-us-economy)

GOOD NEWS ON THE ECONOMY, BUT A FEW CONCERNS

Inflation is subsiding, unemployment is low, and wage growth is modest. Problems in the banking industry provide some concern. The biggest concern for the economy is that the Federal Reserve (the Fed) will continue to push interest rates higher, hurting banks, increasing unemployment, and possibly pushing the economy into a recession.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

SPECIAL NOTE: I’ve created a new website for my blog that has an image with each post and is easier to navigate. The Latest Posts are presented chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org/. If you like the new format, please click on the Subscribe Today button and subscribe. Any comments on the new site or the posts themselves, of course, are most welcome. The old site will continue to be available.

Annual inflation in March was 5.0% (i.e., consumer prices were 5% higher than a year earlier). This continued the steady decline in annual inflation since its peak of 9.0% last June. Consumer prices increased just 0.1% from February to March, which would be an annualized inflation rate of just 1.2%. Consumer prices for housing (a component of the overall inflation rate) increased 0.6% from February to March, but that is expected to decline. Note that housing costs have risen in part because of the Federal Reserves’ increases in interest rates, which increase the cost of mortgages, depress the production of new housing, and reduce the purchases of homes. The latter two increase the number of people needing rental housing, which pushes up rents. [1]

Wholesale prices fell in March, down 0.5% from February. For the whole year, they were up only 2.7%. Wholesale price inflation is generally considered an indicator of future consumer price inflation, so this suggests that consumer inflation will continue to fall. [2] In addition, wage increases have been modest, around 4% on an annual basis. This is lower than the annual price increase, so wage growth is not driving inflation. [3]

Given that inflation appears to be under control and with the uncertainty in banking industry in mind (due to the collapse of three banks in March in part due to high interest rates), the Fed and Chairman Powell should at least pause interest rate hikes.

Powell’s recent interest rate hikes have caused the value of banks’ investments in bonds to fall an estimated $620 billion as-of the end of 2022. The Fed has announced a bailout for banks with bond losses; a safety net for financiers for a systemic crisis created by the Feds’ dramatic interest rate increases. In addition, the Fed has announced what is in effect a bailout for foreign central banks (i.e., other countries’ equivalent of the Fed), so that their dollar-based holdings don’t rapidly flow out to be invested in the high interest rates available in the U.S. [4]

Corporate profits have played a central role in creating and sustaining the inflation experienced since 2021. Profit markups (the percentage that profits are of all production costs) in the non-financial corporate sector of the economy jumped from about 12.5% in 2017 through early 2020 to an average of 15% from the 2^nd quarter of 2020 through 2023. Putting this in terms of inflation, from 2017 through early 2020, profits represented 13% of inflation, with labor costs being almost 60% and non-labor costs about 30%. From the 2^nd quarter of 2020 through the end of 2022, profits represented over one-third of inflation (about 34%), while labor costs and non-labor costs each accounted for roughly one-third of inflation (about 33%). The noteworthy change is that the contribution of profits to inflation jumped from 12.5% to 34%.

Given that the Feds’ increases in interest rates have no effect on corporate profit markups and no effect on the supply chain issues (which have been a major contributor to inflation but are easing), further interest rate increases are likely to be ineffective in reducing inflation. Moreover, they may push the economy into a recession, which won’t be good for anyone. [5]

Unemployment has fallen to 3.5%, the lowest level since 1969, while Black unemployment is at an all-time low of 5.0%. The percentage of prime age workers (those 25 to 54 years old) who are in the labor force is the highest it’s been since 2001. This is all good news for workers.

Much of the credit for this good jobs news goes to President Biden and the Democrats in Congress for passing the American Rescue Plan in the spring of 2021. Much of the mainstream media chooses to ignore the health of the job market and fails to give Biden and the Democrats credit for this accomplishment. By way of contrast, it took nearly 13 years for the job market to recover to this extent after the Great Recession of 2008. A major reason for this difference is that the 2009 stimulus package was much smaller and, in hindsight, clearly inadequate (as many progressives said at the time). Biden was Vice President then and may have learned a lesson from that experience that informed his decision to go big in 2021. In addition, President Biden’s economic advisors are ones who are more focused on Main St. and workers than on Wall St. and financiers. In contrast, in 2009, President Obama’s economic advisors were Wall St.-types – Bob Rubin, Tim Geithner, and Larry Summers. [6]

[1] Kuttner, R., 4/12/23, “Will the Fed wreck an improving economy?” The American Prospect Blog (https://prospect.org/blogs-and-newsletters/tap/2023-04-12-will-fed-wreck-improving-economy/)

[2] Wiseman, P., 4/14/23, “Wholesale inflation pressure eases,” The Boston Globe from the Associated Press

[3] Kuttner, R., 4/12/23, see above

[4] Galbraith, J. K., April 17/24, 2023, “The Fed, the banks, and the dollar,” The Nation (https://www.thenation.com/article/economy/svb-collapse-fed-causes-bailout/)

[5] Bivens, J., 3/30/23, “Even with today’s slowdown, profit growth remains a big driver of inflation in recent years,” Economic Policy Institute (https://www.epi.org/blog/even-with-todays-slowdown-profit-growth-remains-a-big-driver-of-inflation-in-recent-years-corporate-profits-have-contributed-to-more-than-a-third-of-price-growth/)

[6] Meyerson, H., 4/13/23, “Are good jobs good news?” The American Prospect Blog (https://prospect.org/blogs-and-newsletters/tap/2023-04-13-good-jobs-good-news/)

HOLDING EXECUTIVES OF FAILED BANKS ACCOUNTABLE

A history of greed, mismanagement, deregulation, and weak oversight has resulted in a litany of banking and financial system crises over the last 40 years. Future crises could be prevented by:

Strengthening regulation,
Increasing deposit insurance, and
Holding bank executives personally liable and culpable.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

Greed and mismanagement by bank executives led to the collapse of three banks in early March. Deregulation of “mid-size” banks in 2018 and 2019, along with failures of banking oversight by the Federal Reserve (the Fed), were also major factors in the banks’ collapses. The Chair of the Federal Reserve, Jerome Powell, bears significant responsibility for the conditions that led to these bank failures. (See this previous post for more details.) The first two strategies above for preventing future banking crises – strengthening regulation and increasing deposit insurance – were discussed in this previous post.

To hold bank executives personally liable and culpable when their banks fail, banking regulators and the Justice Department should:

Demand the return of executives’ compensation (i.e., “claw back” compensation), especially when it was linked to the stock price or other metrics that were inflated by inappropriate risks taken by the executives. For example, CEO Becker of the failed Silicon Valley Bank (SVB) received $9.9 million in compensation last year, including a $1.5 million bonus for increasing profitability. He made $3.6 million from selling SVB stock in late February, just weeks before his bank collapsed. In the previous four years, he collected $58 million from the sale of stock received as part of his compensation. Similarly, several top executives at First Republic Bank, which was also bailed out, sold almost $12 million in stock in the two months before their bank went under. Senator Warren (D-MA) is asking for the details of ten years of compensation for the executives at the bailed-out banks, including what criteria were used to determine their bonuses. Senator Warren is calling on bank regulators to demand repayment of executives’ pay and bonuses when they are linked to engagement in high-risk activities.
Investigate bank executives for possible illegal insider trading. Senator Warren is also calling for an investigation into whether these executives engaged in illegal sales of their banks’ stock based on inside information and into other possible illegal activities.
Charge executives of bailed-out banks with criminal offenses. Prior to 2003, criminal prosecutions were the norm. In the 1980s savings and loan scandal, more than 1,000 bank executives were prosecuted and many went to jail. Then, under President G. W. Bush, the prosecutions of bank executives stopped and were replaced by Deferred Prosecution Agreements (DPAs). These DPAs typically impose corporate fines and include promises of remedial action, but criminal prosecution is deferred and almost never invoked, even when repeat offenses occur. [1]
Ban senior executives of failed banks from future employment in the financial industry.

One exception to the new norm of using DPAs instead of criminal prosecutions is occurring now and may indicate a shift in the norm under the Biden administration. Wells Fargo bank created roughly 3.5 million unauthorized customer accounts and issued about 500,000 unauthorized credit cards, costing customers billions of dollars. The corporation and the Trump Justice Department settled with a DPA that required Wells Fargo to pay $6.7 billion in fines and restitution, while five senior executives personally paid civil fines of tens of millions of dollars. The CEO lost his job and the executive under him who presided over the creation of the fraudulent accounts was prosecuted and just pled guilty to a reduced charge of interfering with a bank examination. She might actually do some jail time, although sentencing hasn’t occurred yet. [2]

In conclusion, it’s well past time to stop bank executives from pocketing private profits while socializing risk (i.e., dumping losses on the government and taxpayers). Repeated bailouts and the failure to prosecute individuals reinforces and incentivizes inappropriate risk-taking by bank executives. And, as history has proven, they will take inappropriate risks in order to enrich themselves. Accountability and deterrence are sorely needed; they are essential to preventing the next banking crisis. The steps listed above would serve as strong deterrents to future bad behavior by bank executives.

In the aftermath of this (hopefully mini-) banking crisis, President Biden has called for more accountability and punishment for executives of the failed banks, including clawing back compensation, imposing fines, and banning them from working in the banking industry. [3] He has also called for stricter regulation by executive branch agencies, noting that the Trump administration weakened key regulations. Treasury Secretary Yellen has echoed Biden’s statements and has noted that “the costs of proper regulation pale in comparison to the tragic costs of financial crises.” [4]

Senator Warren and Representative Porter (D-CA) have filed legislation that would strengthen banking regulations, including reversing the provisions in the 2018 EGRRCP law that dramatically weakened regulation of mid-size banks, like the three that just collapsed.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support the strengthening of banking regulations and the holding of bank executives accountable with financial, criminal, and other consequences. Urge them to call on Fed Chair Powell to resign due to his complicity in these bank failures.

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

[1] Kuttner, R. 3/20/23, “Former Wells Fargo exec could do prison time,” The American Prospect https://prospect.org/justice/2023-03-20-wells-fargo-exec-justice/

[2] Kuttner, R., 3/20/23, see above

[3] Gardner, A. 3/18/23, “Biden calls for tougher penalties on bank execs,” The Boston Globe from Bloomberg

[4] Hussein, F., & Boak, J., 3/31/23, “Biden calls to revive bank regulations,” The Boston Globe from the Associated Press

PREVENTING BANK FAILURES

A history of greed, mismanagement, deregulation, and weak regulatory oversight has created a litany of banking and financial system crises over the last 40 years. Future crises can be prevented by:

Reversing the deregulation of a 2018 law,
Strengthening regulation,
Increasing deposit insurance, and
Making bank executives personally liable and culpable.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

The ultimate trigger for the collapse of Silicon Valley Bank (SVB), the first of the three to collapse, is an interesting story of conflicts of interest and hypocrisy. On Wednesday afternoon, March 8, SVB announced it needed to raise capital, presumably because the value of its long-term bond holdings had fallen, meaning its assets weren’t sufficient to meet its required level of capital. Hearing this, the venture capitalists who had invested in many of the companies with deposits at SVB, warned their companies (who further spread the word) that SVB was in trouble and they should withdraw their deposits. This was especially important for those with deposits above the $250,000 federal insurance cap, which was 90% of SVB’s depositors and 97% of its deposits. For example, Roku, the media streaming company, had $500 million on deposit at SVB. As a result, depositors withdrew $42 billion from SVB in the next 24-hours, causing the bank to collapse because it could not come up with sufficient cash to cover the withdrawals. [1]

The venture capitalists and the start-up companies, along with the failed banks’ executives, then insisted that the federal government should cover the uninsured deposits (roughly $175 billion) and make cash available to depositors immediately (both of which it did), even though they were the ones who had triggered the run on the bank that led to its collapse. Furthermore, the venture capitalists (who I believe deserve the moniker “vulture capitalists”) threatened to withdraw money from other banks and cause them to collapse if the government didn’t fully cover the deposits at the three failed banks. The resultant bailout is, in effect, a gift to a few very wealthy people who are happy to walk away with the profits of their risky behavior while dumping the costs of its failures on the government and taxpayers. Furthermore, until they need a bailout, they demand that government should stay out of their business.

This is a blatant display of hypocrisy, as many of these venture capitalists and bankers had pushed (and will push again, undoubtedly) for the deregulation that was a major contributing factor to the banks’ collapses. Notably, SVB CEO Greg Becker had vigorously lobbied for the 2018 law that dramatically reduced regulation of his bank.

The history of bank and financial deregulation is one of repeated bank and financial system crises. Most notably, there were the savings and loan crisis in the late 1980s and 1990s, and the financial collapse of 2008. In addition, there were the junk bond scandal of 1990, the Prudential Insurance scandal in 1994, the dot-com bubble bust of 2000 – 2002, and the Enron scandal of 2001. There have also been small numbers of banks failing from time to time as has just happened. [2]

This history makes it clear that strong regulation of banks and the financial industry is necessary. Banking by institutions with federally (i.e., taxpayer) insured deposits should be safe and boring. Financial activities with high risk and potentially higher returns should be separated from insured bank deposits. This is what the Glass-Steagall Act did until it was repealed in 1999.

To prevent future banking and financial system crises, the following steps should be taken:

Reverse the deregulation of the 2018 law,
Strengthen regulation,
Increase deposit insurance, and
Make bank executives personally liable and culpable.

REVERSE THE DEREGULATION: Key provisions of the 2018 deregulation law, the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP), should be reversed. Most notably, the provision that exempted “mid-size” banks (i.e., those with assets of $50 billion to $250 billion) from most regulation should be repealed. The argument was that these banks weren’t systemically important and therefore didn’t warrant strong regulation. Recent events have proved this wrong as the Federal Reserve formally declared the failure of these three “mid-size” banks as a systemic crisis. A multi-trillion-dollar bailout program was required to stabilize the banking industry.

STRENGTHEN REGULATION: The further weakening of regulations for “mid-size” banks (in addition to those in the 2018 law) that the Fed put in place in 2019 should be reversed. Regulations required or allowed by the 2010 Dodd-Frank law that have still not been implemented, such as regulation of bank executives’ compensation, should be implemented quickly and strongly. Dodd-Frank prohibits compensation that incentivizes inappropriate risk-taking, such as compensation heavily based on a bank’s stock price. Because of the Feds’ failure to implement this prohibition, between 2019 and 2022, SVB CEO Becker made $58 million from stock-based compensation as the SVB stock price went from $100 to $700 over six years due to his inappropriate risk-taking. [3]

The use of Deferred Prosecution Agreements (DPAs) must stop. These are settlements with regulators where banks pay fines and agree to stop bad behavior, but there’s no prosecution of executives. DPAs have become the norm since 2003. Bank executives used to be prosecuted, as in the savings and loan crisis of the 1980s and 1990s when more than 1,000 bank executives were prosecuted and many went to jail.

SVB ignored six formal warnings from the Fed over the course in 2021 and 2022, apparently assuming (correctly) that there would be no consequences. The Fed did little to follow-up on or enforce its warnings. This must change. Furthermore, SVB had no chief risk officer for almost a year. [4] [5]

INCREASE DEPOSIT INSURANCE: Deposit insurance by the Federal Deposit Insurance Corporation (FDIC) should be increased, along with appropriate fees to pay for it. The current $250,000 limit should be increased substantially, perhaps to $10 million, as even a relatively small business today needs more than $250,000 on hand to meet payroll and other routine expenses. [6]

My next post will describe how bank executives should be held personally liable and culpable for the failures of their banks. It will also present some specific steps that can be taken to prevent future banking and financial system crises.

[1] Dayen, D., 3/13/23, “The Silicon Valley Bank bailout didn’t need to happen,” The American Prospect (https://prospect.org/economy/2023-03-13-silicon-valley-bank-bailout-deregulation/)

[2] Miller, K., 3/21/23, “Seeking the roots of banking turmoil,” The Boston Globe

[3] Anderson, S., 3/21/23, “Curbing bad behavior of bank CEOs isn’t as hard as they make it seem,” Common Dreams (https://www.commondreams.org/opinion/curbing-big-bank-ceo-greed)

[4] Dayen, D., 3/21/23, “The Fed’s Silicon Valley Bank coverup won’t work,” The American Prospect (https://prospect.org/economy/2023-03-21-fed-supervision-silicon-valley-bank)

[5] Smialek, J., 3/20/23, “Failed bank ignored Fed’s warnings,” The Boston Globe

[6] Smialek, J., 3/20/23, see above

BANK DEREGULATION FAILS AGAIN

Deregulation of “mid-sized” banks in 2018 and 2019, along with failures of banking oversight by the Federal Reserve, led to the collapse of three banks in the last ten days. The Chair of the Federal Reserve, Jerome Powell, bears significant responsibility for the conditions that allowed these bank failures to occur.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

The collapse of three banks in the last weeks has been widely reported. What hasn’t been nearly as widely reported are the factors that led to these failures. Greed and mismanagement by the banks’ executives caused their collapses, of course. However, this wouldn’t have happened without deregulation and failures of oversight by bank regulators (primarily the Federal Reserve). Deregulation in banking and other industries over the last 40 years has not lived up to its promises of greater efficiencies and better products and prices for consumers. Moreover, in many cases, it has harmed employees, customers, and taxpayers. (See this previous post for more details on the failures of deregulation.)

