Category: Government

SOLVING THE PROBLEMS OF OUR PRIVATIZED HEALTH CARE SYSTEM

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

COUNTERACTING THE LOW-WAGE BUSINESS MODEL OF PARASITIC CORPORATIONS

The low-wage business model of Walmart and McDonald’s, for example, is a choice, both of corporations and of our policy makers. In the restaurant industry, there are restaurants in Seattle and San Francisco that are paying their servers $13 per hour and are doing fine. Costco successfully competes with Walmart and In-N-Out-Burger with McDonald’s even though the former eschew the low-wage business model of their competitor. [1]

Economists have a label for the behavior of corporations that rely on a low-wage business model where employees need public assistance to survive: it’s called “free riding.” It’s a free ride for the employer, as public assistance programs are subsidizing their payrolls. It’s anything but a free ride for taxpayers and the workers.

In the fast food industry, over half of employees are enrolled in at least one public assistance program. The estimated cost to taxpayers is $76 billion per year. Ironically, the taxes paid by high-wage businesses and their employees, including those competing with the likes of McDonald’s and Walmart, help to pay for the public benefits that subsidize the low wages of these parasitic corporations. Until recently, McDonald’s actually assisted its employees in signing up for public benefits – to the tune of $1.2 billion per year. Walmart employees are estimated to receive $6 billion per year in public assistance. By the way, in 2015 McDonald’s profit was $4.53 billion and Walmart’s was $130.2 billion.

Economic theory states that workers get paid what they are worth. Clearly, this is an over simplification given the variations in pay that exist among employers within an industry, such as within the fast food or restaurant industries. It is more accurate to say that workers get paid what they negotiate, and that some employers are friendlier negotiators than others. At the top end of the pay spectrum, some CEOs negotiate to get paid far more than they’re worth, while many ordinary workers get paid far less than they are worth because they don’t have the power to negotiate better pay.

The U.S. labor market has a dramatic imbalance of power. Unless a worker is a member of a union, he or she has little or no power to negotiate with an employer. The rate of union membership has fallen from roughly 1 in 3 private sector workers in 1979 to only about 1 in 10 workers today. Unions negotiate higher wages and benefits for union members and also, indirectly, for nonunion workers. This occurs for several reasons: union contracts set wage standards across whole industries and strong unions prompt employers to keep wages high in order to reduce turnover and discourage unionizing at non-union employers. The decline in union membership has resulted in reduced wages for both union and nonunion workers. It is estimated that this decline is costing non-union workers $133 billion a year in lost wages. [2]

Individual workers lack bargaining power because there are relatively few employers and job openings but lots of workers looking for a job. Furthermore, a worker has an immediate need for income to pay for food and shelter, while most employers can leave a job unfilled for a while without suffering any great hardship. They can take the time to search for someone willing to take the job at whatever pay they offer.

Since 1980, employers have aggressively exploited this imbalance of power, while our federal government has stood aside and, in many ways, supported them in doing so. As a result, $1 trillion per year that used to go to workers now goes to executives and profits. Workers’ rewards for their contributions to our economic output (gross domestic product [GDP]) has dropped from 50% of GDP to 43%.

There is truth to the argument that in very competitive, price-sensitive industries producers have to squeeze workers’ wages to remain in business. However, this is where the role of government and public policy is critical. If every producer in the industry is required to pay a minimum wage, then a floor is set and all producers are on a level playing field, but with workers getting better pay. Without a good minimum wage, the competition drives wages down to the point where workers are suffering and public subsidies are required.

Public policies and laws, as well as collective action (such as unions negotiating on workers’ behalf), regulate the marketplace and affect the balance of power among competing economic interests. A market economy cannot operate effectively without the rules put in place by policies and laws. They are not antithetical to capitalism; rather, they are essential for markets to function.

Rules are necessary to prevent cheating, such as regulation of weights and measures of goods sold, and to protect the health and safety of consumers and workers. Laws and court systems enforce contracts between parties for the exchange of goods and services for money. Rules are needed to prevent companies from gaining an unfair advantage by being a free rider or externalizing costs (i.e., shifting the costs to others such as by polluting public air and water or by paying such low wages that employees need taxpayer-funded support).

Our low-wage, parasite economy is a collective choice, made by corporations but allowed and abetted – and subsidized – by public polices enacted by elected officials. We, as voters, can change this by electing representatives who support:

  • Increasing the minimum wage,
  • Enforcing and strengthening laws that allow workers to bargain collectively through unions, and
  • Stopping the free riding and externalizing of costs by large, profitable corporations.

