THE OPIOID CRISIS: SAVING LIVES VS. SAVING PROFITS

President Trump pledged months ago to declare the nationwide opioid crisis a national emergency. He now says he’ll do so this week. The crisis has claimed well over 200,000 lives and the death rate continues to climb.

Declaring opioid deaths a national emergency would be nice, but taking effective action is even more important. So far, the Trump administration and key Republicans in Congress have shown no interest in doing so.

Trump recently nominated Representative Tom Marino, a Pennsylvania Republican, to be his national drug czar. Marino withdrew his name from consideration last week after it was revealed that he had spearheaded a successful effort in Congress to block the Drug Enforcement Agency’s (DEA) efforts to stop fraudulent distribution of prescription opioids. [1]

In April 2016, as the deadliest drug epidemic in US history raged, Congress passed a bill stripping the DEA of its ability to stop the distribution of large quantities of prescription narcotics. Drug industry experts blame the origins of the opioid crisis on the over-prescribing, some of it fraudulent, of narcotic pain killers. [2] The pharmaceutical corporations’ marketing of these drugs has also come in for blame, as they downplayed the potential for addiction to the drugs and promoted the supposed under-treatment of pain.

At the behest of the drug industry, Representative Marino in the House and Senator Hatch in the Senate (a Utah Republican) led the efforts by a handful of members of Congress to undermine DEA enforcement efforts aimed at blocking the supply of narcotic pain killers to corrupt doctors and pharmacists who were selling them on the black market. They passed a law making it impossible for the DEA to freeze suspicious shipments of narcotics by drug distributors who had repeatedly ignored DEA warnings while selling millions of pills for billions of dollars. Marino had spent years working to pass such a law.

The drug industry contributed at least $1.5 million to the campaigns of the 23 members of Congress who sponsored the bill and spent over $100 million lobbying Congress.

Besides the sponsors of the bill and the drug industry, few members of Congress or others outside of Congress knew of the impact the bill would have. It was passed in Congress by “unanimous consent,” an expedited process supposedly reserved for non-controversial bills. Former White House officials say they and President Obama were unaware of the bill’s impact when it was signed into law. Requests for interviews with current and former officials, as well as dozens of Freedom of Information (FOI) Requests, have been submitted to the DEA and the Justice Department by the media to try and find out who knew what when. The interview requests have been declined or ignored, and the FOI requests have been denied or delayed; some have been pending for 18 months. [3]

This is a powerful example of the incredible influence and control our large corporations have over policy making in Washington, D.C. The large pharmaceutical corporations and their distributors have gotten Congress to make their profits from illegally selling narcotic painkillers more important than the 60,000 deaths that are occurring each year from opioid use. These deaths are roughly twice the number that occur due to gun violence or car accidents. The number of deaths last year was roughly 50% more than occurred at the peak of the HIV/AIDS crisis. Drug overdoses have become the leading cause of death among those under 50. [4]

I urge you to contact your US Representative and Senators and ask them to take real action to fight the opioid crisis. This includes spending money on addiction treatment and drug enforcement. And it requires repealing the 2016 legislation that undermined the DEA’s efforts to control the distribution of prescription, narcotic pain killers. We must assert that people’s lives, as well as recovery from and avoidance of addiction, are more important than profits for large pharmaceutical corporations.

[1]      Superville, D., & Daly, M., 10/18/17, “Marino pulls name from US drug czar consideration,” The Boston Globe from the Associated Press

[2]      Higham, S., & Bernstein, L., 10/16/17, “Drug industry quashed effort by DEA to cut opioid supply,” The Boston Globe from The Washington Post

[3]      Higham, S., & Bernstein, L., 10/16/17, see above

[4]      Katz, J., 6/5/17, “Drug deaths in America are rising faster than ever,” The New York Times (https://www.nytimes.com/interactive/2017/06/05/upshot/opioid-epidemic-drug-overdose-deaths-are-rising-faster-than-ever.html)

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DEREGULATION AND THE ELECTION OF TRUMP

Thirty years of deregulation have produced a declining standard of living and reduced economic security for the working and middle class. This is causing them significant stress and anxiety. In particular, there is strong evidence of the toll this is taking on the members of the white working and middle class. After decades of increasing life expectancy among all Americans, the life expectancy of middle-aged (35 – 59 years old), non-Hispanic whites without a college education is now actually declining largely due to premature deaths from drug and alcohol abuse and from suicides. [1] These “deaths of despair” as they are being called, are linked to the stress of falling behind one’s own life expectations as well as relative to others. [2] [3] [4]

The loss of economic well-being for the working and middle class generally has produced real anger against the political establishment that has allowed and abetted it. Numerous books have been written on the alienation of this demographic group. [5] It’s no wonder many of them voted for Trump and against the Washington, D.C., establishment in 2016. Many of them felt they had no better way to express their anger or to demand change in our policies than to vote for Trump. The fact that Trump (despite some of his rhetoric) is the embodiment of everything that has driven workers to this brink of despair is the great irony of the election. It is also an indication of the incredibly deep frustration, anxiety, and despair felt by many in the middle and working class.

Both in the U.S. and internationally, democracy – the power of the people to drive policy making including regulation – has only been successful when corporate power is under control. Regulation of big corporations has historically been necessary for workers to have the economic security that allows them to realistically engage in life, liberty, and the pursuit of happiness. In a capitalistic society, a basic level of economic security is essential if individuals are to have the freedom to make important choices in their day-to-day lives (such as where to live and what education to obtain for themselves and their children). [6]

For a capitalistic democracy to work, market place rules and regulations are essential to maintain fair and competitive markets for consumers and workers. They are also necessary to keep large corporations from wielding controlling influence over government and undermining democracy. When President Teddy Roosevelt used anti-trust laws to break up giant corporations in the early 1900s, the focus was “less on the power of giant corporations to dominate markets and more on the power of giant corporations to dominate government.” [7]

The political establishment in Washington, D.C., appears either to have forgotten this lesson of the early 20th century or to have allowed themselves to be bought by the corporate elites. As a result, the anxiety, anger, and frustration of the working and middle class has grown to historic proportions. In the election of 2016, they voted for Trump for President to clearly repudiate the Washington establishment. The Tea Party wing of the Republican Party and the Bernie Sanders wing of the Democratic Party both reflect this same rebellion against the political establishment, albeit from opposite ends of the political spectrum.

How this anxiety, anger, and frustration gets expressed in the future is very much up for grabs. We’re likely to be in for a rocky ride politically as individual candidates and the political parties battle to channel this energy and emotion in elections and policy making.

If we want to have a democracy instead of a corporatocracy and to revitalize our working and middle class, we must restrain corporate power, both in the private market place and in the public sphere of government. Strong regulations that control corporate power; protect the well-being of workers, consumers, and the public; and ensure that political power rests with the people are essential. As Supreme Court Justice Louis Brandeis warned in the 1930s, “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” [8] Clearly, Justice Brandeis understood that great wealth also means great political power, which, when concentrated in the hands of a few, is antithetical to democracy.

[1]      Boddy, J., 3/23/17, “The forces driving middle-aged white people’s ‘deaths of despair,” National Public Radio (http://www.npr.org/sections/health-shots/2017/03/23/521083335/the-forces-driving-middle-aged-white-peoples-deaths-of-despair)

[2]      Payne, K., 7/5/17, “Economic inequality goes well beyond the bank account,” The Boston Globe

[3]      Burke, A., 3/23/17, “Working class white Americans are now dying in middle age at faster rates than minority groups,” Brookings (https://www.brookings.edu/blog/brookings-now/2017/03/23/working-class-white-americans-are-now-dying-in-middle-age-at-faster-rates-than-minority-groups/)

[4]      Case, A., & Deaton, A., 5/1/17, “Mortality and morbidity in the 21st century,” Brookings (https://www.brookings.edu/wp-content/uploads/2017/03/casedeaton_sp17_finaldraft.pdf)

[5]      Kuttner, R., 10/3/16, “Hidden injuries of class, race, and culture,” The American Prospect (http://prospect.org/article/hidden-injuries-0) This is an insightful review of nine books on the “decline of the white working class and the rise of the Tea Party and Donald Trump.”

[6]      Kuttner, R., 4/7/17, “Corporate America and Donald Trump,” The American Prospect (http://prospect.org/article/corporate-america-and-donald-trump)

[7]      Warren, E., 2017, “This fight is our fight: The battle to save America’s middle class,” Metropolitan Books, NY, NY. p. 159

[8]      Warren, E., 2017, see above, p. 159

TO REGULATE OR DEREGULATE? THAT IS THE QUESTION

Regulations put in place after the financial collapse of 1929 and the resultant Great Depression served the country well. The current push for deregulation began with the deregulation of the railroad and trucking industries in the late 1970s. The consensus at the time was that regulations in these industries were not serving the public interest. Initial deregulation efforts worked to eliminate regulations that favored existing corporations and prevented competition from start-ups and innovators.

In 1982, anti-trust laws were used to break-up the AT&T monopoly on telephone service and introduce competition into the long-distance phone market. This reflected both strong regulation – the breaking up of a large corporation using anti-trust laws – and a belief that deregulation of the long-distance phone market coupled with the introduction of competition would best serve consumers.

During the late 1980s, the focus shifted to deregulation that benefited corporations rather than the public interest. Deregulation became “a mantra that can be translated to mean: let corporate America do more of whatever corporate America wants to do.” [1]

A telling example of this change in attitude is seen in the Consumer Product Safety Commission’s (CPSC) history. It was created in 1972 to protect consumers from dangerous products. It is responsible for the safety of all consumer goods except vehicles, guns, food, drugs, and cosmetics. Initially, it had 786 employees. However, as the regulatory focus shifted to benefiting corporations, it fell out of favor. In 2016, before Trump’s election, it was down to 567 employees, despite significant growth in the economy and in imports. Many imported products come from low wage countries with minimal safety standards. Therefore, the need for the CPSC to inspect and regulate goods has increased, while its capacity to do so has decreased. [2]

In a glaring example of its failure to live up to its initial promise and goals, in 2007, imported toys for young children that had lead paint (a neurotoxin) were not detected until well after the fact. For example, 1.5 million Thomas the Train components that had been imported and sold had to be recalled. [3] The weakening of the CPSC is occurring even though it reports that deaths, injuries, and property damage from consumer product incidents cost more the $1 trillion each year.

Since the late 1980s, the push for deregulation has reduced product safety standards; relaxed regulation of mergers, acquisitions, and financial practices (including allowing virtual monopolies); reduced on-the-job protections for workers; and weakened enforcement in many areas. Simultaneously, deregulation of the labor market has weakened workers’ bargaining power. The regulations that supported workers’ ability to bargain collectively with employers, largely through unions, have been undermined and weakened repeatedly since the 1980s. The formation of a union is now more difficult, while the ability to eliminate unions by outsourcing jobs overseas or hiring “replacement” workers has been made easier. As a result, union membership for private sector workers has declined from 25% in 1972 to 6% today.

Weak labor market regulation has allowed dramatic growth in the number of part-time, temporary, contracted, and consultant workers. This has undermined the economic security of the middle and working class, which was based on a full-time job with benefits. The explosive growth of the “gig” economy reflects this trend. Corporate employers have used the weak regulation of the labor market to restructure the workforce and reduce workers’ pay and benefits. As a result, fewer and fewer workers have employer provided health insurance, and when they do have it, they are typically paying a greater share of the cost and/or are footing the bill for higher co-payments for seeing doctors or getting prescription drugs. The guaranteed retirement incomes of pensions are largely a thing of the past. Workers are now much more likely to have to self-fund retirement through contributions to retirement savings accounts (sometimes with employer matching contributions). Furthermore, the investment decisions and risk fall on the worker. This decreases economic security for workers and gives financial corporations and advisors opportunities to charge fees and make commissions that often undermine the return on investment for workers, who typically are not sophisticated investors. As a result, workers are much less likely to be able to afford to retire at normal retirement age and are less likely to be financially secure in retirement.

The financial collapse of 2008, which was caused by the deregulation of the financial industry, robbed many in the working and middle class of their living standard and the last vestiges of their economic security. It destroyed many of their middle-class jobs and also their equity in their homes. Over 60% of U.S. households experienced a decline in wealth and many of those who didn’t lose wealth simply didn’t have any savings or assets to lose (e.g., the young and the poor). Although the high unemployment of the Great Recession has now finally declined after 8 years, high under-employment remains. Many workers are now in lower paying jobs for which they are over-qualified or are working part-time or in the “gig” economy instead of in full-time jobs, let alone ones with benefits.

Simultaneously, these workers watched the federal government bailout the Wall Street corporations and allow their executives not only to avoid penalties or jail, but to continue to enjoy huge paydays. There was no bailout for homeowners or laid off workers.

Although Republicans have typically been the politicians leading the charge on deregulation for the benefit of big corporations, many Democrats have not been far behind in their support of the deregulation agenda. Somewhat surprisingly, big corporations themselves have largely escaped the wrath of workers and the public, at least to-date. [4] This is partly because neither of our major political parties or any other powerful group has pointed the finger in their direction. Conversely, there are well-funded media, think tanks, public relations, and other initiatives that have promoted the deregulation and pro-corporate message.

My next post will link deregulation and its effects with the election of President Trump.

[1]      Warren, E., 2017, “This fight is our fight: The battle to save America’s middle class,” Metropolitan Books, NY, NY. p. 79

[2]      Steinzor, R., 4/17/17, “The war on regulation,” The American Prospect (http://prospect.org/article/war-regulation-0)

[3]      Lipton, E., & Barboza, D., 6/19/07, “As More Toys Are Recalled, Trail Ends in China,” The New York Times

[4]      Kuttner, R., 4/7/17, “Corporate America and Donald Trump,” The American Prospect (http://prospect.org/article/corporate-america-and-donald-trump)

MAKING REGULATION WORK

For society to function, regulatory agencies must protect consumers, workers, and the public from self-interested and unscrupulous individuals, employers, and businesses. In a democracy, this requires a concerted effort and leadership from elected officials to put appropriate regulations in place and to ensure that they are enforced.

In a recent speech, Senator Elizabeth Warren (MA) noted that an essential piece of regulating large corporations is to use anti-trust laws to stop mergers that create huge corporations that have the power to distort our economy and policy making. The Justice Department, the Federal Trade Commission, and state attorneys general all have the power to do this. However, the political climate and, to some extent, the judicial climate have left anti-trust regulation withering on the vine in recent decades. [1]

Due to weak anti-trust law enforcement, a few giant corporations now control major U.S. industries including the airline, banking, health care, pharmaceutical, agriculture, telecommunications, and technology industries. Today, two-thirds of the 900 U.S. industries that are tracked by The Economist are more concentrated than they were in 1997, i.e., have fewer and larger corporations making them up. Competition is increasingly choked off. Small businesses and innovators are shut out of the market place, either by being bought up or squashed.

With this reduced competition, consumers pay more and get lower quality, while workers have their pay and benefits cut. A classic example of this is the cost and speed of Internet access. The U.S. has some of the most expensive Internet access among the developed countries of the world. And the speed of access is among the slowest in the world, particularly when comparing major cities. [2] Furthermore, cost and speed of access in the U.S. varies tremendously among urban and rural areas, as well as among wealthier and poorer communities.

The poor Internet service in the U.S. occurs because we have a small number of large, private, lightly regulated telecommunications providers that often have a monopoly or near-monopoly on service in a geographical area. To improve access, cost, and speed, a handful of U.S. cities have chosen to create their own municipal broadband services to compete with private Internet service providers: Chattanooga, Tennessee; Bristol, Virginia; Lafayette, Louisiana; Cedar Falls, Iowa; and Wilson, North Carolina. However, the private providers are working to get states and the federal government to ban the creation or expansion of these municipal providers because they do not want the competition. The private providers are also lobbying hard to weaken regulation, such as the net neutrality rules that the Federal Communications Commission recently put in place.

The argument that corporations and competition in a free market will result in effective self-regulation has been shown to be false time and again. The financial industry is probably the poster child for refuting this argument. The deregulation of the financial industry led, not to effective self-regulation as the proponents promised, but to the savings and loan crisis of the late 1980s and early 1990s, as well as the financial collapse of 2008. The lack of regulation led to risky and abusive business practices that spiraled out of control and eventually collapsed, causing major disruption to the financial industry and the whole economy.

In another example, U.S. industry has not, on its own, kept our air and water clean. Without regulation, it is much easier and cheaper for industry to dump its waste products into our air and water.

Corporations have a knee-jerk reaction against regulation because they want unfettered control of their products, their markets, and their marketing. They highlight the (often exaggerated) costs of regulations and ignore benefits. Unfortunately, this has been a very effective strategy for resisting regulation in our current political climate. It seems that no one is highlighting the benefits of regulation or standing up for consumers, workers, and the public.

Corporations always claim (with little evidence) that regulation will hurt business and reduce the number of jobs. However, as the financial collapse demonstrated, a lack of regulation can lead to a crisis that dramatically hurts businesses and reduces the number of jobs.

In fact, studies have shown that regulation has a neutral or modestly positive effect on the overall number of jobs, although it may cause some shifting of jobs, for example from the coal industry to the wind and solar power industries. [3]

Furthermore, the Office of Management and Budget (OMB) reported to Congress that the cost-benefit analyses of new, major federal regulations from 2009 to 2015 showed that benefits exceeded costs by between $103 billion and $393 billion annually. These findings are corroborated by other reports.

In another report, OMB reviewed major regulations from 2000 to 2010 and found that the average annual benefits of regulations were about 7 times the costs. This finding is especially significant given that almost all costs are included in such analyses and are often over-estimated, while many benefits are not monetized and, therefore, are not included (e.g., the lifetime benefit of better cognitive functioning when children’s exposure to lead and mercury is reduced). In other words, benefits outweigh costs by 7 to 1 even though costs are over-estimated and benefits are under-estimated. [4]

So, what will it take to get good regulations in place that protect workers, consumers, and the public? Senator Warren in a recent speech called for 4 policy changes to reduce corporate power and allow appropriate regulation to occur:

  • Enforce anti-trust laws to limit the size and power of corporations,
  • Reform campaign finance laws, including enhancing the value of small contributions from individuals by matching them with public funds,
  • Close the revolving door of personnel who move between industry and government jobs, creating conflicts of interest and an industry-friendly mindset among regulators, and
  • Reform the process for implementing regulations to limit corporate influence. [5]

We as citizens and voters need to work with our elected officials to make sure that the influence and interests of large corporations are appropriately balanced with the interests of workers, consumers, and the public. This means we need to be active and engaged in our democratic processes – in our elections and in communicating with our elected officials. Senator Warren notes that the concentrated money and power of large corporations and wealthy business people influence nearly every decision made in Washington, D.C. We must ensure that the voices of we the people are heard and have every bit as much influence as those of wealthy individuals and large corporations.

[1]      Marans, D. 5/16/17, “Elizabeth Warren has a real plan to drain the swamp in Washington,” HuffPost (http://www.huffingtonpost.com/entry/elizabeth-warren-clean-up-washington-trump_us_591b6f2ae4b0a7458fa3f3d8)

[2]      Yi, H., 4/26/15, “This is how Internet speed and price in the U.S. compares to the rest of the world,” PBS NewsHour (http://www.pbs.org/newshour/updates/internet-u-s-compare-globally-hint-slower-expensive/)

[3]      Shierholz, H., & McNicholas, C., 4/11/17, “Understanding the anti-regulation agenda,” Economic Policy Institute (http://www.epi.org/publication/understanding-the-anti-regulation-agenda-the-basics/)

[4]      Shierholz, H., & McNicholas, C., 4/11/17, see above

[5]      Marans, D. 5/16/17, see above

SAVING OUR REGULATORS FROM THE WAR ON REGULATION

The war on regulation is a war not only on regulations themselves, but on the regulatory agencies that work to protect consumers, workers, and the public. The federal regulatory agencies that we rely on include the:

  • Consumer Financial Protection Bureau (CFPB) that protects us from deceptive financial products (e.g., loans and credit cards) and abusive financial corporations (e.g., banks, payday lenders, and loan sharks);
  • Consumer Product Safety Commission (CPSC) that protects us from dangerous physical consumer products (e.g., toys, children’s car seats, cribs, power tools, appliances, cigarette lighters, and household chemicals);
  • Environmental Protection Agency (EPA) that protects us from pollution of our air and water;
  • Federal Trade Commission (FTC) that protects us from unfair and deceptive practices in the marketing of consumer goods (e.g., products that promise that your baby can learn to read);
  • Food and Drug Administration (FDA) that protects us from tainted food and unsafe medications;
  • National Labor Relations Board (NLRB) that protects workers from unfair treatment on the job;
  • Occupational Health and Safety Administration (OSHA) that protects workers from unhealthy and unsafe working conditions; and
  • Securities and Exchange Commission (SEC) that protects investors from unfair or deceptive practices in the buying and selling of securities.

The Consumer Financial Protection Bureau (CFPB) is the newest of these agencies. It was created after the financial collapse of 2008 as part of the Dodd-Frank financial reform act. Its creation was spearheaded by Massachusetts Senator Elizabeth Warren. It is stopping the abusive and deceptive mortgage loans that were a major contributor to the financial collapse and to the loss of over 9 million homes by middle and working-class Americans.

The CFPB works to protect consumers from unfair, discriminatory, deceptive, and abusive practices by banks and other financial institutions. It provides consumers with information and tools to make good financial decisions. It receives and responds to consumer complaints. And it takes action against financial corporations that break the law. In its short life, it has handled over 1 million consumer complaints and obtained $12 billion in relief for over 29 million consumers.

Because the CFPB regulates Wall Street firms and holds them accountable, it has been in the crosshairs of the big banks and investment corporations. Since before the CFPB came into existence, Wall Street, through its campaign spending, its lobbyists, and its friends in government offices (both elected and appointed ones), has worked to weaken, delay, and eliminate the CFPB and its regulations. Currently, CFPB’s opponents are working to reduce the power of its director or to get him to resign so Trump can appoint someone who won’t stand up for consumers and take on the big financial corporations. They are also trying to cut its budget and weaken its independence by putting it under the control of the President and Congress. [1] [2]

President Trump and Scott Pruitt, his head of the Environmental Protection Agency (EPA), are working hard to weaken the EPA. They have proposed dramatic budget cuts for it and significant weakening of its regulations promoting clean air and water, as well as its efforts to reduce global warming and climate change. The proposed budget cut, from $8.2 billion to $5.65 billion (31%), is the greatest percentage cut proposed for any federal agency. It would have so many very serious implications that many of them will get very little if any attention from the media.

For example, the proposed budget for the EPA would eliminate federal funding for protecting children from poisoning by lead paint. According to a 2014 report from the Centers for Disease control, 243,000 children in the U.S. have lead levels in their blood that exceed the danger threshold for permanent neurological damage. Moreover, there is compelling evidence that significantly lower blood lead levels can cause serious harm.

The Lead Risk Reduction Program at the EPA educates the public and certifies home renovators on the safe removal of lead paint. This program’s $2.5 million and 73 employees would be eliminated in the Trump budget. The supposed rationale for this is that state and local governments can do this better than the federal government. However, the proposed budget also eliminates the $14 million for grants to state and local governments to help them address the risks of lead paint. [3]

I urge you to contact your U.S. Representative and Senators. Ask them to stand up for children and all of us by supporting a strong, well-funded EPA, as well as a strong and independent Consumer Financial Protection Bureau. Strong consumer and worker protections, in general, should be the priority, not kowtowing to large corporations.

[1]      Frank, B., 5/2/17, “The art of the deal: Bait and switch division,” The Boston Globe

[2]      Freking, K., & Gordon, M., 5/5/17, “GOP-led House panel votes to overhaul Dodd-Frank,” The Boston Globe from the Associated Press

[3]      Mooney, C., & Eilperin, J., 4/6/17, “EPA programs to protect kids from lead paint may end,” The Boston Globe from the Washington Post

FIGHTING RESISTANCE TO NEEDED REGULATIONS

We need rules and regulations to protect workers, consumers, and the public. However, opposition to regulations comes from organizations and individuals that have strong self-interests at stake and often lots of resources. Typically, it’s large corporate employers and producers of goods and services that oppose regulation. They use campaign spending and lobbying to persuade public officials to side with them. They use public relations campaigns to try to win support from voters and the public, often using deceptive messages. They claim that the costs of regulation are too high, but they almost never discuss the benefits.

My previous two posts described the war being waged on regulation by the Trump administration and some Members of Congress, particularly Republicans. (You can read them here and here.) My last post highlighted examples of rules and regulations that have been repealed or delayed. Every one benefits corporations at the expense of workers, consumers, or the public.

How does this happen in a democracy? There are several factors, but ultimately it comes down to the concentrated self-interests of large corporations and their political power.

Regulation typically has immediate and sometimes significant costs that are concentrated on a small group of organizations or individuals. The benefits typically are spread over a much broader group of people and often over a longer time period. The costs are typically easy to identify and measure in dollars, while the benefits are often much more difficult to monetize and some are even hard to identify.

As a result, those bearing the costs of regulation have strong self-interests in opposing and stopping or weakening regulation. When they are large corporations, they have tremendous resources to use in their opposition (e.g., money, people [including lobbyists], and the ability to sustain efforts over time).

Those who benefit (i.e., workers, consumers, and the public) have a self-interest in regulation. However, the impact is much smaller at the individual level and often gets lost among the many demands of every-day life. Furthermore, individuals’ resources (e.g., time, energy, and attention span) to use in supporting regulation are generally quite limited. Although the aggregate benefit may be huge, it is often very diffuse – spread over millions of people and across many years.

Therefore, the politics of regulation tend to favor weak or no regulation and even de-regulation. It typically takes political leadership that stands up for the broader public interest to push through (and maintain) strong regulation. With our corporations growing larger and more powerful all the time, the ability to stand up to them has become more difficult.

Let’s look at a specific, current example of regulation that is being considered.

Scientists at the Environmental Protection Agency (EPA) and other agencies, along with advocates for public health and the environment, are urging that certain pesticides need to be regulated. However, to-date, the Trump administration has failed to act on findings that the pesticide chlorpyrifos (for example), a Dow Chemical product, can cause significant harm. (By the way, Dow Chemical contributed $1 million to Trump’s inauguration activities and its chairman heads a White House working group on manufacturing.)

Chlorpyrifos has been widely used on fruit crops since the 1960s. Dow Chemical sold 5 million pounds of it in the US last year. Traces of it are commonly found in drinking water and umbilical cord blood, which is the blood a mother provides to her baby while pregnant. It can harm children’s brain development at very low exposure levels. Scientists have also compiled over 10,000 pages of evidence that chlorpyrifos harms animals, presenting a risk to 1,778 out of the 1,835 animals and plants that were studied, including endangered species of frogs, fish, birds, and mammals. [1]

The costs of the regulation of chlorpyrifos, i.e., a reduction in its use, fall immediately and directly on Dow Chemical, an $8 billion corporation (that is about to merge with DuPont and get even bigger). The benefits of regulating chlorpyrifos are clear but are hard to monetize. They occur over time to a broad range of people and to animals and our ecosystem.

Dow Chemical has strong political connections and lobbying capacity. It has spent about $12 million per year on lobbying in each of the last 5 years. [2] The political resources and clout of the beneficiaries of regulating chlorpyrifos are nowhere near as great as those of Dow Chemical.

Unless there is strong political leadership on behalf of the public and the environment, regulation of chlorpyrifos probably won’t happen or will be very weak. Given the current political environment in Washington, D.C., I’d bet that Dow Chemical corporation’s efforts to block regulation of chlorpyrifos will succeed.

This is a classic example of why democracy won’t succeed if the public and voters treat it as a spectator sport. We need to be informed, sometimes down to the level of detail of this example, and engaged. We must insist that our elected officials – and candidates during elections – are committed to standing up for the public interest despite the power and resources that large corporations can bring to bear on our political system.

We need to join and support advocacy groups that will act on our behalf on issues such as these, and that will let us know when there are opportunities for us to act and have an impact. We need to support the regulatory agencies (more on them in a future post) that are working to protect us. Many of them are under attack by President Trump, corporations, their lobbyists, and some of our other elected officials. And finally, we need to pay attention to and support information sources that will cover these issues.

We certainly can’t do all of these things all the time. But each of us, as a voter and citizen in a democracy, needs to be an active participant in our political system, and to do what we can to ensure that government works for us, not for the big corporations.

[1]      Biesecker, M., 4/21/17, “Dow wants Trump to set aside report on pesticide risks,” Associated Press in The Boston Globe

[2]      OpenSecrets.org, retrieved from the Internet on 5/27/17, “Dow Chemical,” Center for Responsive Politics (https://www.opensecrets.org/lobby/clientsum.php?id=D000000188&year=2016)

REPEALING OR DELAYING REGULATIONS HARMS WORKERS AND THE PUBLIC

The Trump administration and Republicans in Congress are repealing or delaying rules and regulations that protect workers, consumers, and the public. Some of these rules and regulations protect workers from unsafe working conditions, help them save for retirement, or protect their rights and pay. Trump and the Republicans are also delaying rules that would protect investors and the environment.

For example, over a dozen rules that provided important protections for workers have been repealed, including: [1]

  • Repealed the Fair Pay and Safe Workplace Rule that required companies applying for federal contracts to disclose past violations of labor laws. As a result, companies that have violated labor and employment laws will continue to be rewarded with federal contracts and taxpayers’ money. The rule would have required disclosure of violations of laws on:

o   Workers’ pay (including pay for overtime),

o   Workplace health and safety,

o   Collective bargaining rights, and

o   Civil rights.

  • Repealed the Workplace Injury and Illness Recordkeeping Rule that required employers to keep records of injuries and illnesses on the job. As a result, the Occupational Health and Safety Administration (OSHA) will be unable to accurately identify and protect workers from unsafe, and potentially life-threatening, working conditions.
  • Repealed a pair of rules that allowed state and local governments to set up retirement savings accounts for private-sector workers whose employers do not provide a retirement plan. Therefore, 55 million workers without a retirement savings plan will not be afforded this retirement savings opportunity, primarily because Wall Street lobbyists made it clear they did not want this competition from a public-sector sponsored program.
  • Repealed a rule that blocked drug testing (which is probably unconstitutional) of applicants for unemployment insurance (UI). Drug testing is an unnecessary and inappropriate hurdle for laid off workers applying for UI. However, whenever a former employee is denied UI or delayed or discouraged from obtaining it by drug testing, it saves their employer from having to pay for unemployment benefits.

The Trump administration has also delayed the implementation of many regulations that would benefit workers, consumers, and the public. These include: [2]

  • Delayed for at least 2 months, the Fiduciary Rule that would require financial advisors, including retirement planners, to put their clients’ best interests first. This is what most people seeking financial advice assume they are getting, but nothing currently prevents financial advisors from steering clients toward investments that pay the advisor a larger commission even if the client is likely to get a lower return on their investment. It is estimated that such behavior costs investors $17 billion a year and that each week’s delay in implementing the rule will cost retirement savers over $400 million over the 30 years (on average) until they take their money out to support them in retirement.
  • Delayed rules limiting exposure to silica and beryllium in the workplace. Roughly 2.3 million workers are exposed to silica dust at work. It is estimated that the rule’s limits would have prevented 900 new cases of silicosis each year and saved over 600 lives. The net benefits are estimated at $7.7 billion annually. In the case of beryllium, an estimated 62,000 workers are exposed to it at work and this can lead to lung disease and lung cancer.
  • Delayed requiring mine operators to inspect their mines for safety hazards and notify miners of hazardous conditions that have not been corrected. The rule also would have required mine operators to keep a record of safety examinations, hazards found, and corrective action taken. In 2010 – 2015, 122 miners died in 110 workplace accidents.
  • Delayed the implementation of a regulation requiring oil and gas companies to monitor and reduce methane (i.e., natural gas) leaks. This delay is occurring due to lobbying by the American Petroleum Industry and other industry groups. Methane gas is a potent global warming gas that is 100 times more harmful than carbon dioxide (i.e., CO2). This is one example, of many, where Environmental Protection Agency (EPA) head, Pruitt, is working to repeal or delay environmental regulations that benefit the public and the environment, but are opposed by corporate interests. [3]

Repealing and delaying these regulations, and many others, puts large corporations and their profits first and America’s workers and consumers in danger. It demonstrates the continuing influence of big money, corporate special interests, and their lobbyists in Washington. This is not what many voters expected when Trump spoke (and speaks) about putting America (and its workers) first and draining the swamp of special interests in Washington.

[1]      Shierholz, H., & McNicholas, C., 4/11/17, “Understanding the anti-regulation agenda,” Economic Policy Institute (http://www.epi.org/publication/understanding-the-anti-regulation-agenda-the-basics/)

[2]      McNicholas, C., Shierholz, H., Bivens, J., & Costa, D., 4/27/17, “The first 100 days: President Trump’s top priorities include rolling back protections to workers’ wages, health, and safety,” Economic Policy Institute (http://www.epi.org/publication/the-first-100-days-president-trumps-top-priorities-include-rolling-back-protections-to-workers-wages-health-and-safety/)

[3]      Associated Press, 4/21/17, “Trump EPA balks at new emission rule,” in The Boston Globe Talking Points

REGULATORY REFORM PUTS LARGE CORPORATIONS, NOT AMERICA, FIRST

The Trump administration and the Republicans in Congress have declared war on regulations. This puts large corporations and their profits first (not America) and puts America’s workers and consumers in danger.

Regulations and rules are what the Executive Branch of government (i.e., the President and his administration) uses to implement laws passed by the Legislative Branch (i.e., Congress). Rules and regulations are also used to update the implementation of laws over time as things change. For example, new products are brought to market, new medical procedures are developed, new chemicals are formulated, new financial instruments and transactions are invented, and so forth. If rules and regulations can’t be updated to respond to these situations, the implementation of our laws would fairly quickly become outdated and inappropriate. New laws would have to be passed to deal with every significant change in the real world. This would clearly be an inefficient and ineffective way to deal with our changing world, especially given the current dysfunction in Congress.

Rules and regulations protect public health and public goods (e.g., our air and water, our environment). They also protect workers and consumers from unsafe situations and products.

The Trump administration and the Republicans in Congress want to block new regulations and repeal existing ones for two, inter-related ideological reasons:

  • Belief in an unfettered free market that allows corporations to make profits without any constraints, and
  • Belief in a very limited role for government.

I believe there is another, non-ideological reason: our elected officials want to reward and do the bidding of their large campaign donors, both individuals and corporations. (Note that their donations are often given via intermediaries that are used to disguise the actual donors and their interests.) These large campaign donations buy essentially unfettered access to our elected officials so large donors can lobby and communicate their perspective on every rule or regulation. This, along with paid lobbyists, skews rules and regulations to favor the interests of these large donors. For example, the oil and gas industry spends $300 million per year on lobbying and has over 1,600 lobbyists working to communicate and convince officials in the legislative and executive branches to follow the industry’s preferences on rules and regulations.

The current war on regulations is being fought on multiple fronts and with multiple tactics:

  • Repealing the 150 or so regulations implemented by the Obama administration in its last 6 months in office. Currently, there are over 50 resolutions in the House or Senate targeting over 30 regulations for repeal.
  • Passing legislation that would give Congress the power to review and veto new regulations. This would substitute the political judgement of Congress for the judgement of scientists and experts in federal agencies in developing rules and regulations.
  • Passing legislation requiring new regulations to be evaluated with a focus on costs, reducing or ignoring the importance and value of their benefits.
  • Requiring that 2 regulations must be eliminated for every new one issued. This is being applied only in areas where the Trump administration opposes regulation but not for new regulations they favor, such as ones restricting the implementation of the Affordable Care Act.
  • Appointing executive branch personnel who do not support the mission of the agencies they head or are in. As a result, the agencies’ regulations won’t be effectively enforced. This clearly applies to Secretary Pruitt at the Environmental Protection Agency (EPA), as well as to the Securities and Exchange Commission (SEC) (which regulates banks and financial institutions) and the Department of Health and Human Services (which oversees the implementation of the Affordable Care Act).
  • Underfunding agencies so they do not have the capacity to enforce the regulations they oversee. Again, this applies to the EPA and the SEC, among others.
  • Reducing opportunities for public input into the repeal of existing regulations and the development of new ones.

In my next post, I’ll share some specific examples of rules and regulations that are being repealed, delayed, or weakened.

DAMAGE IS BEING DONE BEHIND THE TRUMP SMOKESCREEN

What you don’t know can hurt you. Behind the smokescreen of President Trump’s high profile Executive Orders and public statements, he and Congress are undermining public health and safety, as well as government revenue. By undoing or weakening existing policies, they are allowing, among other things:

  • Underpayment of royalties on fossil fuel extraction,
  • Use of unsafe and inefficient private prisons,
  • Dumping of coal mining wastes into streams, and
  • Weakened background checks for gun purchases by people unable to manage their own affairs.

President Trump rescinded a rule that stopped corporations from paying royalties based on artificially low prices. When a corporation extracts oil, gas, and coal on public lands, it will (if it can) sell them to a subsidiary at an artificially low price that allows it to pay an artificially low royalty to the federal government. Its subsidiary then sells the extracted fossil fuel at a much higher, market price. The result is a windfall for the corporation and a rip-off of taxpayers. [1]

Trump’s Attorney General has rescinded the decision to eliminate the use of unsafe and inefficient private prisons. Last August, a Department of Justice Inspector General’s report found that the private prisons used by the Bureau of Prisons did not provide the same level of safety and security as government owned and operated prisons. Therefore, Obama’s Deputy Attorney General announced a decision to eliminate this use of private prisons. In her announcement, she also noted that the private prisons did not provide the same level of correctional services, programs, and resources to prisoners as government-run prisons, and that they did not substantially reduce costs.

Despite this evidence, the Trump administration has decided that 13 private federal prisons, which hold 22,000 inmates, will continue to be run by private corporations. Thus, hundreds of millions of taxpayers’ dollars will pay three corporations to run unsafe, substandard, inefficient prisons. (See my previous posts here and here for more details.) Perhaps not surprisingly, these three corporations have given significant amounts of money to politicians, including to President Trump. One of them, CoreCivic, formerly the Correction Corporation of America, gave $250,000 to Trump’s inaugural festivities. GEO Group, another one of the three private prison corporations, also gave $250,000 to Trump’s inaugural festivities, on top of the $275,000 it had given to a Super PAC that supported the Trump campaign. [2]

Congress has also taken steps to roll back regulations that are in the public interest. A measure to rescind a rule banning the dumping of coal mining debris into streams has passed the House and Senate. President Trump is expected to sign it. The House and Senate have also voted to rescind a regulation requiring oil and gas corporations to disclose payments to foreign governments for mining and drilling rights. The House has voted to overturn a rule that reduced the harmful atmospheric emissions from burning unused natural gas at drilling operations on federal lands. [3] The House has also passed a resolution weakening background checks for gun purchases by Social Security recipients who have been declared incompetent to manage their personal affairs. [4]

Republicans in Congress are employing a rarely used tool, the Congressional Review Act, to roll back rules issued in the final months of Obama’s presidency. The Act provides a temporary window in which a simple majority of both chambers can rescind a newly promulgated rule. Trump must sign these measures to complete the rescinding of the targeted rule. The Act also prevents the executive branch from enacting a substantially similar rule in the near future. [5]

Furthermore, Congress is considering two new laws that would make it even easier for it to exercise its political judgement and overrule science-based regulations. One of the new laws, dubbed the Midnight Rules Relief Act, is described as the Congressional Review Act on steroids and would, among other things, prohibit federal agencies from re-proposing a rejected regulation indefinitely. The other new law, called the Regulations from the Executive In Need of Scrutiny (REINS) Act, would require any new regulation to be approved by Congress. If Congress failed to approve the regulation, it would not go into effect. Both of these laws are being pushed by corporate lobbyists who want to block the implementation of science-based standards for air and water quality, among other things. [6]

Behind the smokescreen of Trump’s high-profile actions, his administration and Congress are undermining public health and safety. It seems clear that the current Congress and administration are committed to benefiting corporate America and ignoring the well-being of every-day Americans. Furthermore, sweetheart deals for large corporations are providing them a financial windfall at the expense of every-day taxpayers.

I urge you to tell your Representative and Senators in Congress that you believe it is government’s job to protect the health and safety of the public, even if it is an inconvenience for big corporations. And that corporations should pay their fair share of taxes and government fees, because otherwise you and I and all the other individual taxpayers have to make up the difference. Tell your Congress men and women that our democracy is supposed to be of, by, and for the people, not large corporations.

[1]      Sierra Club, 2/14/17, “Trump ends rule blocking corporate polluters from paying themselves,” Common Dreams (http://www.commondreams.org/newswire/2017/02/24/trump-ends-rule-blocking-corporate-polluters-paying-themselves)

[2]      Zapotosky, M., 2/23/17, “Justice Department will again use private prisons,” The Washington Post (https://www.washingtonpost.com/world/national-security/justice-department-will-again-use-private-prisons/2017/02/23/da395d02-fa0e-11e6-be05-1a3817ac21a5_story.html?utm_term=.f631c1be57d2)

[3]      Daly, M., 2/3/17, “House votes to overturn Obama rule on natural gas ‘flaring’,” Associated Press (http://bigstory.ap.org/article/d84e8dd2a74042ed8d9e864fdb59d069/house-poised-overturn-obama-rule-natural-gas-flaring)

[4]      Freking, K., & Daly, M., 2/2/17, “Congress scraps Obama rules on coal mining, guns,” Associated Press (http://bigstory.ap.org/article/bf29ce0c4ba84550b51f503e7618d901/house-gop-aims-scrap-obama-rule-gun-background-checks)

[5]      Freking, K., & Daly, M., 2/2/17, see above

[6]      Kothari, Y., 1/4/17, “Attacking science in week one: How Congress is trying to dismantle public protections,” Union of Concerned Scientists in Common Dreams (http://www.commondreams.org/views/2017/01/04/attacking-science-week-one-how-congress-trying-dismantle-public-protections)

IS TRUMP A POPULIST, A FASCIST, BOTH, NEITHER?

Some in the media and many political pundits have referred to President Trump as a populist or a fascist or both. These terms are not opposites, but they aren’t comfortable bedfellows. I cringe every time I see Trump referred to as a populist because my vision of populism is the inclusive, broad-based populism of Senators Bernie Sanders and Elizabeth Warren.

A populist is someone who supports the concerns of ordinary, working people, as opposed to the elite, upper class. Populist activism is based on the belief that the common people are being exploited by the privileged elite. The underlying ideology of populists can be left, right, or center. Populist activism becomes likely when mainstream political institutions fail to deliver economic and social well-being for ordinary people. [1] The direction that populist activism takes depends heavily on the style of the politician who taps into it.

Populism has a long history in the US. There was a Populist Party in the 1890s and William Jennings Bryan ran as the Democratic presidential candidate on a populist platform in 1896, 1900, and 1908. President Theodore Roosevelt and the Republican Party took over the populist banner in the early 1900s. George Wallace’s campaigns of the 1960s and 1970s had populist themes that some labeled reactionary populism due to their racist underpinnings. Ralph Nader in the 1990s and 2000s ran for president using populist themes.

Trump’s campaign and presidency have a populist element in their appeals to the working class. However, their focus on the white working class evokes memories of the reactionary populism of George Wallace. Trump argues that the working class is being hurt by the actions of political elites in Washington, D.C. He also appeals to the working class by asserting that their well-being is being undermined by immigrants. There is a racist element to Trump’s appeals, as he lays the blame for the struggles of the white working class on (largely Latino) immigrants and Blacks. Historically, this type of reactionary populism has been fertile ground for the development of fascism.

Some view Trump’s populism as faux-populism and demagoguery because his appeals to the working class are based only on rhetoric and unrealistic policy proposals. Trump exhibits attributes of a demagogue, such as exploiting the prejudices and gullibility of some voters, and stirring up anger and resentment while eschewing reasoned debate. Historically, demagogues often overturn established customs of political conduct, assert the presence of a national crisis, and accuse moderate and thoughtful opponents of weakness or disloyalty to their country. A demagogic populist typically claims legitimacy directly from the people and asserts that he alone will do what the people want. He refuses to acknowledge the legitimacy of opposition and attacks institutions, from the courts to the news media, that don’t support him. Trump has exhibited many of these attributes. [2]

Personally, when I think of populism, I think of inclusive populism that is committed to including stigmatized groups (e.g., the poor, minorities, immigrants, and women). They are embraced and supported rather than being targeted for blame and as scapegoats. This is the type of populism that Senator Bernie Sanders promoted during the presidential primaries and for which Senator Elizabeth Warren has been advocating. [3]

Fascism, on the other hand, is an authoritarian and nationalistic approach to governing where the government controls or partners with business and/or labor. Typically, opposition is not tolerated and the government is led by a strong leader who asserts that strong central control is needed to effectively combat economic difficulties and external threats. A principal goal is self-sufficiency and independence through protectionist economic policies. [4]

Trump’s rhetoric echoes many of the themes of fascism. Perhaps most prominently, he promotes ethnic stereotypes and fear of foreigners, which is typical fascist rhetoric. Asserting concern about national decline is another common element of fascist discourse. Trump’s slogan “Make America great again” fits this theme exactly. Even though the US, by most measures, isn’t in serious decline, he’s able to persuade the white working class that the country is in decline, or at least their position in it is. Poorly-educated white males have experienced economic decline over the last 35 years. The Great Recession of 2008 and the weak recovery from it have left many working people economically worse off. [5]

Fascists tend to use threats of violence to intimidate opponents and silence critics. They are skilled at getting their followers to believe them even when the narrative they present is at odds with facts; truth becomes subjective. [6] These are also themes that have been apparent in the Trump campaign and presidency.