This banking system crisis is a somewhat surprising repeat (on a smaller scale) of the banking crisis in 2008, although it was predictable in some experts’ eyes. Again, as in 2008, fifteen short years ago, the banks and wealthy depositors are being bailed out by the federal government.

After the 2008 debacle, the Dodd-Frank Act was passed in 2010 to enhance bank regulation and (hopefully) prevent a recurrence. However, Dodd-Frank wasn’t as strong as many experts would have liked and efforts to weaken it further began immediately. These efforts were led by the banks and Wall St. financial corporations, with support from most Republicans and some Democrats – and some of the federal banking regulators. The efforts included a focus on weakening and delaying the implementation of the regulations required by Dodd-Frank.

In 2018, the Trump administration and the Republicans in control of Congress (with some Democratic support), passed a law significantly reducing banking regulation, primarily for “mid-sized” banks (i.e., ones with assets between $50 billion and $250 billion). The three banks that collapsed recently are in this group.

The Chair of the Federal Reserve (the Fed), Jerome Powell, lobbied for the 2018 deregulation law, despite the fact that the Fed is the primary regulator of these banks. He is a former investment banker and was nominated to the post by President Trump. Many supporters of strong banking regulation were dismayed when President Biden renominated him in 2021.

The collapse of these three banks is due in part to the failure of the Fed’s oversight (what’s referred to in the business as “supervision”). Banking experts, investors, rating agencies, and even some in the media had identified risks at Silicon Valley Bank (SVB) that the Fed seems to have missed or ignored. SVB was the first of the three banks to collapse and is the 2^nd biggest bank failure in U.S. history. (There would have been other bigger ones in 2008 if the government hadn’t stepped in to rescue them.) SVB had grown rapidly, had deposits largely from one industry and from companies that were inter-related, had significant individual deposits over the insurance limit of $250,000, and had invested lots of its cash in long-term investments that heightened risk if interest rates went up or depositors wanted money back on short notice. All of these factors are flags that should have drawn the attention of the Fed long before SVB’s collapse. Senator Warren (D-MA) and other banking watchdogs have called the collapse of these three banks a glaring failure of oversight by the Fed.

The federal government released a statement on Sunday, March 12, to reassure the public about safety and security of the country’s banking system and their bank deposits. Fed Chair Powell delayed the release of the statement with his insistence that the statement not mention the failures of the Fed in overseeing SVB and other banks. [1]

On March 15, Senator Warren sent a scathing 10-page letter to Fed Chair Powell detailing his and the Fed’s role in aiding and abetting the collapse of these banks. She wrote to Powell that these banks collapsed “under faulty supervision and in a weakened regulatory environment that you helped create.” She noted that Powell had “led and vigorously supported efforts to weaken the regulations” for these banks. In 2018, Powell, as Fed Chair, supported the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP), which rolled back some provisions of the Dodd-Frank law, dramatically weakening regulation of banks, particularly those with $50 billion to $250 billion in assets. At that time, a Wall Street Journal editorial warned that the bill would make the financial system more vulnerable and a Bloomberg editorial warned that the bill chipped away at the bedrock of financial resilience. Powell supported it anyway.

Furthermore, in 2019, Powell took additional deregulatory steps that weakened or eliminated guardrails that would have applied to SVB. As he was doing so, a federal Reserve Board member warned that safeguards at the core of the system were being weakened. A Federal Deposit Insurance Corporation (FDIC) Board member objected to Powell’s deregulatory steps, warning at the time that they significantly underestimated the risks of banks SVB’s size, noting that banks of this size experienced significant stress in the 2008 debacle and would have collapsed without government bailouts.

Just three days before the SVB collapse, when asked by Senate Republicans if he would continue to weaken banking regulation, Powell replied, “Yes, I can easily commit to that.” Ironically, Powell’s strong and persistent push to raise interest rates causes the value of long-term bonds to fall. SVB and other banks holding long-term bonds therefore would see the value of their investments fall which would threaten their ability to sell them to deliver cash to depositors. This was a key factor in the collapse of SVB and, although Powell’s actions at the Fed precipitated it, he and the Fed apparently did not anticipate their negative effects on banks.

Senator Warren’s letter concludes by noting that Powell contributed to the bank failures in three ways:

Powell actively supported legislation that weakened the Dodd-Frank law,
Powell implemented regulations that further weakened bank regulation, and
Powell failed to ensure that the oversight of the Fed was effective in preventing the banks’ collapses.

Warren’s letter states that Powell should recuse himself from the internal review the Fed has announced into the oversight and regulation of SVB, given his direct involvement in and responsibility for the chain of events that led to the bank’s collapse.

As-of March 17, a week after SVB’s collapse, it and other banks that have collapsed or are at-risk have borrowed a total of $165 billion from the Fed to bail them out. The U.S. Treasury and the FDIC have committed to protect all depositors at the failed banks, bailing out the start-up companies and their venture capital funders, particularly the ones that had over $250,000 on deposit at a bank that collapsed.

My next post will provide a few more details about the collapse of these three banks and will discuss efforts to prevent this from happening again.

[1] Johnson, J., 3/17/23, “‘An abomination’: Powell cut mention of regulatory failures from bank bailout statement,” Common Dreams (https://www.commondreams.org/news/powell-cut-regulatory-failures-mention)

GOOD AND BAD NEWS ON MEDICARE

The takeaways from this post are:

President Biden has proposed Medicare changes as part of his proposed budget that would keep it funded for 25 years, however, Republicans in Congress are not likely to pass them.
Partial privatization of Medicare through the Medicare Advantage and ACO REACH programs undermines quality and increases costs.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

There are three pieces of good news on the Medicare front. First, President Biden’s budget for the next fiscal year (starting 10/1/23) includes increased funding and decreased costs for Medicare that would mean it is fully funded for the next 25 years. The increased funding comes from raising the Medicare tax on people with incomes over $400,000, based on both earned and unearned income (such as capital gains). The decreased costs come from significantly expanding Medicare’s ability to negotiate what it pays pharmaceutical companies for drugs. [1] The bad news is that Republicans in the House are not likely to pass this. The other bad news is that Biden didn’t propose strengthening Medicare by adding coverage for vision, hearing, and/or dental services.

Second, there’s some good news on reining in the privatization of Medicare. The Biden administration is increasing the auditing of the private Medicare Advantage (MA) plans. (As you may well know, Medicare pays a private insurer for seniors’ care when they enroll in a MA plan. Private insurers were allowed to offer these plans because they promised to deliver better care for less money. The result has been the reverse: worse care for more money.) Because of documented and systematic overbilling of Medicare by many of these private MA insurers, Medicare projects that these audits will save $470 million per year. (See this previous post for more details on overbilling by MA insurers.) [2] Nearly every large insurer offering a MA plan has been sued by the Justice Department for overbilling Medicare. [3]

Third, the Biden administration is proposing tougher rules governing Medicare Advantage plans to counter widespread inappropriate denial of coverage for seniors’ health care and deceptive marketing. The new rules would require quick action on authorizations (or denials) of coverage for health care services and require an authorization to cover the full course of treatment, rather than requiring reauthorization for each step or individual treatment.

An inspector general’s investigation found that one out of every seven denials of payment by a Medicare Advantage insurer was inappropriate. It estimated that tens of thousands of MA enrollees have been inappropriately denied medically necessary care. Health care providers report increasingly frequent denials of payment by MA insurers for care routinely covered by traditional, government-run Medicare. In 2022, the number of appeals patients filed contesting Medicare Advantage denials was almost 150,000, up 58% from 2020. On many occasions denials are overturned when appealed; for example, most denials of coverage of skilled nursing care are eventually overturned. However, the denial and appeal process can take over two years. It is not unusual for patients to use their life savings to pay for denied coverage before recovering thousands of dollars months or years later. It is also not unusual for patients to die before their appeals are decided. [4]

Insurers’ marketing of Medicare Advantage plans often confuses consumers (intentionally?) about the fact that MA plans are private, for-profit plans as opposed to traditional government-run Medicare. The new rules would ban the private insurers from using the Medicare logo and name in ads, while requiring them to identify the insurance company operating the MA plan. The rules would also hold the insurers responsible for the actions of third parties doing marketing for them, such as aggressive, unsolicited phone calls. This third-party marketing is often done on a commission basis, so there is great pressure to sell the MA plan.

Medicare Advantage plans are very profitable for the private insurers. They charge Medicare more per enrollee than traditional, government run Medicare costs, despite the fact that their advertising attracts healthier-than-average seniors. They use prior authorization and in-network provider requirements to limit and deny payments for care. Their in-network provider and geographic area limitations mean that enrollees may find that when they’re traveling or on vacation they have no health insurance coverage. [5] Furthermore, in numerous cases, MA networks do not include the best quality care options, such as the best cancer centers and specialists. It is estimated that roughly 10,000 lives per year would be saved if Medicare terminated the 5% of MA plans with the worst rankings. [6]

The bad news on the Medicare privatization front is that a new and more insidious privatization scheme is continuing, albeit with a new name as-of Jan. 1, 2023. The Direct Contracting program initiated by the Trump administration has been renamed ACO REACH by the Biden administration. It allows private companies to manage the care of seniors enrolled in traditional government-run Medicare. Medicare enrollees may be put into these plans without their knowledge or consent based on where they live. The sliver of good news is that new criteria for companies’ participation have eliminated some companies with histories of fraud and abuse with Medicare. However, over a dozen members of Congress have sent a letter to the Centers for Medicare & Medicaid Services (CMS, the agency running Medicare) asking for investigations into nine companies allowed to participate in ACO REACH that have documented cases of defrauding Medicare or other government health programs. [7]

The Physicians for a National Health Program (PNHP) has sent a series of letters to CMS highlighting problems with ACO REACH and calling for its termination. Its latest letter identifies four insurers in ACO REACH that have a history of involvement in health care fraud or other malfeasance (Centene, Sutter Health, Clover Health, and Bright Health). It took only a small investigation by PNHP to identify them. [8]

Overall, the seven largest for-profit health insurers in the U.S. are making a fortune in profits from Medicare and other government health programs, notably Medicaid and the Affordable Care Act which both provide subsidized health insurance for low-income people. For three of the seven, Centene, Humana, and Molina, roughly 90% of their health insurance revenues come from government programs. For all seven (the previous three plus Cigna, CVS/Aetna, Elevance, and UnitedHealth), their 2022 government-program revenues were $577 billion, up from $116 billion in 2012. These seven companies have more than 70% of the Medicare Advantage market, with MA plans generally being their most profitable products. Therefore, they aggressively market their MA plans and have grown them substantially so that now 31 million seniors, almost half of the Medicare-eligible population, have signed up for them. Because the private MA plans’ billings for care are more expensive per enrollee than traditional Medicare, Medicare would realize substantial savings if the MA program was eliminated. [9]

In conclusion, any privatization of Medicare, such as through the Medicare Advantage and ACO REACH programs, (as well as privatization of other government health programs) does NOT save money. It adds costs for private middlemen and their profits, advertising, and administrative costs. Moreover, there are additional costs for government oversight: creating rules and regulations to govern the private entities, monitoring their performance, enforcing the almost certain violations of the rules and regulations, and investigating and stopping efforts to game the system to increase profits. The efficiency and quality of Medicare would be best served by ending privatization, i.e., by eliminating the ACO REACH and MA programs.

I urge you to contact President Biden and your U.S. Representative and Senators and to ask them to stop the privatization of Medicare. Specifically, ask them to eliminate the new ACO REACH program and to rein in Medicare Advantage plans. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your 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] Biden, President J., 3/7/23, “My plan to extend Medicare for another generation,” New York Times (https://www.nytimes.com/2023/03/07/opinion/joe-biden-medicare.html)

[2] Kuttner, R., 2/1/23, “Can Medicare Advantage be contained,” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/2023-02-01-medicare-advantage-privatization/)

[3] Abelson, R., & Sanger-Katz, M., 12/18/22, “US officials seek curbs on private Medicare Advantage plans,” The Boston Globe

[4] Ross, C., & Herman, B., 3/14/23, “Denial of care often blamed on insurers’ AI,” The Boston Globe

[5] Cyrus, R., 2/27/23, “Private health care companies are eating the American economy,” The American Prospect (https://prospect.org/health/2023-02-27-private-health-insurance-medicare/)

[6] Archer, D., 6/2/22, “Inspector General, AMA and AHA agree: Some Medicare Advantage plans are endangering their enrollees’ lives,” Common Dreams (https://www.commondreams.org/views/2022/06/02/inspector-general-ama-and-aha-agree-some-medicare-advantage-plans-are-endangering)

[7] Jayapal, Representative P., 1/19/23, “Jayapal applauds exit of bad actors from ACO Reach program, calls for greater accountability,” (https://jayapal.house.gov/2023/01/19/jayapal-applauds-exit-of-bad-actors-from-aco-reach-program-calls-for-greater-accountability/)

[8] Physicians for a National Health Program, 1/17/23, “Letter to US Department of Health and Human Services Secretary Becerra and CMS Administrator Brooks-LaSure,” (https://pnhp.org/system/assets/uploads/2023/01/REACHLetter_20230117.pdf)

[9] Johnson, J., 2/28/23, “Report shows big insurance profiting massively from Medicare privatization,” Common Dreams (https://www.commondreams.org/news/report-shows-big-insurance-profiting-massively-from-growing-privatization-of-medicare)

WHAT CORPORATIONS GET FOR THEIR CAMPAIGN AND LOBBYING SPENDING

Corporations and other business interests spend billions of dollars each year on election campaigns and lobbying. (See this previous post for details.) This spending is an investment in influencing public policies and the way they are (or are not) enforced. It provides benefits that are much, much greater than what the businesses spend.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

Here are some examples of what they get in return for their lobbying and campaign spending:

Deregulation so they can maximize profits with little regard for the safety of workers and the public or the fair treatment of customers and employees.
Lack of enforcement of antitrust laws, so they can become as big and as powerful as possible, while swallowing up or squashing competition.
Low tax rates and tax loopholes that allow them to minimize the taxes they pay.
Regulations, such as patent laws, that stymie competition.
Government bailouts when they’re in trouble.
Financial laws and regulations that facilitate acquisitions and mergers, including the vulture capitalism of hedge funds and private equity, such as bankruptcy laws (see this post for more detail) that allow rewarding executives and shareholders while ripping off every other stakeholder.

The safety risks of deregulation are apparent in the derailment of the Norfolk Southern train in Ohio on February 3, 2023, and the toxic nightmare that’s been the result. In 2017, after the railroad industry put over $6 million into Republican campaigns and millions more into lobbying, the Trump Administration repealed a regulation enacted by the Obama Administration that required better braking systems on rail cars carrying hazardous materials. Norfolk Southern and other railroads lobbied for its repeal because they claimed the regulation would be costly and wouldn’t increase safety that much. The railroad industry also lobbied to limit the regulation by defining the “high-hazard flammable trains” (HHFTs) that it would cover to include only trains carrying oil and not ones with industrial chemicals. The train that recently derailed in Ohio was NOT classified as a HHFT! [1] (See this previous post for more details on the railroad industry’s deregulation, consolidation, monopolistic behavior, working conditions, and soaring profits.)

In the aftermath of the train derailment, President Biden pointed out that deregulation has compromised Americans’ safety. He stated that “Rail companies have spent millions of dollars to oppose common-sense safety regulations. And it’s worked. This is more than a train derailment or a toxic waste spill – it’s years of opposition to safety measures coming home to roost.” [2]

Despite their rhetoric about the free market, big corporations do not want to compete for customers or for workers. Because of forty years of failure to enforce antitrust laws, monopolistic corporations dominate the U.S. economy from airlines to food processing to oil and gas to beer, banks, and health care. (See this post for more details.) For example, since 2006, banking regulators have processed 3,500 bank merger applications and haven’t stopped a single one.

To avoid competing for customers, huge monopolistic corporations eliminate competitors via the extreme capitalism they have gotten the government to allow, which includes wiping out small businesses. The dominant corporations buy small business competitors and swallow them, or drive them out of business with their market place power. For example, in the last decade, nearly 20,000 small businesses have been eliminated from the military goods and services market by the five huge defense contractors. Amazon did this in the book selling market and now does this in other markets as well.

Among other things, huge corporations that dominate an industry have monopolistic pricing power. Therefore, during the pandemic, these dominant corporations have been able to engage in price gouging to increase their profits. The best estimates are that between 40% and 53% of the inflation consumers have experienced over the last year is due to corporate price gouging. (See this post for more details.)