Increasing the minimum wage and strengthening unions are two key policies that would strengthen our economy and the middle class by reducing the prevalence of the low-wage business model of parasitic corporations. I encourage you to ask candidates where they stand on these issues and to vote for ones who support fair wages and bargaining power for workers.

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

[2]       Rosenfeld, J., Denice, P., & Laird, J., 8/30/16, “Union decline lowers wages for nonunion workers,” Economic Policy Institute (http://www.epi.org/publication/union-decline-lowers-wages-of-nonunion-workers-the-overlooked-reason-why-wages-are-stuck-and-inequality-is-growing/)

THE TRUTH ABOUT RAISING THE MINIMUM WAGE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

LACK OF GOVERNMENT SPENDING LEADS TO WEAK RECOVERY

The current economic recovery from the Great Recession of 2008 has been the weakest recovery since World War II. The average annual growth of our economy since the recession officially ended in June 2009 has been only 2.1%. [1] The other ten recoveries since 1949 have had annual growth rates of 2.8% to 7.6%, with an average of 4.65%. [2]

It’s not a coincidence that every other economic recovery since WWII was supported by increased government spending (federal, state, and local combined), except the one in 1970 – 1973. The current recovery (2009 – 2016) has seen government spending actually decline by 6.1%. It and the one in the 1970s both experienced declines in government spending of about 1% annually. The 1949 – 1953 recovery saw government spending increase at an annual rate of 17.9%, while the other eight recoveries averaged a little over 2%.

In contrast to the 6.1% decline (-0.9% annually) in government spending during the current recovery, government spending during the 2001 – 2007 recovery under President George W. Bush grew by 11.7% (1.9% annually) and during the 1982 – 1990 recovery under President Reagan it grew by 33.5% (3.8% annually).

A recession is defined as a period of time when economic output (i.e., Gross Domestic Product [GDP]), incomes, employment, industrial production, and sales decline. This occurs when the demand for goods and services in our markets – the spending of households, businesses, and governments – is not sufficient to purchase everything the economy is capable of producing.

The remedy for a recession is to boost marketplace demand. There are three ways to do this:

  • Reduce interest rates to spur borrowing and resultant spending,
  • Increase government spending, and
  • Cut taxes to spur spending by consumers, which increases demand for goods and services. (Consumer spending represents two-thirds of our economy.)

At the start of the Great Recession, interest rates were already very low so there was not much interest rate reduction that could be done. Currently, the basic interest rates of the Federal Reserve, the key ones to cut to stimulate the economy, are virtually zero.

Some cutting of taxes was done, but it was small scale because of concerns about increasing the federal deficit or creating unmanageable losses of revenue at the state level. Tax cuts for middle and low income Americans are the most effective stimulus for the economy because this group will quickly spend the increased money that’s in their pockets in the local economy. Tax cuts for wealthy individuals and corporations, which were favored by some politicians, are less effective because larger portions of this money will be saved or spent outside the local economy (e.g., overseas), so they are not as effective in stimulating the local economy.

As noted above, government spending decreased during the current recovery and therefore reduced economic growth. Spending in the economy, including government spending, has what’s referred to as a “multiplier effect” on growth. That’s because each dollar spent supports additional spending by the individual or business that received it (a cycle that is repeated endlessly), meaning that its impact is multiplied. Similarly, cuts in spending have a multiplier effect in reducing growth, reducing economic activity by more than a dollar for each dollar of reduced spending.

One reflection of reduced government spending is that the number of government employees today is roughly 400,000 fewer than it was at the beginning of the recovery in June 2009, after bottoming out in late 2013 at 800,000 less than in 2009. Each person without a job adds to unemployment and reduces consumer demand for goods and services. Prior to President Obama’s term, the total number of government employees had grown under every president since Eisenhower. [3] This loss of jobs has been primarily at the state and local levels, where government revenue was hard hit by the recession, has been slow to recover, and has not been augmented by increased funding from the federal government. Government spending per resident in the U.S. is 3.5% lower today than it was in 2009. [4]

This austerity (i.e., reductions in government spending) are widely viewed as the primary reason the current economic recovery has been so weak and so slow. Government spending cuts have occurred largely because Republican lawmakers at the federal and state levels have insisted on them. [5] If it weren’t for these cuts, economic growth would be stronger and our economy would have lower unemployment and under-employment. [6] To confirm the harm that austerity policies cause, one can look to Europe and especially Greece, where austerity policies even more extreme than the ones in the U.S. have resulted in continuing high unemployment and fiscal crises.

Government spending, even if it increases the federal government’s budget deficit in the short-term, will stimulate economic growth. This growth will lead to increased government revenue that will reduce the deficit.