Trump’s selections for his Cabinet appear to contradict the populism of his campaign rhetoric. They do, however, fit with fascism’s alignment of business and government. Many of his nominees are from the corporate elite who have played a major role in diverting federal policy from supporting the working class to supporting large corporations. They seem positioned to strengthen the role of the private sector in policy making and undermine the role of the federal government in supporting working people. For example, they have opposed labor unions, workplace regulation, and workers’ rights; they have worked to privatize public education; they have weakened voting and civil rights; they have opposed environmental regulation and action on global warming; and they have supported weakening the social safety net. [7] [8]

There were and are elements of xenophobic, reactionary populism in Trump’s rhetoric and in some of his (to-date largely symbolic) actions. His style, cabinet nominees, and some of his actions exhibit themes of fascism. Although it’s too early to conclusively decide whether he is more of a populist or a fascist, President Trump has never expressed support for the inclusive populism of Senators Sanders and Warren. On the other hand, he has consistently displayed, and his background seems much more aligned with, some of the core themes of fascism.

[1]      Wikipedia, retrieved 2/18/17, “Populism” (https://en.wikipedia.org/wiki/Populism)

[2]      Wilkinson, F., 2/16/17, “Why Donald Trump really is a populist,” BloombergView https://www.bloomberg.com/view/articles/2017-02-16/why-donald-trump-really-is-a-populist

[3]      The Economist, retrieved 2/18/17, “The Economist explains populism,” http://www.economist.com/blogs/economist-explains/2016/12/economist-explains-18

[4]      Wikipedia, retrieved 2/18/17, “Fascism” (https://en.wikipedia.org/wiki/Fascism)

[5]      Chotiner, I., Feb. 2016, “Is Donald Trump a fascist?” Slate (http://www.slate.com/articles/news_and_politics/interrogation/2016/02/is_donald_trump_a_fascist_an_expert_on_fascism_weighs_in.html)

[6]      Kuttner, R., 12/16/16, “The audacity of hope,” The American Prospect (http://prospect.org/article/audacity-hope)

[7]      Vanden Heuvel, K., 12/20/16, “Sham populism, shameless plutocracy,” The Washington Post

[8]      Bonham, L., & Jennings, G., 2/17/17, “Is Trump’s billionaire cabinet actually a closet full of fascists?” Common Dreams (http://www.commondreams.org/views/2017/02/17/trumps-billionaire-cabinet-actually-closet-full-fascists)

STOP COMMERCIALIZATION OF OUR NATIONAL PARKS

Unfortunately, the National Park Service (NPS) has just enacted a policy that allows expanded commercialization of our national parks. Corporations have been pushing for years to commercialize our national parks with their names, logos, and products. The timing of the new policy is particularly inappropriate because this year is the 100th anniversary of our national parks. Their pristine beauty and intergenerational legacy were celebrated in the Ken Burns’ wonderful 2009 PBS special, “The National Parks: America’s Best Idea.” [1]

This new policy has been put in place despite overwhelming public opposition – hundreds of public comments in opposition and over 200,000 signatures on a petition opposing this policy. [2] The new policy will allow corporate sponsorships and partnerships, lift naming rights restrictions, allow advertising in parks (including for alcohol), and allow, if not require, parks to seek donations from corporations.

The new policy allows facilities from auditoriums to benches to have corporate names on them. Buses in national parks can now be plastered with advertising. Bricks or paving stones can have corporate names and logos on them. Educational programs and endowed positions can be branded by corporations. Large banners with corporate logos will now be allowed in the parks.

Even before this policy was in place, Coca-Cola, after donating $13 million to the NPS, blocked a proposed ban on bottled water in Grand Canyon National Park. The ban would have reduced trash in the park by 20%, saving money and employees’ time, while reducing litter and wasteful use of plastic. After public pressure, NPS allowed a park-by-park ban that requires a rigorous cost-benefit analysis and a multi-layered approval process. In another pre-policy example, Budweiser had a joint marketing campaign with NPS that allowed it to use the image of the Statue of Liberty on its labels and to co-sponsor a concert in a national park.

This is happening because our national parks are starved for money. While attendance at the parks has been up for three years in a row and is 20% higher than it was in 2013, Congress and the President have provided flat funding for operating the parks. [3] Despite the increased wear and tear, as well as the need for more parking and greater capacity on trails and roads, due to the increased number of visitors, the parks have received dramatically insufficient funding to maintain, let alone expand, infrastructure. It is estimated that there is an $11 billion backlog in maintenance projects. [4] Park superintendents struggle to meet their goals of preserving their parks for future generations, while providing a safe and enjoyable experience for visitors. They will now be put in the awkward position of needing to be involved in fundraising to support their park while being banned by federal law from directly soliciting donations.

As a poignant example of the problems commercialization can cause, Delaware North Corporation (DNC) is suing the NPS for $51 million for compensation for trademarks on the names of facilities in Yosemite National Park. DNC had been the concessionaire at the park since 1993, but recently lost the contract. Because this suit could take some time to resolve, Yosemite National Park has had to rename facilities in the park. The iconic Ahwahnee Hotel has been renamed, despite having operated under this name since 1927. It was named after the Native Americans who lived in the valley and whose descendants still work in the park. The Badger Pass Ski Area, among other facilities, has also been renamed and the trademark on the name “Yosemite National Park” may also be disputed. [5]

Commercialization is spoiling the pristine beauty of our national parks and detracting from the inspiring experience of visiting them. Conservationist and President Teddy Roosevelt envisioned our national parks as being preserved for future generations “with their majestic beauty all unmarred.” Commercialization of our national parks is antithetical to that vision and to the basic principle for creating national parks – to preserve our natural wonders and beauty for future generations in their natural, awe-inspiring state. We need to do a better job of protecting our national parks and the experience of visiting them.

I encourage you to contact your members of Congress and urge them to adequately fund our national parks and to ban commercialization of them. We must resist the efforts by corporate America and budget cutting politicians to commercialize and privatize these truly unique and irreplaceable public assets.

[1]      Burns, K., & Duncan, D., 2009, “The National Parks: America’s Best Idea,” Public Broadcast System, (http://www.pbs.org/nationalparks/)

[2]      Strader, K., 1/4/17, “Disregarding public concern, the National Park Service finalizes commercialism policy and opens parks to industry influence,” Public Citizen as reported by Common Dreams (http://www.commondreams.org/newswire/2017/01/04/disregarding-public-concern-national-park-service-finalizes-commercialism-policy)

[3]      Associated Press, 1/17/17, “National Parks set yet another attendance mark,” The Boston Globe

[4]      Rein, L., 5/9/16, “Yosemite, sponsored by Starbucks? National Parks to start selling some naming rights,” The Washington Post

[5]      Howard, B.C., 1/15/16, “National park advocates appalled by Yosemite name changes,” National Geographic (http://news.nationalgeographic.com/2016/01/160115-yosemite-names-ahwahnee-hotel-wawona-curry-badger-pass/)

PROBLEMS WITH PRIVATIZED PRISONS

The problems with privatized prisons have come to public attention largely due to the investigative journalism of The Nation and Mother Jones. Their reporting underscores the importance and challenges of investigative journalism. It has become relatively routine for targets of investigative journalism to sue (or at least threaten to sue) the journalists and their publishers. Both corporate and government entities have built an ever stronger set of legal protections including employee non-disclosure agreements and other employer protection laws and legal precedents. The mainstream, corporate media have largely abandoned investigative journalism at least in part due to the threat of litigation and because news and reporting budgets have been slashed to increase profits.

When Mother Jones published its report based on a guard’s experiences at a private prison run by the Corrections Corporation of America (CCA, see overview and link below), it received a threatening letter from a law firm on behalf of CCA. It was the law firm that had represented a billionaire and large political campaign donor who had spent 3 years suing Mother Jones over its reporting of his anti-LGBT activities. Although the billionaire lost his case, the legal costs Mother Jones incurred in defending itself were a very serious financial burden. Furthermore, he pledged $1 million to support others who might want to sue Mother Jones over its reporting. [1] Needless to say, this type of aggressive behavior by the subjects of investigative reporting puts a chill on this valuable kind of journalism.

The Nation’s investigative reporting was based on reviewing a large number of documents from the Bureau of Prisons (BOP) in the US Department of Justice. The documents were obtained only after a lengthy and costly process using the Freedom of Information Act to gain access to these public records.

The records showed that the Bureau of Prisons’ monitors had documented, between January 2007 and June 2015, the deaths of 34 inmates who were provided substandard medical care in the BOP’s private prisons. Fourteen of these deaths occurred in prisons run by the Corrections Corporation of America, while fifteen were in prisons operated by the GEO Group. These two corporations are the largest operators of for-profit prisons. [2]

Despite this and other documentation of serious problems at the for-profit prisons, top BOP officials repeatedly failed to enforce the remediation of dangerous deficiencies and routinely extended contracts for the prisons. This was due, at least in part, to a cozy relationship between BOP leadership and the private-prison operators because of the revolving door of personnel between the BOP and the private providers. In 2011, for example, Harley Lappin, who had served as the Director of the BOP for eight years, left to join CCA as executive vice president. There he earned more than $1.6 million in one year; roughly 10 times his salary at BOP. Two previous BOP Directors, J. Michael Quinlan and Norman Carlson, had gone to work for CCA and the GEO Group, respectively. Five BOP employees recalled the former BOP Directors participating in meetings between the BOP and the contractor for whom they worked. The BOP employees felt this influenced decisions that were made and made taking disciplinary action against the contractors difficult.

Mother Jones magazine’s investigative reporting was done by Shane Bauer, a reporter who spent 4 months as a guard at one of CCA’s private prisons in Louisiana. [3] He found that cost cutting was a focus of both the state and CCA. Employee costs made up 59% of CCA’s operating expenses and therefore were a key target for cost-cutting. Starting guards at Bauer’s CCA facility made only $9 per hour while those at public prisons in the state made $12.50. To further save money and increase profits, the CCA facility was typically under-staffed. The facility’s guard towers were unmanned on a regular basis and staffing inside the facility was typically 10% – 20% below standard. Lockdowns, where prisoners can’t leave their wing of the prison, were supposed to be punishments for major disturbances, but they also occurred over holidays and other times when there simply weren’t enough guards to run the prison. Security checks on prisoners were logged as being done even when they weren’t because of understaffing. However, when the state’s Department of Correction was coming for an inspection, guards were required to work overtime so the facility was fully staffed.

As a result of under-staffing and perhaps under-training (another cost-cutting strategy), the use of force or chemical agents, typically pepper spray, occurred more often at the CCA prison than at comparable facilities: twice as often for force and 7 times as often for chemical agents. With 1,500 inmates, 546 sexual offenses were reported at Bauer’s prison in 2014, 69% higher than at a comparable government-run facility. Between 2010 and 2015, CCA was sued more than 1,000 times nationwide, with approximately 3% of the cases involving a death, 6% sexual harassment or assault, 10% physical violence, 15% injuries, 15% medical care issues, and 16% prison conditions and treatment.

Louisiana’s efforts to cut costs and use contractors to run cheap prisons was reflected in the $34 per inmate per day that it paid CCA, while funding for state-run prisons was about $52. In addition, the inflation-adjusted cost per prisoner at the CCA facility Bauer worked at had dropped by 20% between the late 1990s and 2014.

CCA has an incentive to keep prisoners in its prisons in order to maximize revenue. An inmate can be charged with an infraction of the rules and lose credit for good behavior. This can mean that an inmate stays in prison an extra 30 days and that CCA gets paid an additional $1,000.

In Louisiana, the state also had an incentive to keep the prison full because CCA’s contract with the state required that CCA get paid for a minimum of 96% of full occupancy. Occupancy guarantees are common in private prison contracts and are one aspect of privatization that leads to perverse incentives for the state. The state’s incentive to keep the prison full may mean that prisoners who could be released are kept in prison or that the criminal justice system is pressured to arrest and sentence enough people to ensure that the prison is full.

CCA has been very active politically through lobbying and campaign contributions. Since 1998, CCA has spent $23 million on lobbying the federal government. Since 1990, it and its employees have contributed more than $6 million to candidates and other political activity. It has lobbied for high levels of incarceration. It co-chaired the criminal justice task force of the American Legislative Exchange Council (ALEC), a corporate and conservative think tank that drafts and promotes state-level legislation. Among the pieces of legislation it has promoted are mandatory sentencing laws, punitive immigration reform, and truth-in-sentencing laws, all of which helped fuel the growing prison population of the 1990s.

CCA and other for-profit prison corporations aggressively lobbied Congress in 2009 for a minimum number of undocumented immigrants to be in private detention centers. They succeeded; US taxpayers are required by law to pay for a daily minimum of 34,000 beds in private detention centers. [4] These corporations have also lobbied against bills in Congress that would require private prisons to be subject to public information laws, such as the Freedom of Information Act. Such bills have been introduced at least 8 times in Congress, but have failed to pass each time.

These are examples of the problems and issues with private prisons, and with privatization in general. The problems with the private prisons were severe and intractable enough that the BOP concluded that it had to terminate its use of them. The BOP’s experiences and decision to end privatization should be kept in mind as other privatization efforts are reviewed or proposed.

[1]       Jeffery, C., July/August 2016, “Why we sent a reporter to work as a private prison guard,” Mother Jones (http://www.motherjones.com/politics/2016/06/cca-private-prisons-investigative-journalism-editors-note)

[2]       Wessler, S.F., 6/15/16, “Federal officials ignored years of internal warnings about deaths at private prisons,” The Nation (https://www.thenation.com/article/federal-officials-ignored-years-of-internal-warnings-about-deaths-at-private-prisons/)

[3]       Bauer, S., July / August 2016, “My four months as a private prison guard,” Mother Jones (http://www.motherjones.com/politics/2016/06/cca-private-prisons-corrections-corporation-inmates-investigation-bauer)

[4]       Editorial, 8/27/16, “Dump private prisons – all of them,” The Boston Globe

SOLVING THE PROBLEMS OF OUR PRIVATIZED HEALTH CARE SYSTEM

Clearly, the private market is not working well for health insurance or health care in the U.S. Costs are rapidly escalating in a system that is already the most expensive in the world, but that has mediocre to poor outcomes. Many private health insurance, pharmaceutical, and health care corporations are putting profits before patients.

Increasing premiums for health insurance and high drug prices (see my previous post on drug prices) are undermining efforts to control health care costs. The exorbitant and fast growing costs of U.S. health care are squeezing state and federal governments’ budgets, as well as employers and individuals. In many states’ budgets, increased costs for health care for poor families and seniors through Medicaid, as well as for employees and retirees, are eating up all the increases in revenue from economic growth – and then some. This means that without tax increases or other sources of increased revenue, states and the federal government are having to cut spending in other areas of their budgets.

Increasing costs for employees’ health insurance are hurting employers’ competitiveness with foreign companies and reducing their profitability. Some employers have dropped health insurance as an employee benefit, while others have increased the portion of health insurance premiums employees must pay or are offering insurance plans with less comprehensive coverage as well as higher deductibles and co-pays. As fewer employees get health insurance through their employers, the number of people in subsidized government health programs increases, further increasing costs for governments.

Individuals are not getting the health care they need because insurance is not making it accessible and affordable. Many people are suffering financial hardship and some file for bankruptcy because of the costs of health care.

The clear solution to these problems is to provide everyone access to what’s referred to as a “public option” or a Medicare-for-all type health insurance plan. This would be a government run insurance pool, which is what Medicare is for seniors. When the Affordable Care Act (ACA) was being considered by Congress, a public option was initially included. In other words, a government run insurance plan would have been offered by each of the ACA’s state-level health insurance marketplaces (aka exchanges) where people without health insurance would buy coverage. A public option was vehemently opposed by the private insurers and was eventually dropped from the ACA legislation. They opposed it because they didn’t want the competition from a Medicare-type program that would be likely to expose their inefficiencies – despite, of course, these private corporations’ dedication to free markets and competition whenever any government regulation is proposed.

With problems in our privatized health care system becoming increasingly apparent, including a public option in the ACA exchanges is gaining increased support. [1] With some private health insurers abandoning the exchanges, it is projected that 7 states will have only one private insurer offering coverage. [2] In these state, having a public health insurance plan as an option would mean that there was still competition. This would serve as a check on the sole private insurer, ensuring that its coverage and pricing remained competitive and that it didn’t exploit a monopoly situation.

More broadly, there have been numerous proposals over many years to allow anyone over 50 or 55 years old to “buy into” Medicare. In other words, although they hadn’t yet reached the normal Medicare eligibility age of 65, these individuals would be allowed to pay an appropriate premium to buy health insurance as part of the Medicare insurance pool.

Senator Sanders, in his presidential campaign, highlighted his proposal for Medicare-for-All. This proposal would allow anyone to pay an appropriate premium to buy health insurance as part of a large, Medicare-like, government insurance pool. This proposal received broad and often enthusiastic support. [3]

A public option in the ACA exchanges or a Medicare-for-All option for everyone is the only way to realistically address the shortcomings of our privatized system of health care. By providing real competition for the private insurers, this would ensure the quality and affordability of health insurance. By giving the public option or Medicare-for-All insurance pools the right to negotiate with the pharmaceutical corporations over drug prices, prescription drug costs could be brought under control. (The Medicare drug benefit should also be changed to allow Medicare to negotiate drug prices.)

If we want quality and affordability in our health care system, a public option or Medicare-for-All program is essential as a check on the private corporations that currently dominate our health care system. Currently, a proposal in the U.S. Senate would add a public option to the ACA exchanges. It already has the support of over 30 Senators, including Senators Bernie Sanders (VT), Elizabeth Warren (MA), Jeff Merkley (OR), Charles Schumer (NY), Patty Murray (WA), and Dick Durbin (IL).

I encourage you to contact your U.S. Senators and other elected officials to tell them you support a public option under the Affordable Care Act specifically and a Medicare-for-All program in general. The for-profit health insurance, pharmaceutical, and health care corporations will fight tooth and nail to stop this competition. They will make huge campaign and lobbying expenditures to try to maintain their ability to manipulate our health care system to generate large profits and exorbitant executive compensation. Only a huge outcry and sustained pressure from the grassroots – from we the people – will get our policy makers to enact the significant reforms needed to create a health care system that delivers affordable, high quality care for all.

[1]       Willies, E., 8/28/16, “Recent headlines signal need for single-payer Medicare for All – now,” Daily Kos (http://www.dailykos.com/story/2016/8/28/1563720/-Recent-headlines-signal-need-for-single-payer-Medicare-for-All-now)

[2]       Alonso-Zaldivar, R., 8/29/16, “Challenges mount for health law,” The Boston Globe from the Associated Press

[3]       Nichols, J., 9/16/16, “Make the public option a central focus of the 2016 campaign,” The Nation (https://www.thenation.com/article/make-the-public-option-a-central-focus-of-the-2016-campaign/)

HEALTH INSURANCE: A BIG PROBLEM IN OUR PRIVATIZED HEALTH CARE SYSTEM

The goals of health insurance are to provide affordable access to health care and to protect people from the catastrophic costs of serious health problems. The health insurance system in the US is failing to meet these goals for many Americans.

The most recent and newsworthy issues with private health insurance are occurring in the so-called health insurance exchanges. These are state-level marketplaces created by the Affordable Care Act (ACA, aka Obama Care) where individuals without health insurance can buy coverage.

Many of the private health insurers offering policies through the exchanges are increasing the premiums they charge; some by as much as 62%. This is happening in part because some insurers initially set premiums unrealistically low in order to attract customers and gain market share. In addition, health care costs for those enrolling through the exchanges have been greater than some insurers estimated. [1]

As a result of these increased premiums, customers may switch to less expensive policies with less comprehensive coverage as well as higher deductible and co-payment amounts. This will increase the costs of health care for these customers, leaving some of them under-insured and vulnerable to financial hardship or bankruptcy if a major medical expense occurs.

Some insurers are terminating their participation in the exchanges, ostensibly because they aren’t making money on the policies they are selling there. However, in the case of Aetna, apparently it is planning to withdraw from 11 of the 15 exchanges in which it participates as retaliation for the federal government’s opposition to Aetna’s proposed merger with Humana. Both Aetna and Humana are among the 5 largest health insurers in the country. If this merger and another one (between Anthem and Cigna) that the government is blocking were approved, the top 5 health insurers would become 3 huge corporations. These are exactly the kinds of mergers that are resulting in decreased competition, increased prices, and near monopolistic power. (See my earlier blog post for more details.)

Overall, the health insurance corporations are raising premiums and cutting their participation in the exchanges to cut losses or increase profits. Profits are more important to them than meeting the goals of health insurance for customers.

Furthermore, private insurers are much less efficient than Medicare, the public health insurance program for our seniors. This is well documented. Medicare spends over 95% of its budget on actual health care. Private health insurers spends as little as 67% of premiums on actual health care. They use money from premiums to pay for advertising, profits, and executives’ compensation. To ensure a reasonable level of efficiency, the ACA requires health insurance policies offered on its exchanges to spend 80% of their premiums on actual health care – as opposed to administrative and corporate expenses.

Private health insurance simply doesn’t make sense from two key perspectives. First, health insurance and health care are not “markets” as defined by economics. Consumers don’t have perfect and clear information about the competing products. Consumers can’t and don’t effectively shop around for health insurance plans or health care services. When one needs a medical procedure, one doesn’t have the time, information, or capacity to shop around and find the best combination of quality and price.

Second, the whole premise of insurance is that risk is shared among a large, random pool of people. However, the multiple health insurers fragment the pool and, furthermore, each one works to attract healthy people (who are less costly to serve) and avoid those who are sick. With one large, random pool, the unpredictable nature of health care needs and costs is shared. The financial hardship of a serious medical issue does not fall on one individual or family. However, our private health insurance industry fragments the pool and tries to only insure healthy people. They do this through advertising, which therefore becomes a major expense, along with special perks like coverage for membership in a fitness center. They do it by denying payment so sick customers get frustrated and leave. This is clearly documented in Medicare, where the private insurers that provide services under Medicare are clearly successful at attracting the healthier seniors but then dumping them back into the government insurance pool when they get sick.

In addition, the presence of multiple private health insurers also increases costs for doctors, hospitals, and other providers of health care. Each insurer has its own forms and procedures with which the providers have to cope.

Roughly 50 – 60 million adults struggle with health care bills each year and the great majority of them have health insurance. This includes roughly 20% of the adult population under 65, the age of eligibility for automatic health insurance under Medicare. [2] Nearly 2 million Americans will file for bankruptcy this year in cases where unpaid medical bills are a major factor. Overwhelming health care bills are the number one reason for personal bankruptcy filings. [3]

More Americans have health insurance today than ever before thanks to the ACA, which has provided health insurance to 15 million people. However, because of the dysfunction of privatized health insurance, this has not significantly reduced financial hardship due to medical bills. Notably, the easiest way for health insurers to reduce costs and increase profits is to refuse to pay for health care services. Having a health insurer deny authorization or payment for care is something almost all Americans have experienced. In addition, health insurers are increasing premiums while reducing coverage and raising deductibles and co-payments.

Clearly, private health insurance is not meeting the goals of affordability and protection from financial hardship. My next post will present solutions to the problems of our privatized health care system.

[1]       Alonso-Zaldivar, R., 8/29/16, “Challenges mount for health law,” The Boston Globe from the Associated Press

[2]       Sanger-Katz, M., 1/5/16, “Even insured can face crushing medical debt, study finds,” The New York Times

[3]       Mangan, D., 6/25/13, “Medical bills are the biggest cause of US bankruptcies,” CNBC (http://www.cnbc.com/id/100840148)

DRUG PRICES: A BIG PROBLEM IN OUR PRIVATIZED HEALTH CARE SYSTEM

A series of recent events have highlighted the problems with our privatized, for-profit health care system. First, there have been numerous cases of drug prices that have increased dramatically. I’ll discuss this topic in this post.

Second, health insurance corporations have been merging (and continue to try to) to create a few, enormous corporations that have monopolistic power, which leads to increases in health insurance costs. A similar pattern is occurring among health care providers, although this tends to be more regional than national. I’ll discuss these issues in my next post, followed by a post on solutions to the problems of our privatized health care system.

These recent events highlight that per capita health care spending in the U.S. continues to climb more rapidly than overall inflation. And they underscore that our health care spending is already exorbitant compared to every other country, while our health outcomes are worse.

The dramatic increase in the cost of EpiPens has been the most recent and perhaps most prominent of the extraordinary increases in drug prices. Perhaps this is because of its widespread usage and dramatic life-saving potential, especially for allergic reactions in children. The history here is that the EpiPen cost $50 in 2004. It was bought by Mylan in 2007, which began to steadily increase its price. It hit $250 in 2013 and then, in August, Mylan jumped the price to $600 – 12 times what it cost in 2004. By the way, the actual drug in the EpiPen costs about $1. [1]

The pharmaceutical corporations typically argue that their high drug prices are needed to pay for research and development. The validity of this argument is questionable at best and clearly false in many cases, such as the EpiPen case. A recent study found no evidence of a connection between drug research and development costs and prices. It concluded that drug prices are based on what the manufacturer can squeeze out of consumers and their insurance. [2]

For example, in August the price of Daraprim was raised to $750 per pill from $13.50. It had been $1 per pill in 2010. This is a 62-year-old drug that treats a life-threatening parasitic infection in babies and those with compromised immune systems, such as AIDS and cancer patients. In 2010, GlaxoSmithKline sold the drug to CorePharma, which quickly increased the price from $1 to around $10 per pill. In August, the drug was acquired by Turing Pharmaceuticals, a start-up run by a former hedge fund manager, and its price was immediately increased to $750 – 750 times its cost in 2010. [3] Turing is not a pharmaceutical company; it doesn’t do research and development. It is basically a hedge fund that buys the rights to drugs on which it believes it can dramatically increase prices to make a great return on its investment. Why the price increases? Greed coupled with a lack of regulation is the only answer.

Similarly, Rodelis Therapeutics bought Cycloserine, a drug to treat drug-resistant tuberculosis. It quickly increased the price per pill to $360 from about $17. Likewise, Valeant Pharmaceuticals acquired two heart drugs and more than doubled the price of one and quintupled the price of the other. This was on top of a quintupling of their prices in 2013 by the previous owner that had recently purchased them. So, overall their prices have jumped to 10 and 25 times what they were in 2013.

Per capita prescription drug spending in the U.S. is the highest in the world. U.S. drug spending is more than twice as high as the average for 19 other advanced countries and one-third higher than in the next most expensive countries, Canada and Germany.

Medicare, the huge health insurance plan for our seniors, is prohibited from negotiating with pharmaceutical corporations for lower drug prices. [4] This was written into the expansion of Medicare that added coverage of drugs by the George W. Bush administration at the behest of the pharmaceutical corporations. Meanwhile, the Veterans Administration, many health insurers, and health care systems in other countries negotiate far lower prices for drugs than what Medicare ends up paying.

U.S. patent laws and other market protections slow the availability of less expensive, generic versions of drugs, thereby supporting high prices for brand name drugs here in the U.S. Brand name drugs (as opposed to generics) represent 10% of prescriptions but 72% of drug spending.

The pharmaceutical corporations also use multiple business strategies to limit competition so they can maintain high prices for their drugs. One strategy is to use what the pharmaceutical industry calls “controlled distribution.” This means that the drugs are not distributed through drugstores but only directly by the corporation. Therefore, companies that want to make and sell a generic version of the drug, cannot get the samples they need to analyze, replicate, and test a generic version of the drug. Another strategy is to pay generic drug manufacturers not to make a generic version of a drug, even after its patent has expired. A third strategy is to make a minor modification to a drug, one that often has no functional impact, in order to obtain a patent extension based on the modification.

Dramatic increases in the prices of generic drugs (i.e., non-brand-name drugs that are no longer covered by a patent) are a relatively new phenomenon. Prices of generic drugs declined from 2006 to 2013. However, there are numerous examples of dramatic price increases over the past 3 years: [5]

  • Tetracycline (a common antibiotic): $0.06 to $4.60 per pill (77 times as expensive)
  • Amitriptyline (an antidepressant): $0.04 to $1.03 per pill (26 times)
  • Clobetasol (a prescription skin cream): $0.26 to $4.15 per gram (16 times)
  • Captopril (a blood pressure med): $0.11 to $0.91 per pill (8 times)
  • Digoxin (a heart med): $0.12 to $0.98 per pill (8 times)

Drug prices in the U.S. are not regulated or routinely negotiated as they are in other countries. Mergers of pharmaceutical corporations have reduced competition. Increasingly, the remaining large corporations have monopolistic power in the marketplace, and hence can increase prices more or less at will.

In California, the pharmaceutical industry, led by Merck and Pfizer, is spending over $80 million to defeat a ballot question that would limit state health plans to paying the discounted drug prices negotiated by the US Department of Veterans Affairs. Back in 2005, the pharmaceutical industry spent $135 million to defeat a ballot question that would have required it to provide discounted drugs for the poor. [6]

Perhaps not surprisingly, prescription drug costs represent the fastest growing portion of health care costs. Overall spending on prescription drugs has been growing at 10% per year, double the rate of increase of total health care spending, and roughly 5 times the rate of general inflation in the economy. Prescription drugs now account for 17% of all health care spending. [7]

[1]       Rosenthal, E., 9/2/16, “The lesson of EpiPens: Why drug prices spike, again and again,” The New York Times

[2]       Kesselheim, A.S., Avorn, J., & Sarparwari, A., 8/23/16, “The high cost of prescription drugs in the United States: Origins and prospects for reform,” The Journal of the American Medical Association

[3]       Pollack, A., 9/21/16, “Huge hikes in prices of drugs raise protests and questions,” The Boston Globe from The New York Times

[4]       Weisman, R., 8/24/16, “Exclusivity rule seen driving up drug costs,” The Boston Globe

[5]       McCluskey, P. D., 11/7/15, “The not-so-cheap alternative,” The Boston Globe

[6]       Robbins, R., 9/7/16, “A revolt against high drug prices,” The Boston Globe

[7]       Weisman, R., 8/24/16, see above

THE TRUTH ABOUT RAISING THE MINIMUM WAGE

 Whenever a proposal to raise the minimum wage is put forth, especially one for a significant increase such as to $15 per hour (the current federal minimum wage is $7.25), the business community and its allies among elected officials immediately warn that there would be dramatic negative effects on the number of jobs and the growth of the economy.

However, there is no actual evidence that raising the minimum wage to $15 over the course of a few years would reduce the number of jobs or slow economic growth. These assertions by the business sector are pure speculation based on the economic theory of ideal markets (which don’t exist in reality). The warnings are meant to create fear among voters and elected officials, and therefore foster opposition to increasing the minimum wage.

Past increases in the minimum wage have not led to increases in unemployment. In January 1950, the minimum wage was increased 87.5% (from $.40 to $.75). Over the next 15 months, the unemployment rate fell from 7.9% to 3.1%. A similar result occurred after a 33.3% increase in the minimum wage in March 1956. A study by the NY Department of Labor found that after six of eight increases in New York’s minimum wage between 1991 and 2015 employment increased.

When San Jose increased its minimum wage by $2 in 2013, the business community and particularly restaurants and small businesses predicted disaster. However, new business registrations grew and unemployment fell, including in the restaurant and hospitality sector where 4,000 jobs were added over the next year. [1]

Washington State has the highest minimum wage in the country at $9.47, and it applies to tipped workers. (This is four and a half times the federal minimum wage for tipped workers of $2.13.) And yet Seattle has the second highest concentration of restaurants per capita in the country (behind only San Francisco, where the city’s minimum wage is even higher). Washington State also boasts the highest rate of small-business job growth in the country.

In 2014, when Seattle raised its city minimum wage to $15, the restaurant industry and the business sector predictably claimed that disaster would follow. But six months later, Seattle’s restaurant industry was growing faster than ever. And in early 2016, Washington State was first in the country in job and wage growth.

International comparisons demonstrate that a high minimum wage does not reduce the number of low paying jobs or increase the unemployment rate of low-education workers. Among 18 countries with advanced economies, the U.S. has the highest proportion of low-wage jobs (25%) but only an average employment rate for low-education workers (57%). In other words, having lots of low-wage jobs in the U.S. has not led to high employment among workers with low levels of education.

It is the presence of a high minimum wage and collective bargaining for workers that explains the presence of jobs with good wages in other countries. Furthermore, most of the 18 other countries have stronger social supports for workers and families than the U.S. in areas such as health care, housing, education, and especially child care. The lower minimum wage and weaker social supports in the U.S. reflect the lack of political power of ordinary workers in America. [2]

It has been seven years since the federal minimum wage was raised to $7.25. That’s seven years without a raise for many workers, while housing, food, and health care costs have risen. Not since the 1930s has the American workforce experienced such a low-wage and insecure labor market. Relatively high unemployment and very high under-employment, as well as the rise of part-time and contingent jobs with their uncertain incomes, are the symptoms of insecure jobs.

Today’s low wages (which have been declining with inflation) and job insecurity are largely the result of decreased union membership and weakened government regulation of the labor market. As Adam Smith wrote over 200 years ago, if workers negotiate wages and working conditions individually with employers, employers will always have the upper hand.

In competitive markets for goods and services, without government regulation (such as a strong minimum wage law) and collective bargaining for workers, the job market becomes a race to the bottom. Employers will drive down wages, benefits, and working conditions to maximize competitiveness and profits.

This is what has happened in the U.S. since 1968 as government regulation and union membership have declined. Using 1968 as the reference point, today’s current federal minimum wage of $7.25 would be:

  • $9.63 if it had kept up with inflation; (In other words, the minimum wage today has roughly 25% less purchasing power than it had in 1968.)
  • $11.35 if it had kept up with the average wage in the economy; or
  • $18.85 if it had kept up with the improvement in workers’ productivity. [3] (In other words, the value of the increased production of today’s workers over those of 1968 is not getting paid to the workers but is going to managers and investors or shareholders.)

So, the truth about increasing the minimum wage is that it doesn’t increase unemployment and slow economic growth. In fact, the opposite may occur. Furthermore, there are many benefits to increasing the minimum wage (which I’ll discuss in my next post) that outweigh any possible negative effects.

[1]       Hanauer, N., Summer 2016, “Confronting the parasite economy,” The American Prospect

[2]       Howell, D.R., Summer 2016, “Reframing the minimum-wage debate,” The American Prospect

[3]       Cooper, D., 7/25/16, “The federal minimum wage has been eroded by decades of inaction,” The Economic Policy Institute (http://www.epi.org/publication/the-federal-minimum-wage-has-been-eroded-by-decades-of-inaction/)

A LARGE CORPORATION BLACKMAILS OUR GOVERNMENT

The U.S. Department of Justice (DOJ) is blocking two mergers, each of which would combine two of the five largest health insurance corporations in America. Aetna and Humana have plans to merge as do Anthem and Cigna. As a result, the big five health insurers would become three, reducing competition and choice for consumers, and, presumably, increasing the cost of health insurance. As I’ve written about in previous posts (here, here, and here), huge corporations with near monopoly power are bad for our economy and our democracy.

It appears in this case that Aetna is using its marketplace and political power to attempt to blackmail the federal government into approving its merger. On August 15, Aetna announced that it will withdraw from 11 of the 15 state health insurance marketplaces (called exchanges) in which it currently participates. These exchanges were created by the Affordable Care Act (aka Obama Care) and are where people without health insurance go to find and buy insurance.

Aetna claims it is dropping out of the exchanges because it cannot afford the losses it is experiencing on consumers from them. However, this is a dramatic reversal from the corporation’s statements four months ago when its CEO Mark Bertolini said that Aetna planned to stay in the exchanges and was “in a very good place to make this a sustainable program.” It appears the major reason for the shift was the DOJ’s decision to block its merger with Humana. [1]

Back in July, in a letter to the DOJ (obtained by The Huffington Post through a Freedom of Information Act request), Aetna CEO Bertolini stated that Aetna would reduce its participation in the health exchanges if the merger wasn’t approved. [2] Note that Bertolini would personally receive up to $131 million if the merger goes through [3] and that Aetna made a profit of $2.4 billion in 2015 on revenue of $60 billion.

The withdrawal of Aetna from the health insurance exchanges will force consumers to switch plans and will result in fewer choices and perhaps increased costs for Americans obtaining health insurance through the exchanges. Other health insurers, including regional Blue Cross Blue Shield plans, find their participation in the exchanges profitable or plan to continue their participation even if currently there are some losses. Obama Care has brought 20 million new consumers to the health insurers through its exchanges and subsidies.

Many people, including former presidential candidate Bernie Sanders, are pointing to Aetna’s action as an example of the unhealthy amount of power that giant corporations have. More specifically, many health advocates are concerned about corporate power in the health care arena and are citing this as another example of corporations putting profit before people’s health. Senator Elizabeth Warren wrote that “The health of the American people should not be used as bargaining chips to force the government to bend to one giant company’s will.” [4]

The need for a publicly sponsored alternative (sometimes referred to as Medicare-for-All) to the private, generally for-profit, health insurers in the health insurance exchanges, is being put forth as the solution to counter the pitfalls of for-profit health insurance. [5]

Corporations shouldn’t have the power – which largely comes with size and near-monopoly market share – to effectively blackmail our federal, state, and local governments. These large health insurers and other huge corporations have amassed unhealthy amounts of power. Fortunately, the DOJ is blocking the two proposed mergers that would only make the situation worse.

The “laws” of economics (more accurately economic theory) assume that markets have multiple small suppliers of goods and services. Therefore, there would be real competition and consumer choice that could constrain market prices and companies’ behavior. Small is beautiful (to revive an old saying).

However, major, critical sectors of our economy have one or a very few large corporate suppliers. Aetna’s actions provide a poignant example of how corporate power can harm consumers, our economy, and democracy.

[1]       Bryan, B., 8/17/16, “Now we know the real reason Aetna bailed on Obamacare,” Business Insider (http://www.businessinsider.com/aetna-humana-merger-reason-for-leaving-obamacare-2016-8)

[2]       Cohn, J., & Young, J., 8/17/16, “Aetna CEO threatened Obamacare pullout if Feds opposed Humana merger,” The Huffington Post (http://www.huffingtonpost.com/entry/aetna-obamacare-pullout-humana-merger_us_57b3d747e4b04ff883996a13)

[3]       Knight, N., 8/17/16, “Sanders: Aetna’s Obamacare threat shows what ‘corporate control looks like’,” Common Dreams (http://www.commondreams.org/news/2016/08/17/sanders-aetnas-obamacare-threat-shows-what-corporate-control-looks)

[4]       Knight, N., 8/17/16, see above

[5]       McCauley, L., 8/16/16, “Aetna’s greed proves that Medicare-for-All is the best solution,” Common Dreams (http://www.commondreams.org/news/2016/08/16/aetnas-greed-proves-medicare-all-best-solution)

SECRET MONEY IN STATE AND LOCAL ELECTIONS FACILITATES CORRUPTION

The growth of secret money in state and local elections means that voters know less and less about who is working to influence their votes and the outcomes of their elections. Secret money is money spent by organizations that do not have to report their funding sources. Therefore, it is referred to as “dark” money. Most of this money is spent by social welfare non-profits (i.e., 501(c)(4) organizations) and trade or industry associations (e.g., the Chamber of Commerce or the Pharmaceutical Research and Manufacturers of America association, 501(c)(6) organizations). Based on the Supreme Court’s Citizens United decision, these groups can spend unlimited amounts of money on advertising and other campaign activities as long as it is independent of a candidate’s campaign, although the independence of such spending is often very questionable.

As I noted in my previous post, big money may have more impact in state and local elections than in federal ones. For example, a race for school board or a state’s public utilities commission costs much less than a race for federal office and gets much less media coverage. State ballot questions are also frequent targets of dark money spending. In such low-cost, low-information elections, it can be relatively easy to sway voters, particularly in non-partisan elections where party affiliation does not serve as a guidepost for voters.

These elections can have significant financial consequences, often for a narrow but economically significant constituency. A utility commission, for example, makes decisions that can effect energy corporations’ profits and homeowners’ electricity rates. Dark money at the state and local levels frequently comes from corporations and other special interests that have a direct and immediate stake in the outcome of the election, whereas at the federal level the outside spending tends to be more ideologically or party focused.

For less than $100,000, a corporation or wealthy individual can have a significant impact on a state or local election. When there is a significant self-interest at stake, this is a modest business expense. On the other hand, for state or local candidates or community groups, such sums are dauntingly large.

By using dark money for its campaign spending, the corporation or wealthy individual can hide its identity so voters don’t know who is trying to influence their votes or about the self-interested nature of the spending. And a growing portion of the big money in state and local elections is dark money. The ability to significantly affect or even dominate an election with high stakes but without public transparency means significant conflicts of interest can be hidden and outright corruption is facilitated. [1]

The Brennan Center for Justice recently studied outside campaign spending (i.e., spending not by a candidate’s own campaign organization) in six diverse states with almost a fifth of the U.S. population (Alaska, Arizona, California, Colorado, Maine, and Massachusetts). [2] It examined dozens of state and local elections in these states. It found that the amount of dark money spent in 2014 was 38 times what was spent in 2006, a rate of increase greater than that for federal elections. It also found that in 2006 76% of the outside spending was fully transparent – that the true identities of the donors was known to voters as they voted. In 2014, only 29% of outside spending was fully transparent.

In Arizona’s 2014 election for two utility commissioners, $3.2 million was spent by dark money groups. This was more than double what all six candidates’ campaigns combined spent and was almost 50 times the amount of dark money spent in the 2012 election. After the election, it was learned that the source of the money was the state’s largest private utility, Arizona Public Service, which didn’t like the state’s requirement that it buy power from homeowners’ solar panels that the homeowners didn’t need. (This is called net metering.) After the candidates the dark money supported were elected, the Commission shifted its stance from actively encouraging homeowner-generated solar power to making it more costly for homeowners.

In Mountain View, CA, a group calling itself the Neighborhood Empowerment Coalition spent $83,000 in dark money in the 2014 city council election. This was more than half of the combined total of what all nine candidates’ campaigns spent. Land use and housing policy were prominent issues in the election in this community where property values and rents have soared. After the election, the voters learned that the coalition was funded by a PAC linked to the country’s largest property owners association and its goal was to prevent the establishment of rent control. The newly elected councilors did not enact rent control.

In the Utah attorney general’s race in 2012, after the election it was learned that an aide to the winner had arranged for payday lenders to fund $450,000 in dark money advertising in exchange for a promise to shield them from consumer protection laws. The attorney general resigned after less than a year in office due to this and other revelations.

Compounding the problem of dark money is the recent growth of “gray” money. This is money spent by organizations such as Political Action Committees (PACs) that are required to disclose their donors, but where the identities of the true donors are hidden. PACs can receive donations from other PACs or organizations and sometimes these organizations are set up to obscure identification of the original donor. Donations can pass through a succession of multiple organizations to obfuscate the true source. This is political money laundering. Furthermore, some of these donor organizations may be “dark” organizations that do not have to disclose their donors. Donations from dark organizations to PACs have grown from less than $200,000 in 2006 to $9.2 million in 2014 in the six states studied by the Brennan Center. Gray money grew from 15% of all outside spending in 2006 to 59% in 2014. [3]

The impact of big money and dark money in state and local elections is undermining democracy by allowing special interests to impact election outcomes and to do so secretly. The potential for outright corruption is clear.

In my next post, I will share some effective steps that can be taken now to address the problems of big money and dark money in state and local elections; ones that can be taken within the constraints of current Supreme Court decisions (e.g., Citizens United and McCutcheon).

[1]       Lee, C., & Norden, L., 6/25/16, “The secret power behind local elections,” The New York Times

[2]       Lee, C., Valde, K., Brickner, B.T., & Keith, D., 2016, “Secret spending in the states,” The Brennan Center for Justice, New York University School of Law (https://www.brennancenter.org/sites/default/files/analysis/Secret_Spending_in_the_States.pdf)

[3]       Lee, C., Valde, K., Brickner, B.T., & Keith, D., 2016, see above

CRIMINAL JUSTICE REFORM FOR WHOM??