Huge, dominant corporations have dramatic negative effects on the economy if they get into trouble, therefore they’re too big to let fail. So, they get government bailouts when they’re in danger. The big banks and financial corporations got trillions of dollars in bailouts in the aftermath of the 2008 financial catastrophe they created. More recently, the airlines – the four huge airlines that are left after consolidation in this industry – got $25 billion in a government bailout during the pandemic. Nonetheless, they laid off thousands of workers, are now raising fares and fees at an exorbitant rate, schedule flights they know they don’t have the workers to fly, and are squeezing workers and customers to increase profits. [3]

Big businesses don’t want to compete for workers, so they have imposed non-compete clauses on many employees in many industries, including the fast-food industry. These non-compete clauses are in employment contracts employees are required to sign and prevent an employee from going to work for a competitor. This means lower wages for workers and less turnover, both of which boost corporate profits. The Federal Trade Commission (FTC) has proposed banning non-compete clauses and big businesses are apoplectic about having to compete for workers. The U.S. Chamber of Commerce, big businesses’ powerful trade association and political megaphone, along with 99 other industry associations, have written a letter to the FTC to complain.

In terms of taxes, the effective tax rate for large, profitable corporations (i.e., what they actually pay) has fallen from 16% in 2014 to 9% in 2018. Furthermore, the portion of large, profitable corporations paying no corporate income tax has increased to 34%. This has occurred in part because of the 2017 Republican tax law that cut the maximum, theoretical corporate tax rate from 35% to 21% and added even more loopholes to a tax code already riddled with them. Corporate taxes are now less than 11% of government revenue; in the 1950s, they were over 30% of revenue. [4]

The ever-increasing wealth of large corporations and rich individuals gives them plenty of money to spend on election campaigns and lobbying. This enhances their political power and allows them to tilt the playing field further and further in their favor, from lax antitrust enforcement to favorable tax and bankruptcy laws to weak regulations to employer-leaning labor laws. This lets them disempower workers (see this post for more details) and destroy communities. It leads to rising prices for housing, food, and medical care; to lower pay and worse working conditions; to the degradation of the quality of the information we get from mass media; and to further concentration of wealth and power.

All of this undermines democracy. It’s past time to take on American corporatocracy and reinvigorate democracy. My next post will discuss current and potential future strategies for fighting back against monopolistic corporations.

[1] Cox Richardson, H., 2/15/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/february-15-2023)

[2] Cox Richardson, H., 2/22/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/february-22-2023)

[3] Warren, Senator E., 2/15/23, “Keynote speech at the Renewing the Democratic Republic Conference,” Open Markets Institute (https://www.warren.senate.gov/imo/media/doc/FINAL%20-%20Senator%20Warren%20Speech%20Antitrust%20Open%20Markets%202023.pdf)

[4] U.S. Government Accountability Office, 12/14/22, “Corporate income tax: Effective rates before and after 2017 law change,” (https://www.gao.gov/products/gao-23-105384)

CURRENT U.S. CAMPAIGN FINANCE SYSTEM IS UNDEMOCRATIC

The key takeaways from this post are:

Business interests are spending billions of dollars each election cycle on political campaigns.
Supreme Court decisions have allowed unlimited campaign spending by wealthy special interests who are increasingly hiding their identities from voters.
Business interests are also spending billions of dollars on lobbying each year.
This huge spending by business interests is affecting public policy, allowing extreme capitalism where returns to shareholders outweigh all other interests.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

The 2022 midterm (i.e., non-presidential) federal elections were the most expensive ever by a wide margin. Candidates and political action committees (PACs) spent a total of $9 billion, up from $7 billion in 2018 and $5 billion in 2014 (both figures are adjusted for inflation). Identifiable business interests contributed $3.5 billion to federal campaigns, a record amount. They spent 14 times as much as organized labor. [1]

In the 2022 election cycle, business interests gave $66 million to members of Congress who voted NOT to accept the results of the 2020 presidential election, the so-called Sedition Caucus. Numerous corporations pledged to stop or re-evaluate supporting these members of Congress after the Jan. 6, 2021, insurrection at the Capitol. A significant number of these corporations have resumed making corporate PAC contributions to members of the Sedition Caucus, including contributions from AT&T, Boeing, Cigna, Comcast, General Motors, Home Depot, Lockheed Martin, Marathon Petroleum, Pfizer, Raytheon, UPS, UnitedHealth, Verizon, and Walmart. [2]

A growing number of members of Congress (73) refused corporate PAC money for the 2022 elections; 59 did for the 2020 elections. A much smaller number (7 members of the House and 6 Senators) refused money from all business PACs, including PACs of businesses not organized as corporations (e.g., many law, lobbying, and accounting firms) and of industry associations (e.g., the National Association of Realtors). Note that neither of these categorical refusals excludes the receipt of donations from corporate executives.

Election spending by outside groups has been growing since the 2010 Supreme Court Citizens United decision (as well as other related decisions). The Supreme Court’s decisions allow unlimited outside spending (i.e., spending that is [supposedly] independent of candidates’ campaigns and the political parties). Since 2010, there’s been over $9 billion in outside spending. A growing portion of this money is coming from sources that aren’t required to disclose their donors – so-called “dark money” groups. Most of the dark money comes through non-profit “social welfare” groups, but shell corporations are also used.

Outside spending was about $2 billion in the 2022 federal elections and over $637 million of that was dark money. All but $25 million of this dark money was contributed to PACs (this is essentially money laundering) or was spent on activities that avoid requirements for reporting to the Federal Elections Commission (FEC). (These activities are typically ads promoting or attacking candidates but without explicitly calling for their election or defeat, and that are run before the short period prior to an election when reporting is required.) [3]

In a troubling but not surprising development, the non-profit dark money groups that spent the most on the 2022 elections, $346 million, are closely linked to Republican and Democratic leaders in Congress. The largest spender was One Nation, a dark money non-profit linked to Senate Republican leader Mitch McConnell (R-KY). It spent $145 million, of which $74 million was contributed to PACs, with the vast majority going to McConnell’s Leadership Fund PAC. Note that his PAC shares staff and offices with One Nation. So much for the independence of such spending, despite the requirement for independence in the Supreme Court’s decision! One Nation also spent $71 million on ads, on which it was careful to avoid triggering reporting to the FEC. McConnell’s PAC spent more money on the 2022 elections than any other outside group: $246 million on U.S. Senate races across the country. [4]

Majority Forward, a dark money non-profit linked to the Democratic Senate leadership, spent over $102 million with $27 million going to ads (that avoided FEC reporting) and $76 million in political contributions (with $72 million going to Senate Majority Leader Schumer’s (D-NY) PAC). On the House side, the Republican dark money group spent $77 million, while the Democratic group spent $21 million.

Business interests spend money on lobbying in addition to campaign spending. For example, the National Association of Realtors spent $4 million on federal campaigns in the 2022 election cycle and $126 million on lobbying in the same two-year period.

Overall, $4.1 billion was spent on federal lobbying in 2022, an all-time record in terms of dollars and the highest since 2010 after adjusting for inflation. Over the course of 2022, over 13,000 organizations paid over 12,600 lobbyists. The $1.7 trillion budget bill passed in late 2022 was the subject of lobbying by 1,393 organizations. [5]

The top ten clients hiring lobbyists ranged from the National Association of Realtors, which spent $82 million on lobbying in 2022, to Meta (parent company for Facebook, Instagram, and WhatsApp), which spent $19 million. Amazon, the only individual corporation other than Meta on the list, spent $21 million. The U.S. Chamber of Commerce was second on the list, spending $81 million, followed by the Pharmaceutical Research & Manufacturers of America (PHRMA, $29 million), the American Hospital Association ($27 million), and Blue Cross / Blue Shield ($27 million).

In terms of industries, pharmaceuticals topped the list, spending $372 million on lobbying in 2022, followed by electronics ($220 million), insurance ($158 million), securities and investments ($140 million), and real estate ($135 million). Electric utilities, oil and gas, hospitals and nursing homes, and health services and HMOs each spent roughly $120 million on lobbying.

With billions of dollars being spent by business interests on campaigns and lobbying, it’s clear there’s a lot at stake in federal policy making and implementation. These businesses spend this amount of money because they see a return on their investment. My next post will discuss what they get for their money.

With corporate and business interests spending so much money to buy and exercise influence over government actions, it’s no wonder that we have largely unfettered capitalism in the U.S. The result is extreme capitalism that puts returns to investors and executives ahead of all other stakeholders – workers, consumers, communities, and the public interest. This creates high levels of economic insecurity and inequality in our society.

Everyday citizens have little voice to fight back against the megaphones all this money gives to businesses’ voices. Our only hope is to elect people to office who will stand up for workers, consumers, communities, and the public interest. This is why elections and campaign financing are so important. We must all be involved and informed citizens and voters if we want to stand a chance against the onslaught of corporate and business interests’ spending to influence public policy.

[1] Giorno, T., 1/27/23, “Business interests spent $3.5 billion on federal political contributions during the 2022 cycle,” Open Secrets (https://www.opensecrets.org/news/2023/01/business-interests-spent-3-5-billion-on-federal-political-contributions-during-the-2022-cycle/)

[2] Giorno, T., 1/27/23, see above

[3] Massoglia, A., 1/24/23, “ ‘Dark money’ groups have poured billions into federal elections since the Supreme Court’s 2010 Citizens United decision,” Open Secrets (https://www.opensecrets.org/news/2023/01/dark-money-groups-have-poured-billions-into-federal-elections-since-the-supreme-courts-2010-citizens-united-decision/)

[4] Massoglia, A., 1/24/23, see above

[5] Giorno, T., 1/26/23, “Federal lobbying spending reaches $4.1 billion in 2022 – the highest since 2010,” Open Secrets (https://www.opensecrets.org/news/2023/01/federal-lobbying-spending-reaches-4-1-billion-in-2022-the-highest-since-2010/)

SOUTHWEST AIRLINES: ANOTHER EXAMPLE OF EXTREME CAPITALISM

Southwest Airlines and its debacle of canceled flights around the Christmas holiday is another example of the extreme capitalism that U.S. policies have allowed to flourish. These policies of deregulation, a lack of support for workers and unions, and failure to enforce antitrust laws have allowed profits and returns to shareholders to trump all other goals and responsibilities of businesses.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

Southwest Airlines canceled over 17,000 flights in the couple of weeks around the Christmas holiday. It canceled far more flights than any other airline; some days it was responsible for 90% of the flights canceled in the U.S. On some days it canceled two-thirds of its flights while other airlines were canceling 2% or fewer of their flights. Although the weather contributed to triggering the cancellations, other airlines coped much, much better with the weather conditions. [1]

The dramatic extent of Southwest’s cancellations was caused, not bad by weather, but by extreme capitalism that has pushed its workforce to the limit and failed to invest in needed infrastructure, while maximizing profits and returns to shareholders. Southwest’s management admitted that the cancellations were primarily due to the failure of internal systems and technology, particularly its personnel scheduling system. Its unions have been highlighting the need for an improved personnel scheduling system for years.

Workers had been complaining about their treatment even before the December meltdown – 16-hour days, mandatory overtime, and a requirement for a doctor’s letter to take a sick day – driven by very thin staffing levels, driven in turn by the push to maximize profits. Things only got worse with December’s problems. Some of Southwest’s unions are talking about going on strike, with much of the focus on working conditions.

Southwest is not a corporation that has been struggling to survive; rather it’s one that’s very profitable. It’s had profits of $5.9 billion and $5.4 billion in 2022 and 2021, respectively, while revenue has grown from $9 billion in 2020 to $15.8 billion in 2021 and $22.7 billion in 2022. It received $7 billion in pandemic relief funds from the federal government, but nonetheless laid off 7,800 workers between March 2020 and July 2021. Its CEO was paid $9 million in 2022 and it spent $2 million on lobbying in 2021 – 2022.

Furthermore, from 2017 through 2019, Southwest spent $5.6 billion of its profits on buying back its own stock and then another $451 million on buybacks in the first quarter of 2020 (as the pandemic was hitting). Using its profits for stock buybacks enriched shareholders and executives, when it could have invested them in workers or needed infrastructure and technology instead. [2] Furthermore, in December 2022, Southwest resumed paying $428 million a year in dividends to shareholders. (Dividends were suspended in the first quarter of 2020 when the pandemic hit). Clearly, Southwest could afford to invest in infrastructure improvements and to treat its employees reasonably.

Despite its horrible performance in December, in January 2023, Southwest announced the promotions of five executives, including the person in charge of network operations. While customers suffered, it seems there’s no accountability for executives. [3]

So far, the federal Department of Transportation has not imposed any penalties for Southwest’s December meltdown. Members of Congress, union representatives, and consumer advocates are all calling for an investigation of what happened, of delayed refunds to customers, and of possible deceptive business practices (such as letting customers book flights when Southwest knew if didn’t have the personnel to operate the flights, which at least three airlines are being investigated for doing).

Better government oversight of the whole airline industry is needed, including stronger rules for consumer protection, as well as better enforcement of existing regulations. Industry-wide problems include slow payments of refunds and compensation to harmed customers. The airlines owe roughly $10 billion in unpaid refunds and other compensation to customers, which have accumulated over the course of the pandemic.

The industry as a whole is so thinly staffed (in pursuit of higher profits) that problems with cancellations and delays are happening fairly regularly when travel peaks around holidays. For example, around July 4, 2022, the problems were bad enough that Attorneys General of 38 states wrote to Congress in August to complain that the federal Department of Transportation (DOT) wasn’t doing enough to respond to customer complaints and problems. Last fall, the DOT imposed fines on airlines (but not Southwest) of $7.25 million in total for delays in providing refunds and compensation to customers. [4]

The airline industry is another example of the poor treatment of workers and customers because U.S. policies allow extreme capitalism and big profits. The big profits are used, of course, to reward shareholders and executives rather than to invest in the business, reward workers, or improve service and prices for customers. I’ve previously written about extreme capitalism in general here and here, as well as about its manifestations specifically in the railroad industry (here and here), in the food industry, and in Medicare privatization.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support stronger regulation of businesses, better protection for consumers, more enforcement of antitrust laws, and enhanced support for workers and their unions. We need to temper the extreme capitalism in the U.S. because it’s hurting workers and consumers, as well as leading to high and growing levels of economic insecurity and inequality. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your 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] Stancil, K., 12/28/22, “Southwest under fire for mass flight cancellations, ‘despicable’ treatment of workers,” Common Dreams (https://www.commondreams.org/news/southwest-airlines-corporate-greed)

[2] Johnson, J., 1/8/23, “Southwest Airlines spent $5.6 billion on shareholder gifts in years ahead of mass cancellation crisis,” Common Dreams (https://www.commondreams.org/news/southwest-airlines-shareholder-gifts)

[3] Johnson, J., 1/12/23, “‘They are just mocking Pete Buttigieg’: Southwest promotes executives after historic meltdown,” Common Dreams (https://www.commondreams.org/news/southwest-promotes-executives)

[4] Johnson, J., 1/8/23, “Sanders calls on Buttigieg to hold Southwest CEO accountable for ‘greed and incompetence’,” Common Dreams (https://www.commondreams.org/news/sanders-southwest-greed)

STORIES CENSORED BY CORPORATE MEDIA Part 3

A central purpose of my blog posts is to share information that is under-reported by the mainstream, corporate media. This post and the previous two (here and here) share highlights of the top ten under-reported stories of 2022 from the annual State of the Free Press report from Project Censored. The media – print, TV, on-line, and social media – have undergone a dramatic corporate consolidation over the last 40 years. They are now a handful of huge, for-profit corporations, often owned and run by billionaire oligarchs. Through bias and self-censorship, this has restricted the content and quality of the information reported, skewing the terms and content of public debate and decision making. Project Censored works to hold the corporate news media and their owners accountable. (See this previous post for more detail.)

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

The under-reported stories highlighted by Project Censored’s report mean that the media are failing to provide citizens and voters important information, which threatens our democracy. This also undermines progress toward of a just, fair, and inclusive society. My previous post summarized numbers five through seven of its top ten stories for the year. Here are summaries of the last three. [1]

UNDER-REPORTED STORY #8: CIA’s plans under Pompeo and Trump to kidnap or kill Wikileaks founder, Julian Assange. Such plans were seriously considered in late 2017 according to September 2021 investigative reporting by Yahoo News based on interviews with over 30 former government officials. Pompeo and others wanted vengeance against Assange for Wikileaks online publishing of documents from the CIA’s top secret hacking division. Apparently, resistance from England (where Assange was in refuge in an embassy), from the U.S. National Security Council, and from the U.S. Department of Justice kept these plans from being undertaken. Despite some coverage in non-mainstream media of the Yahoo News reporting, very little, if any, coverage occurred in the mainstream, corporate media.

