EXAMPLES OF CORRUPT CAPITALISTIC BEHAVIOR Part 4

Here are eight recent examples of corporate corruption and of the overall corruption of our current system of capitalism, in which a lack of regulation of large corporations and Wall Street allows greed to run rampant. The frequency of these incidents is astounding; they are reported on a daily basis. The varied examples below document a breadth of greed-driven corruption that puts lives in danger, destroys news reporting that is essential to a well-functioning democracy, and makes the stock market vulnerable to manipulation and our financial system vulnerable to criminal money laundering. (This previous post highlighted three other examples of corrupt capitalistic behavior.)

Example #1: The power outage in Texas has dramatically illustrated what happens when the private sector is not properly regulated. This is, of course, particularly important when we rely on the private sector to deliver a vital public service (e.g., electricity or water) or an essential public product (e.g., health care supplies or food). In Texas, the private electric power generation companies and the private electric grid manager decided in the 1930s to avoid federal regulation by refusing to participate in the national power grid. Then, they got Texas regulators to let them cut corners to maximize profits. The result is an electric power system that doesn’t have the capacity to respond in an emergency and, therefore, left millions of people in the dark and cold, jeopardizing their health, safety, and, indeed, their lives, during a recent mid-February cold snap. [1]

Example #2: The wild fluctuations in GameStop stock, a small, previously little-known company, have focused attention on weaknesses in the regulation of the stock market and of the companies that facilitate stock trading. GameStop stock shot up from $4 to $5 a share in August to $20 in mid-January to $483 in late January. It then fell back to $41 by mid-February. This roller coaster ride has highlighted the risks and often unfair environment that individual investors face in the stock market, which is dominated by sophisticated, powerful, and wealthy traders, who too often are further advantaged by access to inside, non-public information. [2]

Example #3: Three big drug distributors (Cardinal Health, AmerisourceBergen, and McKesson) and Johnson & Johnson are paying big fines (a total of $26 billion) as part of the settlement for fraudulently marketing and selling opioids, which led to drug addictions, overdoses, and tens of thousands of deaths. However, they are deducting these fines from their taxes, reducing what they owe the government by a combined $4.6 billion. Under the settlement, the four companies will avoid having to admit to any guilt, wrongdoing, or legal responsibility. Many people involved with this case feel that the fines are too low based on the damage that was done and that the tax deductions and the lack of any admission of guilt are insulting to the victims. [3]

Example #4: Tribune Publishing, one of the last newspaper chains not already owned and gutted by private equity or hedge fund vulture capitalists, is being bought by the Alden Global Capital (AGC) hedge fund. AGC, along with other vulture capital newspaper purchasers, has consistently maximized financial returns by cutting the newspapers’ staffs, selling their real estate, busting their unions, and eliminating their pension liabilities, while pocketing as much cash as possible and loading debt onto the newspaper companies, often pushing them toward bankruptcy. The Tribune papers that will almost certainly be similarly decimated are in Chicago, Baltimore, Hartford, Orlando FL, New York (the Daily News), Annapolis, Allentown, Newport News, and Norfolk VA. AGC now owns over 200 newspapers. This purchase (and the others like it) is possible because of a lack of antitrust enforcement and special tax law provisions that favor debt-financed acquisitions and payment of special dividends from companies operating at a loss. [4]

Example #5: An investor lawsuit against Boeing is moving forward based on claims that the Board of Directors and management failed to uphold their responsibilities to shareholders relative to the safety issues and crashes of the 737 Max airplanes. Two of the planes crashed in the spring of 2019 killing 346 people. The suit questions the Board’s and management’s roles both in the initial testing of the plane and its software, and their actions after the crash of the first plane, when they decided not to ground all the 737 Max planes. Boeing has already agreed to pay more than $2.5 billion to resolve criminal charges that it conspired to defraud the Federal Aviation Administration (FAA) during the plane’s safety review and certification. The Board did fire Boeing’s CEO in 2020, but gave him a $62 million severance package. [5]

Example #6: Bristol-Myers Squibb and Sanofi, who jointly market the blood-thinning drug Plavix, were ordered by a judge to pay the State of Hawaii over $834 million for illegally marketing the drug. For 12 years, they failed to properly warn consumers about health risks and didn’t disclose that the drug was ineffective for up to 30% of users, both of which put some users’ lives at risk. They engaged in these practices in order to maximize their profits. [6]

Example #7: Google has agreed to pay a $1.3 million fine to French fraud and competition regulators for displaying misleading rankings for French hotels on Google Maps and in Search results. [7]

Example #8: Citigroup, parent of Citibank, was fined $400 million for deficient financial controls and related technology. In an ironic example of its lack of controls, Citibank, in what it says was a mistake, transferred over $500 million to a client’s lenders while intending to make a much smaller interest payment. A judge recently ruled that the lenders do not have to return the money. [8]

[1]      Cox Richardson, H., 2/16/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/february-16-2021)

[2]      Rosen, A., 2/18/21, “Mass. Investor ‘Roaring Kitty’ says he wasn’t part of any coordinated effort to boost GameStop,” The Boston Globe

[3]      MacMillan, D., & Schaul, K., 2/12/21, “Drug companies seek billion-dollar deductions from opioid settlement,” The Washington Post

[4]      Kuttner, R., 2/17/21, “Private equity swallows up yet another newspaper group,” The American Prospect blog (https://prospect.org/blogs/tap/private-equity-swallows-up-yet-another-newspaper-group/)

[5]      MacMillan, D., 2/17/21, “Boeing directors misled on safety, investor lawsuit claims,” The Boston Globe from the Washington Post

[6]      Bloomberg News, 2/16/21, “Bristol-Myers, Sanofi must pay $834 million over Plavix,” The Boston Globe Talking Points

[7]      Associated Press, 2/16/21, “Google fined $1.3M for misleading French hotel rankings,” The Boston Globe Talking Points

[8]      Bloomberg News, 2/17/21, “Citigroup loses $500 million legal battle over transfer blunder,” The Boston Globe Talking Points

UNITY MEANS VOTING FOR ALL

In a democracy built on the promise of all people created equal and a commitment to one person, one vote, the electoral goal should be 100% voter turnout. Working toward this goal would be a strong unifying force and would provide a strong unifying message for the country. The states, which run our elections, and their election officials should work to make it easy to vote and to encourage people to register and vote.

Unfortunately, there are many Republicans who are working to restrict voting in ways that give them an electoral advantage. This is anything but unifying. A national law establishing election standards and overseeing states to ensure they live up to our democracy’s voting goals would make sense.

At the federal level, there are  two pieces of legislation (which I will describe in more detail in a future post) that will protect and support every citizen’s right to vote: [1]

  • For the People Act (H.R. 1 in the House and S. 1 in the Senate) which addresses many of the election oversight issues that the Supreme Court eliminated in its 2013 decision gutting the Voting Rights Act
  • John Lewis Voting Rights Advancement Act which focuses on racial discrimination in voting.

At the state level, the very high voter turnout in 2020, partially propelled by no-excuse mail-in voting and early voting implemented as a response to the coronavirus pandemic, is a great starting point to work toward further increasing voter participation. Indeed, to-date, 37 states are considering 541 bills to expand or ease access to voting. This is almost three times as many such bills as had been introduced in 29 states at this point a year ago. [2]

However, 33 states are considering 165 bills that would restrict access to voting. This is almost five times as many such bills as were under consideration in 15 states a year ago. In general, these restrictive bills have been introduced by Republicans in Republican-dominated legislatures, particularly in states where Donald Trump, the Republican presidential candidate, lost. These efforts are not the way to unify America. [3]

The 541 bills to expand or ease access to voting have been introduced in a wide variety of states, from New York (87 bills) and New Jersey (38 bills) to Texas (67 bills), Mississippi (38 bills) and Missouri (26 bills). These bills primarily focus on:

  • Making it easy to vote by mail. Eleven states will consider bills allowing all voters to vote by mail without requiring a reason or “excuse” for needing an absentee ballot. Twelve states have bills that would give voters the opportunity to correct technical mistakes on their mailed-in ballots. Twelve states have bills that would allow or require drop boxes for returning mail ballots. Nine states might extend the postmark or delivery date deadline for mailed ballots. Fourteen states will consider allowing election officials to start processing mail ballots before election day, which would speed up the counting of votes and the availability of election results.
  • Expanding opportunities for early voting. Eighteen states will consider allowing early voting for the first time, lengthening the early voting period, and/or increasing the number of early voting sites.
  • Making it easier to register to vote. Fifteen states have bills that would allow same-day registration, i.e., registering to vote on the same day that one votes. Fifteen states will consider implementing automatic voter registration, e.g., registering people to vote when they get a driver’s license or have some other interaction with a state agency. Five states will consider adding on-line voter registration.
  • Restoring voting rights to those with criminal convictions. Nineteen states have bills to restore voting rights to or ease voting restrictions on people with a criminal conviction.

The 165 bills that would restrict or complicate access to voting are under consideration in 33 states, with Arizona (19 bills), Pennsylvania (14 bills), Georgia (11 bills), and New Hampshire (10 bills) having the most such bills. The rationale for these requirements is almost always the supposed danger of fraud, which is non-existent for all practical purposes. However, President Trump’s unrelenting but false assertion of voter fraud and a stolen election have fed this narrative. These bills primarily focus on:

  • Making it harder to vote by mail. Nine states will consider eliminating no-excuse voting by mail or tightening the excuse requirement. Seven states have bills to prevent the sending of a mail ballot to a voter unless they specifically request one, while four states might prohibit sending an application for a mail ballot without a request. Six states have bills that would reduce the ability of voters to register permanently for a mail ballot. Some states will consider bills that require witnesses or notarization for mail ballots or requests for mail ballots. Some states will consider restrictions on how mail ballots can be returned, including requiring an ID, prohibiting the use of drop boxes, and even prohibiting returning them by mail. Some states have bills proposing restrictions on the counting of mail ballots based on deadlines for postmark or receipt date, or through requiring signature matching.
  • Imposing stricter voter identification (ID) requirements. Eighteen states will consider imposing new or more stringent voter ID requirements for in-person or mail voting.
  • Making it harder to register to vote. Five states have bills that would eliminate same-day registration and ten more have bills that would cut back on same-day registration. Four states have bills that would require proof of citizenship to register to vote and four states have bills that would eliminate, prohibit, or suspend automatic voter registration.
  • Allowing more aggressive purges of registered voters. Twelve states have bills that would expand the purging of voters from the rolls of registered voters.

So, the good news is that there are more efforts in the states to expand and streamline access to voting than there are efforts to restrict voting. The bad news is that there are significant efforts to restrict voting plus there is much damage to be undone, given that Republicans have been engaged in successful efforts to restrict voting in ways that benefit them politically for at least ten years.

The efforts to and success in restricting voting accelerated after the Supreme Court gutted the Voting Rights Act in 2013. Republicans have blocked efforts in Congress to replace parts of the Act that are clearly necessary to prevent states from engaging in targeted voting restrictions, often aimed at non-white voters (who tend to vote for Democrats).

Targeted voter suppression has been a successful strategy for the Republicans. For example, the 2018 Governor’s race in Georgia and the 2016 presidential race were almost certainly stolen by the Republicans due to the success of their voter suppression activities. The 2000 presidential race, Gore versus Bush, was also almost certainly stolen, not by the vote counting debacle, but by the permanent disenfranchisement of hundreds of thousands of people with felony convictions in Florida (who are disproportionately Black and likely to vote for Democrats).

At the state level, I encourage you to contact your state officials – your Governor, State Senator, State Representative, and Secretary of State or whomever runs your state’s elections – and urge them to support efforts to make it easier to vote and to encourage every citizen to vote.

[1]      Perez, M., & Lau, T., 1/28/21, “How to restore and strengthen the Voting Rights Act,” The Brennan Center for Justice (https://www.brennancenter.org/our-work/research-reports/how-to-restore-and-strengthen-voting-rights-act)

[2]      Brennan Center for Justice, 2/8/21, “Voting laws roundup 2021,” (https://www.brennancenter.org/our-work/research-reports/voting-laws-roundup-2021-0)

[3]      Wines, M., 1/31/21, “After record turnout, GOP tries to make it harder to vote,” The Boston Globe from the New York Times

POLICIES FOR UNIFYING AMERICA

Unifying America requires economic security and equal opportunity for all. If one’s choices in life (i.e., one’s liberty and freedom) are constrained by an unfair criminal justice system or unaffordable necessities of life such as food, shelter, health care, and education, the result will be anger, frustration, and divisiveness. The fear and stress of economic insecurity, especially the loss of economic security one thought one had, make people susceptible to demagoguery and manipulation.

Among the public, there is strong bipartisan support for policies that support the well-being of all Americans and of our democracy. Most Americans actually agree on the problems we face and the solutions for them, so long as politicians do not make them partisan issues. This can be seen in the strong support President Biden is getting for his executive actions and his push for a strong pandemic relief bill, which will support the general welfare, i.e., the well-being of all Americans. (See my previous post for more detail on these.) Beyond these immediate steps, there are other policies that are needed to unify Americans by moving toward the aspirations of our democracy for liberty, justice, and equal opportunity for all.

Unity requires fair and even-handed accountability based on the rule of law. Ignoring violations of the law and “moving on” without accountability is unfair and divisive because it means some people are not held to the same standard of accountability as others are. Unity is not achieved by turning a blind eye to sedition, insurrection, and domestic terrorism (see my earlier post on this topic) or to other criminal behavior. If accountability does not make clear what is unacceptable behavior in our society, lawlessness and anarchy will be the result. Pardons of criminal behavior by allies are antithetical to the rule of law and accountability.

Accountability for white collar crimes is an essential part of achieving unity. When employers’ violations of labor laws (e.g., on pay, union organizing, and safe working conditions), when insider trading and financial manipulation on Wall Street, when corporate pollution and unsafe products, when conflicts of interest and self-dealing by government officials, and so forth are not punished, our criminal justice system is unfair and will be viewed, accurately, as biased. Lax enforcement of the law for certain types of crimes or criminals creates disunity, not unity.

Unity in our democracy means allowing and encouraging every citizen to vote and giving each vote equal impact. The suppression of voting, particularly when targeted at certain groups, is antithetical to our democracy’s promise of equality for all. Voting should be easy and convenient in terms of the places and times for voting. Early voting and mail-in voting (including drop boxes for mail-in ballots) should be broadly and easily available. Efforts to restrict voting do not promote unity. Onerous identification requirements for voters are voter suppression; there is absolutely no evidence of any voter fraud, except very occasional, isolated, local incidents that ID requirements typically would not address. Gerrymandering of districts for state and federal offices reduces the impact of some voters’ votes and has no place in our democracy; it fosters divisiveness, not unity. The standard of one person, one vote, means that each vote should have as equal an impact as possible.

Unity requires acknowledgement and healing of the effects of the deep and long-standing racism in our country. Racism and white supremacy are key components of our current disunity and of the heightened focus on the Confederate flag and Confederate statues and symbols.

The failure to hold the leaders of the Confederacy accountable after the Civil War and the “moving on” that let them resume control of state and local governments in the South was devastating to African-Americans.  It resulted in Jim Crow laws and a racist criminal “justice” system that subjugated the supposedly emancipated African-Americans after the Civil War. This failure to demand accountability led directly to the racism in our society today. Racism has been used politically by the Republican Party since Nixon’s Southern Strategy in 1968 and it exploded with Donald Trump and his presidency and takeover of the Republican Party. Our society’s racism has been aided and abetted by many Democrats and non-partisans, as well, over many years.

In the late 1700s, equal opportunity and “all men are created equal” applied only to white men with property. Over the past 230 years, the United States has slowly and fitfully moved toward its aspirational vision of equal opportunity for all people, regardless of race, ethnicity, country of origin, gender and gender identity, religion, and other characteristics. But we still have a long way to go. Our democracy’s vision has been and is undermined by intolerant white men and other white people who fail to realize or accept that it requires extending rights and equality to everyone – liberty, justice, and equal opportunity for ALL. [1]

America needs a Truth and Reconciliation Commission along the lines of what South Africa did to end apartheid and what Canada has done to address its treatment of its native populations. We must acknowledge the harm done and implement restorative justice for both Blacks and Native Americans. We need to act aggressively now to stop current discrimination, while pursuing a serious, in-depth examination of what has transpired and how to achieve justice.

On these issues and many others, unifying America requires that Congress, state legislators, and our political parties work together on policies that are in the public interest and support the well-being of all Americans. Obstructionism must end. It is anti-democratic and divisive. Ideas and policy proposals need to be considered based on whether they are fair and good for the general welfare, not whether they are Democratic or Republican. Decisions need to be made based on whether they move our society toward the aspirational vision of our democracy, not based on some politicizing label someone may try to attach to them or to a proposed solution.

Polling of the public can provide important guidance on what people want, but true leadership by our elected officials is also needed. There’s strong evidence from polling and elsewhere that people want:

  • Health care for all and reduced drug prices;
  • Serious actions to address climate change;
  • Steps to reduce gun violence;
  • Wealthy individuals and corporations to pay their fair share of taxes and other steps to reduce economic inequality;
  • An end to special interest influence on policy making through campaign spending, lobbying, and the revolving door;
  • Actions to increase economic security, including increasing the minimum wage and addressing housing and food insecurity;
  • Improvements to our education systems: affordable higher education; affordable, universal, high quality early education and child care; and equity and quality in K-12 education; and
  • Strong enforcement of antitrust laws to reduce the monopolistic marketplace power of large corporations as well as the undemocratic concentration of economic and political power they hold.

President Biden is taking actions that are unifying America. He is making all Americans feel like the government is doing something good for them, for the good of our country, and not just for special interests and wealthy individuals and corporations. Biden has stated repeatedly that he will work for the good of all Americans whether they voted for him or not, and that he will reach out for sincere bipartisanship. This rhetoric and these actions are essential if we want unity.

People calling for unity are being hypocritical if they aren’t committed to honestly working toward the vision of our democracy and our Constitution for liberty, justice, and equal opportunity for all. Without such a commitment, both in action and in rhetoric, there can be no unity. Our aspirational principles and ideals are what make our democratic republic exceptional. To work toward unity and achieving our democracy’s goals, we and our elected leaders must undertake an honest search for the common good, common ground, and how to best to promote the general welfare via government of, by, and for all the people.

[1]      Baptiste, N., Jan.-Feb. 2021,  “Trump lost. But racism will probably win again,” Mother Jones  (https://www.motherjones.com/politics/2020/12/trump-lost-but-racism-will-probably-win-again/)

PRESIDENT BIDEN: STAND UP FOR A STRONG PANDEMIC RELIEF BILL

I just sent the following message to President Biden about the pandemic relief bill that he is meeting with ten Republican Senators today to negotiate. I had to break it into two pieces because of the limit on how many words you can submit in their contact form.

I urge you to contact him at https://www.whitehouse.gov/contact/ with your thoughts about the  pandemic relief bill.

President Biden,

Please stand up firmly for a strong pandemic relief bill. Americans need economic security in the face of this pandemic. Many Americans need financial assistance, including direct payments and enhanced unemployment benefits. Over 1 million workers are still applying for unemployment each week. Millions of families are facing hunger and homelessness. Many small businesses need financial assistance too. Thousands of small businesses have gone out of business and thousands more are on the verge of doing so.

Funding for the COVID vaccination program and other steps to fight the pandemic are essential and should not be short-changed. This is a matter of life and death. It is also about reducing suffering by reducing the numbers of people that get COVID.  And it is essential to the recovery of the economy. If there’s an area where we should not worry about allocating more money than may eventually be needed, this is it.

Finally, state and local governments need financial assistance. They’ve seen their revenues fall dramatically and their costs increase with the pandemic. Without assistance, state and local governments have been laying off tens of thousands of workers which hurts the workers, the economy and its recovery, and the delivery of badly needed government services. Support for getting children back in schools is a critical component of this. We know from the Great Recession in 2008 how harmful cutbacks in state and local spending were.

While I support bipartisanship, please do not let the Republicans undermine support for working families, the COVID programs, small businesses, or state and local governments. Many Republicans’ concerns about the cost of the benefits and the deficit are hypocritical. Their concern about the deficit did not stop the bailout of large corporations nor the huge tax cuts for wealthy individuals and corporations back in 2017. If they are truly concerned about the deficit, ask them to support repealing the 2017 tax cuts.

President Biden,

Please stand up firmly for a strong pandemic relief bill. Do not let Republicans give the cold shoulder to working Americans and small businesses after they very generously – and successfully – provided financial assistance to large corporations. The financial assistance to large corporations has their stocks at record high prices and their executives and large shareholders taking in billions of dollars.

I urge you to approach the negotiations with Republicans with caution. There are multiple examples where Republicans have not negotiated in good faith. They have pushed for compromises, then pushed for more compromises, and then have failed to support the final, compromise legislation. The Affordable Care Act is a classic example of this. Their supposed negotiations on pandemic relief bills that never passed this summer were similar. They demanded poison pills, moved the goal posts, and added new demands at the last minute. Their threat that failing to meet their demands will poison the well of bipartisanship rings very hollow; their lack of bipartisanship and bad faith negotiations through the Trump presidency and the whole Obama administration poisoned the well of bipartisanship long ago.

Please do not let your commitment to bipartisanship blind you to the Republicans’ disingenuous and divisive partisan tactics over the last 12 years and beyond. Their tactics had nothing to do with unity and everything to do with dividing and conquering or delaying and killing legislation.

Unity means providing economic security and equal opportunity for all Americans. Calling for unity is hypocritical without a commitment to honestly work toward the vision of our democracy and our Constitution for liberty, justice, and equal opportunity for all. In the face of the pandemic, Americans need you to act boldly to move toward that vision. The danger is not in doing too much, it’s in doing too little.

POLICIES FOR UNITY, i.e., FOR LIBERTY, JUSTICE, AND EQUAL OPPORTUNITY FOR ALL

What unites all truly patriotic Americans are the promises of our democracy: liberty, justice, and equal opportunity for all. These aspirational principles and ideals are what make our democratic republic exceptional. (See my previous post for more detail.) To work toward unity and achieving our democracy’s goals, we and our elected leaders must undertake an honest search for the common good, common ground, and how to best promote the general welfare via government of, by, and for all the people.

Unity requires economic security and equal opportunity for all, so one’s choices in life (i.e., one’s liberty and freedom) are not constrained by economic deprivation or unaffordable necessities of life such as food, shelter, health care, and education. Unity means equal opportunity for all, particularly for every child. This is what valuing families or “family values” should mean to all of us.

We can’t have unity when a million people a week are requesting unemployment benefits and millions are struggling to put food on the table and avoid eviction, while 660 billionaires have added $1.1 trillion (an average of $1.7 billion each) to their wealth since March.

Unity requires adherence to facts and a commitment to seeking and promoting truth. Without this, there is no common ground on which to formulate policies and make decisions. Unity requires acknowledging the results of the 2020 election and stating that they were legitimate and fair. The media must stop promoting false equivalencies – of truth with untruth and alternative “facts” (which aren’t facts, of course) – and either ignore or prominently label false narratives and statements as such. A return to the Fairness Doctrine governing broadcast media (TV and radio), which was repealed in 1987, should be considered to require those using the public airwaves (which requires a public license) to present information on issues of public importance and to do so honestly, equitably, and in a balanced manner. Similar regulation of social and cable media should also be explored.

Unity requires a fair and unbiased application of the rule of law. Everyone must be held accountable to the same set of legal standards or a society cannot function; it would be riven with divisiveness and fighting among factions. Violent protesters of all stripes need to face equal justice and those who aided and abetted violent protests must be held accountable under the law as well. There needs to be acknowledgement of racial bias and harm. Then, there needs to be restorative justice if unity is to be achieved.

Unity requires our elected officials to work together in good faith to promote the general welfare. Certainly, there will be differences of opinion, but they must be resolved through good faith negotiations and compromise. Obstructionism is antithetical to unity.

Hypocrisy is also antithetical to unity. Different standards or principles cannot be applied in the same or similar situations. There are too many examples of this in our politics and society today to do justice to them all, but examples include:

  • Condemning violence against police that occurs in demonstrations for racial justice but not when it occurs in an insurrection targeted at stopping the democratic transition of power.
  • Blocking the confirmation of a Supreme Court justice nine months before the end of a Democratic president’s term but confirming a Republican President’s nominee on short notice just three months before the end of his term.
  • Opposing deficit spending when proposed by Democrats to help working Americans but not when proposed by Republicans to cut taxes on wealthy individuals and corporations.

Here are some specific, largely short-term, actions and policies our elected leaders must embrace if they truly wish to strive for unity:

  • President Biden’s appointees must be approved in a timely fashion, with appropriate oversight of course. This applies to Cabinet members, other executive branch positions, and to judges.
  • Financial assistance must be provided to working Americans. Over 1 million workers are still applying for unemployment each week. The economy has not rebounded to the point where emergency assistance is no longer needed; millions of families are facing hunger and homelessness. Additional direct financial assistance is needed, as Treasury Secretary Janet Yellen, among many others, has stated. Furthermore, unemployment benefits need to be extended and enhanced and the minimum wage needs to be raised – for those who have jobs and those re-entering the workforce.
  • For workers doing face-to-face work, their safety must be assured. Strong, enforceable and enforced safety standards are a necessity.
  • Financial assistance must be provided to small businesses. Thousands of small businesses have gone out of business and thousands more are on the verge of doing so. Financial supports for large corporations through Federal Reserve and Treasury programs that operate largely out of the public eye have been very generous (trillions of dollars) and very successful. This is evidenced by the fact that the stock markets are at all-time highs, believe it or not, despite the struggles of small businesses and working Americans.
  • Funding is needed for COVID vaccinations. Money is needed for distribution of the vaccines and to help financially strapped states and communities implement vaccination programs. The quicker and more effective the rollout of vaccinations, the greater the number of lives that will be saved and of illnesses that will be prevented. The Federal Reserve and others have also noted the importance of vaccinations to the recovery of the economy.
  • Financial assistance is needed for state and local governments, as they have seen their revenue fall dramatically and their costs increase with the pandemic. Without this assistance, state and local governments have been laying off tens of thousands of workers which hurts the workers, the economy and its recovery, and the delivery of badly needed government services.
  • Criminal justice system reform must be undertaken aggressively. Racism needs to be eliminated from all components of the system. Police need strong national standards and oversight on the use of force and racism. The school (and even preschool) to prison pipeline needs to be ended and more appropriate interventions and discipline instituted. Mental health services need to be made available to children, youth, and adults instead of throwing these problems to the criminal justice system. Prosecution and sentencing need to fair and the use of restorative justice needs to be expanded. Rehabilitation and successful re-entry to society need to be the focus of imprisonment, probation, and parole.

President Biden’s Executive Orders are beginning to address many of these issues. They are promoting unity (despite claims otherwise by some Republicans) because they are implementing policies that most Americans support, but which haven’t made it through Congress due to partisanship. For example, 83% of Americans support a ban on workplace discrimination based on sexual identification, 77% want the government to promote racial equity, 75% support the government requiring masks on federal property, and 68% support the continued suspension of federal student loan repayments. A majority of Americans support rejoining the World Health Organization and the Paris climate accords. [1]

People calling for unity are hypocrites unless they are committed to honestly working toward the vision of our democracy and our Constitution for liberty, justice, and equal opportunity for all or, in other words, for promotion of the general welfare. Without such a commitment, there can be no unity.

My next post will highlight more specific and longer-term policies that will promote unity and our shared vision of liberty, justice, and equal opportunity for all.

[1]      Richardson, H.C., 1/29/21, Letters from an American blog post,” (https://heathercoxrichardson.substack.com/p/january-29-2021)

UNIFYING AMERICA

We do need to unify America, both among the public and our policy makers, particularly our partisan Members of Congress. However, there are some people whose minds are like concrete, thoroughly mixed and permanently set – often based on false information – who cannot be convinced to share in a unified vision of America. We will need to ignore them at times and at other times to counter their destructive messages and acts.

What we have that truly unites us all are the promises of our democracy: its principles and ideals of liberty, justice, and equal opportunity for all. As the preamble to Constitution states, the United States of America was formed to create “a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.”

These principles and ideals are what make our democratic republic exceptional – not what was actually established in 1789, not what it looks like today, and not what it has been at any time in between. The aspiration to achieve this vision is what is exceptional and we have struggled to live up to it to this day.

There is great diversity in America – which can and should be one of our strengths – and significant differences of opinion on how to achieve the promises of our democracy. We need to approach these differences rationally and collegially, with an eye on the overarching vision.

To unify America, we need a unity of purpose, driven by our vision for our democracy, and to be delivered by government of, by, and for all the people. Unifying America requires an honest search for the common good, common ground, and how to best to “promote the general welfare”. Loyal opposition is fine but not destructive opposition, not obstructionism, nor radical revolutionaries trying to tear down our democratic institutions and processes.

In today’s economy and society, we need to reconceptualize the commitments to liberty, freedom, and the promotion of the general welfare. President Franklin D. Roosevelt (FDR) in his State of the Union Address in 1944 argued that the “political rights” guaranteed by the Constitution and the Bill of Rights had “proved inadequate to assure us equality in the pursuit of happiness”. FDR proposed an “economic bill of rights” to guarantee equal opportunity and freedom from want that included the:

  • Right to a job and a fair income that could support a family,
  • Right to a decent home,
  • Right to health care and health,
  • Right to social security in old age, sickness, unemployment, and injury,
  • Right to a good education, and
  • Freedom from unfair competition and domination by monopolies.

To unify America, we need to work toward liberty and freedom for all built on economic security and equal opportunity so one’s choices (i.e., one’s liberty and freedom) in life are not constrained by poverty, economic deprivation, or unaffordable necessities of life such as food, shelter, health care, and education.

To ensure liberty and freedom for all in our new democratic republic, the Bill of Rights, the first ten amendments to the Constitution, was adopted in 1791. These rights remain critically important. However, we need to review the implementation of some of them in light of current technology and current politics.

On freedom of speech, we need to figure out how to regulate free speech on social media; to figure out what is the social media equivalent of yelling “FIRE” in the middle of a crowded theater. Recent events have made it clear that unbridled free speech on social media has contributed to violence and terrorism (i.e., speech that puts people in fear or psychological distress). In addition, social media have contributed to the dissemination of harmful misinformation. How to appropriately control speech on social media – allowing robust speech and conversations while limiting harm – is something we need to figure out.

Freedom of speech in our democracy, where all people are promised equality, means giving equal volume to every voice in America. Giving a bullhorn to those with money and a muzzle to those without money is antithetical to our vision for American democracy. Current legal interpretations equate spending money with free speech, including spending by corporations (not just spending by human beings). This needs to be reconsidered if we want to unify America.

Freedom of religion was meant to allow each individual to practice his or her own religion without the government dictating what an individual could believe or practice. Today, legal interpretations have gone beyond this and, for example, given employers the right to deny contraceptives and other health care to women because of the employer’s religious beliefs. Legal interpretations have also given health care provider institutions and individuals, who are licensed by the government, the right to deny both services and information to patients based on the provider’s religious beliefs. If we want to unify America, freedom of religion should not impede an individual’s right to make decisions with full information and with all choices available to her or him. Individual’s choices should not be dictated or constrained by others’ religious beliefs.

Justice for all means that everyone’s treatment in our society and justice system should be equal and fair, and that the rule of law should be applied fairly and equally to everyone. Anyone and everyone who violates the law must be held accountable. If some people are allowed to violate the law with impunity and others are prosecuted and punished, there won’t be unity. A dramatic, historical example is that after the Civil War we failed to hold the leaders of the Confederacy accountable. We allowed them to return to power in state and local governments. The result was Jim Crow laws and the re-subjugation of African Americans. This underscores the importance of holding white supremacists and racists accountable for their domestic terrorism and other violations of the law today, 150 years later.

Justice for all also means that if some people have received unfairly harsh treatment from our laws and criminal justice system, there cannot by unity until those wrongs are acknowledged and corrected, including providing just compensation.

Unifying America means providing equal opportunity to everyone, particularly to every child. This is what valuing families or “family values” should mean to all of us. One test for a just society is what ethicist John Rawls called the veil of ignorance. He defined a fair society as one where, if confronted with a veil of ignorance about our position and role in society, we would be willing to accept anyone’s position and role in the society. As an early childhood advocate, I’ve presented this as thinking that you are the baby that the stork is about to deliver and if you are comfortable being delivered to any parent in the society, then it’s a fair society. But if there are some parents (or for the previous description, some positions and roles in society) that you would not want to be delivered to or put in, then the society is unfair and unjust, as it does not provide equal opportunity for everyone.

If people truly want to unify America, they must be committed to honestly working toward the vision of our democracy and our Constitution for liberty, justice, and equal opportunity for all or, in other words, for promotion of the general welfare. Without this, there can be no unity.

In my next post, I will discuss these topics more specifically in terms of public policies and actions that are needed to unify America.

BIDEN-HARRIS ADMINISTRATION CAN DO A LOT WITH EXECUTIVE ACTIONS Part 2

There are literally hundreds of important executive actions that the Biden-Harris Administration could take on day one (or shortly thereafter) that are well within its existing authority. The American Prospect magazine and the Biden-Sanders unity taskforce (which was created at the end of the Democratic primaries last summer) have identified 277 executive actions that it could take. All of them are policies that have broad support within the Democratic Party. Many of them simply more fully implement or better enforce current laws. They would take important steps toward addressing important problems. [1] [2]

In summary, the Biden-Harris Administration could, without having to wait for Congress to act:

  • Revamp many aspects of our immigration system (specific examples were in my previous post),
  • Address climate change along with energy and environmental issues (see my previous post),
  • Improve our education system and reduce the burden of student debt (see my previous post),
  • Make our tax system and economy fairer (see specific examples below),
  • Make important reforms in the criminal justice system (see below),
  • Expand access to health care and lower drug prices (see below), and
  • Strengthen the safety net by expanding unemployment benefits as well as housing and food assistance (see below).