Efforts to reform our criminal justice system were hijacked in Congress at the last minute by an effort to weaken the ability to prosecute corporate and white collar crime.

Our criminal justice system is in need of reform. Incarceration in the U.S. has grown dramatically while the crime rate has fallen. There are over 2.2 million people incarcerated in federal, state, and local prisons today compared with 1 million in the late 1980s and half a million in the 1970s. Our incarceration rate of over 700 people per 100,000 of population is the highest in the world. With 4.4% of the world’s population, we have over 22% of the world’s prisoners. There is also great variation among the states with Louisiana having an incarceration rate (over 1,400 people per 100,000) over three times that of Minnesota and Maine (less than 400 people per 100,000). [1]

The cost of incarceration at the federal, state, and local levels has been growing along with the prison population and is currently roughly $80 billion a year. This rapidly growing cost is unsustainable for many states and is squeezing public spending in other areas.

However, since 1990, the overall crime rate in the U.S. has fallen by 45% (i.e., from roughly 5,900 per 100,000 residents to about 3,250). It is at its lowest rate since the late 1960s after peaking in 1980. [2]

Another key problem with our criminal justice system is its racial bias. In terms of incarceration, 60% of those in prison are racial or ethnic minorities. The incarceration rate for Black adult men (4.7% of their population) is almost seven times that of White men (0.7%) and over 2.5 times that of Hispanic men (1.8%). Over their lifetimes, 1 out of every 3 Black men will spend time in prison, while only 1 in 20 White men will and 1 in 6 Hispanic men.

These were the problems that were ostensibly the focus of a broad, bipartisan coalition that formed in early 2015, although priorities undoubtedly varied. Fiscal conservatives wanted to reduce costs, increase efficiency, and reduce government spending. Human rights and liberal groups wanted to reduce racial inequities, including in sentencing for non-violent drug crimes. Libertarian groups wanted to reduce the prison population in order to reduce the size of government and its control over people’s lives.

The initial targets for reform were elimination of mandatory minimum sentences for non-violent drug offenses and giving judges more discretion in sentencing. The coalition worked closely with members of the U.S. Senate in drafting a bill and had the strong support of the President. [3]

After months of work by the bipartisan coalition and on the eve of a vote on the bill in the Senate Judiciary Committee, Senator Hatch demanded that provisions weakening the ability to prosecute white collar crime be added to the bill. This, apparently, was the hidden agenda of the business conservatives, led by the Koch brothers, who had participated in the coalition. The Senate refused to add these provisions and proceeded to pass the bill.

The bill then went to the House where Judiciary Committee Chairman Goodlatte threatened to kill the bill unless provisions weakening the prosecution of white collar crime were added. As a compromise to move the sentencing reform ahead, these provisions were added along with some other criminal justice reforms, such as easing re-entry into society after completion of a prison sentence. It is unclear when and if this compromise bill will move forward.

The Department of Justice and the White House are strongly opposed to the provisions weakening the prosecution of white collar crime. They maintain their opposition despite four meetings with a senior White House official by Koch Industries’ (the Koch brothers company) Senior Vice President during the time the compromise was being negotiated in the House. This is the kind of access and power the economic elites in our society have to our elected officials.

Basically, the white collar crime provisions would eliminate the longstanding legal principle that ignorance is no defense for breaking the law. They would require prosecutors to prove that defendants knew they were committing a crime, not just that a crime was committed. Moreover, they would institute a much higher standard of proof for what constitutes knowledge of guilt than has been used by judges for decades. [4]

Over-prosecution of white collar crime is not a problem unless you are a corporate executive who pushes the limits of the law. On the contrary, the American public strongly believes that white collar criminal prosecution is too lax. The fact that there were no significant prosecutions after the 2008 Wall Street debacle is exhibit one.

Federal prosecutions of white collar crime are down to 2% of federal criminal cases from 7% in 1980. The proposed provisions would not only reduce prosecutions further, it would give white collar criminal defendants a vehicle for engaging in extensive litigation (e.g., about who knew what when) and likely allow many of them to escape liability for serious crimes. Plausible deniability would clearly become a get out of jail free card, if it isn’t already.

Senator Warren released a report in early 2016 that documents 20 examples of cases where white collar crime prosecution was inexcusably weak. They range from ignition switch problems in GM cars to foreign currency market manipulation by a group of the largest financial corporations. She notes that the differential prosecution of street crime versus white collar crime “has a corrosive effect on the fabric of democracy.” (page 1) In some of her examples it appears that large corporations and their executives have decided that lax enforcement and weak punishment make the penalties for breaking the law an acceptable cost of doing business. Senator Warren promises to provide annual updates on responses to white collar crimes. [5]

The gaping chasm between get tough on crime incarceration for street crime and the lax punishment of white collar crime is an important factor in the cynicism and anger of the American public. The undermining of a bipartisan, thoughtful effort to reform over-incarceration and its racial bias by economic elites trying to weaken prosecution of white collar criminality is symbolic of their power to bend public policy to their benefit. This underscores how difficult the task of reclaiming our democracy will be and the vigilance it will require.

[1]       Wikipedia, retrieved 7/21/16, “United States incarceration rate” (https://en.wikipedia.org/wiki/United_States_incarceration_rate)

[2]       Wikipedia, retrieved 7/21/16, “Crime in the United States” (https://en.wikipedia.org/wiki/Crime_in_the_United_States)

[3]       Steinzor, R., 5/11/16, “Dangerous bedfellows: The stalemate on criminal justice reform,” The American Prospect (http://prospect.org/article/dangerous-bedfellows)

[4]       Steinzor, R., 5/11/16, see above

[5]       Staff of Sen. Elizabeth Warren, Jan. 2016, “Rigged justice: How weak enforcement lets corporate offenders off easy” (http://www.warren.senate.gov/files/documents/Rigged_Justice_2016.pdf)

MONOPOLY POWER AND HOW TO STOP IT

Monopolistic corporate power is a big problem in the US. Ever since the Reagan presidency in the 1980s, our government has effectively given up on enforcement of anti-trust (i.e., anti-monopoly) laws. Our anti-trust regulators have ignored evidence that the monopolistic power of huge corporations results in higher prices, lower wages, job losses, declining entrepreneurship, and increased inequality.

The regulators, the Department of Justice (DOJ) and Federal Trade Commission (FTC), rarely block mergers or acquisitions. Sometimes they require corporations to make changes meant to address the negative consequences of huge size and significant economic (and potentially political) power. However, the changes corporations promise to make are often not fully implemented or are ineffective in ameliorating negative consequences, especially in the long-term. [1]

The DOJ and FTC have been compromised by decades of appointments of officials who came through the revolving door from the corporate sector and don’t believe that corporate power is a problem. A similar situation exists with the Securities and Exchange Commission (SEC). Its lack of effective oversight of Wall Street and the financial industry led to the 2008 economic collapse, as well as a host of other harmful consequences.

When the regulatory agencies are staffed with people from the industries they are supposed to regulate, weak standards and lackadaisical enforcement (including a lack of criminal prosecution) tend to be the result. This aspect of crony capitalism is referred to as the “cognitive capture” of regulatory agencies by the industries they are supposed to regulate. It occurs when the regulators share the mindset of and empathize with those they are supposed to regulate. [2] As Senator Elizabeth has said, “Personnel is policy.”

Crony capitalism has led to concentrated corporate power in our economy, higher corporate profits and CEO pay, increased economic inequality, destruction of the middle class, corruption of our elections, and distortion of public policies. A few months ago, the Senate Judiciary Committee held its first hearing on anti-trust laws and efforts to rein in monopolistic power in more than three years. Recently, the Obama administration has gotten noticeably more aggressive about challenging merger deals, but only after years of inaction. These are baby steps in the right direction, but there is a long, long way to go given how bad the situation has grown over the past 35 years.

Americans strongly agree (83%) that “the rules of the economy matter and the top 1 percent have used their influence to … their advantage.” Two-thirds of the public believe that corporations pay too little in taxes and three-quarters want to close tax loopholes that let speculators pay lower taxes on their profits than working people pay on their earnings. Eighty-six percent believe corporations have too much political power and that increased enforcement of laws and regulations is needed. [3] Our elected officials need to stop favoring corporate interests and start sticking up for working Americans and our democracy.

As voters, we need to demand that our elected officials support vigorous enforcement of anti-trust laws and effective regulation of corporate America. The federal government needs to use its powers under the Sherman Anti-trust Act to stop corporate power from growing, given that it is harming our economy and our democracy. Our President needs to appoint strong, independent regulators. Congress and state legislatures need to pass laws and budgets that reflect the interests, values, and priorities of the people, not the corporations and wealthy elites.

The good news is that the current presidential campaign has brought the issue of corporate power into the spotlight. For the first time since 1988, the Democratic Party platform contains language calling for stronger enforcement of anti-trust laws and more market place competition in our economy. [4] A recent report from the White House calls for promoting competition in our economy through stronger enforcement of anti-trust laws and pro-consumer policies and regulations. [5]

In this election year, I encourage you to examine federal and state candidates’ positions on these issues and to vote for candidates who support:

  • Strengthening enforcement of anti-trust (i.e., anti-monopoly) laws in order to increase market place competition,
  • Improving the effectiveness of regulations, and
  • Reducing the power of corporations in our economy, our elections, and in policy making.

This is essential if our democracy is to be of, by, and for the people, instead of controlled by and run for the benefit of large corporations and their wealthy executives and investors.

[1]       Jamrisko, M., & McLaughlin, D., 7/18/16, “Democrats imitate trust-busting Teddy in own populist appeal,” Bloomberg (http://www.bloomberg.com/politics/articles/2016-07-18/democrats-imitate-trust-busting-teddy-in-own-populist-appeal?cmpid=GP.HP)

[2]       Lehmann, C., May 2016, “In the grip of greed,” In These Times (https://www.highbeam.com/doc/1P3-4034979561.html)

[3]       Weissman, R., 4/11/16, “Americans agree: It’s corporate power that’s in our way,” Common Dreams (http://www.commondreams.org/views/2016/04/11/americans-agree-its-corporate-power-thats-our-way)

[4]       Jamrisko, M., & McLaughlin, D., 7/18/16, see above

[5]       Council of Economic Advisers, April 2016, “Benefits of competition and indicators of market power,” The White House (https://www.whitehouse.gov/sites/default/files/page/files/20160414_cea_competition_issue_brief.pdf)

MORE EFFECTS OF MONOPOLY POWER AND CRONY CAPITALISM

Huge corporations with monopolistic economic power not only affect economic outcomes, but also political and policy outcomes. As my previous post described, economically, corporate power results in higher prices, lower quality service, depressed wages, fewer jobs, increased profits, higher CEO pay, and a redistribution of income upward to big corporations, their executives, and big shareholders.

Politically, the concentration of power in huge corporations distorts public policies. Examples of policies that benefit large corporations and their wealthy CEOs and investors – to the detriment of the rest of us – include:

  • Special tax breaks and loopholes for both big corporations and wealthy individuals;
  • Bankruptcy laws that provide relief for corporations but not for distressed homeowners, student loan recipients, or credit card debtors;
  • Lack of restraints on corporations amassing power but many hurdles for workers trying to assert bargaining power through unions; and
  • Trade deals that protect the profits, intellectual property, and assets of big corporations but not the jobs and incomes of American workers, nor the environment and the safety of our food.

In addition, intellectual property laws here in the U.S. mean that we pay more for drugs than the citizens of any other developed nation. That’s partly because it’s perfectly legal in the U.S. (but not in most other nations) for the maker of a brand-name drug to pay generic drug makers to delay introducing their cheaper equivalents when the patent on the brand-name drug expires. This costs American consumers an estimated $3.5 billion a year – a hidden upward redistribution of our incomes to Pfizer, Merck, and other big pharmaceutical corporations, their executives, and major shareholders. [1]

Wealthy corporations and individuals distort public policies to their benefit through lobbying, the revolving door of personnel, and corruption of our elections through hundreds of millions of dollars of campaign spending. They obtain public policies that support their interests by using state governments to preempt or nullify local laws or initiatives, such as local public internet access or local minimum wage laws. [2] They also use the federal government to preempt state laws as they are trying to do with GMO food labeling. They have passed federal laws that ban federal regulation of fracking, for example, or that ban Medicare from negotiating drug prices with manufacturers (despite the fact that private insurers, the Veterans Administration, and most countries’ health care systems do this). And they use the courts to create corporate “rights” that are used to overturn local, state, and federal laws and regulations, such as limitations on corporate spending on elections.

In terms of campaign spending, the super wealthy account for a growing share of both Republicans’ and Democrats’ campaign funds. In the 1980 presidential election, the richest 0.01% (1 out of every 10,000 Americans or roughly 23,000 people) gave 10% ($10 out of every $100) of total campaign contributions. In 2012, the richest 0.01% of Americans (now 32,000 people due to population growth) accounted for 40% ($40 out of every $100) of all campaign contributions. So, whose voices do you think our elected officials are listening to when they make policy decisions?

If this weren’t bad enough, the exploding outside spending on our elections (i.e., outside of candidates’ campaigns as described in the previous paragraph), which is supposedly independent of candidates’ campaigns, is almost entirely funded by wealthy individuals and big corporations. Furthermore, they can make unlimited “independent expenditures” while their direct contributions to candidates are quite limited. But the candidates know who is paying for the “independent” spending, so these voices are further amplified.

This campaign spending by wealthy individuals and corporations affects who runs for office, shifts the results of elections, and affects the decisions of elected officials. This corrupts the election process and the policy making of our elected officials. The result is not government of, by, and for all the people, but policies favoring the wealthy and their corporations.

Further adding to the influence of big corporations is the revolving door of personnel. Many government regulators, and some members of Congress, come from the industries they oversee in their official, governmental duties. Some Wall Street firms actually pay big bonuses to employees who take jobs in the agencies, such as the Treasury Department and the Securities and Exchange Commission (SEC), that regulate and oversee the banking and financial services industries.

On the other end, when members of Congress or other government employees leave, they often go to work in the industries they oversaw or had contact with when they were in government. A significant number go back to work for the employer they left when they took their government job. Knowing that a well-paying job in the private sector is waiting for you when you leave your government job certainly would seem to present a conflict of interest and might influence decisions made while working in government.

Some members of Congress and other government employees leave, not for jobs in industries they oversaw, but to lobby their previous colleagues on behalf of industries they oversaw or with which they had contact. In the 1970s, only about 3% of departing members of Congress went on to become lobbyists. In recent years, half (50%) of all departing senators and 42% of retiring representatives have done so. This isn’t because recent retirees have fewer qualms about making money off their government contacts. It’s because the financial rewards of lobbying have become much greater as our giant corporations spend more and more money on lobbyists in their efforts to influence public policies. [3]

This is crony capitalism and it has led to huge corporations with significant market and political power. As my previous post described, America only has four big airlines, three big health insurance companies, four big cable and internet conglomerates, and six too-big-to-fail banks that are getting bigger not smaller. Other examples of huge corporations and limited competition are that just two companies sell 70% of the countless toothpaste brands, there are only five big book publishers, and firms like Walmart, Google, and Amazon use their market power to squeeze out competitors and exercise significant power over suppliers. Big technology companies are driving small competitors out of business and massive conglomerates control our food, cosmetics, and drug industries.

Huge corporations with monopolistic power are not healthy for our economy or our democracy. We need to reassert that government policies and the rules of our economy should be of, by, and for the people, not of, by, and for the economic elite. Otherwise, we become a plutocracy, oligarchy, or corporatocracy – they’re pretty interchangeable, take your pick.

[1]       Reich, R., 11/1/15, “The Rigging of the American Market” (http://robertreich.org/post/132363519655)

[2]       Linzey, T., 1/21/16, “Slaves in all but name: Abolishing the corporate state in rural communities,” In These Times (http://inthesetimes.com/rural-america/entry/18792/community-rights-and-corporate-slavery)

[3]       Reich, R., 6/19/16, “A big idea for Hillary,” (http://robertreich.org/post/146169929945)

EFFECTS OF MONOPOLY POWER

My last post described the efforts of the big food and agricultural corporations to block the labeling of food that contains genetically modified ingredients. Here are some other examples of the effects of the monopolistic power of large corporations, which is allowed and abetted by crony capitalism. (See my Crony Capitalism = Monopoly Power post for more information.)

Americans pay more for Internet service than do residents of any other developed country and typically get lower speed service. This is largely because for 80% of us our internet service provider (ISP) has a monopoly, i.e., we have no alternative choice for our ISP. This lack of competition allows ISPs to charge monopoly prices for low quality service.

Internet service in the U.S. costs three-and-a-half times more than it does in France, for example, where the typical customer can choose among seven providers. [1] In the U.S., there are just four giant telecom corporations: AT&T (includes DirecTV and U-verse services), Comcast, Charter Communications (includes Time Warner and Bright House), and Dish. They serve focused geographic areas that limit the competition among them and with the next three providers (Verizon, Cox, and Cablevision) who are roughly a third the size of the smallest of the four giants.

The giant U.S. telecom corporations have succeeded in getting 21 states to pass laws barring municipalities from creating or expanding their own, public Internet access, which typically provides cheaper and higher speed service than the commercial providers. In February, 2015, the Federal Communications Commission (FCC) voted 3 to 2 overrule the state laws that were preventing Chattanooga, Tennessee, and Wilson, North Carolina, from expanding their municipal networks. This occurred soon after the White House’s release of a report on Community-Based Broadband Solutions that explains why escaping from the monopoly power of commercial ISPs is so important. It noted that America’s internet service is too slow, too expensive, and too unreliable to support a 21st century economy, especially in rural areas. [2] Hopefully, the FCC ruling and the White House report will lead to more competition and better service in the ISP business, but you can bet that the big, corporate ISPs will keep fighting in the states, in Congress, at the FCC, and in the courts to maintain their monopolistic power.

Due to limited competition in the airline business, prices are rising despite falling costs. Domestic airfares rose 2.5% over the past year, and are now at their highest levels since the government began tracking them in 1995. Meanwhile fuel prices, the largest single cost for the airlines, have plummeted. This can happen only because there are just four major airlines in the U.S. now (i.e., American, Delta, United, and Southwest) and many airports are served by only one or two. Ten years ago, there were nine major airlines, but the lack of enforcement of anti-trust laws have allowed mergers that have reduced competition. [3]

Similarly, food prices have been rising faster than inflation, while crop prices are now at a six-year low. Here again, the giant corporations that process food have the market power to raise prices due to limited competition. Four food companies control 82% of beef packing, 85% of soybean processing, 63% of pork packing, and 53% of chicken processing.

Because our big banks and financial corporations face limited competition, the interest rates we pay on home mortgages, college loans, and credit cards are higher than they would be if there were more competition. As recently as 2000, America’s six largest banks (JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley) held just 25% of all U.S. banking assets; they now hold 44%. We need to break up these giant financial corporations to increase competition and to protect our economy from the risks that led to the 2008 financial collapse.

Finally, health insurance is costing us more each year, and co-payments and deductibles are rising, because insurers are consolidating into bigger and bigger corporations. There are now only three major health insurers (i.e., Aetna, Anthem, and UnitedHealth) and due to the lack of competition, they have the power to raise prices. They say that mergers make their companies more efficient, but they really just give them more power to charge more and increase profits. This is borne out by the fact that their stock prices are skyrocketing and Standard & Poor’s index of health insurers’ stock prices recently hit its highest level in more than twenty years.

These over-priced goods and services produce a hidden upward redistribution of income from consumers to large corporations and their executives and big shareholders. These monopolistic corporations dominate our telecommunications, banking, air travel, food, health insurance, and other industries. [4] Crony capitalism has allowed the mergers and acquisitions that have built these giant corporations and produces the weak regulation that allows them to wield extensive power in the market place.

As long as the big corporations, their top executives, and wealthy shareholders have the political power to do so, they’ll keep redistributing as much of the nation’s income as they can upward to themselves. We, the American voters, need to assert our political power and stop monopolistic market practices and collusion, break up the giant corporate monopolies, and put an end to the rigging of the American economy.

In this election year, I encourage you to examine candidates’ positions on these issues and vote for candidates who support strengthening enforcement of anti-trust (i.e., anti-monopoly) laws, increasing market place competition, and reducing the power of corporations in our economy and elections.

I’ll share more examples of how and where corporate power and crony capitalism are rigging our economy in subsequent posts.

[1]       Reich, R., 11/1/15, “The Rigging of the American Market” (http://robertreich.org/post/132363519655)

[2]       Estes, A.C., 1/14/15, “Obama’s plan to loosen Comcast’s stranglehold on your Internet,” Gizmodo (http://gizmodo.com/obamas-plan-to-loosen-comcasts-stranglehold-on-your-int-1679463766)

[3]       Reich, R., 11/1/15, see above

[4]       Reich, R., 11/1/15, see above

ACT NOW: CORPORATE POWER BLOCKING GMO FOOD LABELING

One reason large corporations succeed in influencing policies is that they are relentless. If at first they don’t succeed, they try, try again and again and again. They can do so because they have:

  • Lots of money and other resources, such as top notch lawyers, and
  • As much time as it takes, given they are around forever and policy makers, i.e., elected and appointed public officials, change over time.

Corporations pursue favorable policies in multiple venues and at the federal, state, and local levels. They work to get the policies they want from legislatures and Congress, from regulators in the executive branch, and through court cases. They lobby, they contribute to candidates, they move people back and forth between being their employees and holding positions in government, and they engage in direct spending on campaigns, often through “dark money” groups so they can remain anonymous.

A perfect and current example of this is the battle over labeling food that contains genetically modified (GM) ingredients from genetically modified organisms (GMO) such as corn, wheat, soybeans, or animals.

The U.S. Food and Drug Administration (FDA) requires detailed food labeling that identifies ingredients. However, the big corporations of the food and agriculture industry have blocked any FDA requirement that food labels indicate the use of GMO ingredients. There have been bills on both sides of this issue in Congress, but they have gone nowhere – until now. But first a little background.

Various polls indicate that 70% to 93% of Americans want GMO labels. Proponents argue that consumers have a right to know what’s in their food so they can make informed decisions about what they want to eat – which is the precise reason for the FDA requirement to list ingredients. They do not argue that one should or shouldn’t eat GMO-containing food, but rather that one should have the information to make such a choice. By the way, over 60 other countries have GMO labeling laws.

Given the lack of progress on GMO labeling at the federal level, consumers who want to know if their food contains GMOs have turned their attention to requiring labeling through state laws. Ballot questions on GMO labeling were presented to voters in California in 2012, Washington State in 2013, and Colorado and Oregon in 2014. All were defeated by aggressive, expensive campaigns against them by the big food and agriculture corporations.

In California, opponents spent $46 million while proponents spent $9 million. Monsanto alone spent $8 million while DuPont, PepsiCo, Bayer, Kraft Foods, Coca-Cola, Nestle, ConAgra Foods, and General Mills each contributed over a million dollars. (Monsanto’s stakes in the fight are huge: its GM seeds account for 80% of the corn and 93% of the soybeans grown in the U.S.) Aggressive advertising by the opponents, including the claim that GMO labeling would lead to increased food prices, was successful in undermining support for the ballot questions. Polls showed the ballot question winning by 36% in mid-September and 8% to 9% in early October, but it eventually lost 51% to 49% on Election Day in November. [1]

The Oregon vote was even closer. After polls showed it winning by 65% in June and 5% to 8% in early October, it lost by 837 votes out of 1.5 million cast (0.06%) on Election Day. Twenty-one million dollars was spent in opposition to it and $11 million in support. Opposition spending included $6 million from Monsanto, $4.5 million from DuPont, and over $1 million each from PepsiCo and Coca-Cola. [2]

In addition to ballot questions, roughly 100 bills on GMO labeling have been introduced in state legislatures in at least 29 states. Alaska, Connecticut, Maine, and Vermont have passed labeling laws despite industry efforts to defeat them. As is not unusual in corporations’ relentless efforts to win policy battles, the industry is threatening to file court challenges to these laws. [3]

The Vermont GMO labeling law just went into effect on July 1, so the food and agriculture industry is making a big push to get federal legislation passed to preempt it. Ostensibly, their goal is to have one national standard rather than 50 individual state standards that would be hard to comply with and potentially confusing to consumers. However, the compromise legislation in Congress seems to indicate that they have other goals.

The bipartisan bill that the U.S. Senate Agriculture Committee announced last week would:

  • Ban states from requiring GMO labeling (preempting Vermont’s strong law),
  • Exempt beef, pork, poultry, and eggs from GMO labeling,
  • Exempt foods with meat as the majority ingredient from GMO labeling,
  • Narrowly define genetic engineering to exclude new techniques, and
  • Allow labeling that wouldn’t be clear to consumers, such as a symbol or a link to GMO information (e.g., a phone number, a website, or a QR code for scanning with a smart phone), as opposed to a clear, text label such as “Contains GMO ingredients.” [4]

Tellingly, the bill would not impose any penalties for violating the labeling requirement! The food and agriculture industry is supporting this compromise, of course, including Monsanto, General Mills, Campbell Soup, Kellogg, ConAgra Foods, and Mars corporations, as well as industry groups such as the American Soybean Association, the National Grain and Feed Association, and the Grocery Manufacturers Association.

I urge you to contact your U.S. Senators NOW, as they may vote on this bill the week of July 5. (One of the strategies used by big corporations and their allies to win policy battles is to rush bills through the legislative process so the public and opponents don’t have time to mount opposition.) Let them know what you think of this compromise legislation. Let them know if you’d like your food clearly labeled as to whether it contains GMO ingredients, thereby allowing you to make informed consumer decisions about what you eat.

You can find contact information for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]       Ballotpedia, “California Proposition 37, Mandatory Labeling of Genetically Engineered Food (2012)” (https://ballotpedia.org/California_Proposition_37,_Mandatory_Labeling_of_Genetically_Engineered_Food_(2012))

[2]       Ballotpedia, “Oregon Mandatory Labeling of GMOs Initiative, Measure 92 (2014)” (https://ballotpedia.org/Oregon_Mandatory_Labeling_of_GMOs_Initiative,_Measure_92_(2014))

[3]       The Atlantic, May 2014, “Want to know if your food is genetically modified?” (http://www.theatlantic.com/politics/archive/2014/05/want-to-know-if-your-food-is-genetically-modified/370812/)

[4]       Wasson, E., 6/26/16, “Bipartisan deal struck on GMO labeling,” The Boston Globe from Bloomberg News

CRONY CAPITALISM = MONOPOLY POWER

The vote in Great Britain to exit from the European Union and the support that Bernie Sanders and Donald Trump received in the U.S. presidential primaries all reflect a strong belief among voters that corporations and the economic elites have rigged our economies and governments to work in their favor. Workers and average citizens struggle to make ends meet while the rich get much richer. Corporate welfare is maintained while the safety net for individuals is shredded. “Trade” treaties expand corporate power while workers see their jobs shipped overseas.

These are examples of how our economy and government regulation of it are rigged in favor of large corporations and wealthy individuals. Close relationships between corporate executives and government officials (both elected and appointed) result in policies that favor large corporations and wealthy individuals. This is “crony capitalism.” There is self-dealing and collusion between the private sector and the public sector that sometimes rises to the level of outright conspiracy and corruption.

In 1964, just 29% of U.S. voters thought government was “run by a few big interests looking out for themselves,” according to the American National Election Studies survey. Today, almost 80% of Americans think so.

A study published in the fall of 2014 by Princeton professor Martin Gilens and Northwestern professor Benjamin Page confirms the reality of this sentiment. They examined 1,799 public policy issues to determine the relative influence on them of economic elites, business groups, and average citizens. They found that the influence of the economic elites and business groups almost entirely overwhelmed that of average American citizens.

Their conclusion was that “The preferences of average Americans appear to have only a minuscule, … non-significant impact upon public policy.” On the other hand, wealthy individuals and big business strongly influence policy. [1]

There are many, many examples of how large corporations and the wealthy influence public policies to their advantage. One is that they have gotten our government officials to essentially stop enforcing anti-monopoly (aka anti-trust) laws. As a result, corporations have gotten bigger and bigger and have much more power, both market power (including over prices) and political power (including over regulations, tax laws, and trade).

Therefore, our democracy looks more and more like a plutocracy, oligarchy, or corporatocracy as the political power and influence of the economic elites grows. Our founders’ vision for our democratic republic was quite different. They wanted economic as well as political power dispersed as widely as possible. Jefferson and Madison, in particular, greatly distrusted concentrated power, both private and public. Furthermore, they envisioned a government that structured markets to promote the common good, not private interests.

The fight against companies exercising monopoly power has a long history in America. The Boston Tea Party was a rebellion against the effective monopoly on tea granted to the British East India Company by the British King. The Populist Movement of the late 1800s and early 1900s revived this anti-monopoly sentiment. It fought against the efforts of large corporations to monopolize commerce and natural resources through the power of concentrated wealth (i.e., capital). President Teddy Roosevelt and later President Woodrow Wilson (guided by future Supreme Court Justice Louis Brandeis) implemented strong anti-trust, anti-monopoly laws. Preventing the development of monopolies was, for them, less about achieving economic efficiency and low prices for consumers than it was about protecting political equality and democratic governance. [2]

The goals of anti-trust laws and their enforcement were both to limit corporations’ political power and to ensure that they were small enough that the competition of the market place would provide effective control of corporate behavior. Thus, the need for government intervention in the economy, which can be complicated and have unintended consequences, could be avoided.

Strong enforcement of anti-trust laws continued into the 1960s. In 1962, for example, the merger of two shoe companies was blocked by anti-trust laws because it would have given a single company 2% of the national market. This is in stark contrast to today’s economy where a few large corporations control many national markets and where effective monopolies exist in some local markets.

By the late 1970s, policy makers from both parties supported greatly relaxed enforcement of anti-trust laws under a revised set of economic goals based on a theory of efficiency through deregulation, free markets, and economies of scale. This has allowed unprecedented corporate growth and with it the growth of corporate power in our markets and political system.

In my next post, I’ll share some examples of how monopolistic corporate power affects some of the goods and services we all use, such as Internet service, banking, air travel, food, and health insurance.

[1]       Reich, R., 6/19/16, “A Big Idea for Hillary,” (http://robertreich.org/post/146169929945)

[2]       Lynn, B.C., & Longman, P., Summer 2016, “Populism with a brain,” Washington Monthly (http://washingtonmonthly.com/magazine/junejulyaug-2016/populism-with-a-brain/)

IS JUSTICE FOR SALE IN STATE COURTS?

There is widespread recognition that a fair and impartial judiciary is essential to the maintenance of public trust and confidence in our court system and our democracy. In 39 states, at least some judges are elected; in aggregate, 87% of state judges nationwide run in elections. (In some states and for the federal judiciary, judges are appointed and not elected.)

The impartiality and integrity of our state courts is critical because they handle the vast majority of criminal and civil cases in the U.S. For example, 94% of felony convictions occur in state courts, including 99% of rape cases and 98% of murder cases.

The rapidly growing spending on judicial campaigns brings with it the potential for money to influence (or appear to influence) judges’ decisions and to create conflicts of interest. Elected judges are routinely raising campaign funds from and benefiting from spending by those who will appear before them in court as lawyers or parties in a case.

Between 2000 and 2009, over $200 million was spent on elections for state supreme court justices in 22 states. This was more than double the $83 million spent in the previous decade. This growth in spending appears to be accelerating and has been exacerbated by the U.S. Supreme Court’s Citizens United and related decisions, which allow unlimited contributions to and spending by supposedly independent groups, including corporations.

As with other elected offices, spending by outside, supposedly independent groups is growing in judicial races. Furthermore, the frequency of very large contributions and high levels of spending by a small number of wealthy individuals and organizations is increasing. For example, in the 29 most expensive judicial elections in the decade from 2000 to 2009, the top five spenders averaged $473,000 while all others averaged $850. [1] As with other races, much of the outside spending is on negative advertising. Negative advertising tends to undermine trust in elected officials and to reduce voter turnout. Outside spending also fuels an arms race with special interests spending more and more to out-spend competing interests.

As a result, there is the appearance, if not the actuality, that campaign money is influencing elected judges’ actions. As retired U.S. Supreme Court Justice Sandra Day O’Connor said, “In too many states, judicial elections are becoming political prize fights where partisans and special interests seek to install judges who will answer to them instead of the law and the Constitution.” [2] For example, in Alabama, the primary sources of campaign funds for supreme court candidates have been businesses and trial lawyers as they battle each other over tort reform. In 2006, candidates for the chief justice position raised $8.2 million. (Tort reform refers to changes in the laws governing the ability of victims to get court-ordered compensation for damages or personal injury.)

My previous post highlighted a case before the Wisconsin Supreme Court where a 4 to 2 decision found that Governor Walker and his campaign had not engaged in illegal coordination with two supposedly independent business groups that spent millions of dollars supporting his campaign. Two justices, who participated and voted with the majority, had been asked to recuse themselves because the two groups whose support of Walker was at issue had also spent millions of dollars on their campaigns. They refused to recuse themselves and this case is now being appealed to the U.S. Supreme Court.

West Virginia is another state where business interests are spending millions of dollars on judges’ elections and where a state supreme court justice refused to recuse himself in a case where he had a conflict of interest. The case is Caperton vs. Massey where a jury verdict that had ordered Massey Energy Co. to pay $50 million was being appealed. Massey’s CEO, Don Blankenship, knowing the case was going to the court, spent $3 million supporting the election of Justice Brent Benjamin in 2004. This was over 60% of the total spending on Benjamin’s campaign. After he won the election, he was one of the majority votes in a 3 to 2 decision that overturned the $50 million award against Massey. He refused to recuse himself. This was appealed to the U.S. Supreme Court and it ruled in June, 2009, that Justice Benjamin had to recuse himself because of the “serious risk of actual bias.” [3]

In May 2016, Justice Benjamin was up for re-election. Outside groups spent $3 million in the election. The biggest spender, at $2 million, was the Washington, D.C., based Republican State Leadership Committee, despite the fact that the election was supposedly non-partisan. It spent its money in support of the eventual winner, Beth Walker, who won with 39.5% of the vote in a five-person election. In addition, various outside business groups spent almost $500,000 supporting her. This $2.5 million in outside spending was many times the $200,000 she raised for her campaign and still many times what she may have spent including $500,000 in loans from her husband. [4]

In summary, judges are facing unprecedented challenges to their ability to deliver fair, impartial justice that is free from the influence of special interests and partisan pressures. A major driver of the threat to judicial integrity is growing campaign spending, including the rapid increase in unlimited spending by outside groups and individuals.

My next post will take a look at the effects of judicial elections on criminal cases. After that, I will present some policy solutions to the problem of elections and campaign financing that can undermine a fair and impartial judiciary.

[1]       Sample, J., Skaggs, A., Blitzer, J., & Casey, L., 2010, “The new politics of judicial elections 2000-2009,” Justice at Stake (http://www.justiceatstake.org/media/cms/JASNPJEDecadeONLINE_8E7FD3FEB83E3.pdf)

[2]       Justice at Stake, 2016, “Money & Elections,” Justice at Stake (http://www.justiceatstake.org/issues/state_court_issues/money-and-elections/)

[3]       Brennan Center for Justice, 6/8/09, “Supreme Court reverses decision in Caperton vs. Massey,” Brennan Center for Justice, New York University School of Law (https://www.brennancenter.org/legal-work/caperton-v-massey)

[4]       Brennan Center for Justice, 5/6/16, “Outside spending in West Virginia Supreme Court race nears $3 million,” Brennan Center for Justice, New York University School of Law (https://www.brennancenter.org/press-release/outside-spending-west-virginia-supreme-court-race-nears-3-million)

FIXING ECONOMIC AND POLITICAL INEQUALITY

Since President Teddy Roosevelt took on the mantle of trust buster at the turn of the 20th century, government regulation through anti-trust laws and other regulatory mechanisms has been recognized as the only way to counterbalance corporate power and individual wealth.

However, since the 1980s, the corporate and financial elite of the country has increasingly exercised influence and control over our federal and state governments and their policy making and regulatory functions. This has undermined government as the counterbalance to the power of the elite. The tools they use to gain influence and control are campaign contributions and spending, lobbying, and the revolving door.

As a result of their economic and political power, the rules of our economy have been shifted to favor wealthy corporations and individuals. This has undermined the middle class and led to growing inequality in incomes, wealth, and opportunity. [1] (See my post Economic Inequality is Due to Shifts in Political and Marketplace Power for more detail.)

A return to the policies of the 1950s and 1960s would go a long way toward stopping runaway inequality and beginning to rebuild the middle class. A return to these policies is clearly not radical, although some may argue that it would be based on the current landscape of politics and power. Key elements of the post-World War II policies that led to broadly beneficial economic growth and decreasing inequality were:

  • A truly progressive tax system;
  • Workers with bargaining power, primarily through unions, who were better able to balance the power and interests of employers;
  • Financial regulation that prevented speculation, manipulation, and international or offshore transactions that hurt or destabilized our economy; and
  • Fair corporate and estate taxes that required payment of a reasonable share of taxes by these entities.

In addition, we need to create new policies to address newly emergent factors that have shifted power in our economy and politics:

  • Full disclosure and stricter regulation of campaign contributions and spending;
  • Trade agreements that actually benefit US workers and our economy; and
  • Strict regulation and disclosure of lobbying and the movement of personnel through the revolving door between private sector jobs and government positions.

Institution of these seven policies would enhance economic equality and bolster the middle class. They would also reverse growing political inequality that is undermining our democracy. This would shift power away from wealthy individuals and corporations and back to average Americans.

I encourage you to contact your representatives in Congress and/or in your state government to let them know what you think needs to be done to address the economic and political inequality in the U.S. today.

[1]       Kuttner, R., 1/14/16, “The new inequality debate,” The American Prospect (http://prospect.org/article/new-inequality-debate-0)

ECONOMIC INEQUALITY IS DUE TO SHIFTS IN POLITICAL AND MARKETPLACE POWER

The debate over the causes of and remedies for growing economic inequality in the US has been in the forefront of the presidential campaign. Economists and most politicians have traditionally argued that economic inequality was the inevitable result of technological change, workers’ education and skill levels, and globalization. However, a stronger and stronger sentiment – maybe even a consensus – is growing that income and wealth inequality is driven by inequalities in political and marketplace power. Even many economists are now acknowledging the important effects of shifts in political and marketplace power. [1]

It is becoming increasingly clear that market outcomes and the rules of the marketplace reflect political and marketplace power, not economic efficiency or inevitability. Marketplace rules are set by government policies. Since 1980, government policies have shifted power from workers to employers through weakened labor laws and lax enforcement of them. Free trade policies have allowed jobs to move overseas, meaning that US workers must compete with low-paid foreign workers. Policies have also shifted power from consumers to corporations through weakened regulations and lax enforcement of consumer protection laws, including of anti-trust laws.

Simultaneously, political power has shifted from average citizens and voters to wealthy elites and their corporations. Spending on election campaigns has grown dramatically. Campaign finance laws now allow wealthy individuals and corporations to spend unlimited amounts of money on campaigns for public offices. As a result, elected officials are more beholden to wealthy individuals and corporations than ever before.

Political power has also been shifted through lobbying, the revolving door, and legal strategies. Corporate lobbying of public officials has grown substantially. This means the voices of the big corporations are much louder and more frequently heard in policy making arenas than before. Their voices are much louder than the voices of average citizens. The revolving doors between regulated industries and government regulators or policy makers has ever greater numbers of people passing through them. Corporations have pursued legal strategies in the courts that have given them increased power, including a right to freedom of speech that was previously reserved for individuals. Their court strategies have also blocked and greatly delayed regulation, including on issues of public health and safety.

Business and environmental regulations have been weakened. Anti-trust laws have effectively ceased to limit market size and concentration. Simultaneously, corporations have developed new ways to exploit market power. Consolidations of pharmaceutical corporations have resulted in unjustifiable skyrocketing drug prices for existing drugs, while changes in patent laws and market manipulations delay the arrival of generic drugs in the marketplace.

These shifts in marketplace and political power are mutually reinforcing. As a result, our markets unjustifiably reward the rich and powerful. For example, Wall Street traders are making millions and sometimes billions of dollars in incomes but are not adding much – if anything – of value to the overall economy. Similarly, the very high pay for corporate CEOs is well above the value they add to the economy.

Taxes have been reduced for wealthy individuals and corporations. The well-off have seen dramatic tax cuts on their high incomes, on unearned income (i.e., gains, dividends, and interest on investments), and on their wealth (primarily through cuts in the estate tax). Many large, profitable corporations, particularly large, multi-national corporations, avoid paying any taxes at all. Meanwhile, the relative tax burden on work and workers has grown.

Leveraged buyouts result in financial manipulators making millions while workers lose jobs or take pay and benefit cuts. Retirees also lose benefits or taxpayers have pay them through the government’s Pension Benefit Guaranty Corporation. Globalization benefits multi-national corporations and the financial industry while hurting workers and national sovereignty.

Economists are now acknowledging that in many cases economic size and power are undermining market efficiency rather than enhancing it as the economies of scale argument traditionally promised. Furthermore, marketplace power starkly contradicts the core assumption of economics, namely that markets are perfectly competitive.

The corporate and financial elite’s agenda of deregulation, tax cuts, and free trade has been promoted as creating jobs and strengthening our economy. The data clearly show that this has not been the case. Economic growth is certainly no greater now than it was in the 1950s and 1960s. Meanwhile, economic volatility, insecurity, and inequality are clearly greater.

My next post will describe what we can and should do to stop runaway economic inequality, which will also contribute to rebuilding the middle class.

[1]       Kuttner, R., 1/14/16, “The new inequality debate,” The American Prospect (http://prospect.org/article/new-inequality-debate-0)

A CONSENSUS ON TRADE TREATIES?

Most of the presidential candidates agree that past trade treaties have had negative effects on US workers and that future trade treaties need to take a different approach. This would appear to be bad news for the Trans-Pacific Partnership (TPP) and other trade agreements that are in various stages of negotiation and ratification. Bernie Sanders has been a long-standing opponent of the TPP, Hillary Clinton has recently converted to opposing it, Donald Trump appears to oppose it but with bluster and little substance, Ted Cruz has not been clear on where he stands, and John Kasich supports the TPP.

Support for the arguments against recent trade treaties has recently come from an unlikely source, Clyde Prestowitz, who served in a senior position in President Reagan’s Department of Commerce and as President Clinton’s vice chairman of the Commission on Trade and Investment in the Asia-Pacific Region. [1]

Prestowitz writes that after the 2001 agreement that let China join the World Trade Organization, our trade deficit with China soared from $80 billion to $370 billion. The best estimates are that imports from China have cost the US about 2.5 million jobs. This occurred despite assurances to Congress and the public that this agreement would dramatically reduce the trade deficit with China and create US jobs. These assurances were given by very senior members of the Bush administration including the Secretary of Commerce and the US Trade Representative.

The results of the US-Korea Free Trade agreement of 2012 are similar. Our trade deficit with Korea increased from $13 billion to $28 billion, costing the US roughly 90,000 jobs. However, the same promises of a reduced trade deficit and US job growth were made in promoting this trade deal.

Prestowitz concludes that “None of the trade agreements have eliminated [the trade deficit], or even reduced it, as promised, and none of them have come close to achieving other promised benefits.”

So, he poses the question of why both political parties and numerous well-educated officials have persisted in making and supporting these trade agreements, as well as using the same old arguments to sell them to Congress and the public. He gives two answers. The first is that the real reason for these trade agreements is to strengthen the US’s geopolitical position, not to improve the economic welfare of its workers. As an example of this, Prestowitz, to this day, defends the North American Free Trade Agreement (NAFTA) with Mexico and Canada as an appropriate step to counter the growing geopolitical influence of China and other Asian countries.

His second answer is that many experts base their analyses on a theoretical and outdated model of trade and globalization. This model assumes full employment, fixed exchange rates, no flow of investments across borders, no transfers of technology, and no costs due to displaced workers losing one job and having to find another one. In reality, the US has rarely, if ever (depending on the standard you use), been at full employment. Exchange rates have been floating and not fixed since the 1970s and some countries, notably China, systematically manipulate the exchange rates for their currencies. The flow of investments, of financial deals and money, across borders is greater today than the flow of goods (traditional trade). China and Japan, among others, have made the transfer of technology to their countries a condition of allowing access to their workforces and markets. And we know how painful the displacement of workers has been. New jobs have been hard to find and, for those lucky enough to get a new job, the pay and working conditions are typically far worse than they were with their previous job.

Another answer, that Prestowitz doesn’t present, is that large, multi-national corporations have great power in Congress and our federal government. They are the main beneficiaries of these trade treaties. Through campaign contributions (largely by their senior executives), lobbying, and the revolving door between them and positions in the federal government (including the executive branch and Congress), they have tremendous influence on trade and other policies.