UNDER-REPORTED STORY #9: Efforts to prevent disclosure of election campaign donors. In the wake of the Supreme Court’s 2010 Citizens United decision (and others) that have reduced regulation of and limits on campaign spending, the role of money whose true donor is unknown (so-called “dark money”) in our elections has exploded. Republican legislators at the national and state levels are promoting legislation that would make it illegal to require non-profit organizations engaged in political spending to disclose their donors.

At the state-level, legislators are using model legislation developed by the American Legislative Exchange Council (ALEC) to ban such disclosure and have passed such laws in nine states. ALEC brings together corporate lobbyists and corporate-friendly legislators to draft and promote legislation favorable to corporations and right-wing interests. ALEC is part of the sprawling political influence network funded by right-wing billionaires, such as the Kochs and Bradleys, both of whom use dark money non-profits to conceal their political spending.

At the federal level, the 2022 fiscal year budget bill included a rider exempting politically-active non-profit organizations that self-identify as promoting the social welfare from having to report their donors. Another rider prevents the Securities and Exchange Commission (SEC) from requiring corporations to disclose political and lobbying spending.

There has been very little coverage in the corporate, mainstream media of these efforts to protect and expand dark money in election campaigns, let alone the role of ALEC and its collaborators in such efforts at the state level.

UNDER-REPORTED STORY #10: Lobbying against online privacy protections is, in part, funded by the mainstream media. “Surveillance advertising,” which collects a user’s data from online activities to tailor advertising to that individual, generally without the user’s knowledge, is ubiquitous and essential to profiting from online advertising. It is extremely profitable for social media apps and platforms, including Facebook, YouTube, Instagram, TikTok, etc. The mainstream media also depend on online advertising revenue, including the New York Times, CNN, MSNBC, Time, the Washington Post, Fox TV, and many others.

The Federal Trade Commission (FTC) is working on regulations for the collection and use of data on online users. However, the Interactive Advertising Bureau (IAB) and its lobbyists are opposing such regulation. The IAB is funded by and represents the interests of online media outlets (including the mainstream media) and data brokers. The personal user information collected online (including from minors) is not only used to target advertising by the app or platform being used, it is typically sold to data brokers. These data brokers create predictive models of users’ online behavior and then sell them to advertisers. These predictive models also allow manipulation of the public’s perceptions of political issues. This occurred during the 2016 presidential campaign: the British firm, Cambridge Analytica, used the personal date of Facebook users, without consent or permission, to craft and target political ads and propaganda.

The importance of revenue from online advertising is huge; it has grown from $32 billion in 2011 to $152 billion in 2020 (almost five times the previous amount). Meanwhile, hardcopy advertising revenue has declined roughly one-quarter from $125 billion in 2011 to $90 billion in 2020. The mainstream corporate media increasingly rely on extensive privacy violations to generate badly needed revenue from online advertising, while the public relies on them to report on this – obviously a huge conflict of interest. While there’s been some reporting of the FTC’s efforts to protect users’ privacy, the corporate media have been largely silent on the push by the FTC and in Congress to ban or severely regulate surveillance advertising. And they have been totally silent on the fact that the industry organization they fund, the IAB, is lobbying against privacy protections for online users as well as against limitations on surveillance advertising.

CONCLUSION: The overarching theme of these under-reported stories is the failure of the mainstream corporate media to educate the American public about the power and influence of wealthy corporations and individuals. The success of these wealthy special interests in influencing government policy and the enforcement of laws is something every voter needs to be well aware of in order to make informed decisions.

This blog can only scratch the surface of the issue of stories under-reported by the mainstream corporate media. For reporting on such stories (and many others), please see the free, reader-supported media that I recommended in this previous post.

[1] Rosenberg, P., 1/3/23, “Project Censored, Part 2: Billionaire press domination,” The American Prospect, (https://prospect.org/power/project-censored-part-2-billionaire-press-domination/)

STORIES CENSORED BY CORPORATE MEDIA Part 2

A central purpose of my blog posts is to share information that is under-reported by the mainstream, corporate media. This post and the previous one share highlights of the top ten under-reported stories of 2022 identified by the annual State of the Free Press report from Project Censored. The media – print, TV, on-line, and social media – have undergone a dramatic corporate consolidation over the last 40 years so they are now a handful of huge, for-profit corporations, often owned and run by billionaire oligarchs. Through bias and self-censorship, this has restricted the content and quality of the information reported and, therefore, skewed the terms and content of public debate and decision making. Project Censored works to hold the corporate news media and their owners accountable. (See my previous post for more detail.)

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

By failing to provide citizens and voters important information, the under-reporting highlighted by Project Censored’s report undermines democracy, the public interest, and the promotion of a just, fair, and inclusive society. My previous post summarized the first four of its top ten issues for the year. Here are summaries of the next three. [1]

UNDER-REPORTED STORY #5: A network of right-wing “dark money” organizations is undermining democracy in multiple ways. Dark money organizations are politically active groups organized as non-profits so they don’t have to report their donors. A network of them, including the Judicial Crisis Network, The 85 Fund, and the Donors Trust, has been funding election deniers, the January 6 insurrectionists, and campaigns for and against Supreme Court nominees. They have funded support for President Trump’s Supreme Court nominees and opposition to President Biden’s nominee. The billionaire Koch brothers (although one of them has passed away) have their own network of groups that funnel money to political causes, including through the Donors Trust. These dark money groups are also closely link to the Federalist Society of right-wing lawyers and judges and its co-chair Leonard Leo.

This network of dark money groups has been set up to obscure the sources of funding for right-wing political activities. In 2020, these dark money groups provided the Federalist Society and related groups over $52 million, primarily to promote the confirmation of Supreme Court Justice Barrett. In 2020, they provided over $37 million to entities that played a role in the January 6 insurrection. They previously had spent tens of millions of dollars promoting the confirmations of Trump-nominated Justices Gorsuch and Kavanaugh. They gave tens of millions to groups promoting lies about the 2020 election. Members of the Federalist Society played key roles in the various schemes to overturn the results of the 2020 election and to prevent the confirmation of Biden as President. For example, 14 of the 18 Attorneys General who filed suit to throw out election results in key states are Federalist Society members.

Despite the size and scope of this dark money network supporting right-wing political, anti-democracy activities, the corporate media have left the story of the connections and coordination of these funders almost totally unreported. Although the media have covered specific right-wing activities, they have not provided the context of the network of funders of these activities. Therefore, the impact and threat of these dark money funders and the need to address the overarching issue of dark money remain unknown to most of the public and most voters. If nothing else, this minimizes public understanding of the level of the threat to our democracy, to our elections, and to trust in our governments. This undermines democracy by failing to educate voters about the extent of the network of funders and the coordination among the right-wing extremists’ organizations.

UNDER-REPORTED STORY #6: Corporate consolidations and the marketplace power that this creates are key drivers of “inflation.” The mainstream, corporate media have reported extensively on the current surge of inflation. However, they rarely report on the price gouging by huge, monopolistic corporations that has been a key cause of inflationary price increases. When they do report on it, it’s usually to dismiss it as a cause of inflation. Corporate consolidation leading to the marketplace power to engage in price gouging has occurred in many industries in the U.S. and globally, from railroads to pharmaceuticals to ocean shipping. The food industry, which has engaged in price gouging causing high inflation in grocery prices, is a great example. Three corporations own 93% of the carbonated soft drinks sold, three other corporations own 73% of cereals, and four or fewer firms control at least 50% of the market for 79% of groceries. The four big meat suppliers have paid over $225 million to settle suits related to price fixing and other market manipulation.

Because of price increases across the whole economy, U.S. corporations’ profits are at the highest levels in 70 years. Fifty to 60 percent of “inflation” is going to increased profits, which are being used to pay big dividends to investors and to buyback over $20 billion of corporations’ own stocks in 2021 alone. (See previous posts here, here, and he re for more information on corporate consolidation and price gouging that causes “inflation.”)

UNDER-REPORTED STORY #7: Gates Foundation gifts of well over $319 million to the media and related entities. The identified gifts (the true total is undoubtedly far higher) go directly to the media, to the coverage of specific topics, and to journalism training programs and associations. These gifts raise serious questions about journalistic independence and conflicts of interest. U.S. recipients include CNN, NBC, NPR, PBS, and The Atlantic. International recipients include the BBC, Al-Jazeera, The Guardian, The Financial Times, Le Monde, and Der Spiegel. An example of funding for coverage of a specific topic is the Gates Foundation’s $2.3 million grant to the Texas Tribune to increase public awareness and engagement in education reform. Given Gates’ longstanding advocacy for charter schools, which many educators and political leaders see as an effort to privatize public education and undermine teachers’ unions, this grant could be viewed as an effort to generate pro-charter school stories that appear to be objective news reporting.

The Gates Foundation, a tax-exempt charity that frequently trumpets the importance of transparency, is often very secretive about its finances and gifts. Not included in the $319 million figure are gifts to academic journals and research targeted at producing journal articles that often end up getting reported in the mainstream media. For example, at least $13.6 million has been spent on creating content for the prestigious medical journal, The Lancet.

Major corporate media have not covered this story, despite a 2011 Seattle Times article noting that the Gates Foundation’s gifts to media organizations were blurring the line between journalism and advocacy.

My next post will summarize the last three stories that Project Censored had in its top ten list of those censored by the corporate media in 2022.

[1] Rosenberg, P., 1/3/23, “Project Censored, Part 2: Billionaire press domination,” The American Prospect, (https://prospect.org/power/project-censored-part-2-billionaire-press-domination/)

STORIES CENSORED BY CORPORATE MEDIA Part 1

A central purpose of my blog posts is to share information that is under-reported by the mainstream, corporate media. This post and the next one will share highlights from the State of the Free Press report from Project Censored, which annually identifies its list of the most important issues that were under-reported by the corporate media. The corporate consolidation of the media – print, TV, on-line, and social media – into a handful of huge, for-profit corporations, often owned and run by billionaire oligarchs, has restricted the content and quality of the information reported and, therefore, skewed the terms and content of public debate and decision making. Project Censored works to hold the corporate news media accountable.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

Over the years, Project Censored’s State of the Free Press report has identified under-reported issues involving climate change, corporate corruption, campaign financing, poverty, racism, and war. In addition, the report’s diverse contributors advocate for press freedom and media literacy as necessary to hold powerful interests accountable and to promote a just, inclusive, and democratic society. The authors note that, “History shows that consolidated media, controlled by a handful of elite owners, seldom serves the public interest.”

The corporate media’s owners filter the news they report through a class-driven frame, which they may be oblivious to. They overlook or ignore conflicts of interest between their ownership, their investors’ and their advertisers’ interests and the interests of the public that they are supposedly serving with objective news coverage. The concentration of corporate wealth and power skews or distorts what they report and, therefore, what the public learns or doesn’t learn about our society, our economy, and our policy making.

The corporate media’s self-censorship of certain stories and topics does not occur through explicit, blanket bans on reporting them, but through omission or under-reporting due to bias based on the personal perspectives of owners, some editors, and some reporters who tend to be white, male, and economically well-off. Although specific incidents of, for example, corporate corruption may be reported, the overall underlying pattern, scope, and scale of stories are often not presented. This reporting is what is referred to as “episodic,” i.e., about a specific episode or example. It lacks the context that would allow the public to truly understand the scope and scale of the issue or topic. The lack of what’s referred to as “thematic” reporting means the consumer of information is not given a complete picture or understanding of what’s happening in society, and what can and perhaps should be done to address problems, such as corporate corruption.

As a result, citizens and voters in our democratic society are under-informed, in particular about the role of government policies in shaping our economy and society. Therefore, they are ill-equipped to be knowledgeable citizens and voters in a democracy and “government based on the consent of the governed is but an illusory dream.” [1]

An overarching element of many of the under-reported stories is corporate power and sometimes outright corporate corruption. A secondary theme is the exercise of corporate power in influencing government policy making and functioning.

UNDER-REPORTED STORY #1: Public subsidy of the fossil fuel industry is over $5 trillion per year worldwide. The subsidy is largely indirect and reflects externalized costs, i.e., costs of using fossil fuels that the industry doesn’t pay. These costs include the health costs of deadly air pollution (42% of the total), damages from extreme, climate-change-driven weather events (29%), and costs of traffic accidents and congestion (15%). Two-thirds of the subsidy occurs in just five countries: the United States, Russia, India, China, and Japan. No national government sets fossil fuels prices at a level that would cover the external costs of fossil fuel use. These were key findings of an International Monetary Fund study of 191 countries published in September 2021 that was ignored by the mainstream, corporate media.

UNDER-REPORTED STORY #2: U.S. employer wage theft from workers is billions of dollars annually and goes largely unpunished. In 2017, the Economic Policy Institute released a study of one form of wage theft: minimum wage violations. It estimated that workers lose $15 billion each year to this type of wage theft, which is rarely reported by the corporate media. For the sake of comparison, street crime is heavily reported by the media, even though its financial impact is less – an estimated $14 billion in 2017 according to the FBI.

Nonetheless, employers are seldom punished for minimum wage violations that steal workers’ pay. A Center for Public Integrity report in 2021 found that over 15 years only one in four employers who were repeat offenders were fined and only 14% of those were required to pay a penalty to the aggrieved worker beyond paying the back wages they owed.

Employer wage theft also includes not paying overtime, requiring workers to work hours “off-the-clock” that they’re not paid for, and withholding tips. Most wage theft is from low-come workers, including, disproportionately, workers of color as well as immigrant and guest workers.

Another form of wage theft is misclassifying workers as independent contractors instead of employees. This has occurred with port-based truck drivers for years and has become an epidemic with the growth of gig workers in recent years. A 2014 study by the National Employment Law Center estimated that California port truckers have $800 million to $1 billion in wages stolen annually through misclassification.

Both federal and state enforcement of wage and labor laws are weak and underfunded. The Wage Theft Prevention and Wage Recovery Act of 2022 is designed to address enforcement issues but is unlikely to pass in Congress.

Given its scale, wage theft is dramatically under-reported by the corporate media. When it is covered, the reporting is episodic, focusing on a specific employer and specific employees. Thematic reporting that includes the scope of the problem, the weak enforcement, and the light punishment of offenders is very rare indeed.

UNDER-REPORTED STORY #3: EPA failed to make reports on dangerous chemicals public. In January 2019, the Environmental Protection Agency (EPA) stopped publicly releasing legally required reports about chemicals presenting a substantial risk of harm to health or the environment. By November of 2021, the EPA had received at least 1,240 reports of substantial risk of harm, but only one was publicly available.

In January 2022, Public Employees for Environmental Responsibility filed a lawsuit to force the EPA to make the reports publicly available. Within a few weeks, the EPA announced it would resume the public release of the reports. There was essentially no reporting of any of this in the corporate media.

UNDER-REPORTED STORY #4: At least 128 Members of Congress have investments in the fossil fuel industry. At least 100 U.S. Representatives and 28 U.S. Senators have investments in the fossil fuel industry. Despite detailed reporting of this in non-corporate media in late 2021, this story has been virtually ignored by the mainstream corporate media. The Senators’ investments add up to roughly $12.5 million with Senator Manchin (D-WV) topping the list with up to $5.5 million in industry investments. (Most reporting is in ranges not specific dollar amounts.) In the House, Representative Taylor (R-TX) topped the list with investments of up to $12.4 million.

Notably, many of the Members of Congress with fossil fuel investments sit on committees that have jurisdiction over energy-related policies. Therefore, they have substantial conflicts of interest as elected legislators supposedly acting in the public’s interest. By the way, the fossil fuel industry spent at least $40 million on congressional campaigns in the 2020 election cycle and spent almost $120 million on lobbying in 2020.

My next post will summarize the six other stories or topics censored by the corporate media that Project Censored had in its top ten list for the year.

[1] Rosenberg, P., 1/2/23, “Project Censored, Part 1: Billionaire press domination,” The American Prospect, p. 1, (https://prospect.org/power/project-censored-part-1-billionaire-press-domination/)

CORPORATE POWER AND A BIT OF ACCOUNTABILITY

Large corporations wield enormous power in our economy with little accountability. There’s a little good news on the accountability front and more evidence, both in general and in specific examples, of their power in creating “inflation.”