Specific executive actions could include:

  • Change economic and tax policies
    • Require federal contractors to pay a $15 minimum wage and not to oppose unionization of their workers, not to move jobs overseas, and not to have violated labor laws
    • Enforce antitrust laws and broaden antitrust criteria to include factors other than hypothetical consumer cost savings
    • Strengthen the Consumer Financial Protection Bureau and regulation of the financial industry, especially payday lenders and the vulture capitalists of private equity
    • Ensure strong and binding labor, environmental, and human rights standards in every trade agreement
    • Direct the National Labor Relations Board to make unionization easier and to penalize companies that don’t bargain in good faith with their workers
    • Enforce existing tax laws to reduce tax avoidance and close tax loopholes, including ones created under the 2017 tax cut and especially those for multi-national corporations
    • Re-prioritize and expand IRS tax law enforcement with a focus on high-income individuals and large corporations instead of on low-income individuals [3]
    • Roll back policies that gutted fair lending and fair housing protections
    • Restore the requirement for net neutrality by Internet Service Providers (ISPs)
    • Catalyze the creation of public banking by initiating banking and financial services through the U.S. Postal Service
    • Ban arbitration clauses in consumer and employment contracts that prohibit aggrieved parties from suing in court
    • Direct government procurement of goods and services to prioritize purchasing from small businesses and those owned by people of color, women, and veterans
    • Expand job training programs particularly for green and environmental jobs, as well as for formerly incarcerated persons
  • Reform the criminal justice system
    • Rescind the policy directing prosecutors to pursue the harshest criminal penalties possible
    • Stop executions of federal prison inmates
    • Withhold funds from states that use cash bail
    • Reduce criminal penalties for drug possession and increase availability and use of treatment instead of incarceration for drug crimes
    • Investigate racial discrimination by police departments, prosecutors, and others in the criminal justice system
    • Enforce the requirement that police departments capture and report data on use of force
    • Establish national standards on police use of force and create a national police review commission to provide oversight and make recommendations to local departments
    • Empower the Civil Rights Division of the Department of Justice to aggressively fight racial discrimination within the federal government and in all federal policies
    • Nominate judges with backgrounds as public defenders, legal aid attorneys, and civil rights lawyers
    • Prosecute white collar crimes from illegal polluting to money laundering
    • Prosecute employers who violate wage and labor laws
    • Launch a federal restorative justice program
  • Improve health and health care
    • Re-join the World Health Organization
    • Allow new enrollments in health insurance through the Affordable Care Act (aka Obama Care) outside of the normal enrollment period due to COVID-19
    • Direct Medicare to reduce excessive prices and price increases for drugs
    • Issue and enforce strong workplace safety standards related to infectious diseases
    • Commit to study gun violence as a public health issue
    • Enforce the Mental Health Parity and Addiction Equity Act
  • Address other issues
    • Reestablish the White House’s pandemic response unit
    • End the work requirement for receiving food stamps
    • Change the definition of poverty and the eligibility for government assistance programs based on it
    • Make housing subsidy vouchers an entitlement to all those who qualify
    • Direct the Federal Communication Commission to use its Lifeline program to offer subsidies for high-speed internet access to low-income households
    • Strengthen enforcement of the Americans with Disabilities Act

Once President Biden and Vice President Harris have been inaugurated, I urge you to contact them and encourage them to act boldly using executive orders to improve racial and social justice as well as the economic well-being of every working American. Taking these bold policy actions will go a long way toward restoring the public’s faith in government and their belief that government can and is working for their benefit and not just for the benefit of big businesses and the wealthy. This is essential to rebuilding our economy, strengthening our society, and unifying our country by showing that the Biden-Harris Administration and the federal government are actively working to advance the principles and ideals of our democracy, namely liberty, justice, and equal opportunity for all.

[1]      Moran, M., 7/28/20, “The 277 policies for which Biden need not ask permission,” The American Prospect (https://prospect.org/day-one-agenda/277-policies-biden-need-not-ask-permission/)

[2]      Dayen, D., Fall 2019, “The day one agenda” and related articles, The American Prospect (https://prospect.org/day-one-agenda)

[3]      Wamhoff, S. & Gardner, M., 12/16/20, “The day one agenda for corporate taxes,” The American Prospect (https://prospect.org/day-one-agenda/day-one-agenda-for-corporate-taxes/)

BIDEN-HARRIS ADMINISTRATION CAN DO A LOT WITH EXECUTIVE ACTIONS

The Biden-Harris Administration can make needed policy changes through executive actions or legislation. These two approaches are complementary and should both be used. Getting progressive legislation passed by Congress will be difficult but possible with narrow control of both the Senate and the House. However, there are literally hundreds of important executive actions that the Biden-Harris Administration could take on day one (or shortly thereafter) that are well within its existing authority.

President Franklin D. Roosevelt (FDR) issued 99 executive orders in his first 100 days and 3,721 over the course of his presidency. Some of them were monumental, such as the creation of the Rural Electrification Administration, which addressed a major infrastructure issue, and the Civil Works Administration, which created millions of jobs to address the unemployment of the Great Depression. These times call for the Biden-Harris Administration to be bold and to aggressively use executive orders to address the serious problems facing our country. Similar to FDR’s situation, Biden and Harris are facing a country in need of relief from a serious recession and high unemployment coupled with a need for major infrastructure investments. They also, of course, have to deal with the coronavirus pandemic and its effects.

The American Prospect magazine and the Biden-Sanders unity taskforce (which was created at the end of the Democratic primaries last summer) have identified 277 executive actions that the Biden-Harris Administration could take immediately. All of them are policies that have broad support within the Democratic Party. Many of them simply more fully implement or better enforce current laws. They would take important steps toward addressing important problems. [1] [2]

In summary, the Biden-Harris Administration could, without having to wait for Congress:

  • Revamp many aspects of our immigration system (see specific examples below),
  • Address climate change along with energy and environmental issues (see specific examples below),
  • Improve our education system and reduce the burden of student debt (see specific examples below),
  • Make our tax system and economy fairer (specific examples will be in my next post),
  • Make important reforms in the criminal justice system (specific examples will be in my next post),
  • Expand access to health care and lower drug prices (specific examples will be in my next post), and
  • Strengthen the safety net by expanding unemployment benefits as well as housing and food assistance (specific examples will be in my next post).

Specific executive actions could include:

  • Change immigration policies
    • Enact a 100-day ban on deportations while reviewing current immigration and border practices
    • Rescind the “Zero Tolerance” immigration policy, which is effectively a family separation policy
    • Rescind policies limiting admissions of refugees and asylees
    • End the freeze on issuing new green cards, which allow non-citizens to permanently live and work in the U.S.
    • Rescind the declaration of an emergency for the purpose of funding a Mexico border wall
  • Address climate change, energy, and environmental issues
    • Rejoin the Paris Climate Agreement
    • Re-protect federal land including reinstituting bans on mining and drilling
    • Reinstate the Clean Power rule limiting carbon emissions from power plants
    • Re-institute and then strengthen auto and truck emissions standards
    • Reinstate the Cabinet-level Interagency Council on Environmental Justice
    • Tighten regulations on the release of methane, sulfur dioxide, ozone, mercury, and coal ash
    • Make all 3 million government vehicles at all levels of government zero-emission vehicles
    • Buy clean energy and require federal contractors to do so as well
    • Make home energy efficiency programs accessible for low-income households
    • Establish a task force for planning the transition to clean energy including supports for displaced workers
  • Improve our education system
    • Reduce student debt through various loan forgiveness programs and suspend debt payments during the pandemic
    • Reinstate the program to eliminate racial disparities in school discipline
    • End federal contracts with student loan servicers who have a history of misleading clients
    • Encourage states to develop and adopt a “multiple measures” approach to assessment
    • Appoint a federal task force to study charter schools’ impact on public education and make recommendations to strengthen public schools
    • Aggressively enforce the Individuals with Disabilities Education Act
    • Facilitate pathways for early childhood educators to obtain higher education degrees
    • Require for-profit colleges to demonstrate their return on investment before allowing their students to be eligible for federal student loans

Once President Biden and Vice President Harris have been inaugurated, I urge you to contact them and encourage them to act boldly using executive orders to improve racial and social justice as well as the economic well-being of every working American.

My next post will present examples of executive actions the Biden-Harris Administration could take on economic, criminal justice, health and health care, and other issues.

[1]      Moran, M., 7/28/20, “The 277 policies for which Biden need not ask permission,” The American Prospect (https://prospect.org/day-one-agenda/277-policies-biden-need-not-ask-permission/)

[2]      Dayen, D., Fall 2019, “The day one agenda” and related articles, The American Prospect (https://prospect.org/day-one-agenda)

BIDEN’S OPPORTUNITY TO IMPROVE ECONOMIC SECURITY WITH PROGRESSIVE POLICIES

Looking ahead to 2021, many challenges face the country and President-elect Biden. Most of them have negatively affected the economic well-being of many Americans,  including the pandemic, the lack of racial justice, and the economic recession. All of them and others (e.g., climate change) can and should be addressed in a way that will improve the economic security of working and middle-class Americans. This would also go a long way toward restoring their faith in government and their belief that government can and is working for their benefit and not just for the benefit of big businesses and the wealthy.

Since the 1990s, the Democratic Party has joined the Republican Party in aligning itself with large corporations and the wealthy elites that run and own them through deregulation, trade deals, and tax policies that work to their benefit. As a result, the middle class has been decimated and blue collar, often unionized, workers have lost their economic security; 90% of Americans have lost ground economically over the last 30 years. Income and wealth inequality have spiraled to levels unseen since the 1920s and the economy of the 1950s and 1960s that lifted all boats has disappeared. [1]

Abandoned by the Democratic Party, which traditionally had stood up for them, white, blue collar workers and their families have been convinced to support demagogues, including Trump, who promote divisive, anti-immigrant, racist, reactionary, and undemocratic policies.

To address mainstream Americans’ loss of economic security, Biden must implement  progressive policies that will enhance their economic well-being. The public strongly supports such policies as poll after poll shows. For example, polls find that: [2]

  • 68% believe our tax system should require the wealthy to pay more,
  • 75% support paying higher income taxes to support health care, education, welfare, and infrastructure, and
  • 92% say they would rather live in a country with a low level of income inequality than one with high inequality.

There also was plenty of evidence of support for progressive policies and candidates in the 2020 election results. (See my previous post on this topic for some details.)

A key factor contributing to economic insecurity and inequality, and one Americans clearly understand, is that large corporations and their executives and lobbyists have undue influence on U.S. policies. By margins of more than two-to-one they don’t want President Biden appointing corporate executives or lobbyists to positions in his administration. Roughly 75% of poll respondents say that an administration official overseeing or regulating an industry they have a connection to is a “big problem” and about 90% say it is at least “a little bit of a problem.” The public knows that the so-called “revolving door” between positions in large corporations and ones in government lead to policies that benefit the corporations and their wealthy executives and investors. Sixty-seven percent of respondents, including 60% of Republicans, say that this revolving door is “corrupt and dangerous.” [3]

In government, personnel is policy. In other words, the personnel in key positions in the Biden administration will strongly influence who benefits from policies and their implementation – the working and middle-class or the upper class and big businesses. Therefore, it is important that Biden select people for his administration who are committed to working for the good of the people and not for the economic elites, many of whom are big campaign donors.

President Biden has two main avenues for creating needed policy changes: executive actions and legislation. These two are complementary and should both be used. Getting progressive legislation passed by Congress will be difficult even if Senate control is nominally with the Democrats (i.e., with a 50-50 split among Senators if Democrats win the two Georgia runoffs). But Senator Warren and others have shown that bipartisan legislation is possible even in the current contentious and polarized environment in Congress. Her successes include making hearing aids more affordable, enhancing consumer protection in various financial transactions, strengthening oversight and regulation of the financial industry, expanding access to affordable housing, and reining in abuses in housing financing. (I will write a post about this in the near future.)

There are also literally hundreds of executive actions that a Biden administration could take that are well within its existing authority. As many as 277 such actions have been enumerated by the writers at the American Prospect magazine and the document produced by the Biden-Sanders unity taskforce at the end of the Democratic primary last summer. They include steps to make our tax system fairer, to strengthen the safety net (including unemployment benefits and housing and food assistance), to expand access to health care and lower drug prices, to increase pay and benefits for employees of federal contractors, and to make it easier for workers to bargain collectively for better pay, benefits, and working conditions. (I will write a post about possible executive actions in the near future.)

I encourage you to contact your U.S. Senators and Representative to express your support for issues you would like to see them address in 2021, including policies such as the examples above that would improve the economic security of mainstream Americans. You can find contact information for your US Representative at  http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

You can get information and sign-up for updates from the Biden-Harris transition at https://buildbackbetter.gov/.

[1]      Lemann, N., 10/19/20, “Losing ground: the crisis of the two-party system,” The Nation (https://www.thenation.com/article/politics/let-them-eat-tweets-the-system-never-trump/)

[2]      Hightower, J., Nov. 2020, “Timeless truths for trying times,” The Hightower Lowdown (https://hightowerlowdown.org/article/timeless-truths-for-trying-times/)

[3]      Demand Progress, Dec., 2020, “Americans want a progressive Biden administration,” (https://s3.amazonaws.com/demandprogress/reports/Americans_Want_A_Corporate-Free_Biden_Administration.pdf)

EXAMPLES OF CORRUPT CORPORATE BEHAVIOR Part 3

Here are three recent examples of corrupt corporate behavior in the financial industry, where corruption is persistent and seems to know no bounds. The exposure of corruption and its triggering of the 2008 financial crash doesn’t seem to have changed anything. It seems that every week there’s another report of serious corruption in the financial industry. Here are three examples that show the depth and breadth of that corruption: one of long-term systemic corruption at a major bank, one of a specific example of corruption from a different major bank, and one from a small, relatively new member of the industry. (This previous post highlighted three other examples of corporate corruption, two from the pharmaceutical industry and one from the financial industry.)

Example #1: Deutsche Bank has fallen from the second largest bank in the world in 2008 to the 21st largest in 2020 due to a wide range of corrupt behavior that finally caught up with it. It postponed its financial collapse and shrinkage by overvaluing its assets, among other fraudulent accounting strategies. Its history of corruption is meticulously detailed in the book, Dark Towers. [1] In 2018, its long-time involvement in tax evasion and money laundering for wealthy individuals resulted in police raiding its Frankfurt, Germany, headquarters. This wasn’t the first time this had happened. In 2012, hundreds of government police had raided its office to gather evidence in a different tax evasion scheme that involved permits for carbon dioxide emissions.

Since 2012, Deutsche Bank has paid over $15 billion in settlements for illegal activities. As-of 2016, it was involved in over 7,000 legal cases and had set aside over $5 billion for the potential impact of those cases. It was a major contributor to the 2008 financial crash, which led to its payment in 2017 of over $7 billion in settlements for fraud in its sales of mortgage-backed securities. In 2015, it agreed to pay a fine of $2.5 billion for manipulating international interest rates, pleading guilty to fraud and agreeing to fire 29 employees who had been involved. (Not a single individual was charged with a crime, however.) In 2017, it was fined over $600 million for money laundering that moved over $10 billion of suspicious money out of Russia. In 2018, it agreed to pay $75 million to settle charges of improperly handling U.S. transactions involving foreign securities.

Deutsche Bank is or has been investigated for numerous other corrupt behaviors including manipulating foreign currency exchange rates and violating international sanctions by engaging in over $10 billion of illegal financial transaction with Iran, Syria, Libya, Sudan, and other sanctioned countries. Some of these transactions involved funding for terrorism and drug trafficking. It is under investigation for participating in a criminal cartel in Australia, $150 billion of money laundering with a Danish bank, and a multi-billion fraud scheme with a Malaysian development fund. And by the way, it has engaged in illegal spying on its critics. Its corruption goes back at least to the 1930s when it cooperated with the Nazis and funded their activities, which it tried to hide for many years thereafter.

Example #2: Goldman Sachs, the fifth largest U.S. bank, has agreed to pay $3 billion to regulators in multiple countries for a massive bribery scheme that stole hundreds of millions of dollars from the Malaysian government. Goldman Sachs took in $593 million in unusually large fees for its role in the underlying transactions. Although two of its executives have been indicted (a partner and a managing director) and its Malaysian subsidiary has pleaded guilty to bribery, many have criticized the settlement as not being a meaningful punishment both because of the scale of the criminal activity and the dollar amount of the settlement, which is less than 3 months of profits. Furthermore, Goldman Sachs has only partially cooperated with the investigation, delayed providing crucial information, and failed to self-report illegal activity that it knew about and is required by law to report. [2] By the way, this will bring the fines it has paid out since 1998 to over $10 billion. [3]

Example #3: Robinhood Financial LLC, a 2015 start-up that provides a smart phone app for buying and selling stocks, has agreed to pay a $65 million penalty to the federal Securities and Exchange Commission for misleading customers and costing them an estimated $34 million. Robinhood advertised no commission trades, however, it generated revenue by executing customers’ trades through companies that paid it fees for the trades. It failed to disclose this to its customers. It had an incentive to select companies that paid it the most for those trades even if customers got worse prices on the stocks they were buying. Nonetheless, Robinhood claimed the quality of its execution of its customers’ trades was as good or better than its rivals. [4] In addition to this federal settlement, Massachusetts regulators are pursuing a complaint against Robinhood for violating state securities laws by not providing accurate information to customers. The complaint also states Robinhood’s website has had several outages that have prevented customers from trading during important periods when stock prices were shifting significantly. [5]

To put financial industry corruption in a larger perspective, often federal cases of financial misbehavior, as in the Deutsche Bank and Goldman Sachs cases above, result in the financial corporations signing a Deferred Prosecution Agreement (DPA). This requires the corporation to pay a fine and agree to a period of probation (during which it promises not to repeat its bad behavior), but usually the corporation and its executives avoid criminal prosecution. However, there are multiple examples of money laundering cases against big banks where the corporations had already signed DPAs in previous money laundering cases, repeated their bad behavior, and received the same lenient treatment all over again. As a result, the big financial corporations appear to view fines for corrupt behavior as a routine cost of doing business. [6]

The persistence of corruption in the financial industry makes clear the need for stronger steps to deter future illegal behavior. Stronger government regulation and significant financial and criminal punishments for the corporations (e.g., truly significant fines and, ultimately, revocation of their corporate charters, putting them out of business) and for their executives (e.g., jail time and personal fines) are needed. The industry and its supporters among our elected officials have fought back hard and largely successfully against efforts to strengthen regulation and consumer protection in the wake of the 2008 financial collapse, so not only is there much work to do but, in addition, it will be a tough fight.

[1]      Enrich, D., 2020, “Dark Towers,” HarperCollins Publishers, NY, NY.

[2]      Woodman, S., 11/2/20, “Goldman Sachs 1MDB settlement: a meaningful punishment for major financial crimes?” International Consortium of Investigative Journalists (https://www.icij.org/inside-icij/2020/11/goldman-sachs-1mdb-settlement-a-meaningful-punishment-for-major-financial-crimes/)

[3]      Collins, C., 11/30/20, “Petulant plutocrat of the week,” Inequality.org weekly blog post from the Institute for Policy Studies (https://inequality.org/wp-content/uploads/2020/11/inequality-newsletter-november-30-2020.html)

[4]      Michaels, D., & Osipovich, A., 12/17/20, “Robinhood Financial to pay $65 million to settle SEC probe,” The Wall Street Journal

[5]      Denham, H., 12/18/20, “Robinhood agrees to $65m penalty to resolve SEC charges,” The Boston Globe from the Washington Post

[6]      Woodman, S., 11/2/20, see above

REPUBLICANS ARE ALREADY UNDERMINING BIDEN’S PRESIDENCY

Republicans, led by President Trump and Senator Mitch McConnell (KY), are already  undermining Senator Biden’s presidency. This is all about politics. They want the Biden presidency and the Democrats to be unable to do much to help working people and the economy because that will make it easier for them to win seats in Congress in 2022 and the presidency in 2024. This is the same reason that Sen. McConnell said at the beginning of each of Obama’s terms as president that his goal was to keep Obama from passing any legislation.

Trump and McConnell are working to ensure that Biden begins his presidency with crises to face: a high number of COVID cases; an economy in a shambles; a safety net with as many holes in it as possible; angry divisions in the country over election results, racism, and immigration; and international crises with Iran and China and in Afghanistan and the Middle East.

Moreover, Trump and McConnell are trying to limit the resources and flexibility that President Biden has to tackle these crises. They are undermining efforts to control the pandemic and provide economic relief by:

  • Letting the coronavirus spread with no effort from the federal government to slow it,
  • Retracting funding Congress has appropriated for pandemic relief from the Federal Reserve and perhaps other agencies or programs, and
  • Refusing to pass any significant pandemic relief and predicating any relief on the elimination of employer and business liability for workers or customers who get COVID.

Normally, the outgoing president defers important decisions to the incoming president and refrains from making personnel changes in his lame duck period. George W. Bush did so after Obama was elected and Obama did so for Trump. However, Trump is doing just the opposite. He is aggressively replacing personnel at the Defense Department and elsewhere. He is issuing executive orders and making personnel policy changes that will make it hard for President Biden to undo his actions. He is appointing partisan loyalists to scientific and advisory panels, weakening environmental regulations, and repealing health care regulations. He is carrying out executions, giving out oil drilling leases on public lands, and withdrawing troops from Somalia and Afghanistan. He is inflaming tensions with Iran, which will make it harder for President Biden to re-engage Iran in a treaty to block its ability to build a nuclear bomb. (Iran now has twelve times as much enriched uranium as it would have had if Trump hadn’t abrogated the Iran nuclear accord.) Some of Trump’s advisors have been upfront in stating that their actions are meant to limit President Biden’s policy options. [1]

Treasury Secretary Mnuchin is taking multiple actions that will prevent President Biden from having the flexibility to quickly use remaining resources from the March relief bill to respond to economic hardship. Mnuchin announced that on December 31 he will suspend the Treasury Department’s lending program that supports businesses and local governments. He is also requiring the Federal Reserve to return about $250 billion that was appropriated for pandemic relief and putting $455 billion into a fund that will require congressional authorization before Biden can spend it. [2] Even the U.S. Chamber of Commerce, the lobbying arm of big corporations, objected to Mnuchin’s actions and called for Congress to pass additional pandemic relief to support the economy. David Wilcox, a former chief economist for the Federal Reserve, said, “The most obvious interpretation is that the Trump administration is seeking to debilitate the economic recovery as much as possible on the way out of the door.” [3] [4]

Senator McConnell has refused to act on a $3 trillion pandemic relief bill the House passed in May, despite a call from 125 bipartisan economists for a relief package to address the economic crisis, which includes quickly escalating poverty as the benefits of the March relief bill expire. (Just about the only business McConnell has the Senate doing is approving right-wing federal judges.) As poverty and hunger are surging across the country, key components of a relief bill are enhanced unemployment benefits, aid to state and local governments, and increased food assistance. Some sustained relief will be needed until the pandemic is under control and the economy has recovered. [5]

Aid to state and local governments is critical because, faced with plunging tax revenue, they have cut 1.3 million jobs since February. There is no more effective, tried and true way of reducing unemployment and supporting economic recovery than providing aid to state and local governments; we know this from the 2008 recession. If families don’t have jobs and income, if parents can’t work because schools and child care are closed, local economies suffer. Every dollar of assistance to state and local governments boosts local economies by $1.70 due to the spending and re-spending of that dollar as it cycles through local workers and businesses. [6]

Senator McConnell appears to be more focused on limiting the liability of corporations when workers or customers get COVID than providing relief to workers, such as unemployment benefits for the 12 million workers whose benefits will run out before the end of December. He is also talking about imposing austerity on the federal government by focusing on cutting the deficit during Biden’s presidency. He wasn’t concerned about the deficit when President Trump increased it to levels not seen since World War II or when he cut taxes in 2017 for wealthy individuals and corporations, which increased the deficit by over one hundred billion dollars a year. Furthermore, austerity, i.e., cutting federal spending, will weaken and slow the economic recovery, hurting all Americans other than the wealthy, as we know from the aftermath of the 2008 recession. [7]

Despite the good news that vaccines will be ready for distribution soon, Republicans in Congress and the White House are not even talking about providing the funding needed to distribute the vaccines, which is estimated to be $30 billion. It also appears that there’s no or little planning happening in the Trump administration for vaccine distribution. With over a thousand people dying daily of COVID, one would think this would be a bipartisan priority, but Republican politics appear to trump even this essential public health initiative. [8]

Trump, McConnell, and many other Republicans are putting politics ahead of the best interests of the country and its people. This is sabotage and treasonous. We must all speak up against this unprecedented, corrupt behavior. I urge you to contact your U.S. Representative and Senators and ask them to take action to provide necessary relief in the face of this pandemic and to ensure a smooth and respectful transition to the Biden presidency.

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

[1]      Shear, M. D., 11/22/20, “Trump using last days to lock in policies and make Biden’s task more difficult,” The Boston Globe from The New York Times

[2]      Mohsin, S., 11/25/20, “Mnuchin to put $455 billion in funds out of Yellen’s easy reach,” The Boston Globe from Bloomberg News

[3]      Richardson, H. C., 11/24/20, “Letters from an American blog post,” (https://heathercoxrichardson.substack.com/p/november-24-2020

[4]      Smialek, J., & Rappeport, A., 11/20/20, “Mnuchin to end some emergency Fed programs,” The Boston Globe from The New York Times

[5]      Johnson, J., 11/24/20, “ ‘Go big, and stay big’: Economists call for $3 trillion Covid relief package to stop nation’s descent into ruin,” Common Dreams (https://www.commondreams.org/news/2020/11/24/go-big-and-stay-big-economists-call-3-trillion-covid-relief-package-stop-nations)

[6]      Tahmincioglu, E., 8/25/20, “The way out through state and local aid,” Economic Policy Institute (https://www.epi.org/blog/state-and-local-aid-bipartisan-economists-video/)

[7]      Johnson, J., 12/2/20, “Critics smell ‘economic sabotage’ as McConnell unveils Covid plan with $0 for unemployment boost, direct payments,” Common Dreams (https://www.commondreams.org/news/2020/12/02/critics-smell-economic-sabotage-mcconnell-unveils-covid-plan-0-unemployment-boost)

[8]      Dayen, D., 11/30/20, “Unsanitized: The COVID-19 Report for Nov. 30, 2020,” The American Prospect (https://prospect.org/coronavirus/unsanitized-vaccine-distribution-gaps-transparency-funding/)

TRUMP’S WAR ON WORKERS

Despite Trump’s rhetoric, his 2016 campaign promises, and an occasional symbolic gesture, his administration has shown a total lack of empathy or concern for the plight of American workers. He has:

  • Undermined workers’ health and safety, as well as job security,
  • Repeatedly supported employers and business interests rather than workers,
  • Depressed workers’ pay and benefits, and
  • Failed to support workers’ rights, including their ability to bargain collectively with employers through unions.

During the coronavirus pandemic, the Trump administration has consistently sided with employers and against protecting workers from the very contagious virus. It has refused to promulgate mandatory standards and safety measures to protect workers. The most notable example has been in the meat packing industry, where the Trump administration has ordered workers back to work using emergency powers meant to ensure the supply of “scarce and critical material essential to the national defense.” Local public health officials are prohibited from closing plants and workers have to obey employers’ orders to return to work or be fired and lose their eligibility for unemployment benefits. [1]

Over 200 workers in the meatpacking industry have died and tens of thousands have been infected. Nonetheless, the Trump administration’s Occupational Safety and Health Administration (OSHA) has not issued any regulations to protect these workers. Its fines for violations have been a slap-on-the-wrist few thousand dollars, despite thousands of complaints from workers about unsafe working conditions. The neglect of workers’ health and safety has undoubtedly cost many thousands of lives. [2]

Trump has consistently appointed pro-corporate, pro-employer, anti-worker officials to his cabinet and government agencies, as well as to judgeships. His Secretary of Labor, Eugene Scalia (son of the right-wing Supreme Court Justice), and all but one of his appointees to the National Labor Relations Board have spent their careers fighting for corporate employers and against workers’ rights and protections, despite the fact that they are now, supposedly, enforcing workers’ rights and protections.

On the other hand, Trump has failed to appoint anyone to head OSHA and has reduced its number of inspectors to a 50-year low. It would take these inspectors 165 years to visit every U.S. workplace once, despite an annual toll of 14 workers killed and 5 million injured on the job (not including the impact of COVID-19). [3]

Trump’s Department of Labor (DOL) has relaxed rules on overtime pay, resulting in millions of workers being denied overtime when they work over 40 hours in a week. The DOL and the Trump-appointed National Labor Relations Board (NLRB) have let McDonalds and other corporations that use a franchisee business model escape responsibility for franchisees who engage in wage theft (e.g., by failing to pay overtime, minimum wage, or for all hours at work) and other illegal practices.

The Trump administration and Republicans in Congress have worked relentlessly to weaken and repeal the Affordable Care Act (aka Obama Care), which has increased costs and denied health insurance to millions of workers, including many of those who have lost jobs during the pandemic. On the other hand, the Trump administration and Republicans in Congress have done nothing about increasing the minimum wage (which has been unchanged for a decade) or the Earned Income Tax Credit, which augments the income of low wage workers. They also have done nothing to increase the availability of paid sick time or to provide paid leave for new parents. [4]

The Trump administration has acted favorable on all ten items on an employer-friendly, anti-worker wish list from the U.S. Chamber of Commerce, the lobbying organization of large corporations. All of these items involved undermining workers’ rights and unions, such as allowing employers more opportunities to interfere in union organizing efforts. The Trump NLRB has stripped Uber drivers and other similar workers of their rights under labor laws and has also proposed a ban on union organizing by tens of thousands of graduate students who work as teaching and research assistants. [5]

Trump’s 2017 tax cut legislation gave billions of dollars in tax cuts to wealthy individuals and corporations, while neglecting workers. It also increased incentives for multi-national corporations to move jobs overseas.

The Trump administration’s mismanagement of the coronavirus pandemic has hurt the economy, increasing the number of jobs lost and the length of unemployment. The administration and Republicans in Congress have limited the amount and duration of unemployment benefits for those out of work. They provided limited pandemic relief for workers in general and have let it run out, refusing to extend it, even though the end of the pandemic is nowhere in sight, unemployment remains high, and millions of households are struggling to make ends meet.

The litany of the Trump administration’s anti-worker actions is long. Here are a few more examples:

  • Repealed the fiduciary rule that required investment advisors to act in workers’ best interests in handling their retirement savings. Instead, the advisors can select investments that pay them higher fees.
  • Relaxed or rescinded safety rules in numerous industries, such as more than a dozen rules protecting mine workers from such things as explosive coal dust and mining chemicals. However, the effort to relax safety inspections in coal mines was blocked by a federal court.
  • Made it easier to award federal contracts to companies with multiple violations of laws on fair wages, sexual harassment, racial discrimination, and workers’ rights to form a union.
  • Relaxed rules on toxic chemicals that harm farmworkers and children.
  • Relaxed requirements on reporting of workplace injuries and ended requirements for large corporations to report payroll data by race and gender, which allowed analysis of possible pay discrimination.
  • Rolled back regulations on usurious practices of payday lenders who prey on financially struggling workers.
  • Supported, both through legal arguments and court appointments, a prohibition on class action lawsuits by workers against employers (instead requiring them to submit grievances to arbitration) and a prohibition on requiring public sector workers to pay union fees or dues for the benefits they receive from union actions on their behalf.
  • Is pushing hard for blanket corporate / employer immunity from lawsuits if workers or customers get sick or die from COVID-19, regardless of any failure by the business to implement appropriate or required protection measures.

I hope America’s workers and voters are paying attention and not letting themselves be fooled by Trump’s rhetoric. Even a quick look at the actions and personnel of the Trump administration make it clear that it supports corporations and employers to the explicit detriment of workers.

[1]      Hightower, J., July 2020, “Something is rotten at Big Meat, Inc.,” The Hightower Lowdown (https://hightowerlowdown.org/article/something-is-rotten-at-big-meat-inc/)

[2]      Lee, T.M., 9/25/20, “Trump’s war on workers,” The American Prospect (https://prospect.org/labor/trump-war-on-workers/)

[3]      Hightower, J., Aug. 2020, “Behind his daily spectacle, Trump is pounding workers and their rights,” The Hightower Lowdown (https://hightowerlowdown.org/article/behind-his-daily-spectacle-trump-is-pounding-workers-and-their-rights/)

[4]      Greenhouse, S., 8/30/19, “The worker’s friend? Here’s how Trump has waged his war on workers,” The American Prospect (https://prospect.org/power/worker-s-friend-trump-waged-war-workers/)

[5]      McNicholas, C., Rhinehart, L., & Poydock, M., 9/16/1/20, “50 reasons the Trump administration is bad for workers,” Economic Policy Institute (https://www.epi.org/publication/50-reasons/)

OUR ELECTIONS ARE RIGGED Part 2

Our elections are indeed rigged – by Republicans and the country’s wealthy capitalists to skew results to their benefit. One of their strategies is to reduce voting by those who are not part of their primary constituency of well-off, white voters. [1] My previous post describes the four main barriers to voting that states have been imposing. Studies show they disproportionately disenfranchise non-white, low-income, student, and/or elderly voters, groups who tend to vote for Democrats:

  • Imposing voter identification requirements
  • Reducing places and times for voting
  • Purging eligible voters from voter registration lists
  • Denying people with a felony conviction the right to vote

There are a variety of strategies that are being used to suppress voter participation in general and participation by likely Democratic voters in particular, in addition to the four above. In some states, Republican gerrymandering of state legislative districts has given Republicans undeserved power to enact barriers to voting. In Wisconsin, for example, in 2018, Democrats won a majority of the statewide vote for the state legislature (52%) but got only 36 of 99 seats in the legislature (36%).