It is encouraging to see that when the public is paying attention, as it does during a presidential campaign, and when there is at least one candidate who presents a strong position and argument against the TPP and other trade treaties, that other candidates will forego their allegiance to corporate power (and money) and take a position in opposition to the TPP. It will be our job, as voters and constituents, to make sure that the next president follows through on his or her campaign commitment to oppose the TPP and to work to ensure that trade treaties benefit US workers and the US economy.

[1]       Prestowitz, C., 3/22/16, “Trading down and up,” The Boston Globe

THE YEAR-END SPENDING BILL: A BIG WIN FOR SPECIAL INTERESTS, WHILE KEEPING GOVERNMENT OPERATING

The year-end spending bill that Congress passed on December 18 was loaded with riders that had nothing to do with the budget. For example, it lifted the 40-year-old ban on crude oil exports from the US, just as the climate summit in Paris concluded that emissions from burning fossil fuels must be lowered to address climate warming. The bill continued a ban on federal funding for public health studies of the causes of gun violence and continued to allow people on the no-fly list to buy guns. It repealed the 2008 requirement that meat sold in the US has to identify its country of origin.

This spending bill also included two provisions that block the disclosure of the sources of political spending. The Internal Revenue Service is prohibited from requiring the disclosure of political spending by and donors to not-for-profit entities that engage in political activity. And the Securities and Exchange Commission is prohibited from requiring the disclosure of political spending by corporations. [1]

The bill also had pork barrel spending inserted by individual members of Congress. For example, a provision for Senator Cochran of Mississippi directs the Coast Guard to build a $640 million ship in his home state, but the Coast Guard says the ship isn’t need. Similarly, Maine Senator Collins got $1 billion in the budget for a destroyer that will probably be built in Maine, but the Navy says the ship isn’t needed. [2]

The good news is that the year-end spending bill keeps our government open and operating and funds important programs for middle and low-income Americans. Furthermore, many even more odious riders were kept out of the bill. As I noted in my last post, the good news about the separate year-end tax bill is that 40% of its provisions actually benefit regular, working Americans. This percentage is almost double what it has been in the past. Concerted activism by progressive politicians, leaders, and regular Americans made some good things happen in both the year-end spending bill and the year-end tax bill.

The bad news is that, as Moyers and Winship write, “There is an unwritten rule in Congress that before you do even a little for the working class you must do a lot for the donor class.” [3] These bills do a lot for the donor class – wealthy individuals and the corporations they run. As Moyers writes, “Candidates ask citizens for their votes, then go to Washington to do the bidding of their donors,” including cutting their taxes. So, we now have a wealthy donor class that gets high levels of representation and low levels of taxation. [4]

So, keep an eye on and be in touch with your elected officials. Let them know you are watching. Let them know that you want them to serve the interests of regular, working Americans, not those of the donor class of economic elites and the corporations they run. Make this a New Year’s resolution, because your activism as an informed citizen in a democracy can make a difference. Indeed, it has to, or our democracy, of, by, and for the people, will become a plutocracy run by and for the wealthy.

[1]       Moyers, B., & Winship, M., 12/17/15, “Lurking Within That Ominous, Omnibus Spending Bill,” Moyers & Company (http://billmoyers.com/story/lurking-within-that-ominous-omnibus-spending-bill/)

[2]       Moyers, B., 12/22/15, “The Plutocrats Are Winning. Don’t Let Them!” Common Dreams (http://www.commondreams.org/views/2015/12/22/plutocrats-are-winning-dont-let-them)

[3]       Moyers, B., & Winship, M., 12/17/15, see above

[4]       Moyers, B., 12/22/15, see above

THE YEAR-END TAX BILL: A BIG WIN FOR CORPORATIONS AND A LITTLE WIN FOR WORKING AMERICANS

Because of the gridlock in Congress, so few bills pass that those that have to pass get laden with special interest provisions and riders like ornaments on a Christmas tree. The recent year-end spending bill (2,009 pages long) and tax legislation (233 pages long) are the latest two examples. There were literally thousands of riders attached to these two massive and complicated bills. Many special interest provisions are slipped in by powerful legislators, typically on behalf of corporate lobbyists, when there is little time for other legislators (let alone the public) to scrutinize them. Nonetheless, these provisions can produce significant, windfall benefits for the targeted beneficiaries. Not surprisingly, the executives of the corporations that stand to reap the benefits are often large campaign contributors. [1]

The tax legislation Congress passed on December 18 was a $686 billion 10-year package. In it, Congress made permanent two recent expansions of tax credits that support low-income, working families: the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). Over the next 10 years, this will put $118 billion in the pockets of low-income working Americans. This will keep 16 million people from falling into poverty or deeper into poverty and it will help the economy by putting money in the pockets of people who will spend it at local businesses.

Congress also renewed the American Opportunity Tax Credit. It provides a tax credit of up to $2,500 per year for the costs of college. This will give a helping hand to millions of families struggling with the costs of higher education.

Overall, nearly 40% of the tax breaks in this legislation – approximately $250 billion – benefit working Americans who are overwhelmingly low- and middle-income. Typically, when the year-end tax cut package is passed low- and middle-income Americans have gotten just 20% of the tax breaks. So this year, with advocacy by many progressive leaders and activists, the benefits for working families were double what they usually are. [2]

This is the difference that political activism can make. Thank you to all of you who contributed your time, efforts, and voices to this fight.

Nonetheless, corporations got more than $400 billion in tax breaks. For example, heavy lobbying by Wall Street financial institutions made permanent a supposedly temporary, major tax loophole that makes it easier to stash profits offshore and avoid taxation here at home. This $78 billion (over 10 years) tax loophole has helped General Electric go five straight years without paying any federal income tax, and instead getting billions in refunds. Another offshore tax loophole was extended for five years at a cost of $8 billion. A special tax provision on the depreciation of equipment, intended as a temporary measure to fight the 2008 recession, was extended for another six years costing $28 billion in lost corporate tax revenue. Corporate lobbyists helped draft the language of at least some of these tax giveaways.

The hypocrisy of the supposed deficit fighters in Congress was on full display. None of the $400 billion in corporate tax breaks was paid for; their cost was simply added to deficit. Not one loophole was closed or tax subsidy eliminated to pay for this largesse. Yet when a provision to extend benefits for 9/11 first responders came up, the supposed deficit hawks insisted that it had to be paid for with spending cuts and new revenue!

My next post will cover highlights of the year-end spending bill.

[1]       Moyers, B., 12/22/15, “The Plutocrats Are Winning. Don’t Let Them!” Common Dreams (http://www.commondreams.org/views/2015/12/22/plutocrats-are-winning-dont-let-them)

[2]       Clemente, F., 12/22/15, “Families Advance With Recent Tax Bill, But Corporations Got a Lot More,” The Huffington Post (http://www.huffingtonpost.com/frank-clemente/families-advance-with-rec_b_8861986.html)

THE TRANS-PACIFIC PARTNERSHIP: CORPORATE POWER GRAB Part 2

With the full text of the Trans-Pacific Partnership (TPP) treaty now available, groups espousing environmental and workers’ interests state that the actual text is even worse than what they had expected. Environmental groups note that climate change is not even mentioned in the treaty. Workers’ groups note that the TPP will continue the experience under past treaties of US jobs moving overseas to lower wage countries and, therefore, reducing jobs and wages here in the US. This pattern will continue to undermine the middle class. Furthermore, on issues ranging from access to affordable medicines to the open Internet to food safety and labeling (e.g., country of origin and presence of genetically modified organisms [GMOs]), the TPP furthers corporate interests while undermining the interests of the public. [1]

Labor and environmental groups also note that there is no dispute resolution process focused on workers’ rights or environmental protection that parallels the Investor-State Dispute Resolution (ISDS) tribunals for multi-national corporations. If a state or country tries, for example, to ban or limit fracking or stop a coal mine, the fossil fuel corporation can sue the state or national government in the ISDS tribunal to overturn the action or get compensation. There is no similar mechanism for protecting workers or the environment.

The TPP also provides unjustified expansions of intellectual property protections in ways that benefit corporations. It extends and expands patents on drugs so that it will be longer before cheaper, generic versions of drugs are on the market and so that it will be harder for health care insurers to negotiate lower drug prices with the pharmaceutical corporations.

It requires Internet Service Providers (ISPs) to protect copyrights on corporate products such as movies and music. The TPP threatens ISPs with substantial penalties if they fail to shut down or remove protected content from a website that shares copyrighted material. Therefore, ISPs are likely to act in favor corporate copyright holders as soon as a copyright violation is alleged. [2]

The fact that the TPP enshrines corporate power is not a surprise. Corporate executives have been involved in the negotiating process from the beginning while everyone else was locked out. Furthermore, the process of drafting the TPP and now of approving it has been the target of substantial lobbying by multi-national corporations. Over the eight years of negotiations, 487 clients paid lobbyists to meet with or contact lawmakers and administration officials to discuss the TPP. Clients who reported lobbying on the TPP accounted for nearly thirty percent of all reported lobbying expenditures. The TPP has been mentioned 4,875 times in lobbying reports since 2008, when the US began negotiations. Corporations and other groups, such as the US Chamber of Commerce, paid lobbyists $2.6 billion during this period, although that figure includes lobbying expenditures on other issues listed along with the TPP on lobbying reports. The lobbying increased each year as the negotiations continued. Just two organizations mentioned the TPP in their 2008 lobbying reports but that number exploded to 1,317 in 2014. [3]

In a future post, I’ll discuss TPP’s failure to address currency manipulation and its ineffectiveness as a geopolitical response to the growing power of China.

[1]       Fulton, D., 11/5/15, “’Worse than we thought’: TPP a total corporate power grab nightmare,” Common Dreams (http://www.commondreams.org/news/2015/11/05/worse-we-thought-tpp-total-corporate-power-grab-nightmare)

[2]       Popular Resistance Newsletter, 11/8/15, “The secretly negotiated TPP will impact your life in many ways; together we can stop it,” (https://www.popularresistance.org/newsletter-10-shocking-realities-of-the-tpp-join-the-revolt/)

[3]       Tucker, W., 10/6/15, “Millions spent by 487 organizations to influence TPP outcome,” Center for Responsive Politics (http://www.opensecrets.org/news/2015/10/millions-spent-by-487-organizations-to-influence-tpp-outcome/?utm_source=CRP+Mail+List&utm_campaign=3570922ae8-Newsletter_9_24_15&utm_medium=email&utm_term=0_9df8578d78-3570922ae8-210762457)

THE TRANS-PACIFIC PARTNERSHIP: CORPORATE POWER GRAB

The full text of the Trans-Pacific Partnership (TPP) – a trade treaty and much more – was recently released. It was negotiated over 8 years in secret from the public and even Congress, although corporate executives were routinely involved. The treaty includes 12 countries: the US, Japan, Canada, Mexico, Australia, New Zealand, Peru, Chile, Singapore, Brunei, Malaysia, and Vietnam. Although the countries in the TPP represent over 40% of the global economy, the impact on trade per se – trade volume, tariffs, and quotas – will be small because the US already has a trade treaties with most of these countries, including all of the larger ones. [1]

Now that the full text has been released, at least 60 days have to pass before Congress can act on it. The Obama administration asked for and Congress agreed to consider this treaty under Fast Track rules. These rules require Congress to vote yes or no on the treaty with no amendments and in a limited time window. However, in the negotiations over approval of Fast Track rules, due to strong push back against them and against the treaty itself, the Obama administration agreed to release the full text of the treaty to Congress and the public for at least 60 days before a Congressional vote.

President Obama says that the TPP includes the strongest provisions of any trade treaty for protecting workers and the environment. [2] However, this is not saying much as past trade treaties have done almost nothing to protect workers and the environment. In addition, the TPP provisions for enforcing the labor and environmental provisions are quite weak. [3]

On the other hand, there are strong protections and enforcement mechanisms for corporate and investor interests. The “set of regulations governing investor rights, intellectual property, and … key service sectors, including financial services, telecommunications, e-commerce, and pharmaceuticals … enshrine the power of corporate capital above all … including labor and even governments.” [4]

Corporations and investors are allowed to sue governments if they feel their ability to make future profits is harmed by a country’s laws, rules, or regulations. They can take these claims to private Investor-State Dispute Settlement (ISDS) tribunals that make final, binding decisions and that bypass a country’s own courts and legal system. There is significant experience based on similar provisions in previous treaties that the ISDS process can undermine countries’ environmental and public health laws, as well as require governments to pay hundreds of millions of dollars in compensation to multi-national corporations. [5]

Senator Elizabeth Warren has criticized the TPP for giving multinational corporations too much power, in particular by allowing them to settle disputes through the ISDS tribunals and by expanding the ability of the large Wall St. financial corporations to challenge country’s financial rules and regulations. She has also stated that the TPP doesn’t go far enough in enforcing labor, public health, and environmental standards. [6]

Some conservatives are joining Senator Warren and others in expressing concern about the ISDS tribunals because they undermine US sovereignty by giving foreign corporations the right to challenge US laws and regulations. In addition to laws on safety, public health, and environmental standards, any US government law or regulation giving preference to the use of US companies in fulfilling government contracts would be subject to challenge by a foreign corporation under the TPP.

I’ll share more concerns about the TPP in subsequent posts.

My previous posts on the TPP and related matters include:

STOP “TRADE” TREATIES THAT FAVOR BIG MULTINATIONAL CORPORATIONS, 3/9/15, https://lippittpolicyandpolitics.org/2015/03/09/stop-trade-treaties-that-favor-big-multinational-corporations/

HISTORY AND LEAKS MAKE CASE AGAINST “TRADE” TREATIES, 1/20/14, https://lippittpolicyandpolitics.org/2014/01/20/history-and-leaks-make-case-against-trade-treaties/

STOP FAST TRACK FOR CORPORATE POWER GRAB, 1/13/14, https://lippittpolicyandpolitics.org/2014/01/13/stop-fast-track-for-corporate-power-grab/

TRADE TREATIES NEED OPEN DEBATE, NOT FAST TRACK, 1/8/14, https://lippittpolicyandpolitics.org/2014/01/08/trade-treaties-need-open-debate-not-fast-track/

“TRADE” AGREEMENTS & CORPORATE POWER, 9/13/13, https://lippittpolicyandpolitics.org/2013/09/13/trade-agreements-corporate-power/

“TRADE” AGREEMENT SUPERSIZES CORPORATE POWER, 9/10/13, https://lippittpolicyandpolitics.org/2013/09/10/trade-agreement-supersizes-corporate-power/

CORPORATE RIGHTS IN TRADE TREATIES, 7/22/12, https://lippittpolicyandpolitics.org/2012/07/22/corporate-rights-in-trade-treaties/

TRADE AGREEMENTS PAST AND PRESENT, 7/17/12, https://lippittpolicyandpolitics.org/2012/07/17/trade-agreements-past-and-present/

[1]       For more details and background on the TPP and related issues see previous posts that are listed at the end of this post.

[2]       Nakamura, D., 11/6 /15, “Release of text of Pacific trade pact does not quiet critics,” The Boston Globe from The Washington Post

[3]       Sachs, J.D., 11/10/15, “TPP is too flawed for a simple ‘yes’ vote,” The Boston Globe

[4]       Sachs, J.D., 11/1015, see above

[5]       Sachs, J.D., 11/1015, see above

[6]       Jan, T., 11/6/15, “Warren steps up criticism of the deal,” The Boston Globe

BIG CORPORATIONS BEHAVING BADLY PART 2

In my previous post, I focused on the big Wall St. corporations’ efforts to weaken financial regulations and consumer protections. In this post, I’ll share two much less visible examples of the power of big corporations to tilt the playing field in their favor:

  • H-1B visas
  • Consumer agreements and employee contracts

First, large corporations are dominating and gaming the H-1B visa program set up to help US companies hire foreign workers with special skills needed for their businesses that they are unable to find among US citizens. Only 85,000 of these visas are issued each year and many small companies with such needs are being shut out by large corporations requesting tens of thousands of the visas. It used to be that companies could apply and get one of these visas at any point during the year when the need arose. Now, immediately after the application process starts on April 1 each year, big corporations request thousands of visas so that a week later applications have already exceeded the year’s supply. [1]

Just twenty corporations took nearly 40% of the visas last year, about 32,000 of them, with one company applying for over 14,000. Thirteen of these 20 corporations are global outsourcing operations that typically bring in their employees from India to fulfill large contracts with US corporations that are outsourcing customer contact, marketing, or other functions. Their dominance and gaming of the system mean that many of the 10,000 other companies, many of them small businesses, that want and need these visas can’t get them.

These large corporations’ claims that they can’t find US citizens to perform these jobs is somewhat suspect. It seems likely that in some cases they simply want to pay the foreign workers less than they would have to pay Americans to do these jobs. Furthermore, a number of these corporations aren’t actually US corporations; they have their headquarters in India or Ireland, for example.

On a different front, many of the agreements that consumers must sign or agree to to shop online, rent a car, put a relative in a nursing home, or to get a credit card, cell phone, or many other products and services, contain a clause that goes something like this: “the company may elect to resolve any claim by individual arbitration.” Increasingly, this language is also showing up in contracts individuals must sign to get a job. This means that the corporate employer or provider of the product or service can force employees and consumers to resolve any complaint, problem, or claim, including ones that may involve fraud, illegality, or serious risk to the individual, through a corporate-controlled arbitration process and as an individual (i.e., not through any group action such as a class-action lawsuit).

This prevents the individual from going to court, from suing, and from joining with others in a class-action lawsuit. Class-action lawsuits, where a group of individuals who have been similarly harmed by a corporation’s actions band together to bring a lawsuit, are often the only realistic way to fight the power and deep pockets of a large corporation. Many attempts to bring class-action lawsuits have been rejected by the courts due to such arbitration clauses, including ones against Time Warner Cable for unauthorized charges on customers’ bills, AT&T for excessive cancellation fees, a travel booking website for price fixing, and ones for predatory lending, wage theft, and multiple cases of race and sex discrimination. The evidence indicates that once a class-action suit is blocked, most individuals simply drop their claims because they aren’t worth pursuing on an individual basis given the time and effort required and the small likelihood of winning any significant compensation.

“This is among the most profound shifts in our legal history. Ominously, business has a good chance of opting out of the legal system altogether and misbehaving without reproach,” according to US District Judge William Young, a Reagan appointee. The effort to prevent class-action lawsuits was led by a coalition of credit card companies and retailers; it has been underway for 10 years. The Attorneys General of 16 states have written to the Consumer Financial Protection Bureau (CFPB) warning that “unlawful business practices” could flourish with the growing inability to use class-action lawsuits to seek compensation for victims. [2]

In October, the Consumer Financial Protection Bureau outlined rules to prevent financial corporations from banning class-action lawsuits in consumer agreements. Wall St. and the US Chamber of Commerce immediately mobilized to block the CFPB’s effort.

Large corporations are continuously working to gain benefits for themselves at a cost to consumers, workers, and small businesses. I urge you to contact your elected officials and tell them that big corporations don’t need or deserve a playing field that’s tipped in their favor. If anything, the field should be tipped in favor of the little guy – individuals and small companies.

[1]       Preston, J., 11/11/15, “Top companies ‘game’ visa system, leaving smaller firms out of luck,” The Boston Globe from The New York Times

[2]       Silver-Greenberg, J., & Gebeloff, R., 11/1/15, “Hidden in fine print, clause stacks deck against consumers,” The Boston Globe from The New York Times

BIG CORPORATIONS BEHAVING BADLY

FULL POST: One of the themes that runs through many of my blog posts is the prevalence of corporate power in our politics, policies, economy, and lives. The power of large, often multi-national, corporations is evident in:

as well as in consumer protection laws, workplace and labor law, and the topics that our corporate media cover and don’t cover.

In this post, I’ll focus on efforts to weaken financial regulations and consumer protections, including some that are likely to come up in Congress in the near future. In my next post, I’ll share some other examples of the power of big corporations to tilt the playing field in their favor.

The large Wall St. financial corporations are wielding their power in opposing regulations and oversight intended to prevent another financial sector collapse and bailout like the one in 2008. Much of the fighting is over provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, including the Consumer Financial Protection Bureau that it created. Wall St. has been working hard to delay, water down, and repeal regulations under the Dodd-Frank law, in spite of their success in weakening the original law.

One of their tactics is to slip provisions weakening regulations and oversight into unrelated legislation that must pass, hoping their provisions will pass with little or no attention in Congress or among the public. Last December, when a must-pass year-end budget bill was being considered, they slipped in a provision repealing the requirement that their trading of risky investments called swaps (a kind of derivative) had to be conducted by entities separate from those that held insured deposits from individuals. The budget bill passed as did the repeal of the swap regulation. This means that $10 trillion of risky trades are held by banks that have federal deposit insurance. If these risky trades turn sour and produce big losses, the Federal Deposit Insurance Corporation and perhaps other government agencies will have to bailout the banks to make sure depositors don’t lose their insured deposits.

More recently, in October, Wall St. lobbied hard as bank regulators set the amount of money banks have to keep in reserve to cover potential losses on these risky trades. They were able to reduce the amount of these reserves, called the “margin requirement,” which increases the likelihood of a bailout at taxpayers’ expense.

With two pieces of must-pass legislation coming up Congress, the expectation is that Wall St. will again try to slip additional provisions into these bills to weaken regulation and oversight. The two bills are the year-end budget bill and the bill funding highway construction and maintenance. [1] One target appears to be the Consumer Financial Protection Bureau, which was the target of a recent $500,000 advertising campaign that falsely accuses the CFPB of denying people loans. (The CFPB doesn’t make loans; it regulates lenders to prevent them from making predatory and fraudulent loans.)

We have a Consumer Product Safety Commission to regulate and protect us from dangerous consumer products and a National Highway Traffic Safety Administration to protect us from dangerous automobiles (e.g., ones with faulty air bags or ignition switches). However, until Dodd-Frank passed, we did not have an agency to protect consumers from unsafe or predatory financial products. In Canada, where they did have such an agency, the incidence of predatory lending and mortgages was a tiny fraction of what it was in the US in the years leading up to the financial crash. This is a key reason the impact of the crash on homeowners and consumers in Canada was minor compared to the trillions of dollars of losses suffered by Americans.

I urge you to keep an eye out for efforts by our large corporations to bend policies – laws and regulations – to benefit themselves at a cost to consumers, workers, citizens, and small businesses. Contact your Members of Congress and tell them you’re tired of big corporations making out like bandits (sometimes literally) and getting away with it at your expense.

[1]       Hopkins, C., & Brush, S., 11/11/15, “Lawmakers urge regulators to hold the line on risky trades,” The Boston Globe from Bloomberg News

GOOD NEWS FOR US WORKERS

ABSTRACT: This Labor Day workers were able to celebrate falling unemployment, increased hiring, improved access to health insurance, and increases in the minimum wage. Expanded eligibility for overtime pay is also in the works. And the US Labor Department has proposed a new regulation that would cover home care workers under minimum wage and overtime rules. (They are currently exempted.) Policies could also be changed that would require more contingent or gig workers to be treated as employees under some or all of our labor laws and/or to require part-time employees to get pro-rated benefits.

Laws that support the right to unionize and bargain collectively could be strengthened, as could the enforcement of existing laws. Higher unionization correlates with lower inequality and a greater portion of national income going to the middle class.

Our public policies need to change, both to reinstitute workers’ bargaining power and to better serve workers in the gig economy. Workers in the US have been getting the short end of the stick for 40 years. Changes in public policies to address these issues are long overdue.

FULL POST: This Labor Day workers were able to celebrate falling unemployment and increased hiring. They could also celebrate improved access to health insurance through the Affordable Care Act (aka Obama Care). Increases in the minimum wage in a number of states and cities are more good news, along with the growing momentum behind the Fight for 15, which is pushing for a $15 minimum wage. Grassroots activism in support of workers specifically, and the middle and working class in general, is on the rise. [1] A number of political leaders have taken on this fight as well, including Senators Bernie Sanders (who is running for President), Elizabeth Warren, Jeff Merkley, Al Franken, Tammy Baldwin, Brian Schatz, Mazie Hirono, and Sherrod Brown. Pope Francis is also advocating for fairer treatment of workers and a reduction in economic inequality.

The momentum for increases in the minimum wage is supported by examples like San Jose, CA, which are refuting the scare-tactic claims of the business community and its political supporters in opposing any increases in the minimum wage. In San Jose, the minimum wage has gone from $8.00 per hour to $10.15. As a result, 70,000 of the city’s 370,000 workers directly or indirectly got a raise. But rather than costing jobs as opponents always assert minimum wage increases will do, unemployment has fallen to 5.4% from 7.4% in March 2013. The hardest hit industry – the restaurant business – has seen a 20% increase in the number of restaurants in the last 18 months. Although restaurants raised prices by an average of 1.75%, business is good and most customers don’t seem to notice that prices went up by a bit. [2]

Expanded eligibility for overtime pay is also in the works. Currently, most hourly workers are required to be paid time and a half for overtime work, i.e., work beyond 40 hours per week. However, employers are not required to pay overtime to salaried workers who are classified as managers or supervisors and are paid over $23,660 per year. (This is below the federal poverty line for a family of 4 people.) This $23,660 cutoff was established in 1975 and has not been updated since. In 1975, 60% of salaried workers qualified for overtime pay; today, less than 10% do. The US Department of Labor is proposing to raise the cutoff to $50,440, which is roughly adjusting it for the inflation of the last 40 years. If implemented, this change in regulations would mean that over 10 million additional US workers would qualify for overtime pay when they work over 40 hours per week. [3]

When the Fair Labor Standards Act was passed in 1938, it excluded domestic services workers and farm labor from its standards, such as the minimum wage and overtime pay. Many believe this happened because these workers were largely black and/or female. Amazingly, this exclusion remains in place today. Partly because of sub-minimum wages for their domestic services workers, the publicly-traded, national home-care corporations are very profitable – gross profits range from 30% to 40%. Furthermore, their CEOs’ compensation has risen 150% since 2004 (after adjusting for inflation), while their workers’ pay has declined 6%. [4]

In 2013, the US Labor Department proposed a new regulation that would cover home care workers under minimum wage and overtime rules. The coverage was supposed to take effect in January 2015, however the home care industry has been vehement in its opposition and has delayed the change by challenging the new regulation in court.

Policies could also be changed that would require more contingent or gig workers to be treated as employees under some or all of our labor laws, such as minimum wage, overtime pay, Social Security, workers’ compensation, and unemployment insurance laws. Rules could be changed to require part-time employees to get pro-rated benefits under many of these laws. Or employers could be required to make contributions to “individual security accounts” for gig workers to help them pay for benefits. [5] [6] Workers would also benefit from laws that regulate their schedules so they have more predictable hours and incomes. (See my post Supporting families is an investment in human capital Part 2 for more detail.)

Laws that support the right to unionize and bargain collectively could be strengthened, as could the enforcement of existing laws. For example, laws could be changed to make it easier for workers in franchised businesses and gig work to form unions and bargain collectively. [7] Enhanced workers’ bargaining power and workplace precedents based on union contracts would benefit all workers and support the revitalization of the middle class. Data over the last 100 years document a strong correlation between higher unionization and lower income inequality. Data from the last 50 years show a strong correlation between higher union membership and a greater portion of national income going to the middle class. [8]

Our public policies need to change, both to reinstitute workers’ bargaining power and to better serve workers in the gig economy. Our policies need to reflect the change from an industrial to a knowledge-based economy. Many current labor market standards, regulations, and economic security provisions were put in place around the Great Depression and responded to the transition from an agrarian economy to an industrial one. They need to be updated and adjusted to better align with current economic realities. [9]

Workers in the US have been getting the short end of the stick for 40 years. The results are stagnant wages, growing economic insecurity for most workers and families, a dramatic increase in economic inequality, and a declining middle class that lacks the purchasing power to keep our consumer-based economy humming. Changes in public policies to address these issues are long overdue.

[1]       Hightower, J., Sept. 2015, “The rebellious spirit of Matthew Maguire’s first Labor Day is spreading again across our country. Join the parade,” The Hightower Lowdown

[2]       Clawson, L., 6/16/14, “In San Jose, a minimum wage increase and falling unemployment,” Daily Kos (https://www.dailykos.com/story/2014/06/16/1307351/-In-San-Jose-a-minimum-wage-increase-and-falling-unemployment?detail=emailclassic)

[3]       Wise, K., 9/3/15, “Labor Day 2015: Important gains, many challenges for MA workers,” Massachusetts Budget and Policy Center (http://www.massbudget.org/report_window.php?loc=Labor_Day_2015.html)

[4]       Rogers, H., Summer 2015, “A decent living for home caregivers – and their clients,” The American Prospect (http://prospect.org/article/decent-living-home-caregivers%E2%80%94and-their-clients)

[5]       Ramos, D., 9/6/15, “The sharing revolution and the uncertain future of work,” The Boston Globe

[6]       Chen, M., 9/14/15, “This is how bad the sharing economy is for workers,” The Nation (http://www.thenation.com/article/this-is-how-bad-the-sharing-economy-is-for-workers/)

[7]       Johnston, K., 9/6/15, “Work’s dark future,” The Boston Globe

[8]       Clawson, L., 5/26/14, “The tight link between unions, the middle class and inequality in two charts,” Daily Kos (https://www.dailykos.com/story/2014/05/27/1301209/-The-tight-link-between-unions-the-middle-class-and-inequality-in-two-charts?detail=emailclassic)

[9]       Goodman, M.D., 9/6/15, “Public policies fail to keep pace with changing economy,” The Boston Globe

WORKING HARD, GAINING LITTLE

FULL POST: We recently celebrated the Labor Day holiday and workers in the US do have some things to celebrate, but in general the outlook is bleak. First, the bad news, and then in my next post the good news.

Wages (adjusted for inflation) fell 4% between 2009 (when the recovery officially started) and 2014. The fall was the greatest for low income workers – even in industries where hiring was strong – such as restaurant cooks (down 8.9%), home health aides (down 6.2%), and retail workers. Many workers are worse off than they were 20 years ago. [1]

Hourly wages for the typical worker have been basically stagnant since 1970, despite significant increases in worker productivity. From 2000 to 2014, for example, productivity grew by 21.6% while hourly compensation grew by just 1.8%. The value of the increased productivity has primarily gone to highly paid managers, business owners, and shareholders. Workers are not getting the fruits of their increased productivity because the rules of our economy have changed over the last 40 years to the benefit of employers. Workers’ power, through collective bargaining and other means, has been intentionally eroded by policy decisions by federal and state governments at the behest of powerful corporations. [2]

An important factor in these stagnant and falling wages is the growth of the number of workers who are not full-time employees; those who are temporary, part-time, or contract workers. This reflects the growth of what is called the gig economy. Roughly 40% of US workers were contingent or gig workers in 2010, up from 35% in 2006. [3] Roughly 27 million Americans are working as independent contractors or temporary workers, while another 24 million work at a mix of traditional and freelance work. These workers not only suffer from low wages, they also typically do not receive benefits and are not protected by labor laws covering health, safety, and working conditions, such as minimum wage and overtime pay laws. Furthermore, much of the safety net for workers in the US depends on being a regular, full-time employee: health insurance, retirement benefits, unemployment insurance, and workers’ compensation and disability insurance (for being unable to work due to an injury or a health issue). [4]

Our current employee-focused policies provide perverse incentives for employers because costs and administrative burdens are lower with non-employees than employees. As a result, employers actively work to maximize the use of contingent workers and minimize the number of full-time employees. They also misclassify workers as contractors to avoid paying payroll and unemployment taxes.

The gig economy means less economic security for workers now and in the future. Their jobs can disappear at any moment with no unemployment benefits to tide them over to the next job. Their weekly hours and income fluctuate. And typically they have no retirement benefits and no health insurance. If they buy health insurance on their own, they may have caps and high deductibles that could leave them in a financial crisis if a serious accident or illness were to occur. The risk of economic changes and recessions now falls primarily on employees, with little support from employers or our public safety net.

My next post will review good news for workers, including policy changes that would recapture workers’ bargaining power and better serve workers in the gig economy.

[1]       Schwartz, N.D., 9/3/15, “Pay has fallen for many, study says,” The Boston Globe from The New York Times

[2]       Economic Policy Institute, 9/2/15, “Gap between productivity and typical workers’ pay continues to widen,” Economic Policy Institute (http://www.epi.org/press/gap-between-productivity-and-typical-workers-pay-continues-to-widen/)

[3]       Johnston, K., 9/6/15, “Work’s dark future,” The Boston Globe

[4]       Ramos, D., 9/6/15, “The sharing revolution and the uncertain future of work,” The Boston Globe

A VOICE FOR WORKERS

Workers need to have a strong voice in the workplace and in our democracy to maintain an equitable balance of power with large, corporate employers. As the voice of labor has weakened over the last 35 years, workers’ pay has barely kept up with the cost of living and has fallen far behind workers’ growing productivity. In addition, the minimum wage has fallen substantially relative to the cost of living and workers’ benefits have been cut – many fewer workers have pensions and workers are paying more and more for their health insurance, if they have it.

Without a strong voice and bargaining power, workers do not get their fair share of economic growth and prosperity. (See my previous post, The Undermining of the Middle Class, for more detail.) For example, as workers’ pay and benefits have fallen in recent years, corporate profits and executives’ pay and benefits have risen dramatically.

The primary vehicle for providing a voice and bargaining power to workers is a labor union. Over the last 35 years, large corporations and their allies in government have engaged in a concerted campaign to weaken unions and workers’ bargaining power. Corporate employers have voided union contracts by declaring bankruptcy (e.g., many airlines), employers have been allowed to hire replacement workers when unionized workers engage in a strike (e.g., the air traffic controllers), employers have closed factories and moved jobs overseas, it has been made harder to organize workers and form a union, labor laws have been only weakly enforced, and penalties on employers who break labor laws are minimal.

This campaign to weaken unions has succeeded in reducing union membership among corporate employees from over 1 in 3 workers in the 1950s to 1 in 14 workers today. It has also undermined all workers’ bargaining power and throughout our economy has caused wages to stagnate and benefits to decline. The result has been a decline in the middle class’s share of national income.

Three key policy changes are needed to strengthen unions and the voices of workers:

  • Make it easier to form a union. Eliminate the ability of employers to delay and put up procedural hurdles to workers organizing a union.
  • Implement meaningful penalties for labor law violations. For example, the current penalty for firing a worker who is working to form a union (which is illegal), is simply to give him or her a job back, possibly with back pay. There is no fine or other penalty for having broken the law. Often these cases take so long to resolve (often it’s over a year) that the worker has had to find employment elsewhere.
  • Overturn, through federal law, states’ “right to work” laws. These laws allow employees in a unionized workplace to benefit from union-negotiated pay and benefits without having to pay union dues. This is a backdoor way to weaken and destroy unions by reducing their membership and revenue.

Wages and benefits are better in states (and countries) with higher levels of union membership. For example, in states with “right to work” laws, wages are $6,000 per year lower than in states without such laws and workers have weaker health and pension benefits as well. This applies not just to unionized workers but to all workers; all workers’ wages and benefits are better when unions are stronger.

Workers deserve fair pay and benefits for a hard day’s work. Unions provide the voice and bargaining power for workers; they establish a countervailing power to that of large, corporate employers. They improve pay and benefits, as well as working conditions, such as limiting the standard work week to 40 hours. Strong unions lead to a strong and fair economy, as well as a strong middle class. We need to strengthen labor unions to bring back a thriving middle class, as well as the fairness and shared prosperity that our economy produced in the 1950s through 1970s.

Strengthening labor unions is the seventh of Ten Ideas to Save the Economy: The Big Picture presented by Robert Reich and MoveOn.org. (You can watch the 3 minute video at: https://www.facebook.com/moveon/videos/vb.7292655492/10152780314000493/?type=1&theater.)

CORPORATE WELFARE IS MAKING US POOR

When we hear the term welfare, we think of public programs to help poor people. However, there are numerous public programs that provide welfare to corporations, most of whom are not poor at all. Corporate welfare occurs through so many subsidies and tax breaks that it is hard to keep track of them all. And it’s even harder to determine how much they are costing the federal and state governments.

Corporate welfare costs tens of billions of dollars – maybe $100 billion – per year. This means the federal and state governments have billions of dollars less to spend on education, public safety and defense, roads and bridges, and so forth. And it means that other taxpayers – you and me – have to pay more to make up the difference.

The corporate welfare goes mainly to large, often multi-national, corporations. They have the clout to bend government policies to serve their interests rather than the public interest. There are tax breaks and subsidies for the oil, coal, and gas industries ($37.5 billion per year [1]); for agribusiness; for the pharmaceutical industry; for the big Wall Street banks and financial corporations; for hedge fund managers; for international investors and multi-national corporations; etc.

This is crony capitalism: the private capitalists get their cronies in government to do them favors. They do this through campaign contributions and spending, through lobbying, and through the revolving door for personnel, which includes well-paying jobs in the private sector for public officials and employees when they leave their government positions.

For example, 288 of the Fortune magazine’s list of the 500 largest US corporations were profitable in every year from 2008 to 2012. But because of corporate welfare tax breaks, 26 of these large, profitable corporations paid no federal income taxes over those 5 years, including Boeing, General Electric, and Verizon. Furthermore, 93 of the 288 paid taxes at an effective rate of less than 10% over those 5 years – far less than the stated tax rate of 35%. [2]

Corporate welfare and crony capitalism need to end. Although the capitalists like to extol and advocate for the “free market,” our economy is anything but a free market. The large corporations have used their political clout to tip the scales in their favor. This is bad for the economy, for small businesses, for workers and the middle class, for governments and the public sector, and for democracy. Corporate welfare is unfair, inefficient, and wasteful; it needs to stop.

Ending corporate welfare is the sixth of the Ten Big Ideas to Save the Economy presented by Robert Reich and MoveOn.org. [3]

[1]       Aronoff, K., July 2015, “The death of climate denialism,” In These Times

[2]       Citizens for Tax Justice, 2/25/14, “The sorry state of corporate taxes,” http://ctj.org/ctjreports/2014/02/the_sorry_state_of_corporate_taxes.php

[3]       You can watch the 3 minute video at: https://www.facebook.com/moveon/videos/vb.7292655492/10152770639760493/?type=1&theater

PROTECTING OUR ECONOMY AND DEMOCRACY FROM WALL STREET

We need to protect our economy from the risky behavior of the big Wall Street banks and financial corporations. This is the fourth of the Ten Big Ideas to Save the Economy, presented by Robert Reich and MoveOn.org. [1] We need to prevent these Wall St. giants from crashing the financial system and sending our economy into a severe recession again – as they did in 2008. Millions of Americans lost their jobs, their homes, and their savings in the Great Recession of 2008. The Wall Street corporations and their senior managers got bailed out, but the rest of us got sold out.

The giant Wall St. banking corporations are bigger than ever and are up to their old tricks. Given their increased size, they are even more potent economically and politically than before the 2008 crash. They continue to engage in speculative trading and other risky financial activities that could bring them and our economy crashing down again. They are pushing to repeal even the very modest financial regulations that were put in place to better protect us after the 2008 crash (by the Dodd-Frank law). They have friends in Congress (from both parties), as well as in the administration, who are supporting their efforts. They press their case by spending tens of millions of dollars on campaign contributions and lobbying.

Three actions need to be taken:

  • Reinstate the requirement that banking activities involving government-insured deposits be kept separate from risky financial activities. The Glass-Steagall Act that used to do this – and kept our banking system safe for 70 years – was repealed in the late 1990s. This led to the 2008 collapse and bailout.
  • Re-institute a small transaction tax, a sales tax, on the purchase of financial assets. This would discourage speculative activity that has no value beyond self-enrichment (especially high-volume, computer-driven trading) and would produce significant revenue that could be put to good use. A 0.5% sales tax on the purchase of financial assets ($5 on every $1,000) would generate roughly $500 billion per year. (See my posts of 10/8/12 and 9/29/12 for more details.)
  • Split the big banks into multiple, smaller entities. Currently, they are too big to fail, which should mean that they are too big to exist. Their size gives them too much clout, both economically and politically. This makes them dangerous to our economy and our democracy. In the past, the country used its anti-trust laws to break up the big oil companies and the telephone monopoly ATT. Similarly, we should break up the giant Wall St. financial corporations of today. They are so big that a speculative trade that goes sour and puts them into bankruptcy threatens our whole financial system and economy, and, therefore, requires a public bailout. And they are so big that through spending on campaigns and lobbying, coupled with the revolving door that puts former employees in key government positions, they are able to bend the rules of our financial system and economy to their benefit.

[1]       You can watch the 3 minute video at: http://civic.moveon.org/tamewallstreet/share.html?id=116548-5637721-c7x9Tcx.

WHY ECONOMIC INEQUALITY CONTINUES TO GROW AND WHAT YOU CAN DO ABOUT IT

ABSTRACT: Despite many indicators that our economy is strong, most Americans are experiencing economic insecurity. Over half of US households have less than one month’s income in regular savings and median household income continues to decline. Low-wage workers at Walmart, McDonalds, and elsewhere are so poor they are receiving $45 billion in public assistance. This translates into the average US household paying $400 a year in taxes to support these workers.

So why are the majority of Americans falling behind economically? And why were things so different in the post-World War II period? The US job market has changed dramatically. Many full-time jobs have been replaced part-time jobs, contract work, and temporary work. Many large employers and some politicians have engaged in a conscious effort to undermine the bargaining power of workers and weaken the enforcement of labor laws. Policies that allow outsourcing of jobs overseas and high unemployment further undermine the availability of good jobs at good wages.

The ability of the public and voters to demand policies that support the middle class and workers has also been undermined. Wealthy individuals and corporations are now allowed to make huge contributions and expenditures in our elections, drowning out the voices of average voters. This means that economic inequality translates into political inequality and policies that favor the well-off. Furthermore, new barriers to voting and a strategy of paralyzing and denigrating government has fostered voter cynicism, which leads to “a downward spiral [of] depressed expectations and diminished participation.”

A genuine mass movement is needed to restore economic security and opportunity for the typical American worker. An opportunity to participate in building such a movement is available right now in the election of the Mayor of Chicago. Jesus “Chuy” Garcia is unexpectedly giving incumbent Mayor Rahm Emanuel, a crony of wealthy business interests, a run for his money. You can learn more about Garcia and contribute to his campaign at http://www.chicagoforchuy.com/index.html. The success of candidates like Garcia is critical to turning around the direction of our politics and policies, and to re-establishing government of, by, and for the people.

FULL POST: As the stock market sets record highs, as unemployment falls, and as the economy grows, most Americans are experiencing economic insecurity. Since 2007, US wealth as grown by over $30 trillion, but the number of children in families receiving public assistance to buy food has grown by 6.5 million to 16 million children (20% of all kids). Over half of public school students are poor enough to qualify for lunch subsidies and over half of US households have less than one month’s income in regular savings (as opposed to retirement accounts or home equity). Median household income has continued to decline in the 5 years since the official recession ended; 95% of income growth since 2009 has gone to the richest 1%. The jobs that are being created pay, on average, 23% less than the jobs that were lost. [1]

Low-wage workers (those earning less than $10.10 per hour) at Walmart, McDonalds, and elsewhere are so poor they are receiving $45 billion in public assistance. This translates into the average US household paying $400 a year in taxes to support these workers. Walmart’s highly publicized $1 raise for its lowest paid workers will cost the company about $1 billion per year. Its profits last year were $25 billion and it spent about $6.5 billion to buy back its own stock, enriching its investors. It’s estimated that taxpayers spent about $6 billion providing public assistance to Walmart employees last year. [2]

So why are the majority of Americans falling behind economically when many measures indicate that our economy is doing well and when the wealthy are doing very well? And why were things so different in the post-World War II period when our economy was doing well and the majority of Americans were getting ahead? Bob Kuttner offers seven reasons, which I summarize below. [3]

The US job market has changed dramatically. Many full-time jobs with career opportunities have been replaced part-time jobs, contract work, temporary work, and so forth. Many large employers and some politicians have engaged in a conscious effort to undermine the bargaining power of workers and weaken the enforcement of labor laws. Policies that allow outsourcing of jobs overseas and high unemployment (while limiting unemployment benefits) further undermine market forces that would provide good jobs at good wages – and with benefits.

Pro-business Republicans and Democrats have supported these policies. Furthermore, the ability of the public and voters to demand policies that support the middle class and workers has been undermined. Laws and court decisions have allowed wealthy individuals and corporations to make huge contributions and expenditures in our elections, drowning out the voices of average voters. This means that economic inequality translates into political inequality, and wealthy special interests can promote their own good at the expense of the public.