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

First, the good news. The Consumer Financial Protection Bureau (CFPB) is proposing a registry of finance companies whose violations of consumer protection laws are the subjects of criminal or other legal action. The registry would allow consumers, both individuals and small businesses, to check on the performance of finance companies before engaging in business with them, such as obtaining mortgages or other loans. It would help the CFPB track and oversee corporations that repeatedly break consumer protection laws. The registry would also help CFPB more effectively share information with other regulators and law enforcement agencies. [1]

Then, there’s the bad news. It’s become crystal clear that consumers are suffering from substantial increases in the cost of living because big corporations are increasing prices to increase their profits. Although costs for corporations have increased, they have increased their prices to more than cover their costs. As a result, their profits have soared to their highest levels in 70 years. In 2020 and 2021, increased profits were responsible for over 53% of the increase in prices. [2] Workers’ wages have increased somewhat, but not enough to keep up with the increases in the costs of food, baby formula, cars, gasoline, housing, drugs (including insulin), and other essential needs. [3]

Big corporations have the power to increase prices more than their costs have increased because 40 years of deregulation, consolidation, and lax antitrust enforcement have resulted in mega-corporations with monopolistic economic power. This hyper-capitalism creates great economic inequality and threatens our democracy. (See previous posts here and here about the threat to democracy; here, here, and here about how this has shifted our economy and political system toward oligarchy; and here about the effects of deregulation and consolidation.)

Here’s the really bad news. As corporations’ costs are starting to decline and supply chain delays are easing, they have no intentions of reducing prices – they just plan to increase their profits even more. The Groundwork Collaborative has documented hundreds of examples of corporate CEOs telling investors that they have used Covid-related reasons to jack up prices and profits and, furthermore, that they have no intentions of reducing prices as costs come down. This means they will further increase profits beyond their already record levels! Corporate executives from corporations ranging from the Kroger supermarket super chain, to toy-maker Mattel, to food-makers Hostess, Hormel, J.M. Smucker, and Kraft Heinz, to Proctor and Gamble, to Autozone, to paint and chemical giant company PPG have all boasted to investors about their increased profitability and their plans to increase profits even more – while consumers and workers struggle to survive high “inflation” due to corporations’ price gouging.

Because corporate power and profits are the main drivers of “inflation” (exacerbated and facilitated by pandemic-related supply chain problems and the war in Ukraine), Federal Reserve interest rate increases aren’t likely to be very effective in reducing inflation. They will, however, hurt workers by increasing unemployment, hurt home buyers by increasing mortgage rates, and hurt small businesses and home builders by increasing the interest costs for their loans.

Three strategies that would be more effective in addressing the current brand of “inflation” than increasing interest rates are:

A windfall profits tax,
Closing loopholes in antitrust laws to prevent corporations from colluding to increase prices (i.e., engaging in price fixing), and
Better enforcement of antitrust laws to reduce the monopolistic power of mega-corporations over for the longer-term.

There are bills in Congress that would institute a windfall profits tax. Senator Bernie Sanders (I-VT) has introduced legislation that would put such a tax on a broad range of companies, while other bills have focused on the oil and gas industry. [4] Eighty percent (80%) of U.S. voters support a windfall profits tax. (See this previous post for more details.) [5]

A bill to prohibit price gouging during market disruptions such as the current pandemic, the Price Gouging Prevention Act of 2022, has been introduced by Senators Elizabeth Warren (D-MA) and Tammy Baldwin (D-WI), along with Representative Jan Schakowsky (D-IL). It would empower the Federal Trade Commission (FTC) and state attorneys general to enforce a ban on excessive price increases. It would require public companies to report and explain price increases in their quarterly filings with the Securities and Exchange Commission. (See this previous post for more details.) [6]

The Competitive Prices Act, which would close antitrust loopholes that have allowed blatant price fixing and collusion to go unpunished, has been introduced by Representative Katie Porter (D-CA). For example, the three dominant makers of insulin have for years increased their prices in lock step. [7] Porter’s bill would make this illegal. [8]

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support the CFPB’s proposed corporate criminal registry and to take steps, including a windfall profits tax, to reduce corporate price gouging and price fixing. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your 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] Conley, J., 12/13/22, “CFPB applauded for proposing ‘public rap sheet’ for corporate criminals,” Common Dreams (https://www.commondreams.org/news/2022/12/13/cfpb-applauded-proposing-public-rap-sheet-corporate-criminals)

[2] Bivens, J., 4/21/22, “Corporate profits have contributed disproportionately to inflation. How should policy makers respond?” Economic Policy Institute (https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/)

[3] Becker, C., 12/19/22, “Understanding corporate power and inflation,” Common Dreams (https://www.commondreams.org/views/2022/12/16/understanding-corporate-power-and-inflation)

[4] Corbett, J., 7/29/22, “Price gouging at the pump results in 235% profit jump for big oil: Analysis,” Common Dreams (https://www.commondreams.org/news/2022/07/29/price-gouging-pump-results-235-profit-jump-big-oil-analysis)

[5] Johnson, J., 6/15/22, “With US consumers ‘getting fleeced,’ Democrats demand windfall profits tax on big oil,” Common Dreams (https://www.commondreams.org/news/2022/06/15/us-consumers-getting-fleeced-democrats-demand-windfall-profits-tax-big-oil)j

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

[7] Pflanzer, L. R., 9/16/16, “A 93-year-old drug that can cost more than a mortgage payment tells us everything that’s wrong with America’s healthcare,” Business Insider https://www.businessinsider.com/insulin-prices-increase-2016-9

[8] Owens, L, 10/30/22, “Who’s really to blame for inflation,” The Boston Globe

THE RAILROAD SETTLEMENT SHORTCHANGES WORKERS

As you’ve probably heard, the threat of a railroad workers’ strike was ended by a new contract imposed by the federal government. The Biden administration brokered a tentative agreement last September after almost three years of unsuccessful bargaining by the workers’ unions and the railroad corporations. However, some of the workers’ unions voted against the proposed settlement, largely because they didn’t feel it adequately addressed some quality-of-life issues; in particular, it lacked paid sick days.

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

Four of the 12 railroad workers’ unions, but those representing a majority of the workers, voted against the proposed contract, which included only one paid sick day. Congress passed a bill that President Biden signed which has imposed the proposed contract on railroad workers because a rail strike would have had serious negative effects on the economy, which is never a good thing but especially not just before the December holidays.

The new contract that was imposed, which covers 115,000 workers, would:

Allow workers to take days off for medical care without being penalized, but only one of those days would be paid. (The unions had asked for 15 days of paid sick leave.)
Increase pay by 24% over five years, going back to 2020 when the last contract expired, bringing the average workers’ pay to $110,000 in 2024.
Provide more worker-friendly work schedules.
Keep workers’ health care premiums at current levels.

In addition to the bill imposing the contract, a separate bill was passed by the House but rejected by the Senate (the vote was 52 in favor, including six Republicans, but the filibuster requires 60 votes to pass) that would add seven days of paid sick time to the contract. This paid sick time would cost the railroad corporations an estimated $321 million a year. Given the over $20 billion a year in profits the six big railroad corporations are making, this is less than 2% of their record profits.

President Biden could require the railroads to provide seven paid sick days to the railroad workers through an executive order. An executive order from President Obama required companies with federal contracts to provide seven paid sick days. The railroads, which all have large, long-standing federal contracts, were exempted. President Biden could remove this exemption. Over 70 Democrats in Congress and union supporters are urging him to do so. [1] [2]

I urge you to contact President Biden to ask him to require the railroad corporations to provide their workers seven paid sick days per year. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

The background for all of this is that the railroad industry is a textbook example of the extreme capitalism our current laws allow. The railroad corporations are generating very large profits for shareholders (including executives) while workers are getting squeezed very hard. Fortunately, the railroad workers are in a union so they have some power to fight back.

Extreme capitalism has allowed the railroad corporations, through consolidation, deregulation, and aggressive personnel policies, to gain so much power that they have been providing huge returns to shareholders while making life miserable for their employees. Since 1980, through mergers and acquisitions (that our government has failed to stop under antitrust laws), the 40 major railroad corporations have become six (Burlington Northern and Santa Fe [BNSF], Union Pacific, CSX, Canadian National, Norfolk Southern, and Canadian Pacific). Four of them have roughly 85% of the freight business and they operate with monopolistic power in much of their service territories. [3] (See this previous post for more background.)

The profit margin in the industry (the percentage of revenue that is profit) has soared from 15% in 2001 to 40% in 2021. A big part of this increased profitability is that the portion of revenue dedicated to paying employees has dropped from 34% to 20%. [4] In 2019, the freight railroad industry was the most profitable industry in the country with a 51% profit margin. [5]

These record profits are, for the most part, NOT being reinvested in the businesses but are being used to reward shareholders (including executives) through the buying of the corporations’ own stock and paying dividends. For the industry as a whole, these stock buybacks and dividends have totaled over $200 billion since 2010, averaging over $15 billion per year, and they are continuing. [6]

Many have called the working conditions at the railroads inhumane. Workers’ schedules have been unpredictable as they have been on-call 24/7. The railroads are so thinly staffed that they can’t allow employees any flexibility and need to have them on-call at all times to keep the trains running. Workers had been penalized if they took a day off to go to the doctor or deal with a medical need. The safety of the workers and the communities the trains run through is being compromised.

It’s ironic that railroad executives, who regularly complain about and oppose government regulation, turned to the federal government to impose a contract on their workers. [7]

[1] Meyerson, H., 12/2/22, “The rail impasse: Your questions answered,” The American Prospect (https://prospect.org/labor/rail-impasse-your-questions-answered/)

[2] Conley, J., 12/9/22, “70+ lawmakers tell Biden ‘You can and you must’ provide rail workers paid sick leave,” Common Dreams (https://www.commondreams.org/news/2022/12/09/70-lawmakers-tell-biden-you-can-and-you-must-provide-rail-workers-paid-sick-leave)

[3] Buck, M. J., 2/4/22, “How America’s supply chains got railroaded,” The American Prospect (https://prospect.org/economy/how-americas-supply-chains-got-railroaded/)

[4] Gardner, E., 9/13/22, “Rail strike by the numbers: Railroad profits are soaring at workers’ expense,” More Perfect Union (https://perfectunion.us/rail-profits-soaring-at-workers-expense/)

[5] Buck, M. J., 2/4/22, see above

[6] Stancil, K., 9/19/22, “While fighting workers, railroads made over $10 billion in stock buybacks,” Common Dreams (https://www.commondreams.org/news/2022/09/19/while-fighting-workers-railroads-made-over-10-billion-stock-buybacks)

[7] Johnson, J., 11/25/22, “One day of Warren Buffett wealth gains could fund 15 days of paid sick leave for rail workers,” Common Dreams (https://www.commondreams.org/news/2022/11/25/one-day-warren-buffett-wealth-gains-could-fund-15-days-paid-sick-leave-rail-workers)

GIVING THANKS FOR FREE, READER-SUPPORTED MEDIA

I give thanks for news and information sources that are not-for-profit, reader-supported, and free, given that the mainstream media are large, for-profit corporations. Unconstrained by a corporate, for-profit mindset and dependence on advertisers for revenue that both skew “news” toward infotainment to attract attention and capitalistic viewpoints to please corporate bosses and advertisers, reader-supported media provide valuable information and perspectives that go unreported by the mainstream media.

(Note: If you find my posts too much to read on occasion, feel free to read just read the bolded portions. They present the key points I’m making.)

The mainstream media are NOT liberal on economic issues, despite the decades of assertions by the right-wing that they are. They may be liberal on social issues such as abortion rights, LGBTQ+ issues, and gun violence reduction, but they are NOT liberal on economic issues such as business and Wall St. regulation, taxes, workers’ rights, economic inequality, and enforcement of antitrust laws.

My favorite progressive (or liberal if you like), print (hardcopy and online), non-profit, free, reader-supported publications with a focus on news and public policy are presented below. I’m sure there are others but these are more than sufficient to keep me busy and informed with in-depth, accurate information, thoughtful perspectives, and expert policy analysis. You can sign-up for daily or weekly emails from them that highlight their current content.

Take even a quick look at any of these sources of news, information, and analysis and I believe you’ll quickly agree with me that the mainstream media are NOT liberal or progressive!

Common Dreams: Founded in 1997, it lists its mission as: “To inform. To inspire. To ignite change for the common good.” Its website further states: “We are optimists. We believe real change is possible. But only if enough well-informed, well-intentioned – and just plain fed up and fired-up – people demand it. We believe that together we can attain our common dreams.” It only publishes online and delivers daily or weekly emails with summaries of and links to its relatively short articles covering current news.

The Hightower Lowdown: This entertaining, irreverent, progressive populist newsletter is written by Jim Hightower. Hightower worked in Congress, was twice elected Texas Agriculture Commissioner (1983 – 1991), and “has long chronicled the ongoing democratic struggles by America’s ordinary people against rule by its plutocratic elites.” The Lowdown is available in print, online, and on the airwaves.

The American Prospect: In my opinion, this magazine and website deliver the best and most comprehensive progressive policy content. Its stated mission is “to tell stories about the ideas, politics, and power that shape our world.” It is “devoted to promoting informed discussion on public policy from a progressive perspective.” It identifies “policy alternatives and the politics necessary to create [and enact] good legislation.”

The Nation: It publishes progressive, independent journalism that “encourages debate, foments change, and lifts up the voices of those fighting for justice.” Founded by abolitionists in 1865, it believes that provocative, independent journalism can bring about a more democratic and equitable world. It provides thoughtful and investigative reporting that “speaks truth to power to build a more just society.” It’s available both online and in print.

Mother Jones: Founded in 1976, it’s “America’s longest-established investigative news organization.” Its mission is to deliver “reporting that inspires change and combats ‘alternative facts.’” It provides in-depth stories on a wide range of subjects including politics, criminal and racial justice, education, climate change, and food and agriculture. Its fellowship program is one of the premier training grounds for investigative journalists. It is available in print, online, and via videos and podcasts.

ProPublica: It was founded in 2007 with the beliefs that investigative journalism and informing the public about complex issues are crucial for our democracy. Its mission is “to expose abuses of power and betrayals of the public trust by government, business, and other institutions, using the moral force of investigative journalism to spur reform through the sustained spotlighting of wrongdoing.” With more than 100 journalists, it covers topics including government, politics, business, criminal justice, the environment, education, health care, immigration, and technology with in-depth, detailed articles.

If you prefer video content to print, I recommend Inequality Media. Its vision is “a United States where active participation by informed citizens restores the balance of power in our democracy and creates an economy where gains are widely shared.” Its mission is “to inform and engage the public about inequality and the imbalance of power” in U.S. society. Founded in 2015, its short videos are “entertaining and easy to understand [with] graphics, photos, and animations.” It focuses on current news and explains it in a way that ties it to the larger story of needed social change to create a more equitable economy and a more stable democracy.

I urge you to read and, if you can, support financially one or more of these organizations. In the current hyper-capitalistic, plutocratic economic and political environment in the U.S., we need these sources of non-profit, reader-supported journalism to support a well-informed citizenry, democratic governance, and the relatively level economic playing field democracy requires. Today’s mainstream media are simply not performing these responsibilities of the media in a democracy. As Supreme Court Justice Louis Brandeis stated, “we can have democracy in this country or we can have great wealth concentrated in the hands of the few, but we can’t have both.”

ITS TIME TO TAKE ON AMERICAN CORPORATOCRACY

Corporate power and influence in the American economy and policy-making process are evident on multiple fronts: from bankruptcy laws, to tax laws, to the failure to enforce antitrust laws that has led to huge, monopolistic corporations that drive “inflation” with price gouging. The bottom line of all this is that in 2022 corporations are realizing their highest profit margins in 70 years while consumers are coping with the highest “inflation” in 40 years. This is on top of the record corporate profits in 2021 of $2.8 trillion, up 25% from the previous year.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

The U.S. bankruptcy system reflects a huge double standard with much more favorable rules for corporations than for individuals. Individuals who file for bankruptcy have their credit ruined and their economic security upended. They can’t get rid of student loans or mortgages. Credit card debt is very difficult to escape. Senator Elizabeth Warren (D – MA), an expert in bankruptcy law and leader of the 1995 National Bankruptcy Review Commission, fought for years to keep the banks and credit card industry from toughening bankruptcy laws for individuals (but not for corporations). She lost that battle in 2005. [1]

On the corporate front, the current example is the bankruptcy of the FTX cryptocurrency exchange. Its CEO Sam Bankman-Fried (now ex-CEO) hired a top-notch team of bankruptcy lawyers (who will collect a small fortune in fees) who tried to get the bankruptcy judge to let FTX write off its debts (and cheat its customers), while allowing Bankman-Fried to retain control of the company. They argued to the judge that, although Bankman-Fried and his associates drove the company into bankruptcy, because of their knowledge of the company and what happened, they were best positioned to recover as much money as possible.

Bankruptcy judges often let corporate executives keep control of their bankrupt companies because of their knowledge of the company and its situation. Fortunately, the judge in the FTX case didn’t. However, this is a standard tactic that private equity and vulture capitalists have used in pillaging companies, including Sears Roebuck, for example. By the way, one of the goals of using the bankruptcy process is that it lets companies break union contracts and escape the debt that workers’ pension plans represent. So, current corporate bankruptcy laws treat corporate executives and owners much better than they treat workers.