Voter suppression strategies being used in various places across the country include:

  • Impeding voter registration: While some states are making it easier to register to vote, for example through election day registration and automatic voter registration at motor vehicle offices and other state agencies, many Republican-controlled states are making it harder to register. For example, some states have made the process for conducting voter registration drives so onerous that the effect has been to ban them. In Georgia, in 2018, the Secretary of State (who oversees elections and was a white male running against a Black woman for Governor) was charged with blocking the registration of 50,000 voters (80% of whom were non-white) due to minor discrepancies in the spelling or spacing of their names. [2]
  • Failing to update voter registration systems with address changes: Without up-to-date addresses for people who move frequently, e.g., young people, students, and low-income workers, these voters (who tend to vote for Democrats) do not receive ballots or voting information, and hence are less able and likely to vote.
  • Undermining confidence in our elections: Spreading lies about the existence of voter fraud and the validity and honesty of our elections creates skepticism about the importance of voting. Failure to combat foreign efforts to affect the outcome of our elections and to undermine faith in their credibility also damages voters’ enthusiasm for voting. Calling ballots that are counted after election day fraudulent (for example, mailed-in ballots that were postmarked on time) contributes to the false perception that our elections are dishonest. All of these techniques and other related ones undermine voters’ motivation to turnout to vote.
  • Providing misinformation about voting and registering to vote: This is a classic “dirty trick” used to confuse voters and keep them from registering to vote and from voting.
  • Creating barriers to or doubts about mail-in or absentee ballots: The President and some Republican-led states are erecting barriers to mail-in voting because it has been shown to increase voter participation, which does not work to their benefit. In addition, the President, in particular, is trying to sow doubt about the validity and effectiveness of mail-in voting despite its very successful use in many states, including as the sole method of voting in Oregon since 1998. Some states are making it complicated to correctly complete a mail ballot. In Alabama, for example, the signature on an absentee ballot must have two witnesses or a notarization. [3] A complicated process increases the likelihood that ballots can be disqualified due to a technical error in completing them and most states do not have a process for remedying a minor technical error; the ballot is simply not counted. Some states are setting strict deadlines for receipt of mail ballots (e.g., they must be received by election day not just postmarked by election day). In one county in Florida, 1,200 ballots were not counted for being too late despite being postmarked on time. And, as I imagine you’ve heard, the Trump administration is working to harm the U.S. Postal Service’s ability to process mail in a timely fashion. Finally, some states prohibit the opening of mail ballots until election day or even until the polls have closed. This delays the finalization of election results and gives Republicans the opportunity to assert that the late counting of ballots is indicative of fraud, as they did in Florida in the 2000 presidential election.
  • Intimidating voters: In Pennsylvania, the Republicans have sued all 67 counties to allow Republican-hired, outside “poll watchers” at the polls. Poll watchers such as these have typically been used to harass, challenge, and intimidate targeted voters, namely those who are likely to be voting for Democrats. They do this by, for example, demanding proof of eligibility to vote. They are typically deployed in low-income, non-white neighborhoods and sometimes wear uniforms and carry badges, cameras, and guns. This kind of intimidation was so bad back in 1982 that a federal judge imposed restrictions on activities that might intimidate voters. However, in 2018, with the Trump campaign’s support, these restrictions were lifted. [4]
  • Refusing to give workers time to vote: In most states, election day is not a holiday and most employers do not give workers time off (let alone paid time off) to vote, although this may be starting to change.
  • Negative campaigning: Negative messages and nasty campaigning create disillusionment with candidates (whether the information is true or not) and with voting in general. The result is lower voting participation both in general and for the targeted candidate.

Republicans have amassed a $20 million fund to bring lawsuits aimed at reducing voting and blocking the counting of ballots, such as provisional ballots cast by people whose voter registration was purged or blocked by voter suppression techniques. In Florida, for example, Republicans have sued to prevent postage-paid return envelopes from being sent with mail-in ballots, hoping to reduce the rate at which they are returned. In Nevada, they have sued to prevent the state from sending mail-in ballots to all registered voters.

President Lyndon Johnson called voting “the first duty of democracy”. However, President Trump and Republicans in Congress and in the states have been doing everything they can to denigrate that duty and to make it as hard as possible for those likely to vote for Democrats to fulfill their duty to vote. [5] This is stunningly unpatriotic and in violation of our Constitution and the founding principles of this country. Democracy’s foundational principle is that all citizens have a right and duty to vote. Undermining the ability to vote and the importance of voting are antithetical to democracy.

There are steps we can take to increase voter participation and, thereby, improve the health of our democracy. Steps to make it easy to vote and to block strategies inhibiting voting are occurring in the courts and in some states. The battle over allowing voting by those convicted of felonies in Florida has gone through three levels of courts already and is on-going, although it appears likely that 775,000 of them will not be able to vote this fall. In Virginia, where Democrats gained control of the state government in the 2019 election, they have repealed the state’s voter ID law, made election day a state holiday, expanded the early voting period to 45 days, and implemented automatic voter registration for people using services from the Department of Motor Vehicles. Mail-in ballots will have pre-paid postage and drop boxes for returning them will be installed throughout the state. Voters will be able to fix technical errors on mail-in ballots, while absentee ballots will no longer require a witness’s signature. [6] In North Carolina, a Democratic Governor, a state Board of Elections with a non-partisan leader, and court orders have reversed the tide in a state that was one of the leaders in voter suppression in 2016. [7]

The ultimate solution is a national one, namely reinstituting the protections that were in place under the Voting Rights Act before the Supreme Court disingenuously eviscerated it in 2013. To this end, I encourage you to contact your U.S. Representative and Senators and let them know you support the Voting Rights Advancement Act, which passed the House in December 2019 but has not been acted on by the Senate. In addition, our election systems need extra financial support to operate safely, effectively, and accurately during the current pandemic. To this end, I also urge you to let your Members of Congress know you support the VoteSafe Act and the funding for election systems in the House-passed HEROES Act. [8] Given that the Republicans in control of the Senate are not likely to act on these bills this year, in the meantime, encourage your state and local election officials to make it as easy as possible for all eligible voters to register and vote.

To live up to our principles, every citizen needs to be readily able to fulfill that first duty of democracy – to vote.

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

[1]      Hightower, J., 9/1/20, “Six ways the Right is shredding the right to vote,” Common Dreams from The Hightower Lowdown (https://www.commondreams.org/views/2020/09/01/six-ways-right-shredding-vote)

[2]      Durkin, E., 10/19/18, “GOP candidate improperly purged 340,000 from Georgia voter rolls, investigation claims,” The Guardian (https://www.theguardian.com/us-news/2018/oct/19/georgia-governor-race-voter-suppression-brian-kemp)

[3]      Bidgood, J., 9/20/20, “Alabama: ‘They’re doing everything to stop us from voting’,” The Boston Globe

[4]      Hightower, J., 9/1/20, see above

[5]      Graham, R., 9/14/20, “Vote!” The Boston Globe

[6]      Gibson, B., 9/14/20, “How Virginia made voting easier and fairer,” The American Prospect (https://prospect.org/politics/how-virginia-made-voting-easier-and-fairer/)

[7]      Kuttner, R., 9/16/20, “Election night could be smoother for Senate races,” The American Prospect (https://prospect.org/blogs/tap/election-night-could-be-smoother-for-senate-races/)

[8]      Fudge, M., 9/21/20, “The struggle to vote continues,” The Boston Globe

OUR ELECTIONS ARE RIGGED

Our elections are indeed rigged, but not in the direction or way President Trump claims. For decades now, Republicans and the country’s wealthy capitalists have been working to skew election results to their benefit by reducing voter participation. As Republican campaign strategist Paul Weyrich said in 1980, “I don’t want everybody to vote. … Our leverage in the elections quite candidly goes up as the voting populace goes down.” [1]

Low participation in elections works to the advantage of corporations, wealthy individuals, and Republicans. They know that their constituency – white, well-off voters – will continue to vote but that others can be prevented or discouraged from voting by barriers to voting and by spreading doubts about candidates and our elections.

Since the 1980s, Republicans and their wealthy donors have engaged in an escalating, coordinated, well-funded, multi-pronged effort to prevent targeted people from voting and to suppress voting in general. It now seems that no holds are barred; serious distortions of candidates’ positions, beliefs, and experiences and blatant lies are commonplace. One prong of their effort was getting “conservative” judges appointed to courts at all levels including the U.S. Supreme Court. This culminated in the Supreme Court’s ruling in 2013 that key portions of the Voting Rights Act (VRA) were unconstitutional because discriminatory voting practices were (supposedly) no longer a significant issue. This was essential to the escalation of Republicans’ targeted voter suppression efforts.

The states have proved the Supreme Court wrong; every one of the nine states that had been subject to Voting Rights Act oversight (which occurs because of past discriminatory practices) has implemented new discriminatory barriers to voting. All told, over half of the 50 states have enacted hundreds of barriers to voting in the seven years since the Supreme Court’s decision, some literally within days of the decision.

The four main barriers to voting that states have imposed are:

  • Implementing voter identification laws: Eleven states had strict voter ID laws in 2016, where without the required ID a vote will not be counted unless the voter quickly takes the steps required to validate the provisional ballot they are allowed to cast. These strict voter ID laws first appeared in 2006. In 2000, only 14 states had any ID requirement and all of them allowed a voter to cast a ballot that would be counted through a relatively simple, on-the-spot process. By 2016, 33 states had an ID requirement. [2] For example, in Alabama, a state that had been subject to VRA oversight, a strict voter ID requirement was enacted the year after the Supreme Court’s decision. Motor vehicle offices were where most people would go to get the required photo ID. However, soon after enactment of the voter ID requirement many of these offices in predominantly Black communities were closed, although some of them were later reopened. [3] In Iowa, a very strict voter ID law was enacted in 2017, which it is estimated will keep 260,000 people from voting this fall. Studies have shown that voter ID laws disproportionately disenfranchise non-white, low-income, and elderly voters. There is no evidence of voter fraud, however, it is, nonetheless, given as the rationale for voter ID laws. Moreover, voter ID requirements would NOT prevent the kind of voter fraud Republicans claim is happening. [4]
  • Reducing places and times for voting: A number of states have reduced the number of polling places. The nine states subject to the Voting Rights Act before its evisceration by the Supreme Court in 2013 have closed 1,688 polling places, typically in areas with high proportions of Black voters. Some states have reduced the number of days of early voting and Alabama, for example, does not allow early voting.
  • Purging eligible voters: While election officials do need to clean up voting registration lists (e.g., to remove people who’ve died or moved out of the jurisdiction), Republicans have turned the updating of voting lists into a technique for purging likely Democratic voters. Nationally, an unusually high number of voters (17 million) have been removed from voting lists since the 2016 election. The purges often target people who move frequently (e.g., young people, students, low-income workers, and non-white voters). These groups also happen to tend to vote Democratic. Often a postcard is mailed to the targeted voters (but not forwarded) and if it isn’t returned, they are removed from the voting rolls. Sometimes voters who haven’t voted in a couple of elections are summarily removed from voting lists. Georgia, for example, purged more than 534,000 voters from its voting rolls in 2016 and 2017. However, a study found that 340,000 of them were valid voters, predominantly non-white, and still living at the addresses on their voter registration information. [5]
  • Denying people with a felony conviction the right to vote: Forty-eight states deny those convicted of a felony the right to vote while they are incarcerated. Eleven states deny them the right to vote even after they have completed their sentences (including any probation or parole), although there typically is, in theory, a process for regaining their voting rights. [6] These laws denying voting rights reflect the racism of Jim Crow laws, where whites were looking for ways they could legally keep Blacks from voting (among other things). Laws were written and selectively enforced so that Black males were convicted of felonies at a high rate and therefore prevented from voting. (Women couldn’t vote at that time.) In 2016, there were over 4.7 million citizens out of prison but disenfranchised by their criminal record. One-third of them are Black. [7] In recent years, there has been a trend toward reinstating their right to vote often with some conditions. For example, in Florida in 2018, voters overwhelmingly approved a ballot question to repeal the law preventing those who had been convicted of a felony from voting after completing their sentences (except for those convicted of murder or a sex crime). However, the Republican Governor and legislature have gone out of their way to thwart the will of the people. As it currently stands, those who have completed their sentences, now also have to pay all restitution, fines, fees, and court costs before they are allowed to vote. This is effectively a new kind of poll tax and will keep an estimated 775,000 people, who are predominantly Black men, from voting this fall.

My next post will cover some of the secondary techniques for suppressing voting and steps we can take to increase voter participation and, thereby, the health of our democracy.

[1]      Hightower, J., 9/1/20, “Six ways the Right is shredding the right to vote,” Common Dreams from The Hightower Lowdown (https://www.commondreams.org/views/2020/09/01/six-ways-right-shredding-vote)

[2]      National Conference of State Legislatures, retrieved 9/20/20, “History of voter ID,” (https://www.ncsl.org/research/elections-and-campaigns/voter-id-history.aspx)

[3]      Bidgood, J., 9/20/20, “Alabama: ‘They’re doing everything to stop us from voting’,” The Boston Globe

[4]      Gibson, B., 9/14/20, “How Virginia made voting easier and fairer,” The American Prospect (https://prospect.org/politics/how-virginia-made-voting-easier-and-fairer/)

[5]      Durkin, E., 10/19/18, “GOP candidate improperly purged 340,000 from Georgia voter rolls, investigation claims,” The Guardian (https://www.theguardian.com/us-news/2018/oct/19/georgia-governor-race-voter-suppression-brian-kemp)

[6]      National Conference of State Legislatures, retrieved 9/21/20, “Felon voting rights,” (https://www.ncsl.org/research/elections-and-campaigns/felon-voting-rights.aspx)

[7]      Wood, E., 2016, “Florida: An outlier in denying voting rights,” Brennan Center for Justice (https://www.brennancenter.org/sites/default/files/publications/Florida_Voting_Rights_Outlier.pdf)

MAKE THE POST OFFICE GREAT AGAIN

The scandalous behavior of Louis DeJoy, the Trump administration’s new Postmaster General for the U.S. Postal Service (USPS), has gotten quite a bit of attention in the mainstream media; my previous two posts presented at least some of the rest of the USPS story. (My last post described the efforts to undermine and privatize the USPS, and, on the other hand, growing interest in reviving postal banking. My previous post described DeJoy’s Friday night massacre of personnel and the role of Treasury Secretary Mnuchin in the USPS shenanigans.)

In case you missed it, two new scandals have emerged involving the Trump administration’s leaders at the USPS. First, Postmaster General DeJoy faces multiple allegations that he pressured employees of his private business to make political contributions and rewarded employees if they did so with bonuses or raises. If true, this is a blatant violation of campaign finance laws. [1] Second, Robert Duncan, the chairman of the USPS Board of Governors (which formally appointed DeJoy), is a long-time major Republican fundraiser (as DeJoy is). Duncan recently was identified as one of three directors of a Republican Super PAC that has already spent nearly $18 million supporting Senate Republican candidates in the 2020 elections. Senate Majority Leader Mitch McConnell basically controls this Super PAC. Duncan’s long-time relationship with McConnell and his role with the Super PAC are coming under scrutiny as concerns are growing about political manipulation of the USPS. [2]

Here are a number of actions and policy changes that Congress should initiate to restore and strengthen the USPS and its ability to deliver quality services, which would make the USPS great again. After all, it is a public good that connects us with each other and supports our democracy and our economy. [3]

  • Investigate Postmaster General DeJoy and ultimately remove and replace him with a qualified, non-partisan leader.
  • End the Treasury Department’s and Secretary Mnuchin’s control over and involvement with the USPS.
  • Repeal the provisions of the 2006 Postal Accountability and Enforcement Act that require the USPS to pre-fund its retiree benefits and instead allow the USPS to account for its retiree benefits and present its finances using Generally Accepted Accounting Principles.
  • Repeal the provisions of the 1970 Postal Reorganization Act that require the USPS to be considered a private business and instead treat it like a public agency and a public service.
  • Rescind restrictions on the USPS’s operations and, for example, allow it to pursue postal banking to provide a valuable service to unbanked Americans and others poorly served by private, for-profit financial corporations.
  • Remove the requirement that the USPS invest its retiree benefits funds solely in Treasury Bonds; no private retirement fund would do this and it negatively affects investment returns and, therefore, increases costs for the USPS.
  • Explore the possibility of enrolling retirees in Medicare to more efficiently provide retiree health benefits.

These steps would allow the USPS to provide efficient, quality, universal service, while providing good jobs for its workers. They would stabilize and normalize the finances of the USPS and benefit the public.

DeJoy, Mnuchin, and Trump are engaged in sabotage of the USPS, plain and simple. They want to discredit it as a public agency, undermine its union workers, and shift its revenue to private companies (namely their friends and campaign contributors).

I urge you to contact your U.S. Representative and Senators to tell them that you support the U.S. Postal Service and oppose efforts to undermine it. Please also ask them to support postal banking to provide affordable and convenient basic financial services to the public, particularly low-income households. Private banks have failed to provide such services to many Americans and payday lenders have emerge to fill this gap but are taking advantage of desperate low-income workers.

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

[1]      Queally, J., 9/6/20, “ ‘This is against the law and DeJoy must be fired’: Postmaster General accused of criminal violation of campaign laws,” Common Dreams (https://www.commondreams.org/news/2020/09/06/against-law-and-dejoy-must-be-fired-postmaster-general-accused-criminal-violation)

[2]      Johnson, J., 9/1/20, “ ‘The corruption is bottomless’: Documents reveal chair of postal service board is Director of McConnell-allied Super PAC,” Common Dreams (https://www.commondreams.org/news/2020/09/01/corruption-bottomless-documents-reveal-chair-postal-service-board-director-mcconnell)

[3]      Anderson, S., Klinger, S., & Wakamo, B., 7/15/19, “How Congress manufactured a postal crisis – and how to fix it,” Institute for Policy Studies (https://ips-dc.org/how-congress-manufactured-a-postal-crisis-and-how-to-fix-it/)

THE REST OF THE POST OFFICE STORY Part 2

The scandalous behavior of Louis DeJoy, the Trump administration’s new Postmaster General for the U.S. Postal Service (USPS), has gotten quite a bit of attention in the mainstream media, but there’s more to the story than they have been reporting. This post and my previous post present at least some of the rest of the story. (My previous post described DeJoy’s Friday night massacre of personnel and the role of Treasury Secretary Mnuchin, who obtained sweeping operational control over the USPS and unprecedented access to its information through negotiation of a $10 billion line of credit for the USPS from the Treasury. [1] [2] )

Despite the current characterization of the USPS has operating at a loss, the postal service wasn’t viewed as a profit-making business by our country’s founders or throughout most of its history. Moreover, Congress has put requirements and restrictions on it that mean it can’t be run like a business.

The USPS is a public good that supports our democracy, a civil society, and other economic activity, as roads and schools do; it shouldn’t be run like a business to make a profit. We don’t expect the military or the National Park Service to generate a profit, so why should we expect the USPS to generate a profit? Our country’s founders thought of the postal service as critical to ensuring that citizens of the new democracy were well informed and therefore believed it should, among other things, subsidize delivery of newspapers. According to the Postal Policy Act of 1958, the USPS provides an essential public service that promotes “social, cultural, intellectual, and commercial intercourse among the people of the United States”. The Act also states that the USPS is “clearly not a business enterprise conducted for profit.” [3]

However, in 1970, as the era of deregulation and privatization began under President Nixon, the Postal Reorganization Act made the USPS an independent federal agency (instead of a Cabinet agency like the Departments of Education or Defense) and required it to cover its costs. Nonetheless, the law limited the USPS’s ability to increase prices for its services, expected it to deliver mail to every household and business in America six days a week, and required it to keep postal rates the same across the whole country despite substantial differences in the costs of delivering mail in different areas. [4]

Since then, Republicans have been trying to privatize the USPS because it represents a large revenue stream, $71 billion a year, that they would like to see go to their friends and campaign contributors in the private sector. One strategy for doing this has been to undermine the USPS and make it look bad, to make it look like it’s poorly run, and to make it look like it’s operating at a deficit, in order to build an argument that privatizing it would make sense.

In 2006, in what many observers felt was an effort to make the USPS look financially unstable and therefore ripe for privatization, the Postal Accountability and Enforcement Act (PAEA) was passed. It required the USPS to pre-fund retiree health benefits far into the future, which no other federal agency or private business is required to do. Specifically, it required the USPS to pay $5 billion to $6 billion a year into a retiree health benefit fund from 2007 to 2017. This has made the USPS appear to be running a deficit, when, without these payments, the USPS would have reported operating surpluses from 2013 through 2018. [5]

The current slowing of mail service is just another tactic in the effort to make the USPS look bad. The resultant inability to deliver ballots or medicines in a timely fashion, not only makes it look bad, but also undermines its revenue because mailers and shippers are shifting their business to competing, private service providers. For example, the slowdown is forcing the Veterans’ Administration to use private shipping services to get medicines to patients in a timely fashion and Amazon is building up its in-house delivery capacity and its fleet of vehicles.

The USPS is prohibited by law from branching out into new business lines that could boost its revenue and its services to the public. Offering basic banking services is one example, for which there is historical precedent. From 1911 to 1967, the USPS offered savings accounts. In 1967, the Postal Savings System was terminated at the behest of private bankers who did not want its competition. Today, money orders are the only financial service offered by the USPS. [6]

Postal banking is now receiving renewed attention because there are sizable poor urban and rural areas where bank branches are scarce. In addition, private banks have a track record of charging high interest rates and fees to low-income account holders, as well as failing to provide equitable treatment in access to credit and other financial services. As a result, 9 million U.S. households are effectively excluded from banking services and are described as “unbanked”.

The payday lending business has emerged to fill this gap and has grown into a $90 billion business. However, its usurious interest rates and fees, and its business model of locking customers into a cycle of debt that it’s often difficult to escape from, have led to a search for more consumer-friendly alternatives. In 2014, the USPS’s Inspector General noted that the USPS could make profitable loans at a much lower costs to consumers than what payday lenders were and are providing.

In the presidential primaries, a number of the Democratic candidates proposed allowing the USPS to offer basic banking services and Senator Biden, the Democratic nominee for President, supports this policy proposal. It would make basic banking services more accessible and affordable, particularly for low-income households.

In the face of this revived interest in postal banking, which would help the finances of the USPS and benefit the public, Postmaster General DeJoy and Treasury Secretary Mnuchin have reportedly engaged in discussions with megabank JPMorgan Chase (JPMC) about putting its ATMs in post offices and giving JPMC the exclusive right to solicit banking business from postal customers. This is clearly a backdoor effort to eliminate the possibility of postal banking – competition private sector bankers and payday lenders vehemently oppose. (So much for the private sector’s belief in a free market and competition!) Moreover, this doesn’t address the issue of unbanked people because if they don’t have a bank account, they can’t use the ATM. JPMC has a particularly troubling track record in this regard as it has historically failed to provide branch services in low-income, minority, or immigrant neighborhoods. [7]

A postal banking system would provide free usage of Treasury Direct Express cards and other government payment services. This would have streamlined and simplified the distribution of the pandemic emergency relief funds to low-income households who badly needed the $1,200 but didn’t have bank accounts to which the money could be electronically transmitted. Furthermore, the privacy of users’ information would be much better protected by the USPS, which could only collect limited user information and is barred from sharing it. A private bank, on the other hand, will collect as much information as it possibly can and will use it, share it, and sell it for commercial, profit-making purposes.

Mnuchin and DeJoy are engaged in sabotage of the USPS, plain and simple. They want to discredit it as a public agency, undermine its union workers, and shift its revenue to private companies (namely their friends and campaign contributors).

My next post will review policy changes that would strengthen the USPS and better serve the public.

[1]      Dayen, D., 8/18/20, “Treasury’s role in postal sabotage,” The American Prospect (https://prospect.org/blogs/tap/treasurys-role-in-the-postal-sabotage)

[2]      Queally, J., 8/8/20, “ ‘Friday night massacre’ at US Postal Service as Postmaster General – a major Trump donor – ousts top officials,” Common Dreams (https://www.commondreams.org/news/2020/08/07/friday-night-massacre-us-postal-service-postmaster-general-major-trump-donor-ousts)

[3]      Editorial, 8/21/20, “The US postal service lost $0,” The Boston Globe

[4]      Morrissey, M., 8/11/20, “Trump’s war on the Postal Service helps corporate rivals at the expense of working families,” Economic Policy Institute (https://www.epi.org/blog/trumps-war-on-the-postal-service-helps-corporate-rivals-at-the-expense-of-working-families)

[5]      McCarthy, B., 4/15/20, “Widespread Facebook post blames 2006 law for US Postal Service’s financial woes,” PolitiFact, The Poynter Institute (https://www.politifact.com/factchecks/2020/apr/15/afl-cio/widespread-facebook-post-blames-2006-law-us-postal)

[6]      Shaw, C. W., 7/21/20, “Postal banking is making a comeback. Here’s how to ensure it becomes a reality.” The Washington Post (https://www.washingtonpost.com/outlook/2020/07/21/postal-banking-is-making-comeback-heres-how-ensure-it-becomes-reality/)

[7]      Carrillo, R., 8/30/20, “Postal banking: Brought to you by JPMorgan Chase?” Inequality.org (https://inequality.org/research/postal-banking-jpmorgan/)

THE REST OF THE POST OFFICE STORY

The scandalous behavior of Louis DeJoy, the Trump administration’s new Postmaster General for the U.S. Postal Service (USPS), has gotten quite a bit of attention in the mainstream media, but there’s more to the story than they have been reporting. Here’s at least some of the rest of the story.

First, to provide some context, the USPS delivers 472 million pieces of mail every day, including 182 million pieces of first-class mail. It delivers mail to 159 million households and businesses each year, including 1.2 billion prescribed medications, and generates $71 billion a year in operating revenue. It employs 500,000 career employees, who receive stable jobs with decent benefits and include a disproportionate share of military veterans and Black Americans. The USPS, until recently, had an excellent service record and has low costs compared to other countries. [1] (You know this if you’ve ever bought postage in another country.)

Despite what some people are saying, the USPS has plenty of capacity to handle mail-in ballots, which in the extreme might produce 10 – 20 million ballots on any given day, which is only about 10% of normal daily volume. Delaying the delivery of ballots, however, could be serious as this could mean that ballots aren’t delivered by the required deadlines for being counted. DeJoy’s management edicts have already made delivery delays a reality due to the removal of sorting machines and banning of overtime (despite the fact that thousands of USPS employees are out sick due to the coronavirus).

Again, despite what some people are saying, the USPS has more than enough funds to operate through the end of the year, although it has lost substantial revenue during the pandemic and deserves special support just like businesses are getting. It has almost $13 billion on hand (as-of Aug. 7) and it has a $10 billion line of credit from the U.S. Treasury that was included in the original coronavirus bill enacted in March. [2] By the way, commercial package delivery does not lose money for the USPS. Its agreements with Amazon, FedEx, and UPS, who regularly use the USPS to perform the most expensive portion of delivery service, the “last mile” to places other delivery services won’t bother to go, are profitable. Commercial packages are the only growing line of business for the USPS, especially since the pandemic hit. [3]

Treasury Secretary Mnuchin negotiated the terms of the $10 billion line of credit for the USPS that was included in the coronavirus relief law to give him and the Treasury Department sweeping operational control over the USPS and unprecedented access to its information. As a result, Mnuchin has played a major role in USPS affairs, including in the appointment of DeJoy as the Postmaster General. The Trump administration has claimed that an executive search firm was used to find the new Postmaster General. However, recent evidence has revealed that DeJoy was not one of the candidates from the search process but was put forth by Mnuchin. The USPS Board of Governors, all of them Trump appointees, formally appointed DeJoy the Postmaster General on June 15th. DeJoy is a North Carolina businessman and a major Republican fundraiser. His knowledge of the USPS is limited to the fact that a company of his did some subcontract work for the USPS. The company was a virulently anti-union company and some of his (and Mnuchin’s) initiatives appear targeted at undermining the USPS workers’ union.

Using his negotiated operational control of the USPS, Mnuchin had a Treasury (not USPS) task force set USPS policies that included reducing employee pay and benefits, partially by reducing overtime. He has inserted himself into hiring decisions, including the selection of the new Postmaster General. He also exerted influence on the terms of large USPS contracts. Union leaders warned that the implementation of Mnuchin’s task force’s policies would slow delivery of the mail and lead to privatization. So far, they have been right. [4]

David Williams, vice chair of the USPS Board of Governors and a Trump appointee, resigned in May to protest the handing over of effective operational control of the USPS to Mnuchin. He recently reported that Mnuchin required the members of the supposedly independent Board of Governors to meet with him to discuss the process for selecting the Postmaster General. He stated that the Board interviewed candidates who were qualified, but that DeJoy had to be coached and supported during his interview, demonstrating a lack of knowledge about the USPS and that he was unfit for the job. [5] DeJoy was not a candidate identified by the executive search company the USPS hired to find the new Postmaster General. Williams also stated that the removal of blue, street-corner mailboxes had not been previously planned and that it was specifically promoted by Mnuchin.

DeJoy quietly conducted a Friday night (literally) massacre of personnel while the mainstream media focused on the slowing of mail service and the removal of blue, street-corner mailboxes and sorting machines. (So-called Friday night massacres are done late in the day on Fridays to avoid news coverage and to hide them from public attention.) On Friday, August 7, DeJoy reassigned or displaced 23 USPS senior management personnel. He has also implemented a hiring freeze and is pushing for employees to take early retirement. [6]

The loss of so many people and their expertise through DeJoy’s personnel moves would seem likely to undermine the effective operation of the USPS, given that DeJoy has no experience at and little knowledge of the USPS and its operations. (The previous Postmaster General retired after a 34-year career at the USPS.) Coupled with other operational changes DeJoy has made, the USPS’s ability to deliver the mail in a timely fashion and its longer-term financial outlook seem likely to be harmed.

My next post will provide some historical perspective and identify some steps that should be taken to strengthen the USPS.

 

[1]      Morrissey, M., 8/11/20, “Trump’s war on the Postal Service helps corporate rivals at the expense of working families,” Economic Policy Institute (https://www.epi.org/blog/trumps-war-on-the-postal-service-helps-corporate-rivals-at-the-expense-of-working-families)

[2]      Kuttner, R., 8/17/20, “Postal service has plenty of capacity to deliver mail-in ballots,” The American Prospect (https://prospect.org/politics/postal-service-mail-in-ballots-10-billion-dollar-credit-treasury)

[3]      Brody, B., 8/19/20, “Amazon, USPS deal profitable,” The Boston Globe from Bloomberg News

[4]      Dayen, D., 8/18/20, “Treasury’s role in postal sabotage,” The American Prospect (https://prospect.org/blogs/tap/treasurys-role-in-the-postal-sabotage)

[5]      Johnson, J., 8/21/20, “ ‘Complete bombshell’: Former top USPS official reveals ‘disturbing’ new details of DeJoy selection and Mnuchin sabotage of mail service,” Common Dreams (https://www.commondreams.org/news/2020/08/21/complete-bombshell-former-top-usps-official-reveals-disturbing-new-details-dejoy)

[6]      Queally, J., 8/8/20, “ ‘Friday night massacre’ at US Postal Service as Postmaster General – a major Trump donor – ousts top officials,” Common Dreams (https://www.commondreams.org/news/2020/08/07/friday-night-massacre-us-postal-service-postmaster-general-major-trump-donor-ousts)

PERSONNEL IS POLICY AND LARRY SUMMERS IS A DISASTER Part 2

As Senator Elizabeth Warren has stated on numerous occasions, “Personnel is policy.” The people who implement policies are the ones who ultimately determine what the policy is; their actions are more important than their or anyone else’s words.

Larry Summers is a classic example of this. My last post summarized his resume and his disastrous performance in President Clinton’s Treasury Department. It also noted that he is currently a senior adviser to Senator Joe Biden’s presidential campaign and that he may well aspire to a senior post under Biden if he is elected president. [1] Here are some additional reasons Biden needs to reject Summers and his policies.

After serving as Treasury Secretary under President Clinton, Summers returned to Harvard as its president in 2001 after George W. Bush won the 2000 presidential election. At Harvard he:

  • Alienated faculty members by denigrating many of them, including the whole sociology department,
  • Questioned the scholarship of Cornel West (a high-profile black professor),
  • Also questioned the ability of women to succeed in math and the sciences, and
  • Commandeered investment decision making, despite Harvard’s well-paid and highly successful money managers. Summers’ investment mistakes cost Harvard roughly $1.8 billion and had serious effects on its budget. [2]

As a result of all of this, and after a no-confidence vote by the faculty, Summers resigned as Harvard’s president in 2006. In 2008, before returning to the government, Summers earned $600,000 as a Harvard “University Professor”, $5.2 million from the private equity firm D.E. Shaw, and $2.7 million from speaking fees, largely from financial corporations. Clearly, Wall St. was the butter on his bread.

In 2009, Summers returned to the federal government as head of the President Obama’s Economic Council. As the Obama administration formulated its response to the Great Recession from the 2008 financial collapse (for which Summers bears significant responsibility), he pushed to reduce the size of the economic stimulus, to minimize the support for state and local governments, and for the budget deficit to be kept as small as possible. As a result, the recovery was slowed and high unemployment persisted. Summers promised substantial spending to provide foreclosure relief for homeowners and a reform of bankruptcy laws so that underwater homeowners could reduce the principal on their mortgages. However, he did not deliver on this rhetoric and seemed much more focused on rescuing the banks than homeowners. He also opposed a financial transaction tax, which would have generated needed revenue and curbed short-term trading that can destabilize financial markets, even though in 1989 he had co-authored an academic article arguing for such a tax. [3]

To summarize, no single person bears more responsibility than Larry Summers for Democrats’ support for Wall St. deregulation, outsourcing of jobs to foreign countries, fiscal austerity at home and abroad (even in the face of recessions and economic hardship for the masses), and privatization of public assets and responsibilities both in the U.S.  and internationally. [4] Summers’ consistent policy prescription has been to apply free market theory (which benefits his cronies in the financial industry, wealthy individuals, and large multi-national corporations), even when this was inappropriate for the situation. Other economists and policy makers raised concerns about Summers’ policies, but he persisted even after they led to disaster after disaster.

For example, Summers’ catastrophic policy decisions or miscalculations led to:

  • The 2008 financial collapse whose key triggers were his blocking of regulations on the financial industry and of all regulation of derivatives,
  • The slow recovery and enduring high levels of unemployment from the 2008 Great Recession due to his prioritizing of support for financial corporations while minimizing support for homeowners, workers, and the economy as a whole, and
  • Hyper-inflation, economic hardship for workers, and the discrediting of democracy as an effective form of government in Russia and Third World countries due to his policies demanding rapid privatization and free marketization.

Although Summers’ rhetoric has turned more progressive lately as he jockeys for a role in the Biden campaign and in the government if Biden wins, he has denounced wealth tax proposals from Senators Warren and Sanders in the presidential campaign, which are supported by many progressives. Moreover, his actions speak louder than his words and he has consistently supported deregulation and policies that benefit wealthy individuals and corporations – including his own work in the financial industry.