In particular, spending that represents investments in our physical and human capital has a high rate of return and pays for itself over the long-term. [7] Investments in infrastructure (e.g., roads, bridges, trains, public transportation systems, and school buildings) and education (from birth through higher education) create jobs, support our current and future economies, and address real needs while also stimulating the economy. Especially with the extremely low interest rates at which the federal government can currently borrow money, it is a lost opportunity to fail to make important and needed investments in our future.

[1]       Morath, E., & Sparshott, J., 7/29/16, “U.S. GDP grew at a disappointing 1.2% in second quarter,” The Wall Street Journal (http://www.wsj.com/articles/u-s-economy-grew-at-a-disappointing-1-2-in-2nd-quarter-1469795649)

[2]       Scott, R.E., 8/2/16, “Worst recovery in postwar era largely explained by cuts in government spending,” Economic Policy Institute, Working Economics Blog (http://www.epi.org/blog/worst-recovery-in-post-war-era-largely-explained-by-cuts-in-government-spending/)

[3]       Walsh, B., 8/5/16, “Here’s an Obama-era legacy no one wants to talk about,” The Huffington Post (http://www.huffingtonpost.com/entry/obama-austerity-legacy-jobs_us_57a499ece4b03ba68012032b?)

[4]       Bivens, J., 8/11/16, “Why is recovery taking so long – and who’s to blame?” Economic Policy Institute (http://www.epi.org/files/pdf/110211.pdf)

[5]       Bivens, J., 8/11/16, see above

[6]       Scott, R.E., 8/2/16, see above

[7]       Scott, R.E., 8/2/16, see above

A LARGE CORPORATION BLACKMAILS OUR GOVERNMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CRIMINAL JUSTICE REFORM FOR WHOM??

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MONOPOLY POWER AND HOW TO STOP IT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MORE EFFECTS OF MONOPOLY POWER AND CRONY CAPITALISM

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EFFECTS OF MONOPOLY POWER

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CRONY CAPITALISM = MONOPOLY POWER

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

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

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

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

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

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

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

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

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

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

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

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

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

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

AUSTERITY AGENDA RESULTS IN THE POISONING OF FLINT MICHIGAN

You may have heard that the tap water in Flint, Michigan, has been poisoning its residents and particularly its children. What you may not have heard was that this was caused by the austerity agenda of the Michigan Governor and legislature (the same ones that pushed Detroit into bankruptcy). Moreover, as with Detroit, the residents of this depressed city are very poor and largely minorities (56% black).

Based on municipal budget issues, Flint was forced into receivership, control was stripped from local elected officials, and an emergency manager appointed by the Governor. In April 2014, the austerity plan called for a switch to cheaper Flint River water for residential tap water rather than that of the Detroit water system. Residents immediately complained about the color, odor, and taste of the water, as well as the appearance of rashes after using it for bathing. Residents’ concerns were ignored despite the history of contamination of the river from manufacturing plants’ wastes. And the switch was defended as a necessary business decision to address the budget issues.

Within 4 months, the water had tested positive for E-coli bacteria and residents were told to boil it before drinking it. Within 7 months, children’s blood tests began showing elevated levels of lead. By early 2015, after residents had suffered with this water for a year, state and federal officials began acknowledging privately that there were serious issues with the water, including data indicating high levels of lead in the water. [1] However, it wasn’t until October, 2015, that the source of water was shifted back to the Detroit water system after 18 months of contaminated water. And it wasn’t until January, 2016, that a state of emergency was declared. [2]

The harm to Flint residents will be long lasting. Chemicals in the Flint River water corroded water pipes and leached lead out of the pipes and into the water. The result is widespread lead poisoning whose effects cannot be undone. Young children are particularly vulnerable to the toxic effects of lead, which is a neurotoxin that harms their developing brains and nervous systems. [3] Effects can include mental retardation, as well as stunted growth, hearing loss, and cognitive dysfunction. Over 1,700 cases of children with elevated blood lead levels have been found. In adults, high lead levels can cause miscarriages and increases in blood pressure and cardiovascular disease. Some of Flint’s children and adults have undoubtedly suffered permanent harm from which they will never recover.

To add insult to injury, Flint’s emergency manager has been sending out shut off notices to residents who are behind in paying for their contaminated water. Over 1,800 such notices have been sent out and more are on their way. [4]

The potential for the problem of lead leaching into the drinking water was well known in advance. However, the Michigan Department of Environmental Quality did not require Flint to treat the river water to prevent corrosion, belittled the public’s complaints, and did not conduct testing of the water. The agency’s director and other state officials resigned last month. [5] The federal Department of Justice has just announced that it is launching an investigation into the water crisis.

