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.

(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.)

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.

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. 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).

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.

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)

GOOD ECONOMIC NEWS ACCOMPANIED BY PRICE GOUGING AND INFLATION

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

Good economic news:

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

Bad economic news:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

FACEBOOK KNOWS IT PROMOTES MISINFORMATION AND DOES SO TO MAXIMIZE PROFITS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

STOP SUPPORTING FOX TV WITH MONEY FROM YOUR CABLE BILL

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

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

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

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

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

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

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

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

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

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

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

Sample letter to Verizon CEO

April 24, 2022

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

Dear Mr. Vestberg,

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

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

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

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

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

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

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

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

EXAMPLES OF CORRUPT CAPITALISTIC BEHAVIOR Part 5

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

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

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

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

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

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

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

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

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

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

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

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

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

WHY AMERICANS ARE SO PESSIMISTIC ABOUT THE ECONOMY

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

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

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

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

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

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

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

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

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

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

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

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

GOOD AND BAD NEWS FROM THE ECONOMY AND FOR WORKERS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

FIXES FOR INSTAGRAM AND FACEBOOK

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE HARMS OF INSTAGRAM, FACEBOOK, AND SOCIAL MEDIA

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

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

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

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

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

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

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

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

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

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

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

MORE EVIDENCE THAT “INFLATION” IS PRICE GOUGING

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

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

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

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

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

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

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

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

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

Other ways to fight price gouging include:

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

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

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

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

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

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

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

PRICE GOUGING BY BIG PHARMA

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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

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

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

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

GOOD AND BAD ECONOMIC NEWS YOU MAY NOT HAVE HEARD

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PRIVATIZED MEDICARE CAN’T BE CONTROLLED

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MEDICARE IS BEING PRIVATIZED AND IT’S A RIP OFF

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WHICH CORPORATIONS SUPPORT SEDITIOUS REPUBLICANS AND WHICH SUPPORT DEMOCRACY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SOCIALISM IS THE ANSWER FOR SAVING DEMOCRACY FROM CAPITALISM

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

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

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

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

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

Other examples of harmful deregulation and privatization include:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

STOPPING CYBERCRIME AT THE PERSONAL, ORGANIZATIONAL, AND GOVERNMENTAL LEVELS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CYBERWARFARE: GOOGLE’S RESPONSE TO CHINA’S ATTACK

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

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

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

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

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

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

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

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

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

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

CORPORATE CRIMINALS GET OFF SCOT-FREE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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