If you believe that:

  • Economic inequality is a problem that the U.S. needs to address,
  • The financial industry should be regulated so it doesn’t crash our economy again and again,
  • Consumers should be protected from dangerous, predatory financial products,
  • The world should be protected from destructive free market privatization and speculation, and
  • Workers should be protected from trade treaties that benefit large multi-national corporations and drive a race to the bottom for workers,

then Larry Summers is NOT your man – and he shouldn’t be Biden’s man either. Personnel is policy and if Summers is influential in Biden’s campaign or administration these issues will NOT be tackled through any significant policy initiatives.

I encourage you to keep an eye out for Summers and his policies. If they appear to be gaining traction with Biden or his administration if he’s elected, please be ready to object.

[1]      Kuttner, R., 8/7/20, “Did Summers jump, or was he pushed?” The American Prospect (https://prospect.org/blogs/tap/did-larry-summers-jump-or-was-he-pushed/)

[2]      Kuttner, R., 7/13/20, “Falling upward: The surprising survival of Larry Summers,” The American Prospect (https://prospect.org/economy/falling-upward-larry-summers/)

[3]      Kuttner, R., 7/13/20, see above

[4]      Dayen, D., 5/13/20, “Dr. Jekyll, or Mr. Biden?” The American Prospect (https://prospect.org/politics/dr-jekyll-or-mr-biden/)

PERSONNEL IS POLICY AND LARRY SUMMERS IS A DISASTER

As Sen. Elizabeth Warren has stated on numerous occasions, “Personnel is policy.” Platforms, policy statements, and rhetoric are nice, but the people who are in charge of implementing policies are more influential. In judging personnel, as well as candidates or elected officials, past actions are more important than words.

There is perhaps no better example of this than Larry Summers, who is a senior adviser to Sen. Joe Biden’s presidential campaign. Everyone seems to agree that he is brilliant, politically nimble (or some might say shifty), and a consummate bureaucratic infighter. He is known for his boundless self-confidence and his vindictive retribution against those who oppose or expose him. He is well-connected, particularly to powerful Wall St. elites, and has numerous proteges who are or have been in powerful positions in government and the financial industry.

Summers recently announced that he would not take a job in a Biden administration. This was likely due to the strong resistance to him from progressives, which may have led Biden to decide that Summers should not be part of his administration. Nonetheless, Summers is still likely to be, either directly or through this proteges, an informal and potentially influential adviser to Biden. Summers is also known to covet the job as Chair of the Federal Reserve, a position he previously tried to get. Because it is technically not in the Biden administration but is a presidential appointment at the independent Federal Reserve, this position may not be ruled out by his statement. So, Summers, his influence and his potential to play a major role in a government entity, cannot be ignored. [1]

As background, his resume includes:

  • Harvard economics professor (1983-1991)
  • Chief Economist and Vice President of Development Economics at the World Bank (1991-1993)
  • S. Treasury Department (1993 – 2001 under President Clinton) as Undersecretary for international affairs (1993-1995), Deputy Secretary (1995-1999), and Treasury Secretary (1999-2001)
  • President of Harvard University (2001-2006); faculty member (2006-2008)
  • Simultaneously, Managing Director, D.E. Shaw (private equity firm) and highly paid speaker, typically for Wall St. firms (2006-2008)
  • Director, National Economic Council (2009-2010 under President Obama)
  • Harvard faculty member (2011 – current)
  • Simultaneously, Managing Director, D.E. Shaw (private equity firm) (2011 – current)

In his time at the U.S. Treasury, Summers pressured the former Soviet Union and Third World countries to rapidly adopt free market economies and privatize public assets. These efforts repeatedly proved to be disastrous. Financial crises in Russia, Mexico, and East Asia were the result. Typically, inflation soared, workers’ wages fell, government services were cut, oligarchs became rich and powerful, and in Russia, Putin took dictatorial power after the supposed transition to democracy was a total disaster and democratic governance was completely discredited. [2]

As Summers was driving U.S. Russia policy, his close friend and Harvard colleague, Andrei Shleifer, got a government contract and engaged in insider trading based on it. Shleifer headed up a Harvard-based project in Moscow that was the lead contractor for USAID in helping with Russia’s economic transition. According to federal prosecutors, Shleifer and his wife were making investments based on insider information they got through the USAID project. The case was finally settled in 2004, when Summers was president of Harvard, and Harvard paid a $26.5 million settlement and Shleifer paid $2 million but retained his tenured professorship at Harvard. This was one of the issues that led to Summers departure as Harvard’s president.

Summers also promoted trade agreements that benefited Wall St. financial businesses and large, multi-national corporations, at the expense of American workers. For example, he advocated for admitting China to the World Trade Organization and promoted the North American Free Trade Agreement (NAFTA). He also opposed reviving enforcement of antitrust laws, despite the clear growth in size and market power of huge corporations, and ignored the need to address climate change.

Summers aggressively opposed regulation of derivatives (financial instruments / investments based on or derived from other financial instruments such as mortgage-backed securities, options to buy or sell securities, credit default swaps, etc.). Through his efforts and those of his cronies regulation of derivatives by the federal government was banned by the Commodity Futures Modernization Act of 2000. It also banned states from regulating them.

Predatory lending practices (where borrowers had a high risk of default) proliferated under Summers’ deregulation of financial markets. “The interaction of predatory subprime lending with unregulated and opaque derivatives such as credit default swaps was the single most important cause of the 2008 financial collapse.” (page 23) [3]

Summers returned to Harvard as President in 2001 after George W. Bush won the 2000 presidential election. My next post will present a summary of his performance at Harvard and his return to government under President Obama.

[1]      Kuttner, R., 8/7/20, “Did Summers jump, or was he pushed?” The American Prospect (https://prospect.org/blogs/tap/did-larry-summers-jump-or-was-he-pushed/)

[2]      Kuttner, R., 7/13/20, “Falling upward: The surprising survival of Larry Summers,” The American Prospect (https://prospect.org/economy/falling-upward-larry-summers/)

[3]      Kuttner, R., 7/13/20, see above

WE CAN’T AFFORD OUR RIGGED TAX SYSTEM

Our unfair tax system is one piece of our rigged economic system. To put our tax system in some perspective, the Internal Revenue Service (IRS) collects nearly 95% of all the federal government’s revenue; it collected $3.5 trillion in taxes in 2018.

My previous post on how our overall economic system is rigged, noted that the CARES Act, the $2.2 trillion coronavirus pandemic response, tilted our tax system further in favor of the wealthy by providing $135 billion in tax cuts for the richest 1% of Americans. This is money that could have been used to provide aid to workers who lost their jobs or to buy personal protective equipment for front-line workers or other needs related to the effects of the pandemic. Ironically, Republicans are now complaining about the cost of the pandemic relief efforts!

Another example of the rigging of our tax system in favor of wealthy individuals and corporations is the substantial tax cuts for corporations and wealthy individuals that were at the center of the 2017 Tax Cuts and Jobs Act (TCJA). The Act failed to deliver any significant benefits to workers and the middle class, despite politicians’ promises. (See this post for more detail.)

However, the tax cuts of the TCJA weren’t enough for the big multi-national corporations, so they lobbied, quite successfully, to rig the tax system even further to their benefit by getting additional tax reductions in the rules and regulations that were written to implement the TCJA. (See this post for more detail.)

A year after the TCJA passed, a study of the largest corporations in the U.S. found that of 379 large, profitable corporations:

  • 91 (almost a quarter of them) paid no federal income tax including Amazon, Chevron, Halliburton, and IBM.
  • Another 56 of them (15%) paid less than 5% of profits in taxes.
  • The average effective federal income tax rate for these 379 large, profitable corporations was 11.3%, barely half of the reduced tax rate of 21% in the TCJA (down from 35%), and the lowest rate in the history of this analysis, which was first done in 1984. [1]

So, not only are wealthy individuals and corporations successful in getting politicians to cut the taxes they owe, but many of them then do everything they can to avoid paying even the reduced (I’m tempted to say, minimal) taxes they owe under our rigged tax system.

Some of them simply don’t pay the taxes they owe. According to a recent report from the Congressional Budget Office (CBO) [2] unpaid taxes averaged $381 billion per year (roughly 14% of federal taxes owed) from 2011 to 2013. The richest 1% of taxpayers are responsible for 70% ($267 billion) of this total. [3]

The amount of unpaid taxes is growing because the IRS’s budget has been cut by 20% since 2010 (after adjusting for inflation), reducing its capacity to crack down on tax avoidance. Audits of the tax returns of the highest income taxpayers have declined by 63% from 2010 to 2018 and now occur at the same rate as for the poorest taxpayers. This has happened because the IRS no longer has the capacity to engage in audits of the complex tax returns of the rich. The number of IRS personnel who handle these complex cases fell by about 40% between 2010 and 2018. [4] Enforcement action against high-income individuals who do not file a tax return has been reduced to simply mailing a notice to them.

The CBO report estimated that for every dollar added to the IRS budget for tax law enforcement, about three dollars in unpaid taxes would be collected. In addition to reduced auditing of wealthy individuals, the frequency of audits of the largest corporations (those with over $20 billion in assets) also dropped from 2010 to 2018; it dropped by roughly 50%.

In his reaction to the CBO report, Senator Sanders stated that “the primary beneficiaries of IRS funding cuts are wealthy tax cheats and large corporations.” [5] In response to an earlier study of audit rates, Senator Wyden stated that “We have two tax systems in this country, and nothing illustrates that better than the IRS ignoring wealthy tax cheats while penalizing low-income workers over small mistakes.” [6]

Our tax system is rigged from top to bottom – from reduced tax rates for wealthy individuals and corporations, to tax loopholes and subsidies for them, to tax dodging by them, to weak enforcement of tax laws to stop their tax avoidance. Hundreds of billions of dollars (actually probably well over a trillion dollars) of tax revenue from wealthy individuals and businesses are lost every year because of unfairly low tax rates, special interest tax breaks, and tax dodging.

When politicians say we can’t afford to support education or unemployment benefits or food assistance or whatever, don’t believe them. What we can’t afford is rich individuals and corporations who don’t pay their fair share in taxes due to our rigged tax system.

[1]      Gardner, M., Roque, L., & Wamhoff, S., Dec. 2019, “Corporate tax avoidance in the first year under the Trump tax law,” Institute on Taxation & Economic Policy (https://itep.org/corporate-tax-avoidance-in-the-first-year-of-the-trump-tax-law/)

[2]      Congressional Budget Office, July 2020, “Trends in the Internal Revenue Service’s funding and enforcement,” (https://www.cbo.gov/system/files/2020-07/56422-CBO-IRS-enforcement.pdf)

[3]      Johnson, J., 7/9/20, “‘An absolute outrage’: Sanders rips ‘wealthy tax cheats’ as CBO estimates $381 billion in annual unpaid taxes,” Common Dreams (https://www.commondreams.org/news/2020/07/09/absolute-outrage-sanders-rips-wealthy-tax-cheats-cbo-estimates-381-billion-annual)

[4]      Congressional Budget Office, July 2020, see above

[5]      Johnson, J., 7/9/20, see above

[6]      Kiel, P., 5/30/19, “It’s getting worse: The IRS now audits poor Americans at about the same rate as the top 1%,” ProPublica (https://www.propublica.org/article/irs-now-audits-poor-americans-at-about-the-same-rate-as-the-top-1-percent)

RACISM IN HOUSING HAS BEEN EXPLICIT GOVERNMENT POLICY

The murder of George Floyd, a black man, by a white police officer kneeling on his neck for nine minutes (while three other officers facilitated the killing) has brought the racism of U.S. society to the forefront. The attention to racism has gone beyond this specific episode and has included the underlying, long-term racism of policies, practices, and funding of federal, state, and local governments. (See my previous post for more background.)

Throughout U.S. society, a powerful element of racism is discrimination in housing and the segregation that it has produced. The conventional wisdom in the U.S., including in legal circles and the courts, is that racial housing segregation is de facto, i.e., the result of private practices and personal preferences and not the result of government policies and laws. This belief has led courts to declare that governments have no responsibility to address segregation and its negative effects, other than perhaps in our public schools.

The truth is that housing segregation is clearly the result of government policies and practices throughout the last 140 years, including ones that persist to this day. The legal term for effects that are direct or intentional results of actions is de jure. Therefore, racial housing desegregation in the U.S. is de jure. If legally acknowledged as such, it is a violation of our Constitution, specifically the Fifth, Thirteenth, and Fifteenth Amendments, and of the Bill of Rights. Acknowledgement of this would mean that our governments have an obligation to respond to housing segregation and the harm that it has caused. The definitive case for this is made by Richard Rothstein in his book The Color of Law: A forgotten history of how our government segregated America. [1]

The Color of Law describes in detail the government policies and practices at the local, state, and federal levels that promoted and enforced racial segregation in housing, and even forced the segregation of communities that had been integrated. Some of this dates from the late 1800s and some still exists today. Furthermore, many discriminatory private policies and practices have been supported by the action (or inaction) of government entities, such as the police, the courts, and various government agencies and regulators.

I apologize for the length of this post, but I felt it was important to give a good sense of the breadth and depth of the government policies and practices behind the racism in housing. Skim by reading the bolded portions if your time is limited. Policies and practices that contributed to housing segregation include:

  • In the late 1800s, Jim Crow laws and explicit, enforced segregation became the way of life in the South after the 1878 removal of federal troops that had been protecting blacks and implementing Reconstruction. The discrimination and segregation of the South proceeded to spread throughout the country. For example, in the early 1900s, blacks were systematically expelled from Montana, where they had previously thrived. In 1890, there were blacks in all 56 counties in Montana. By 1930, there were none in eleven counties and few left in the others. In the state capital of Helena, there were 420 blacks in 1910, but only 131 in 1930 and 45 in 1970.
  • Beginning in 1910 and continuing to today, zoning restrictions have been widely and intentionally used to segregate housing, sometimes explicitly and sometimes by banning multiple family housing or requiring large lot sizes (which make property very expensive). These latter types of zoning laws exist quite widely today. In 1910, Baltimore was the first city to adopt an explicitly segregationist zoning law. It prohibited blacks from buying homes on blocks where whites were the majority and vice versa. Implementing the zoning ordinance proved difficult because many areas of the city were quite integrated at the time. West Palm Beach adopted a racial zoning ordinance in 1929 and maintained it until 1960. Kansas City and Norfolk, VA, maintained racist zoning practices until at least 1987. Racist zoning ordinances effectively prevented blacks from moving to the suburbs and, in many cases, effectively prevented them from buying homes, forcing them to rent their homes.
  • In the 1920s, restrictions written into in home ownership deeds prohibiting the selling of a home to a black person spread throughout the country and in some cases persisted into the 1970s. Governments at the local, state, and federal levels promoted and enforced these restrictive covenants. State courts upheld them. In 1948, the U.S. Supreme Court ruled that these covenants were private agreements and therefore not unconstitutional. However, it ruled that they represented discrimination that was illegal for the government to be a party to. Therefore, the power and resources of the government, including law enforcement and the courts, should not be used to enforce them. Shockingly, the FHA and other federal agencies, in complicity with state and local governments, effectively ignored this Supreme Court ruling for at least another decade. It wasn’t until 1972 that a federal court ruled that these covenants were illegal as a violation of the Fair Housing Act of 1968.
  • In the 1930s, the Federal Housing Authority (FHA) was created to promote home ownership, including by insuring home mortgage loans. Mortgage loans were newly available to middle class borrowers and insurance against default by the borrower made banks much more willing to make these loans. This insurance was, for all practical purposes, required by banks for mortgage loans. However, the FHA generally refused to insure mortgage loans for blacks, and definitely would not do so if the home being purchased was in a white neighborhood. Furthermore, the FHA would not insure a mortgage for a white person if the home was in a neighborhood where blacks were present. The FHA explicitly stated in its Underwriting Manual that segregated neighborhoods were preferable because segregated schools made neighborhoods more stable and desirable. (See pages 65 – 66 in The Color of Law.)
  • Up until 1962, the FHA also supported financing for developers building whites-only subdivisions in suburbia. It wasn’t until 1962, when President Kennedy issued an executive order banning the use of federal funds to support racial discrimination in housing, that the FHA stopped supporting subdivisions by developers who refused to sell homes to blacks.
  • As mortgage loans proliferated in the 1930s, federal bank regulators allowed banks to deny mortgages to blacks, as well as to whites buying in an integrated neighborhood. State regulated insurance companies that issued mortgages had similar policies. Federal bank regulators also allowed banks to “redline” areas and refuse to make mortgage loans for the purchase of any home within those areas, which were typically neighborhoods where blacks lived. This practice continued at least into the 1980s.
  • Starting in the 1940s, public housing was built. Initially, it was primarily for working- and lower-middle-class white families and was not heavily subsidized. In the late 1940s, as whites increasingly purchased homes in the suburbs and public housing became more available to blacks, most public housing was explicitly segregated until the 1970s and developments for whites were typically better built and built in nicer areas. By the 1960s, urban public housing had mostly poor, black residents and, by government policy, was built almost exclusively in black neighborhoods.
  • In the late 1940s, black World War II veterans were denied the government-guaranteed mortgages for purchasing homes that white veterans used in great numbers to buy suburban homes.
  • Beginning in the late 1940s, violence against blacks trying to move into white neighborhoods was not uncommon. However, law enforcement at the local, state, and federal levels rarely responded to these incidents until the 1980s. The proportion of these incidents where charges were filed against perpetrators grew from only 25% in 1985-6 to 75% in 1990, when roughly 100 such incidents occurred.
  • Numerous studies in the 1960s and 1970s found that blacks paid higher effective property tax rates on their homes than whites. This was typically accomplished by assessing black-owned properties at a high value compared to market value, while white-owned properties were assessed at a low comparative value. A 1973 study of ten cities by the U.S. Department of Housing and Urban Development found systematic under-assessment in white middle-class neighborhoods and over-assessment in black neighborhoods. In Baltimore, it found an effective property tax rate 9 times higher for blacks than for whites; in Philadelphia it was 6 times higher and in Chicago it was twice as high. A 1979 analysis of Chicago property taxes found the effective rate for blacks to be 6 times that for whites.
  • In the early 2000s, federal bank regulators failed to stop banks from providing subprime mortgages disproportionately to black customers – at two to three times the rate of white customers. Subprime mortgages were mortgage loans with onerous provisions or deceptive presentation that made it likely that the borrower would be unable to meet the terms the loan. Defaults on these subprime mortgages were a key factor in the 2008 financial collapse and the resultant foreclosures represented a huge loss of wealth for blacks in the U.S. Moreover, many of the blacks who received these predatory, subprime mortgages qualified for regular mortgages but were steered to these subprime mortgages typically because the mortgage broker made more money on them.

These policies, and others, both reinforced racially segregated housing where it existed and imposed segregation in places where it hadn’t previously existed. “In 1973, the U.S. Civil Rights Commission concluded that the ‘housing industry, aided and abetted by the Government, must bear the primary responsibility for the legacy of segregated housing. … Government and private industry came together to create a system of residential segregation.’” (page 75)

My next post will summarize effects on black people of housing and other discrimination that are evident today. I’ll also ask you to share your thoughts on how we should address racism in the U.S.

[1]      Rothstein, R., 2017, The Color of Law: A forgotten history of how our government segregated America, W. W. Norton & Co., Inc., NY, NY.

RACISM IS AND HAS BEEN EXPLICIT GOVERNMENT POLICY

The murder of George Floyd, a black man, by a white police officer kneeling on his neck for nine minutes (while three other officers aided and abetted the act) has brought the racism of U.S. society to the forefront. The discussion it has spurred is going beyond this specific episode and has embraced the broader themes of racism in police personnel, training, and practices. In addition, the overall racism of U.S. society is being confronted, including the underlying, long-term racism of policies, funding, and practices of federal, state, and local governments.

For several years, the U.S. has been experiencing a simmering discussion about the racist practices and results of our criminal justice system. They typically start with police, or sometimes school disciplinary practices, and extend through prosecutors, courts, and prisons. (I’ve posted about the need for criminal justice reform, in large part because of embedded racism, here and here.)

Some of the racism in criminal justice is the result of public policies – laws defining crimes and penalties for them. Drug laws with much stiffer penalties for crack cocaine (typically used by blacks) than powdered cocaine (typically used by whites) are one clear example. Mandatory sentencing laws and three strikes laws are others. The racism of laws is exacerbated by their implementation, i.e., the practices of police, prosecutors, and courts. For example, blacks have been much more likely to be arrested and prosecuted for marijuana possession than whites, although good research has found no significant difference in use of marijuana (or other illegal drugs) between blacks and whites. Criminal justice system outcomes are different by race in part because whites can afford and have access to better legal representation.

I’ve previously posted on other topics related to racism that are embedded in laws, policies, and practices of governments at all levels, including:

  • The need for a political revolution to restore democracy and overcome economic inequality and other effects of hardcore capitalism as described in Ben Fountain’s book, Beautiful Country Burn Again: Democracy, rebellion, and revolution. [1] The book is based on his reporting on the 2016 presidential campaign. It now looks prescient in its analysis and title. Although this argument didn’t focus on racism, race was certainly an underlying theme. (link)
  • The racism of the Supreme Court in overturning the Voting Rights Act in 2013 (as analyzed in Fountain’s book). (link)
  • The largely racially motivated voter suppression and gerrymandering that has exploded since the Supreme Court decision overturning the Voting Rights Act in 2013.
  • The disparate impact of the coronavirus pandemic on people of color. (here and here)

Underlying all of this, and a powerful element of racism throughout U.S. society, is racism in housing and the segregation that it has produced. Housing segregation has been widely acknowledged for decades as the driver of racially unequal access to education in K-12 schools, which are largely funded by local property taxes. It is also a major driver of economic inequality, the unequal impact of the coronavirus, and many disparities in health and mental health conditions and in access to health care services. Housing segregation is, of course, also linked to the racial biases in law enforcement.

The conventional wisdom in the U.S., including in legal circles and the courts, is that housing segregation is de facto, i.e., the result of private practices and personal preferences, but not the result of government policies and laws. This belief has led courts to declare that because racial housing segregation is de facto, governments have no responsibility to address it and its negative effects, other than perhaps in our public K-12 schools.

The truth is that housing segregation is clearly the result of government actions of the whole 20th century, including policies and practices that persist to this day. The legal term for effects that are intentional results of explicit policies and laws is de jure. Therefore, racial housing desegregation in the U.S. is de jure segregation. If housing segregation is legally acknowledged to be de jure, it is a violation of our Constitution, specifically the Fifth, Thirteenth, and Fifteenth Amendments, and of the Bill of Rights. This acknowledgement would mean that our governments have an obligation to respond to the harms caused by housing segregation. The definitive case for this is made by Richard Rothstein in his book The Color of Law: A forgotten history of how our government segregated America. [2] I will summarize the book in my next post.

An important but less direct way that housing segregation has been created and maintained is by keeping the incomes and wealth of black households low so that they cannot afford to buy homes in white areas. Long after the end of the sharecropping system, which was indentured servitude that was barely distinguishable from slavery, many public policies have kept blacks poor.

In the 1930s, President Franklin Roosevelt needed the votes of southern Democrats to pass New Deal legislation. To get their votes, the Fair Labor Standards Act (FLSA) of 1938 and other legislation that benefited workers excluded industries in which blacks were the predominant workers, such as agriculture and domestic services. Therefore, these occupations and many blacks didn’t receive the benefits of the minimum wage, participation in labor unions, or coverage from Social Security. Furthermore, many of the New Deal’s employment programs rarely employed blacks or restricted them to lower paying jobs. The minimum wage and some, but not all, of the other protections and benefits of the FLSA were finally given to most farm and domestic workers in the 1960s and 1970s.

From the 1930s to the 1960s, blacks who worked in unionized jobs were often in segregated unions, which typically had lower pay and represented less skilled jobs. Federal agencies continued to recognize segregated unions until President Kennedy ended the practice in 1962. In 1964, the National Labor Relations Board finally refused to certify whites-only unions and it was another decade before blacks were admitted to construction trade unions. Even then, their lack of seniority in the union meant that it would be many years before their incomes were comparable to white union members’ earnings.

Although many of the racist policies and practices that were once allowed and facilitated by governments are no longer in place, their effects have never been remedied and their discriminatory results endure. Economic inequality is one of their enduring legacies. In 2017, the median income for white households was about $60,000, while it was roughly $37,000 for black households – only 60% as much. Median white household wealth (assets minus liabilities) was about $134,000 versus $11,000 for black households – only 8% as much. Given that equity in a home is the primary source of wealth for middle-class households in the U.S., housing discrimination and segregation have been big contributors to racial economic inequality.

It is long past time to address the racial discrimination that has persisted in the U.S. over the last 140 years since Reconstruction of the South was abandoned and indeed over the last 400 years since black slaves were first brought to America. We need to reform our police and criminal justice system, our housing policies and practices, and so much more.

We need to have a serious discussion about reparations – remedies for the enduring harm that past and current policies and practices have caused to blacks in the U.S. I encourage each and every one of us to think long and hard about how we can contribute to the effort to end racism in our society and to erase its enduring scars.

[1]      Fountain, B., 2018, Beautiful Country Burn Again: Democracy, rebellion, and revolution, HarperCollins Publishers, NY, NY.

[2]      Rothstein, R., 2017, The Color of Law: A forgotten history of how our government segregated America, W. W. Norton & Co., Inc., NY, NY.

CORONA VIRUS PANDEMIC HIGHLIGHTS WEAKNESS OF PUBLIC INFRASTRUCTURE

The corona virus pandemic has highlighted critical issues in the U.S. economy and society that have led to unnecessary hardship, suffering, and deaths. These include the neglect of public infrastructure that led to the inability of governments to respond effectively to a pandemic.

Although the Trump administration’s disorganized and incompetent response to the pandemic (aided and abetted by some in Congress) bears significant responsibility for the high death rate in the U.S. (as documented in this previous post), the long-term neglect of public agencies and capacities shares some of the blame.  [1]

For forty years the U.S. has been neglecting, weakening, and, in some cases, literally dismantling public infrastructure, including government agencies, programs, and capabilities. Much of this has been done because of tax cuts and reductions in government revenue. (By the way, these have disproportionately benefited wealthy individuals and corporations.) When a politician tells you he can cut taxes without harming the services government provides, remind him that there’s no such thing as a free lunch; this pandemic has painfully shown this to be true.

At both the federal and state levels, bipartisan neglect of investments in government infrastructure, typically with Republicans leading the way but with many Democrats jumping on board, is now painfully obvious. Often the people who use the government’s safety net infrastructure are our poor and vulnerable residents who have the least political influence. Now, middle-class Americans are discovering the shortcomings and challenges of these programs, which include unemployment insurance. One particular area of weakness is information technology, where investments in updating and enhancing computer systems has been sorely lacking. It’s important to note that other wealthy countries are not experiencing the same breakdowns of government systems. [2]

A successful response to a disease threat requires not only treatment capacity (personnel and equipment), but the ability to identify individuals who have contracted it, track them and their contacts, and quarantine those individuals to contain, slow, and eventually stop the spread of the disease.

The U.S., theoretically, learned all of this from the 2014 Ebola outbreak. However, the Trump administration ignored the response plan prepared by the Obama administration. It disbanded or weakened the agencies needed to respond. So, in the face of the current pandemic, these lessons learned were ignored. (See more here.) The lack of investment in pandemic preparedness has left the U.S. with an insufficient supply of ventilators, protective masks, and other medical supplies. It also lacks a plan to obtain these supplies, a trigger to initiate a pandemic response, and the capacity to implement testing, tracking, and containment of a deadly disease.

The threat of a deadly virus shouldn’t have come as any surprise. Bill Gates (the Microsoft billionaire) did a TED Talk in 2015 entitled, “The next outbreak? We’re not ready,” in which he states that the biggest threat of mass deaths is not war or terrorism – it’s a virus. Gates states that the U.S. needs to treat pandemic preparedness the same way we treat military readiness: we need to have people, equipment, and plans in place and ready to go at a moment’s notice.

Other warnings were ignored as well. In the fall of 2019, a government exercise revealed that the U.S. was woefully unprepared for a pandemic. In January 2020, U.S. intelligence agencies’ warnings that a pandemic was on its way went unheeded. Also in January, a medical mask manufacturer in Texas contacted senior federal government officials and offered to increase production of masks but was ignored. [3] The country – and the world – later scrambled to address serious shortages of these masks.

In addition to providing a direct response to the disease, public infrastructure is critical to supporting society and the economy in the wake of a pandemic. An essential response to the economic shutdown is to provide unemployment benefits. However, the state unemployment systems that deliver these benefits are a case study example of public sector systems and agencies that have been under-invested in and allowed to decay. State unemployment agencies have been completely overwhelmed and unable to deliver benefits, despite the availability of funding for emergency benefits. Applicants in states across the country report an inability to get a response from their state unemployment agencies. [4] An important factor has been old computer systems that are unable to support the workload and respond to changed eligibility requirements and benefits.

Similarly, the Small Business Administration has been overwhelmed by requests for emergency relief. Its staff and technology have been unable to process applications, let alone get money out the door. The Internal Revenue Service is struggling to get stimulus checks to people due to years of cuts that have resulted in reduced staffing and antiquated computer systems. It has had problems identifying recipients and delivering checks accurately. The people most in need are likely to be the last ones to actually get checks.

The neglect of public investment has left our economy less resilient and our public and private, physical and social infrastructure less able to respond to a crisis, such as this corona virus pandemic. Basic democratic institutions and capabilities, such as holding safe and fair elections and delivering the mail, have been undermined.

In the response to this pandemic, as with the 2008 financial industry implosion, the government has stepped in to bail out corporations (and their wealthy executives and investors) first and foremost, providing them the protections of socialism for their losses in bad times, after having let them take the out-sized profits of capitalism in the good times.

However, despite the public bailout of the private sector, the private sector has let workers go by the millions, leaving them to depend on the public sector for a safety net of unemployment benefits, food and housing subsidies, public health insurance, and other essentials. The pandemic has shown that a capitalistic economy and society built on catering to the rich and their large corporations (a plutocracy), promising (falsely) that some of the riches will trickle down to the masses, is literally willing to sacrifice the lives of its elders and others vulnerable to disease for the sake of the wealth of its plutocrats. [5]

I hope we will learn some lessons from and implement long-term fixes for the critical issues in the U.S. economy and society laid bare by the pandemic. These lessons include the need to invest in public infrastructure (such as pandemic preparedness), address inequality and racism in our economy and society, and provide an effective safety net.

In my next post I’ll explore how the pandemic is exposing the underlying racism in U.S. society and the devastating effects it’s having on Blacks, Latinos, Native Americans, and immigrants.

[1]      Hanauer, N., 4/14/20, “Our uniquely American virus,” The American Prospect (https://prospect.org/coronavirus/our-uniquely-american-virus/)

[2]      Cohen, M. A., 4/12/20, “Decades of neglect in basic services now exposed,” The Boston Globe

[3]      Davis, A. C., 5/10/20, “HHS turned down offer to manufacture N95 masks,” The Boston Globe

[4]      Cohen, M. A., 4/12/20, see above

[5]      Hanauer, N., 4/14/20, see above

CORONA VIRUS PANDEMIC HIGHLIGHTS ILLS OF U.S. ECONOMY AND SOCIETY

The corona virus pandemic has highlighted critical issues in the U.S. economy and society that have led to unnecessary hardship, suffering, and deaths. These include the economic inequality, insecurity, and instability of plutocratic economics, where the playing field is tilted in favor of wealthy corporations and individuals and workers struggle to survive, in some cases literally, with this pandemic.

The neglect of public infrastructure is another such issue highlighted by the pandemic, including the inability of the government to respond effectively to the crisis and the weakened safety net that is now literally leaving people at risk of dying. The pervasive racism of U.S. society has been highlighted by the disproportional rate at which Blacks, Latinos, and Native Americans have gotten ill with COVID-19 and have died from it.

Although the Trump administration’s disorganized and incompetent response to the pandemic (aided and abetted by some in Congress) bears significant responsibility for the high death rate in the U.S. (as documented in this previous post), the larger context is important and provides many lessons that should be learned.

The pandemic has highlighted the value of and risks to front-line workers who meet essential needs, such as providing food, transportation, and care services. They typically receive low pay and often limited benefits (such as paid sick leave and health insurance). They are disproportionately people of color. They interact with the public and therefore are disproportionately likely to be exposed to the virus. Increasing numbers of them are part-time or contract workers who have little if any job security and typically no benefits, including not being covered by unemployment insurance.

Over the last 40 years, safety, health, and economic protections for workers have been undermined. This includes the weakening of the Occupational Safety and Health Administration and more recently the Consumer Financial Protection Bureau (see previous posts on this here and here). Unions, which provide important protections to workers, and the ability to unionize have been weakened. This has resulted in stagnant wages, deteriorating working conditions, and increased economic insecurity for the middle- and lower-income households.

One result has been the highest level of economic inequality in the U.S. in one hundred years. Over 40% of households don’t have $400 for an emergency expense, let alone the savings to support months of self-quarantine. Furthermore, over 40% of full-time workers get no paid sick time. And, given the employer-based health insurance system, a worker (and often his or her family) has no health insurance once he or she loses a job – as over 20 million Americans have by early May 2020. [1] (By the way, the Trump administration has refused to allow these workers to enroll in health insurance through the Affordable Care Act’s insurance marketplaces.)

Plutocratic economics’ beliefs that the private sector is the best solution for all of society’s needs and that bigger businesses are better have led to policies that have benefited the private sector and corporate shareholders and executives over everyone else and over the greater public good. Examples include corporate-friendly trade treaties, the failure to enforce antitrust laws, and the relaxation of corporate regulation, or perhaps more accurately, the skewing of it to benefit large, often multi-national corporations.

Plutocratic economics have resulted in near-monopolistic corporations in everything from the food industry to medical equipment suppliers and medicine manufacturers. The pandemic has highlighted the lack of capacity in the U.S. to produce important goods, including reliance on China for medical supplies needed to respond to a pandemic, such as medical masks and ventilators. It has also highlighted dependence on a few huge corporations and their plants for key food items, such as meat.

In the health care industry, forty years of deregulation, lack of antitrust enforcement, and increasing numbers of for-profit entities have led to, among other things, mergers and closures of hospitals in search of greater profits. This has left the U.S. with some of the lowest numbers of both doctors and hospital beds per capita among countries with advanced economies. This is particularly surprising given that the U.S. spends almost twice as much per capita on health care as other wealthy nations. (The U.S. also has notably worse health outcomes than these other countries, even in good times.) Many localities now have a single provider of hospital services and many rural communities have no local hospital services. (See this previous post for more detail.)