Despite the new water supply, damage to water pipes may mean the high lead levels will persist in tap water. The federal Environmental Protection Agency’s standard is that no amount of lead in drinking water is safe and it requires local water systems to take action if over 10% of samples at the tap contain lead. Unfortunately in Flint, almost a year went by before testing was done and another 6 months passed before action was taken.

This is an example (and there are numerous others at the state and federal levels) of what happens when austerity, budget and tax cutting, and shrinking of the public sector are the goals of elected officials – typically for ideological or political reasons – rather than the health and well-being of citizens.

[1]       Bryant, J., 1/15/16, “How much do we hate our children?” Common Dreams (http://www.commondreams.org/views/2016/01/15/how-much-do-we-hate-our-children)

[2]       Gilmore, B., 1/13/16, “Flint’s water crisis flows from a much bigger problem,” Common Dreams (http://www.commondreams.org/views/2016/01/13/flints-water-crisis-flows-much-bigger-problem)

[3]       Lazare, S. 1/7/16, “Calls for Michigan Gov. Snyder’s arrest as Flint poisoning scandal implicates top staffers,” Common Dreams (http://www.commondreams.org/news/2016/01/07/calls-michigan-gov-snyders-arrest-flint-poisoning-scandal-implicates-top-staffers)

[4]       Lazare, S., 1/15/16, “’Ludicrous’ as Flint tells residents: Pay for poisoned water or we’ll cut you off,” Common Dreams (http://www.commondreams.org/news/2016/01/15/ludicrous-flint-tells-residents-pay-poisoned-water-or-well-cut-you)

[5]       Schneider, R., & Eggert, D. 1/13/16, “Michigan National Guard, FEMA help Flint amid water crisis,” Associated Press (http://bigstory.ap.org/article/68fbd53623b147b2831296c2bce2f9ff/michigan-national-guard-fema-help-flint-amid-water-crisis)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PRESIDENTIAL CANDIDATE SANDERS ON DEMOCRATIC SOCIALISM

Democratic presidential candidate Bernie Sanders recently gave a speech focused on defining what he means by democratic socialism and why he has identified as a socialist for his entire political career. Our mainstream corporate media can’t seem to cover him or his campaign without labeling him a socialist. The intent seems to be to identify him as outside the mainstream at best or as a dangerous radical. Often the implicit or explicit message is that a socialist is one step away from being a communist – and many Americans do not know what socialism or communism means or the difference between them.

To address this pejorative use of the term socialist, Sanders began by noting that many of the programs and policies that President Franklin Delano Roosevelt (FDR) instituted in the 1930s in response to the Great Depression were called socialist: Social Security for seniors, the minimum wage, unemployment insurance, the 40 hour work week, an end to child labor, collective bargaining for workers, job programs to reduce unemployment, and banking regulations. They were enacted despite the strong opposition of the economic elites and have become part of the fabric of our society and the foundation of the American middle class.

Similarly, when President Johnson provided health insurance through Medicare for seniors and Medicaid for poor children and families, these programs were called socialist and a threat to the American way of life.

Sanders stated that we need to transform our democracy and our country as FDR did in the 1930s. We are facing a political and economic crisis that requires dramatic change. He noted that the US is the wealthiest nation in the history of the world and yet we have high rates of poverty that include over one-quarter of our children. He called for a political movement to take on the ruling, economic elite class, whose greed is destroying our democracy and our economy.

Sanders cited FDR’s inaugural address in 1944 as one of the most important speeches in our nation’s history. In it, FDR proposed an economic bill of rights, noting that true individual freedom cannot exist without economic security. Sanders pointed to this economic bill of rights as reflecting the core of what democratic socialism means to him. It includes:

  • Decent jobs at decent pay with time off and the ability to retire with dignity;
  • The ability to have food, clothing, a home, and health care; and
  • The opportunity for small businesses to operate without domination by large corporations.

Sanders noted that Martin Luther King, in 1968, echoed FDR’s call for economic rights and stated that the US provides “socialism for the rich and rugged individualism for the poor.”

Sanders went on to present specific examples of what democratic socialism means to him. He stated that the principle of economic rights for all is not a radical concept and that many countries around the world have done a far better job of providing economic security for their citizens than the US has done. In particular, he noted that almost all countries provide 3 months of paid family leave for new mothers and that all major countries provide health care as a right, not a privilege. The US does neither of these. He addressed climate change, racism, and economic and social justice issues including a fairer tax system and an end to excessive incarceration. He called for a more vibrant democracy with higher voter participation and the removal of barriers to voting.