Senator Warren has proposed a fundamental reform of U.S. bankruptcy laws in the Consumer Bankruptcy Reform Act. In the meantime, bankruptcy judges should stop letting executives keep control of companies that they have driven into bankruptcy.

On the tax law front, despite their record profits, corporations are asking Congress to renew and extend special tax loopholes that would cost the government about $60 billion a year. Despite the 40% federal income tax cut corporations got from the December 2017 tax cut bill that Trump and congressional Republicans rammed through, corporations are asking for tax cuts in a 2022 end-of-year budget bill. They want to be able to write-off as immediate expenses assets they purchase and research costs, both of which are more appropriately spread out over many years. They also want to be able to deduct a larger share of interest expenses. Deducting large interest expenses is a key factor in making leveraged buyouts by private equity and vulture capitalist firms financially viable. [2]

Instead of more tax cuts for wealthy corporations and vulture capitalists, corporate taxes should be increased (by repealing at least part of the 2017 tax cuts), the corporate minimum tax should be strengthened (so wealthy corporations can’t dodge paying income tax), and offshore corporate tax loopholes should be closed. Offshore loopholes incentivize corporations to shift jobs and profits to tax havens, which results in about $60 billion in lost U.S. tax revenue each year. Globally, it is estimated that $312 billion a year in government revenue is lost to cross-border tax abuse by multi-national corporations. The Organisation for Economic Cooperation and Development, made up of 38 rich countries, enables this by failing to require corporations to disclose profit-shifting to tax havens, despite a formal international request to do so. [3]

Some members of Congress and various advocacy groups are working to rein in the American corporatocracy, its power and influence, and the unfair policies that they have produced. For example, the economic justice advocacy organization, Fight Corporate Monopolies, recently released it Corporate Power Agenda, which consists of 19 policy recommendations including: [4]

Strengthening antitrust enforcement to protect small businesses and consumers from monopolization, which has been evident in 75% of U.S. industries over the last 20 years,
Banning stock buybacks, which enrich investors and executives while hurting workers and other stakeholders, and which were an illegal form of market manipulation until 1982,
Reining in private equity and vulture capitalists by passing the Stop Wall Street Looting Act,
Fixing tax laws to ensure that corporations pay their fair share of taxes,
Passing the Protecting the Right to Organize (PRO) Act to support workers’ collective bargaining in the face of the growing power of huge corporate employers,
Outlawing price fixing and price gouging, including passing the Ending Corporate Greed Act and instituting a windfall profits tax,
Blocking employers from requiring employees to sign “non-compete” agreements that prevent many workers, including low-wage workers, from going to work for a competitor,
Closing campaign finance law loopholes that effectively allow Political Action Committees (PACs), funded by wealthy corporations and individuals, to coordinate with candidates’ campaigns, and
Stopping bailouts of huge corporations.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to take on the American corporatocracy, and to rein in corporate power and influence in our economy and politics. Ask them to pass a windfall profits tax and other tax laws to ensure corporations are paying their fair share of taxes and aren’t price gouging consumers. Ask them to make bankruptcy laws fairer so corporate executives don’t get a free pass while individuals have their economic security ruined. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your 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] Kuttner, R., 11/16/22, “Bankman and the bastardization of bankruptcy,” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/bankman-and-the-bastardization-of-bankruptcy/)

[2] Americans for Tax Fairness, retrieved from the Internet 11/19/22, “Congress should raise, not cut, corporate taxes during the lame-duck session,” (https://americansfortaxfairness.org/wp-content/uploads/Lame-Duck-Corporate-Tax-Breaks-Fact-Sheet-1.pdf)

[3] Johnson, J., 11/15/22, “Secrecy enabled by rich countries lets corporations dodge $90 billion in taxes per year,” Common Dreams (https://www.commondreams.org/news/2022/11/15/secrecy-enabled-rich-countries-lets-corporations-dodge-90-billion-taxes-year)

[4] Conley, J., 11/15/22, “Democrats urged to embrace agenda to combat crisis of ‘corporate power’ in US,” Common Dreams (https://www.commondreams.org/news/2022/11/15/democrats-urged-embrace-agenda-combat-crisis-corporate-power-us)

MEDICARE ADVANTAGE IS A PRIVATIZATION FRAUD

Medicare’s open enrollment period occurs each year from mid-October to early December. In this window, private insurers deluge seniors with ads for their privatized versions of Medicare, called Medicare Advantage plans. Rather than allowing more and more seniors to enroll in these slickly marketed for-profit plans, they should be eliminated because they undermine Medicare and our health care system with fraud and other schemes that reduce health care quality while overbilling the federal government. Roughly half of the Medicare population, almost 30 million seniors, are now enrolled in this privatized version of Medicare.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

Medicare was created in 1965 when people over 65 found it virtually impossible to get private health insurance coverage. It made health care a universal right for Americans 65 and over. It improved the health and longevity of older Americans, as well as their financial security. Initially, Medicare consisted solely of a public insurance program that included all seniors.

Today, a mixed public-private health insurance market exists under Medicare. The Medicare-eligible population has been able to enroll in private health insurance plans since the 1980s. The private, for-profit health insurance industry pushed hard for a privatized option under Medicare; they wanted the opportunity to sell insurance to the large, population of seniors. They claimed they could deliver better quality services at lower cost due to their efficiencies, thereby saving Medicare money. However, these promised efficiencies never materialized and it became clear that the private insurers were simply looking for a way to increase their profits. For example, the typical administrative overhead for Medicare Advantage plans, including profits, is around 15% – 20% of premiums paid, while for traditional, government-operated Medicare it’s around 2%. [1] [2]

Medicare Advantage plans should be eliminated for the following four reasons:

They have become very skillful at paying as little as possible for enrollees’ health care services in order to maximize profits for themselves. They attract seniors by offering low or no premiums and special benefits (such as dental or vision coverage, or a subsidized health club or gym membership). However, they typically have high out-of-pocket costs, restrictive networks of providers, and requirements for pre-authorization of services. Through their marketing, they work to attract healthier-than-average enrollees to minimize their costs; this is called cherry-picking. By restricting or denying access to care, they cut costs and often drive sicker enrollees to leave, further lowering their costs; this is referred to as lemon-dropping.
They game the reimbursement system by over-reporting the seriousness or even the number of illnesses or health conditions of their enrollees; this is called “upcoding”. It makes the enrollees appear to be sicker than they are and therefore eligible for more or higher reimbursements from Medicare. For example, knee pain can be reported as arthritis and an episode of distress can be reported as major depression, even if no services are provided for the more serious diagnosis. Efforts by Medicare to police upcoding result in significant administrative costs and a cat and mouse game where the private insurers find new ways to game the system as old ones are brought under control. Multiple studies and investigations have documented rampant, fraudulent upcoding. Estimates of its cost to Medicare range from $10 to $25 billion a year. (This is enough money to pay for adding vision and hearing coverage for everyone eligible for Medicare.) Almost every major insurer has been charged with upcoding fraud by the government or a whistleblower.
They have been very effective at limiting regulation and enforcement by contributing money to members of Congress, spending significantly on lobbying, and using the revolving door to move people back and forth between jobs at the insurance companies and at the government agencies that oversee Medicare. For example, U.S. Representative Richard Neal (D – MA), Chair of the House Ways and Means Committee, which oversees all government spending, has received $3.1 million in campaign contributions from the insurance industry.
Their profit motive inevitably provides perverse incentives to skimp on enrollees’ care and engage in fraud to maximize payments from Medicare. One study found that insurers make twice as much profit on Medicare Advantage plans as they do on other types of insurance. Medicare Advantage was supposed to lower Medicare spending and save the government money; instead, it costs the government substantially more per enrollee than traditional Medicare.

Furthermore, a mixed public-private health insurance system can’t achieve the efficiencies and quality of traditional Medicare because private insurers:

Fragment the pool of insured people undermining the basic theory and efficiency of insuring large groups of diverse individuals,
Have no financial incentive to maintain the long-term health of their enrollees, and
Spend a large portion of premiums on overhead and profits. (See this previous post for more details.)

(Previous posts provide more details on Medicare Advantage and why it can’t work and needs to be eliminated.)

Bills have been introduced in Congress to reduce payments to Medicare Advantage insurers, to increase regulation and oversight, and to end Medicare Advantage (and a related, even more insidious pilot program, called ACO REACH, which puts seniors into privatized plans without their consent or knowledge). Furthermore, a bill has been introduced to ban private insurers from using the term “Medicare” in the titles and ads for their plans. [3] This would reduce confusion for seniors and curb misleading advertising. In particular, this would reduce the confusion between Medicare Advantage plans and Medicare Supplemental Insurance (often called Medigap insurance) that covers health care not covered by traditional Medicare (i.e., it fills “gaps” in Medicare, such as coverage for dental, vision, and hearing care). Medigap insurance is also sold by private insurers and adds coverage on top of Medicare, while a Medicare Advantage plan is a replacement for Medicare.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to eliminate Medicare Advantage because it is a rip off of Medicare and undermines our health care system. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your 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] Rogers, S., 8/25/22, “Comment on Request for Information: Medicare Advantage program,” Physicians for a National Health Program (https://pnhp.org/system/assets/uploads/2022/08/PNHPMedicareAdvantageComment_Aug2022.pdf)

[2] Stancil, K., 10/9/22, “ ‘Straight up fraud’: Data confirms private insurers use Medicare Advantage to steal billions,” Common Dreams (https://www.commondreams.org/news/2022/10/09/straight-fraud-data-confirms-private-insurers-use-medicare-advantage-steal-billions)

[3] Johnson, J., 10/14/22, “New bill would ban private insurance plans from using ‘Medicare’ name,” Common Dreams (https://www.commondreams.org/news/2022/10/14/new-bill-would-ban-private-insurance-plans-using-medicare-name)

WELL-KNOWN COMPANIES ARE SUPPORTING ELECTION DENIERS

My last four posts have been about the record spending by wealthy individuals and corporations in the 2022 elections, its corruption of democracy, and what we can do about it. (See previous posts here and here for some details about the spending and here and here for what we can do about it.) This post focuses on corporations that are giving money to the 147 Republicans in Congress who voted against certifying the 2020 presidential election. In particular, it focuses on those corporations that announced a suspension of contributions to those 147 members of Congress after the January 6, 2021, storming of the Capitol, but have now resumed supporting them.

(Note: If you find my posts too much to read on occasion, please just read the bolded portions. They present the key points I’m making.)

For an overall perspective on the huge amounts of money being spent on the election, Open Secrets now projects that spending on the 2022 federal and state elections will set a record and will exceed $16.7 billion. Spending on federal races is projected to be $8.9 billion and has already surpassed the 2018 record for a mid-term election of $7.1 billion (adjusted for inflation). Federal election spending in non-presidential years has increased from almost $5 billion in 2014 to over $7 billion in 2018 (up 48%) and to a projected nearly $9 billion in 2022 (up 25%). (Prior year figures are adjusted for inflation.) [1]

Spending on state elections, including ballot questions, is projected to be $7.8 billion, which would exceed the 2018 record of $6.6 billion. State election spending has increased from $4.6 billion in 2014 to roughly $7.0 billion in 2018 (up 52%) and to a projected $7.8 billion in 2022 (up 11%). (Prior year figures are adjusted for inflation.)

At least 228 of the Fortune 500 largest American companies have made contributions totaling over $13 million to Republicans that voted against accepting the 2020 presidential election results. (Millions of dollars in companies’ contributions to Republican Party committees are NOT included in this figure. Much of the spending of these committees is going to the 147 election-denying members of Congress.)

In the immediate aftermath of the Jan. 6 insurrection, many of these companies condemned the attack and the violence, and stopped making political contributions to the 147 members of Congress who voted against the peaceful transfer of power. This was good public relations for them. Furthermore, these big companies depend on the stability of the country, its political system, and its economy to successfully operate.

However, at least 228 of these companies have now quietly gone back to giving money to the 147 election results deniers. Note that they resumed giving to these members of Congress before their next election. Therefore, there was NO meaningful impact from their short-lived suspensions of contributions on the re-election fundraising of the election deniers. [2]

Home Depot suspended political contributions after Jan. 6 but a year later resumed making them. It has now made 100 contributions totaling $475,000 to 65 of the 147 election deniers. This makes it the biggest corporate donor for direct contributions to election deniers and represents 12% of Home Depot’s direct donations to candidates. [3]

Boeing stated in Jan. 2021 that it “strongly condemns the violence, lawlessness and destruction” of the Jan. 6 insurrection. It promised to ensure that the politicians it supported would “uphold our country’s most fundamental principles.” However, since then, it has supported 74 of the 147 election deniers with 314 contributions totaling at least $390,000 (which is 14% of its giving).

Other companies that announced a suspension of political giving after Jan. 6 but have now given to election deniers include AT&T ($389,900 in 127 contributions), United Parcel Service ($385,500 in 155 contributions), Lockheed Martin ($366,000 to 90 deniers), Raytheon ($309,000 to 66 deniers), and Northrop Grumman ($175,000 to 26 deniers).

General Dynamics has donated over $324,000 to 67 election deniers despite the fact that a recent investor report stated: “Our employee PAC will not support members of Congress who provoke or incite violence or similar unlawful conduct.” However, it seems clear that denying the validity of the 2020 presidential election has indeed incited a range of violence and unlawful conduct.

After Jan. 6, Amazon announced in a strongly worded statement that it would stop contributing to members of Congress who voted not to certify the election results because their actions represented an “unacceptable attempt to undermine a legitimate democratic process.” Nonetheless, in September 2022, its PAC gave $17,500 to nine of the election deniers. [4]

General Electric (GE) issued a particularly strong statement after Jan. 6 stating its “commitment to democracy” and suspending donations to the 147 election deniers. Nonetheless, GE has now made contributions totaling $12,500 to eleven deniers, saying it is considering “individual exceptions [to its suspension of donations] on a case-by-case basis.” Not coincidentally, all eleven of them sit on congressional committees of importance to GE: defense and energy spending, transportation and infrastructure spending, and taxation. By the way, to give you a sense of the amounts companies are donating to election deniers, this $12,500 dollar amount ranks GE as tied for 145^th on the ProPublica list of companies donating to election deniers.

I urge you to boycott or reduce your business with these companies and the others in the ProPublica list. I also urge you to contact them (e.g., their Chief Executive Officer or their corporate communications office) to let them know you disapprove of their support for election deniers and the undermining of democracy that it fosters.

[1] Giorno, T., & Quist, P., 11/3/22, “Total cost of 2022 state and federal elections projected to exceed $16.7 billion,” Open Secrets (https://www.opensecrets.org/news/2022/11/total-cost-of-2022-state-and-federal-elections-projected-to-exceed-16-7-billion/)

[2] MacGillis, A., & Hernandez, S., 11/1/22, “What Fortune 500 companies said after Jan. 6 vs. what they did,” ProPublica (https://www.propublica.org/article/companies-funding-election-deniers-after-january-6)

[3] Hernandez, S., & Lash, N., 11/4/22, “Fortune 500 companies have given millions to election deniers since Jan. 6,” ProPublica (https://projects.propublica.org/fortune-500-company-election-deniers-jan-6/)

[4] Legum, J., 10/26/22, “Amazon puts January 6 in the rearview mirror: ‘It’s been more than 21 months’,” Popular Information (https://popular.info/p/amazon-puts-january-6-in-the-rearview)

WEALTH IS CORRUPTING OUR POLITICAL SYSTEM LIKE NEVER BEFORE

Wealthy individuals and corporations are buying and corrupting our candidates for public office and our policy making processes like never before. Congressional races, state ballot questions, and possible 2024 presidential candidates are all raising record amounts of money. (See this previous post for some details.) This is bad for democracy.

Most of this record amount of money is spent on advertising and much of that is negative advertising, i.e., attacking, undermining, discrediting, and demeaning the opposing candidate, even lying about them. One effect of all the negative ads is that they tend to depress turnout (e.g., why bother to vote for the better of the flawed candidates) and to undermine faith in our elected officials and the government. This undermines democracy and citizens’ belief in democracy.

Of particular concern, is that a big chunk of the huge amount of money being spent on our elections is coming from a relatively few individuals and corporations. A few dozen billionaires will spend over $100 million on the 2022 elections. They and the corporations they are connected with want policies that will reduce their taxes and provide other benefits to them. The 2017 tax cut bill was very directly the result of these big donors telling Trump and Republicans in Congress that they wanted a big tax cut or their donations to 2018 campaigns would be significantly curtailed. This quid pro quo is corrupt; it’s a kickback scheme.