Another example of the failure of this privatized, for-profit health care industry, is that the federal government’s plan to produce thousands of ventilators for pandemic preparedness collapsed in 2012 when the government’s contracted supplier was purchased by a large manufacturer that shut the supplier because it didn’t produce sufficient profit.

Another industry where the vulnerability of our dependence on large, dominant corporations has been exposed is meat processing. The presence of a few dominant meat processors and weak regulation has created the conditions for the inability to supply meat that we are now experiencing. The spread of COVID-19 in the huge processing plants is forcing them to shut down. Fourteen major slaughterhouses, each of which may process 10,000 animals a day, have had to close at least temporarily. The huge Smithfield Foods pork processing plant in South Dakota, which had to close, produces about 4% of the country’s supply of pork. [2]

In pork processing, after decades of mergers that receive little or no antitrust scrutiny, the four largest corporations control at least 70% of the market. This is bad for producers and consumers. Pig farmers often face a single local purchaser for their pigs, leaving them vulnerable to monopolistic business practices. Furthermore, U.S. Department of Agriculture (USDA) regulation favors large slaughterhouses over small ones. The USDA inspection regime for large slaughterhouses has been relaxed to the point that most health and safety inspections are self-performed. The regulation of speed on production lines has been rescinded and workers now report they must move so fast that they can’t stop to cover their faces if they cough or sneeze. In addition, it means they are working shoulder to shoulder, conditions that make it impossible to stop the transmission of disease, such as COVID-19. In the beef market similar concentration has occurred. As a result, the large slaughterhouses are now making a profit of about $550 per cow, while the ranchers make only about $25.

My next posts will discuss the neglect of public infrastructure and the pervasive racism in the U.S. and how they have been exposed by this pandemic.

[1]      Hanauer, N., 4/14/20, “Our uniquely American virus,” The American Prospect (https://prospect.org/coronavirus/our-uniquely-american-virus/)

[2]      Knox, R., 5/4/20, “Monopolies in meat: Endangering workers, farmers, and consumers,” The American Prospect (https://prospect.org/economy/meat-monopolies-endanger-workers-farmers-consumers/)

THE CONSUMER FINANCIAL PROTECTION BUREAU IS NEEDED TO PROTECT US FROM PREDATORY LENDING

The 2008 financial crash was triggered by predatory mortgage loans. As a result, the Consumer Financial Protection Bureau (CFPB) was created to protect consumers from dangerous financial products. There’s a Consumer Product Safety Commission to protect us from dangerous physical products, but prior to the creation of the CFPB, there wasn’t an agency dedicated to protecting consumers from dangerous financial products, such as predatory mortgages and other predatory loans.

Predatory loans are loans where the lender isn’t concerned about the borrower’s ability to repay the loan. In many cases, the lender is just as happy – and may benefit financially – if the borrower defaults on the loan. Predatory lenders usually target people who are desperate for cash or dying to purchase a home, a car, or a consumer product they can’t afford. The loans typically charge very high interest rates, as well as high fees for obtaining the loan and big penalties for failing to meet the terms of the loan, such as being late on a loan payment.

Unethical, deceptive, and/or blatantly fraudulent practices are almost inevitably part of predatory lending. These practices include lying to consumers about the interest rate, fees and other charges, or future payments. Borrowers are often convinced to accept unfair terms through deceptive, coercive, or unscrupulous statements and actions. A predatory lender may add costs for insurance or other services that the borrower doesn’t need or benefit from by presenting them deceptively or as a requirement for the loan.

Predatory lenders routinely target the poor, minorities, the elderly, people with low levels of education, those who don’t understand English well, and people who don’t understand loans or finances well.

Predatory lending is what free market capitalism looks like without regulation. It occurs across the financial industry when good regulation and enforcement aren’t in place, from student loans to car loans and from mortgage loans to payday loans.

Predatory lending is the bread and butter of much of the financial industry as it is a source of big profits. Therefore, the financial industry has fought hard against the CFPB and its efforts to regulate lending since the day the CFPB was conceived.

As a specific example, the predatory lending industry fought a CFPB rule known as the payday lending rule. Promulgated under the Obama administration, it required lenders to assess customers’ ability to repay their loans. This was unwelcome, to say the least, in an industry that makes huge sums of money by charging high fees when customers miss a loan payment (as the lender often expected they would) and then rolling the loan over into a new loan so they can repeat this process over and over. [1]

The predatory lending industry bought access to and influence in the Trump administration by making millions of dollars of contributions to Trump’s campaign and engaging in heavy lobbying. Trump replaced the Obama-appointed Director of the CFPB with a person who is much friendlier to the financial industry.

In addition to an industry-friendly Director, Trump further undermined the work of the CFPB by appointing Christopher Mufarrige as an “attorney-advisor” to the Director. Mufarrige had been the owner of a car dealership that used the “Buy Here Pay Here” model of selling used cars, which provides on-the-spot loans to buyers with poor credit ratings. The loans carry high interest rates and Mufarrige was quick to repossess the car if there was a default, i.e., a late payment. Then, he would sell the same car again and do the same deal all over again.

Mufarrige’s business was covered by the CFPB’s payday lending rule that required a lender to assess each borrower’s ability to repay. Mufarrige had stated that this rule was flawed and unnecessary. Nationwide, Buy Here Pay Here model car dealers were making $80 billion in loans annually and an investigation by the New Jersey Attorney General found that roughly one-quarter of their customers default on their loans.

Mufarrige and other political appointees at the CFPB used false statistics and manipulated evidence to claim there was no value to the requirement to assess a borrower’s ability to repay. This allowed the CFPB to justify proposing watered-down regulation of the payday lending industry that does not require it to assess customers’ ability to repay their loans.

Another example of the need for CFPB regulation of predatory financiers is Progressive Leasing, LLC, (a subsidiary of Aaron’s Inc.), which has as its mission “to provide convenient access to simple and affordable purchase options for credit challenged consumers.” It offers rent-to-own programs through major retailers at over 30,000 stores (including Best Buy, Lowe’s, Big Lots, and Kay Jewelers). In effect, its programs are predatory loans to consumers who can’t afford to pay for their purchases up-front.

Progressive Leasing, LLC, has just settled with the Federal Trade Commission (FTC) for the second time in three months over complaints that it uses deceptive practices. It leads customers to believe they are not being charged extra for financing their purchase. In reality, many customers end up paying more than double the sticker price of the item they purchased. In its training materials, Progressive Leasing instructs retail sales staff to say there isn’t an interest rate associated with the rent-to-own program because it is not a loan. They don’t inform customers of the fees and other charges that are part of the program. [2]

In April, Progressive Leasing paid $175 million to settle claims that it misled consumers after having paid another $175 million in February to settle claims about its disclosure practices. Despite tens of thousands of customer complaints, Progressive Leasing had continued to use the same practices. One FTC Commissioner said the most recent penalty did not go far enough, noting that customers had paid Progressive Leasing more than $1 billion in undisclosed fees and charges.

The Consumer Financial Protection Bureau is badly needed to protect consumers from the greed and unethical behavior of unrestrained lenders. Capitalism without regulation will prey on all of us when we are most in need of financial assistance. The financial industry has shown time and again that without good regulation and enforcement it will ruin people’s lives and our nation’s economy.

I urge you to contact your U.S. Representative and your Senators and ask them to support and protect the integrity of the Consumer Financial Protection Bureau. Encourage them to advocate for strong regulation and enforcement of responsible behavior in the financial industry.

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

[1]      Dayen, D., 5/4/20, “CFPB appointee who helped water down payday lending rule operated a high-cost auto lender,” The American Prospect (https://prospect.org/power/cfpb-appointee-helped-water-down-payday-lending-rule/)

[2]      Bhattarai, A., 4/21/20, “Leasing company agrees to pay $175m,” The Boston Globe from the Washington Post

THE PROOF IN THE PUDDING OF TRUMP’S CORONA VIRUS RESPONSE

Although President Trump and his administration have not been wrong about everything they have said and done, they’ve been wrong about most things. The ultimate proof is in the results. Although final results aren’t in yet, of course, the results as-of late April are pretty damning: [1]

  • 4% of the world’s population is in the U.S. (330 million)
  • 33% of the world’s COVID-19 cases are in the U.S. (929,000)
  • 25% of the world’s COVID-19 fatalities are in the U.S. (52,500)
  • The U.S. death rate is 50 times that of Australia and New Zealand (see details below)

I could stop right here, but as long as I’ve started, here are some facts to back up the laying of the blame for these statistics at the feet of Trump and his administration.

In 2018, the Trump administration dissolved the office of pandemic preparedness in the National Security Council and cut funding for the Centers for Disease Control and Prevention (CDC). Those groups would have been the leaders in responding to the pandemic, using a plan (that the Trump administration ignored) prepared after the Ebola crisis in 2014. Trump had been briefed by outgoing Obama administration officials about the plan and its importance, but obviously ignored the briefing and the plan. [2]

If the pandemic response plan had been followed, the federal government would have started getting equipment to doctors in late January or February (rather than late March and April), given that by mid-January intelligence reports were warning of a likely pandemic. On January 18, Health and Human Services Secretary Azar warned Trump of the threat of the corona virus outbreak in Wuhan, China, which had begun in December 2019. As U.S. diplomats were being evacuated from Wuhan, cases of the virus were confirmed in South Korea and the U.S. (on Jan. 22).

The week of January 20th, South Korea began mass production of test kits for the virus and the World Health Organization (WHO) declared a global health emergency, while Trump did nothing. When China locked down Hubei Province (where Wuhan is located), Trump banned entry of foreigners from China but did nothing else.

By February, there were fourteen COVID-19 cases in the U.S. but few test kits for it – and the initial ones from the CDC proved faulty. Trump was actively downplaying the threat, saying things like, “We pretty much shut it down.”

On Feb. 25, the CDC announced that daily life could be seriously disrupted. It noted that containment was not in place, nor was the testing needed to effectively execute it. Meanwhile, Trump called the emerging crisis a hoax by Democrats. With 100 cases in the U.S., Trump declined to declare a national emergency. Testing in South Korea was ramping up 40 times faster than in the U.S.

Trump didn’t declare a national emergency until March 13th, when there were 1,645 cases in 47 states. [3] Even then, Trump did not take the steps needed to ensure the availability of sufficient test kits and of the equipment needed by hospitals and front-line workers.

In late April, even the military – the defenders of our country – can’t get enough COVID test kits. It is testing 7,000 troops a day and hopes to be able to test 60,000 a day by June – over eight times as many as it can test now. This would allow it to test all military personnel by some time this summer in order to ensure their readiness to fight.

Trump’s daily press briefings are more misinformation than information because he doesn’t attend corona virus task force meetings and doesn’t prepare for the press briefings. The official in charge of the agency working on vaccine development has been fired, apparently for political reasons, and there’s regular speculation on whether Trump will fire the other experts in the federal government who correct his press briefing statements. Trump appears to be detached from reality, indifferent to the suffering, and focused on the well-being of his ego and on his political popularity rather than the well-being of the American public and managing a public health crisis.

In case you’ve been wondering, the course of the pandemic is different with different leadership. In Australia (AU), with a conservative Prime Minister (PM) and states with significant power as in the U.S., there are just a handful of new cases a day, down from hundreds in March, while there are 25,000 – 30,000 new cases a day (and growing) in the U.S. The situation is the same in New Zealand (NZ) with a progressive Prime Minister.

In both Australia and New Zealand, partisanship has been put aside, experts and data are driving the response, and coordination and collaboration are the operating principles. Leaders in both countries responded to their country’s first case (1/25 in AU and 2/28 in NZ) with strong action and clear warnings. In Australia, the PM labeled the outbreak a pandemic on Feb. 27, two weeks before the WHO did and two weeks before the declaration of a national emergency in the U.S. He formed a national taskforce of federal and state leaders who worked together to build hospital capacity and guide the response. In New Zealand, the PM ordered a total lockdown less than one month after the first case. [4]

The results:

  • Australia (population 25 million): first case Jan. 25
    • 6,670 cases (27 per 100,000 people), <1% daily rate of new cases
    • 78 deaths (0.3 per 100,000 people)
  • New Zealand (population 5 million): first case Feb. 28
    • 1,456 cases (29 per 100,000 people), <1% daily rate of new cases
    • 17 deaths (0.3 per 100,000 people)
  • United States (population 330 million): first case Jan. 22
    • 929,000 cases (282 per 100,000 people), 3.5% daily rate of new cases
    • 52,500 deaths (15.9 per 100,000 people)

Leadership does make a difference. The U.S. would better off if Trump would simply get out of the way and let others lead – and had done so three months ago. His “leadership” has done startling harm. Given that the death rate in the U.S. is 50 times that of Australia or New Zealand, it seems safe to say that Trump’s lack of leadership has led to tens of thousands of unnecessary deaths.

[1]      Cohen, M., 4/26/20, “Say it loud, say it clear: Donald Trump needs to resign,” The Boston Globe

[2]      Reich, R., 4/16/20, “Trump’s failed coronavirus response,” The American Prospect (https://prospect.org/coronavirus/trumps-failed-coronavirus-response/)

[3]      Trump Administration, 3/13/20, “Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak,” (https://www.whitehouse.gov/presidential-actions/proclamation-declaring-national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/)

[4]      Cave, D., 4/26/20, “Australia and New Zealand pave the way for virus eradication,” The Boston Globe from the New York Times

THE TRUMP ADMINISTRATION’S SWAMP OF CORRUPTION Part 2

President Trump campaigned on a promise to drain the Washington, D.C., swamp of special interests and insider dealing. This is one promise he clearly hasn’t kept – and probably never meant. I provided some background on this and an overview of the personal corruption of Trump and his family in my previous post.

The level of corruption – of special interests running our government for their own benefit and of outright self-enrichment by individuals in the Trump administration – is stunning. The American Prospect magazine has begun mapping the Trump Swamp of conflicts of interest and unethical behavior agency by agency. [1] They have created an interactive map of Washington where you can click on an agency’s headquarters building and get highlights of the swamp of corruption at each agency.

Here are some examples of Trump appointees who have on-going conflicts of interest, have oversight of industries they used to work in (and may well work in again), and/or have committed serious ethical violations: [2]

  • Steve Mnuchin, Secretary of the Treasury, a former Goldman Sachs (GS) partner. His specialty at GS was mortgage securities, which were at the heart of the 2008 economic collapse. He capitalized on the collapse by buying a failing bank and foreclosing on 36,000 homeowners, many of whom were elderly and who had been targeted with high-risk reverse mortgages, supposedly intended to keep them in their homes. Furthermore, he simultaneously collected federal subsidies that were meant to keep people in their homes. At the Treasury, he has weakened regulation of banks and reduced scrutiny of financial activities, which benefits his colleagues still in the financial industry (and to which he will likely return). Under Mnuchin, the Treasury has provided favorable tax rulings for wealthy individuals and businesses, again rewarding his former colleagues. It also put forth tax regulations that were almost identical to those proposed by a group of large corporations. It tweaked the rules for Opportunity Zone tax credits so they would be more available to real estate magnates including Jared Kushner (Trump’s son-in-law), Chris Christie (former Governor of New Jersey), Richard LeFrak (longtime Trump associate in NYC), Anthony Scaramucci (former White House aide), and Michael Milken (longtime Mnuchin friend and convicted junk bond dealer).
  • Elaine Chao, Secretary of the Department of Transportation (DOT), heiress to a shipping company fortune. While her DOT regulates international shipping, her family runs a huge international shipping business that has ship building done by Chinese government-linked entities, while also getting hundreds of million dollars of loans from them. Numerous actions by Chao and DOT have benefited the family business, including cutting subsidies for competing shippers, public appearances with her father, and a joint trip with him to China to meet with government officials. Until June 2019, she also owned an investment in a manufacturer of road construction materials, an industry very much affected by DOT policies. She sold this investment only when the holding was publicly reported. Kentucky (which her husband, Sen. Mitch McConnell, represents) has seen its transportation projects receive favorable treatment. Kentucky has received at least $78 million in DOT grants, including for a project rejected twice before. A former aide to Sen. McConnell, now a top aide to Chao, provides special attention for Kentucky projects.
  • Wilbur Ross, Secretary of Commerce, a former private equity manager. His firm paid a $2.3 million fine in 2016 for unethically siphoning $120 million from former associates. Companies his firm controlled found ways to escape obligations to provide workers pensions and health benefits. After he became Secretary, and with his department regulating shipping, he retained ownership in a shipping company with ties to Russian oligarchs and members of Russian President Putin’s family. As Secretary, he personally negotiated a deal to ship liquified natural gas (LNG) to China while his shipping company owned the world’s largest fleet of LNG tankers. Ross has conferred on official business with leaders of government-controlled funds in Qatar, Japan, and Singapore who had invested in his private equity firm. He had official meetings with the CEOs of Chevron and Boeing, while his wife held investments in those corporations of $400,000 and $2 million, respectively.
  • Betsy DeVos, Secretary of the Department of Education (DOE), rich, major campaign contributor with no expertise in education other than advocacy for charter schools. For numerous top jobs at DOE, she has hired former employees of private, for-profit college companies that had paid fines or signed legal settlements for deceptive advertising. The DOE has maintained the flow of federal funds (via student loans) to for-profit schools with questionable track records, while insisting that students defrauded by private colleges continue to make loan payments. The DOE also effectively stopped the public-service loan forgiveness program, requiring tens of thousands of teachers, nurses, police officers, and others to continue to pay off their student loans. She has done nothing to help ease the $1.5 trillion student debt crisis, despite promises by President Trump to do so.
  • David Bernhardt, Secretary of the Department of the Interior, former partner in a Denver law and lobbying firm that represented mining, oil, and gas companies. He disclosed 20 separate conflicts of interest, but nonetheless acted at least 25 times to benefit former clients of his law firm. His former law firm has quadrupled its revenue since he became Secretary.
  • Andrew Wheeler, head of the Environmental Protection Agency, a former lawyer and lobbyist for the coal industry.
  • Alex Azar, Secretary of Health and Human Services, a former executive of the giant drug corporation, Eli Lilly, where dramatic increases in drug prices were a common practice.

The list goes on and on and includes many staffers in these and other agencies. Overall, as-of October 2019, less than three years into Trump’s term, there are 281 former lobbyists working in the Trump administration, four times as many as the Obama administration hired in six years.

This is not how a democracy is supposed to operate, let alone our democracy, which is supposed to be the exceptional shining light on the hill. This is how a plutocracy operates – where government is of, by, and for the wealthy.

I urge you to contact your U.S. Representative and Senators to ask them to investigate the conflicts of interest, the self-enrichment, and the ethics of the many members of the Trump administration identified in The American Prospect’s expose. Please ask your Senators to refuse to confirm any Trump appointee with conflicts of interest or histories of unethical behavior. Because of current vacancies and the high level of turnover, additional appointments of senior officials will continue to come before the Senate.

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

[1]      Lardner, J., 4/9/20, “Mapping corruption: Donald Trump’s executive branch,” The American Prospect (https://prospect.org/power/mapping-corruption-donald-trump-executive-branch/)

[2]      Lardner, J., 4/9/20, see above

THE TRUMP ADMINISTRATION’S SWAMP OF CORRUPTION

President Trump campaigned on a promise to drain the Washington, D.C., swamp of special interests and insider dealing. This is one promise he clearly hasn’t kept – and probably never meant – although it was good rhetoric for the campaign because many of his potential supporters wanted to hear this. They were working and middle-class people who wanted to see the federal government turned upside down because they had lost their economic security to:

  • Trade deals that sent their jobs overseas,
  • Anti-union policies that made it impossible for them to strike or to organize, so their wages stagnated and their overall compensation (including benefits) declined,
  • Financial policies that let already wealthy executives and stockholders capture the benefits of increased productivity of workers,
  • A health care system that increased their costs while decreasing coverage,
  • A retirement system that either abandoned them or shifted investment risk onto their shoulders, and
  • A government that repeatedly bailed out the financial industry, reduced taxes on huge corporations, and allowed leveraged buyouts and bankruptcies that cut jobs and eliminated retirement benefits.

While these policies were benefiting wealthy corporations and individuals, blue collar and middle-class workers lost their jobs, had mortgages foreclosed on, and saw their credit card balances and their children’s student debt skyrocket. (See this previous post for more detail.)

The American Prospect magazine has begun mapping the Trump Swamp of conflicts of interest and unethical behavior agency by agency. [1] They have created an interactive map of Washington where you can click on an agency’s headquarters building and get highlights of the swamp of corruption at each agency.

The level of corruption – of special interests running our government for their own benefit and the outright self-enrichment by individuals in the Trump administration – is stunning. Much of this flies beneath the radar of all the bluster, lies, and shocking policy proposals the Trump administration throws out daily. It relies on misdirection delivered through words to distract attention from corrupt actions. Our mainstream media is just too focused on the theater of Trump and his minions, and too overwhelmed to report everything that’s being done. And the American public is too distracted – having had its attention diverted from the real action just as a magician does – and too overwhelmed to take it all in.

The personal self-dealing of President Trump is appalling even before one considers what’s going on in executive branch agencies. For example, foreign diplomats and domestic lobbyists are paying untold sums of money to stay in Trump hotels and at Trump resorts. This money is functionally a bribe, buying access, attention, often face-time, and sometimes outright rewards. The President has spent one out of every three days at one of his resorts, giving the resorts free advertising and revenue from the lodging and other expenses of his Secret Service detail and his retinue. The Secret Service, for example, in protecting the President as he golfs, has spent over $500,000 on golf carts alone.

Family members have benefited, too. Perhaps most notably, Ivanka Trump got rare and valuable trademarks from China the same day she dined with China’s leader. Trump’s spokesperson also touted Ivanka’s products in official TV interviews.

In another example of what’s functionally bribery, two large private prison corporations, GEO Group and CoreCivic, after hundreds of thousands of dollars of political spending, have received over $3 billion in payments for their services from Immigration and Customs Enforcement (ICE), a unit of the federal Department of Homeland Security. Together, they run 41 detention centers that house more than half of ICE detainees. They’re providing these services because the Trump administration has reversed the phaseout of the use of private prisons that was occurring under the Obama administration. The phaseout was happening because of a series of scandals at private prisons including deaths, high suicide rates, substandard medical care, and other malfeasance. (See previous posts here and here for more detail.)

This dramatic reversal of policy by the Trump administration didn’t happen by accident; it happened because of a concerted effort by the private prison corporations through campaign contributions and use of the revolving door. GEO-associated executives and entities gave at least $675,000 to Trump’s campaign and inauguration and other Republican campaigns. GEO hired two former aides to Sen. Sessions, the new Attorney General, as lobbyists. When AG Sessions formally reversed the Obama administration’s phaseout of the use of private prisons, GEO stock had already doubled in value and CoreCivic’s stock was up 140%. As a thank you, the private prison industry gave another $1 million to the Trump campaign. [2]

Payday lenders also functionally bribed the Trump administration to get a reprieve from Obama administration policies, which were working to protect borrowers from usurious fees and interest rates (sometimes over 100% a year when annualized). The payday lending industry donated over $2.2 million to Trump’s campaign and inauguration. The CEO of one large payday lending chain told his peers that the money would buy access to top administration officials and the chair of the Republican National Committee, who could get them an audience with the President.

The change in payday lending oversight policy was facilitated by Trump’s appointment of his top budget official, Mick Mulvaney, to head the Consumer Financial Protection Bureau (CFPB). The appointment process was probably illegal, but the White House Office of Legal Counsel said it was okay in a memo written by a lawyer who had been the lead attorney for a payday lender fighting CFPB regulations. The CFPB dropped that enforcement action after Mulvaney took over.

Trump’s personal corruption is mind boggling, but it is only the tip of the iceberg. The overarching economic philosophy and purpose of the Trump administration has been to handover government regulation and policy making to large corporations, while sending as much as possible of government spending and program operation to them as well in an unprecedented spurt of privatization. As a result, there are numerous issue areas where policies that are widely supported by the public and are clearly in the public interest go nowhere as the corrupt influence of wealthy corporations and individuals blocks them. Instead, policies are often enacted that benefit the self-interests of wealthy corporations and individuals.

Beyond bad policies – ones that are uninformed and dangerous to public health, safety, and well-being – the Trump administration has made no effort to stop its bureaucrats, from Cabinet members on down, from enriching themselves from their work as government employees.

I urge you to visit The American Prospect’s interactive map of Washington and to click on one or more agency’s headquarters building to review highlights of the swamp of corruption at that agency.

In my next post, I will highlight some of the corrupt individuals in the Trump administration and their corrupt actions. I’ll also ask you to contact your elected officials to ask them to crack down on this corruption.

[1]      Lardner, J., 4/9/20, “Mapping corruption: Donald Trump’s executive branch,” The American Prospect (https://prospect.org/power/mapping-corruption-donald-trump-executive-branch/)

[2]      Lardner, J., 4/9/20, see above

BIG BUSINESS HAS FAILED US IN THE PANDEMIC

Big businesses and their executives have failed us in the coronavirus pandemic, but nonetheless they are standing at the public trough getting more bailout money than anyone else. This sounds just like what happened in 2008.

Big corporations and their so smart executives didn’t see the business opportunity and respond to the pandemic when it appeared in late 2019 in China. They could and should have seen what was coming and increased the production of ventilators and personal protection equipment (PPE). This was a great opportunity for them to make a profit and garner good publicity but with their short-term, finance-focused mentality, they totally missed the opportunity.

Corporate executives have failed to push back on the Trump administration and the right-wing movement in their disdain for science and expertise. At times, they have promoted it, for example in climate change denial. In the case of the coronavirus, shortly before Trump made his dangerous call for the country to get back to normal by Easter, he had been on a conference call with financial executives who apparently told him that ending social distancing would be good for the financial markets.

Corporate executives – supposedly leaders – have failed to stand up for rational policies and preparedness. In doing so, they have aided and abetted the right-wing anti-government, anti-knowledge, anti-truth movement. By doing everything they can to avoid paying taxes, corporate executives have undermined government capacity to respond to public health crises, among other things.

Lessons that were learned during the Ebola outbreak in 2014 have been ignored and undermined by the Trump administration and its enablers in Congress. They have weakened our public health system and undermined our global health security, including eliminating the key position that coordinates U.S. global health efforts. [1] The Trump administration ignored the plans the Obama administration gave them, developed based on the Ebola outbreak, on how to respond to a public health crisis.

The right-wing movement reflexively opposes government policies and programs, both because it wants unbridled, unregulated opportunities to make profits at any cost to the public good, and because they don’t want to take the chance that any government action would appear to be valuable or successful. They don’t want voters to ever get the sense that government does important things that serve the public interest. [2]

Deregulation, particularly of the financial industry and financial standards, has undermined the financial stability of multiple corporations and industries. There are many financially unstable corporations in the U.S. that are likely to be in or on the brink of bankruptcy without government assistance in the face of the coronavirus pandemic. This is the result of big banks making high-risk loans, vulture capitalists’ leverage buyouts (with high-risk loans), and corporations using virtually all their profits and even borrowed money to buy back stock and pay dividends (which enriches executives and wealthy shareholders). The systematic weakening of the regulation of the big banks since the 2008 crash, including the undermining of the Dodd-Frank law’s financial safeguards put in place after that crash, have contributed significantly to this dangerous situation. [3]

For example, over the last decade the airline industry has spent 96% of the cash generated by profits to buy back its own shares of stock. Therefore, it failed to build a reserve against tough times and is now standing at the public trough asking for a bailout of $50 billion. Coincidentally, the six biggest U.S. airlines spent $47 billion over the last ten years buying their own stock, endangering the financial stability and future of the corporations. [4]

A corporation buying its own stock boosts the price of its shares, which enriches big stockholders and executives. In 2012, for example, the 500 highest paid executives at public U.S. corporations received, on average, $30 million each in compensation with 83% of it based on stock options and stock awards. Therefore, a boost in the price of the corporation’s stock enriches these executives substantially. [5]

Over five decades, corporate executives have outsourced their supply chains to foreign countries, notably China, while ignoring the risks and hidden costs of being dependent on global trade. They did so to increase profits by dramatically reducing labor costs. The coronavirus pandemic has brought the risks and hidden costs of globalization home to roost. Manufacturing operations in China and other countries have shut down due to the pandemic, which has also made the shipping of goods problematic. Foreign governments, especially authoritarian ones like China, are controlling exports, including of critically needed supplies to respond to the pandemic. As a result, corporations dependent on global operations to produce goods for export to and sale in the U.S., don’t have products to sell and consumers can’t get things they need, including critical health care supplies and drugs.

The risks of global supply chains shouldn’t have come as a surprise to smart corporate executives. In the 1930s, when dealing with the Great Depression, economist John Maynard Keynes argued for the globalization of ideas and arts, but the retention at home of the manufacturing of goods. [6]

The bottom line is that corporate executives exacerbated the coronavirus pandemic by:

  • Failing to respond to the emergence of the coronavirus in a timely and effective manner,
  • Failing to support preparedness for a public health crisis and a knowledge-based response when the coronavirus hit,
  • Supporting deregulation of finances that have made their own corporations and our economy more vulnerable to economic stress, and
  • Outsourcing global supply lines making their own corporations and all of us more vulnerable to disruptions in global trade.

[1]      Warren, E., retrieved from the Internet 4/5/20, “Preventing, containing, and treating infectious disease outbreaks at home and abroad,” https://elizabethwarren.com/plans/combating-infectious-disease-outbreaks

[2]      Krugman, P., 3/28/20, “COVID-19 brings out all the usual zombies,” The New York Times

[3]      Warren, E., retrieved from the Internet on 4/5/20, “My updated plan to address the coronavirus crisis,” https://elizabethwarren.com/plans/updated-plan-address-coronavirus

[4]      Van Doorn, P., 3/22/20, “Airlines and Boeing want a bailout – but look how much they’ve spent on stock buybacks,” MarketWatch (https://www.marketwatch.com/story/airlines-and-boeing-want-a-bailout-but-look-how-much-theyve-spent-on-stock-buybacks-2020-03-18)

[5]      Lazonick, W., Sept. 2014, “Profits without prosperity,” Harvard Business Review (https://hbr.org/2014/09/profits-without-prosperity)

[6]      Prestowitz, C., & Ferry, J., 3/30/20, “The end of the global supply chain,” The Boston Globe

REMEDIES FOR THREATS TO OUR ELECTIONS

My previous post highlighted threats to our election and voting systems. There are remedies for these threats, including the new and exacerbated ones due to the corona virus pandemic.

Surprisingly, there are lessons about cybersecurity that we should learn from Estonia. As a former state within the Soviet Union, it has decades of experience with Russian propaganda. It also has over a decade of experience dealing with Russian cyberattacks. In 2007, Russian hackers executed the first politically motivated cyberattack against a nation, bringing down much of Estonia’s Internet. They disabled government, newspaper, and bank websites. In response, Estonia built a Cyber Defense League based on a small staff and budget ($300,000) and a network of hundreds of volunteers. The volunteers do public education and plan simulated cyberattacks to test the government’s response. Estonia also has an ambassador at-large for cyber diplomacy and a federal Information System Authority that includes a cyber emergency response team. [1]

Estonia’s national government offers free cybersecurity trainings and screenings to candidates and political parties. In the lead-up to each election, it holds a hackathon where security experts try to break into the country’s election systems. Any vulnerabilities and the steps taken to fix them are publicly reported. The State Electoral Office has a working group that meets daily during elections to monitor the media and identify disinformation campaigns.

When Estonia joined NATO in 2004, it proposed hosting a center for cyber defense. Initially, NATO members were cool to the idea, but after Russia’s attack on Estonia in 2007, NATO agreed to create the NATO Cooperative Cyber Defense Center of Excellence housed in Tallinn, Estonia. It now hosts the largest cyber defense exercise in the world with over 1,200 participants from nearly 30 countries. In April 2019, the exercise’s scenario involved a coordinated cyberattack during a national election that affected vital services and also sought to manipulate public perception of the election results.

Estonia has become the model for countries working to counter Russian (and other) electronic meddling. It has developed cybersecurity expertise and a secure on-line voting system (over 40% of Estonians vote on-line). It requires high school students to take a 35-hour course on media and manipulation.

A key underlying element of Estonia’s preparedness for election meddling is broad public understanding that cybersecurity requires eternal vigilance, a sense of urgency, and a unity of purpose that leads to coordination among public agencies and private entities. These elements have, unfortunately, been lacking in the U.S. due to the lack of urgency from the Trump administration and Republicans in Congress about meddling in our elections.

To address cybersecurity and the other threats to our elections, and to ensure that everyone can vote safely and securely the U.S. needs to do the following: [2]

  • Establish an overarching national strategy on election security that coordinates efforts by governments, the private sector, academia, and the public,
  • Replace paperless voting machines with ones that have a paper backup and audit trail,
  • Expand alternative voting opportunities such as early voting and mail-in voting,
  • Enhance the ease of voter registration (e.g., on-line and same day registration) and the security of voter registration databases,
  • Provide federal funding to states to enhance voting systems and election-related security,
  • Increase oversight of and security requirements for vendors of voting systems,
  • Establish national standards for voting machines, registration databases, and voting procedures (e.g., post-election audits to verify the accuracy of results) to ensure that every eligible voter can vote safely and securely, and
  • Enhance the monitoring and response to misinformation and foreign attempts to influence our elections.

I urge you to contact your state election agency, often the Secretary of State, as well as your local, state, and national elected officials to encourage them to enhance the security and user-friendliness of our voting and election systems and procedures.

We need to make it as easy and as secure as possible for every citizen to vote!

[1]      Bryant, C. C., 2/4/20, “Cybersecurity 2020: What Estonia knows about thwarting Russians,” The Christian Science Monitor (https://www.csmonitor.com/World/Europe/2020/0204/Cybersecurity-2020-What-Estonia-knows-about-thwarting-Russians)

[2]      Brennan Center for Justice, retrieved 3/20/20, “Defend our elections,” (https://www.brennancenter.org/issues/defend-our-elections)

HEIGHTENED THREATS TO OUR ELECTIONS

Our election and voting systems were facing serious challenges before the corona virus pandemic hit; it has added new challenges and exacerbated old ones. Although the final federal election isn’t until November, state and local elections are occurring (or getting postponed) now, including primaries for the federal election.