You can listen to Sanders’ speech at https://www.youtube.com/watch?v=slkQohGDQCI. It’s an hour and 36 minutes long. You can listen to it while you’re doing something else or, if you want to listen to the highlights, listen to minutes 4 – 9 and from minute 24 for 5 – 10 minutes.

WHY GOVERNMENT DOESN’T GET CREDIT FOR ITS SUCCESSES

ABSTRACT: Government rarely gets credit for its successful programs and initiatives in the media or among the public. On the other hand, government failures or shortcomings get lots of attention. One reason is that denigrating government is at the heart of the political strategy of small government proponents and special interests who want large corporations and the wealthy to control our economy. Furthermore, there is no one presenting a forceful argument that government is a necessary part of a functioning society and that government does a lot of good.

Governments are needed, for example, to regulate the economy, protect civil rights, and ensure public safety. There are certain societal functions that only the shared enterprise of government can provide including public education, retirement security, infrastructure such as roads and bridges, a criminal justice system, and a safety net for those who experience life’s misfortunes.

A series of events over the last 50 years has divided the country and created resentment and mistrust of government policies. These experiences have been in sharp contrast to the unifying nature of the recovery from the Great Depression, World War II, and the widespread economic prosperity of the 1950s.

The active and purposeful government-denigrating forces have spent the last 35 years undermining government effectiveness. By under-funding and weakening government programs, the positive effects of government have been lessened and failures made more likely.

Among the public, the benefits of government are often taken for granted, seem to be going to other people, or are invisible or not visibly connected to government. Even direct government benefits are often taken for granted, including unemployment payments, Social Security and Medicare, public education, student loans for higher education, and the income tax deduction for interest on one’s home mortgage. Many people who have received such benefits say they have never benefited from a government program.

The media should cover government success stories with at least the same level of attention they give to stories of government shortcomings and should reject fear mongering and government bashing that is political and unfounded. The American public needs balanced coverage of government, including reporting of all the good government does.

FULL POST: Government rarely gets credit for its successful programs and initiatives in the media or among the public. On the other hand, government failures or shortcomings get lots of attention. [1] There are a range of reasons for this phenomenon. One is that denigrating government is at the heart of the political strategy of small government proponents and special interests who want large corporations and the wealthy to control our economy.

Furthermore, there is no one presenting a forceful argument that government is a necessary part of a functioning society and that government does a lot of good. Governments are needed, for example, to regulate the economy, protect civil rights, and ensure public safety. There are certain societal functions that only the shared enterprise of government can provide including public education, retirement security, infrastructure such as roads and bridges, a criminal justice system, and a safety net for those who experience life’s misfortunes. However, there is no organization or political group with anywhere near the clout of the government bashers that is promoting the good things government does and should do in well-functioning society.

Faith in government has been falling in polls for 50 years. A series of events has divided the country and created resentment and mistrust of government policies, including:

  • Resurgent racism over the Civil Rights Movement and the War on Poverty of the 1960s;
  • Disenchantment with the Vietnam War in the 1970s;
  • Disillusionment over the Watergate political scandal in the 1970s;
  • The small government, pro-corporation, and anti-labor rhetoric and policies beginning in the 1980s;
  • The North American Free Trade Treaty of the 1990s;
  • The Iraq War of the 2000s; and the current
  • Racial bias evident in law enforcement and incarceration;
  • Unjustified barriers to voting in some states; and
  • The slow economic recovery and growing inequality.

These experiences have been in sharp contrast to the unifying nature of the recovery from the Great Depression, World War II, and the widespread economic prosperity of the 1950s.

The active and purposeful government-denigrating forces have spent the last 35 years undermining government effectiveness. They say that taxes – government revenue – can be cut without reducing government services or benefits. Unfortunately, the American public has been willing to believe this promise of a free lunch. Until recently, it hasn’t noticed the deterioration in government services and supports, as well as the decaying of public infrastructure that has inevitably resulted from reducing government revenue. By under-funding and weakening government programs, their positive effects have been lessened and their failures made more likely. And the anti-government crowd is all too happy to point the finger and say, “See, government doesn’t work,” when the then inevitable shortcomings become evident. As a result, the public’s perception of government has been undermined as well.

This makes it hard for those who support the positive role of government because they have to criticize the weak, poorly performing government programs to make their argument for strengthening them. This criticism often just adds to the negativity surrounding government.

Among the public, the benefits of government are often taken for granted, seem to be going to other people, or are invisible or not visibly connected to government. For example, the government’s successful response to the Ebola crisis was taken for granted by many, seemed remote and as benefiting other people to others, and was connected to hospitals and medical personnel not to the government that had funded and supported them. The public isn’t left with a strong, positive impression of government when it acts to avoid a worse outcome, as in the Ebola crisis or the response to the 2008 financial collapse and recession. In particular, with the economic recovery, it is hard to get the public to acknowledge that things are better than they might have been when they are still not great. Let alone to give kudos to government for a job well-done in such a situation.