Similarly, laws and court decisions have made it more difficult for many voters to vote. And finally, a strategy of paralyzing and denigrating government, particularly at the national level, has fostered voter cynicism. This leads to passivity and lack of involvement in political activity including voting – “a downward spiral [of] depressed expectations and diminished participation.”

Kuttner says a genuine mass movement is needed to restore economic security and opportunity for the typical American worker, as well as democracy to our political process. He notes that the Roosevelt Revolution and New Deal of the 1930s accomplished this. The Civil Rights Movement of the 1960s also made major changes in economic justice and democratic processes. So it’s time again to throw off cynicism and apathy, and to activate and organize.

An opportunity to do so is available right now in the election of the Mayor of Chicago. Jesus “Chuy” Garcia is polling within 4 percentage points of incumbent Mayor, Rahm Emanuel, a crony of wealthy business interests (and former Chief of Staff for President Obama and former US Representative). As Mayor, Emanuel closed 50 public schools, attacked teachers, and engaged in privatizing schools, parking meters, transit fare collection, and other public sector functions and jobs. He has focused on downtown development while ignoring the neighborhoods. He has raised taxes and fees on working people while providing sweetheart deals for business people, many of whom have contributed to his election campaign. Emanuel has raised over $13 million, ten times what Garcia has raised, and has a super PAC backing him as well. He is receiving substantial support from wealthy business people who are active Republicans. [4]

Garcia shocked everyone in the primary by keeping Emanuel from getting a majority of the vote, thereby forcing the run-off election on April 7. If you would like to contribute to the movement to restore democracy, reduce inequality, and support workers and the middle class, supporting Garcia is a good opportunity. You can learn more about him and contribute to his campaign at http://www.chicagoforchuy.com/index.html. Even if you contribute just a few dollars, the number of donors is an important indication of the breadth of support. You can sign-up to make calls from your home encouraging Chicago residents to get out and vote for him here: http://pol.moveon.org/2015/garcia_calls.html?rc=kos.

The success of candidates like Garcia is critical to turning around the direction of our politics and policies, and to re-establishing government of, by, and for the people. Even if they don’t ultimately win, they change the issues and policies that are discussed, and help build the movement for change.

P.S. I think it’s noteworthy that there hasn’t been much coverage by the mainstream (corporate) media of this unexpectedly contested mayoral race in our 3rd largest city.

[1]       Buchheit, P., 2/9/15, “New evidence that half of America is broke,” Common Dreams

[2]       Buchheit, P., 3/16/15, “Four numbers that show the beating down of middle America,” Common Dreams

[3]       Kuttner, R., 3/23/15, “Why the 99 percent keeps losing,” Huffington Post

[4]       Perlstein, R., Feb. 2015, “How to sell off a city,” In These Times (http://inthesetimes.com/article/17533/how_to_sell_off_a_city)

STOP “TRADE” TREATIES THAT FAVOR BIG MULTINATIONAL CORPORATIONS

ABSTRACT: The Obama administration is in the final stages of negotiating two major “trade” treaties. It is pushing for Fast Track approval, which requires Congress to ratify them quickly (only 20 hours of debate on the thousands of pages in each treaty) with no amendments. These “trade” treaties primarily serve to enhance the power and profits of large multi-national corporations.

The Congressional Progressive Caucus (CPC) has released a set of principles for trade including:

  • Trade treaties should promote balanced trade and reduction of the current US trade deficit;
  • Workers’ rights should be protected and assistance provided to those who are displaced;
  • Currency manipulation to gain unfair advantage in trade should be banned;
  • The environment should be protected and environmental laws should not be undermined;
  • Trade treaties must not supersede countries’ consumer protections;
  • Private court systems that bypass and supersede a countries’ court system must not be allowed;
  • Trade treaties must safeguard affordable access to essential medicine; and
  • Trade treaties should support the United Nations Universal Declaration of Human Rights.

I encourage you to contact your U.S. Representative and Senators to urge them to support the Congressional Progressive Caucus’s principles for trade, and to oppose these “trade” treaties and Fast Track approval of them.

FULL POST: The Obama administration is in the final stages of negotiating two major “trade” treaties, [1] the Trans-Pacific Partnership (TTP) and the Trans-Atlantic Trade and Investment Partnership (TTIP). It is pushing for Fast Track approval, which requires Congress to ratify them quickly (only 20 hours of debate on the thousands of pages in each treaty) with no amendments to or filibustering of the language to which the administration has agreed. Despite the fact that a vote on the Fast Track approval process was delayed last week in Congress, it and these treaties will be back soon.

These “trade” treaties primarily serve to enhance the power and profits of large multi-national corporations. U.S. sovereignty and workers will be undermined, along with protections for our health, consumer and worker safety, the environment, and the stability of the financial system. Laws and regulations to protect public well-being are treated as illegal barriers to trade, although in reality it’s because they might be barriers to corporate profits. Multi-national corporations would be able to return to practices that were prohibited by the Clean Air and Clean Water Acts of the early 1970s and to the financial schemes that caused the 2008 Great Recession. [2] (See my posts of 1/13/14, 1/8/14, 9/13/13, 9/10/13, and 7/22/12 for more details.)

US Senator Elizabeth Warren has focused her opposition to the TPP on a provision called Investor-State Dispute Settlement (ISDS). It gives foreign corporations special rights to challenge U.S. laws, rules, and regulations in international tribunals, instead of the normal process of going through the U.S. courts. They could win large financial awards for alleged loss of potential profits. Such awards would have to be paid by U.S. taxpayers without ever going to a U.S. court. This significantly undermines U.S. sovereignty. [3]

This ISDS provision is already in the North American Free Trade Agreement (NAFTA) and some other existing trade treaties. As a result, governments have paid hundreds of millions of dollars to multi-national corporations under decisions by international tribunals where high-priced corporate lawyers serve as the judges. The number of cases brought to these tribunals is growing and there were 58 cases in 2012 alone. For example, a French corporation sued Egypt because it raised its minimum wage, a Swedish corporation sued Germany because it is phasing out nuclear power after the Japanese Fukushima disaster, and Philip Morris is suing Uruguay to stop new tobacco regulations. Eli Lilly is suing Canada to overturn a decision by its Supreme Court that limits drug prices. [4]

As a candidate for President, Obama criticized ISDS provisions in NAFTA. He promised to oppose foreign corporations’ rights to sue governments over laws or regulations that protect public safety or promote the public interest. He has done an about face on this issue.

Robert Reich, Bill Clinton’s Secretary of Labor, has a great, 2 ½ minute video explaining why we should oppose Fast Track and the TPP. [5] He notes that although it is the largest trade treaty in history, involving almost 800 million people and 40% of the world’s economy, it is being negotiated in secret. The public, the media, and even Congress have been shut out from the process and denied access to draft documents. However, corporate leaders have been extensively involved. The leaked information that has come out indicates that the TPP will exacerbate inequality and the undermining of the middle class by facilitating the outsourcing of jobs. It will also undermine rules and regulations that protect people (but might reduce profits) and make drugs more costly by lengthening patent protections.

The TPP and TTIP will provide few if any benefits to the economy, jobs, wages, or our balance of trade. Past trade treaties, such as NAFTA, have resulted in documented job losses, declining wages for middle class workers, increased trade deficits, and increasing inequality. [6] (See my posts of 1/20/14 and 7/17/12 for more information.)

The Congressional Progressive Caucus (CPC) has released a set of principles for trade. [7] Those principles include the following:

  • Trade treaties must allow open debate with full disclosure of their provisions, sufficient time to discuss them, and the opportunity to amend them;
  • Trade treaties should promote balanced trade and reduction of the current US trade deficit;
  • Workers’ rights should be protected and assistance provided to those who are displaced;
  • Currency manipulation to gain unfair advantage in trade should be banned;
  • Trade treaties must not limit the United States government’s ability to set contract guidelines, including giving a preference to domestic producers when making purchasing decisions;
  • The environment should be protected and countries’ environmental laws should not be undermined;
  • Trade treaties must not supersede countries’ food and safety standards, financial regulations, or other consumer protections;
  • Private court systems, such as Investor State Dispute Settlement tribunals, that bypass and supersede a countries’ court system must not be allowed;
  • Trade treaties must safeguard affordable access to essential medicine and not establish unfair drug patent protections that delay access to affordable generic drugs; and
  • Trade treaties should require signatory countries to implement and enforce domestic laws consistent with the United Nations Universal Declaration of Human Rights and should not prevent the U.S. or other nations from using trade benefits to promote human rights.

I encourage you to contact your U.S. Representative and Senators to urge them to support the Congressional Progressive Caucus’s principles for trade. In addition, I encourage you to urge your elected representatives to oppose these “trade” treaties and the Fast Track approval process for them.

[1]       I put trade in quotes because these and other recent “trade” treaties, such as the North American Free Trade Agreement (NAFTA), actually do little to reduce trade barriers (which are already quite low) or increase trade (which is already quite extensive). They primarily address a broad range of legal and regulatory issues.

[2]       Stiglitz, J., 3/15/14, “On the Wrong Side of Globalization,” The New York Times

[3]       Warren, E., 2/25/15, “The Trans-Pacific Partnership clause everyone should oppose,” The Washington Post

[4]       Gallagher, K.P., 3/4/15, “Saving Obama from a bad trade deal,” The American Prospect

[5]       Reich, R., 1/29/15, “Robert Reich takes on the Trans-Pacific Partnership,” https://www.youtube.com/watch?v=3O_Sbbeqfdw

[6]       Meyerson, H., 1/14/14, “Free trade and the loss of U.S. jobs,” The Washington Post

[7]       Congressional Progressive Caucus, 3/6/15, “Principles for trade: A model for global progress,” http://cpc.grijalva.house.gov/uploads/Final%20Principles%20for%20Trade%203-4-151.pdf

OUR ELECTIONS ARE ALL ABOUT THE MONEY

ABSTRACT: Although the next presidential election is over 20 months away, there is already media attention focused on who can and who is raising the most money. The top lobbyists / bundlers raise over $1 million for candidates’ campaigns. If this isn’t a blatant way of buying influence, I don’t know what is. A Washington, D.C., lawyer and political activist formed a super PAC that raised $145 million for Romney’s campaign in 2012. Presidential candidate Jeb Bush is holding $100,000 per person fundraisers. He plans to hold 60 fundraisers before April 1, an average of nearly one per day.

The money race is the real race; the actual courting of voters and voting is secondary. The savvy, hard-working, profit-driven individuals making large campaign contributions are looking for a return on their investment. And they get it through government actions that benefit their interests. This, in a nutshell, is the legalized corruption of the political system of our supposed democracy.

We must reform our system of financing election campaigns. Two essential elements are:

  • Reversing the Supreme Court’s Citizens United and related decisions, and
  • Establishing campaign financing systems where small contributions to viable candidates are matched by public funds so candidates can be competitive based on support from every day citizens and voters instead of being dependent on wealthy individuals and interest groups.

 

FULL POST: Although the next presidential election is over 20 months away, it is already getting quite a bit of media attention. Little of that attention is focused on the policies that the possible candidates support. Much of the attention is focused on who can and who is raising the most money.

On the Republican side, Romney’s decision not to run has set off a scramble among other possible candidates to win over his financial backers. Romney’s top five lobbyists / bundlers each raised over $1 million for his campaign. These lobbyists for powerful corporate interests solicited campaign contributions from multiple individuals and political action committees (PACs) and presented them in aggregate (i.e., a bundle) to Romney’s campaign. If this isn’t a blatant way of buying influence, I don’t know what is. The top lobbyist / bundler was Bill Graves, president of the American Truckers Association and former Governor of Kansas.

Announced presidential candidate Jeb Bush has been aggressively wooing the Romney fundraisers and others. He began active fundraising last November, two years before the election. In a recent week, he held a $100,000 per person fundraiser in New York, two fundraisers in Washington, D.C., and two in Chicago. He told his audience of lobbyists, CEOs, and corporate industry group representatives that he plans to hold 60 fundraisers before April 1, an average of nearly one per day. Charlie Spies, a Washington, D.C., lawyer and political activist, who formed a super PAC that raised $145 million for Romney’s campaign is now working with a newly formed super PAC supporting Bush. [1]

The money race is the real race; the actual courting of voters and voting is secondary. Is this really the way we want to be selecting candidates for President (or any office) in a democracy? Is this really how we want our candidates to be spending their time? Is this really what we want the media to be reporting about the candidates – how many fundraisers they are having, how much money they are raising, and who is providing them with huge amounts of money? Do we really want our candidates courting and being indebted to these wealthy individuals and interest groups?

The savvy, hard-working, profit-driven individuals making large campaign contributions are looking for a return on their investment. And they get it through government actions that benefit their interests. As one example of such a return, the Koch brothers spent in excess of $100 million in the 2014 federal election, primarily, if not exclusively, in support of Republican candidates. The new Republican-controlled Congress just happened to fast-track a vote on a bill mandating the construction of the Keystone XL Pipeline. The Koch brothers and their corporations lease oil rights on more than a million acres of land in the Alberta tar sands region from which the pipeline would transport oil. The construction of the pipeline would increase the value of their leases by an estimated $100 million! [2] This is just one example of the kind of payback wealthy campaign donors get. And the Koch brothers have just announced their intention to spend close to a billion dollars in the 2016 elections.

This, in a nutshell, is the legalized corruption of the political system of our supposed democracy. We are well down the road to a plutocracy (where the wealth elites rule) or a corporatocracy (where the corporations rule). I’m not sure there’s much difference, actually. (See my post on 7/21/14 for more detail.)

We must reform our system of financing election campaigns or we will lose our democracy – government of, by, and for the people. Reforming campaign financing will not be easy or quick. Two essential elements are:

  • Reversing the Supreme Court’s Citizens United and related decisions that equate money with speech and give corporations the free speech rights of the Bill of Rights (see my post on 1/11/15 for more detail), and
  • Establishing campaign financing systems, such as those in Arizona, Maine, and New York City, where small contributions to viable candidates are matched by public funds so candidates can be competitive based on support from every day citizens and voters instead of being dependent on wealthy individuals and interest groups (see my post on 7/25/14 for more detail).

[1]       Viser, M, 2/14/15, “Bush pressing to lock in Romney’s donors,” The Boston Globe

[2]       Hightower, J., 12/14, “Koch Kongress: The best money can buy,” The Hightower Lowdown (http://www.hightowerlowdown.org/)

THE UNDERMINING OF THE MIDDLE CLASS

ABSTRACT: Senator Elizabeth Warren gave a great speech recently in which she laid out how actions taken by corporations and related policy changes have undermined the middle and working class. She also spelled out what we need to do to change the rules of our economy so it works for everyone, not just the wealthiest. Up until the 1980s, our economy and the wages of the middle and working class grew together. But since the 1980s, all the growth of the economy has gone to the wealthiest 10%. Wages for the 90% of us with the lowest incomes have been flat, while our living expenses for housing, health care, and college have grown significantly.

This change in our economy, where all the benefits of growth go to the wealthiest 10%, represents a huge structural economic shift. It occurred because of cutting taxes; trade treaties; financial manipulation via leveraged buyouts and bankruptcies; minimum wage erosion with inflation; reductions in health care, unemployment, sick time, and overtime benefits; cutting of pensions and retiree benefits; and restrictions on employees’ rights to negotiate pay and working conditions as a group. Furthermore, corporations have been allowed to turn full-time employees into independent contractors or part-time workers who get no benefits and no job security.

These changes affect all workers, those in the private and public sectors, as well as both union and non-union employees. The changes were promoted by corporations and their lobbyists. Senator Warren states that it doesn’t have to be this way. We can make different choices and enact different policies that reflect different values. More on that next time.

FULL POST: Senator Elizabeth Warren gave a great speech recently in which she laid out how actions taken by corporations and related policy changes have undermined the middle and working class. She also spelled out what we need to do to change the rules of our economy so it works for everyone, not just the wealthiest. [1] She notes that up until the 1980s our economy and the wages of the middle and working class grew together. The rising tide of our growing economy did lift all boats. While the wealthiest 10% got more than their share of the growth (about 30%) in those years, the other 90% of us got 70% of the money generated by the growing economy.

But since the 1980s, all the growth of the economy has gone to the wealthiest 10%. The pay for Chief Executive Officers (CEOs) of corporations was 30 times that of average workers in the 1980s; today it is 296 times that of workers. And in the last 25 years, corporate profits have doubled as a portion of our economy, while the portion going to workers has declined. [2]

Wages for the 90% of us with the lowest incomes have been flat, while our living expenses for housing, health care, and college have grown significantly. Mothers have gone to work and parents are working more hours but this has not been enough to maintain a middle class standard of living. It certainly looks like today’s young people will be the first generation in America to be worse off than their parents.

Since 1980, the wages of the wealthiest 1% have grown by 138% (adjusted for inflation) while wages for the 90% with the lowest wages have received only a 15% increase (less than half of one percent per year). Workers have not received the benefit of their increased productivity, as was the case up until 1980. Since 1980, productivity has increased 8 times faster than workers’ compensation. If the federal minimum wage had kept up with productivity, it would be $18.42 instead of $7.25. And if it had kept up with inflation since 1968, it would be $19.58. [3]

This change in our economy, where all the benefits of growth go to the wealthiest 10%, represents a huge structural economic shift. So how did the economy get rigged so the top 10% get all the rewards of economic growth?

In the 1980s, government was vilified by politicians who were supported by corporate money. The supposed evils of big government were used to argue for deregulation and cutting taxes. This turned Wall Street’s financial corporations and other large multi-national corporations loose to maximize profits with no holds barred. Furthermore, trade treaties allowed corporations to manufacture goods overseas and bring them back into the U.S. with low or no tariffs, few U.S. regulations, and no regulations on how foreign labor was paid or treated. In addition, the U.S. corporations were allowed to cut benefits and pay for U.S. employees, including by undermining workers’ bargaining power in multiple ways, and through financial manipulation via leveraged buyouts and bankruptcies, as well as changes in tax laws.

Middle class workers have been undermined by corporations moving (or threatening to move) their jobs overseas and by changes in state and federal laws. The minimum wage has been eroded by inflation; workplace safety and legal protections have been weakened; health care, unemployment, sick time, and overtime benefits have been reduced; restrictions on child labor have been lifted; and it has become harder to sue an employer for discrimination. Pensions and retiree health benefits have been cut or eliminated. Just 34 of the Fortune 500 list of the largest corporations offered traditional pensions to new workers in 2013, down from 251 in 1998. [4] And wage theft through failure to pay the minimum wage or overtime wages, or through manipulation of time cards and other means, has spread. Meanwhile, enforcement of labor laws has been weak.

Employees’ rights to negotiate pay and working conditions as a group have been restricted. In addition, the middle class has been hammered by labor laws that allow corporations to turn full-time employees into independent contractors or part-time workers who get no benefits and no job security.

These changes affect all workers, those in the private and public sectors, as well as union and non-union employees. The changes were promoted by corporations and their lobbyists, along with corporate-funded think tanks, the Chamber of Commerce, the National Federation of Independent Business, the National Restaurant Association, the National Association of Manufactures, and other business groups. These efforts were also advanced by corporate-funded advocacy organizations such as the American Legislative Exchange Council (ALEC), Americans for Tax Reform, and Americans for Prosperity. [5]

Senator Warren states that it doesn’t have to be this way. We can make different choices and enact different policies that reflect different values. My next post will discuss those values and policies. In the meantime, I encourage you to listen to Warren’s speech (just 23 minutes while you’re doing something else) or to read the press release. (See footnote 1 for links to them.)

[1]     You can listen to and watch Warren’s 23 minute speech at: https://www.youtube.com/watch?v=mY4uJJoQHEQ&noredirect=1. Or you can read the text in the press release her office put out at: http://www.warren.senate.gov/?p=press_release&id=696.

[2]       Tankersley, J., 12/25/14, “Amid gain, middle class wages get no lift,” The Boston Globe from the Washington Post

[3]       Economic Policy Institute, 12/24/14, “The 10 most important econ charts of 2014 show ongoing looting by the top 1 percent,” The American Prospect

[4]       McFarland, B., 9/3/14, “Retirement in transition for the Fortune 500: 1998 to 2013,” Towers Watson (http://www.towerswatson.com/en/Insights/Newsletters/Americas/Insider/2014/retirement-in-transition-for-the-fortune-500-1998-to-2013)

[5]       Lafer, G., 10/31/13, “The legislative attack on American wages and labor standards, 2011-2012,” Economic Policy Institute (http://www.epi.org/publication/attack-on-american-labor-standards/)

GOVERNMENT BY THE BIG WALL ST. CORPORATIONS

ABSTRACT: The big Wall St. financial corporations just got another big gift. The Federal Reserve announced that it will give Wall St. a year’s delay (to mid-2017) on the implementation of the Volcker Rule, which would ban Wall St. from engaging in risky investments with federally-insured deposits. Many observers believe that this delay will simply give the financial corporations time to kill the Volcker Rule before it ever goes into effect through their lobbying and campaign contributions. The financial corporations’ incessant lobbying and cumulative campaign contributions weakened the Dodd-Frank bill to begin with, and now are delaying, weakening, and repealing its pieces during implementation. Citigroup spent $5.6 million on lobbying in 2013 and its political action committee and employees gave $2.1 million to candidates for federal office in the 2014 election cycle. JPMorgan Chase spent and gave similar amounts.

In addition to huge, risky investments with taxpayer-insured deposits, other risks in the banking and financial system are growing. The bottom line is that the huge financial corporations, which were too-big-to-fail in 2008 and therefore got trillions of dollars in a public bailout, are now bigger than ever and getting riskier by the day. Another bailout and crash of our economy are one financial mistake or economic surprise away.

We need to push back and tell our elected officials that:

  • The Dodd-Frank law’s financial reforms need to be strengthened,
  • Financial corporations should not be allowed to gamble with taxpayer-insured deposits, and
  • Too-big-to-fail financial corporations should be broken up.

FULL POST: The big Wall St. financial corporations just got another big gift. First, the ban on derivatives trading with federally-insured deposits was repealed in the year-end budget bill. (See blog post on 12/14/14.) Then, the Federal Reserve announced that it will give Wall St. a year’s delay (to mid-2017) on the implementation of the Volcker Rule. This Rule, which is a key part of the Dodd-Frank post-2008 crash financial reform legislation, would ban Wall St. from engaging in other types of risky investments with federally-insured deposits. The Volcker Rule is a partial re-implementation of the Glass-Steagall Act, which was enacted after the Great Depression and prohibited banks with federally insured deposits from engaging in investment banking activities. (It kept our banking system safe for 70 years until its repeal in 1999.) The prohibited investment activities include participation in private equity funds and hedge funds, which are basically unregulated investment activities and can be very risky. Goldman Sachs has $11 billion in such investments, while Morgan Stanley has $5 billion. [1]

Many observers believe that this delay will simply give the financial corporations time to kill the Volcker Rule before it ever goes into effect through their lobbying and campaign contributions. This is exactly what happened to the ban on derivatives: it was delayed from 2013 to mid-2015 and has now been repealed so it never went into effect. Citigroup, whose lobbyists wrote the repeal of the derivative ban, held over $60 trillion of derivatives (that’s right, trillion not billion) at the end of 2013 and this huge, risky investment will now continue to be protected by federal deposit insurance. [2]

The financial corporations’ incessant lobbying and cumulative campaign contributions weakened the Dodd-Frank bill to begin with, and now are delaying, weakening, and repealing its pieces during implementation. Citigroup spent $5.6 million on lobbying in 2013 and its political action committee (PAC) and employees gave $2.1 million to candidates for federal office in the 2014 election cycle. JPMorgan Chase spent $5.5 million on lobbying in 2013 and its PAC and employees gave $2.6 million to federal candidates for the 2014 election. Most of the members of Congress who voted for the budget bill that contained the repeal of the derivatives ban had received campaign contributions from one or both of these huge financial corporations. [3]

In addition to huge, risky investments with taxpayer-insured deposits, other risks in the banking and financial system are growing. The requirement for down payments on mortgages was recently decreased to 3%. The number of subprime auto loans has grown to $21 billion; some of them give borrowers 6 or 7 years to pay off the loan. This weakening of credit standards is the same pattern that triggered the 2008 collapse. The large financial corporations are also engaging in a growing amount of lending and trading in investments, some quite risky, that are beyond the scrutiny of regulators. This is all very reminiscent of the situation that led to the 2008 crash. [4]

The bottom line is that the huge financial corporations, which were too-big-to-fail in 2008 and therefore got trillions of dollars in a public bailout, are now bigger than ever and getting riskier by the day. Another bailout and crash of our economy are one financial mistake or economic surprise away. Nothing substantial has changed from the 2008 scenario.

To avoid another collapse and bailout, we need to push back and tell our elected officials that:

  • The Dodd-Frank law’s financial reforms and their implementation need to be strengthened, not weakened or delayed,
  • Financial corporations should not be allowed to gamble on risky investments with taxpayer-insured deposits, and

 

  • Too-big-to-fail financial corporations should be broken up to reduce the risks they present to our financial system and economy.

[1]       Queally, J. 12/19/14, “Just in time for the holidays, another Wall Street giveaway,” Common Dreams (http://www.commondreams.org/news/2014/12/19/just-time-holidays-another-wall-street-giveaway)

[2]       Eskow, R., 12/26/14, “Wall Street had a merry Christmas. The New Year’s still up for grabs.” Campaign for America’s Future (http://www.commondreams.org/views/2014/12/26/wall-street-had-merry-christmas-new-years-still-grabs)

[3]       Choma, R., 12/12/14, “Wall Street’s omnibus triumph, and others,” Open Secrets (http://www.opensecrets.org/news/2014/12/wall-streets-omnibus-triumph-and-others/)

[4]       Wiseman, P., 12/16/14, “Memories of financial crisis fading as risks rise,” Associated Press (http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article_2014-12-15-US–Financial%20Crisis-Forgotten%20Lessons/id-1422b6cbcd4d4b06a93fca295eaf1b7e)

CORPORATIONS ARE NOT PEOPLE AND MONEY IS NOT SPEECH

ABSTRACT: Many millions of dollars are being spent by special interest groups on our political campaigns. This level of spending makes it clear that wealthy special interests – individuals, corporations, unions, and non-profit organizations – are taking over our elections.

The only way to stop this undemocratic spending is through an amendment to the U.S. Constitution – because of the Supreme Court’s rulings in Citizens United and other cases. Overturning the 2010 Citizens United decision has broad support across all demographic and political groups, including 85% of Democrats, 76% of Republicans, and 81% of independents. And two-thirds of small business owners view the Citizens United decision as bad for small businesses.

Move to Amend, Wolf PAC, and other organizations are working to enact a corrective Constitutional amendment by introducing bills in state legislatures that call on Congress to enact such an amendment or, if Congress fails to act, calling for a Constitutional Convention to propose such an amendment. This legislation has passed in California, Vermont, and Illinois, and is pending in 13 other states.

If you’d like to participate in the effort to overturn Citizens United, contact Move to Amend or Wolf PAC via their websites. Both have local and national activities in which you can participate.

FULL POST: Many millions of dollars are being spent by special interest groups on our political campaigns, both for candidates’ elections and on ballot questions. Nationally, hundreds of millions of dollars were spent in 2014 by outside groups (i.e., not a candidate’s own campaign). (See previous post on 11/17/14 for details.) However, this is not just an issue for national elections. For example, here in Massachusetts recent outside spending included:

  • Governor’s race in 2014:                over $17 million
  • Two ballot questions in 2014:       over $23 million
  • Boston Mayor’s race in 2013:        over $  4 million

This level of spending makes it clear that wealthy special interests – individuals, corporations, unions, and non-profit organizations – are taking over our elections. The basic democratic principle of one person, one vote, is being overwhelmed by money. This money serves as a megaphone so that the voices and wishes of these wealthy special interests drown out the voices of average voters and citizens.

Making this situation even worse is that a growing portion of these huge sums is given by anonymous donors. (See previous post on 11/17/14.) This money is called “dark money” because its source is unknown. Anonymous donors means there is no accountability for the messages delivered. Furthermore, voters can’t effectively evaluate the credibility of the message because they don’t know who is paying for it.

The only way to stop this undemocratic spending in our elections is through an amendment to the U.S. Constitution – because of the Supreme Court’s rulings in Citizens United and other cases. (These rulings said that corporations and other organizations are people and have all the same rights as actual human beings under the Bill of Rights and the U.S. Constitution. The rulings also said that spending money in elections [and elsewhere] is speech and is protected by freedom of speech rights.)

The American public broadly supports overturning the Supreme Court’s 2010 Citizens United decision, which was the key to the avalanche of political spending by outside groups. Polling finds that 80% of the American people oppose the Citizens United decision with remarkably strong agreement across all demographic and political groups, including 85% of Democrats, 76% of Republicans, and 81% of independents. Similarly, 88% of small business owners view the current role of money in politics negatively and two-thirds view the Citizens United decision as bad for small businesses.

To address this situation, Move to Amend (https://movetoamend.org/), Wolf PAC (http://www.wolf-pac.com/), and other organizations are working to enact a corrective Constitutional amendment. They are introducing bills in state legislatures that take a two-step approach to advancing the Constitutional amendment necessary to reverse these rulings.

  • First, these bills call on Congress to pass a Constitutional amendment stating two things:
    • The rights protected by the Bill of Rights and the U.S. Constitution are the rights of human beings only and not of corporations or other organizations.
    • Congress and the states may place limits on political contributions and spending to ensure that our elections are fair and that all citizens can participate and have their voices heard in a reasonably equitable manner.
  • Second, if Congress fails to act within six months, the bills call for a Constitutional Convention to propose this amendment.

Such legislation has passed in California, Vermont, and Illinois, and is pending in 13 other states. You can check at the Move to Amend and Wolf PAC websites to see if there is an initiative in your state. A call for a Convention to amend the Constitution needs to be part of the legislation because our current Congress is so indebted to and dependent on wealthy campaign contributors that it is unlikely to pass an amendment staunching the flow of campaign money on its own.

Four of the last 11 amendments to the Constitution began this way – with state resolutions pressuring Congress to act. Notably, the 17th amendment, which established direct election of US Senators in 1913, was passed by Congress only after many states had passed a call for a Constitutional Convention. Although such a Convention has never occurred, if one did occur, any amendment it proposed would have to be ratified by ¾ of the states in order to go into effect.

If you’d like to participate in the effort to overturn Citizens United, first, go to the Move to Amend website and sign their petition (if you haven’t already). Second, I encourage you to contact Move to Amend or Wolf PAC via their websites. Both have local and national activities in which you can participate.

SECRETS OF THE FY15 FEDERAL SPENDING BILL

ABSTRACT: Congress recently rushed to pass a 1,700 page, $1.1 trillion spending bill. Such last minute, have-to-pass pieces of legislation are ideal vehicles for enacting laws that wouldn’t withstand the scrutiny of the regular legislative process. In my 12/14/14 post, I wrote about 2 such provisions: the repeal of the ban on banks investing in derivatives with taxpayer insured funds and the dramatic increase in the amount an individual can contribute to political party committees. This post highlights some of the other items that were slipped into this budget bill.

The Environmental Protection Agency had its budget cut by $60 million, which will result in its lowest staffing level since 1989. Multiple other provisions affecting the environment and the EPA were included. The Internal Revenue Service had its budget cut by $346 million. This will reduce federal government revenue and increase the deficit because the IRS collects $7 for every $1 it spends on audits. Some of the other provisions are listed below in the Full Post.

To help shed light on the passage of special interest legislation, Open Secrets (www.opensecrets.org) tracks campaign contributions and lobbying expenditures. It then reports on connections between them and the votes and actions of elected officials.

In summary, the budget bill and its various provisions were bad for low-income, middle class, and working families; for the environment; for educational outcomes and good nutrition in schools; and for fair tax collection. They were good for Wall Street, other large corporations, and wealthy individuals. If there are issues here that you care about, contact your Members of Congress and the President now to express your views and ask them where they stand.

FULL POST: As you probably know, Congress recently rushed to pass a 1,700 page, $1.1 trillion spending bill that keeps the federal government operating. Such last minute, have-to-pass pieces of legislation are ideal vehicles for enacting laws that wouldn’t withstand the scrutiny of the regular legislative process. In my 12/14/14 post, I wrote about 2 such provisions: the repeal of the ban on banks investing in derivatives with taxpayer insured funds and the dramatic increase in the amount an individual can contribute to political party committees. This post highlights some of the other budgetary and non-budgetary details that were slipped into this budget bill. [1] [2] [3]

The Environmental Protection Agency’s (EPA) budget was cut by $60 million, which will result in its lowest staffing level since 1989. Multiple other provisions affecting the environment and the EPA were included:

  • Block the EPA from applying the Clean Water Act to certain farms
  • Require the EPA to allow “mountain top removal” coal mining
  • Prevent the EPA from protecting 2 types of sage grouse under the Endangered Species Act (a benefit for the oil and mining industries)
  • Bar funding to help developing countries cut carbon emissions

The Internal Revenue Service (IRS) had its budget cut by $346 million. This will reduce federal government revenue and increase the deficit because the IRS collects $7 for every $1 it spends on audits. Most IRS enforcement targets high income tax cheaters because that’s where the significant losses in tax revenue occur. This might explain why its enforcement capacity is being cut.

Other provisions include:

  • Provided record funding to airlines that serve rural airports, $5.4 billion to fight Ebola, $5 billion to fight Islamic militants, and $3 billion for weapons systems the Pentagon doesn’t want.
  • Eliminated funding for President Obama’s Race to the Top initiative, which works to improve educational outcomes for children of all ages.
  • Repealed some nutrition requirements for school lunches (a Michelle Obama initiative).
  • Cut the Women, Infants, and Children (WIC) program, which provides vouchers for nutritious food to low income pregnant women and mothers and their young children. In addition, white potatoes must be included as an approved food. (Guess which industry pushed for this latter provision?)
  • Cut funding for Pell higher education grants to low income students. The money will be diverted to for-profit companies that serve as collection agents on student loans.
  • Allowed corporations to cut pensions for current retirees in certain situations.
  • Repealed rules regulating the hours truck drivers can drive. (A benefit for the trucking industry.)
  • Blocked Washington, D.C.’s marijuana legalization.

To help shed light on the passage of special interest legislation, Open Secrets (www.opensecrets.org) tracks campaign contributions and lobbying expenditures. It then reports which elected officials received how much in contributions from special interests and how the office holders voted on or otherwise affected policy making favoring the source of their campaign contributions. Open Secrets also reports on the lobbying expenditures of special interests that benefited from legislation or other policy making. For example, it recently reported on campaign contributions and lobbying by Wall Street corporations and the voting to repeal the ban on federally-insured banking corporations engaging in derivatives trading. The report also covered mining interests and the blocking of endangered species protection that would affect them, as well as the trucking industry and changes in driver safety regulations that benefit it. [4] (I’ll provide some of the detail from this report in my next post.)

In summary, the budget bill and its various provisions were bad for low-income, middle class, and working families; for the environment; for educational outcomes and good nutrition in schools; and for fair tax collection. They were good for Wall Street, other large corporations, and wealthy individuals.

The issues included in the year end budget bill are precursors of the issues, budgetary and others, that will be on the table when Congress reconvenes. If there are issues in the items above that you care about, keep tuned and be ready to act when they come up. Better yet, contact your Members of Congress and the President now to express your views and ask them where they stand. And don’t think that based on party affiliation you know where a politician stands; 57 Democrats in the House voted for this budget bill; only 6 Democrats in the Senate voted to stop it from going to a final vote; and President Obama supported it and signed it.

[1]       Waldman, P., 12/12/14, “Did Democrats get hosed on the Budget Bill?” The American Prospect (http://prospect.org/article/did-democrats-get-hosed-budget-bill)

[2]       Kuttner, R., 12/16/14, “The great budget sellout of 2014: Do we even have a second party?” The American Prospect (http://prospect.org/article/great-budget-sellout-2014-do-we-even-have-second-party)

[3]       Taylor, A., 12/16/14, “Defense, tourism among winners in spending bill,” Associated Press (http://bigstory.ap.org/article/418395cf20be4a409cfd85bb93020077/defense-tourism-among-winners-spending-bill)

[4]       Choma, R., 12/12/14, “Wall Street’s omnibus triumph, and others,” Open Secrets (http://www.opensecrets.org/news/2014/12/wall-streets-omnibus-triumph-and-others/)

WALL STREET BAILOUT REVIVED

ABSTRACT: As you probably know, Congress just rushed to pass a $1.1 trillion spending bill that keeps the federal government operating. Such last minute, have-to-pass pieces of legislation are ideal vehicles for enacting laws on unrelated matters that wouldn’t withstand the scrutiny of the regular legislative process.

One such provision in this bill repeals a piece of the Dodd-Frank financial industry regulation law entitled “Prohibition against federal government bailouts of swap entities.” The Dodd-Frank law does not prohibit banks from owning these derivatives, but requires them to do so in a separate entity that is not insured by the federal government. Derivatives were a major contributor to the 2008 financial collapse. Repealing this piece of the Dodd-Frank law benefits a very few, very large, very profitable, financial corporations. The actual language of the repeal provision was written by a lobbyist for Citicorp, one of those large financial corporations. Senator Elizabeth Warren (D MA) took the lead in fighting this provision because it raises the risk of another financial collapse and another taxpayer-funded bailout.

Wall Street held the whole federal government’s budget hostage. It, in effect, demanded federal insurance for its gambling with derivatives or the federal government would shut down for lack of a budget. Teddy Roosevelt broke up the trusts in the early 1900s because they had too much political power and this undermined democracy. We’re at that point again.

Another unrelated provision in the budget bill allows an individual to give almost $800,000 per year to a political party. This would exacerbate the already disproportionate influence these very few, very wealthy individuals have over our elected officials and our government. These individuals are investing and looking forward to a nice return on their investment from the politicians whose elections they supported.

I encourage you to contact your US Representative, your Senators, and the President. Tell them you are outraged by these provisions in the budget bill that undermine our democracy and increase the risk of another financial collapse and another bailout of private, Wall Street corporations with the public’s money.

FULL POST: As you probably know, Congress, having procrastinated until the last hour, just rushed to pass a $1.1 trillion spending bill that keeps most of the federal government operating through next September. At least partly by design, such last minute, have-to-pass pieces of legislation are ideal vehicles for enacting laws on unrelated matters that wouldn’t withstand the scrutiny of the regular legislative process. In some cases, these tacked on provisions are passed and become law despite the public, and many members of Congress, being unaware of their existence. There are quite a few of them buried in this over 1,000 page budget bill.

One such provision repeals a piece of the Dodd-Frank financial industry regulation law, which was passed after the 2008 financial meltdown and bailout, in an effort to prevent them from happening again. [1] [2] This provision repeals a section of the Dodd-Frank law entitled “Prohibition against federal government bailouts of swap entities,” which prohibits federally insured banks from owning highly speculative financial instruments known as “swaps.” These are one kind of what are called derivatives, which are bets (i.e., gambling) on how certain other financial securities or factors, such as interest rates, will change over time.

The Dodd-Frank law does not prohibit banks from owning these derivatives, but requires them to do so in a separate entity that is not insured by the federal government, which ultimately means insured by the taxpayers. Derivatives were a major contributor to the 2008 financial collapse and to the need for what was ultimately a multi-trillion dollar bailout of large Wall Street corporations.

Repealing this piece of the Dodd-Frank law benefits a very few, very large, very profitable, financial corporations. The actual language of the repeal provision, which was slipped into the bill at the last minute, was written by a lobbyist for Citicorp, one of those large financial corporations.

Senator Elizabeth Warren (Democrat from Massachusetts) took the lead in fighting this provision because it raises the risk of another financial collapse and another taxpayer-funded bailout. [3] Somehow this provision made it into this crucial piece of legislation despite apparent, strong bipartisan support for ensuring that we never have to bail out Wall Street again. For example, opposition to the 2008 bailout was a central issue in the rise of the Tea Party movement.

As Senator Warren states, this is all about power and money. There were no public hearings, no debate, and no transparency. This was all inside, backroom, backdoor politics by Wall Street. Warren highlights the extraordinary influence of one of the large, Wall Street financial corporations, Citicorp. She notes that 3 of the last 4 Secretaries of the Treasury have come from Citicorp, along with the Vice-chairman of the Federal Reserve. She identifies at least 5 other senior officials in the executive branch who have worked for Citicorp. She notes that Citicorp has spent tens of millions of dollars on lobbying and campaign contributions, as well as additional, unknown amounts on think tanks and PR campaigns.

These expenditures and the movement of people through the revolving door from Wall Street to government (and often back to Wall Street) has proven to be an investment with a big payoff. Citicorp alone got roughly $500 billion from the bailout and then went right back to making huge profits and paying huge amounts to senior executives. During the development of the Dodd-Frank legislation, there was a proposal to break up Citicorp and the other huge financial corporations because they were too big to fail, and therefore a danger to the economy and likely to receive a bailout with public money if they got in trouble. This proposal was killed by those on Wall Street and their friends at the Treasury Department. Now, these huge financial corporations are even bigger than they were before.

Wall Street held the whole federal government’s budget hostage. It, in effect, demanded federal insurance for its gambling with derivatives or the federal government would shut down for lack of a budget. This is the power that Wall Street has, and it is far too much power. It means we do not have a democracy; we have a corporatocracy.

When Teddy Roosevelt broke up the trusts in the early 1900s, he did it not primarily because their power was distorting the economy and markets, but because they had too much political power. He stated that this undermined democracy. Well, we’re at that point again, without a doubt.

Underscoring this point, another unrelated provision in the budget bill allows an individual to give almost $800,000 per year to a political party (up from the current limit of just under $100,000). A few hundred people – out of the 300 million in this country – give that kind of money to political campaigns. This would exacerbate the already disproportionate influence these very few, very wealthy individuals have over our elected officials and our government. And these individuals aren’t throwing their money to the wind; they are investing and looking forward to a nice return on their investment from the politicians whose elections they supported.

US Although the budget bill passed Congress on Saturday and will presumably be signed by the President, I encourage you to contact your Representative, your Senators, and the President. Tell them you are outraged by these provisions in the budget bill that undermine our democracy and increase the risk of another financial collapse and another bailout of private, Wall Street corporations with the public’s money.

(You can contact your Representative and Senators by calling the Congressional switchboard at 202-224-3121. 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. You can email the President at http://www.whitehouse.gov/contact/submit-questions-and-comments. You can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414).

[1]       Bierman, N., & Meyers, J., 12/12/14, “A late rush to fund government,” The Boston Globe

[2]       Taylor, A., 12/10/14, “Massive $1.1 trillion spending bill unveiled,” Daily Times Chronicle from the Associated Press

[3]       I encourage you to watch 2 speeches (each less than 10 minutes) that Senator Warren gave in Congress in the past week. They’re on YouTube at: https://www.youtube.com/watch?v=LgsN7ilcWL4 and https://www.youtube.com/watch?v=DJpTxONxvoo. She very powerfully makes the case that the repeal of this piece of the Dodd-Frank law is unjustifiable, undemocratic, and dangerous special interest law making.

DANGER AHEAD IN DC: CORPORATIONS AND THE WEALTHY POISED TO TAKE ADVANTAGE

ABSTRACT: Some people in Washington, D.C., are taking the election results as an indication that Republican policy priorities are in favor with the public. Furthermore, the Republicans in Congress and the President may want to show that they can work together, get things done, and pass new laws. Senator Elizabeth Warren (Democrat from Massachusetts) warns us that big corporations and their lobbyists will try to take advantage of this situation. (As my previous post (11/25/14) documented, the conclusion that Republican policy priorities are in favor with the public is not an accurate interpretation of the election results.)

Given Warren’s warning, it’s little surprise that the House this week passed a massive package extending tax breaks primarily for banks, investment firms, and other wealthy interests. The more than 50 tax breaks included in the bill would add nearly $42 billion to the budget deficit over the next decade. Surprisingly, there seems to be little concern over this cost. Previously, less expensive initiatives (that benefited the unemployed, low income families, and families with child care expenses) were defeated, supposedly because they were unaffordable.

I encourage you to contact your Senators and the President to let them know that these tax breaks for big corporations and wealthy individuals, if warranted, should be paid for by closing loopholes benefiting these same groups. Furthermore, I’d encourage you to note that the focus of any tax breaks and other legislation should be on helping low and middle income families and individuals, not wealthy corporations and individuals.

FULL POST: Some people in Washington, D.C., are taking the election results as an indication that Republican policy priorities are in favor with the public. This may include President Obama, who may feel that he has to reach out and accommodate the new Republican majorities in the Senate and House. Furthermore, the Republicans in Congress and the President may want to show that they can work together, get things done, and pass new laws. Senator Elizabeth Warren (Democrat from Massachusetts) warns us that big corporations and their lobbyists will try to take advantage of this situation. [1]

As my previous post (11/25/14) documented, the conclusion that Republican policy priorities are in favor with the public is not an accurate interpretation of the election results. Truly progressive candidates won in the US Senate and elsewhere. Progressive ballot initiatives won across the country, including in states that were electing Republicans. The public supports, among other things, improved pay and paid sick leave for low income workers, as well as stronger regulation of campaign spending and the ethics of elected officials.