The need to postpone elections or adjust procedures for them due to the pandemic highlight the need for effective voter communication and the threat of misinformation. Voters need to know about changes in the date of an election or the location of a polling place, e.g. to move it out of a senior living facility. Voters also need to know about changes in voting procedures such as expansions of early voting and absentee / mail-in voting.

Changes in election dates and procedures provide fertile ground for misinformation that could suppress voting or manipulate it for partisan or other purposes. The pandemic also provides opportunities for divisive misinformation aimed at stirring up social unrest and manipulating election outcomes. Such misinformation can also be used to undermine trust in government and our elections. [1]

One election strategy for addressing the challenge of keeping a safe social distance from others to limit the spread of the virus would be to conduct as much voting as possible by mail. For state or localities that have the capacity, mail-in ballots could be sent to every registered voter. In other places, absentee voting could be expanded to include anyone who would prefer to vote by mail. The options for requesting an absentee ballot should be expanded to include mail, on-line or email, phone, and in-person requests.

Before the corona virus hit, our voting systems and elections were vulnerable to operational glitches and ill-intentioned manipulation. Most states use electronic voting systems that are at least a decade old and prone to malfunction. Their software is old and doesn’t have up-to-date protections from hacking. Many states have voter registration databases that are similarly antiquated and vulnerable to hacking. Finally, poor design of ballots in some states leads to voter confusion and errors in voting. [2]

Issues with our voting and election systems are of particular concern given Russian cyber attacks on the 2016 U.S. election. Russian hackers probed election networks in all 50 states, breached at least one state voter registration database, attacked local election boards, got into at least two Florida counties’ computer networks, and infected the computers at a voting technology company. Russians hacked into the Clinton campaign’s email system and two units of the Democratic National Committee, stealing hundreds of thousands of documents and emails. These purloined documents then were leaked at multiple times, frequently when the timing had particular benefit for the Trump campaign. [3]

In addition, Russian entities engaged in extensive election-related misinformation campaigns in 2016. Probably most notably, the Internet Research Agency (IRA), a Russian government-linked organization, reached over 100 million Americans via social media using a budget of over $1 million a month. Through 470 Facebook accounts and 3,814 Twitter accounts, the IRA reached over 127 million people.

The goal of the Russian social media campaign was to sow political discord in the U.S. and to build doubts about American democracy by undermining trust in our political institutions, including the validity of our elections. It used hot-button topics such as race, immigration, and religion to inflame political polarization and heighten fear and confusion. Russia seeks to undermine and delegitimize Western democracies in general, both to boost its own international prestige and to discourage democratic aspirations at home. It hopes to exacerbate divisions within the U.S. and also to fracture NATO and other international alliances.

The U.S. Justice Department’s Mueller investigation of Russian interference in the 2016 election led to the indictment of 25 Russian individuals and three Russian organizations. They had infiltrated individual, public, and private computers and networks, including voting lists and banking systems.

Although a federal information clearinghouse for election infrastructure has been created and $380 million was provided to states for election security, most cyber experts believe our election infrastructure is quite vulnerable. In January 2019, the U.S. Director of National Security warned that Russia was looking at opportunities to advance its interests in our 2020 elections and that it would use social media to weaken our democratic institutions, influence U.S. policies, and undermine U.S. alliances and partnerships.

My next post will outline steps we should take to ensure the accessibility and security of voting for all citizens.

[1]      Weiser, W. R., & Feldman, M., 3/16/20, “How to protect the 2020 vote from the coronavirus,” Brennan Center for Justice (https://www.brennancenter.org/our-work/policy-solutions/how-protect-2020-vote-coronavirus)

[2]      Brennan Center for Justice, retrieved 3/20/20, “Election security,” (https://www.brennancenter.org/issues/defend-our-elections/election-security)

[3]      Bryant, C. C., 5/14/19, “Amid growing concerns about 2020, a primer on Russian election interference,” The Christian Science Monitor (https://www.csmonitor.com/USA/Politics/2019/0514/Amid-growing-concerns-about-2020-a-primer-on-Russian-election-interference)

THE LEGACY OF WARREN’S RUN FOR PRESIDENT

As a policy wonk and someone who believes governments have an important role to play in addressing issues in our economy and society, I’m disappointed to see Sen. Elizabeth Warren drop out of the Democratic presidential race. Her highlighting of the work we need to do on social and economic justice will have a lasting legacy.

Warren has more clearly and specifically laid out a progressive vision for this country than anyone since President Franklin D. Roosevelt. She spelled out not only what that vision looked like but how to achieve it. She focused attention on the role of government, who it is supposed to work for in a democracy, and how those with wealth and power have undermined the basic principles and promise of our democracy. [1]

The detailed roadmap Warren put forth of how to solve problems in our society and economy, and to return to government of, by, and for the people will, fortunately, long outlive her presidential campaign. In February 2019, she put forth the first of her numerous plans to address our problems with a proposal to make affordable, high quality child care available for all children under school age. And she put forth her proposal for a wealth tax on ultra-millionaires as the way to pay for it and a number of her other plans.

Warren next presented a plan to break up and regulate the Big Tech corporations that are engaging in monopolistic practices and abusing the personal information they gather from all of us. She followed this up with a proposal to reverse decades of racist housing policies implemented by governments at all levels along with private sector lenders and the real estate industry. She followed up with plans to tackle the cost of higher education and student debt, a detailed plan to pay for health care for all, and policies to lessen the influence of big corporations and wealthy individuals in our policy making process.

Warren’s meticulous policy proposals set the agenda for the Democratic race for the presidential nomination. Hopefully, they will set the agenda for the final presidential race and future policy debates in Congress and governments at all levels.

Her proposals and arguments on the campaign trail hammered home the message that America’s problems are not inevitable but are the results of choices reflected in government policies. Warren highlighted how these decisions have been driven by the power of wealthy individuals and corporations, and how they have put their profits, power, and personal gain ahead of the common good.

Warren’s abilities as a storyteller made our problems and her solutions resonate with many Americans, as she wove her personal life story and America’s history into a clear, understandable, and persuasive narrative.

In keeping with her message that government needs to better serve the broad public, she raised the majority of her campaign’s $92 million (which, sadly, is necessary to run a competitive campaign these days) from small donors giving $200 or less. She refused to hold big ticket fundraisers where attendees make contributions in the thousands of dollars. She received more than half of her fundraising total from women, which is highly unusual if not unprecedented. This all demonstrated, as Sen. Sanders has as well, that a viable presidential campaign can be run without relying on large sums of money from wealthy individuals (who have vested, special interests). [2]

Warren has changed the way many Americans view our society and economy. Many people have learned about a wealth tax and the racial wealth gap for the first time, for example.

I believe she has changed the course of our country. Only time will tell how quickly and extensively her vision will affect the policies of our governments and the characteristics of our economy and society.

[1]      Voght, K., 3/5/20, “What Elizabeth Warren taught us,” Mother Jones (https://www.motherjones.com/politics/2020/03/what-elizabeth-warren-taught-us/)

[2]      Hasan, I., & Monnay, T., 3/5/20, “Low on cash and delegates, Warren ends her White House bid,” OpenSecrets.org, Center for Responsive Politics (https://www.opensecrets.org/news/2020/03/warren-ends-her-bid/)

LIES ABOUT THE 2017 TAX CUT ARE NOW CLEAR

The effects of the December 2017 tax cut bill, the Tax Cuts and Jobs Act (TCJA), rammed through by Republicans in Congress and President Trump, are now quite clear. I’ll provide a summary of what it did, note the promises that were made about its effects, and then review its actual effects.

The 2017 Tax Cuts and Jobs Act, among other things:

  • Permanently cut the corporate tax rate from 35% to 21% (the lowest level since 1939)
  • Repealed the 20% corporate alternative minimum tax (which had required profitable corporations to pay at least some taxes on their profits)
  • Allowed up to $63,000 of pass-through business profits to go untaxed to help small businesses (supposedly). (These are profits from businesses that are not taxed because they are passed through to and taxed on an individual’s tax return.)
  • Provided significant tax benefits to corporations for investments in facilities and equipment, as well as for borrowing money
  • Adjusted the taxation of multinational corporations to more fairly tax their profits, for example, by increasing taxes on profits shifted to overseas entities and by incentivizing corporations to repatriate trillions of dollars of profits previously stashed overseas
  • Doubled the size of an estate that is exempt from taxation from $5 million to $10 million per person
  • Repealed the requirement of the Affordable Care Act (aka Obama Care) that individuals have health insurance or pay a tax to support the health care system
  • Made changes in the personal income tax system that are generally neutral for most taxpayers, although several of the tax reduction provisions are scheduled to expire in 2025

The supporters of the TCJA, including Members of Congress, the President, corporate executives, and wealthy shareholders all promised that it would:

  • Provide a sizable tax cut for workers and middle-income people, while increasing taxes on high-income people
  • Increase wages and workers’ incomes by $4,000 a year
  • Increase business investment, and hence worker productivity, the number of jobs, and economic growth in the U.S.
  • Limit the increase in the federal government’s deficit to $150 billion a year
  • Discourage the shifting of corporate profits and jobs overseas through new taxes, while also increasing tax revenue by giving corporations an incentive to bring up to $4 trillion of profits stashed overseas back to the U.S. by reducing the taxes they would have to pay on those profits. (More on this topic in my next post.)

The actual effects of the TCJA have been: [1]

  • No discernable wage increase due to the TCJA. In fact, wage growth appears to have slowed in 2019.
  • Clear failure to increase business investment; no increase in 2018 and a significant decline in the first 9 months of 2019. When the TCJA was enacted in 2017, year-over-year investment growth was at 5.4%. However, it has been dropping sharply and was only 1.3% in the third quarter of 2019 (the latest data available). [2]
  • Larger than projected decline in federal corporate tax revenue, which was expected to be $96 billion a year (roughly a 26% tax cut). As a result, the deficit is increasing by about $30 billion a year more than the $150 billion a year that was promised. The deficit is projected to increase to over $1 trillion a year in 2020.

    The latest information suggests that the decline in revenue and the increase in the deficit may be even larger. (More on this in my next post.) The Congressional Budget Office now estimates that the deficit (including interest payments) will be an average of $230 billion a year higher over the next 10 years due to the TCJA and $310 billion a year higher in 2028.

    The federal government’s revenue from corporate taxes had already been declining as a portion of total federal tax revenue, largely due to corporate tax evasion and avoidance. The trend of declining tax revenue from corporations has been accelerated by the TCJA, which cut corporate taxes by about 26% or $96 billion a year. The corporate tax cut has primarily benefited corporate shareholders, at least in the short run; the 10% wealthiest households own roughly 80% of corporate shares and, therefore, these already wealthy households are the primary beneficiaries of the corporate tax cuts. [3]

  • Business profit pass-through tax exemption, supposedly targeted at small businesses, has largely benefited millionaires, which isn’t what most people think of when they think of a small businessperson. This shouldn’t have been a surprise to anyone, as 49% of pass-through income appears on the tax returns of the richest 1% of taxpayers.
  • Increase in income and wealth inequality along both class and racial lines. Rich corporate executives and wealthy shareholders have been enriched at the expense of workers. White households are 67% of taxpayers but are estimated to receive 80% of the TCJA’s benefits, and most of this will go to the 5% of households with the highest incomes, i.e., over $243,000 a year. The average tax cut for a Black household has been $840, but $2,020 for a White household. For families with incomes under $25,000, the average tax cut has been about $40.

    In 2018, the 5% of individuals with the highest incomes received nearly 50% of the TCJA’s benefits. After the individual tax cuts expire in 2025, the 1% of households with the highest incomes will receive 83% of the benefits of the TCJA.

  • A bigger tax cut for foreign investors than for low- and middle-income households in the U.S. Foreign investors, as a group, will receive an estimated $38 billion tax cut from the TCJA in 2020, while the 20% poorest households in the U.S., as a group, will receive an estimated $2 billion.

The bottom line is that the Tax Cuts and Jobs Act of 2017 has delivered none of the promised benefits to workers and low- and middle-income households, but has delivered much greater benefits than were promised (or admitted to) to large, particularly multi-national, corporations and to wealthy individuals. Economic benefits for workers and low- and middle-income households have not materialized and there is no reason to expect them to. Business investment and economic growth have not increased as promised. The promise of more fairly taxing multi-national corporations’ profits to increase tax revenue and discourage the shifting of profits and jobs overseas have not lived up to the promises made, and the most recent findings indicate that this failure has been more dramatic than was initially realized. (More on this topic in my next post.)

The loss of revenue for the federal government is significantly larger than was projected and, therefore, the increase in the federal budget deficit is much greater than what was promised.

[1]      Corser, M., Bivens, J., & Blair, H., Dec. 2019, “Still terrible at two: The Trump tax act delivered big benefits to the rich and corporations but nearly none to working families,” The Center for Popular Democracy and the Economic Policy Institute (https://www.epi.org/files/uploads/20191211_Trump-Tax-Bill-R6.pdf)

[2]      Blair, H., 12/17/19, “On its second anniversary, the TCJA has cut taxes for corporations, but nothing has trickled down,” Economic Policy Institute (https://www.epi.org/blog/on-its-second-anniversary-the-tcja-has-cut-taxes-for-corporations-but-nothing-has-trickled-down/)

[3]      Corser, M., Bivens, J., & Blair, H., Dec. 2019, see above

LOBBYING: HOW THE WEALTHY WIELD POWER

Wealthy individuals and their companies have inordinate influence on our supposedly democratic policy making through the reinforcing combination of lobbying, campaign spending, and the revolving door of personnel going back and forth between the private and public sectors. This post presents two examples of how lobbying has successfully blocked policies with strong public support and benefits for the public. My next post will focus on how to control lobbying and curb its use as a tool for undue influence. (See my previous post for background on lobbying.)

Drug price controls are one example of how lobbying, campaign spending, and the revolving door all come into play when corporate America and its wealthy executives and investors want to influence policy making. The costs of prescription drugs have been increasing dramatically and growing numbers of people can’t afford their drugs. In the first half of 2019, prices of 3,400 drugs surged an average of 10.5%, which is five times the rate of inflation. The cost of insulin, an old drug that is essential for many diabetics, has tripled in price over the last ten years for no reason other than greed. A third of uninsured Americans report they cannot afford their prescribed drugs and, as a result, millions of people are not taking needed medications.

With strong public support, Congress and the President have been considering ways to control and reduce drug prices. In response, the pharmaceutical industry is ramping up its lobbying and campaign spending. It is launching an advertising campaign opposing such steps and trying to blame others for high drug prices. In addition, courtesy of the revolving door, the pharmaceutical industry has one of its own on the inside in President Trump’s cabinet. Alex Azar, the secretary of Health and Human Services, which oversees Medicare and Medicaid among other things, was the president of a branch of drug maker Eli Lilly. Eli Lilly faced a class action lawsuit over its tripling of the price of insulin while Azar worked there. Eli Lilly has spent $4.2 million on lobbying so far in 2019 and has hired a former assistant to President G.W. Bush, who went through the revolving door to lobbying, as one of its lobbyists. In addition, Joe Grogan, a former lobbyist for Gilead Sciences, a drug company, is President Trump’s top policy adviser.

The pharmaceutical industry association has spent $16.3 million on lobbying so far this year and more than 70% of its lobbyists are revolving door participants, having previously worked for the government. It has spent $3.5 million on social media ads over the last 15 months, which typically blame others for high drug prices. It spends millions through affiliated advocacy groups and on election campaigns, including $2.5 million in 2017 to a pro-Trump dark money political group (i.e., one that hides the identity of its donors). Individuals and entities in the pharmaceutical industry have given millions to Congresspeople already this year, including $135,486 to Senate leader Mitch McConnell (R-KY) and $205,100 to Kevin McCarthy (R-CA), the House Minority Leader and the biggest recipient of pharmaceutical industry contributions so far this year. [1]

The  pharmaceutical industry has been very successful in blocking attempts to rein in drug prices . Even though the public identifies drug prices as the number one issue it wants Congress to do something about, no meaningful relevant legislation has been passed in the ten months this Congress has been in session. For example, Senator Cornyn (R-TX) launched tough attacks in a Senate hearing on AbbVie, a pharmaceutical company, and its CEO for filing more than 100 patents for its arthritis drug Humira. This “patent thicketing” as it’s called, is a way to prevent competition from generic drugs. Cornyn filed legislation to address this problem but lobbying and campaign contributions from the pharmaceutical industry convinced him to eliminate his own proposal that would have given the Federal Trade Commission the power to address the abuse of patent laws. Similarly, numerous other proposals to address drug prices and patenting issues have been dropped or dramatically weakened, and none have been passed. And the pharmaceutical industry was able to overturn in court the Trump administration’s recently issued rule that would have required drug prices to be disclosed in TV ads. [2]

Even when policies have been passed into law, the business lobbyists are experts at killing or weakening their implementation. In these efforts, they count on assistance from their friends in Congress (both elected members and staff) and from allies in the executive branch (who often have entered through the revolving door).

For example, in October 2010, the Department of Labor (DOL) proposed a “fiduciary rule” as part of the implementation of existing law. It would have required investment advisers for retirement savings accounts to act as fiduciaries, meaning that when providing investment advice they would have to put the best interests of their clients first, ahead of benefits for themselves, such as commissions, fees, etc. Some advisers have been recommending that their clients make investments that paid the advisers high fees and commissions but were not the best options for the clients and, in some cases, were clearly inappropriate investments for retirement savings.

Because this fiduciary rule could potentially reduce the incomes of financial advisers and the profits of their employers in the financial industry, the corporate lobbyists undertook an extensive and unrelenting campaign to kill the rule. First, during the public comment period on the proposed regulation, the financial industry and the Chamber of Commerce literally buried the DOL with hundreds of written comments and lots of testimony at public hearings. Because agencies are required by law to respond to every concern presented in public comments, a deluge of comments takes significant time and resources from the sponsoring agency. This delays the rule making process and can kill a proposed rule.

After 11 months of work, the DOL withdrew the proposed rule but said it would try to implement something similar in the future. The financial industry lobbyists continued their campaign against the fiduciary rule, trying to dissuade DOL from proposing a similar rule. In June 2013, a lobbyist drafted a letter urging Obama’s DOL to delay a second attempt and got 32 members of Congress from both parties to sign it. Nonetheless, the DOL persisted and re-proposed the rule in February 2015. The Wall Street lobbyists again geared up to fight the rule and submitted thousands of comments.

The DOL and its supporters persisted and got the rule through the process. However, the delay of five years meant that the rule couldn’t be fully implemented until after President Trump was elected.

After another $3 million of lobbying by the financial industry, the Trump administration delayed implementing the fiduciary rule and then its Department of Justice refused to defend it when the financial industry sued to block the rule from going into effect. So, after 7 years of work by DOL to protect workers’ retirement savings, the financial industry succeeded in killing this broadly supported, common-sense protection. Then, rubbing salt in the wound, President Trump appointed Eugene Scalia (son of Supreme Court Justice Antonin Scalia), the corporate lawyer and lobbyist who filed the lawsuit to block the fiduciary rule, as the Secretary of the DOL. [3]

This same pattern of industry lobbyists blocking implementation of laws passed by Congress and signed into law by the President happens repeatedly. For example, it happened when the Environmental Protection Agency tried to regulate methane emissions. And it happened when the Consumer Financial Protection Bureau tried to regulate payday lenders who rip off desperate borrowers with incredibly high interest rates and fees that often lock low-income individuals into an inescapable debt trap.

Companies and their wealthy executives and investors work relentlessly through lobbying, campaign spending, and the revolving door to block or weaken policy changes that would benefit workers and the public. They attack legislation as it goes through Congress. They work to get the President to oppose or veto proposed laws. Failing that, they work to block or weaken the implementation of laws, including the issuing of relevant rules and regulations. If they can’t block the issuing of rules or regulations, they sue in court to block them from going into effect. At best, all of this delays policy changes that would benefit workers and the public by years; often it succeeds in killing them completely.

My next post will discuss how to control lobbying and curb its use as a tool for undue influence.

[1]      Stella Yu, Y., 9/25/19, “Big pharma invests millions as Congress readies drug pricing bills,” Open Secrets, Center for Responsive Politics (https://www.opensecrets.org/news/2019/09/big-pharma-invests-millions-drug-pricing-bills/)

[2]      Florko, N., & Facher, L., 7/22/19, “How Big Pharma keeps winning in Washington,” The Boston Globe

[3]      Warren, E., 10/2/19, “Excessive lobbying tax proposal,” Team Warren (https://medium.com/@teamwarren/excessive-lobbying-tax-fca7cc86a7e5)

HOW TO REIN IN MONOPOLISTIC BUSINESSES

The failure to enforce antitrust laws during forty years of plutocratic economics has produced dominant businesses in numerous sectors. The resultant concentration of economic power, and, along with it, political power, has undermined our democracy both economically and politically. It has also led to rapidly growing income and wealth inequality. (See my previous post for details.)

The monopolistic, unregulated markets created by plutocratic economics since the late 1970s have made it clear that well-managed markets, where real competition thrives, are more efficient and equitable. There is a stark contrast between the economy of well-managed competition from the 1950s through mid-1970s and today’s plutocratic economy. In the post-World War II period, income and wealth were much more evenly distributed and workers’ compensation rose with their increases in productivity. In the latter period, economic inequality has grown tremendously and workers’ compensation has been stagnant, despite increasing productivity.

The economic security of the middle class has disappeared, in part because of increased economic and financial instability. After a period of over 30 years without an economic crash or major economic scandal, from 1980 on there have been three major economic crashes or scandals: the Savings and Loan crisis, the bursting of the dot com bubble, and the 2008 financial collapse and Great Recession.

There are a variety of solutions that would reverse the trend toward greater industry concentration, [1] [2] [3] as well as steps that can be taken to reduce the power of monopolistic firms. [4] There is much the U.S. can learn from Europe where more vigorous antitrust enforcement has produced more competitive markets, lower economic inequality, and more equitable sharing of corporate earnings. [5]

  • Reviving vigorous use of antitrust laws to block mergers and acquisitions, including:
    • Declaring a moratorium on approvals of large mergers and acquisitions (e.g., those above $6 billion in value or ones creating firms with over 10% of local market share)
    • Banning mergers or acquisitions that would reduce the number of major firms in a local market to less than four
    • Expanding the antitrust judgment criteria from the simplistic focus on lower prices for consumers and “productive efficiency” to include a broader interpretation of the public’s interests
    • Reinvigorating enforcement of laws limiting predatory pricing, and
    • Considering monopsony power (i.e., a dominant buyer) as well as monopoly power (i.e., a dominant seller)
  • Using antitrust laws to break up companies with monopolistic power
  • Imposing much bigger fines for violations of antitrust laws
  • Making the merger and acquisition review process more public and transparent
  • Banning “exclusive dealing” where dominant firms require customers, wholesalers, and suppliers to sign contracts banning them from doing business with rivals or rewarding them for not doing so
  • Banning pharmaceutical companies from paying potential competitors not to introduce generic versions of drugs
  • Stopping pharmaceutical companies from extending their patents on drugs through trivial changes in a drug, erroneous patent filings, and outright patent fraud
  • Restoring consumers’ ability to repair durable products (e.g., smartphones, computers, cars, and tractors and other farm machinery) themselves or at independent repair servicers by banning product designs intended to prevent servicing and prohibiting restrictions on the availability of spare parts, repair tools, and detailed owners’ manuals

There are also a variety of solutions that would ameliorate some of the negative effects of industry concentration:

  • Making the formation of a union easier and less susceptible to employers’ efforts to block and delay unionization
  • Allowing workers of franchisees or ones in the gig economy to unionize
  • Banning non-compete agreements for low-paid, low-skill workers and ban non-poaching agreements for franchisees
  • Increasing the minimum wage

Recognition of the importance of antitrust enforcement is growing. It is being discussed in the presidential campaign for the first time in many years. Congress is holding hearings on monopolistic practices by businesses for the first time in decades. This included a hearing in May where a military spare parts supplier was called to task for charging over 40 times its costs for some parts and where a bipartisan group of legislators called for the company to return over $16 million in excess profits. [6]

Democratic society is threatened by dominant, market-controlling businesses. Huge monopolistic corporations can transcend the power of elected government to effectively control them. Every entrepreneur and businessperson should have the opportunity to compete without unfair competition and domination by monopolistic firms. Regional-level businesses should be able to thrive without being throttled by giant, national, monopolistic companies.

A functioning democracy relies on citizens who are free from domination by employers and sellers of goods and services. I encourage you to listen to what candidates for public office have to say about reducing the presence and power of monopolistic businesses and to ask them questions about what they would do to restore a vibrant, competitive economy in the U.S. – an economy that is fair for consumers, workers, small businesses, and entrepreneurs.

[1]      MacGillis, A., Jan./Feb./March 2019, “Taking the monopoly threat seriously,” Washington Monthly (https://washingtonmonthly.com/magazine/january-february-march-2019/taking-the-monopoly-threat-seriously/)

[2]      Cortellessa, E., April/May/June 2019, “Meet the new trustbusters,” Washington Monthly (https://washingtonmonthly.com/magazine/april-may-june-2019/meet-the-new-trustbusters/)

[3]      Sussman, S., July/Aug. 2019, “Superpredators: How Amazon and other cash-burning giants may be illegally cornering the market,” Washington Monthly (https://washingtonmonthly.com/magazine/july-august-2019/superpredators/)

[4]      Vaheesan, S., 9/24/19, “Unleash the existing anti-monopoly arsenal,” The American Prospect (https://prospect.org/day-one-agenda/unleash-anti-monopoly-arsenal/)

[5]      Horowitz, E., 7/30/16, “Europe may do capitalism better than US,” The Boston Globe

[6]      Dayen, D., 6/24/19, “In the land of the giants,” The American Prospect (https://prospect.org/article/land-giants)

MONOPOLISTIC COMPANIES HARM THE ECONOMY AND DEMOCRACY

Forty years of plutocratic economics has resulted in monopolies and near monopolies in many business sectors due to the failure to enforce antitrust laws. This concentration of economic power, and, along with it, political power, has undermined our democracy both economically and politically. It has also contributed to rapidly growing income and wealth inequality. (For information on plutocratic economics in general, see this previous post. For more on the effects of its deregulation of business, see this post.)

The Sherman Antitrust Act of 1890 laid the groundwork for antitrust regulation. Its purpose was to reduce the size and economic power of large, monopolistic companies. It was based on the federal government’s responsibility to regulate interstate commerce. At the time, the conglomeration of companies under trusts had come to dominate several major business sectors, such as the oil industry under the Standard Oil Trust. These trusts were monopolistic and destroyed competition.

The Sherman Act banned business activity that was “in restraint of trade or commerce among the several states, or with foreign nations”. The Sherman Act sought to balance the power of commercial, for-profit enterprises and the public interest. [1] The Clayton Antitrust Act of 1914 built on the Sherman Act and states that any merger is illegal if “in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly”. The reference to “any section of the country” is significant because when a few companies dominate an industry, they often have effectively divided the country up geographically so each one has a monopolistic position in some areas. Therefore, to effectively enforce antitrust laws, industry concentration should be analyzed in markets properly defined by product or service AND geography. Such an analysis often finds that market concentration is much higher than a nationwide analysis would suggest. [2]

In the 1960s, a concerted effort to undermine the historically broad economic and public interest goals of antitrust enforcement began. It was spearheaded by a group from the Chicago Law School with Robert Bork playing a leading role. (He was nominated for the Supreme Court by President Reagan in 1987 but was rejected by the Senate.) Bork and others argued that the only legitimate use of antitrust laws was to maximize consumer welfare, narrowly defined as low prices (often presumed to be the inevitable result of the economies of scale possible for large companies). This theory was adopted by pro-business economists, judges, and policy makers, including President Reagan.

Under President Reagan, antitrust enforcement was significantly scaled back and the Federal Trade Commission actually stopped collecting data on industry concentration. In eight years, President George W. Bush’s administration did not initiate a single antitrust case. [3] [4] The number of mergers grew from 2,308 in 1985 to 15,361 in 2017. [5]

Since 2000, three-quarters of U.S. industries have become more concentrated, including the technology, health care, communications, defense, and agriculture industries. This is perhaps most noticeable in the high-tech industry where Google and Facebook now control over 60% of all digital advertising and Amazon controls over half of all e-commerce. [6] From 1997 to 2012, the top four firms in any given industry saw their share of industry-wide revenue grow from 24% to 33%. [7]

There’s clear evidence that entrepreneurship and the number of start-up companies is down in the U.S. This is mostly due to dominant companies suppressing competition in multiple ways. They can block the entry of new firms simply by dominating the consumer and supplier markets. They can simply acquire competitors, especially given the lack of antitrust enforcement. Or these large companies can overwhelm start-ups in the market through fair and unfair competition using their vast resources. Among the evidence of reduced entrepreneurship and start-ups is that from 1987 to 2015 employment by companies under 10 years old has declined from 33% of the workforce to just 19%. [8]

Fewer, bigger employers have negative effects on workers and their compensation. Industry concentration means employees have fewer options, reducing their bargaining power. One reflection of this is the reduction in employment by newer companies. Furthermore, increasing numbers of companies, including low-wage, franchise businesses like McDonald’s, are forcing workers to sign non-compete agreements and franchisees to sign non-poaching agreements (banning solicitation or hiring of employees from other franchisees), further limiting workers’ options for employment, advancement, and wage growth. [9]

The growing size and reduced number of companies have exacerbated the economic divide between urban and rural areas. The large, highly profitable companies tend to be in urban areas, and people and economic vitality are drained from rural areas. Furthermore, the relatively small number of highly profitable, very large companies has made a handful of big cities the big economic winners, leaving many other cities behind.

The growing number of large, dominant companies also gives them power over suppliers. The condition of having a dominant buyer in a marketplace is called monopsony. It allows buyers like Wal Mart or Amazon to drive down suppliers’ prices, often forcing them to reduce the compensation of their workers, or in some cases, to drive the supplier out of business and take over the business for themselves. [10]

The result of industry concentration in the U.S. economy has been soaring profits, stagnant wages, and falling investment in companies’ equipment, research, and product development. In addition, service quality has fallen, along with entrepreneurship and innovation. This combination of rising profits with falling investment and stagnant worker pay violates the basic economic theory of competitive markets.

There is only one explanation: monopoly or near-monopoly conditions that allow companies to give their increased profits to owners while under-investing in human and physical capital, as well as service quality and innovation, because they can squelch competition, for example by buying up or crushing competitors and innovators. [11]

My next post will present solutions to the problem of large, monopolistic companies dominating our economy and democracy.

[1]      Paul, S., 6/24/19, “The double standard of antitrust law,” The American Prospect (https://prospect.org/article/double-standard-antitrust-law)

[2]      Abdela, A., & Steinbaum, M., Sept. 2018, “The United States has a market concentration problem,” The Roosevelt Institute (https://rooseveltinstitute.org/wp-content/uploads/2018/09/The-United-States-has-a-market-concentration-problem-brief-final.pdf)

[3]      MacGillis, A., Jan./Feb./March 2019, “Taking the monopoly threat seriously,” Washington Monthly (https://washingtonmonthly.com/magazine/january-february-march-2019/taking-the-monopoly-threat-seriously/)

[4]      Dayen, D., 6/24/19, “In the land of the giants,” The American Prospect (https://prospect.org/article/land-giants)

[5]      Abdela, A., & Steinbaum, M., Sept. 2018, see above

[6]      MacGillis, A., Jan./Feb./March 2019, see above

[7]      Shambaugh, J., Nunn, R., Breitwieser, A., & Liu, P., 6/16/18, “The state of competition and dynamism: Facts about concentration , start-ups, and related policies,” Brookings (https://www.brookings.edu/research/the-state-of-competition-and-dynamism-facts-about-concentration-start-ups-and-related-policies/)

[8]      Shambaugh, J., Nunn, R., Breitwieser, A., & Liu, P., 6/16/18, see above

[9]      Covert, B., 2/15/18, “Does monopoly power explain workers’ stagnant wages?” The Nation (https://www.thenation.com/article/does-monopoly-power-explain-workers-stagnant-wages/)

[10]     Abdela, A., & Steinbaum, M., Sept. 2018, see above

[11]     Covert, B., 2/15/18, see above

PROGRESSIVE POLICIES TO REVERSE PLUTOCRATIC ECONOMICS AND ITS FAILURES

Forty years of plutocratic economics has produced a high level of economic inequality and numerous business sectors dominated by a monopoly or near monopolies. This has undermined democracy in our economy and in our political institutions.

A high level of economic inequality is bad for the economy. The Organisation for Economic Cooperation and Development (OECD), an international organization of 36 economically developed countries, estimates the U.S. lost almost 5% in economic growth over the period from 2000 to 2015 ($1 trillion a year in a $20 trillion economy) due to its high level of inequality. Part of this loss is due to limited access to education for people with lower incomes, which wastes human capital and reduces the productivity of the workforce. [1] In addition, our high level of inequality has undermined the consumer spending that is close to 70% of our economy because workers and the middle class simply have less money to spend.

There are multiple policy changes that are needed to reverse the failed plutocratic economic policies (see more information in previous posts here and here) that have been put in place over the last four decades and their effects. Some of them directly address the high levels of economic inequality in incomes and wealth that have been created. Others address the underlying issues that have allowed the plutocrats to amass wealth and power. Both are needed to reinvigorate our democracy and its commitment to equal opportunity, fairness, and the ability of all to pursue life, liberty, and happiness.