The Affordable Care Act is an example of where the immediate benefits for most people were hardly noticeable. Most people already had health insurance and for those who didn’t, the benefit of having health insurance is clear only when you are sick and need it. Therefore, requiring everyone to have health insurance, which has a great societal benefit and a long-term personal benefit, can feel, in the short-term, like a burden to those who are healthy. Similarly, the benefit of the ban on denying coverage for a pre-existing condition only becomes evident when one has to change one’s health insurer, which may not happen immediately. Moreover, when it does happen, the ability to get new health insurance is often taken for granted.

Other government benefits that are taken for granted, and only get attention when there is a breakdown or failure, include public safety, roads, and bridges. Even direct government benefits are often taken for granted, including unemployment payments, Social Security and Medicare, public education, student loans for higher education, and the income tax deduction for interest on one’s home mortgage. Surveys indicate that 60% of the people who have taken the home mortgage interest deduction say they have never benefited from a government program. Similarly, many people who have received student loans or unemployment benefits say they have never benefited from a government program. And virtually no one who has attended public schools, driven on our public roads, or felt safe in public recognizes that they have benefited from a government program.

The media should cover government success stories with at least the same level of attention they give to stories of government shortcomings and should reject fear mongering and government bashing that is political and unfounded. The American public needs balanced coverage of government, including reporting of all the good government does. Unfortunately, that is not the case with current media coverage.

You can contribute to achieving a better balance in the media coverage of government by writing letters or emails to the editors of media outlets with stories of government successes and posting them on social media. You can also write to criticize negative stories and the lack of balance and objectivity in the coverage of government. A democracy requires an accurately informed public and the media today are not doing a good job of providing accurate information about the role government plays.

[1]       Cohn, J. Spring 2015. “Why public silence greets government success,” The American Prospect (Much of my post is a summary of this article.)

GOVERNMENT SUCCESSES RARELY GET ATTENTION

ABSTRACT: There are many examples of successful government programs and initiatives but they rarely get much attention in the media or among the public. On the other hand, government failures or shortcomings get lots of attention. The media, and in particular right wing talk radio and Fox, along with “conservative” and libertarian politicians, fan the flames of supposed government failure at every opportunity.

Remember the Ebola crisis of last fall? The right wing media and politicians severely criticized the government for not reacting appropriately, stated that government could not be trusted to handle the situation, and predicted an epidemic here in the U.S. There was no epidemic here. The few patients were treated in facilities funded, designed, and/or supported by our government with great success. However, this success of government policies and facilities got very little attention or acknowledgement.

As another example, the largely successful U.S. government’s response to the 2008 financial debacle almost certainly prevented a worldwide depression. It softened the recession here and put the U.S. on a better track toward recovery than has happened in Europe. However, the government got little credit for keeping us out of a depression or a much worse recession.

Under the Affordable Care Act (ACA), tens of millions of people now have health insurance who didn’t before. Many of these families are now avoiding financial distress and bankruptcy due to medical bills because they have health insurance. The ACA has probably contributed to the slowing of the increase in health care costs and it clearly hasn’t generated the runaway inflation in health care costs that its critics predicted. Despite the tangible and significant successes of the ACA, the media coverage of it is largely negative as is a large portion of the public’s perception of it.

FULL POST: There are many examples of successful government programs and initiatives, but they rarely get much attention in the media or among the public. On the other hand, government failures or shortcomings get lots of attention; they are blasted across the headlines and blared out by talk radio and social media. [1] It seems that every member of the public has a story of a government failure on the tip of his or her tongue, but has a hard time identifying something positive to say about government.

The media, and in particular right wing talk radio and Fox, along with “conservative” and libertarian politicians, fan the flames of supposed government failure at every opportunity (including contrived ones). From President Reagan’s statement that government isn’t the solution it’s the problem to today’s Tea Party and the undermine-President-Obama-at-any-cost Republicans, denigrating government is in the forefront of these politicians’ political strategy.

Remember the Ebola crisis of last fall? The right wing media and politicians severely criticized the government for not reacting appropriately, stated that government could not be trusted to handle the situation, and predicted an epidemic here in the U.S. Fear mongering ran rampant. But what happened? There was no epidemic here; every one of the small handful of people who contracted the disease in the U.S. recovered, along with a number of others with the disease who were evacuated to the U.S. from Africa. Patients were treated in facilities funded, designed, and/or supported by our government. However, this success of government policies and facilities got very little attention or acknowledgement. The critics didn’t apologize and admit they were wrong, let alone thank the government for a job well-done. The media didn’t cover this success with anywhere near the attention it gave to the criticism and fear mongering.