As Warren writes, “The stock market and gross domestic product keep going up, while families are getting squeezed hard by an economy that isn’t working for them. … they see a government that bows and scrapes for big corporations, big banks, big oil companies and big political donors — and they know this government does not work for them.” She states that we the people should look carefully at any new laws that surface in Congress or get to the President’s desk to be signed and examine whose interests they serve. The big corporations, their lobbyists, and the elected officials whose campaigns they and their wealthy allies funded will try to take advantage of the situation to push their agendas and benefit their interests. [2]

She warns us to be on the lookout for “trade deals negotiated in secret, with chief executives invited into the room while the workers whose jobs are on the line are locked outside. … tax deals that carefully protect … billionaires and big oil and other big political donors, while working families just get hammered.” She also is concerned that the big Wall Street financial corporations will try to weaken regulation despite their billions in profits and huge executive pay packages, which they are reaping only because of huge public bailouts after they crashed our economy in 2008.

Given Warren’s warning, it’s little surprise that the House this week passed a massive package extending tax breaks primarily for banks, investment firms, and other wealthy interests, such as NASCAR race track owners, filmmakers, racehorse owners, and rum producers. However, the bill fails to extend tax breaks for low income families and for child care expenses. There are some benefits for teachers, commuters, individuals in states without an income tax, and small businesses, but the bulk of the benefits go to wealthy corporations and individuals. [3]

The more than 50 tax breaks included in the bill would add nearly $42 billion to the budget deficit over the next decade. Surprisingly, there seems to be little concern over this cost. Previously, less expensive initiatives (that benefited the unemployed, low income families, and families with child care expenses) were defeated, supposedly because they were unaffordable.

The President has threatened to veto the bill, saying it favors large corporations over families and the middle class. The Senate’s leaders have not yet indicated what they plan to do with this legislation from the House.

I encourage you to contact your Senators and the President to let them know that these tax breaks for big corporations and wealthy individuals, if warranted, should be paid for by closing loopholes benefiting these same groups. Furthermore, I’d encourage you to note that the focus of any tax breaks and other legislation should be on helping low and middle income families and individuals, not wealthy corporations and individuals. Let’s help those who need it the most, not those who already have the most.

[1]       Warren, E., 11/11/14, “It’s time to work on America’s agenda,” The Washington Post

[2]       Warren, E., 11/11/14, see above

[3]       Ohlemacher, S., 12/4/14, “House votes to extend tax breaks through December,” The Boston Globe from the Associated Press

HOLDER’S FAILURE AT JUSTICE

ABSTRACT: As Attorney General Eric Holder leaves office, one of his legacies will be his Department of Justice’s (DOJ) treatment of the major banks and financial corporations. Of particular note is the failure to prosecute any of the senior officers at the banks and financial corporations that caused the 2008 financial collapse. Bill Black calls this “the greatest strategic failure in the history of the Department of Justice.” This lack of prosecution leaves the management in place at these huge corporations. When dishonest people and their illegal activity produce success, they and their organizations have a competitive advantage. As a result, their bad ethics drive good ethics out of the market place.

In the Savings and Loan Crisis of the 1980s and 1990s, over 1,000 bankers were convicted of criminal activity, even though this crisis was less than one-tenth the size of the 2008 crisis. The civil fines and penalties that the financial corporations have paid for their fraudulent activities that caused the 2008 crash were not sufficiently large to put a real dent in their multi-billion dollar revenues and profitability. Furthermore, the costs of these fines and penalties were not borne by the senior executives, but by the shareholders and the taxpayers (given that they typically were deducted from revenue as a cost of doing business and therefore reduced profits and taxes on them). The executives got to keep all their compensation and bonuses, despite their being based on profits generated from illegal activity.

The lack of criminal prosecutions is even more astounding when one looks at the repeated engagement in illegal activity that was widespread among this handful of very large financial corporations and the collusion among them.

The relationship between Wall St. and our federal government, including regulators and legislators, is built on campaign contributions, lobbyists, and the revolving door. This cozy relationship serves Wall Street’s interests rather than the public interest and will be hard to break. Bill Black says to Bill Moyers, “there’s never going to be a decisive victory against power and money and finance. We have to fight. Every generation has to engage in this struggle.”

FULL POST: As Attorney General Eric Holder leaves office, one of his legacies will be his Department of Justice’s (DOJ) treatment of the major banks and financial corporations. Of particular note is the failure to prosecute any of the senior officers at the banks and financial corporations that caused the 2008 financial collapse. In addition, the fines and penalties paid by these huge corporations, although large in dollar amounts, were not large enough to have any meaningful effect.

Bill Black calls this “the greatest strategic failure in the history of the Department of Justice.” He should know. He is the author of The Best Way to Rob a Bank is to Own One and was a bank regulator intimately involved with the Savings and Loan crisis of the 1980s and 1990s. [1] He recently appeared on Bill Moyers’ TV show and this post summarizes their conversation. [2]

The lack of prosecution of the financial corporations’ senior officers leaves them in charge of these huge corporations. Furthermore, they now know that there are no bad consequences for them for massive fraud and repeated illegal behavior. When dishonest people and their illegal activity produce success, they and their organizations have a competitive advantage. As a result, their bad ethics drive good ethics out of the market place. Enforcement of the rule of law is essential to protecting not just consumers, but also to incentivizing honest and ethical people and behavior. Prosecuting the executives of banks and financial institutions that engaged in massive fraud and illegal activity would have important, positive effects on accountability and deterrence.

In the Savings and Loan Crisis of the 1980s and 1990s, President George H.W. Bush and his administration were committed to cleaning up the mess they inherited. As a result, over 1,000 bankers were convicted of criminal activity, even though this crisis was less than one-tenth the size of the 2008 crisis. Among other things, this ensured that these individuals would never lead a financial institution again because of their criminal records.

President Obama and his administration focused instead on ensuring the stability of the huge financial corporations. They avoided prosecutions of individuals even though it is unlikely that such prosecutions would have had much impact on the corporations. Many members of the Obama administration, including Holder and Treasury Secretary Geithner, had come to the administration through the revolving door from the industry or roles where they had close relationships with the industry. In addition, President Obama received very large amounts in campaign contributions from Wall Street, with JP Morgan Chase CEO Jamie Dimon as a leading contributor and fundraiser. Many people believe that without this big money from Wall Street Obama would have lost the primary to Hillary Clinton or that he might have lost the final election to John McCain.

The civil fines and penalties that the financial corporations have paid for their fraudulent activities that caused the 2008 crash were not sufficiently large to put a real dent in their multi-billion dollar revenues and profitability. This is consistent with the Obama administration’s overall approach of putting the stability of these corporations first. Furthermore, the costs of these fines and penalties were not borne by the senior executives, but by the shareholders and the taxpayers (given that they typically were deducted from revenue as a cost of doing business and therefore reduced profits and taxes on them). The executives got to keep all their compensation and bonuses, despite their being based on profits generated from illegal activity. Moreover, the civil settlements did not prohibit these financial corporations from continuing to engage in the lines of business where they had engaged in fraudulent and illegal activity. The settlements either explicitly or implicitly granted all the senior executives immunity from prosecution, ensuring that lower level executives’ testimony against senior executives could not be leveraged through individual offers of immunity or leniency for cooperation with prosecutors (as was done in the Enron case, for example).

The lack of criminal prosecutions is even more astounding when one looks at the repeated engagement in illegal activity that was widespread among this handful of very large financial corporations, and the fact that the illegal activities often required collusion among them. Over the last 10 years, these illegal activities have included:

  • Encouraging home owners to take on fraudulently underwritten and financially unviable mortgages
  • Knowingly selling those toxic mortgages to investors (including Fannie Mae and Freddie Mac) while fraudulently vouching for their quality
  • Fraudulently foreclosing on hundreds of thousands of home owners
  • Rigging the Libor interest rate that is used to price trillions of dollars of securities
  • Rigging bond prices and the underwriting of the issuing of bonds, and
  • Laundering money for viciously violent drug cartels, terrorist groups, and countries that had been officially banned from financial transactions as state sponsors of terrorism

The relationship between Wall St. and our federal government, including regulators and legislators, is built on campaign contributions, lobbyists, and the revolving door. This cozy relationship serves Wall Street’s interests rather than the public interest and will be hard to break, especially given the Supreme Court’s Citizens United and other decisions that allow huge amounts of money from corporations and their wealthy senior executives to flow into our political campaigns. Bill Black says to Bill Moyers, “there’s never going to be a decisive victory against power and money and finance. We have to fight. Every generation has to engage in this struggle.” The corporations live forever and their thirst for profits will never stop. Therefore, they will continually work to subvert our democracy and its laws to serve their interests unless we and our elected representatives are continually vigilant and fight back.

[1]       William K. Black was formerly the litigation director of the Federal Home Loan Bank Board from 1984 to 1986, deputy director of the Federal Savings and Loan Insurance Corporation (FSLIC) in 1987, senior vice president and general counsel of the Federal Home Loan Bank of San Francisco from 1987 to 1989, and senior deputy chief counsel of the Office of Thrift Supervision.

[2]       Moyers, B., with Black, W.K., 10/3/14, “Too Big to Jail?” Moyers and Company (http://billmoyers.com/episode/full-show-big-jail/)

THE CORPORATE EDUCATION INVASION Part 2

ABSTRACT: The most recent embodiment of the corporate efforts to capture (i.e., privatize) funding from public K-12 education is the new Common Core national curriculum standards and the testing that accompanies it. Common Core’s implementation will require public school systems to spend billions of dollars on new curriculum materials and on new testing, including software, hardware, and technology infrastructure as the testing is computer and Internet based. This comes at a time when school budgets are being cut, teachers and other staff are being laid off, and music, art, and extracurricular activities are being eliminated.

All the focus on privatization, on charter schools, on testing, and on the Common Core standards as the solutions to our supposedly failing public schools has diverted attention from the real failure of our public schools and our society. The failure of our public schools is their inability to close the gap in educational outcomes between well-off white children without special needs and everyone else. Low-income and minority students, along with those with special needs and English as a second language, typically arrive at school already well behind their better-off peers. Catching up is difficult and we don’t give our school systems the resources to have a realistic chance of closing the gap.

Expecting our schools to fix the pervasive impacts of poverty and inequality is a prescription for failure. To use that failure as an excuse to privatize schools and force public schools to spend billions on new curricula and testing is misguided (assuming the best of intentions) and only exacerbates the problem. It would be far more effective and efficient to use those billions of dollars to provide high quality early care and education (i.e., child care) and other supports to low income families with children under school age.

FULL POST: The most recent embodiment of the corporate efforts to capture (i.e., privatize) funding from public K-12 education is the new Common Core national curriculum standards and the testing that accompanies it. The corporations and their allies have convinced the public and policy makers that our public schools are failing through an extensive and inaccurate PR campaign. Their solutions are new education standards and accountability through testing.

The new Common Core standards have been widely adopted, in large part due to federal grants that effectively required their adoption. However, the pushback against Common Core is now taking hold with a broad and surprisingly varied set of opponents. The opposition includes working and upper class suburbanites, right wing Tea Partiers, and teachers. [1]

Common Core’s implementation will require public school systems to spend billions of dollars on new curriculum materials and on new testing, including software, hardware, and technology infrastructure as the testing is computer and Internet based. This comes at a time when school budgets are being cut, teachers and other staff are being laid off, and music, art, and extracurricular activities are being eliminated. [2]

It’s worth noting that the Gates Foundation spent over $200 million, given to a wide range of over 30 organizations (e.g., colleges and universities, for-profit and not-for-profit education corporations, states and local school systems, think tanks and advocacy groups, and teachers’ unions) developing and building support for the Common Core. [3] The Common Core standards were NOT developed and adopted through a democratic process that engaged the public and a broad set of stakeholders. The writers of the standards included no experienced classroom teachers, no educators of children with special needs, and no early childhood educators. The single largest group on the drafting committee was from the testing industry. Furthermore, the standards were not pilot tested in the real world and there is no process for challenging or revising them. [4]

While the stated goals of the Common Core are to improve student outcomes and produce a better prepared workforce, it’s hard to overlook the billions of dollars of immediate business for corporations. Therefore, it is not surprising that the Chamber of Commerce spent more than a million dollars promoting the adoption of the Common Core. [5]

All the focus on privatization, on charter schools, on testing, and on the Common Core standards as the solutions to our supposedly failing public schools has diverted attention from the real failure of our public schools and our society. The failure of our public schools is their inability to close the gap in educational outcomes between well-off white children without special needs and everyone else. However, this failure goes well beyond the school system. Low-income and minority students, along with those with special needs and English as a second language, typically arrive at school already well behind their better-off peers. Catching up is difficult and we don’t give our school systems the resources to have a realistic chance of closing the gap.

It would be much more cost effective and the likelihood of success would be higher if we addressed the root causes of the school readiness gap. This means supporting families and children in the years from birth until they enter school, and during pregnancy. However, our political leaders haven’t mustered the political will to seriously address these issues. And corporations haven’t figured out how to profit of off these services.

Expecting our schools to fix the pervasive impacts of poverty and inequality is a prescription for failure. To use that failure as an excuse to privatize schools and force public schools to spend billions on new curricula and testing is misguided (assuming the best of intentions) and only exacerbates the problem. It would be far more effective and efficient to use those billions of dollars to provide high quality early care and education (i.e., child care) and other supports to low income families with children under school age.

[1]       Murphy, T., Sept./Oct. 2014, “Tragedy of the Common Core,” Mother Jones

[2]       Ravitch, D., 6/9/14, “Time for Congress to investigate Bill Gates’ role in Common Core,” Common Dreams (http://www.commondreams.org/views/2014/06/09/time-congress-investigate-bill-gates-role-common-core)

[3]       Murphy, T., Sept./Oct. 2014, “Tragedy of the Common Core,” Mother Jones

[4]       Ravitch, D., 6/9/14, “Time for Congress to investigate Bill Gates’ role in Common Core,” Common Dreams (http://www.commondreams.org/views/2014/06/09/time-congress-investigate-bill-gates-role-common-core)

[5]       Murphy, T., Sept./Oct. 2014, “Tragedy of the Common Core,” Mother Jones

THE CORPORATE EDUCATION INVASION Part 1

ABSTRACT: Corporations covet public funding streams, especially large and consistent ones. A relatively recent example of a focused effort by corporations to capture public funding is evident in our public schools. These efforts have included an extensive public relations campaign aimed at convincing the public and elected officials that our public schools are failing. This is a standard corporate strategy: create a real or imagined crisis in a public service and push privatization as the solution.

This attack on our public schools is not only inaccurate, it diverts attention from the real issues underlying poor educational outcomes, which are poverty and inequality. Another key component of the PR strategy is to blame teachers for the supposed failure of our public schools. This undermines teachers and their unions, who are the most likely constituency that would stand up and oppose these privatization efforts.

The PR strategy has worked and privatized public education and testing are now multi-billion dollar corporate revenue streams. Charter schools, despite the promises of privatizers to produce better results, are no better on average than public schools with comparable populations of students.

Corporate efforts to profit off of public funding streams are not new. Eisenhower warned of the military-industrial complex back in the 1950s. The flow of money to private corporations, privatization in the broad sense, threatens to distort public services, decisions, and spending, because the interests and priorities of the corporations receiving the public funds are different from those of the public.

FULL POST: Corporations covet public funding streams, especially large and consistent ones. A relatively recent example of a focused effort by corporations to capture public funding is evident in our public schools. Although corporations have long sold textbooks and other curriculum materials to public schools, a lucrative business with a large and reliable funding stream, recent efforts have focused on privatizing the actual delivery of education, as well as designing and implementing testing.

These efforts have included an extensive public relations campaign aimed at making the public receptive to privatized spending in these areas. A major focus of this public relations (PR) campaign has been to convince the public and elected officials that our public schools are failing, that alternatives are necessary, and that the private sector is by definition more effective and efficient than the public sector. This is a standard strategy straight out of the playbook of corporate America and their political allies: create a real or imagined crisis in a public service and push privatization as the solution. (For more on this strategy, see my blog post, “Find a crisis, demand privatization,” of 6/5/14 [https://lippittpolicyandpolitics.org/2014/06/05/find-a-crisis-demand-privatization/].)

The PR campaign makes the case that our schools are failing by comparing US students to those from other countries. Although average scores indicate that US students perform worse than others, white children from well-off families do just fine in international comparisons. It is the gap between those students and less affluent and minority students that drags the average down. In actuality, a reliable nationwide test of student performance, the National Assessment of Educational Progress (NAEP), finds that US students’ performance is at the highest level on record. [1] So this attack on our public schools is not only inaccurate, it diverts attention from the real issues underlying poor educational outcomes, which are poverty and inequality in the US.

A second component of the PR strategy is the assertion that standardized, high stakes testing is necessary to measure the performance of US students and to establish accountability for improving results. Although testing is presented as part of a “no child left behind” goal, the commitment and funding to improve schools and education (including preschool education) for the students identified as being behind has never materialized. Meanwhile, policies and the funding to address poverty and inequality more broadly are not even on the radar screen.

A final component of the PR strategy is to blame teachers for the supposed failure of our public schools. This again diverts attention from the real underlying issues of poverty and inequality in the US. It also undermines teachers and their unions, who are the most likely constituency that would stand up and oppose these privatization efforts. Undermining unions (and the bargaining power and rights of workers in general) is an overarching goal of large corporations, so this kills two birds with and one stone from their perspective.

The PR strategy has worked and privatized public education and testing are now multi-billion dollar corporate revenue streams. Testing alone is a $2.7 billion a year industry in the US and the new Common Core standards will grow the testing business further. Wall Street investors, including private equity and hedge fund managers, are investing in for-profit corporations in the student testing and charter school industries because they are seen as opportunities for high profits and growth.

Charter schools, despite the promises of privatizers to produce better results, are no better on average than public schools with comparable populations of students. Many of the charter schools that show good results achieve them by attracting motivated students from motivated families. And they also cull students along the way, forcing or pushing out students who aren’t performing well, thereby improving testing results and other statistics. They also typically serve fewer students with special needs and with English as a second language than the public schools. [2]

Corporate efforts to profit off of public funding streams are not new. Eisenhower warned of the military-industrial complex back in the 1950s, when private corporations’ receipt of Defense Department funds was already distorting public policy making and spending. The corporate effort to tap into health care funding from Medicare and Medicaid is another example. For-profit prisons, water and sewer systems, and public education are more recent examples.

In all these cases, the flow of money to private corporations, privatization in the broad sense, threatens to distort public services, decisions, and spending, because the interests and priorities of the corporations receiving the public funds are different from those of the public. Most notably, the corporations are primarily interested in increased revenue and profit, while public goals such as quality and effectiveness of services, public health and safety, and equitable treatment of all service recipients, are typically secondary, at best, to the corporation. Furthermore, there is substantial evidence that private delivery of these services is NOT more effective or more efficient. Nonetheless, the advocates of privatization continue to assert that they are. (For more detail, see my previous posts on privatization, especially the ones on 10/16/12 and 10/23/12.)

[1]       Ravitch, D., 2/17/14, “Reign of error: The hoax of the privatization movement and the danger to America’s public schools,” as reviewed by Featherstone, J., in The Nation

[2]       Ravitch, D., 2/17/14, see above

TITLE: CORPORATOCRACY OR DEMOCRACY?

ABSTRACT: Here are three current examples of corporate power and influence.

Tax dodging: Burger King is the latest corporation to announce plans to move its legal headquarters to a foreign country as a way to avoid paying taxes in the US; a so-called “inversion.” Corporations suffer no consequences as a person would if he or she renounced US citizenship. The tax burden increases on the rest of us to pay what these corporations don’t. I encourage you to contact President Obama and urge him to take action to prevent, or at least discourage, these corporate inversions.

Fracking: In an effort to get favorable treatment of fracking in North Carolina (and elsewhere), the oil and gas corporations have been telling legislators and the public that there are no documented cases of fracking contaminating water supplies. That lie was dramatically exposed recently when the state of Pennsylvania released previously hidden details of 243 cases of water contamination between 2008 and 2014.

High-speed Internet: The fastest Internet access in the US is in Chattanooga, TN. It is about 50 times faster than the US average because it is provided by the municipally-owned electric company. The big cable companies had vigorously tried to prevent Chattanooga from building a publicly-owned network. They don’t want competition for their stranglehold on the slower, more expensive internet service that they provide. Despite their multi-billion dollar annual profits, internet service in the US is worse than that in thirty other countries, including Uruguay.

Conclusion: Corporate power and influence over public policies and our governments is achieved through campaign spending and lobbying. It is hurting our health, our quality of life, and our pocketbooks. It’s time to elect leaders who will stand up to corporations; stand up for consumers, workers, and the middle class; and change our campaign finance and lobbying laws. This is essential to preventing our democracy from becoming a corporatocracy.

FULL POST: Here are three current examples of corporate power and influence that affect our daily lives.

Tax dodging: Burger King is the latest corporation to announce plans to move its legal headquarters to a foreign country as a way to avoid paying taxes in the US; a so-called “inversion.” Although it would, in effect, renounce its US citizenship, everything else remains the same: the same executives and employees, the same stores and facilities, the same customers, and the same benefits from the publicly supported infrastructure in the US, including education of its employees, public benefits for its low wage employees (food stamps, subsidized health care and child care, etc.), transportation, police, fire, and military protection, etc. The only thing that does change is that it pays fewer taxes in the US.

As Senator Elizabeth Warren noted, “If a person did that we’d call them a freeloader. We’d insist they pay their fair share. And that’s exactly what our tax laws do for people who renounce their American citizenship.” However, corporations suffer no consequences; they are treated better than a person would be.

Senator Dick Durbin stated that, “With every new corporate inversion, the tax burden increases on the rest of us to pay what these corporations don’t.” This growing problem is an example of the tremendous corporate influence on our politics and policies through campaign spending and lobbying. [1]

I encourage you to contact President Obama and urge him to take action to prevent, or at least discourage, these corporate inversions.

Fracking: In an effort to get favorable treatment of fracking in North Carolina (and elsewhere), the oil and gas corporations have been telling legislators and the public that there are no documented cases of fracking contaminating water supplies. That lie was dramatically exposed recently when the state of Pennsylvania released previously hidden details of 243 cases of water contamination between 2008 and 2014.

The industry has pressed hard to keep cases of water contamination from being made public. Pennsylvania’s inspector general stated that problems with fracking have overwhelmed state regulators who were “unprepared to effectively administer laws and regulations to protect drinking water and unable to efficiently respond to citizen complaints.” [2]

High-speed Internet: The fastest Internet access in the US is in Chattanooga, TN. It is about 50 times faster than the US average because it is provided by the municipally-owned electric company. This has spurred the local economy, including a growing high tech sector.

This all happened because the electric company needed a high-speed network but the country’s big cable companies wouldn’t be offering service there for a decade or more. So Chattanooga raised $220 million through bond financing and won $111.5 million in federal stimulus dollars and built the network in 3 years.

The big cable companies had vigorously tried to prevent Chattanooga from building a publicly-owned network (as they have in other places). Chattanooga’s electric company had to lobby the state government for permission to participate in the telecom market. It had to win several court battles with Comcast and the state cable association.

Twenty states prohibit or restrict municipalities from doing what Chattanooga has done due to lobbying by the big telecom and cable companies. They don’t want competition for their stranglehold on the slower, more expensive internet service that they provide. They are taking legal steps to stop any further expansion of Chattanooga’s internet service, calling on the Federal Communications Commission (FCC) to block its (and another city’s) plans to expand public high-speed internet services for local residents.

Meanwhile, Comcast and Time Warner, 2 of the giants in the field, are seeking approval for a mega-merger, saying it won’t hurt competition or quality of service. However, Time Warner just paid $1.1 million to resolve an investigation by the FCC that found that it did not properly report multiple network outages, which is a violation of FCC rules.

Furthermore, despite their multi-billion dollar annual profits, internet service in the US is worse than that in thirty other countries, including Uruguay. With the deregulation and glorification of big business corporations, we’ve seen America go from being a leader in many fields to falling further and further behind even many third world countries, such as in Internet speed and access. [3]

Conclusion: Corporate power and influence over public policies and our governments is achieved through campaign spending and lobbying. It is hurting our health, our quality of life, and our pocketbooks. It’s time to elect leaders who will stand up to corporations; stand up for consumers, workers, and the middle class; and change our campaign finance and lobbying laws. This is essential to preventing our democracy from becoming a corporatocracy.

[1]       Germanos, A., 8/27/14, “Burger King ‘inversion’ allows it to profit off public, dodge taxes, say critics,” Common Dreams (http://www.commondreams.org/news/2014/08/27/burger-king-inversion-allows-it-profit-public-dodge-taxes-say-critics)

[2]       FishOutofWater, 8/29/14, “Pennsylvania makes public 243 cases of fracking contaminated water, “ Daily Kos (http://www.dailykos.com/story/2014/08/29/1325694/-Pennsylvania-Makes-Public-243-Cases-of-Fracking-Contaminated-Water)

[3]       Steven D, 8/30/14, “Fastest Internet in US? It’s Chattanooga, TN, thanks to local and fed $$$ (Ps. Big cable very angry),” Daily Kos (http://www.dailykos.com/story/2014/08/30/1325887/-Fastest-Internet-in-US-It-s-Chattanooga-TN-Thanks-to-Local-and-Fed-Ps-Big-Cable-Very-Angry)

INEQUALITY IS NOT INEVITABLE

ABSTRACT: “Inequality is not inevitable” is the title of a recent piece in the New York Times by Joseph Stiglitz. Our current levels of inequality – and the undermining of the middle class – are the result of policies and politics, not a fundamental feature of capitalism. One example is the recent bailout of the large bank and financial corporations with hundreds of billions of taxpayers’ dollars while only a pittance went to homeowners and other victims of these corporations’ predatory lending.

Our campaign finance laws allow economic inequality to lead to political inequality by letting the wealthy buy political influence. And political inequality increases economic inequality in a vicious cycle: politicians increase corporate welfare and give the rich tax cuts while cutting support for middle class workers and the poor.

True economic success is measured by how well the typical citizen is doing, especially in America, which claims to be the bastion of equal opportunity. But here in the US, the typical worker’s income is lower today than it was 25 years ago.

There are policy solutions that will simultaneously strengthen our economy, address the federal government’s budget deficit and debt issues, tackle our infrastructure needs, and reduce inequality. Tax reform is a core ingredient of these policy changes. (See details below.) It and other policies that can and should be changed will reduce inequality, improve our economy, and address other important issues.

FULL POST: “Inequality is not inevitable” is the title of a recent piece in the New York Times by Joseph Stiglitz, [1] a Nobel prize-winning economist. It is the final piece of a New York Times series on inequality entitled “The Great Divide.” [2] The series presents a wide range of examples that demonstrate that our current levels of inequality – and the undermining of the middle class – are the result of policies and politics, not a fundamental feature of capitalism. Other countries’ economies are performing as well or better than ours with far greater equality.

Policies that have increased inequality and weakened the middle class include the recent bailout of the large bank and financial corporations with hundreds of billions of taxpayers’ dollars while only a pittance went to homeowners and other victims of these corporations’ predatory lending. More help for homeowners and the unemployed would have helped the economy recover more quickly and vigorously. We also allow corporate monopolies and near monopolies to exist and make huge profits while they ship jobs and profits overseas, avoiding paying US taxes.

Our campaign finance laws allow economic inequality to lead to political inequality by letting the wealthy buy political influence. And political inequality increases economic inequality in a vicious cycle: politicians increase corporate welfare and give the rich tax cuts while cutting support for middle class workers and the poor. The wealthy corporations and individuals increase their wealth, not by working harder or being smarter, but by manipulating the rules of our economic and political systems. As a result, for example, corporate income taxes have declined as a portion of the federal government’s revenue from 39.8% in 1943 to 9.9% in 2012. Furthermore, Wall St. corporations and executives were not brought to justice for their criminal behavior that led to the economic collapse, or even for their abuse of our legal system in foreclosing on and evicting homeowners, inappropriately, fraudulently, and sometimes in total error.

True economic success is measured by how well the typical citizen is doing, especially in America, which claims to be the bastion of equal opportunity. But here in the US, the typical worker’s income is lower today than it was 25 years ago. And the life prospects of our children are determined more by the income and education of their parents than they used to be, and more than they are in other advanced countries. The tremendous growth in income and wealth of the top 1% in the US has not trickled down, it has evaporated, often in Caribbean and other tax havens. [3] There is compelling evidence that the current level of inequality in the US is weakening our economy and our social cohesion.

There are policy solutions that will simultaneously strengthen our economy, address the federal government’s budget deficit and debt issues, tackle our infrastructure needs, and reduce inequality. We can improve economic growth, promote economic efficiency, and reduce unemployment through changes in our tax system. Tax reform is a core ingredient of the policy changes needed to reduce inequality. Such tax reform includes: [4]

  • Reducing incentives and opportunities for corporations and wealthy individuals to avoid paying taxes
  • Increasing the top marginal income tax rates and reducing preferential treatment of unearned income, such as capital gains and dividends
  • Reforming corporate taxation to incentivize investing in the US (rather than overseas) and to close loopholes that are essentially corporate welfare
  • Taxing too-big-too-fail financial institutions to create a rescue fund (for future, probably inevitable bailouts) and to provide a disincentive for unlimited corporate growth and for speculative, highly leveraged financial activities that increase the likelihood of a bailout
  • Implementing a financial transaction tax to provide a disincentive for unproductive and sometimes harmful financial speculation and activity, such as high volume, high speed, computer-driven trading
  • Reforming the estate and inheritance tax to improve economic efficiency and fairness
  • Taxing pollution and other negative environmental effects
  • Ensuring the government gets full value when it sells public assets, such as natural resources like oil and gas

Tax reform is not an end in itself. The objective is to create a more efficient tax system, while simultaneously producing higher employment and economic growth, reducing inequality and environmental harm, and enhancing the efficiency of our economy.

Inequality is the result of tax and other policies that can and should be changed. Moreover, well-designed changes that address inequality will simultaneously improve our economy and address other important issues.

[1]       Stiglitz, J., 6/29/14, “Inequality is not inevitable,” The New York Times

[2]       See a listing and abstracts of The Great Divide series at http://opinionator.blogs.nytimes.com/category/the-great-divide/?module=BlogCategory&version=Blog Post&action=Click&contentCollection=Opinion&pgtype=Blogs&region=Header

[3]       Stiglitz, J. 6/29/14, see above

[4]       Stiglitz, J., 5/28/14, “Reforming taxation to promote growth and equity,” The Roosevelt Institute, http://rooseveltinstitute.org/sites/all/files/Stiglitz_Reforming_Taxation_White_Paper_Roosevelt_Institute.pdf

FIND A CRISIS, DEMAND PRIVATIZATION

ABSTRACT: Republicans are up to their old tricks: create a crisis at a public agency and then claim that privatization is the answer. The latest example is the Department of Veterans Affairs (VA). Congress hasn’t provided sufficient funding to serve the 1.5 million new veterans from the Iraq and Afghanistan wars. When US Senate legislation proposed 27 new VA health facilities (a 2% increase) and authorized hiring additional doctors and nurses back in February, the Republicans filibustered it, obstructing progress. Now that the lack of capacity has come to public attention, the Republicans are claiming that privatization is the answer.

Most veterans give high ratings to the care they get from the VA and are opposed to privatization. The VA system is actually a model from which our private health care system could learn a lot.

This political tactic of using a “crisis” to push for privatization is one that Republicans have used with Social Security, the US Postal Service, the public school system, road and bridge building and maintenance, the prison system, and so forth. Conservatives in Canada have used the tactic as well to attack their postal service and their universal public health care system.

Using a real, created, or perceived crisis as an excuse to allow inefficient corporate takeovers of societal functions best suited to provision by a public entity puts corporate profits ahead of the public good. Such privatization through “crisis” is a disingenuous tactic used by ideologues who want to shrink government and expand corporate profits regardless of whether or not it’s in the best interests of citizens and taxpayers.

FULL POST: Republicans are up to their old tricks: create a crisis at a public agency and then claim that privatization is the answer. Sometimes the crisis is real, sometimes it is manufactured, and sometimes it’s a perception created by a public relations campaign. However, the answer is always the same: privatize the agency because the “crisis” proves that the public sector can’t do the job.

The latest example is the Department of Veterans Affairs (VA). The cover-up of the waiting list for needed care in the VA’s Phoenix office is unforgiveable. But why was the agency unable to deliver timely care? Is it because doctors, nurses, and others were sitting around with their feet up doing nothing? Or is it because of a lack of capacity to provide the needed care? I’m willing to bet it’s the latter.

Congress hasn’t provided sufficient funding to serve the 1.5 million new veterans from the Iraq and Afghanistan wars. Many of these veterans have injuries, including traumatic body and brain injuries, that would have killed them on the battlefield in the past. However, our improved medical capabilities on the battlefield have saved their lives, but returned them home with significant health care needs. Mental health needs have grown as well.

However, when US Senate legislation proposed 27 new VA health facilities (a 2% increase) and authorized hiring additional doctors and nurses back in February, the Republicans filibustered it, obstructing progress on expanding needed health services for our veterans.

Now that the lack of capacity has come to public attention, the Republicans are claiming that privatization is the answer. Should we turn health care of our veterans over to the health care system that increases its profits by finding ways to deny coverage and care? Interestingly, most veterans give high ratings to the care they get from the VA and are opposed to privatization. The VA has unmatched expertise in traumatic brain injury, amputee care, and other combat-related health issues and it serves rural areas where private sector care is scarce. [1] It computerized medical records and undertook quality of care initiatives long before the private sector. The VA system is actually a model from which our private health care system could learn a lot. [2]

This political tactic of using a “crisis” to push for privatization is one that Republicans have used with Social Security, the US Postal Service, the public school system, road and bridge building and maintenance, the prison system, and so on. Conservatives in Canada have used the tactic as well to attack their postal service and their universal public health care system. [3] Using a real, created, or perceived crisis as an excuse to allow inefficient corporate takeovers of societal functions best suited to provision by a public entity puts corporate profits ahead of the public good.

Privatization of the VA is not good for our veterans or taxpayers. Such privatization through “crisis” is a disingenuous tactic used by ideologues who want to shrink government and expand corporate profits regardless of whether or not it’s in the best interests of citizens and taxpayers. [4]

[1]       Weisman, J., 5/30/14, “VA scandal forces Congress to study systemic change,” The Boston Globe from The New York Times

[2]       Gordon, S. 5/27/14, “Privatization won’t fix the VA,” The Boston Globe

[3]       Taliano, M., 5/16/14, “Privatization is the problem, not the solution,” Common Dreams, http://www.commondreams.org/view/2014/05/16-7

[4]       See my previous posts on privatization, especially the ones of 10/23/12 and 10/16/12, for more detail on the shortcomings of privatization.

CEO PAY: THE RACE TO THE TOP FOR THOSE AT THE TOP

ABSTRACT: CEO pay has increased over 50% in the last 4 years while pay for workers has barely increased. The typical CEO’s pay in 2013 was $10.5 million. The industry with the fastest growth in pay was the banking industry where CEO pay grew 22% in 2013 – on top of 22% growth the year before. While the economy remains weak and unemployment is high, the executives in the banking sector – that we as taxpayers bailed out after they crashed our economy – are making money hand over fist.

CEO pay has increased dramatically over not only the last 4 years but over the last 35 years for a variety of reasons. There also are a variety of reasons that the average workers’ pay has barely increased over the last 4 years and over the last 35 years as well. (See below for more detail.)

As income and wealth inequality have grown dramatically in the US over both the last 4 years and the last 35 years, the wealthy have re-invested part of their windfall in buying influence in our political system through campaign spending and lobbying. They have succeeded in tilting government policies to favor them and their large, typically multi-national, corporations.

Our elected representatives can and should change government policies and actions so that the growing inequality in the US is reduced. We, as the voters in a democratic political system, need to – and can – make them do so.

FULL POST: CEO pay has increased over 50% in the last 4 years while pay for workers has barely increased. CEO pay is now 257 times that of the average worker, up sharply from 181 times workers’ pay in 2009. The typical CEO’s pay in 2013 was $10.5 million – topping the $10 million mark for the first time. The highest paid CEO got over $68 million and the top 10 were all over $31 million. [1] CEO pay was up 8.8% last year while the average workers’ pay rose only 1.3%. [2] And CEO’s wealth is increasing dramatically too, in part because over 40% of their pay is in stock, where gains are taxed at a lower rate than regular cash income.

The industry with the fastest growth in pay was the banking industry where CEO pay grew 22% in 2013 – on top of 22% growth the year before. While the economy remains weak and unemployment is high, the executives in the banking sector – that we as taxpayers bailed out after they crashed our economyare making money hand over fist.

CEO pay has increased dramatically over not only the last 4 years but over the last 35 years for a variety of reasons. One reason is that CEO pay is set by corporate Boards of Directors that include many current and former CEOs of other corporations and often include members hand-picked by the CEO him or herself. When friends and peers set your pay level, is it any surprise you get big increases? Furthermore, every corporation and board want to tout their CEO as the best and the brightest – and, of course, therefore, the highest paid. Hence, it becomes a race to the top for those at the top. [3] If shareholder approval were required for CEO pay, perhaps things would be different.

There also are a variety of reasons that the average workers’ pay has barely increased over the last 4 years and over the last 35 years as well. Over the last 4 years, high unemployment has meant that workers have little leverage to ask for pay raises and corporations don’t need to reward workers because there is little opportunity for workers to quit and find another job. Workers’ negotiating power has also been eroded over the last 35 years by the decline of union membership and power. In 1983, over 20% of workers were members of unions compared to 11% in 2013. Globalization and technology have played a role by reducing the number of middle class jobs in the US, which tends to increase unemployment and reduce workers’ bargaining power and wages. However, their effects could have been ameliorated through rules governing trade that better protect workers both at home and abroad, as well as by policies and programs for job retraining and retention. [4]

As income and wealth inequality have grown dramatically in the US over both the last 4 years and the last 35 years, the wealthy have re-invested part of their windfall in buying influence in our political system through campaign spending and lobbying. They have succeeded in tilting government policies to favor them and their large, typically multi-national, corporations. These policies include:

  • Tax laws that a) have dramatically reduced the income tax rate on high incomes, b) have even lower rates for unearned income (i.e., income from investments), and c) favor corporations;
  • Government spending priorities, that include bailouts for financial and banking corporations but not for homeowners and workers who were devastated by the recession caused by the financial and banking industry; and
  • Labor and other laws that weaken workers’ bargaining power and fail to increase the minimum wage to keep up with inflation.

Our elected representatives can and should change government policies and actions so that the growing inequality in the US is reduced. We, as the voters in a democratic political system, need to – and can – make them do so.

[1]       Sweet, K., 5/28/14, “Median pay for CEOs rises sharply to $10.5m,” The Boston Globe from the Associated Press

[2]       Boak, J., 5/28/14, “Why executives get lavish compensation as rank-and-file wages lag,” The Boston Globe from the Associated Press

[3]       Boak, J., 5/28/14, see above

[4]       Boak, J., 5/28/14, see above

What liberal media? Part 2

ABSTRACT: The conventional wisdom is that the mainstream media has a liberal slant. Here’s part 2 of my refutation of the liberal media myth based on the information that we do NOT receive from it. There’s been little mainstream media coverage of gerrymandering, obstructionism in Congress, Supreme Court decisions that favor the wealthy and corporations, our growing and disproportionately minority prison population, our inefficient health care system, and the consolidation of the mainstream media into six huge corporations.

Our mainstream, corporate media are for-profit corporations, focused on selling advertising and making a profit by reporting the sensational and the titillating, rather than stories of substance and significance. Where’s the coverage of what truly ails our economy and our country? Where are the stories about how, by working together, we can address important issues? That’s what a truly liberal media would cover and I don’t see much of it in our mainstream media. My blog is designed to fill that gap for those of you who don’t have the time to peruse other sources of information.

FULL POST: The conventional wisdom is that the mainstream media has a liberal slant, despite the fact that it is owned by large corporations. Here’s part 2 of my refutation of the liberal media myth based on the information that we do NOT receive from it. I don’t believe we get the information we need to be informed citizens and voters from the mainstream media. My blog is designed to fill that gap for those of you who don’t have the time to peruse other sources of information.

This post is a continuation of my summary of a listing of issues that the supposedly “liberal” media have barely covered based on a recent article on Daily Kos (http://www.dailykos.com) entitled “15 things everyone would know if there were a liberal media.” [1]

  • The manipulation of the boundaries of US House members’ districts to gain political advantage is called gerrymandering. While not a new phenomenon, it has been carried to a new extreme in the last 25 years. It is a significant contributor to the gridlock in Congress. You probably haven’t heard much about this except in my recent blog post: https://lippittpolicyandpolitics.org/2014/03/09/government-gridlock-and-gerrymandering/.
  • Speaking of gridlock in Congress, you probably haven’t read a lot about the number of bills, judges, and executive branch positions that Congressional Republicans have blocked. For my blog’s coverage of this, see, for example, https://lippittpolicyandpolitics.org/2013/10/17/republican-sabotage/.
  • Supreme Court decisions allow wealthy individuals and organizations, primarily corporations, to spend unlimited sums in our political campaigns. The Citizens’ United decision in 2010 and the McCutcheon decision in early April give wealthy individuals and organizations bullhorns for political speech and contributions, drowning out the voices of average citizens. For information on this issue, see, for example, https://lippittpolicyandpolitics.org/2014/02/28/how-money-is-corrupting-our-politics/.
  • The number of people in our prisons has grown dramatically with significant over-representation of minorities. With 2.3 million Americans in prison, we have more people incarcerated than any other country, including China which has 4 times our population but only two-thirds as many prisoners. With 5% of the world’s population, we have 25% of the world’s prisoners. The US prison population is roughly 5 times what it was in 1980, despite falling crime rates. For-profit prison corporations are one interest group that has pushed for increased incarceration. Blacks are 39% of the prison population but less than 14% of the overall population.
  • US health care costs are the highest in the world, while our health outcomes are among the worst. The US spends $8,233 per person on health care while Norway, with the second highest health care costs, spends $5,388. We spend 17.6% of GDP (our total economy) on health care while the Netherlands, in second place, spends 12%. For more information, see: https://lippittpolicyandpolitics.org/2011/12/09/medicare-and-medicaid-and-our-health-care-system/.
  • Exploiting racial and ethnic prejudices, albeit somewhat subtly, has become standard fare for some political campaigns. Built on the concepts of Nixon’s Southern strategy from the 1960s, some people refer to the current version as “dog whistle” politics, because only those sensitized to it, sometimes subconsciously, hear it. For more detail, see Bill Moyers’ website at: http://billmoyers.com/episode/ian-haney-lopez-on-the-dog-whistle-politics-of-race/.
  • Bees may well be the “canary in the coal mine” for the dangers of high tech, high pesticide agriculture. Bees, which are needed to pollinate much of our food supply, are dying in huge numbers. For information on this, see my blog post: https://lippittpolicyandpolitics.org/2013/08/10/banning-bee-killing-pesticides/.
  • There’s been a tremendous consolidation in the media industry. Six huge corporations now control roughly 90% of the media in the US: Time Warner, Disney, News Corporation (Fox), Viacom, Comcast, and CBS. This corporate consolidation and lack of competition are reasons our news coverage is narrow and not liberal. It’s ironic that as our “news” becomes more and more infotainment, we get some of our best news and analysis from our entertainers, such as Jon Stewart and Stephen Colbert.

Our mainstream, corporate media don’t have a commitment to providing the information needed to have the informed citizenry that a democracy requires. They are for-profit corporations, focused on selling advertising and making a profit by reporting the sensational and the titillating (e.g., scandals, tragedy, crime, celebrities, disasters, and the like), rather than stories of substance and significance. In-depth information, investigative journalism, and analysis, the things a truly “liberal” media would cover, are sorely lacking. Where’s the coverage of what truly ails our economy and our country? Where are the stories about how, by working together, we can address important issues? That’s what a truly liberal media would cover and I don’t see much of it in our mainstream media.

[1]       Akadjian, 8/7/13, “15 things everyone would know if there were a liberal media,” Daily Kos http://www.dailykos.com/story/2013/08/07/1229087/-15-things-everyone-would-know-if-there-were-a-liberal-media?detail=email

What liberal media?