Policy changes that would directly address the dramatically increased and increasing economic inequality include: [2]

  • Increasing incomes of workers and the middle class by raising the minimum wage and strengthening unionization
  • Increasing spending on public education and making it equitable so all students are prepared to be productive members of society and the workforce
  • Raising taxes, partly by eliminating loopholes, on wealthy individuals and businesses
  • Raising the estate tax (which was meant to prevent wealth from accumulating and being passed down from generation to generation thereby creating a plutocracy [3])
  • Requiring the payment of a tax on the gain in value of appreciated property when it is passed on to heirs
  • Implementing a wealth tax

Policy changes that would address underlying issues that have enriched and empowered plutocrats include: [4] [5] [6]

  • Building progressive, grassroots, inclusive, and broad-based participation in our democratic policy making and elections, including through reforming campaign financing
  • Strengthening business and financial industry regulation, including strong anti-trust enforcement that limits the size and power, both economically and politically, of businesses (my next post will provide more detail on this important policy)
  • Reforming trade policies to protect workers and the environment and reduce the power of multi-national corporations over nations’ sovereignty
  • Updating labor laws for the gig economy, including clarifying standards for who is deemed an employee vs. an individual contractor
  • Strengthening regulation of public utilities from electric power to phones to airlines and of services that are essential to everyday life such as the Internet and financial services (which is what the Consumer Financial Protection Bureau was created to do but has been undermined in carrying out)
  • Stopping privatization of assets and functions best managed by democratic public entities, such as roads, bridges, basic education, prisons, health insurance, and public assistance programs
  • Building a robust system of public banking and mortgage finance perhaps through the U.S. Postal Service (which used to provide basic banking services)
  • Creating publicly owned, mixed-income, highly desirable social housing (as is widely done in Europe especially Austria) as opposed to the poorly performing privatized or public-private partnership subsidized housing we now have
  • Regulating the flow of capital and valuation of currency to reduce financial manipulation, speculation, and tax avoidance
  • Adding employees to corporate boards of directors

These are some of the key policy changes needed to reverse plutocratic economics and support workers and the middle class. I urge you to listen to and ask candidates running for public office which of these policies they support.

[1]      Ingraham, C., 7/25/19, “The richest 1 percent now owns more of the country’s wealth than at any time in the past 50 years,” The Washington Post

[2]      Reich, R., 7/9/19, “The four biggest conservative lies about inequality,” The American Prospect (https://prospect.org/article/four-biggest-conservative-lies-about-inequality)

[3]      Collins, C., & Hoxie, J., October 2018, “Billionaire Bonanza 2018: Inherited Wealth Dynasties of the United States,” Institute for Policy Studies (https://inequality.org/wp-content/uploads/2018/11/Billionaire-Bonanza-2018-Report-October-2018.pdf)

[4]      Sabeel Rahman, K., Summer 2019, “The moral vision after neoliberalism,” Democracy Journal (https://democracyjournal.org/magazine/53/the-moral-vision-after-neoliberalism/)

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

[6]      Warren, E., 6/4/19, “A plan for economic patriotism,” Office of Senator Elizabeth Warren (https://medium.com/@teamwarren/a-plan-for-economic-patriotism-13b879f4cfc7)

PLUTOCRATIC ECONOMICS HAS FAILED WORKERS

Forty years of right-wing, plutocratic economics (see this previous post for background) has produced stagnant worker compensation, decimating the middle class and leaving growing numbers of low-wage workers struggling to survive. The plutocratic economics of wealthy, elite members of society has intentionally and dramatically weakened public policies that provide support for workers and an economic safety net (including the minimum wage, unemployment benefits, and the right to join a union).

After adjusting for inflation, workers’ compensation has barely increased since 1980, in large part because:

  • The minimum wage’s value has been eroded by inflation and
  • Workers’ negotiating power with their employers has been decimated by concerted attacks on unionization and by the growing size and economic power of employers.

Currently, we are in the longest period since the establishment of the minimum wage, 12 years, without an increase in it. The $7.25 per hour federal minimum wage (about $15,000 per year for a full-time worker) has lost 17% of its purchasing power (or more than $3,000) over those 12 years. Since its peak value in February 1968 at about $22,000 per year for full-time work (adjusted for inflation), the federal minimum wage has lost 31%, or almost one-third, of its purchasing power ($6,800). [1]

As a result, minimum wage workers at Wal Mart, fast food outlets, and elsewhere do not earn enough to survive without public benefits such as food stamps, housing subsidies, subsidized health insurance, and the Earned Income Tax Credit. These public benefits for workers mean that the government and we as taxpayers are subsidizing large, very profitable companies when they pay their workers too little to live on. This is one example of government welfare for companies.

The proponents of plutocratic economics claim that raising the minimum wage will reduce the number of jobs and, therefore, hurt workers, but this ignores the obvious benefits for workers. A high estimate is that 1.3 million jobs might be lost – half of them for teenagers and many of those for adults being part-time jobs. On the other hand, wages would increase for over 27 million workers (roughly one out of every six workers). With an increase to $15 per hour (up from the current $7.25), workers would receive an overall increase in income of $44 billion. This would lift 1.3 million Americans out of poverty and significantly increase consumer spending in local economies. On the downside, companies would raise prices by an estimated 0.3% and business owners would lose $14 billion of profits (a small amount [0.07%] in a $21 trillion economy).

A study of the actual experiences in states and cities that have recently raised their minimum wages found no reductions in the number of jobs or hours at work. It did find that workers’ incomes increased and that poverty declined. [2]

Unionization is important because it allows workers to band together and increase their negotiating power when bargaining with employers for pay and benefits. The rate of unionization in the United States today is 10.5% overall (down from over 25% in the 1950s) and only 6.4% of private-sector workers are unionized. In the early 1950s, unions included over 40% of workers in manufacturing, over 60% in mining, and over 80% in the construction, transportation, communications, and utilities sectors. The attacks on unions have been very successful, to say the least, in reducing unionization and workers’ negotiating strength. By way of comparison, the rates of unionization in Scandinavia range from 81% in Iceland to 71% in Sweden to 52% in Norway. Under pressure from global trade, these rates have come down in recent years; for most of the postwar period the rate in Sweden was in the mid-80s, for example.

The disparity in unionization rates between the U.S. and the Scandinavian countries has produced a dramatic difference in economic inequality. The best measure of economic inequality is a nation’s Gini Coefficient, where a higher number indicates greater economic inequality. The scale is from zero to one with zero indicating complete economic equality (everyone has the same income) and one indicating that all of a nation’s income goes to just one person. In Denmark and Sweden, the Gini Coefficient is 0.25; in Finland and Norway, it’s 0.27; and in Iceland, it’s 0.28. However, in the United States, it’s 0.47. [3]

Employers’ power over workers has grown, not only due to reduced unionization, but also due to the growing economic power in the marketplace of fewer, larger employers. Overall, workers’ compensation has grown less than their increases in productivity since 1979 (productivity has grown 69.3% while compensation has grown only 11.6%). Previously, compensation tracked productivity growth quite closely (from 1948 to 1979 productivity grew 108.1% while compensation grew 93.2%). [4] In other words, workers are not receiving increases in pay despite increases in the value of their output per hour of work.

Instead of paying workers more for their increased output, companies have increased profits and, therefore, returns to shareholders, owners, and executives –  in other words, they have increased income and wealth for plutocrats. As a result, income and wealth inequality have increased dramatically. Just three white men ‒ Jeff Bezos of Amazon, investor Warren Buffett, and Microsoft’s Bill Gates ‒ now own more wealth (a combined total of $248 billion) than the least wealthy half of all Americans (160 million people with combined wealth of $245 billion). The wealthiest 1% of Americans own 40% of all wealth. This is the highest level in at least 50 years and is higher than in any other country with an advanced economy. (Germany is closest with 25% of wealth in the hands of the top 1%). The 400 wealthiest Americans own an astonishing $2.9 trillion. [5]

Government policies set the rules for our economic markets and balance the power and interests of various parties. For 40 years, plutocratic economic policies have put returns to owners (i.e., wealthy investors including executives) ahead of the interests of workers. The result of these policies has been a dramatic growth in income and wealth inequality; the U.S. has the most unequal income distribution of any well-off democracy. [6] Economic security and the standard of living for many in the middle class has fallen dramatically, while many low-income workers are struggling just to make ends meet.

Future posts will review the politics of plutocratic economics and how it has damaged our democracy. They will also identify progressive policies that are needed to reverse its harmful effects.

[1]      Economic Policy Institute, 7/15/19, “Minimum wage,” (https://www.epi.org/research/minimum-wage/)

[2]      Dayen, D., 7/9/19, “Conservatives grasp at straws after CBO minimum wage analysis shows clear benefits,” The American Prospect (https://prospect.org/article/conservatives-grasp-straws-after-cbo-minimum-wage-analysis-shows-clear-benefits)

[3]      Meyerson, H. 7/2/19, “How centrists misread Scandinavia when attacking Bernie and Elizabeth,” The American Prospect Today (https://prospect.org/article/how-centrists-misread-scandinavia-when-attacking-bernie-and-elizabeth)

[4]      Economic Policy Institute, 8/27/19, “How well is the American economy working for working people?” (https://www.epi.org/files/pdf/174081.pdf)

[5]      Anapol, A., 12/6/17, “Study: Wealthiest 1 percent owns 40 percent of country’s wealth,” The Hill (https://thehill.com/news-by-subject/finance-economy/363536-study-wealthiest-1-percent-own-40-percent-of-countrys-wealth)

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

SUPPLY-SIDE, TRICKLE-DOWN TAX CUT THEORY HAS FAILED

Plutocratic economics (see this previous post for background), and specifically so-called supply-side or trickle-down economics, claims that cutting taxes, particularly on the wealthy and businesses, will stimulate economic growth so much that 1) government tax revenue will actually increase, 2) the number of jobs will grow, and 3) workers’ pay will increase.

There have been at least six significant federal tax cuts between 1978 to 2019 and, in every case, federal government revenue did NOT increase as promised. These tax cuts, under Presidents Carter, Reagan, G. W. Bush, and Trump, each produced some short-term economic stimulus, but federal revenue declined and the budget deficit increased. Furthermore, these tax cuts have been neither fair (economic inequality has increased) nor efficient (some of the country’s most profitable corporations and wealthiest individuals pay little or no taxes). [1]

Some states have also cut taxes based on supply-side economic theory, most notably Kansas in 2012. Like the federal cases, the results have not been what was promised. Kansas’s Republican Governor Brownback and the state’s overwhelmingly Republican legislature eliminated state income taxes for more than 100,000 businesses and greatly reduced taxes on wealthy individuals. Invoking supply-side, trickle-down economic theory, Brownback predicted the tax cuts would more than pay for themselves, i.e., that state tax revenue would grow. Instead, revenues fell so precipitously that shortages in funding for schools required that the school year had to be considerably shortened to save money, public construction projects ground to a halt, and the health coverage of the state’s Medicaid program had to be greatly reduced. The state’s economy ceased producing jobs and Kansas’s economy performed more poorly than its neighboring states on virtually every economic indicator. (See this previous post for more details.)

In 2016, Kansas voters – including Republicans who objected to seeing their children’s educations shortchanged – revolted. Republican primary voters, joined by Democrats, ousted legislators who had refused to repeal the tax cuts, and in 2017, the new legislature overrode Brownback’s veto of a bill repealing the cuts. In 2018, voters elected Democrat Laura Kelly as their new governor, and today, with adequate funding restored, Kansas has resumed its support for education, infrastructure spending, and the other basic governmental functions. As a result, in 2019, Kansas leapt from 35th (in 2018) to 19th on CNBC’s list of the top states for business. [2]

Nonetheless, in 2017, supply-side, trickle-down economic theory was invoked by President Trump and the Republicans in Congress in justifying their $150 billion a year tax cut primarily for corporations and wealthy individuals. The results of these tax cuts have been, predictably, NOT what was promised. Rather than stimulating higher economic growth, growth and job creation have been slow.

The federal budget deficit has grown substantially and workers’ compensation remains stagnant. Huge rewards have gone to large corporations and their executives, so economic inequality has grown sharply. The corporations are using the windfall to buy back their own stock at record rates. This enriches executives and other large stockholders. Corporations have not been increasing workers’ compensation, nor hiring additional workers, nor investing in innovation. (For more detail see this previous post.)

Furthermore, the Trump administration and Republicans in Congress, citing the growing budget deficit, argue that cuts need to be made in economic safety net programs including food assistance for the poor, health care for the poor and seniors (i.e., Medicaid and Medicare), and Social Security.

Future posts will summarize the harm plutocratic economics has done to workers and our democracy. They will also discuss the politics of neoliberalism and identify progressive policies that can reverse the harmful effects of plutocratic economics.

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

[2]      Meyerson, H., 7/23/19, “Going up in economic ratings? Then lose trickle-down,” The American Prospect Today (https://prospect.org/blog/on-tap/going-economic-ratings-then-lose-trickle-down)

DEREGULATION HAS FAILED

The failure of 40 years of right-wing, wealthy elites’ plutocratic economics (see my previous post for background) is evident from multiple perspectives. The outcomes for workers and the middle class, along with those for the economy as a whole, have been resoundingly negative.

Proponents of plutocratic economics’ “free” markets and deregulation promised that:

  • Markets would be more efficient without government regulation,
  • Businesses would regulate themselves for the good of all, and
  • Social goals could be more effectively achieved by using market forces. [1]

In concert with their economic and political theories, plutocratic economics’ proponents (aka neoliberals) pushed to eliminate government regulation, stop anti-trust enforcement (which had limited the size and marketplace power of companies), reduce progressive taxation, and dramatically weaken support for workers and the economic safety net (including the minimum wage, unemployment benefits, unions, and public assistance for the poor).

Deregulation of businesses has failed more often than not, perhaps most notably in the financial industry. There, deregulation led to a series of financial scandals and collapses since the 1970s including the Savings and Loan crisis, the Enron scandal and collapse, the bursting of the Dot-com bubble, and, of course, the 2008 financial industry collapse and Great Recession. Today, we are left with a handful of bigger than ever, too big to fail, financial corporations that still have taxpayer insurance and present a significant risk to our economy.

Electricity deregulation has, contrary to the promises, raised costs for consumers, failed to stimulate green power generation, failed to modernize and strengthen the power transmission grid, and failed to provide meaningful choice to consumers.

Airline deregulation has produced bankruptcies at every major U.S. airline, resulting in cuts in workers’ compensation and in many cases costing workers their pensions. In the airline industry and elsewhere, the federal government and taxpayers, through the Pension Benefit Guaranty Corporation, have frequently had to step in to pay pension benefits to workers of corporations that declared bankruptcy. Although airline ticket prices declined somewhat after deregulation, customers face a bewildering fare system, shrinking seats and legroom, declining food service and other benefits, increasing add-on costs for luggage and even seats, fewer non-stop flights, and exorbitant penalties when plans and tickets must be changed. Studies have found that fares declined more in the 20 years before deregulation than in the 20 years afterwards, in part because more fuel-efficient planes have been the primary source of cost-savings for the airlines. [2]

Deregulation of the fossil fuel industry has led to huge oil spills into our water and onto our land, as well as accidents that have caused huge fires with the loss of lives and toxic smoke at refineries and oil platforms at sea.

Rather than the increased competition and better deals for consumers that the neoliberals promised, anti-competitive market concentration has grown – and continues to do so – with consumers and workers ending up worse off. The number of mergers has increased from 2,308 in 1985 to 15,361 in 2017. [3] In industry after industry, without anti-trust enforcement to prevent it, monopolies or near monopolies have emerged. Large companies frequently buy up innovative competitors or crush them in the marketplace. In some cases, rather than using their innovations, competitors are simply eliminated after being bought.

For example, in the technology sector, the giants, Google, Amazon, and Facebook, use their market power, control of Internet platforms, and superior access to consumer data and other resources to out-compete or steal the markets of potential rivals. [4] They use theoretically illegal predatory pricing – the selling of goods and services at below cost – and their ability to sustain financial losses in the short-term to drive competitors out of business. [5] The financial services and airline industries are also highly concentrated, along with the beer, health insurance, and medical devices industries, to highlight a few. The telecommunications, telephone / smart phone, and entertainment industries have all experienced substantial concentration with little consumer-benefiting competition.

Market concentration makes it hard for new businesses to enter the market and for small businesses to compete because suppliers and customers are tied to the dominant firms in the market. Dominant firms increase profits not by increasing efficiency, but by minimizing employees’ compensation; reducing investment in research, development, and productivity improvement; and driving down costs by using their marketplace power to squeeze suppliers. [6]

Plutocratic economics has resulted in anti-competitive consolidation, resulting in many industries with a few large, dominant companies. This does not stimulate economic growth as without competition, companies control prices, hire fewer workers, produce less, and pocket more in profits for executives and owners. [7] Huge rewards have gone to large companies, their executives, and big shareholders. As a result, economic inequality has grown sharply, workers’ wages have stagnated, the middle class has been decimated, and the number of low wage workers struggling to survive has grown substantially.

Market concentration is not good for the economy, for workers, nor for consumers. It reduces healthy competition, decreasing the incentives for innovation and investment to keep up with competitors. It depresses wages and worker mobility because there are fewer employers to choose from. As a result, economic security has disappeared for many workers and much of the middle class. Furthermore, market concentration and marketplace power have reduced entrepreneurship and the number of start-ups. [8]

Concentrated economic power in the marketplace also leads to concentrated political power for large companies and their wealthy executives and shareholders. The result is a self-reinforcing feedback loop where political power produces policies that further expand and entrench marketplace power and economic inequality.

Subsequent posts will summarize other failures of neoliberalism and plutocratic economics.

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

[2]      Kuttner, R., 6/25/19, see above

[3]      Abdela, A., & Steinbaum, M., Sept. 2018, “The United States has a market concentration problem,” The Roosevelt Institute (https://www.ftc.gov/system/files/documents/public_comments/2018/09/ftc-2018-0074-d-0042-155544.pdf)

[4]      Kuttner, R., 6/25/19, see above

[5]      Sussman, S., July/August 2019, “Superpredators,” Washington Monthly (https://washingtonmonthly.com/magazine/july-august-2019/superpredators/)

[6]      Abdela, A., & Steinbaum, M., Sept. 2018, see above

[7]      Shambaugh, J., Nunn, R., Breitwieser, A., & Liu, P., 6/13/18, “The state of competition and dynamism: Facts about concentration, start-ups, and related policies,” Brookings (https://www.brookings.edu/research/the-state-of-competition-and-dynamism-facts-about-concentration-start-ups-and-related-policies/)

[8]      Shambaugh, J., Nunn, R., Breitwieser, A., & Liu, P., 6/13/18, see above

DRUG COMPANY PRICE GOUGING: THE INSULIN CASE

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

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

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

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

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

Estimates of the cost to produce a vial of insulin range from $2.28 to $6.16 depending on the version of insulin and other factors, [3] so the $300 retail cost represents a huge mark-up and huge profits for the drug makers. Until the 1970s, the price of insulin stayed relatively low. In the 1940s the U.S. Department of Justice leveled small anti-trust fines on entities in the Lilly supply chain, indicating the U.S. regulators would intervene if prices were jacked up. [4]

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

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

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

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

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

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

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

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

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

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

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

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

REVERSING SUPREME COURT DECISIONS

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

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

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

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

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

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

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

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

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

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

THE NOT CONSERVATIVE AND NOT IMPARTIAL SUPREME COURT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WHY WE NEED EFFECTIVE GOVERNMENT REGULATION

The need for effective government regulation has been highlighted by recent events including the crash of an airliner in Africa and a mass shooting in New Zealand. We rely on federal regulators to keep us safe and to make informed and independent decisions about the safety of consumer products and services. Deregulation and privatization over the past 40 years, which have accelerated in recent years, have weakened federal regulation and increased risks for consumers and the public.

The Federal Aviation Administration’s (FAA) mission is to keep air travel safe. However, after the crash of a Boeing 737 in Africa, the second for that model airplane in four months, the FAA did not order this plane to be grounded, even though virtually every other airplane regulator in the world did. President Trump, of all people, overruled the FAA and ordered the plane to be temporarily grounded.

Because of the weakening of the FAA and privatization of some of its functions, the FAA relies on Boeing employees to certify that Boeing planes are safe. It’s hard to imagine a more obvious conflict of interest or lack of independent decision making, when the public’s safety should be the sole decision-making criterion.

The FAA’s regulatory mission has been compromised, at least in part, because Boeing is very active politically. It spent $15 million on lobbying in 2018. Its political action committee and employees have donated over $8 million to the election campaigns of members of Congress and presidential candidates since 2016. Trump’s decision was somewhat surprising because Boeing’s president and CEO frequently visits with Trump at his Mar-a-Lago resort and at the White House. He also gave $1 million to Trump’s inaugural committee. A former Boeing executive has also been appointed acting Secretary of Defense by Trump. [1] [2] All these activities by Boeing and its executives are meant to increase its influence over policy makers who oversee the FAA and its budget.

On a different front, Facebook allowed a mass shooting by a White supremacist in New Zealand to be live streamed and widely viewed over its platform. YouTube / Google and Twitter were guilty of allowing this shocking video to be broadly shared. Despite safeguards these companies claim to have in place to prevent this, it took them many hours to remove this video from their platforms. And this isn’t the first time violent, disturbing videos have been widely shared on these platforms. Furthermore, Facebook had been used by the shooter and other like-minded individuals to communicate and share ideas and plans. [3] [4]

Facebook has also faced strong criticism for its repeated failures to protect the privacy of individuals’ data – even after it had promised regulators that it would do so, including in a 2011 consent agreement with the Federal Trade Commission. [5] It has also faced criticism for allowing the spread of false information and inflammatory, racist, bigoted, and terrorist messaging by individuals and groups who were able to establish accounts on Facebook often with false identities or to hijack the accounts of legitimate Facebook users. It has also allowed groups that traffic in such mindsets and mis-information to flourish on its platform, exacerbating extremism and societal divisions, tensions, and hatred. [6]

Finally, Facebook blocked an advertisement by presidential candidate Elizabeth Warren that promoted her policy proposal to regulate and break up huge, monopolistic technology corporations, such as Facebook. Facebook relented and let the advertisement run after a firestorm of criticism.

Clearly, Facebook and other social media platforms need better and stronger government regulation. Government regulators need to figure out how to better protect citizens from mis-use of personal information; on-line sharing of violent videos, inflammatory content, and false information; discrimination by platform operators; and hackers, bullies, and trolls. Ultimately, if regulators can’t get these companies to correct these problems, the social media companies should be forced to shutdown services they can’t run responsibly, such as live-stream video sharing.

As a third example, the Consumer Financial Protection Bureau (CFPB) was created in the aftermath of the 2008 financial collapse in which millions of Americans lost their homes, their savings, and/or their jobs. The collapse occurred because Wall St. financial firms were weakly regulated and were able to engage in fraud and speculative investing that lost huge amounts of money. [7] The CFPB is an example of a federal regulator that was created in the wake of a huge scandal but is now being hampered and weakened by elected officials in response to campaign contributions and heavy lobbying from regulated industries. (See previous posts here, here, here, and here for more background.)

Recently, President Trump and many members of Congress, especially Republicans but including some Democrats, have been working to roll back regulation of payday lenders that the CFPB spent five years carefully crafting. These lenders exploit financially stressed individuals who need a short-term loan until their next payday. The lenders charge annual interest rates as high as 400% and make loans they know the individual is unlikely to be able to pay back on time. When the borrower defaults, the lender then renews the loan (often again and again), typically with additional fees each time, capturing the borrower as a perpetual revenue stream. The payday lending industry makes most of its profits from these financially distressed and desperate repeat borrowers. [8] [9]

Clearly, we need the CFPB to protect consumers from abusive, predatory, and fraudulent behavior by financial companies and to protect our economy from the likelihood of another financial collapse like the one in 2008.

We rely on, or perhaps at this point in time I should say that we should be able to rely on, these and other regulators, such as the Consumer Product Safety Commission, the Environmental Protection Agency, and the Department of Education, to protect us. However, due to regulatory failures, we are increasingly experiencing dangerous consumer products from manufacturers and importers, serious pollutants in our air and water, and fraudulent, for-profit colleges. Weakened federal regulators and increased influence of regulated industries over the regulators are to blame.

We, as citizens and voters in a democracy, and our elected representatives need to realize how important strong, independent regulation is to our health and safety. This is important to us individually and to the functioning of our economy. Regulators’ sole focus must be to protect the health and safety of consumers, workers, and the public. They must be truly independent of the industries they regulate and must have the necessary resources to effectively carry out their responsibilities.

[1]      Robinson, M. S., 3/15/19, “We shouldn’t depend on Boeing to tell us whether Boeing planes are safe to fly,” The Boston Globe

[2]      Lardner, R., & Lemire, J., 3/14/19, “Boeing packs massive lobbying arm,” The Boston Globe from the Associated Press

[3]      Editorial, 3/15/19, “New Zealand mosque attack should be a wake up call for big tech,” The Boston Globe

[4]      Pham, S., 3/15/19, “New Zealand shooting video,” CNN Business

[5]      LaForgia, M., & Rosenberg, M., 3/14/19, “US aims probe at Facebook’s data-sharing,” The Boston Globe from The New York Times

[6]      Schiffrin, A., Winter 2019, “The digital destruction of democracy,” The American Prospect

[7]      Warren, E., 9/17/18, “10 years after Lehman collapse, Washington is back to its old tricks,” The Boston Globe

[8]      Sweet, K., 10/27/18, “Federal agency eyes looser payday loan rules,” The Boston Globe from the Associated Press

[9]      Gordon, M., 3/8/19, “Fresh scrutiny for consumer watchdog,” The Boston Globe from t/he Associated Press

PRIVATE WEALTH IS MADE ON PUBLIC INVESTMENTS

Private companies and individuals benefit from public investments in many ways. You may remember Senator Elizabeth Warren saying back in 2014 that “Nobody got rich on their own. Nobody. People worked hard, they built a business, God bless, but they moved their goods on roads the rest of us helped build, they hired employees the rest of us helped educate, they plugged into a power grid the rest of us helped build,” they are protected by police and firefighters that we all pay for, and so forth. [1]

Clearly, successful companies and individuals owe their success in part to public infrastructure and investments. Therefore, they should pay their fair share in taxes to support public spending on both the infrastructure they depend on and also to invest in the future so other individuals and companies can succeed as they did.

Another way that public investment supports and benefits private individuals and companies is that the federal government invests heavily in basic research that is then used by the private sector to develop products and services.

One example of this is that the National Institutes of Health (NIH) spends $30 billion each year on drug research and development (R&D). The pharmaceutical industry routinely justifies the high prices of drugs by citing the high cost of R&D to bring new drugs to market. This rationale is overstated from many perspectives (see my previous blog on drug pricing), but Representative Ocasio-Cortez shed new light on this overblown claim in a hearing in Congress earlier this year.

Rep. Ocasio-Cortez asked Dr. Aaron Kesselheim [2] whether the public was receiving any return on the investments in drug R&D made by the NIH when they led to highly profitable drugs. His answer, “No, … when those products are … handed off to a for-profit company, there aren’t licensing deals that bring money back into the coffers of the NIH.” [3]

Every one of the 210 new drugs approved by the Food and Drug Administration (FDA) between 2010 and 2016 benefited from NIH funded R&D.

The U.S. government is the biggest venture capital investor in the world. Examples outside of pharmaceuticals abound. The Internet grew out of the 1960s ARAPNET program funded by the Defense Department. Touchscreen technology was developed at a publicly-funded university using National Science Foundation grants. GPS technology began as a 1970s Defense Department program. Voice recognition technology came out of a project of the Defense Advanced Research Projects Agency (DARPA). Every one of the 12 key technologies of smart phones grew out of government-funded research projects. The Department of Energy has made over $35 billion in loans to high-risk clean technology projects, including Tesla’s development of electric cars. [4]

Unfortunately, the U.S. public is not getting the return it deserves on these investments. One way to get a public return is to tax the profits of companies using technologies in which the government has invested. Currently however, some of these companies pay very little or nothing in taxes. Furthermore, the 2017 tax cuts reduced corporate taxes to a near-record low. In addition to taxes, in countries such as Germany and Finland, the government obtains partial ownership or royalty payments from companies that benefit from public investments.

Part of the reason the public does not get a return on public investments in the U.S. is that our political system has been skewed to favor the interests of the private sector through our campaign finance system, lobbying, and the revolving door between government and private sector jobs. For example, over the last ten years, the pharmaceutical industry has spent almost $2.5 billion lobbying Congress. This includes hundreds of millions of dollars spent to influence the drug coverage provisions of the Affordable Care Act, which produce about $35 billion in additional profits for the pharmaceutical corporations.

Our elected officials and government regulators need to begin insisting that private companies and individuals provide the public – the taxpayers – with a reasonable return on public investments, including everything from roads, bridges, and air transportation, to our education system, to research and development. Fair taxation is one way to do this, but other avenues, such as partial ownership and royalty payments, should be explored as well.

[1]      Senator Elizabeth Warren, August 2012, campaign event https://www.youtube.com/watch?v=AHFHznu-N-M (30 seconds in)

[2]      Dr. Kesselheim is a doctor and a lawyer. He is an Associate Professor of Medicine at Harvard Medical School. He is an expert on the effects of intellectual property laws and regulatory policies on pharmaceutical development, the drug approval process, the costs, availability, and use of prescription drugs, and bioethics. (https://bioethics.hms.harvard.edu/person/faculty-members/aaron-kesselheim)

[3]      Karma, R., 3/6/19, “Alexandria Ocasio-Cortez and the myth of American innovation,” The American Prospect (https://prospect.org/article/alexandria-ocasio-cortez-and-myth-american-innovation)

[4]      Karma, R., 3/6/19, see above

THE DEPARTMENT OF DEFENSE’S MASSIVE FINANCIAL FRAUD

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CONTROLLING DRUG PRICES

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

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

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

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

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

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

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

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

ELIMINATING NUCLEAR WEAPONS

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

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

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

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

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

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

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

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

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

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

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

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

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

ELECTION AND ETHICS REFORM

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

DEVELOPING AN AGENDA FOR THE DEMOCRATIC HOUSE

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

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

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

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

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

CONSUMER FINANCE PROTECTIONS UNDER ATTACK

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE DISMANTLING OF POST-CRASH FINANCIAL INDUSTRY REFORMS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

STOPPING GERRYMANDERING; RESTORING DEMOCRACY

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

Gerrymandering can be stopped through multiple strategies:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE UNDERMINING OF THE INDEPENDENCE OF OUR JUDICIARY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

LOCAL POLICIES SERVING RESIDENTS BLOCKED BY RIGHT WING CONSERVATIVES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE UNDERMINING OF THE 2020 CENSUS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ICE IS ENGAGING IN TERRORISM

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

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

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

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

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

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

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

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

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

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

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

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

TAX CUTS FOR THE WEALTHY DON’T STIMULATE THE ECONOMY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

FIGHTING TAX AVOIDANCE BY THE WEALTHY

A recent Op Ed in the Boston Globe caught my attention and I couldn’t resist sharing it. If you want to understand how wealthy individuals and corporations use off-shore tax havens to avoid paying their fair share of taxes and what we can do about it, this article provides answers. [1]

  • The best estimate is that 11.5% of personal wealth (i.e., $8.7 trillion), globally, is stashed in off-shore tax havens.
  • This costs the U.S. government an estimated $32 billion a year in lost tax revenue from individuals. (Other countries’ governments probably lose $140 billion a year in tax revenue.)
  • In addition, corporations dodge about $70 billion a year in U.S. taxes by using off-shore tax havens. This represents about 20% (one-fifth) of what the U.S. does collect in corporate income taxes each year. (Other countries’ governments probably lose $60 billion a year in tax revenue.)
  • The roughly $100 billion per year the U.S. is losing to off-shore tax dodging is what the federal government spends on Food Stamps, other nutrition programs (such as school lunches), the Children’s Health Insurance Program (CHIP), Head Start, child care subsidies, and welfare COMBINED.
  • Taxing corporate income based on what is called formulary apportionment would stop this tax avoidance. Under this approach, a corporation would pay U.S. taxes based on the portion of its sales that are in the U.S., regardless of any accounting gimmicks or other strategies that made it look like the income from those sales was in another country. This tax approach is in wide use today; many states use it to calculate state corporate income taxes. It is a tax approach that has been used since the days of multi-state railroad construction in the 1800s.
  • Stopping individuals from using offshore accounts to avoid paying taxes would require international cooperation. Today, the IRS has a comprehensive system for tracking earned income. Even if you move from state to state or out of the country, the income you earn is reported to the IRS and you pay income taxes based on your total income. States with income taxes track income that you earn out-of-state and require you to pay state income tax on it. A similar approach should be applied to tracking other kinds of income and ownership of financial securities or assets that produce income. The U.S. passed the Foreign Account Tax Compliance Act in 2010 that requires foreign banks, including the notoriously secretive Swiss and Cayman Island banks, to share information with the IRS on accounts held by American clients. This is a starting point for the international cooperation needed to reduce tax dodging by the wealthy that hurts the U.S. and many other countries.

Tax avoidance by the wealthy contributes to the astronomical and growing inequality of wealth and income. It also means that everyone else must pay more in taxes to make up for the lost taxes when wealthy individuals and corporations don’t pay their fair share.

[1]      Scharfenberg, D., 1/21/18, “A world without tax havens,” The Boston Globe

FIGHTING THE OPIOID EPIDEMIC

A recent Op Ed in the Boston Globe caught my attention and I couldn’t resist sharing. If you want to know what we can and should do to truly fight the opioid epidemic, it provides the answers.

Here’s a summary of its recommendations for fighting the opioid epidemic: [1]

  • To seriously tackle the opioid epidemic, the federal government needs to spend $4 – $5 billion a year on the effort for the next 10 years.
  • Laws and regulations at the state and federal levels must ensure that health insurance covers addiction treatment, mental health services, and other services that will reduce opioid addiction and successfully treat those who experience addiction.
  • Medicaid, the Affordable Care Act (aka Obama Care), and perhaps other initiatives need to ensure that as many Americans as possible have health insurance to pay for treatment.
  • Through oversight and research, addiction treatment must be as effective as possible.
  • Pharmaceutical corporations must be held accountable, financially and otherwise, for their significant role in creating the opioid addiction crisis. They should be required to make substantial contributions to treatment costs, including making addiction-related medications available and affordable.
  • Federal laws and regulations should prohibit direct-to-consumer marketing of prescription drugs. Only one other country in the world allows this and it is a relatively recent phenomenon in the U.S. The big pharmaceutical corporations spend over $5 billion a year advertising drugs, increasing sales but leading to inappropriate use and overuse of drugs.
  • Everyone, in the public sector and in private life, should address addiction as a health and public health problem, not a criminal justice issue, and should work to de-stigmatize it.
  • The federal government needs to increase the effectiveness of efforts to reduce the smuggling of opioids into the country, including diplomatic efforts with Mexico and China, particularly focused on stopping the flow of Fentanyl into the U.S.