As another example, the largely successful U.S. government’s response to the 2008 financial debacle, caused by irresponsible behavior by large Wall Street corporations, almost certainly prevented a worldwide depression. The bailout of the financial corporations prevented a full blown collapse of the financial sector worldwide. The economic stimulus bill, formally the American Recovery and Reinvestment Act, created about 3 million jobs and kept the unemployment rate 2% lower than it would have been according to most economists. (See my blog post of 9/13/12 for more detail.) It accomplished this despite political opposition that limited the dollar amount of the stimulus and, consequently, its beneficial effects. Nonetheless, it softened the recession here and put the U.S. on a better track toward recovery than has happened in Europe. The slow but steady recovery has also been supported by the policies of the Federal Reserve.

However, the government got little credit for keeping us out of a depression or a much worse recession. It is interesting to note that Congress people who vociferously criticized the stimulus in Washington would tout the jobs it had created when they were at home in their districts.

Under the Affordable Care Act (ACA), often called Obama Care in an effort to politicize it, tens of millions of people now have health insurance who didn’t before. (This number would be substantially higher if Republican Governors and legislatures had cooperated with the ACA. See my blog post of 8/13/14 for more detail.) Thanks to the ACA:

  • Millions of young adults in their early twenties can and do now stay on their parents’ health insurance;
  • Millions of people with pre-existing health conditions can now change jobs, go back to school to further their education, or start their own businesses because they can’t be denied health insurance if they switch insurance providers; and
  • Many families are now avoiding financial distress and bankruptcy due to medical bills because they now have health insurance to pay them.

Furthermore, the ACA has probably contributed to the slowing of the increase in health care costs and it clearly hasn’t generated the runaway inflation in them that its critics predicted.

Despite these tangible and significant successes of the ACA, the media coverage of it is largely negative as is a large portion of the public’s perception of it.

Another example is the arrival of tens of thousands of unaccompanied minors at the Mexican border last summer. Right wing media and politicians blamed the Obama administration for causing the problem and failing to respond appropriately. This crisis was a major news story. In reality, the problem was caused by a spike in violence in three Central American countries and weak, disrupted economies in part due to the NAFTA trade treaty and other long-standing issues. The Obama administration responded with an improved and expedited process for handling the immigration of these children, as well as diplomacy and economic support to address the issues in the three countries. Within three months, the arrival of unaccompanied minors dwindled and the crisis was solved. But coverage and acknowledgement of this success was, for the most part, nowhere to been seen or heard.

My next post will go into more detail on why the government rarely gets credit for or acknowledgement of its successes.

[1]       Cohn, J. Spring 2015. “Why public silence greets government success,” The American Prospect (Much of my post is a summary of this article.)

RECLAIMING AN ECONOMY THAT WORKS FOR EVERYONE, NOT JUST THE WEALTHY

ABSTRACT: We need to reclaim our economy so it works for everyone, not just the wealthy. With different choices and policies that reflect a different set of values, our economy can once again be one where a rising tide lifts all boats, not just the yachts of the wealthiest.

The policy changes that are needed to support the middle and working class include:

  • Raise the minimum wage
  • Strengthen laws on equal pay for equal work
  • Strengthen labor laws and enforcement, including workers’ right to bargain collectively
  • Strengthen Social Security while protecting and encouraging pensions
  • Close corporate and individual income tax loopholes, and raise tax rates on unearned income
  • Ensure that trade treaties are fair to workers and citizens
  • Strengthen the Dodd-Frank financial reforms and reinstitute a small financial transaction tax
  • Create jobs and make needed investments in our infrastructure

We need new policies and programs that reflect values and choices that put the average citizen and worker first, rather than wealthy individuals and corporations. If some of these proposals resonate with you, contact your elected officials and tell them. A grassroots movement is needed to shift our economy from the current one that is working only for the wealthiest 10% to the one we used to have where everyone benefited from economic growth.

FULL POST: In my last post, I summarized policy choices that have undermined the middle and working class, largely based on a great speech Senator Elizabeth Warren gave recently. She states that it doesn’t have to be this way and spells out what we need to do to reclaim our economy so it works for everyone, not just the wealthy. [1] With different choices and policies that reflect a different set of values, our economy can once again be one where a rising tide lifts all boats, not just the yachts of the wealthiest.