Twenty-seven billionaires have given $89 million to the two Republican congressional super PACs, nearly 50% or half of the money they’ve raised for the 2022 elections. A few have given $20 million or more. Nineteen billionaires have given $26 million to the two parallel Democratic PACs, which is 17% of the money they have raised. For both parties, the bulk of the money came from people in the finance and investment business. These billionaires are also engaged in other political spending. For example, Peter Thiel, the billionaire co-founder of PayPal, who is openly anti-democracy and anti-government, has spent $15 million helping J. D. Vance win the Republican Senate primary in Ohio and $13.5 million helping Blake Masters win his Arizona Senate primary. [1] [2]

Back in the 2020 elections, billionaires collectively spent $1.2 billion, which was roughly one-tenth of all spending, despite being only 0.01% of all donors contributing over $200 (i.e., 1 out of every 10,000 donors). In 2020, the billionaires spent 40 times what they spent in 2010, due to the Supreme Court’s Citizens United and other decisions that now allow unlimited spending in our supposedly democratic elections. The political spending and influence of the billionaires has been growing election after election.

Large amounts of corporate money are also flowing into political campaigns, often through intermediary groups that make it hard to trace the connection between specific donors and specific recipients. Therefore, it is hard to hold the corporations accountable for the policies of the candidates they’re supporting. For example, eight corporations, who publicly committed to covering travel expenses for employees who needed to travel to obtain reproductive care, nonetheless have, since 2018, given almost $8 million to three Republican groups that have helped elected Governors, Attorneys General, and legislators who have worked to restrict abortion rights. The corporations are: Pfizer ($3 million), Comcast ($2.2 million), Microsoft, Citigroup, Uber, and Bank of America (between $800,000 and $400,000), and lesser amounts from Lyft and Yelp. [3]

Fifteen corporations, who publicly committed to covering travel expenses for employees who needed to travel to obtain reproductive care, nonetheless have political action committees that have given $2 million to members of Congress who voted against the Women’s Health Protection Act, which would have protected access to reproductive care. The top givers (between $501,000 and $113,000) are PricewaterhouseCoopers, Google, Microsoft, Wells Fargo, Johnson & Johnson, JPMorgan Chase, and Meta (Facebook’s parent corporation).

Frequently, these large donors, individuals and corporations, make significant efforts to avoid being identified and linked to the candidates they’re supporting. For example, the Conservative Americans Political Action Committee (PAC) filed its statement of organization with the Federal Election Commission on July 11. Then, between July 19^th and 24^th, it spent $2.4 million in Republican U.S. House primary races in Missouri, Tennessee, and Arizona. Because of its late registration, it’s not required to disclose its donors until August 20, weeks after the voting in the primary elections it was working to influence. [4] Therefore, voters didn’t know who was trying to influence their votes.

An insidious strategy that is seeing increased use is the spending of large sums of money by Political Action Committees (PACs) and other political groups aligned with one party in the other party’s primaries. Democratic-aligned groups have spent nearly $44 million in Republican primaries for congressional seats and governorships. They are promoting more radical candidates that Democrats think will be easier to beat in the final election. Some of the downsides of this strategy are that it doesn’t always work, that it diverts funds from Democratic candidates, and that it promotes divisive, fringe positions. [5] Similarly, the American Israel Public Affairs Committee (AIPAC) and its super PAC, heavily funded by Republican donors and the endorser of over 100 Republican candidates who are 2020 election deniers, is spending roughly $20 million in Democratic primaries. It is opposing progressive Democratic candidates and supporting more conservative alternatives.

The amount of outside money in primaries, particularly across party lines, is very unusual if not unprecedented. Given the low voter turnout in primaries for congressional seats, a few million dollars can have a significant effect on the outcome. [6]

In conclusion, the large amount of money being spent on campaigns in supposedly democratic elections is corrupting. When candidates receive large sums of money, it changes who they meet with, who they listen to, and how they weigh competing interests when making decisions on how to vote on legislation once they’re in office. It changes which issues get addressed and what legislation gets written. It means politicians have strong incentives to act in support of their wealthy donors rather than in support of the average Americans who are, nominally, their constituents. This is corruption – money given to candidates’ campaigns changes their behavior when they’re in office.

For example, Senator Joe Manchin (D-WV) refused, along with Senator Kyrsten Sinema (D-AZ) and all the Republicans in the Senate, to increase taxes on wealthy individuals and corporations as part of the recently passed Inflation Reduction Act, despite strong support for this among the public. [7] The obvious explanation for these Senators’ refusal is that they were being responsive to their wealthy donors rather than to the constituents who voted for them. (More detail on Sinema’s unusually blatant apparent quid pro quo corruption is here.)

Among other things, this means that economic inequality is likely to continue to increase in the U.S. It also means that wealthy campaign donors will have even more money to invest in future campaigns – and it is an investment, because favorable tax and other laws put far more money in their pockets than they spend on their campaign contributions, as the Senator Sinema examples makes clear. This is, in effect, a corrupt kickback scheme.

Furthermore, the exorbitant cost of a congressional campaign changes who runs for these seats. Given that in a contested race you need a minimum of $10 million to run a US Senate campaign or $2 million for a House race, who can afford to run is extremely skewed – it’s not your average citizen! This gives incumbents a huge advantage, as it often means that no one runs against them. As a result, Members of Congress are currently older than they’ve ever been with 23% of members over 70, up from 16% in 2012 and 8% in 2002. [8]

My next post will describe steps to rein in the harmful effects of current campaign spending.

[1] Stancil, K., 7/18/22, “Just 27 billionaires have spent $90 million to buy GOP Congress: Report,” Common Dreams (https://www.commondreams.org/news/2022/07/18/just-27-billionaires-have-spent-90-million-buy-gop-congress-report)

[2] Rice, W., Tashman, Z., & Clemente, F., July 2022, “Billionaires buying elections,” Americans for Tax Fairness (https://americansfortaxfairness.org/issue/report-billionaires-buying-elections/)

[3] Datta, S., 8/2/22, “Corporate donations to GOP political groups boosted candidates behind anti-abortion rights laws in states,” Open Secrets (https://www.opensecrets.org/news/2022/08/corporate-donations-to-gop-political-groups-boosted-candidates-behind-anti-abortion-rights-laws-in-the-states/)

[4] Giorno, T., 8/3/22, “ ‘Pop-up super PAC spent over $2.4 million in weeks leading up to three states’ GOP congressional primaries,” Open Secrets (https://www.opensecrets.org/news/2022/08/pop-up-super-pac-spent-over-2-4-million-in-three-states-gop-congressional-primaries-in-three-weeks/)

[5] McCarty, D., 7/15/22, “Democrats spend millions on Republican primaries,” Open Secrets (https://www.opensecrets.org/news/2022/07/democrats-spend-millions-on-republican-primaries/)

[6] Sammon, A., 7/14/22, “AIPAC has taken over the Democratic primary process,” The American Prospect (https://prospect.org/politics/aipac-has-taken-over-the-democratic-primary-process/)

[7] Dusseault, D., & Lord, B., 7/19/22, “Joe Manchin just proved why we need the OLIGARCH Act,” Common Dreams and the Patriotic Millionaires Blog (https://www.commondreams.org/views/2022/07/19/joe-manchin-just-proved-why-we-need-oligarch-act)

[8] Giorno, T., 9/15/22, “Gen Z candidate Karoline Leavitt outraised ‘establishment’ candidate in lead-up to her win in New Hampshire’s GOP House primary,” Open Secrets (https://www.opensecrets.org/news/2022/09/gen-z-candidate-karoline-leavitt-outraised-establishment-candidate-in-lead-up-to-her-win-in-new-hampshires-gop-senate-primary/)

WHY RAILROAD WORKERS WERE THREATENING TO STRIKE

As you’ve probably heard, railroad workers were threatening to strike and may still do so if they don’t feel the tentative agreement is good enough. What you probably haven’t heard much about is why they were threatening to strike.

The railroad corporations, through consolidation, deregulation, and practicing extreme capitalism, have gain so much power that they have been making life miserable for their employees. They have also been a major contributor to the supply chain problems in the post-Covid period and to the high levels of inflation. One of the reasons it was so important for the Biden Administration to step in and negotiate a proposed settlement was that a strike would have further disrupted continuing supply chain problems and exacerbated inflation.

Since 1980, through mergers and acquisitions (that our government has failed to stop under antitrust laws), the 40 major railroad corporations have become six (Burlington Northern and Santa Fe [BNSF], Union Pacific, CSX, Canadian National, Norfolk Southern, and Canadian Pacific,) and four of them have roughly 85% of the freight business. [1]

Because the railroad corporations are focused in different areas, they operate with monopolistic power in much of their service territories. In 2012, 78% of train stations had service from only one railroad. This allows the railroad corporations to engage in the extreme capitalism that is running rampant in the U.S., generating huge profits by price gouging and aggressively squeezing labor and other costs. They have aggressively reduced surge capacity and redundancy to minimize costs, which have contributed to the bottlenecks and fragility in supply chains.

Deregulation has allowed the railroads to shed their obligations to serve the public, which were put in place after the robber barons of the late 19^th century made fortunes from their railroads while running roughshod over the public interest. The railroads have dropped unprofitable routes leaving many small towns cutoff from efficient freight shipping. As a result, from 1980 to 2008, railroads reduced their miles of track by over 40%. Railroads are no longer required to treat similarly situated shippers equally; they can now cut special deals with big shippers putting small businesses at a disadvantage. Like the airlines, the railroads are increasing fees on customers, which some feel is a form of price gouging. In the third quarter of 2021, the railroads had doubled their fee revenue since the beginning of 2019 to about $800 million.

The profit margin in the industry (the percentage of revenue that is profit) soared from 15% in 2001 to 40% in 2021. In other words, for every $100 that the corporations received, $40 is now profit as opposed to $15 ten years ago. A big part of this increased profitability, is that the portion of revenue dedicated to paying employees has dropped from 34% to 20%, or, in other words, from $34 of every $100 or revenue to $20. [2] In 2019, the freight railroad industry was the most profitable industry in the country with a 51% profit margin. [3] As evidence of the high profitability of the railroad industry, all but one of the publicly traded railroad stocks outperformed the overall stock market over the ten-year period from 2011 to 2021. Union Pacific had the second-highest total return in the market over that period, rewarding its investors with an almost six-fold return, roughly a 20% gain each year.

These record profits are, for the most part, NOT being reinvested in the businesses but are being use to reward shareholders (including executives) through the buying of the corporations’ own stock and paying dividends. For the industry as a whole, these stock buybacks and dividends have totaled over $200 billion since 2010, averaging over $15 billion per year, and they are continuing. For example: [4]

Union Pacific: $5 billion in stock buybacks and dividends in the first half of 2022 from $22 billion in revenue and $6.5 billion in profits in 2021.
CSX: $3 billion in stock buybacks and dividends in the first half of 2022 from $12.5 billion in revenue and $3.8 billion in profits in 2021.
Canadian National: $2.3 billion in stock buybacks and dividends in the first half of 2022 from $11.5 billion in revenue and $3.9 billion in profits in 2021.

The railroad corporations have cut staff by one-third since 2016 and over 70% since 1980 as total employment in the railroad industry has dropped from 500,000 to under 135,000. This reduced workforce is generating more profits than ever for their employers but haven’t gotten a wage increase in over two years as their contract negotiations have dragged on and on. Train crews used to be five people but today are two. The corporations have even proposed reducing the number of engineers on a train from two to one, despite what would happen if a single engineer on a long freight train had a medical emergency with no one else onboard. This would be like having an airplane with no co-pilot.

Many have called the working conditions at the railroads inhumane. Workers’ schedules are often unpredictable. They do not have paid sick days or other leave. They are penalized if they take a day off to go to the doctor or deal with a medical need. The railroads are so thinly staffed that they can’t allow employees any flexibility and need to have them on-call at all times to keep the trains running.

The safety of the workers and the communities the trains run through is being compromised; in the rush to get more done with fewer workers safety inspections are being neglected. Since 2012, the rates of accidents, equipment defects, and safety incidents have climbed; there have been more fatalities even though the number of miles trains are running has dropped roughly 40%.

The new proposed contract, which involves 12 unions representing 115,000 workers, would:

Allow workers to take days off for medical care without being penalized, but only one of those days would be paid. (Union leaders had initially asked for 15 days of paid sick leave.)
Increase pay by 24% over five years, going back to 2020 when the last contract expired, bringing the average workers’ pay to $110,000 in 2024.
Provide more worker-friendly work schedules.
Keep workers’ health care premiums at current levels.

Union members will vote over the next couple of weeks on whether to accept the proposed contract. [5]

The railroads are a textbook example of the extreme capitalism our current laws allow. Corporations generate very large profits for shareholders (including executives) while workers get squeezed hard. Amazon and Walmart are other examples that jump to mind. Fortunately, the railroad workers are in a union so they have some power to fight back.

[1] Buck, M. J., 2/4/22, “How America’s supply chains got railroaded,” The American Prospect (https://prospect.org/economy/how-americas-supply-chains-got-railroaded/)

[2] Gardner, E., 9/13/22, “Rail strike by the numbers: Railroad profits are soaring at workers’ expense,” More Perfect Union (https://perfectunion.us/rail-profits-soaring-at-workers-expense/)

[3] Buck, M. J., 2/4/22, see above

[4] Stancil, K., 9/19/22, “While fighting workers, railroads made over $10 billion in stock buybacks,” Common Dreams (https://www.commondreams.org/news/2022/09/19/while-fighting-workers-railroads-made-over-10-billion-stock-buybacks)

[5] Gurley, L. K., & Stein, J., 9/15/22, “Biden scores deal on rail strike, but worker discontent emerges,” The Washington Post

FEDERAL LEGISLATION NEEDED TO PROTECT CHILDREN ON SOCIAL MEDIA

The harm that social media can do to children and youth is well documented. (See this previous post for more detail.) Clearly, the social media platforms are not going to do what’s necessary to keep our kids safe online on their own. No significant relevant federal legislation has been passed since the 1998 Children’s Online Privacy Protection Act (COPPA). A lot has changed since then and new federal legislation is needed.

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

Europe has done a better job than the U.S. of protecting everyone’s privacy and well-being on social media, including that of children. Its General Data Protection Regulation (GDPR) is four years old and provides greater protections than U.S. laws. Meta (formerly Facebook) was recently fined $400 million because its Instagram subsidiary violated European regulations on the protection of children’s data. [1]

The social media platforms’ business model is to hook kids at a young age, amass extensive personal information about them and their online and consumer behavior, and then use these to engage in lucrative (for them) marketing to the kids in ways that too often promote toxic content and harm kids’ well-being and mental health. [2]

Two pieces of relevant federal legislation are being considered in the U.S. Senate:

Kids Online Safety Act (KOSA, Senate bill 3663) and
Children and Teens’ Online Privacy Protection Act (COPPA 2.0, Senate bill 1628)

These bills seek to provide privacy protections for children and youth, limit individually targeted advertising (referred to as surveillance advertising), and require the social media platforms to put the interests of young people first. For example, KOSA would:

Provide families with the tools and safeguards to protect children’s well-being and health,
Require transparency from the social media platforms about the data they are capturing and the algorithms they are using for promoting content and advertising, and
Establish accountability for harms caused by social media.

COPPA 2.0 would, for example:

Extend to 13 to 16-year-olds the prohibition on social media platforms capturing children’s personal information without their consent and require the platforms to delete any such information they collect if requested to do so,
Ban individually targeted marketing to children,
Establish a “Digital Marketing Bill of Rights for Minors,” and
Create a Youth Privacy and Marketing Division at the Federal Trade Commission (FTC) to monitor and regulate data privacy for and marketing to minors.

Some concerns have been raised, particularly about KOSA. Some privacy advocates have raised concerns that it would allow parents to spy on and control children’s activities online. They worry about unsupportive parents spying on LGBTQ+ youth. They worry that politicians could force the social media platforms to block information on topics the politicians dislike, such as abortion information. And they worry that the social media platforms will block broad arenas of information to avoid liability for possible harm to children.

Trying to regulate social media platforms to keep children safe is complicated, but it’s clear that steps need to be taken to reduce the significant harm that’s occurring. The first laws and sets of regulations won’t be perfect, but we need to act. Then, we can figure out what is and isn’t working and make improvements.

I encourage you to contact your Representative and Senators in Congress and to tell them you support regulation of the social media platforms to prevent them from harming our children and youth. Urge them to support the Kids Online Safety Act (KOSA, Senate bill 3663) and the Children and Teens’ Online Privacy and Protection Act (COPPA 2.0, Senate bill 1628).

If you’re interested, you can sign-up here for an online information session and Rally for Kids’ Online Safety next Tuesday, September 13, from 6:30 – 7:00 p.m. eastern time. You’ll learn more about how you can support the Kids Online Safety Act (KOSA) and the Children and Teens’ Online Privacy Protection Act (COPPA 2.0). Senators Ed Markey and Richard Blumenthal will discuss how these bills would revolutionize social media platforms’ treatment of kids and teens, requiring them to put young users’ wellbeing ahead of their profits. If passed, the bills would ban surveillance advertising to minors, extend privacy protections to teens, and set the stage for a safer internet for children and youth. They would also hold the platforms accountable for exploiting kids’ vulnerabilities. Advocates, including Fairplay and members of its Screen Time Action Network, will discuss how you can take action to help get these bills passed.