[1]      Tamasi, R.V., 1/22/18, “How to fight the opioid epidemic,” The Boston Globe

THE GREED OF THE PHARMACEUTICAL INDUSTRY Part 2

The pharmaceutical industry can engage in the unethical and sometimes illegal practices that I’ve highlighted in previous posts [1] because they have:

  • Monopolistic power in the market place due to limited competition,
  • An absence of government regulation, and
  • Political power to block or weaken regulation and oversight due to campaign spending, lobbying, and the revolving door of personnel moving between these corporations and government regulatory positions.

The result is that the greed of the executives of these corporations is unconstrained by market place competition, government regulations, their ethics, or, in some cases, even legality. The examples presented in my previous posts have not been isolated incidents or past bad behavior that has been rectified. This behavior by the pharmaceutical corporations is an on-going pattern.

A 2010 study found that the U.S. prices of prescription drugs were, on average, double what those same drugs cost in Canada, Australia, and the United Kingdom. And things have only gotten worse since then. As a result, one out of five Americans was unable to afford medicines prescribed by their doctors, while the five largest drug corporations had profits of a combined $50 billion in 2015. As Bernie Sanders wrote, “people go to the doctor because they are sick, they get a diagnosis from their doctor, but they can’t afford the treatment. Then they get sicker. Does this make any sense to anyone?” [2]

As part of their price gouging strategies, drug companies will go to great lengths to block competition. For example, Allergan corporation has transferred six drug patents to the St. Regis Mohawk Indian tribe. Because the tribe is a sovereign entity, it is immune from a type of challenge to drug patents that low-cost generic drug makers sometimes use to get the right to produce a generic version of a drug. It is expected that this will become a popular strategy to delay the availability of cheaper, generic versions of drugs, unless Congress intervenes and changes the law. Allergan will pay the tribe only $15 million a year under the deal for the right to continue to sell the drugs, which had $1.4 billion in sales last year.

For a different drug, Allergan tried to avoid competition from a generic version by pulling the drug from the market and forcing patients to buy a new, more expensive version. This move was blocked by a federal appeals court. By the way, Allergan has also moved its headquarters to Ireland to avoid U.S. taxes. [3]

There is no reason to believe that the behavior of pharmaceutical corporations is going to change on its own. Clearly, the free market and competition are not going to stop it. Public outrage, negative publicity, and criticism from elected officials may blunt the worst of the behavior, but it will not stop it.

The behavior of the pharmaceutical industry (which is evident in other industries like the financial industry as well) is not the way the economy should work in a democracy. This behavior is that of a corporatocracy, where large corporations are in control of both our (supposedly free) market place and our (supposedly democratic) government.

Only strong legislation from Congress and strong leadership from regulatory agencies in the executive branch of government will stop these harmful and greedy business practices of the pharmaceutical corporations (and other large corporations). The opioid crisis and the fueling of it by illegal and irresponsible marketing of narcotic prescription drugs has made this absolutely clear.

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

  • Support strong legislation to regulate the pharmaceutical industry,
  • Only confirm executive branch appointees (include the Secretary of Health and Human Services) who have a clear track record of supporting strong regulation of the drug corporations, including their drug pricing and marketing of narcotics, and
  • Pass legislation that not only allows, but requires, Medicare and insurance companies participating in the Affordable Care Act to negotiate drug prices with suppliers to receive the best price based on what other countries pay. A good place to start would be to ask them if they support the Medicare Drug Price Negotiation Act of 2017, which would allow the government to negotiate directly with drug companies to lower drug prices for Medicare beneficiaries, much like the Veterans Health Administration and Medicaid do today.

As we approach the Congressional and state level elections of 2018, I encourage you to scrutinize and ask about candidates’ positions on these issues. Then we can elect candidates who support strong regulation of drug corporations, who will take meaningful steps to control drug prices, and who will seriously tackle the opioid crisis and the pharmaceutical industry practices that have led to it.

 

[1]      You can go to any of the blog posts on my site and click on the categories in the right hand column to find other posts on corporate behavior or corporate power and influence to read more about unethical and illegal practices by large corporations.

[2]      Sanders, B., 2016, “Our revolution: A future to believe in,” St. Martin’s Press, NY, NY. Page 327.

[3]      Silverman, E., 9/19/17, “This CEO’s latest move is raiding eyebrows,” The Boston Globe

THE GREED OF THE PHARMACEUTICAL INDUSTRY Part 1

The unconstrained greed of pharmaceutical corporations is abundantly clear on multiple fronts:

  • Huge price increases on existing drugs with no reasonable justification (See my previous posts on this here and here.)
  • Inhibiting competition however possible (See my previous posts that include this topic here and here.)
  • Blocking regulation and oversight (See my previous post here.)
  • Selling and distributing narcotics that are clearly being diverted to the black market (See my previous posts on this here, here, and here.)

Despite Trump’s campaign rhetoric about bringing down the cost of drugs, his administration has not taken any significant steps to make drugs more affordable. Roughly 45 million Americans don’t buy drugs that are prescribed for them because they can’t afford them.

President Trump has nominated Alex Azar to be Secretary of Health and Human Services. Azar was the CEO of the drug corporation Eli Lilly when it increased the price of an insulin product from $74 to $269. In Sweden, the same medicine is sold for the (still profitable) price of $18.38. Insulin is the life-saving drug needed by the 30 million Americans with diabetes. [1]

The production of insulin is effectively controlled by a cartel of three drug corporations, Eli Lilly, Novo Nordisk, and Sanofi, that produce more than 90% of the insulin products in the world. Because of the inflated prices in the U.S., the typical American with Type 1 diabetes spends about $571 each month on insulin. Many can’t afford the full amount they need, so they risk serious health consequences by stretching their supply and under-medicating their diabetes. Some die as a result. Worldwide, the leading cause of death for a child with Type 1 diabetes is lack of insulin.

The pharmaceutical corporations’ typical response to criticism of drug price increases is that they need the increases to pay for research and development (R&D). However, this is simply not true. [2] Insulin, for example, was developed at a publicly funded lab at the University of Toronto in 1921. Eli Lilly was a small company when it signed an agreement with the University for the right to sell insulin in 1922. Clearly, greed, not R&D costs, is fueling the insulin price increases.

Today, the U.S. National Institute of Health (NIH) annually spends $34 billion to fund university research. When researchers develop new drugs, corporate drug manufacturers typically purchase the rights to them, tweak them, patent them, and then market them to maximize their profits. The U.S. needs to legislate a new, public health-focused drug licensing system that prioritizes access and affordability, along with innovation, instead of profit.

Another example of price gouging by drug corporations comes from the response to the opioid crisis and the increased demand for the drug naloxone, the antidote for a narcotic overdose. With over 60,000 Americans dying of drug overdoses each year, emergency responders, not-for-profit human service organizations, and family members want to have naloxone readily available to save lives. However, the drug manufacturers have responded by jacking up the prices of naloxone and its various delivery systems. Kaleo corporation has raised the price of its easy-to-use, naloxone auto-injector from $690 in 2014 to $4,500 in 2016. Amphastar Pharmaceuticals has raised its wholesale price for naloxone from $20 to $40. Adapt Pharma’s new Narcan nasal spray came on the market in 2015 at $150. These prices and the opioid crisis have increased the drug corporations’ revenue from sales of naloxone from $12 million in 2011 to $274 million in 2016. Economics, specifically economies of scale, would suggest that the price should be going down with increased demand, not up.

As prices for naloxone have risen, first responders and community-based non-profits who provide services to people with drug problems, who are on the front-lines of the opioid crisis, are finding that their tight budgets do not allow them to have the number of naloxone doses they’d like to have. [3] Naloxone has been available since 1985, although new delivery vehicles, such as a nasal spray, have been developed recently. Public funding through the NIH has contributed to the development of and conducting of clinical trials for some of these products. Only five corporations make naloxone and they have been working to block competitors. One of them is Mylan Pharmaceuticals, infamous for its price gouging with its EpiPen product.

Some drug companies are simply investors, buying the rights to drugs, often life-saving ones, that they believe can deliver big profits, usually through dramatic price increases. A recent example is NextSource, a start-up with no research and development costs. In 2013, it bought the rights to a cancer treatment drug with low demand and therefore a single producer. It was priced at $50 per dose. In three years, NextSource has raised the price to $768 per dose.

Soaring cancer drug costs are driving the cost of treatment well over $100,000 a year in many cases. As a result, some patients delay treatment to figure out how they can get the treatments paid for. A study earlier this year found that 24 cancer drugs had, on average, quadrupled in price over the last 8 years. [4]

In an interesting example of how our corporate media sometimes cover increasing drug prices – putting a positive spin on outrageous corporate behavior – The Boston Globe recently had a big headline on the front page of its Business Section that read “Price hikes on top-selling drugs were a lot smaller this year.” The article began with “Average annual price increases have declined at least four years in a row for 20 of America’s top-selling brand-name prescription drugs.” Nowhere in the article does it mention that the 6.9% increase over the last year is three times the rate of inflation or that over the last 5 years the cost of these drugs is up 66%. On a subsequent page the article does note that “these drugs have increased by an average of 213 percent since their launch, well out-pacing inflation.” It also notes that many of these drugs are very expensive with seven having an average, annual cost per patient of between $59,000 and $92,000. [5]

In my next post, I’ll discuss why the pharmaceutical corporations can get away with this price gouging and what we can do about it.

[1]      Zaitchik, A., 11/28/17, “Beyond the planet of the pharma bros,” The American Prospect (http://prospect.org/article/beyond-planet-pharma-bros)

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

[3]      Denvir, D., 12/15/17, “These pharmaceutical companies are making a killing off the opioid crisis,” The Nation (https://www.thenation.com/article/these-pharmaceutical-companies-are-making-a-killing-off-the-opioid-crisis/)

[4]      Berr, J., 12/26/17, “Price of 40-year-old cancer drug hiked 1,400% by new owners,” CBS News, MoneyWatch (https://www.cbsnews.com/news/cancer-drug-lomustine-price-hiked-1400-percent-by-new-owners/)

[5]      Robbins, R., 12/29/17, “Price hikes on top-selling drugs were a lot smaller this year,” The Boston Globe

U.S. FAILS TO PROSECUTE PRESCRIPTION OPIOID DISTRIBUTOR

After years of work by U.S. Drug Enforcement Agency (DEA) investigators building a case against a major drug distributor for fraudulently shipping millions of prescription opioid pills, high-ranking lawyers at the DEA and the US Department of Justice (DOJ) recently decided to settle the case and not pursue criminal charges. Instead, the lawyers settled for a $150 million fine (from a corporation with roughly $200 billion per year in revenue) and a temporary suspension of shipments of narcotics from four of its 30 distribution centers. The lenient settlement was agreed to despite the corporation having promised in a 2008 settlement to be diligent in preventing fraudulent shipments of controlled substances. However, rather than improving its oversight of narcotics shipments, its fraudulent shipments increased. [1]

The DEA team had compelling evidence that McKesson Corporation, the fifth largest public company in the U.S., had fulfilled and failed to report suspicious orders for millions of highly addictive painkillers from pharmacies, including Internet pharmacies. The nationwide DEA team, working with U.S. attorney’s offices in 11 states, wanted to fine the corporation over $1 billion and pursue criminal charges against the corporation and perhaps some of its executives. A senior DEA official stated that the corporation could have been put out of business through an indictment or a very large fine.

But when the team turned over the evidence to top lawyers at DEA and DOJ, the lawyers negotiated a settlement with the corporation and never even discussed possible criminal charges. They even allowed McKesson to keep its $31 billion federal government contract to supply drugs to the Veterans’ Administration, federal prisons, and the Indian Health Service.

Meanwhile, a pharmacy owner in a small town in Colorado that McKesson supplied was found guilty of drug trafficking and was sentenced to 15 years in prison. From 2008 (when McKesson had settled the first set of charges) to 2011, McKesson’s shipments of oxycodone (the narcotic drug that is OxyContin) to this small-town pharmacy had increased 15-fold.

The DEA team had convincing evidence that McKesson’s activities had fueled the nationwide opioid drug crisis. The $150 million fine was a slap on the wrist for a $200 billion corporation that paid its top executive $100 million last year, has 76,000 employees, and makes $100 million a week in profits. The DEA team felt insulted, undermined, and was demoralized.

This is another example of a powerful corporation, as well as its senior executives, getting off with a slap on the wrist for significant criminal activity that harmed hundreds of thousands of Americans. Purdue Pharma, the major player in the prescription opioid drug scandal, also has (so far) gotten off with a slap or two on the wrist, despite the deaths of over 200,000 Americans. (See my previous posts on Purdue Pharma here and here.) The Wall St. financial corporations and their executives have also gotten off with slaps on the wrist despite a long trail of criminal activity across many years and many business lines.

One must ask why this is happening today when in the late 1980s, during the savings and loan (S&L) bank scandal, 750 S&Ls were forced into bankruptcy and out-of-business and over 1,000 of their executives went to jail.

Since the 1980s, corporations have grown in size and power, while government regulation and oversight have been weakened. As corporations have grown, they have gained power in the economy and in the halls of government. In the economy, their size has led to monopolistic power, a lack of competition, and, therefore, the power to control prices and make huge profits.

In the halls of government, the deregulation of campaign financing now allows wealthy corporations and individuals (often business executives) to spend hundreds of millions of dollars on candidates’ campaigns for legislative, executive, and judicial branch offices. As a result, elected officials – legislators, governors, presidents, and judges – are indebted to wealthy donors. These wealthy special interests further influence government decision making by spending millions of dollars on lobbying and by having individuals move back and forth between government roles and private sector jobs, in what is referred to as the revolving door. An example of this is that one of McKesson’s lawyers negotiating the settlement with the DEA and DOJ was a former top DEA official.

Therefore, government decisions tend to favor the interests of wealthy corporations and individuals. Examples include the lack of meaningful punishment for serious wrong doing, favorable tax policies, a failure to protect the public from rip offs in the market place, and weak regulation of the safety of consumer products and our air and water.

In this environment of market place power and weak regulation, the greed of large corporations and their executives is unconstrained and ethics, morality, and often legality get pushed aside. The public interest is overwhelmed by the power of wealthy special interests. This power imbalance is exacerbated by the growing inequality of income and wealth.

We need to elect officials who will represent the public interest and not wealthy corporations and individuals. We also need to let our elected officials know that we are watching and that we know when they are doing the bidding of the wealthy interests, such as in the recent tax bill. And we need to hold them accountable by being informed and voting. That alone could create dramatic change in our country if more people did so.

Only 53% of eligible voters voted in the last presidential election. Many of them were understandably voting against the tilt in favor of the wealthy in Washington. However, they were hoodwinked by the promises of a con man who, now that he is in office, is tilting the scales even further in favor of the wealthy.

Hopefully, this election woke people up to the fact that democracy is NOT a spectator sport. We need a broad, informed, and engaged electorate for our democracy to deliver on its promise of government of, by, and for the people.

[1]      Bernstein, L., & Higham, S., 12/17/17, “‘We feel like our system was hijacked’: DEA agents say a huge opioid case ended in a whimper,” The Washington Post

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)

THE ANTI-WORKER AGENDA OF THE TRUMP ADMINISTRATION

Despite Trump’s pro-American worker rhetoric, his administration’s anti-worker actions speak louder than his words. His administration’s rollback of regulations protecting workers’ health, safety, and pay has been called “stunning” and “staggering” by labor policy experts.

One example is the Trump Administration’s decision not to follow through and update the Overtime Rule as proposed by the Obama Administration. The Overtime Rule sets the minimum amount salaried employees can be paid and not be eligible for overtime pay when they work more than 40 hours in a week. The intent of the Overtime Rule was to identify employees who were managers or professionals who could reasonably be expected to work more than 40 hours in a week and not get additional pay for overtime. The current overtime cutoff amount is only $23,660 and has not been updated for over a decade. It’s actually below the poverty line for a family of four. This lets employers pay low-wage workers a salary, rather than on an hourly basis, and thereby avoid having to pay overtime. The failure to update this dollar amount is an important contributor to the stagnation of wages for low- and middle-income workers.

There appeared to be bi-partisan agreement that the dollar amount should be increased when the Obama administration proposed a new rule raising the threshold to $47,476. Over 4.2 million low-wage workers would have seen an increase in pay or possibly a reduction in work hours as a result. The Trump Administration has abandoned the implementation of the proposed rule. [1]

This will cost low- and middle-wage workers an estimated $1 billion a year in pay.

The Trump Administration has stopped collecting data from large corporations on pay by gender, race, and ethnic background. This data would have allowed the Equal Employment Opportunity Commission to examine pay patterns and look for discriminatory practices. The failure to collect this data will make it harder to document and reduce the stubborn inequities in pay in the US. [2]

Data collection on workplace injuries and deaths has been weakened and made less accessible to the public. This will make it harder for the Occupational Safety and Health Administration and others to identify and respond to unsafe working conditions.

The Trump Administration is rolling back regulation of the trucking industry. Driving a truck is one of the most dangerous jobs in the country; truck accidents account for more than a quarter of all workplace deaths. The Obama Administration had begun an effort to study sleep issues among truckers, given that falling asleep at the wheel is a major cause of accidents. The Trump Administration has halted the study.

The Trump Administration and Congress are also considering allowing federal regulations that require a 30-minute break after 8 hours of driving to override stricter state regulations. For example, California, Colorado, and Kentucky require a 30-minute break every 5 hours. [3]

(Please see my blog post, Repealing or delaying regulations harms workers and the public, here for more examples of the Trump Administration’s rollbacks of regulations that protect workers.)

Trump is nominating people who do not have records of protecting workers to key posts in his Administration that are responsible for worker protections. He has nominated Cheryl Stanton to be the administrator of the Department of Labor’s Wage and Hour Division, which is responsible for enforcing wage protection laws. In the past, she has represented corporations accused of under-paying workers. Stanton has also been sued for failing to pay her house cleaners. [4]

Trump has nominated David Zatezalo to be the head of the Mine Safety and Health Administration. Zatezalo is a former coal mining executive whose company was identified as having numerous health and safety violations.

Trump appears to be trying to hide or minimize attention to these nominations and some of his other anti-worker actions by announcing them on Friday afternoons when attention from the media and the public is at its low point for the week.

The Trump Administration’s actions are clearly anti-worker, despite his sometimes contradictory rhetoric. And actions do speak louder than words, even when you announce them at times when you hope people won’t be paying attention.

[1]      Block, S., 9/13/17, “The Trump Administration will always side with corporations over labor,” Moyers & Company (http://billmoyers.com/story/trump-corporations-over-labor/)

[2]      Olen, H., 9/1/17, “The rollback of pro-worker policies since Trump took office is staggering,” The Nation (https://www.thenation.com/article/the-rollback-of-pro-worker-policies-since-trump-took-office-is-staggering/)

[3]      Miller, K., 8/30/17, “Keep on truckin’ – No, seriously, Trump wants you to,” Moyers & Company (http://billmoyers.com/story/keep-truckin-no-seriously-trump-wants/)

[4]      McNicholas, C., & Sanders, S., 9/8/17, “Policy watch: Two more foxes nominated to run hen houses in the Trump administration,” Economic Policy Institute (http://www.epi.org/blog/policy-watch-two-more-foxes-nominated-to-run-hen-houses-in-the-trump-administration/)

IS THE DEMOCRATS’ “BETTER DEAL” A GOOD DEAL?

Congressional Democrats recently announced a package of policy proposals they are calling “A Better Deal.” It is apparently their policy platform for the 2018 Congressional elections and it seeks to re-establish Democrats as the party that stands up for working people. There is much in it for workers to like. (See my previous post here for a summary of it.)

However, some important pieces are missing from A Better Deal. [1] For example, it doesn’t clearly address:

  • Making it easier for workers to unionize and harder for employers to eliminate or prevent unionization. This would strengthen the collective bargaining power of workers so they could better balance the growing power of employers in negotiations over pay and benefits.
  • Creating a more progressive, fairer tax system to address economic inequality and provide the revenue needed for A Better Deal’s programs.
  • Reducing the power of the huge Wall Street financial corporations and the threat they represent to our economy. [2]
  • Reforming the health care system and its out-of-control costs. It doesn’t call for a Medicare-for-All type single-payer insurance system, despite strong evidence that this is the only way to both control costs and improve quality, and despite broad support for Medicare-for-All among the public and from over 100 members of Congress. (See my post here for why single-payer is the only way to address the problems with our health insurance system.)
  • Increasing the transparency of the process for developing trade agreements and eliminating the trade dispute resolution system that favors multi-national corporations and undermines workers, the public, and even national sovereignty. [3]

A Better Deal is viewed by many as timid and underwhelming. It doesn’t clearly renounce growing economic inequality and the greed of corporate executives. It could, for example, propose penalties and/or taxes on corporations where executive pay is over 20 times that of a corporation’s lowest-paid worker or over 20 times the national median wage. This is what the Labour Party in the United Kingdom has proposed. [4] In the US, this would mean penalties or taxes on corporations where an executive is paid over $290,000 and the corporation has a minimum wage employee, or where any executive is paid was over $605,000 (based on 20 times the national median personal income of $30,240). [5]

A Better Deal is a step toward counteracting the frustration of workers and the middle class and the resultant losses Democrats have sustained in recent state and national elections. However, it is not generating much grassroots enthusiasm. Although it is clearly targeting some of the issues raised by Senator Bernie Sanders in his presidential campaign, it is not generating anywhere near the groundswell of grassroots support that Senator Sanders, or for that matter President Trump’s campaign, stimulated. Part of the lack of excitement about A Better Deal has to do with the shortcomings of its policy content and part of it has to do with its presentation.

Calling the proposal “A Better Deal” is not inspiring or visionary, which is what the Democratic Party needs to be if it wants to win elections. Simply saying that its proposal is better than what the Republicans are proposing or than the current status quo is not saying much. “Better” is not enough to get voters excited and enthusiastic enough to turn out and vote. Hillary Clinton lost the presidency because she did not inspire and excite voters. Turnout in the 2016 presidential election was only 53% of eligible voters! If it wants to win the 2018 or subsequent elections, the Democratic Party needs a strong, inspiring message and a good media strategy that will energize people to get out and vote for its candidates.

I’m surprised the Democratic Party didn’t build A Better Deal and its 2018 election strategy on the People’s Budget that has been developed by its Progressive Caucus in the US House. (See my posts on the People’s Budget here and here.) The People’s Budget includes specific proposals for reforming our tax system to increase fairness and to generate the revenue needed to fund the programs it and A Better Deal recommend. The People’s Budget includes a larger program to build the infrastructure America needs and is specific about increases in domestic spending that are needed to support workers and the middle class, as well as to mend our safety net for people who fall on hard times. It also is specific about the need to strengthen workers’ ability to unionize and negotiate with employers for better pay and benefits.

On the other hand, A Better Deal has more specific proposals than the People’s Budget for rolling back provisions in trade treaties that favor multi-national corporations and undermine workers. It also is more specific about the need to restrict foreign countries’ currency manipulation and monopolistic behavior by large corporations (by strengthening anti-trust laws and their enforcement).

If the Democrats could unify in support of a proposal that combined the best elements of A Better Deal and the People’s Budget, and added an unequivocal call for a Medicare-for-All type, single-payer health insurance system, they would have a policy and election agenda that would be truly visionary and inspiring. The country needs leadership focused on a clear commitment to supporting workers and the middle class. The Democrats have a golden opportunity to provide it, but it isn’t yet clear whether they will seize the opportunity.

Clear, consistent promotion of A Better Deal is not yet evident. And actions will speak louder than its words. However, no action on its promises is yet evident in Washington. Its impact, both practically and politically, will depend on:

  • Clearly spelling out the details of its policy proposals and adding missing pieces,
  • Developing a strong message promoting its goals,
  • Taking definitive actions to move its agenda forward, and
  • Generating consistent and enthusiastic support for it from all Democratic members of Congress and the Party leadership.

[1]      Reich, R., 7/28/17, “How much better is the Democrats’ ‘Better Deal’?” Yahoo! News (2 min. video) (https://www.yahoo.com/news/robert-reich-democrats-better-deal-211752649.html)

[2]      Carney, E.N., 7/27/17, “Is the Democratic Party’s ‘Better Deal’ good enough?” The American Prospect (http://prospect.org/article/democratic-party%E2%80%99s-better-deal-good-enough)

[3]      Bernstein, J., & Spielberg, B., 8/17/17, “Democrats’ ‘Better Deal’ on trade is better than what we have now,” The American Prospect (http://prospect.org/article/democrats-better-deal-trade-better-what-we-have-now)

[4]      Pizzigati, S., 7/26/17, “Will Democrats in Congress go bolder or backwards?” Inequality.org (https://inequality.org/great-divide/democrats-congress-need-go-bolder-not-backwards/)

[5]      Wikipedia, retrieved 9/7/17, “Personal income in the United States” (https://en.wikipedia.org/wiki/Personal_income_in_the_United_States)

THE DEMOCRATS’ “A BETTER DEAL”

Congressional Democrats have announced a package of policy proposals they are calling “A Better Deal.” It’s apparently their policy platform for the 2018 Congressional elections and its focus is on re-establishing Democrats as the party that stands up for working people. It proclaims that too many American families feel that the rules of our economy are rigged against them. It notes that incomes and wages are not keeping up with the cost of living for many workers. It states that large corporations, the rich, and other special interests are avoiding paying taxes and meanwhile are spending huge sums of money to influence our elections. Democrats claim that A Better Deal will grow and strengthen the middle class and reverse the failure of so-called trickle-down economic policies (i.e., tax cuts for the wealthy) to do so.

A Better Deal has three overarching goals: [1]

  • Raise the wages and incomes of American workers and create millions of good-paying jobs,
  • Lower the costs of living for families, and
  • Build an economy that gives working Americans the tools to succeed in the 21st Century.

A Better Deal calls for raising the national minimum wage to $15 an hour by 2024 and then increasing it automatically so it keeps up with inflation. A Better Deal promises that Democrats will fight the offshoring of Americans’ jobs by penalizing corporations that move jobs overseas and by cracking down on unfair trade policies of other countries, including currency manipulation. It calls for renegotiating the NAFTA trade agreement with Canada and Mexico to increase US exports and jobs, while also improving wages. Federal contractors who move jobs to foreign countries would be penalized and there would be Buy American requirements in government purchasing.

The Democrat’s plan calls for $1 trillion in federal spending on the infrastructure, such as bridges, roads, railroads, airports, and waterways, that is the transportation backbone of our economy. The plan projects that 15 million good-paying jobs would be created by these investments. It would also support job creation by prioritizing support for small businesses and entrepreneurs over benefits for large corporations. It would invest in research and innovation, as well as making high-speed Internet service available to everyone. It pledges to ensure that workers will be able to “retire with dignity,” by protecting pensions, Social Security, and Medicare.

A Better Deal calls for lowering the costs of drugs, post-secondary education, child care, cable TV and Internet service, and credit cards. It promises a crackdown on big price increases by pharmaceutical corporations as well as their practices that drive up drug costs. Medicare would be allowed to negotiate drug prices (which it is currently barred by law from doing!).

A Better Deal would curtail the monopolistic practices of large corporations that lead to higher prices and reduced consumer choice. It notes that concentrated market power leads to great political power, which has been used by big corporations to obtain beneficial policies from government. Strengthening anti-trust laws and their enforcement are identified as key strategies for achieving these goals. A Better Deal calls for eliminating unlimited and/or undisclosed spending by corporations and the wealthy in our elections, as well as reducing the power and influence of lobbyists and special interests.

A Better Deal promises paid leave for workers when they are sick or when a family situation merits taking time off. Paid leave for a new child or a family member’s illness would be covered. It notes that this will keep families healthy, both medically and financially.

In A Better Deal, Democrats commit to expanding government investment in workers’ access to the education, training, and other tools they need to succeed in the 21st Century. In addition, employers would receive incentives to invest in their workers’ skills and knowledge. Apprenticeships would be expanded and training programs would be better coordinated with businesses’ needs for workers.

There is much in A Better Deal for workers to like. Democrats appear to be recommitting themselves to putting workers first, ahead of monied interests, reversing their mid-1990s decision to cozy up to those with big money to get the funding they needed for their campaigns. Despite its good points, there are notable weaknesses in A Better Deal and its presentation that I will outline in my next post.

[1]      Schumer, C., retrieved 8/20/17, “A better deal,” U.S. Senate Democrats (https://democrats.senate.gov/abetterdeal/#.WZydEbpFzIU)

PROTECTING CONSUMERS FROM WALL STREET

The collapse of the financial corporations in 2008 was due in large part to their predatory and illegal practices in pushing unaffordable home mortgages onto gullible home buyers. Congress and President Obama enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (known as Dodd-Frank) to help protect consumers from such abusive behavior.

Dodd-Frank’s most notable consumer protection provision was the creation of the Consumer Financial Protection Bureau (CFPB). The CFPB’s role is to protect consumers from illegal and predatory practices, as well as discrimination, by financial corporations and to work to ensure that consumers receive the information necessary to make good financial decisions and to avoid “unsafe” financial products and services.

Since its creation, the CFPB has been hard at work punishing financial corporations that violate the law, returning almost $12 billion to over 29 million victimized consumers. In less than 8 years, it has helped consumers by responding to over 1.2 million complaints and issuing, for example, new standards for home mortgage documents that are clearer and easier to understand. At CFPB’s website you can find information on understanding your credit score and to help you make a good decision about a car or student loan.

Given that financial products and services (such as bank accounts, credit cards, and car and student loans) are essential for individuals, families, and our economy, appropriate regulation of them is necessary. Before the creation of the CFPB, financial services regulation was spread among 6 federal agencies and state regulators. None of them had consumer protection as its sole or primary role nor had the power to establish a single set of regulations for the whole financial industry. The CFPB has this power and a sole focus on consumer protection, much as the Consumer Product Safety Commission does for non-financial products. [1]

In July, the CFPB finalized a rule prohibiting financial corporations from putting mandatory arbitration clauses in their customer contracts. These clauses, which are in most agreements consumers sign when they open a bank account or get a loan or credit card, prohibit customers from suing the financial corporation in court. (They are also in many contracts or agreements for other consumers products and services, such as cell phones and cable TV, Internet, and phone services.) They require the customer to submit any complaint, even one due to illegal activity, to an arbitrator, who is usually selected by the financial corporation. They eliminate the ability of customers to band together in a class action lawsuit, and require them to pursue any grievances only through individual arbitration cases.

In addition to preventing class action lawsuits, the mandatory arbitration clauses often prohibit customers from sharing their experiences with regulatory or law enforcement agencies and the media. Corporations know that consumers will rarely spend the time and money (the typical cost to file an arbitration claim is $161) to pursue arbitration, given that the amount of money at stake is usually small. The result is that corporations evade accountability and can hide illegal or unethical behavior. [2]

The CFPB rule banning mandatory arbitration clauses was put in place after 5 years of study and development pursuant to a Congressional directive to study mandatory arbitration clauses and restrict or ban them if they harm consumers. The CFPB study found that customers win only 1 out of 11 arbitration cases and when they win they receive an average of $5,389. However, when a financial corporation makes a claim or counterclaim against a customer, it wins 93% of the time and the customer is ordered to pay, on average, $7,725 to the financial corporation! [3]

The CFPB study also found that in an average year 6,800,000 consumers get cash awards due to class action lawsuits while only 16 do so in arbitration cases. Consumers in these lawsuits receive a total of $440,000,000 (after deducting lawyers’ and courts’ fees), while consumers across all arbitration cases receive a total of $86,216.

Three recent examples of practices by Wells Fargo & Company make clear the significance and importance of banning mandatory arbitration clauses and allowing class action lawsuits by customers. (By the way, Wells Fargo is the third largest US bank and a multi-national financial corporation headquartered in San Francisco with $22 billion in annual profits.) It recently paid $185 million to settle with the CFPB and other regulators for having illegally opened and charged customers for over 2 million unauthorized checking and credit card accounts. When customers tried to sue Wells Fargo for this starting back in 2013, it forced them to make their claims in individual arbitration cases. This allowed Wells Fargo to continue its illegal behavior and theft from customers for 3 more years (5 years in total) before its behavior came to the attention of regulators.

In July, another class action lawsuit was filed against Wells Fargo based on illegal behavior on car loans. Apparently, Wells Fargo was requiring customers with car loans to buy car insurance they didn’t need (it was typically redundant with insurance they already had). And Wells Fargo was getting kickbacks from the company selling the insurance. The extra cost of the unneeded insurance pushed 250,000 car loan customers into default on their loan payments and resulted in 25,000 cars being repossessed. If these customers are forced into arbitration and are unable to participate in a class action lawsuit, it’s likely that most of them will not receive any compensation from Wells Fargo for its illegal and harmful behavior.

Finally, Wells Fargo is the defendant in an on-going, 8-year-old case over overdraft fees and practices. It is arguing in court that these customers’ claims must be handled in individual arbitration cases rather than a class action lawsuit, despite complaints from customers in 49 states. [4]

Despite these examples, and the fact that Congress has banned mandatory arbitration in home mortgage agreements, members of Congress have quickly introduced legislation to repeal the Consumer Financial Protection Bureau’s new rule banning mandatory arbitration clauses in financial product and service agreements. [5] Weakening or eliminating the CFPB in general, not just its ban on mandatory arbitration, has been a goal of Wall St. corporations and their friends in Congress ever since its creation by the Dodd-Frank law.

I urge you to contact your US Representative and Senators and ask them to support the Consumer Financial Protection Bureau and its ban on mandatory arbitration clauses in consumer product and service agreements.

[1]      Servon, L.J., 7/17/17, “Will Trump kill the CFPB?” The American Prospect (http://prospect.org/article/will-trump-kill-cfpb)

[2]      Germanos, A., 7/12/17, “Serving Wall Street predators, GOP launches swift attack on new rule protecting consumers,” Common Dreams (https://www.commondreams.org/news/2017/07/12/serving-wall-street-predators-gop-launches-swift-attack-new-rule-protecting)

[3]      Shierholz, H., 8/1/17, “Correcting the record: Consumers fare better under class actions than arbitration,” Economic Policy Institute (http://www.epi.org/publication/correcting-the-record-consumers-fare-better-under-class-actions-than-arbitration/)

[4]      Brumback, K., 8/25/17, “Wells Fargo wants customer suits tossed,” The Boston Globe from the Associated Press

[5]      Germanos, A., 7/12/17, “Serving Wall Street predators, GOP launches swift attack on new rule protecting consumers,” Common Dreams (https://www.commondreams.org/news/2017/07/12/serving-wall-street-predators-gop-launches-swift-attack-new-rule-protecting)

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)