ABSTRACT: The conventional wisdom is that the mainstream media has a liberal slant. The best refutation of the liberal media myth is the information that we do NOT receive. There’s been little mainstream media coverage of corporation-friendly “trade” agreements, outsourcing and downgrading of jobs, growing inequality of income and wealth, the power of corporations in our supposedly democratic process, the out-of-control financial industry, and the undermining of the middle class. My blog is designed to fill that gap for those of you who don’t have the time to peruse other sources of information.

FULL POST: The conventional wisdom is that the mainstream media has a liberal slant, despite the fact that it is owned by large corporations. The best refutation of the liberal media myth is the information that we do NOT receive. I don’t believe we get the information we need to be informed citizens and voters in the mainstream media. My blog is designed to fill that gap for those of you who don’t have the time to peruse other sources of information.

My favorite examples of information NOT provided by the mainstream media are the Trans-Pacific Partnership “trade” agreement and Trans-Atlantic Free Trade Agreement along with the President’s effort to have them considered under a Fast Track process in Congress. These “trade” agreements, which are more about economic, regulatory, and legal issues than trade, will benefit multi-national corporations at the expense of US workers, consumers, and citizens. These agreements will hurt local businesses, the middle class, our health, and our national sovereignty. Nonetheless, there has been very little coverage of them in the mainstream media. You can read about this in my blog. See, for example: https://lippittpolicyandpolitics.org/2014/01/20/history-and-leaks-make-case-against-trade-treaties/.

There was a nice listing of other issues that the supposedly “liberal” media have barely covered in a recent article on Daily Kos (www.dailykos.com) entitled “15 things everyone would know if there were a liberal media.” [1]

Here’s a partial summary:

  • Jobs, especially good, middle class jobs, have been outsourced or converted to temporary or part-time jobs. The result is high unemployment (despite an economic recovery) and stagnant wages. Since 2000, US multinational corporations have cut 2.9 million jobs in the US while increasing overseas employment by 2.4 million. And the number of temporary and contract workers is growing rapidly. They now represent 12% of the workforce. They typically have no job security, receive no benefits (such as health insurance or retirement), and often receive low pay. There’s been little coverage of this in the mainstream media but my blog has covered it: https://lippittpolicyandpolitics.org/2013/09/02/labor-day-and-the-middle-class/.
  • Inequality of income and wealth has grown dramatically in the last 30 years. The wealthiest 1% of Americans own over a third of all the wealth in the US. These 3 million individuals have almost 3 times as much combined wealth as all of the 240 million individuals who make up the least wealthy 80% of Americans. See my blog for more detail. For example: https://lippittpolicyandpolitics.org/2013/11/06/us-capitalism-is-out-of-control/.
  • The tax cuts and loopholes instituted in the last 30 years have provided huge benefits to the wealthy, increasing inequality. Cuts in income tax rates, special low rates on investment income, reductions in the estate tax, loopholes for off-shore investments, and other tax laws disproportionately benefit the well-off and shift the tax burden to the middle class. They also reduce government revenue, which leads to cuts in services and programs that help the middle and working class. See my blog post on how income tax rates have changed over the last 35 years: https://lippittpolicyandpolitics.org/2011/11/27/income-tax-rates-an-historical-perspective/.
  • Large corporations through lobbying, campaign spending, and organizations like The American Legislative Exchange Council (ALEC) have bent our governments, including tax policy and regulation, in their favor. ALEC is a corporate sponsored-organization that drafts laws for consideration by state legislatures. It then finds friendly legislators in multiple states whom it works with to promote these corporate-friendly proposals such as public education privatization, anti-worker laws, laws to promote gun sales, laws to block regulation of corporation behavior and products, including environmental, health, safety, intellectual property, finance, and other regulations. For more information, see Bill Moyers’ website at: http://billmoyers.com/spotlight/eye-on-alec/.
  • At the federal level, for 66 years the Glass-Steagall law kept risky financial investing by Wall St. corporations separated from government-insured deposits. Based on a multi-year, concerted campaign by Wall St., that law was relaxed and eventually repealed. As a result, a series of financial crises occurred, capped by the great crash of 2008. We haven’t heard much from the mainstream media about this pattern of deregulation and financial crises, or Wall Street’s continuing fight to avoid regulation. My blog has covered this multiple times. See, for example: https://lippittpolicyandpolitics.org/2012/03/25/the-2008-financial-collapse-context-and-follow-up/. I’ve also blogged on the minimal penalties on the financial corporations and their executives for their illegal and unethical behavior. See, for example: https://lippittpolicyandpolitics.org/2014/02/06/weak-penalties-for-financial-corporations-misbehavior/. In general, see my blog category “The banks & the financial system.”

More examples of what you do NOT learn about from the mainstream media will be in my next post.

[1]       Akadjian, 8/7/13, “15 things everyone would know if there were a liberal media,” Daily Kos http://www.dailykos.com/story/2013/08/07/1229087/-15-things-everyone-would-know-if-there-were-a-liberal-media?detail=email

HISTORY AND LEAKS MAKE CASE AGAINST “TRADE” TREATIES

ABSTRACT: Twenty years of experience with previous “trade” treaties and the recent leaks of draft language for the Trans-Pacific Partnership (TPP) make the case that the “trade” treaties currently in negotiation will not benefit the US economy, our workers, or our middle class. These treaties focus on and benefit multi-national corporations and investors, rather than trade and the public interest. (See my previous posts of 1/13, 1/8, 9/13/13, and 9/10/13 for more detail.)

The growing resistance to Fast Track authority and these new “trade” agreements in Congress and the public is fueled by growing data on the damaging impacts of the 20 year history of the North American Free Trade Agreement (NAFTA). The same claims are being made for the current trade treaties as were made for NAFTA: that they will promote economic growth, increase jobs, and reduce trade deficits or increase trade surpluses. However, the Mexican trade surplus ($2 billion in 1993) quickly turned into growing deficits, totaling $1 trillion over the 20 year life of NAFTA. With Canada, the other country in NAFTA, the story is similar.

It is estimated that NAFTA has eliminated almost 700,000 jobs in the US. NAFTA established the principle that US corporations could move production out of the US but import the goods produced back into the US without any tariffs or other disincentives. This undermines the wages and benefits of American workers and the middle class. In all three NAFTA countries, wages and benefits for workers have not kept up with increased worker productivity over the last 20 years.

Since NAFTA, the US has entered into trade agreements with Korea, China, and others. While the promise has always been growth in US jobs, our economy, and our trade balance, the result has typically been the opposite. The trade agreements of the past 20 years have cost our economy more than $1 trillion through increased trade deficits and close to a million jobs.

I urge you to contact your elected officials in Washington and tell them you have serious concerns about the “trade” agreements being negotiated. And that these “trade” agreements are too important and too far reaching to be approved quickly and quietly.

FULL POST: Twenty years of experience with previous “trade” treaties and the recent leaks of draft language for the Trans-Pacific Partnership (TPP) make the case that the “trade” treaties currently in negotiation will not benefit the US economy, our workers, or our middle class. These treaties focus on and benefit multi-national corporations and investors, rather than trade and the public interest. (See my previous posts of 1/13, 1/8, 9/13/13, and 9/10/13 for more detail.)

The latest leak has been of the environmental provisions of the TPP. They lack mandated standards and have weak enforcement provisions. They are even weaker than the provisions in previous trade agreements, such as the North American Free Trade Agreement (NAFTA). [1]

Those arguing for Fast Track consideration of the TPP and other treaties by Congress (i.e., short timeframe, no amendments, and no filibuster) argue that treaties should be negotiated by the President and the Executive Branch (and not fiddled with by Congress) and that treaties are generally negotiated behind closed doors. [2] However, the current trade negotiations have included extensive involvement and input from corporate interests but virtually no input from the public; from advocates for workers, the environment, or ordinary citizens; or from Congress and other elected officials (other than the President). Furthermore, the Fast Track process is not necessary to pass trade agreements. President Clinton implemented more than 130 trade agreements without the Fast Track process. [3]

The growing resistance to Fast Track authority and these new “trade” agreements in Congress and among the public is fueled by growing data on the damaging impacts of the 20 year history of the North American Free Trade Agreement (NAFTA). The same claims are being made for the current trade treaties as were made for NAFTA: that they will promote economic growth, increase jobs, and reduce trade deficits or increase trade surpluses. And TPP has specifically been described as NAFTA on steroids.

When NAFTA was being promoted for approval by Congress in 1993, it was stated that it would expand our trade surplus with Mexico, thereby creating 200,000 US jobs in two years and a million in 5 years. However, the Mexican trade surplus ($2 billion in 1993) quickly turned into growing deficits (of $16 billion in 1995, $65 billion in 2008, and $50 billion in 2013). Our trade deficit with Mexico has totaled $1 trillion over the 20 year life of NAFTA.

With Canada, the other country in NAFTA, the story is similar: our trade deficit of $11 billion in 1993 grew to $78 billion in 2008 and $28 billion in 2013. (The dramatic drop in the deficit after 2008 is due to reduced imports because of our Great Recession.) [4]

It is estimated that NAFTA has eliminated almost 700,000 jobs in the US, with 60% of them being in manufacturing. Most of the workers who lost jobs have experienced a permanent loss of income; if they have found other jobs, they pay significantly less. [5] Many workers have experienced long-term unemployment (more than 6 months), which is at historically high levels. Numerous other workers have simply dropped out of the labor force. All of this has led to increases in the costs of government assistance programs, including unemployment benefits and food assistance. [6]

NAFTA established the principle that US corporations could move production out of the US but import the goods produced back into the US without any tariffs or other disincentives. This undermines the wages and benefits of American workers and the middle class. It increases job insecurity and weakens labor unions’ ability to negotiate because of the threat that jobs will be moved out of the US. The result has been stagnant wages for all but the richest Americans and, therefore, growing income inequality. In all three NAFTA countries, the US, Canada, and Mexico, wages and benefits for workers have not kept up with increased worker productivity over the last 20 years. [7]

Even Mexican workers have not experienced any significant increase in wages. An important reason for this is that the export of cheap, subsidized corn from the US to Mexico undermined the livelihoods of an estimated 2.4 million Mexican farmers. This displaced Mexican farmers and led to increased immigration (legal and illegal) to the US. Due to the abundant supply of desperate workers, it also pushed down wages in the maquiladora factory zone (the area just south of the US border). [8]

Although Mexico has experienced increased trade and some job growth under NAFTA, the jobs, even those in manufacturing, have been at low wages. The average Mexican manufacturing wage is only 18% of the US wage and that percentage has grown only slightly. The poverty rate in Mexico is 51%, down only slightly from the 52% when NAFTA went into effect. There has been an increase in the availability of consumer goods, but environmental protections have had mixed results at best. Disposal of US waste in Mexico has increased, including, for example, a 500% increase in US exports of highly toxic, spent lead-acid car batteries, with minimal control to ensure environmentally safe handling of them. [9]

Under NAFTA, US corporations have attempted to weaken Canadian regulations on a range of issues, including offshore oil drilling, fracking, pesticides, and drug patents. [10] Mexico and Canada have paid $350 million to foreign corporations for claims that their laws, rules, regulations, or other actions reduce current and expected profits.

Since NAFTA, the US has entered into trade agreements with Korea, China, and others. While the promise has always been growth in US jobs, our economy, and our trade balance, the result has typically been the opposite. Since the 2012 agreement with Korea, the US trade deficit with Korea has increased by $8.5 billion and an estimated 40,000 jobs have been lost. Our trade deficit with China has soared to $294 billion in 2013 from $83 billion in 2001 when China was permitted to join the World Trade Organization. [11]

The trade agreements of the past 20 years have cost our economy more than $1 trillion through increased trade deficits and close to a million jobs. They are key reasons that unemployment is high and the economic recovery is so weak. Furthermore, the mitigation provisions for these past trade agreements, such as retraining for workers who lost their jobs, have been woefully inadequate and ineffective.

I urge you to contact your elected officials in Washington and tell them you have serious concerns about the “trade” agreements being negotiated. And that these “trade” agreements are too important and too far reaching to be approved quickly and quietly. Full disclosure and debate of their provisions is what democracy requires.


[1]       Queally, J., 1/15/14, “Leaked TPP ‘Environment Chapter’ shows ‘Corporate Agenda Wins,’” Common Dreams (http://www.commondreams.org/headline/2014/01/15)

[2]       Boston Globe Editorial, 1/19/14, “Pacific, EU trade deals need up-or-down votes,” The Boston Globe

[3]       Johnson, D., 1/10/14, “New Fast-Track bill means higher trade deficits and lost jobs,” Campaign for America’s Future

[4]       US Census Bureau, retrieved 1/7/14, “U.S. trade in goods by country,” http://www.census.gov/foreign-trade/balance/

[5]       Johnson, D., 12/18/13, “Will we fast-track past the lessons of the NAFTA trade debacle?” Campaign for America’s Future (http://ourfuture.org/20131218/obama-administration-to-push-fast-track)

[6]       Folbre, N., 8/5/13, “The free-trade blues,” The New York Times

[7]       Faux, J., 1/1/14, “NAFTA, twenty years after: A disaster,” Huffington Post

[8]       Wallach, L., 12/30/13, “NAFTA at 20: ‘Record of damage’ to widen with ‘NAFTA-on-steroids’ TPP,” Global Trade Watch, Public citizen

[9]       Stevenson, M., 1/3/14, “20 years after NAFTA, a changed Mexico,” The Boston Globe from the Associated Press

[10]     Carter, Z., 12/8/13, , “Obama faces backlash over new corporate powers in secret trade deal,” The Huffington Post

[11]     Johnson, D., 12/18/13, see above

STOP FAST TRACK FOR CORPORATE POWER GRAB

ABSTRACT: Bipartisan legislation was introduced in Congress last Thursday to allow the President to submit “trade” agreements to Congress and require expedited consideration of them. There is opposition to this Fast Track consideration (formally known as Trade Promotion Authority) in both parties. There is also opposition to the “trade” agreements currently being negotiated themselves. One reason for this opposition is concern that the agreements benefit multi-national corporations (including foreign corporations) at the expense of local businesses, US workers and citizens, and national sovereignty.

Corporations, who have had access to the agreements’ negotiations (while the public has been kept in the dark), are lobbying to weaken current standards for food safety, labor, health, Internet freedom, the environment, and the financial industry. According to leaked documents, the US is pushing for multi-national corporations to be able to challenge countries’ laws and regulations in privately run international courts or tribunals. Concerns about such provisions stem in part from experiences under existing “trade” agreements. For example, under current “trade” treaties, tobacco corporations are suing or threatening to sue a range of countries over existing or proposed smoking reduction efforts. These legal actions are undermining the World Health Organization’s tobacco control efforts.

I urge you to contact your Representative in the US House and your Senators and tell them you do not want Fast Track authority approved. Full disclosure and debate of the provisions of “trade” agreements is what democracy requires, especially given the essentially irreversible nature of them.

FULL POST: Bipartisan legislation was introduced in Congress last Thursday to allow the President to submit “trade” agreements to Congress and require expedited consideration of them – on a quick timetable, with no amendments, and no filibuster. The bill would require that Congress have access to draft language as agreements are being negotiated (which is currently being kept secret); would specify protections for labor, the environment, and intellectual property; and would require provisions in agreements against currency and exchange rate manipulation. There is opposition to this Fast Track consideration (formally known as Trade Promotion Authority) in both parties, so it is unclear when or if this bill will move forward. Alternative bills that give Congress more say over “trade” agreements are likely to be introduced. (I put trade in quotes because recent “trade” agreements, such as the North American Free Trade Agreement [NAFTA], go well beyond trade issues and cover a broad range of legal and regulatory issues. The provisions for reducing trade barriers and increasing trade are only a small part of the agreements.)

The President and the supporters of the “trade” agreement (largely corporate America) want Fast Track authority for the two broad “trade” agreements mentioned in my previous post (1/8/14): the Trans-Pacific Partnership (TPP) among a dozen Pacific Rim countries and the Trans-Atlantic Free Trade Agreement (TAFTA) [1] with 28 European countries. In addition, there is a global agreement on services (as opposed to manufactured goods) with about 50 countries that is currently being negotiated that would also be covered by the Fast Track authority. [2]

As I noted in my previous post (1/8/14), there is opposition to the “trade” agreements currently being negotiated and Fast Track consideration of them for 3 main reasons, one of which is concern that they benefit multi-national corporations (including foreign corporations) at the expense of local businesses, US workers and citizens, and national sovereignty (our ability to control what happens within the boundaries of the US). For example, a goal of TAFTA is to establish health and safety rules and regulations that would be standard across the US and EU. [3] Many people are concerned that this will lead to a race to the bottom, with the weakest standards winning out. For example, the US is demanding that the EU reduce restrictions on importation of genetically modified foods and hormone-treated beef. Europeans, however, want strong regulation of their food. Corporations, who have had access to the agreements’ negotiations (while the public has been kept in the dark), are lobbying to weaken current standards for food safety, labor, health, the environment, and the financial industry. [4]

In the TPP, according to leaked documents, the US is pushing for multi-national corporations to be able to challenge countries’ laws and regulations in privately run international courts or tribunals. This would result in a significant loss of national sovereignty. (This is a change to current rules under the World Trade Organization where countries’ own courts rule on such matters, although NAFTA included a similar but narrower provision for international tribunals.) The US is also advocating for expanded intellectual property protections, including long-term patents, and therefore monopolies, on drugs (similar to current US laws). It is also pushing to ban government agencies from negotiating lower drug prices with pharmaceutical corporations. (Such a ban is included in the US Medicare program and costs the program billions of dollars every year.) There is widespread concern that such provisions would increase drug prices, pharmaceutical corporations’ profits, and health care costs. This would seem to be borne out by the fact that drug prices are much higher in the US than in other countries. The US is also pushing for weak regulation of the financial industry. Leaked TPP documents have raised concerns among health, Internet freedom, environmental, and labor advocates over provisions supported by the US, the US Chamber of Commerce, and corporations in general. [5]

These concerns stem in part from experiences under existing “trade” agreements. For example, under existing “trade” treaties, tobacco corporations are suing or threatening to sue a range of countries (including Australia, Canada, Gabon, Namibia, New Zealand, Norway, Togo, Uganda, and Uruguay) over existing or proposed smoking reduction efforts. These legal actions are undermining the World Health Organization and its Framework Convention on Tobacco Control, a public health treaty signed by 170 countries, whose goal is to reduce smoking and its negative health effects by limiting and controlling advertising, packaging, and sale of tobacco products. As a specific example, Philip Morris is suing Australia for its cigarette packaging law claiming it will reduce current and future profits. The suit is brought under a treaty between Australia and Hong Kong, and the case will be decided in a private, non-public proceeding of a private international tribunal of arbitrators in Singapore. Although the US says it wants the new TPP to promote public health, and specifically named tobacco as a concern, the US Chamber of Commerce objected because it felt that such public health provisions could allow the regulation of other products such as sugar and soda. [6]

My next post will focus on our 20 year experience with NAFTA and some of its implications for what could be expected with these new “trade” agreements.

In the meantime, I urge you to email, call, write, and, if you can, meet with your Representative in the US House and your Senators [7] and tell them you do not want Fast Track authority approved. These “trade” agreements are too important and too far reaching to be approved quickly and quietly. Full disclosure and debate of the provisions of “trade” agreements is what democracy requires, especially given the essentially irreversible nature of them.


[1]       Also known as the Trans-Atlantic Trade and Investment Partnership

[2]       Calmes, J., 1/9/14, “A proposal to speed up action on trade accords,” The New York Times

[3]       Dahlburg, J., 11/12/13, “US, EU restart trade talks,” The Boston Globe from the Associated Press

[4]       Todhunter, C., 10/4/13, “The US-EU Transatlantic Free Trade Agreement (TAFTA): Big business corporate power grab,” Global Research (http://www.globalresearch.ca/the-us-eu-transatlantic-free-trade-agreement-tafta-big-business-corporate-power-grab/5352885)

[5]       Carter, Z., 12/8/13, “Obama faces backlash over new corporate powers in secret trade deal,” The Huffington Post

[6]       Tavernise, S., 12/13/13, “Tobacco firms’ strategy limits poorer nations’ smoking laws,” The New York Times

[7]       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.

TRADE TREATIES NEED OPEN DEBATE, NOT FAST TRACK

ABSTRACT: Action in Congress on requiring Fast Track consideration of trade treaties is likely to happen soon. Two broad “trade” agreements are scheduled for Congressional action this year: the Trans-Pacific Partnership (TPP) with a dozen Pacific Rim countries and the Trans-Atlantic Free Trade Agreement (TAFTA) with the European Union (EU). Fast Track authority requires that Congress consider and act on a treaty in a short timeframe with no amendments or changes allowed and with no filibustering.

I urge you to email, call, write, and, if you can, meet with your member of Congress and your Senators and tell them you do not want them to approve Fast Track authority. These “trade” agreements are too important and too far reaching to be approved quickly and quietly.

Business groups are pushing hard for Fast Track consideration in Congress. They are supporters of the treaties, which are widely viewed as very favorable to corporate interests. The growing resistance to Fast Track authority is fueled in large part by:

  • Secrecy on the negotiations and agreement provisions, which breeds suspicion;
  • Concern that they benefit multi-national corporations at the expense of others; and
  • Growing data on the damaging impacts of 20 years with the North American Free Trade Agreement (NAFTA), on which these treaties are modeled.

The indirect effects of the past and these possible new “trade” agreements on the balance of power in employer-employee relations and in our political system, as well as on economic inequality, may be more significant than the direct effects, such as job losses. The TPP and the TAFTA, based on what is known about them, will likely benefit corporations and investors, while hurting US workers and citizens. Moreover, if approved, these treaties will be very difficult to change, as the consent of all the parties is required. At the least, a full discussion of their provisions, based on full disclosure, is warranted.

FULL POST: Action in Congress on requiring Fast Track consideration of trade treaties is likely to happen soon. President Obama would like to have Fast Track authority, formally known as Trade Promotion Authority, for two broad “trade” agreements that are scheduled for Congressional action this year: the Trans-Pacific Partnership (TPP) with a dozen Pacific Rim countries and the Trans-Atlantic Free Trade Agreement (TAFTA) [1] with the European Union (EU). (I put trade in quotes because these “trade” agreements, like NAFTA, go well beyond trade issues and cover a broad range of legal and regulatory issues. The provisions for reducing trade barriers and increasing trade are only a small part of the agreements.)

Fast Track authority requires that Congress consider and act on a treaty in a short timeframe with no amendments or changes allowed and with no filibustering. Fast Track authority was first used in 1974 and has been used on a number of occasions since then.

I urge you to email, call, write, and, if you can, meet with your member of Congress and your Senators and tell them you do not want them to approve Fast Track authority. [2] These “trade” agreements are too important and too far reaching to be approved quickly and quietly. Full disclosure and debate of the provisions of “trade” agreements is what democracy requires.

The Democratic and Republican leaders of the Senate Finance Committee, along with the Republican chairman of the House Ways and Means Committee, have reportedly reached an agreement on a Fast Track authority bill, although they have not yet released its details. The argument for Fast Track consideration of trade treaties is that it means other countries will be more likely to make concessions and reach agreement on the treaty if they are confident that the US Congress can’t change it.

Business groups, including the US Chamber of Commerce and the Business Roundtable, are pushing hard for Fast Track consideration in Congress. They are supporters of the treaties, which are widely viewed as very favorable to corporate interests, [3] and are presumably worried that debate in Congress and the public on the treaties would reduce their chances for approval.

There is significant opposition to granting Fast Track authority in Congress and outside of it. Nearly 200 members of the US House, mostly Democrats but some Republicans, have signed letters strongly questioning the granting of Fast Track authority for these treaties. [4]

The growing resistance to Fast Track authority for these new “trade” agreements in Congress and the public is fueled in large part by:

  • Secrecy on the negotiations and agreement provisions, which breeds suspicion;
  • Concern that they benefit multi-national corporations at the expense of local businesses, workers and citizens, and national sovereignty; and
  • Growing data on the damaging impacts of 20 years with the North American Free Trade Agreement (NAFTA), on which these treaties are modeled.

Both treaties are being negotiated in great secrecy. For the TPP, the Obama administration has deemed the negotiations classified information, restricting Congressional access to documents and banning discussion of the negotiations and treaty provisions with the press or the public. [5] In 2013, Senator Elizabeth Warren opposed the confirmation of the US Trade Representative because he refused to share any of TPP’s provisions. She noted the important need for transparency and public debate on the treaty. [6]

These treaties are seen by many advocates for health, labor, safety, environmental, and financial industry standards and regulations as a masquerade for a corporate power grab, designed to weaken regulation and run roughshod over workers’ and citizens’ interests. [7] These “trade” agreements would enable multi-national corporations to operate with weakened oversight by national governments, free of nations’ court systems, and with reduced consumer and citizen protections. Corporations would become supra-national entities and would answer only to a separate system of rules and courts, administered by new international tribunals. In essence, an international system, parallel to the United Nations system of international governance for nations, would be created for international governance of corporations – a United Multi-national Corporations system, if you will. (More on this in a subsequent post.)

The same claims are being made for these two trade treaties that were made for NAFTA: they will promote economic growth, reduce trade deficits or increase trade surpluses, and increase jobs. The actual experience with NAFTA is that it has done none of these things, which is probably the best indicator of the likely effects of these new trade treaties. And the TPP has specifically been described as NAFTA on steroids. (More on this in a subsequent post.)

The indirect effects of the past and these possible new “trade” agreements on the balance of power in employer-employee relations and in our political system, as well as on economic inequality, may be more significant than the direct effects, such as job losses. The corporations and investors who have been the winners in this globalization of trade and commerce can invest their winnings (i.e., profits) in campaign contributions, lobbying, and political strategies that ensure they are the victors in next round of “trade” agreements. [8]

Although President Obama recently described growing economic inequality in the US as a major issue, NAFTA has increased inequality and the new trade treaties are likely to as well. NAFTA and other recent “trade” agreements have provided benefits to corporations and investors globally, while hurting workers and the middle class in the US, and sometimes hurting workers in other countries. The TPP and the TAFTA, based on what is known about them, will similarly benefit corporations and investors, while hurting US workers and citizens. Moreover, if approved, these treaties will be very difficult to change, as the consent of all the parties is required. At the least, a full discussion of their provisions, based on full disclosure, is warranted.


 

[1]       Also known as the Trans-Atlantic Trade and Investment Partnership.

[2]       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.

[3]       For more information see my previous posts, “Trade” Agreement Supersizes Corporate Power, 9/10/13, (https://lippittpolicyandpolitics.org/2013/09/10/trade-agreement-supersizes-corporate-power/) and “Trade” Agreements & Corporate Power, 9/13/13 (https://lippittpolicyandpolitics.org/2013/09/13/trade-agreements-corporate-power/).

[4]       Politi, J., 12/13/13, “US Senate deal sets up fierce trade battle,” Financial Times

[5]       Carter, Z., 12/8/13, , “Obama faces backlash over new corporate powers in secret trade deal,” The Huffington Post

[6]       Loth, R., 12/21/13, “Take trade agreement off fast track,” The Boston Globe

[7]       Todhunter, C., 10/4/13, “The US-EU Transatlantic Free Trade Agreement (TAFTA): Big business corporate power grab,” Global Research (http://www.globalresearch.ca/the-us-eu-transatlantic-free-trade-agreement-tafta-big-business-corporate-power-grab/5352885)

[8]       Folbre, N., 8/5/13, “The free-trade blues,” The New York Times

US CAPITALISM IS OUT OF CONTROL

ABSTRACT: Of all the developed countries, the United States has the most unequal distribution of income and wealth. 1928 and 2007 were the peak years for income and wealth inequality in the US. In the periods leading up to these two peaks, the wealthy invested and speculated in financial markets. Speculative bubbles were created. The middle class saw their incomes stagnate. This led to economic instability, the Great Depression of the 1930s, and the Great Recession of 2008.

So where should we look for an example of greater economic stability and equality? The answer is the United States after World War II from 1946 to 1978. So what do we need to do to return to greater economic stability and equality? We need to keep and encourage the creation of jobs that pay middle class wages and have benefits.

We need to change the rules of our economy so the gains of economic growth are more widely shared. Capitalism needs rules, otherwise it runs out of control. A well-functioning democracy can create and enforce appropriate rules (laws and regulations). But if the democratic process of electing officials and making laws and regulations is corrupted by money and lobbying from wealthy capitalists and their corporations, the appropriate rules won’t be in place and capitalism can run out of control.

Currently, the huge amounts of money being spent by wealthy capitalists and their corporations on elections and lobbying are determining the rules of our economy. Americans are losing faith in our democracy, which is our most precious gift and our most important legacy for future generations. What the powerful moneyed interests would like, is for us all to get so cynical about politics and government that we basically give up. But if we’re mobilized, if we’re energized, if we take citizenship to mean not simply voting, paying taxes, and showing up for jury duty, but actually participating actively and knowledgeably, we can make our democracy – and capitalism – work.

FULL POST: Of all the developed countries, the United States has the most unequal distribution of income and wealth. 1928 and 2007 were the peak years for income and wealth inequality in the US. [1] What happened a year after 1928? The Great Crash. And what happened a year after 2007? Another financial system crash. The parallels are breathtaking if you look at them carefully. [2]

In the periods leading up to these two peaks, the wealthy invested and speculated in financial markets. Both times, speculative bubbles were created. In both periods, the middle class saw their incomes stagnate, so they went deeper and deeper into debt to maintain their living standard, creating a debt bubble. These bubbles and the undermining of the middle class led to economic instability, the Great Depression of the 1930s, and the Great Recession of 2008.

Today, many in the middle class are one crisis away from being poor. If they lose a job, have a health crisis, or have a serious accident, they can find themselves suddenly in need of public assistance, which may be unemployment benefits, food stamps or food pantries, or subsidized health insurance from Medicaid. They may find themselves deep in debt and at risk of losing their home.

We seem to be close to the point where the middle class doesn’t have the purchasing power to keep the economy going and where the majority of people feel like the economic and political systems are rigged against them. There may be a tipping point, where the degree of inequality and economic insecurity actually threaten our economy, our society, and our democracy.

So where should we look for an example of greater economic stability and equality? The answer is the United States in the decades after World War II. From 1946 to 1978, the economy doubled in size, everybody’s income doubled, and inequality was low. Although the top income tax rate was as high as 91% and was never below 70%, we had greater annual economic growth than we’ve had since. With today’s top tax rate under 40%, anybody who says that we have to reduce taxes to foster economic growth, simply doesn’t know our own history.

So what do we need to do to return to greater economic stability and equality? We need to keep and encourage the creation of jobs that pay middle class wages and have benefits. We need to increase the minimum wage and we need to include labor standards in our trade treaties. We need to give workers and the middle class the voice and power to stand up to the wealthy and ensure that our economy works for all people, not just for the 1% at the top. We need to change the rules of our economy so the gains of economic growth are more widely shared. (For more detail see my post of 10/29/13 at https://lippittpolicyandpolitics.org/2013/10/29/lack-of-good-jobs-is-our-most-urgent-problem/. )

The rules of our economy are largely set by the federal government. Capitalism needs rules, otherwise it runs out of control, resulting in financial collapses; air and water that are harmful; cars that are unsafe; drugs and food are tainted; industrial accidents where oil wells blow out, chemical plants explode, and trains crash and burn; and so forth.

A well-functioning democracy can create and enforce appropriate rules (laws and regulations) that balance public safety (including environmental safety) and corporate profitability. But if the democratic process of electing officials and making laws and regulations is corrupted by money and lobbying from wealthy capitalists and their corporations, the appropriate rules won’t be in place and capitalism can run out of control.

Currently, the huge amounts of money being spent by wealthy capitalists and their corporations on elections and lobbying are determining the rules of our economy. They are using their economic power to gain political power. They are using this political power to entrench and enrich themselves economically and politically by obtaining laws and regulations that are tilted to benefit their self-interest. This is not a matter of partisan politics; both Democratic and Republican politicians and policy makers receive the money and do the bidding of these powerful economic elites.

Examples of laws and regulations that are tilted to favor capitalist interests include individual and corporate tax laws; bankruptcy laws; antitrust laws and enforcement; intellectual property laws on copyrights, patents, and trademarks; health and safety laws; campaign finance laws; laws and regulations for the financial industry; and priorities for government spending.

Americans are losing faith in our democracy, which is our most precious gift and our most important legacy for future generations. We are losing faith in equal opportunity and upward mobility as practical realities, and we’re feeling real anxiety over our lack of economic security.

Americans need to understand what’s at stake and push good people in government to do the right thing. If we don’t, eventually the moneyed interests will win because they are persistent and there won’t be anybody who can speak loudly enough to be heard over the bullhorn of their money.

What the powerful moneyed interests would like, is for us all to get so cynical about politics and government that we basically give up and say, “Okay, you want our democracy? Take it.” Then they win everything. But if we’re mobilized, if we’re energized, if we take citizenship to mean not simply voting, paying taxes, and showing up for jury duty, but actually participating actively and knowledgeably, we can make our democracy – and capitalism – work.

We can do it if we understand the nature of the problem. Time and again, in the early 1900s and again in the 1930s, for example, we have saved capitalism from its own excesses. We made sure that rules were in place to make capitalism work as it should: as an engine of prosperity for everyone and with a brake on the excesses of greed and power, as well as on the money that can otherwise corrupt our democratic process.

I encourage you to watch, listen to, or read the transcript of Bill Moyers’ show with Bob Reich (http://billmoyers.com/episode/full-show-inequality-for-all/). And I encourage you to go see Bob Reich’s movie, Inequality for All. It’s entertaining and informative. You can see the trailer for the movie, get lots more information, and find opportunities to take action at http://inequalityforall.com/.


[1]       The latest data appear to show that inequality was even greater in 2012 than 2007 as the great majority of the benefits of our weak economic recovery are going to the richest people. For more detail, see my post of 9/27/13 at https://lippittpolicyandpolitics.org/2013/09/27/whats-up-with-the-economic-recovery/.

[2]       Moyers, B., with Reich, R., 9/20/13, “Inequality for all,” http://billmoyers.com/episode/full-show-inequality-for-all/ (This post is a summary of this Bill Moyers show. You can view, listen to, or read the transcript of it at the link provided.)

LACK OF GOOD JOBS IS OUR MOST URGENT PROBLEM

ABSTRACT: The most urgent problem facing the US right now is a lack of jobs, especially jobs that pay middle class wages and provide benefits. Unemployment is high and long-term. The jobs being created during our 4 year old economic recovery are disproportionately low-wage, low skill jobs.

Fast food workers are emblematic of the low wage, low skill jobs being created. The typical fast food worker makes $8.69 per hour. As a result, over half of fast food workers rely on public, taxpayer funded benefits to make ends meet. The cost to taxpayers is estimated to be $7 billion per year. Meanwhile, the fast food corporations make billions of dollars in profits and pay tens of millions of dollars to their senior executives. Workers at Walmart, the largest employer in the US, are in a similar situation. These very profitable corporations can afford to raise their workers’ wages to $15 an hour – a wage they could live on without public assistance. In the meantime, taxpayers are subsidizing these corporations.

It used to be that unions and government provided workers with a voice and the power to balance that of the large employers. Today, that voice and power are largely gone. Therefore, wages, benefits, and job security have been eroding. Starting in the late 1970s, the historic link between growth in the economy and productivity on the one hand, and growth in workers’ wages on the other hand, was severed. We undid or failed to adopt rules for our economy that ensure the gains of economic and productivity growth are widely and fairly distributed.

The failure of our policy makers in Washington to focus on creating jobs, let alone good jobs, and on spurring economic growth is the clear and tragic result of the ascendancy of politics over rational policy making.

FULL POST: The most urgent problem facing the US right now is a lack of jobs, especially jobs that pay middle class wages and provide benefits. Unemployment is high and long-term – since 2010 roughly 40% of those unemployed and actively looking for work have been unemployed for more than 6 months. This is triple the rate of long-term unemployment in the period from 2000 – 2007. [1]

The official unemployment rate is 7.2% based on those who are actively looking for a job. It would be significantly higher, well over 10%, if those who have given up looking were included. And higher still if the under-employed were included – those working part-time who would like to be working full-time and those who are working at jobs for which they are over-qualified.

The jobs being created during our 4 year old economic recovery are disproportionately low-wage, low skill jobs. (See post of 9/27/13 for more detail.) High unemployment and low wage jobs are key factors in our slow economic recovery (consumers’ lack purchasing power), in the government’s budget deficit (reduced tax revenues), and in growing inequality (95% of the economic gains during the recovery have gone to the richest 1%). As a result, income and wealth inequality have increased to levels not seen since the 1920s.

Fast food workers are emblematic of the low wage, low skill jobs being created. The typical fast food worker makes $8.69 per hour. Two-thirds of them are adults, most of them bring home at least half of the family’s income, and a quarter of them have children. Only 13% get health insurance through their employers.

As a result, over half of fast food workers rely on public, taxpayer funded benefits to make ends meet. The cost to taxpayers is estimated to be $7 billion per year; much of it is for health care, but also food assistance and other economic supports. [2] You can watch a 2 minute video about this, which includes a recording of the McDonald’s help line telling a 10-year employee with 2 children to access food stamps and Medicaid, at
http://lowpayisnotok.org/mcvideo/?utm_campaign=LowPay&utm_medium=email&utm_source=mcvideo-r.

Meanwhile, the fast food corporations make billions of dollars in profits and pay tens of millions of dollars to their senior executives. For example, McDonald’s has 700,000 employees. They are estimated to get $1.2 billion a year in taxpayer funded benefits. McDonald’s is very profitable, making $5.5 billion a year and paying its CEO $13.8 million. It has just purchased a $35 million luxury jet for its executives, which costs at least $2,400 an hour to operate.

Workers at Walmart, the largest employer in the US, are in a similar situation. They make an average of $8.80 an hour. When General Motors was the largest employer in the 1950s, it paid its workers about $50 to $60 an hour (adjusted for inflation). As with the fast food workers, we taxpayers are supporting Walmart workers with multiple types of public assistance. [3]

These big, profitable corporations operate with a business model that uses low paid and part-time workers, typically without benefits, who are, therefore, unable to afford the necessities of life. This leaves taxpayers to pick up the tab for the public benefits they need. These very profitable corporations can afford to raise their workers’ wages to $15 an hour (see post of 9/8/13 for more detail)  – a wage they could live on without public assistance. In the meantime, taxpayers are subsidizing these corporations.

Nationally, the typical workers’ wages, adjusted for inflation, have barely increased over the last 30 years. (See post of 9/2/13 for more detail.) The typical male worker in 1978 was making around $48,000 (adjusted for inflation), while the average person in the top 1% earned $390,000. By 2010, the typical male workers’ pay had gone down, while the person in the 1% had their pay more than double. Today, the richest 400 Americans have more wealth than the bottom half of the country, 150 million people, combined.

It used to be that unions and government provided workers with a voice and the power to balance that of the large employers. Today, that voice and power are largely gone. Therefore, wages, benefits, and job security have been eroding. Workers are not even receiving the benefits of their increased productivity. As a result, we are losing the middle class, equal opportunity, and upward mobility. This is undermining our economy and our democracy.

In the first 4 years of the current recovery, the richest 1% of Americans took home 95% of the income gains. In stark contrast, between 1946 and 1978, as the economy doubled in size, everyone’s income doubled as well.

Starting in the late 1970s, the historic link between growth in the economy and productivity on the one hand, and growth in workers’ wages on the other hand, was severed. Income gains started going to the richest Americans and people in the middle, the typical worker, saw their wages stagnate. Part of the problem is that we didn’t adapt to globalization and technological change. We didn’t change public policies. We didn’t change the rules of our economy to continue to provide opportunity, upward mobility, and ensure that economic and productivity growth were broadly shared. We could have done so, but we didn’t. [4]

Among other things, we let the minimum wage fall behind inflation. If it had kept up with inflation, the national minimum wage would be $10.40 today instead of $7.25. If productivity improvement was included, it would be at least $15 an hour. We deregulated the financial system, both domestically and internationally, favoring investors and corporations over workers. And we didn’t include labor standards in trade treaties. Meanwhile, we cut tax rates on high incomes and wealth substantially.

If we had a democracy that was working for the people, the average citizen and worker would have the voice and power to see that their interests and the greater good were served. Instead, we undid or failed to adopt rules for our economy that ensure the gains of economic and productivity growth are widely and fairly distributed – without sacrificing efficiency or innovation. The failure of our policy makers in Washington to focus on creating jobs, let alone good jobs, and on spurring economic growth is the clear and tragic result of the ascendancy of politics over rational policy making. This failure may put their political careers at risk because every poll shows that the public is much more concerned about jobs and the economy than any other issue, including the deficit.


[1]       Woolhouse, M., 10/22/13, “Long search finally ends,” The Boston Globe

[2]       Johnston, K., 10/16/13, “Public aid crucial to fastfood workers,” The Boston Globe

[3]       Moyers, B. with Reich, R., 9/20/13, “Inequality for all,” http://billmoyers.com/episode/full-show-inequality-for-all/

[4]       Moyers, B. with Reich, R., 9/20/13, see above

“TRADE” AGREEMENTS & CORPORATE POWER

ABSTRACT: The Trans-Pacific Partnership (TPP) “trade” treaty that is currently being negotiated (see post of 9/10) would give corporations the right to sue governments if their laws, regulations, or actions negatively affect current or expected future profits. Under existing trade agreements, over $380 million has already been paid to corporations by governments. Furthermore, there are 18 pending suits by corporations against governments for $14 billion. Corporations will use or set up foreign subsidiaries to file suits under investor-state dispute resolution provisions of trade treaties (corporations are referred to as “investors”), thereby avoiding a country’s legal system and relying instead on the international tribunals (i.e., courts) created by the treaties.

The TPP would require countries to allow corporations to compete for the delivery of public services. The result could well be that some people cannot afford a corporation’s fees for basic, formerly universal, public services (such as water).

If ratified, the Trans-Pacific Partnership treaty would enhance the power and rights of corporations while weakening US sovereignty. Given its unlimited term and the virtual impossibility of making changes (which require the unanimous consent of the parties), it amounts to a Constitutional change that gives foreign corporations equal (if not greater) legal status and power than the US and other governments. Furthermore, it would foster a race to the bottom for public health, the environment, and workers, especially well-paid blue and white collar workers, as jobs continue to move overseas and compensation and safety are attacked as limiting profits.

The secrecy and potency of the TPP make it feel like a conspiracy among our corporate and political elite to give corporations the ultimate power in our society. I strongly urge you to call your US Senators, and your Representative as well, to ask them to oppose “fast-track” rules for consideration of the Trans-Pacific Partnership “Trade” Treaty and to demand full disclosure and discussion of its provisions in Congress and with the public.

FULL POST: The Trans-Pacific Partnership (TPP) “trade” treaty that is currently being negotiated (see post of 9/10) would give corporations the right to sue governments if their laws, regulations, or actions negatively affect current or expected future profits. The North American Free Trade Agreement (NAFTA) between the US, Canada, and Mexico and other treaties that are already in place give corporations similar rights. Under existing trade agreements, over $380 million has already been paid to corporations by governments. Furthermore, there are 18 pending suits by corporations against governments for $14 billion. [1] For example, Chevron is suing Ecuador over its environmental laws, Eli Lilly is suing Canada over its patent laws, and European investment firms are suing Egypt over its minimum wage laws. [2]

Philip Morris is suing Australia over its cigarette labeling laws. However, because the US – Australia trade agreement doesn’t include investor-state dispute resolution provisions (corporations are referred to as “investors”) that allow such suits, Philip Morris is using other trade treaties and its Swiss and Hong Kong subsidiaries to file its suits. [3] Corporations will use or set up foreign subsidiaries to file suits under investor-state dispute resolution provisions of trade treaties, thereby avoiding a country’s legal system and relying instead on the international tribunals created by the treaties.

Other examples of corporations suing governments include:

  • Under NAFTA, a US corporation sued and received $13 million from Canada, which then reversed its ban on a gasoline additive that contains a known human neurotoxin.
  • Another US corporation has filed a $250 million investor-state suit against Canada under NAFTA because of its ban on fracking.
  • A French and a US company have succeeded in separate suits totaling close to $300 million against Argentina because its federal government failed to override 2 provinces’ limits on water rate increases after water systems were privatized in a period of economic distress, even though it would have been an unconstitutional intervention in provincial affairs for the federal government to do so. [4]
  • (There are many more examples and much more information on the TPP at www.citizen.org/TPP.)