[1] Business Talking Points, 9/6/22, “Instagram fined over protection of teenagers’ information,” The Boston Globe from the New York Times

[2] Corbett, J., 7/27/22. “ ‘Critical’ online privacy protections for children advance to Senate floor,” Common Dreams (https://www.commondreams.org/news/2022/07/27/critical-online-privacy-protections-children-advance-senate-floor-vote)

CORPORATE SUPPORT FOR SEDITION CAUCUS DESPITE ANTI-DEMOCRACY ACTION

Corporations value having political power and influence to the point that they seem to care little about politicians’ ethics or actions on issues other than those that directly affect their corporate interests. Furthermore, they don’t seem to recognize that customers and employees care about the ethics and political activity of the corporations they do business with or work for.

Immediately after the January 6, 2021 insurrection at the U.S. Capitol, 248 corporations and corporate business organizations voiced support for democracy, condemned the insurrection, and suspended contributions to the 147 members of Congress who voted to overturn the 2020 election by rejecting the Electoral College results. These 139 Republican U.S. Representatives and 8 Republican U.S. Senators have been labeled the “Sedition Caucus” because they voted against the peaceful, democratic transition to a new, duly-elected President.

However, over 100 corporations and industry groups out of the 248 that suspended contributions to the Sedition Caucus have resumed supporting them. (See this previous post for more details.) Corporate business organizations and the political action committees of Fortune 500 companies have donated $21.5 million to them in the 19 months after January 6^th. [1]

Furthermore, the hearings of the House Select Committee to Investigate the January 6th Attack on the U.S. Capitol and the alarming details it has presented of a serious coup attempt, have not slowed the corporate contributions to the Sedition Caucus. In June 2022, its members received over $800,000 from corporate interests. [2] These corporations claim to support democracy but apparently value political influence more than they value democracy.

Members of the Sedition Caucus, aided by corporate support, have raised huge amounts of money for their campaigns. For example, in the first nine months of 2021: [3]

Senator John Kennedy (R-LA) raised over $14 million,
Kevin McCarthy (R-CA) raised over $9 million,
Steve Scalise (R-LA) raised $7.4 million,
Marjorie Taylor Greene (R-GA) raised over $6 million,
Jim Jordan (R-OH) raised over $5 million, and
Matt Gaetz (R-FL) raised over $3.5 million.

Many corporations try to avoid a direct link to Sedition Caucus members by letting industry groups they belong to and support financially make these political contributions. For example, top contributors to Sedition Caucus members have been the political action committees (PACs) of the American Bankers Association, the National Beer Wholesalers Association, and the National Auto Dealers Association.

Corporations whose own PACs have been big contributors to Sedition Caucus members include Home Depot, Verizon, Boeing, Charter Communications, Eli Lilly, Cigna, Northwestern Mutual, Pfizer, State Farm Insurance, Chevron, AutoZone, and Procter & Gamble.

I encourage you to let these corporations know, as a customer, employee, or citizen, that their support for members of the Sedition Caucus does not sit well with you. Boycott them if that makes sense for you and, if possible, let them know you’re doing so.

[1] Johnson, J., 7/26/22, “Corporate interests have given $21.5 million to GOP ‘Sedition Caucus’ since Jan. 6 attack,” Common Dreams (https://www.commondreams.org/news/2022/07/26/corporate-interests-have-given-215-million-gop-sedition-caucus-jan-6-attack)

[2] Accountable.US, 7/25/22, “June 2022: Fortune 500 companies and corporate trade groups contributed at least $819,980 to the Sedition Caucus,” (https://accountable.us/wp-content/uploads/2022/07/2022-07-21-June-Sedition-Caucus-Report.pdf)

[3] Holzberg, M, 1/4/22, “Election objectors are among the GOP’s highest fundraisers ahead of Jan. 6 anniversary,” Open Secrets (https://www.opensecrets.org/news/2022/01/election-objectors-among-gops-highest-fundraisers-ahead-of-jan-6-anniversary)

CORRUPT CAPITALISTIC BEHAVIOR Part 6

Here are five examples of corporate corruption from the meat industry and from global consulting, accounting and auditing firms. The pervasiveness and repetitiveness of business scandals is astounding; they are reported on a daily basis. The varied examples below document a breadth of greed-driven corruption that puts lives in danger, rips off workers, and puts governments and companies at financial risk. The extreme capitalism and wealth allowed by current U.S. laws seem to have resulted in greed rising to new heights and ethics falling to new lows. (This previous post documented corporate price gouging and this previous post highlighted eight examples of corrupt capitalistic behavior. Other posts have highlight corporate corruption as well.)

An underlying theme of corporate corruption is the loss of robust competition in the marketplace due to the emergence of a handful of huge, monopolistic corporations in many industries. This has occurred largely through mergers and acquisitions that have occurred due to little or no enforcement (until very recently) of antitrust laws.

The Four Huge Meatpackers (Cargill, JBS, Tyson Foods, and National Beef Packing Co.): In addition to the House Select Committee to Investigate the January 6th Attack on the U.S. Capitol, there’s a House Select Subcommittee on the Coronavirus Crisis that is investigating waste, fraud, and other issues with the federal government’s response to the Covid coronavirus. One of their findings is that the four huge beef and pork meatpacking corporations (which control over 70% of the market for beef), got the Trump Administration to issue a fraudulent executive order during the Covid pandemic declaring a meat shortage, invoking the Defense Production Act, and requiring the meat packing plants to remain open and operating despite unhealthy working conditions. The meatpackers wanted the federal government to overrule state and local public health officials who were trying to protect workers. However, there wasn’t any shortage; pork exports, for example, were at an all-time high, as were the meatpackers’ profits. [1]

The executive order was drafted by industry leaders. It also gave the industry protection from liability for workers who got Covid on the job. It’s estimated that 59,000 meat plant workers got Covid (and that there were 275,000 linked cases) causing over 250 workers to die and over $11 billion in economic harm.

Most recently, JBS agreed to pay $13 million to settle a pork price fixing lawsuit. A smaller company, Smithfield Foods ($14 billion in annual revenue), agreed to pay $125 million to settle two lawsuits over pork price fixing. [2] (See this previous post for information about beef price fixing by the big meatpackers and this post about the failure of the federal government to protect workers.)

Cargill and other Poultry Producers: The Department of Justice recently announced a lawsuit against some of the largest poultry producers alleging a long-term conspiracy to reduce workers’ wages and benefits by sharing compensation information. Cargill (one of the big four meat packers) and three smaller companies account for the hiring of about 90% of the chicken processing workers in the country. The lawsuit asks for $85 million in restitution for workers who were under-compensated as a result of the conspiracy. The lawsuit also charges that the companies treated contracted chicken farmers unfairly. [3]

Abbott and the other Infant Formula Makers: Four corporations sell 89% of all the baby formula sold in the U.S. They have lobbied long and hard to have monopolistic power by limiting imports and by discouraging promotion of breastfeeding internationally. Their behavior raises concerns that they are limiting supply and price gouging to maximize profits. The current and recently severe shortages of baby formula were most directly caused by the recall of tainted formula (Similac made by Abbott, one of the four big suppliers) and the shutting down of the large facility where it’s made because of bacterial contamination. In October, 2021, a whistleblower had warned that conditions at the Similac-making plant were substandard and that Abbott had falsified records and hidden information from regulators at the Food and Drug Administration (FDA). Four months later, after an investigation, the FDA ordered the Similac recall and shut the plant down, which created major shortages. Note that Abbott had been so profitable that in late 2019 it announced it was spending $3 billion of profits to buy up its own stock to boost the stock price, which rewards wealthy shareholders and executives. [4] [5]

Bain & Co., international consultants: The British government has banned Bain & Co., the Boston-based international consulting company, from bidding for government contracts for three years because it is “guilty of grave professional misconduct which renders its integrity questionable.” Bain was found to have been involved in corruption in South Africa by a South African judicial commission. Bain has said that its 2018 work for the South African Revenue Service was a “serious failure” and has returned its fees but has denied corruption. The government estimates the scandal cost the country $30 billion. Consulting giant McKinsey & Co. and a Swiss firm have also returned their fees related to the scandal. KPMG LLP, one of the big four accounting and auditing firms, and a German company have also been involved in scandals in South Africa in this timeframe. [6]

Ernst & Young and KPMG, accountants and auditors: Since 2017, Ernst & Young, one of the big four accounting and auditing firms (which vouch for the accuracy and honesty of other companies’ financial statements), has facilitated cheating on the ethics tests taken by hundreds of its employees. The employees were required to pass the test to get their professional licenses as auditors. Furthermore, the company withheld evidence of the misconduct from federal investigators. Ernst & Young will pay a $100 million fine, the largest ever imposed on an accounting and auditing firm. However, given its $40 billion in annual revenue, this fine of one-quarter of one percent of yearly revenue probably doesn’t hurt too much. By the way, Ernst & Young is a repeat offender; from 2012 to 2015, over 200 employees had cheated on exams, taking advantage of a software glitch in the company’s testing system. KPMG, another of the big four accounting and auditing firms, paid $50 million in 2019 for its cheating scandal. [7]

[1] Cox Richardson, H., 5/12/22, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/may-12-2022)

[2] Associated Press, 7/6/22, “Smithfield Foods settles lawsuit over pork prices,” In Business Talking Points in The Boston Globe

[3] Balsamo, M., 7/25/22, “Poultry producers sued over workers,” The Boston Globe from the Associated Press

[4] Dayen, D., 5/10/22, “Monopolies and the baby formula shortage,” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/monopolies-and-the-baby-formula-shortage/)

[5] Cox Richardson, H., 5/12/22, see above

[6] Fletcher, O., & Cele, S., 8/4/22, “UK ban on Bain sets key precedent, lawmaker says,” The Boston Globe from Bloomberg News

[7] Newmyer, T., 6/29/22, “Ernst fined $100m over cheating on ethics exam,” The Boston Globe from the Washington Post

CORPORATE PROFITS, “INFLATION,” AND THE FEDERAL RESERVE

Soaring profits at the big oil and gas companies are again making headlines. Combined, Shell, Exxon, and Chevron reported $41 billion in profits for the second quarter of 2022 – record setting figures. Profits in the oil and gas industry are up 235% from a year ago. Meanwhile, almost half of the increase in “inflation” over the past few months has been due to soaring gasoline prices.

The companies’ executives indicated that they plan to spend those profits on buying up their own stock (on top of $19 billion already spent on buybacks this year). This enriches shareholders and executives. The executives do NOT plan to reinvest those profits in their companies, for example to expand production or refinery capacity, or invest in modernization, research, and development. This underscores that these record profits from record high gasoline prices are price gouging and a huge transfer of money from the pockets of working Americans to the wealth of rich shareholders and corporate executives. [1] The oil and gas companies did used some of their huge profits – $200 million last year – to influence policy makers in Washington, D.C.

Price hikes and price gouging are not occurring just in the oil and gas industry, however. Overall, U.S. corporate profits are at their highest level since the 1950s. Markups – the difference between the actual cost of producing a good or delivering a service and the price charged the consumer – are at the highest level on record and saw their largest year-to-year increase in 2021. As a result, as U.S. companies increased their prices, their profit margins jumped from an average of 5.5% from 1960 to 1980, to 9.5% in 2021. [2] (See this previous post for more evidence that much of the current “inflation” is price gouging.)

All of these price hikes have created the highest “inflation” in 40 years. The primary measure of inflation that the Federal Reserve uses, the personal consumption expenditures (PCE) price index, was up 6.8% over prices a year ago. Excluding typically volatile food and energy, the so-called core PCE, was up 4.8% over the last year.

The Federal Reserve likes to see inflation at 2% and historically has used interest rate increases to slow down the economy and reduce inflation. This approach works by slowing consumer buying and business expansion by increasing the cost to borrow money for these purposes. This slows business growth and therefore the need for employees. This increases unemployment and reduces wage increases needed to hire or keep employees. This reduces businesses’ labor costs and their need to increase prices to pay their workers. Hence, price increases, i.e., inflation, are reduced.

The Federal Reserve has increased its key interest rates (which is what it charges financial institutions) by a hefty 1.5% over the last two months, from a range of 0.75% – 1.0% to 2.25% – 2.5%. This is the most aggressive increase in rates in 30 years. There are already signs that economic growth, gasoline price increases, and wage increases have slowed. The economy overall actually shrank a bit in each of the last two three-month periods.

Many economists are worried that the Federal Reserve is raising interest rates too aggressively and that a recession will be the result. Our economy is in an historically uncharted situation. The Covid pandemic has resulted in unprecedented changes in the global economy, in work and the workforce, and in supply chains. On top of this, climate change is affecting food production and natural disasters (from droughts to wildfires to storms) in ways not previously seen. And the war in the Ukraine is disrupting the global economy, especially supplies of and prices for food and fossil fuels, in ways never experienced before. [3] Finally, the widespread presence of huge, monopolistic corporations with the power to increase prices and profits has not been seen for 100 years. [4]

All of this suggests that the Federal Reserve’s effort to fight inflation with interest rate increases is not likely to work as it has in the past. Interest rate increases are not effective in controlling the drivers of today’s inflation. Federal Reserve Chairman Powell was asked by Senator Warren at a recent congressional hearing if he thought interest rate increases would bring down food and gas costs and he replied, “ I would not think so, no.” [5]

A recession, if the Federal Reserve triggers one, would increase unemployment and disproportionately hurt lower-wage employees and workers of color. It would also negatively affect the world economy and have major impacts on poor countries globally.

President Biden has appealed to oil and gas company executives and foreign leaders to increase production and reduce prices. They have refused. So, what’s needed to rein in inflation, curb corporate price gouging, and help consumers deal with high inflation is a windfall profits tax, as was done in 1980. A tax on excessive profits would make price gouging less attractive to companies and provide the government with revenue that could be used to assist families suffering from the effects of inflation and to invest in the transition from fossil fuels.

Multiple countries have already implemented windfall profits taxes. Britain’s Conservative government has implemented a 25% windfall profits tax on oil and gas companies. It will use the $19 billion in revenue generated to support low-income households struggling due to inflation. Italy raised its 10% windfall profits tax to 25% and will use the revenue to subsidize households’ energy costs. Spain implemented a windfall profits tax back in September 2021; Romania and Bulgaria have windfall profits taxes. All of them are using the revenue to provide inflation relief to working people. (See this previous post for more on tackling inflation and its effects.)

Bills in Congress would put a windfall profits tax on oil and gas companies. Senator Bernie Sanders has introduced legislation that would put such a tax on a broader range of companies. [6] Eighty percent (80%) of U.S. voters support a windfall profits tax. [7]

I encourage to you contact President Biden and your Representative and Senators in Congress. Tell them you support a windfall profits tax on companies that are price gouging, like the big oil and gas companies. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your U.S. Representative at http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1] Corbett, J., 7/29/22, “Price gouging at the pump results in 235% profit jump for big oil: Analysis,” Common Dreams (https://www.commondreams.org/news/2022/07/29/price-gouging-pump-results-235-profit-jump-big-oil-analysis)

[2] Johnson, J., 6/21/22, “Study shows excess corporate profits in the US have become ‘widespread’,” Common Dreams (https://www.commondreams.org/news/2022/06/21/study-shows-excess-corporate-profits-us-have-become-widespread)

[3] Lehigh, S., 7/20/22, “A Nobel laureate’s polite plea to the Fed: Go slowly in fighting inflation,” The Boston Globe

[4] Reich, R., 6/16/22, “The Fed is making a big mistake,” (https://www.youtube.com/watch?v=4xcrdDnDR-c)

[5] Johnson, J., 7/25/22, “Elizabeth Warren accuses Fed Chair of fomenting ‘devastating recession’,” Common Dreams (https://www.commondreams.org/news/2022/07/25/elizabeth-warren-accuses-fed-chair-fomenting-devastating-recession)

[6] Corbett, J., 7/29/22, see above

[7] Johnson, J., 6/15/22, “With US consumers ‘getting fleeced,’ Democrats demand windfall profits tax on big oil,” Common Dreams (https://www.commondreams.org/news/2022/06/15/us-consumers-getting-fleeced-democrats-demand-windfall-profits-tax-big-oil)j

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

FOUR WAYS TO TACKLE INFLATION AND ITS HARMFUL EFFECTS

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

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

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

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

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

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

Good economic news accompanied by price gouging and inflation 5/21/22,
Examples of corrupt capitalistic behavior part five 4/16/22,
More evidence that “inflation” is price gouging 3/12/22,
Price gouging by big pharma 3/5/22, and
Good and bad economic news you may not have heard 2/27/22.)

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

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

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

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

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

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

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

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