The TPP language would require countries to allow corporations to compete for the delivery of public services, such as water and sewer, electricity, education, and transportation services. The result could well be, as has occurred in Argentina and other South American countries, that some people cannot afford a corporation’s fees for basic, formerly universal, public services (such as water), or that a distinctly two-tiered system emerges with high quality services for those who can afford to pay and poorer quality services for those who can’t. [5]

If the TPP is ratified by the US, it would, for example, undermine efforts to make the giant international mining corporation Rio Tinto abide by the Clean Air Act at its massive copper mine west of Salt Lake City. [6] Under the TPP, US and local regulations could be nullified or forced to change in areas such as:

  • Worker safety and the minimum wage
  • Importation of food and food labeling
  • Fracking for and exportation of natural gas
  • The length of patent protection on drugs (which could raise drug prices by delaying availability of generic versions of drugs)
  • The separation of banking from financial speculation that has been proposed as part of the answer to the 2008 financial collapse (i.e., reinstating Glass-Steagall provisions). Furthermore, TPP would prohibit a transaction tax on the buying and selling of securities, derivatives, and other financial instruments (as has been proposed in the US and as is being implemented in Europe).

If ratified, the Trans-Pacific Partnership treaty would enhance the power and rights of corporations while weakening US sovereignty. Given its unlimited term and the virtual impossibility of making changes (which require the unanimous consent of the parties), it amounts to a Constitutional change that gives foreign corporations equal (if not greater) legal status and power than the US and other governments. This is in total contradiction to the design of US democracy where there is a balance of power, checks and balances, elections every two years, and law making that can change policies and the course of the country on a regular basis.

Furthermore, it would foster a race to the bottom for public health and the environment by giving corporations the right to challenge health and environmental laws and regulations in pursuit of ever higher profits. Similarly, it would foster a race to the bottom for workers, especially well-paid blue and white collar workers, as jobs continue to move overseas (as they have done under NAFTA), and compensation and safety are attacked as limiting profits.

I’m not one who generally buys conspiracy theories, but the secrecy and potency of the TPP make it feel like a conspiracy among our corporate and political elite to give corporations, which are totally focused on maximizing profits, the ultimate power in our society. Therefore, corporations, not our governments or other civic organizations, would determine our well-being as individuals, communities, and nations, as well as, ultimately, the well-being of our planet. I strongly urge you to call your US Senators, and your Representative as well, to ask them to oppose “fast-track” rules for consideration of the Trans-Pacific Partnership “Trade” Treaty and to demand full disclosure and discussion of its provisions in Congress and with the public.

(You can find out who your Congress people are and get their contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm for your Senators and http://www.house.gov/representatives/find/ for your Representative.)


[1]       Public Citizen, retrieved 9/9/13, “TPP’s investment rules harm public access to essential services,” www.citizen.org/TPP

[2]       Hightower, J., August 2013, “The Trans-Pacific Partnership is not about free trade. It’s a corporate coup d’état – against us!” The Hightower Lowdown

[3]       Public Citizen, retrieved 9/9/13, “TPP’s investment rules harm public health,” www.citizen.org/TPP

[4]       Public Citizen, retrieved 9/9/13, “TPP’s investment rules harm the environment,” www.citizen.org/TPP

[5]       Hightower, J., August 2013, “The Trans-Pacific Partnership is not about free trade. It’s a corporate coup d’état – against us!” The Hightower Lowdown

[6]       Moench, B., 6/25/12, “America: A fire sale to foreign corporations,” Common Dreams (http://www.commondreams.org/view/2012/06/25-0)

“TRADE” AGREEMENT SUPERSIZES CORPORATE POWER

ABSTRACT: The US is currently negotiating a trade agreement known as the Trans-Pacific Partnership (TPP). The negotiations have been so secretive that most members of Congress have never seen a draft of the treaty and the public is mostly unaware of its existence. The mainstream (corporate) media have hardly mentioned the TPP, despite its target date for completion of December 2013.

Much of the TPP has nothing to do with trade; its focus is largely on providing legal rights to multi-national corporations so they can make profits without interference from government laws, regulations, or sovereignty. Foreign corporations would have the right to sue national or local governments if their laws, regulations, or actions negatively affected current or expected future profits. These suits would be resolved by an Investor-State Dispute Resolution system using an international tribunal (i.e., court).

Interestingly, conservatives have generally objected to the use of international precedents and tribunals that might impinge on US sovereignty and initiatives. However, they are generally supportive of the rights and power given to foreign corporations and international tribunals by the TPP.

The Trans-Pacific Partnership treaty puts corporate interests ahead of American interests. I strongly urge you to call your US Senators to ask them to oppose “fast-track” rules for consideration of the Trans-Pacific Partnership “Trade” Treaty and to demand full disclosure and discussion of its provisions in Congress and with the public.

FULL POST: The US is currently negotiating a trade agreement known as the Trans-Pacific Partnership (TPP). The negotiations have been so secretive that most members of Congress have never seen a draft of the treaty and the public is mostly unaware of its existence. Yet, Congress is going to be asked soon to vote on considering the treaty under “fast-track” rules that mean it would get a yes or no vote in Congress with limited debate and no amendments allowed. And once the treaty is approved, it has no expiration date and changes can only be made with the unanimous agreement of the participating countries. [1]

The mainstream (corporate) media have hardly mentioned the TPP, despite the fact that it includes 40% of the global economy, involves 12 (and potentially more) countries [2], has had 18 negotiating sessions, and has a target date for completion of December 2013.

Given that the tariffs among the participating countries are already low and that the US already has trade agreements with many of them (Canada, Mexico, Chile, Peru, Australia, and Singapore), there would seem to be little need for the TPP. However, much of the TPP has nothing to do with trade – only 5 of its 29 sections actually deal with trade. Its focus is largely on providing legal rights to multi-national corporations so they can make profits without interference from government laws, regulations, or sovereignty. It has been described as the most business-friendly “trade” agreement in history and as NAFTA (the North American Free Trade Agreement between the US, Canada, and Mexico) on steroids. (Most people view NAFTA as having been good for US corporations but as not having lived up to the promise that it would create jobs in the US, let alone good jobs with good wages.)

The only people with access to the negotiations and draft treaty language have been members of the US Trade Representative’s official Trade Advisory Committees. These individuals are sworn to secrecy, as are the negotiators for the other countries. Of the roughly 700 US advisory committee members, about 600 represent the business community, about 20 represent workers, and none represent citizens’ or civic groups.

The TPP benefits corporations, particularly foreign corporations, by

  • Strengthening patent, copyright, and intellectual property rights
  • Banning government contracting rules that favor domestic businesses (e.g., Buy America incentives)
  • Allowing government regulations to be challenged and overridden if they reduce a foreign corporation’s profits, including, for example, regulations of food safety, environmental impact, the financial system, public utilities and services, and working conditions (including minimum wage, overtime, safety, and child labor laws)
  • Giving special international tribunals (i.e., courts) the ability to overrule domestic laws and regulations if they would hurt foreign corporations profits
  • Creating a special visa program for highly-paid, white-collar professionals that bypasses all other immigration regulations and processes. [3]

Corporations would have a legal status equal to or superseding that of countries. Foreign corporations would have the right to sue national or local governments if their laws, regulations, or actions negatively affected current or expected future profits. [4] These suits would be resolved by an Investor-State Dispute Resolution system using an international tribunal (i.e., court). (Corporations are referred to as “investors.”) Basically, this is an alternative legal system that supersedes US courts and laws. The three person tribunals would operate behind closed doors and be made up of private lawyers. The same lawyers who serve as judges in one case might represent corporations in other cases. There is no appeal process and when a corporation wins, the losing government must pay the corporation for its “lost” profits and legal costs. (My next post will provide examples of how corporations are using similar rights under existing treaties and of the effects TPP is likely to have.)

Interestingly, conservatives have generally objected to the use of international precedents in making court decisions and writing US laws, and to the United Nations, treaties, and international human rights tribunals that might impinge on US sovereignty and initiatives. However, they are generally supportive of the rights and power given to foreign corporations and international tribunals by the TPP, despite the fact that they would clearly limit US sovereignty. The TPP would give foreign corporations greater rights than domestic firms and would expand incentives for US corporations to move investments and jobs overseas. [5]

The Trans-Pacific Partnership treaty puts corporate interests ahead of American interests. And it is widely viewed as benefitting large, international corporations, while hurting small businesses, small farmers, and workers, especially well paid blue and white collar workers. I strongly urge you to call your US Senators, and your Representative as well, to ask them to oppose “fast-track” rules for consideration of the Trans-Pacific Partnership “Trade” Treaty and to demand full disclosure and discussion of its provisions in Congress and with the public.

(You can find out who your Congress people are and get their contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm for your Senators and http://www.house.gov/representatives/find/ for your Representative.)


[1]       Hightower, J., August 2013, “The Trans-Pacific Partnership is not about free trade. It’s a corporate coup d’état – against us!” The Hightower Lowdown

[2]       The negotiations currently include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Other countries are allowed to join in the future and China, Indonesia, and Russia are likely to join at some point.

[3]       Stangler, C., 9/2013, “MBAs without borders,” In These Times

[4]       Hauter, W., 8/22/13, “The un-American way: The Anti-democratic Trans-Pacific Partnership threatens food safety and public health,” OtherWords (www.commondreams.org/view/2013/08/22-3)

[5]       Moench, B., 6/25/12, “America: A fire sale to foreign corporations,” Common Dreams (http://www.commondreams.org/view/2012/06/25-0)

LABOR DAY AND THE MIDDLE CLASS

ABSTRACT: Labor Day is a time to celebrate the contributions working people make to our country. But with unemployment still high, inequality on the uptick, and the middle class shrinking and under serious financial strain, many working families just don’t have much to celebrate. For 30 years, wages for the middle and lower income workers have barely kept up with inflation and have not kept up with their significant productivity increases. This means that they aren’t being paid fairly for what they produce. From 1979 to 2012, a typical worker’s wages grew only 5.0% despite a 74.5% increase in productivity.

Efforts are building at the federal level and in a number of states to raise the minimum wage, which has not kept pace with inflation or productivity growth. Low wage workers at fast food chains, big box retailers, and elsewhere have been organizing rallies and strikes to protest low wages and poor working conditions.

President Bill Clinton’s Labor Secretary, Robert Reich, has put together a short video (under 3 minutes) that explains how we can turn things around. (http://front.moveon.org/how-workers-can-get-a-fair-shake-a-labor-day-message-from-robert-reich/#.UiSXAknD_IU)

Jobs with wages that support a middle class life are essential to the well-being of individuals, families, our economy, and our country. Such jobs have been disappearing for 30 years. We need to reverse this trend. And we can, through our actions as citizens and through the policies of our government.

FULL POST: Labor Day is a time to celebrate the contributions working people make to our country. They power our economy both through what they produce and what they consume. (Consumer spending is about two-thirds of economic activity.)

But with unemployment still high, inequality on the uptick, and the middle class shrinking and under serious financial strain, many working families just don’t have much to celebrate. The recovery is weak and the jobs that are being created are largely low wage jobs. So far in 2013, 61% of new jobs have been in low-wage industries and 77% have been part-time. [1] Many of the laid off workers who are getting jobs are earning much less than they used to and many are only working part-time; many of them, especially older workers, are experiencing long-term unemployment with unemployment benefits running out and the loss of health insurance. [2]

For 30 years, wages for the middle and lower income workers have barely kept up with inflation and have not kept up with their significant productivity increases. This means that they aren’t being paid fairly for what they produce. Their increases in productivity are not rewarding them, but instead are going to corporate profits, executive pay, and shareholders. Between 2007 and 2012, wages fell for the 70% of workers at the bottom of the income distribution, despite productivity growth of 7.7%. From 1979 to 2012, a typical worker’s wages grew only 5.0% despite a 74.5% increase in productivity. [3] If the minimum wage had kept pace with productivity growth since the 1960s, it would be $16.54 instead of $7.25. [4]

Since 2008, corporate profits are up 25% – 30% while wages have fallen to their lowest portion of corporate revenue since the 1940s. Part of this is due to the continuing trend of employers changing full-time jobs with benefits into part-time or contracted jobs, typically without benefits. [5]

Efforts are building at the federal level and in a number of states to raise the minimum wage, which has not kept pace with inflation or productivity growth. More than 7 million children live in homes whose income would increase if we raised the minimum wage and more than 10 million Americans, including 4% of full-time workers, qualify as the “working poor.” That means they spent at least half the year working yet still live below the poverty line ($19,530 for a family of three, which might be a single parent and two children). [6]

Low wage workers at fast food chains, big box retailers, and elsewhere have been organizing rallies and strikes to protest low wages and poor working conditions.[7] If you didn’t see The Daily Show’s piece on fast food workers and the minimum wage (with John Oliver subbing for Jon Stewart) it’s, as usual, both informative and entertaining. It’s at: http://www.thedailyshow.com/watch/thu-august-1-2013/can-t-you-at-least-wait-until-jon-stewart-gets-back. (It’s 10 minutes long with short ads at the beginning and in two breaks.)

President Bill Clinton’s Labor Secretary, Robert Reich, has put together a short video (under 3 minutes) that explains how we can turn things around. It lists 6 policies that are needed to make sure workers’ get a fair return for their labor and that would support the middle class. It’s at: http://front.moveon.org/how-workers-can-get-a-fair-shake-a-labor-day-message-from-robert-reich/#.UiSXAknD_IU.

As an initial step, the site includes a petition you can sign that calls on two very profitable companies – McDonald’s and Walmart – to pay their workers fair wages. Walmart, for example, pays its typical employee less than $9 an hour and many of its jobs are part-time, while its profits in 2013 were $28 billion. Most people who work for big-box retailers like Walmart, as well as those who work in the fast-food industry, are adults, not teenagers. They are responsible for bringing home a significant share of their family’s income and they should be paid enough to lift them and their families out of poverty.

When Martin Luther King, Jr., led the March to Washington for Jobs and Justice fifty years ago, one of the objectives was to raise the minimum wage to $2 an hour. $2 an hour in 1963, adjusted for inflation, comes to over $15 an hour today. (You can read more on this and many other topics at Bob Reich’s excellent blog at: http://robertreich.org.)

Jobs with wages that support a middle class life are essential to the well-being of individuals, families, our economy, and our country. Such jobs have been disappearing for 30 years. We need to reverse this trend. Increasing the minimum wage is one step. Increasing investments in human capital are another, including high quality, affordable early care and education, good schools, and affordable, quality post-secondary education. Universal access to good health care and steps to increase compensation and conditions for workers here in the U.S., as well as around the globalized world (for example, through trade treaties), are essential. We can affect these matters through our actions as citizens and through the policies of our government.


[1]       Wiseman, P., 8/5/13, “Most new jobs in July were low paying, part time,” The Boston Globe (from the Associated Press)

[2]       Winerip, M., 8/26/13, “Set back by recession, shut out of rebound,” The New York Times

[3]       Mishel, L., & Shierholz, H., 8/21/13, “A decade of flat wages: The key barrier to shared prosperity and a rising middle class,” Economic Policy Institute

[5]       Garson, B., 8/20/13, “How corporate America used the Great Recession to turn good jobs into bad ones,” TomDispatch

[6]       Eskow, R.J., 8/26/13, see above

[7]       Johnston, K., 8/27/13, “Local rally part of nationwide call,” The Boston Globe

DETROIT’S BANKRUPTCY

ABSTRACT: Detroit’s bankruptcy is the result of a long term decline with many contributing factors. Detroit’s bankruptcy proceeding will favor the big financial corporations because of federal bankruptcy laws, which give priority to paying off financial firms’ interest rate swaps before paying pensions or bond holders. If Detroit ends up cutting workers’ pensions and defaulting on its municipal bonds, it will create dangerous precedents. Other financially ailing cities and municipalities may consider filing for bankruptcy, too, to relieve pension and debt costs.

It will be interesting to watch how the state and federal governments respond. Many precedents will be set. We will learn whether our big corporations and their executives and employees are more important from the federal government’s perspective than our cities, their residents and municipal workers, and their municipal bond holders.

FULL POST: Detroit’s bankruptcy is the result of a long term decline with many contributing factors. Since the financial system collapse of 2008, the federal government has done little to help municipalities that took a double hit from the loss of tax revenue due to the recession itself, as well as from the decline of property tax revenue due to falling property values and homeowners in distress. Certainly, state and federal policies for urban America and trade agreements that let manufacturing jobs, especially in the auto industry, move out of the country played a role. Mismanagement by and corruption of Detroit’s elected leadership played a role as well.

Detroit’s bankruptcy proceeding will favor the big financial corporations because of the 2005 changes in federal bankruptcy laws. Those changes, lobbied for heavily by Wall Street, give priority to paying off financial firms’ interest rate swaps before paying pensions or bond holders. (These interest rate swaps are sold by the big financial firms to cities as insurance to protect them from increases in interest rates. However, unlike insurance, they are really interest rate speculation because they require the cities to pay the financial corporations if interest rates fall. And they have fallen dramatically in the wake of the 2008 financial collapse, which was caused by the big financial corporations.) So the financial firms that speculated on interest rates with Detroit will get paid first and its bondholders and employees’ pensions will get whatever is left over. [1]

If Detroit defaults on its municipal bonds, in other words pays less than it owes, it would set a dangerous precedent for the municipal bond market. Other financially ailing cities and municipalities may consider filing for bankruptcy too, to reduce what they owe bondholders. And it is likely to make borrowing more expensive for states, municipalities, and school districts as municipal bonds will no longer be viewed as virtually risk-free. [2]

Similarly, if Detroit ends up cutting workers’ pensions, it will create a scary precedent for other municipal and government employees. (The average pension owed to Detroit municipal workers, incidentally, is less than $23,000 per year. [3]) Other cities, municipalities, or even states could declare bankruptcy as a way to reduce pension costs. [4] In the private sector, declaring bankruptcy has become a standard tactic for cutting pensions and other benefits for retirees. The airline industry has done this and it has been a standard tactic in leveraged buyouts of private companies. (This was a tactic used by Bain Capital, Mitt Romney’s firm, and became an issue when he ran for President.) In many cases, when a corporation declares bankruptcy, the pensions of its workers become the responsibility of the federal government’s Pension Benefit Guaranty Corporation (PBGC). In 2012, PBGC paid for monthly retirement benefits for nearly 887,000 retirees in 4,500 pension plans that could not pay promised benefits. However, it does not cover state or municipal pension plans. [5] (This is another example, along with bailouts, of how the federal government picks up the pieces when corporations fail to meet their commitments.)

It will be interesting to watch how the state and federal governments respond. Here are two interesting tidbits:

  • While the Michigan state government is doing little to help the city itself, it has approved $450 million in bonds to build a new arena for the Red Wings hockey team and its billionaire owners (who also own Little Caesars Pizza and the Tigers baseball team). Decades of studies have shown that sports facilities’ subsidies are massive wastes of taxpayer money. There is no evidence of a return to the public (as opposed to the private owners of the teams) and they are not an efficient way to create jobs. [6]
  • The federal government has been providing about $100 million a year to Detroit under a variety of federal programs. By way of comparison, US aid to Columbia (the South American country) is about $323 million a year to combat drug trafficking and violence. However, Detroit’s homicide rate is 81% higher than Columbia’s. [7]

Many precedents will be set as Detroit moves through the bankruptcy process. It will be interesting to see who the big winners and losers are, as well as whether the federal government steps in to help out the city as it did the big financial corporations and the big auto companies. We will learn whether our big corporations and their executives and employees are more important from the federal government’s perspective than our cities, their residents and municipal workers, and their municipal bond holders.


[2]       Brown, E., 8/6/13, see above

[3]       Kuttner, R., 8/11/13, “We are all Detroit,” The Huffington Post, (http://www.huffingtonpost.com/robert-kuttner/we-are-all-detroit_b_3741418.html?utm_hp_ref=email_share)

[4]       Brown, E., 8/6/13, see above

[5]       The Pension Benefit Guaranty Corporation, A U.S. Government Agency, http://www.pbgc.gov/home.html

[6]       Jackson, D. Z., 7/31/13, “Motor City hustle,” The Boston Globe

[7]       Christoff, C., & McCormick, J., 8/1/13, “US aid to Colombia tops help for Detroit, but more is unlikely,” The Boston Globe (from Bloomberg News)

BANNING BEE KILLING PESTICIDES

ABSTRACT: Pesticides and other toxic chemicals are ubiquitous in our environment and even in our blood. Regulation of them is weak. One of the unintended consequences of widespread pesticide use is the harming or killing of animals, other than those targeted. Last month, 50,000 bumblebees died after a spraying of the pesticide dinotefuran. The class of pesticides called neonicotinoids, of which dinotefuran is one, is the likely culprit in a broad decline in bee populations. Europe has already implemented restrictions on the use of neonicotinoids.

A bill has been introduced in the US House to restrict the use of these chemicals until we can be sure that they are safe and being used properly. The bill is H.R. 2692, the “Save America’s Pollinators Act”.

I urge you to join me as a citizen co-sponsor of this important legislation by signing the petition at: http://org.credoaction.com/petitions/tell-congress-stop-the-pesticide-that-is-killing-bees?akid=8530.653385.cfRZJV&rd=1&t=5.

FULL POST: Pesticides and other toxic chemicals are ubiquitous in our environment and even in our blood. Regulation of them is weak at best because the chemical corporations are very active in lobbying, making campaign contributions, and using the revolving door to move personnel between the industry and government regulatory agencies. (See posts of 6/29, 6/21, and 6/10/13 for more information.) One of the unintended consequences of widespread pesticide use is the harming or killing of animals, other than those targeted. Birds were the victims of DDT 50 years ago and today bees appear to be a victim.

Last month, 50,000 bumblebees died after trees in Wilsonville, Oregon were sprayed with the chemical dinotefuran, the key ingredient in Safari pesticide. This was the largest bee die-off ever recorded. Bee populations are declining across the country at an alarming rate, and a class of pesticides, called neonicotinoids, of which dinotefuran is one, is the likely culprit.

Both our environment and food supply are inextricably tied to the welfare of bees, making the decrease in bee populations a cause for alarm. Many crops, including fruit trees, rely on bees for pollination. The Oregon Department of Agriculture is investigating the die-off and is temporarily restricting the use of 18 pesticide products containing dinotefuran and the Environmental Protection Agency is currently reviewing the use of neonicotinoid pesticides. However, that review is not scheduled to be completed for another five years. Europe has already implemented restrictions on the use of neonicotinoids.

A bill has been introduced in the US House of Representatives by Congressmen Earl Blumenauer and John Conyers to restrict the use of these chemicals until we can be sure that they are safe and being used properly. The bill, H.R. 2692, the “Save America’s Pollinators Act”, would suspend certain uses of neonicotinoids until the Environmental Protection Agency reviews these chemicals and makes a new determination about their proper application and safe use. This will increase pressure on the EPA to speed its review before another mass bee die-off occurs. One strategy for getting the bill passed is to include it in the reauthorization of the Farm Bill, which is currently under active consideration.

I urge you to join me as a citizen co-sponsor of this important legislation by signing the petition linked to below. You can also contact your Representative and urge him or her to support this legislation.

Will you join me and add your name to this petition to the United States Congress asking it to pass legislation suspending use of the pesticides that are killing bees?

This petition was created on org.credoaction.com, a new people-powered platform that allows activists to start and run petition campaigns. org.credoaction.com helps activists like you make progressive change and fight regressive policies by creating online petitions.

NOTE: Please let me know by submitting a comment on this post if you would like me to continue sharing links to on-line petitions on issues I have written about. These petitions are an easy way to express your opinion and increase its weight by combining it with that of others. The effectiveness of these petitions varies greatly based on a wide range of factors, but there’s little downside given how quick and easy it is to do. Each petition also will give you a link to the advocacy organization sponsoring it. If it’s an issue you are particularly interested in, you may want to engage directly with the organization. One forewarning: in many cases when you sign a petition the sponsoring organization will put you on their email list. In some cases, there is a check box on the petition that you can uncheck if you don’t want the organization to start sending you information. You can, of course, always unsubscribe via any email you get from such an organization

OUR TOXIC ENVIRONMENT AND WHAT YOU CAN DO

ABSTRACT: On a societal level, a disproportionate burden of toxic pollution is borne by Americans of color. At the specific level, every day skin care products contain toxic chemicals. Many contain formaldehyde (a known carcinogen), phthalates (linked to hormonal disruption and birth defects), and/or parabens (which mimic the hormone estrogen and have been linked to breast cancer). Lead (a neurotoxin so damaging to young children that it is banned from house paint and gasoline) is present in lipstick.

The US Food and Drug Administration (FDA) does NOT have the authority to test cosmetic ingredients before they are marketed or to order recalls. Regulation is in the hands of the industry itself, which to-date has found only 11 chemicals to be unsafe for use. In contrast, in Europe, 1,400 chemicals have been banned from personal care products. The chemical and cosmetics corporations spend millions of dollars every year on lobbying and other efforts to influence US policy.

Atrazine is a weed killer, widely used in the US but banned in the European Union. As an example of the lengths the chemical industry and its allies in Congress will go to stop any momentum to regulate toxins, they blocked a resolution honoring Rachel Carson, author of Silent Spring 50 years ago, which established a clear link between DDT and other pesticide use and the widespread deaths of birds, as well as reproductive, birth, and developmental abnormalities in mammals.

Options for what you can do at home and politically are included in the full post below.

FULL POST: Before sharing some specific examples of toxic chemicals in our everyday lives and some things you can do about them, here’s an important societal perspective. A disproportionate burden of toxic pollution is borne by Americans of color. The environmental justice movement has documented the disproportionate presence of pollution sources in and near communities with high percentages of people of color. Prominent examples are in Louisiana and Detroit. The stretch along the Mississippi River from Baton Rouge to New Orleans is dotted with oil refineries that belch a variety of toxins into the air of the surrounding, largely minority, communities. This area is known as “Cancer Alley.” Detroit’s zip code 48217 is 85% African American and is know as Michigan’s most polluted area. It is adjacent to a steel plant, a coal-fired power plant, a salt mine, and a huge oil refinery. The refinery alone emits close to 4 tons of toxins per year. Virtually every household in the area has at least one member who suffers from asthma, leukemia, cancer, or sarcoidosis (a disease in which inflammation occurs in the lymph nodes, lungs, liver, eyes, skin, or other tissues). After some homes in the area tested positive for up to 20 toxic gases, the refinery offered to buy the homes in an effort to reduce its liability. [1]

At the specific level, every day skin care products, including cosmetics, contain toxic chemicals. Many of these products, from suntan oil to makeup to hair spray to perfumes and colognes, contain formaldehyde (a known carcinogen), phthalates (linked to hormonal disruption and birth defects), and/or parabens (which mimic the hormone estrogen and have been linked to breast cancer). Lead (a neurotoxin so damaging to young children that it is banned from house paint and gasoline) is present in lipstick at concentrations 30 times higher than what the FDA allows in candy bars. Our skin is our largest organ and readily absorbs these products’ ingredients. Some of the chemicals absorbed accumulate over time because our bodies do not eliminate them or break them down. [2]

The US Food and Drug Administration (FDA), created by the Federal Food, Drug, and Cosmetic Act of 1938, does NOT have the authority to test cosmetic ingredients before they are marketed or to order recalls – as it does for drugs and medical devices. Regulation is in the hands of the industry itself, which to-date has found only 11 chemicals to be unsafe for use in its products, including for use by women of child bearing age. In contrast, in Europe, 1,400 chemicals have been banned from personal care products because they are carcinogenic, mutagenic*, or toxic to reproduction.

The chemical and cosmetics corporations spend millions of dollars every year on lobbying and other efforts to influence US policy. In 2012, they blocked federal legislation that would have required complete ingredient labels on fragrances and hair sprays, as well as banned the use in cosmetics of carcinogens and chemicals linked to reproductive disorders. In addition, these corporations attempted to pass legislation that would block state regulation, such as that in California. If you would like more information and to take action, you can go to the Campaign for Safe Cosmetics at http://safecosmetics.org.

Home cleaning products are another example of every day items that contain toxic chemicals. For information on how to keep your home clean and shiny without using products with toxic chemicals go to http://www.bostonhealthcoach.com/oilrecordings.html and select the teleclass entitled “Chemical-Free Home.”

Atrazine is a weed killer, widely used in the US but banned in the European Union. In the human body, it mimics hormones and has what are referred to as endocrine system disrupting effects. It has been shown to disrupt the reproduction and immune systems in a wide range of animals, including mammals. It is present in water everywhere, including in rain water. It can actually turn male frogs into functioning females. [3]

As an example of the lengths the chemical industry and its allies in Congress will go to stop any momentum to regulate toxins, they blocked a resolution honoring Rachel Carson, author of Silent Spring, on its 50th anniversary and what would have been her 100th birthday. They attacked her as having made “junk-science claims about DDT” and accuse her and her supporters of being responsible for the deaths of “millions of people … particularly children” because supposedly the lack of use of DDT led to deaths from malaria and other diseases. The facts are that the EPA never banned DDT for use against malaria and Carson did not support a universal ban on pesticides but advocated for use of as little as possible. In Silent Spring, Carson established a clear link between DDT and other pesticide use and the widespread deaths of birds, as well as reproductive, birth, and developmental abnormalities in mammals. DDT, other pesticides, and some of the tens of thousands of chemicals in use today will be part of the environment and in our bodies for decades to come because they decompose or are eliminated very slowly. [4]

I urge you to contact your US Representative and Senators (and your state ones too) and to ask them to support the Safe Cosmetics and Personal Care Products Act (H.R. 1385) and the Safe Chemicals Act (S. 696). (Find your Representative at http://www.house.gov/representatives/find/ and your Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.)


[1]       Brune, M., July / August 2013, “And justice for all,” Sierra Club magazine

[2]       Wasik, J.F., May / June 2013, “Beauty tips for the FDA: Did my wife’s cosmetics give her breast cancer?” The Washington Monthly

*       Mutagenic chemicals cause changes in the genetic material, usually DNA, of an organism and thus increase the frequency of mutations. As many mutations cause cancer, mutagenic chemicals are therefore also likely to be carcinogens. http://en.wikipedia.org/wiki/Mutagen

[3]       Steingraber, S., 4/19/13, “Sandra Steingraber’s war on toxic trespassers,” Bill Moyers public TV show, available at BillMoyers.com. Note: Steingraber has written multiple books including “Having faith: An ecologist’s journey to motherhood” and “Raising Elijah: Protecting our children in an age of environmental crisis.”

[4]       Mangano, J.J., & Sherman, J.D., 10/1/12, “Rachel Carson’s brave, groundbreaking ‘Silent Spring’ at 50 years,” The Washington Spectator

CHILDREN AND TOXINS

ABSTRACT: Children are continuously exposed to many toxic chemicals. None of the over 75,000 synthetic chemicals in use in the US are regulated based on their potential to affect children. Chemicals in a mother’s blood can cause a preterm birth or even a miscarriage, and do get into her fetus’s blood. After birth, breast milk can be harmful as it is the most highly chemical-contaminated of any food.

In January, the Environmental Protection Agency (EPA) issued its report America’s Children and the Environment. While there is some good news on air quality, blood lead levels, and tobacco smoke, it finds that children may be exposed to relatively higher amounts of chemicals than adults and have higher blood levels of toxins. Although definite cause and effect is hard to establish with current knowledge and data, and because of multiple risk factors, respiratory diseases, childhood and adult cancers, neuro-developmental disorders, obesity, and adverse birth outcomes are some of the negative health outcomes for which there is evidence of a link to environmental factors. The report finds, among other things, that 1) air pollution and exposure to lead are still problems; 2) mercury in women of child bearing age has not declined over the last 10 years; 3) phthalate blood levels were 10% to 33% higher in children than in women and were detected in all samples of indoor air and dust at child care centers; 4) pesticides were detected in all samples of indoor air and dust at child care centers; 5) asthma rates are up to one in 11 children and the rate for Black children is nearly double that of White children; 6) childhood cancer rates have increased over 10% over the last 15 years; 7) attention-deficit / hyperactivity disorder (ADHD) diagnoses have increased by 50%; 8) one in 100 children now exhibits autism symptoms, a ten-fold increase. Puberty is occurring about a year and a half earlier, with one in 10 girls going into puberty before age 8.

Despite the very high economic and human costs of exposure to toxins, we do not have an effective regulatory system in place to protect us – not even our children.

FULL POST: Children are continuously exposed to many toxic chemicals in the air, dust, water, and everyday items that surround them with no regulation and no evaluation of possible negative effects. None of the over 75,000 synthetic chemicals in use in the US are regulated based on their potential to affect children. The science about how chemicals can affect growth and development in children and fetuses has advanced tremendously in the last 40 years, but our laws regulating toxic substances have not changed. The chemical industry, and related industries, has blocked regulation under existing law, as well as improvements to the current law. (See post of 6/10/13 for more detail.) [1]

Thousands of consumer products for children, such as toys, car seats, bedding, and clothes, contain toxic chemicals linked to cancer, hormone disruption, developmental problems, and reproduction and immune system problems. Yet there is no national requirement to regulate, disclose, or label such products. Washington State in 2008 became the first state to require manufacturers to report the presence of toxic chemicals in their products. [2]

Chemicals in a mother’s blood can also be harmful to children. During pregnancy, toxins can cause a preterm birth or even a miscarriage, and do cross the placenta and get into her fetus’s blood, with unknown effects on her yet to be born baby. After birth, breast milk can be harmful as it is the most highly chemical-contaminated of any food. It contains dioxins, pesticides, PCBs, and the range of other chemicals that are found in human blood. (See posts of 5/22/13 and 6/2/13 for more detail.) These are examples of toxic trespass: toxic chemicals in our bodies that got there without our consent or control. [3]

In January, the Environmental Protection Agency (EPA) issued its report America’s Children and the Environment. The good news is that it finds that air quality has improved, children’s blood lead levels have declined, and children’s exposure to second hand tobacco smoke has decreased. However, it states that research is need on the causes of increased asthma rates, the potential impacts of early life exposure to chemicals, and the higher incidences of diseases in children in minority and low income families than in other families. It notes that children may be exposed to relatively higher amounts of chemicals than adults because they eat, drink, and breathe more relative to their size. Furthermore, they may be exposed to chemicals that adults are not because they play on the ground or floor and more frequently put their hands to their mouths. And children in minority and low income families generally have higher body burdens of toxic chemicals. [4]

It is often difficult to determine the impact of chemicals and the cause of adverse health outcomes because of the presence and interaction of multiple factors. For many environmental exposures, there is very little information on the potential health consequences of exposure levels typically experienced by US children. Furthermore, the impact on children of a given exposure can vary widely due to genetics; the length, avenue, and magnitude of exposure; age and developmental stage; concurrent or prior exposure to other contaminants; and the presence of other, non-chemical stressors. The prenatal period is the most sensitive, generally. Respiratory diseases, childhood and adult cancers, neuro-developmental disorders, obesity, and adverse birth outcomes are some of the negative health outcomes for which there is evidence of a link to environmental factors. The effects of harmful exposure may not be evident until years later and may contribute to the onset of chronic diseases in adulthood.

Specific findings of the EPA report, based on the most recent data available, include:

  • Virtually all children experienced hazardous air pollutant concentrations above the cancer risk benchmark in 2005. 56% experienced one pollutant over the safe level standard for health effects other than cancer, (e.g., asthma).
  • Despite the reductions in blood lead levels, 15% of children birth to age 5 still lived in homes with a lead hazard in 2005-2006. The median lead blood level of Black children was one-third higher than for other children.
  • The median concentration of mercury in the blood of women ages 16 to 49 (i.e., child-bearing age) is unchanged over the last 10 years. Hopefully, the recent regulation of mercury emissions for electric power generating plants will improve this in the future. In recent years, while mercury regulation was blocked by the electric power industry, we advised women of child-bearing age to limit their intake of certain fish to avoid excessive mercury, which is a known neurotoxin for fetuses and young children.
  • The concentrations of phthalates (which have been linked to hormonal changes and birth defects in animals) were 10% to 33% higher in children than in women, with no clear trend up or down. Phthalates were detected in all samples of indoor air and dust at child care centers.
  • Pesticides were detected in all samples of indoor air and dust at child care centers.

The EPA report also found that chronic illnesses and childhood disabilities have risen dramatically in recent years. Although some of this may be due to improved diagnosis, there clearly has been an increase in incidence. While no clear cause has been established, increased exposure to toxic chemicals is very likely to be at least a contributing cause. For example:

  • Asthma rates are up to one in 11 children, increasing from 8.7% in 2001 to 9.4% in 2010. The rate (16.0%) for Black children is nearly double that of White children.
  • Childhood cancer rates have increased over 10%, from 157 cases per million children to 173.5, over the last 15 years.
  • Attention-deficit / hyperactivity disorder (ADHD) diagnoses have increased by 50%, from 6.3% to 9.5% of children over the last 13 years.
  • One in 100 children now exhibits autism symptoms, a ten-fold increase over 13 years.
  • The child obesity rate has risen from 5% to 17% over the last 30 years, but seems to have stabilized. This is due to multiple causes, but chemical exposure is likely to be a factor.
  • One in eight births occurs prematurely, increasing from 11.0% to 12.8% over the last 15 years.
  • A sampling of birth defects has shown an increase over the last 8 years.

Puberty is occurring about a year and a half earlier, with one in 10 girls going into puberty before age 8. Early puberty raises the risk of breast cancer. Puberty marks a broad range of changes in one’s body, including brain structure and functioning. No one knows what the impacts of early puberty overall might be. But we do know that the same chemicals that can cause early sexual maturation in animals in the lab are in the bodies of our children. So it seems likely that these chemicals are at least contributing to the early puberty that is being observed in our children. [5]

We know there are very high economic and human costs to these medical problems and chronic illnesses. Despite this, we do not have an effective regulatory system in place to protect us – not even our children.


 

[1]       Steingraber, S., 4/19/13, “Sandra Steingraber’s war on toxic trespassers,” Bill Moyers public TV show, available at BillMoyers.com. Note: Steingraber has written multiple books including “Having faith: An ecologist’s journey to motherhood” and “Raising Elijah: Protecting our children in an age of environmental crisis.”

[2]       McCauley, L., 5/1/13, “Report: Toxic chemicals found in thousands of children’s products,” Common Dreams. The report cited is at http://watoxics.org/chemicalsrevealed.

[3]       Steingraber, S., 4/19/13, see above

[4]       Environmental Protection Agency, Jan. 2013, “America’s Children and the environment,” http://www.epa.gov/ace

[5]       Steingraber, S., 4/19/13, see above

BLOCKING REGULATION OF TOXINS

ABSTRACT: Corporations with a financial interest in the use and sale of toxic chemicals are engaged in a major, multi-faceted effort to prevent, weaken, and delay regulation. They work to prevent clear, unbiased, scientific information from being available to our policy makers and the public. They engage in efforts to affect the regulatory process – from the enactment of laws to the implementation of regulations – in the legislative, executive, and judicial branches of government. They work to make the whole process as long and complicated as possible. This gives them many opportunities to block, weaken, and delay the actual regulation of a toxic chemical.

The chemical industry works to limit the effectiveness of any regulations eventually implemented and of the agency enforcing them.

It achieves results by using the standard tactics of 1) Campaign contributions, 2) Lobbying, and 3) The revolving door of personnel moving between the industry and legislative and executive branch staff positions, which result in personal relationships (and potential conflicts of interest) that can benefit the chemical industry.

Given that corporations typically have more resources, a more singular focus, and greater longevity for waging the battle against regulation than those working to regulate a toxic chemical, dragging out the process and making it costly generally works to their advantage.

FULL POST: Corporations with a financial interest in the use and sale of toxic chemicals are engaged in a major, multi-faceted effort to prevent, weaken, and delay regulation, despite threats to public health and safety, as well as to the environment. These corporations work to prevent clear, unbiased, scientific information from being available to our policy makers and the public. They engage in efforts to affect the regulatory process – from the enactment of laws to the implementation of regulations – in the legislative, executive, and judicial branches of government. [1] The regulation of lead [2] (see post of 6/2/13 for more detail) and tobacco are classic examples. (Similar efforts are occurring in other arenas, such as climate change and regulation of the financial industry.)

The efforts of the chemical industry on the legislative front are both proactive and reactive, offensive and defensive, as well as high profile and hidden. Examples, for among many, include:

  • The fracking* industry proactively but quietly got legislation passed that exempted fracking from review by the Environmental Protection Agency (EPA) under the Safe Drinking Water Act. This happened in 2005 under President Bush and Vice President Cheney and is widely referred to as the “Halliburton Loophole” because a major beneficiary is Cheney’s previous employer, Halliburton Co.
  • The genetically modified organism (GMO) industry quietly attached a provision to an emergency budget bill (passed and signed into law by President Obama) that allows corporations (notably Monsanto) to sell GMO seeds for agriculture even when a federal court has ordered them not to. [3]
  • A provision in the 2013 Farm Bill, currently in the US House of Representatives, would prohibit states from enacting laws requiring the labeling of food with GMO ingredients or otherwise regulating the production of agricultural goods. [4]

The chemical industry achieves legislative results by using the standard tactics of:

  • Campaign contributions to Congress people (and state legislators) who have oversight roles,
  • Lobbying, and
  • The revolving door of personnel moving between the industry and legislative staff positions, which result in personal relationships (and potential conflicts of interest) that can benefit the chemical industry.

Then, once laws are in place, the chemical industry works to make the process of implementation through rules and regulations as long and complicated as possible. This gives it many additional opportunities (beyond those of the legislative process) to block, weaken, and delay the actual regulation of a toxic chemical.

The chemical industry also works to limit the effectiveness of any regulations eventually implemented and of the agency enforcing them. One way is to lobby to make the regulations as complex as possible with loopholes and details that make them difficult to enforce and open to court challenges. This can include putting the burden of proof on the agency as opposed to the corporation and setting a high standard of proof or harm. For example, the Toxic Substances Control Act gives the EPA just 90 days to find “unreasonable risk” if it wants to regulate a new chemical (see post of 6/2/13 for more detail). Another tactic is to require an extensive and often biased cost-benefit analysis of any new regulation.

The tactics of lobbying and the revolving door of personnel, in this case involving the regulatory agency in the executive branch rather than the legislative branch of government, are used to achieve these results.

A regulatory agency can also have its effectiveness hurt by budget cuts or legislative failure to confirm key agency personnel. And challenging regulations or regulatory decisions in court uses the judicial branch of government as another way to delay and drive up the costs of regulation.

Finally, the chemical industry engages in efforts to control the flow and clarity of information. Corporations with a stake in research on a potentially toxic chemical will create a false and parallel science by paying for biased research and will control, as much as possible, the dissemination of scientific information. They will attack scientists, sometimes directly and personally, including threatening them and suing them, when their research finds toxic effects from the corporation’s chemical. [5] An important goal of these efforts is to create false or exaggerated doubt in the minds of policy makers and the public about the harm that a chemical causes.

Trade associations like the American Chemical Council and public relations experts are used in efforts to manipulate public opinion and influence the media. Supposedly independent groups are created and funded specifically to promote the industry’s position. These allow the corporation with a vested interest to remain behind the scenes and apparently independent of public relations efforts to downplay evidence of dangers, exaggerate uncertainty, allege misconduct by scientists who find toxic effects, and plant inaccurate or biased stories in the media. [6][7]

To avoid having to share information with the public, corporations will claim that it represents “trade secrets” or “proprietary information”. For example, the fracking industry makes such claims when asked to reveal the chemicals it is pumping into the ground to release natural gas. This claim is also used to avoid labeling products with their chemical contents. Eastman Chemical Co. has used this claim to suppress information from a court case on the presence and effects of chemicals in its plastics. [8]

Given that corporations typically have more resources, a more singular focus, and greater longevity for waging the battle against regulation than those working to regulate a toxic chemical, dragging out the process and making it costly generally works to their advantage.


 

[1]       Union of Concerned Scientists, Feb. 2012, “Heads they win, tails we lose: How corporations corrupt science at the public’s expense,” http://www.ucsusa.org/scientific_integrity/abuses_of_science/how-corporations-corrupt-science.html

[2]       Rosner, D., & Markowitz, G., 5/17/13, “Toxic disinformation,” Bill Moyers’ public TV show, available at billmoyers.com

*      Fracking is shorthand for hydraulic fracturing where high pressure water and other fluids, including toxic chemicals, are injected into the ground to release natural gas.

[3]       McCauley, L., 5/20/13, “Senator leads call to repeal the ‘Monsanto Protection Act’,” http://www.commondreams.org/headline/2013.05/20-2

[4]       Sheets, C.A., 5/17/13, “’Monsanto Protection Act 2.0’ would ban GMO-labeling laws at the state level,” International Business Times

[5]       Riley, T., 5/18/13, “Blinding us from science,” http://billmoyers.com/2013/05/18/blinding-us-from-science

[6]       Rosner, D., & Markowitz, G., 4/29/13, “You and your family are guinea pigs for the chemical corporations,” TomDispatch.com

[7]       Union of Concerned Scientists, Feb. 2012, see above

[8]       Dubose, L., 6/1/13, “Silencing science: What you may never know about plastic baby bottles,” The Washington Spectator