The policies that undermined the middle and working class were justified by the theory of “trickle-down” or “supply-side” economics. It was used to justify large tax cuts for wealthy individuals and corporations because the theory said that the country could count on the biggest and richest corporations and the wealthiest individuals to share their growing wealth and create an economy that worked for everyone. The experience of the last 30 years has shown that President George H.W. Bush was right when he called this “voodoo economics.” Nonetheless, there are politicians today who still pledge allegiance to “trickle-down” economics, despite the fact, as Senator Warren states, that it has been shown to be the politics of helping the rich and powerful get more, while cutting off the legs of the middle class.

The set of values that should drive our policies include the following:

  • A person shouldn’t work full-time and be in poverty.
  • Women should receive equal pay for equal work.
  • Labor laws should be strengthened and enforced so that workers are
    • paid what they are due,
    • able to retire with dignity, and
    • able to bargain together as a group with employers for fair pay, benefits, and working conditions.
  • Our tax system should be fair and require wealthy individuals and corporation to pay their fair share. Workers shouldn’t pay higher income tax rates on their hard-earned income than the wealthy pay on their unearned income from investment gains and dividends.
  • The burden of student debt should be reduced.
  • Our trade policies should be fair for workers, creating jobs and raising wages in the U.S.
  • Big banks and financial corporations should not be too-big-to-fail, allowed to make risky investments with government insured deposits, or bailed out by taxpayers if they get into trouble.
  • Regulation and oversight should be enhanced, particularly of the big financial corporations, so consumers and our economy are protected from speculation and fraud.

The policy changes that are needed to support the middle and working class based on these values include:

  • Raise the minimum wage nationally. (Many states and cities are already doing this.)
  • Strengthen laws requiring and enforcing equal pay for equal work.
  • Strengthen labor laws and their enforcement, including workers’ right to form unions and bargain collectively so there is a balance of power between the workers and the employer during negotiations.
  • Strengthen Social Security while protecting and encouraging pensions, as well as personal and employer supported savings, such as 401(k)s.
  • Close corporate and individual income tax loopholes. For example, stop corporations and individuals from hiding income overseas to avoid paying taxes.
  • Raise tax rates on unearned income, including capital gains, dividends, and hedge fund mangers’ investment gains.
  • Allow students to refinance college loans at reduced interest rates and allow relief from student debt in bankruptcy.
  • Ensure that trade treaties are thoroughly debated in public and are fair to workers and citizens, balancing their interests with those of multi-national corporations.
  • Strengthen the Dodd-Frank financial reforms, as well as oversight and enforcement. Prevent financial corporations from gambling on risky investments with taxpayer insured deposits. Require too-big-to-fail corporations to split up into smaller entities.
  • Reinstitute a small financial transaction tax (for example, 0.5%) to discourage speculative trading and generate needed revenue.
  • Create jobs and make needed investments in our infrastructure by building roads, bridges, and schools; and investing in education and research.

While workers suffered after the 2008 economic collapse caused by out-of-control financial corporations, our politicians bailed out the corporations, often with no or few strings attached. Our politicians have also signed trade treaties and currently are negotiating new ones that are highly beneficial to multi-national corporations. Yet workers harmed by past policy changes and trade treaties, as well as homeowners who lost their homes and workers who lost their jobs in the 2008 collapse, have received little help and certainly have not been bailed out the way Wall Street was.

We need new policies and programs that reflect values and choices that put the average citizen and worker first, rather than wealthy individuals and corporations. I encourage you to listen to Warren’s speech if you haven’t already (just 23 minutes) or to read the press release. If some of these concerns or proposals resonate with you, contact your elected officials and tell them. A grassroots movement is needed to shift our economy from the current one that is working only for the wealthiest 10% to the one we used to have where everyone benefited from economic growth.

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

THE UNDERMINING OF THE MIDDLE CLASS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SECRETS OF THE FY15 FEDERAL SPENDING BILL

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

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

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

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

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

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

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

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

Other provisions include:

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

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

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

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

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

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

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

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

POLICY INNOVATION IN OUR CITIES

ABSTRACT: With our federal government gridlocked, many cities around the US are taking the lead in policy innovation. Progressive policies are bubbling up in cities from Seattle and Santa Fe to Cleveland. Minneapolis’s new mayor has championed infant health care, universal pre-kindergarten education, closing racial gaps, and new public transit lines to better connect minority communities to jobs. Pittsburgh’s new mayor is working to establish universal pre-kindergarten, affordable housing with a low carbon footprint, responsible banking, and local hiring and paying of prevailing wages on city-funded projects.

New York’s new mayor is working to institute universal pre-kindergarten, raise the minimum wage, expand paid sick days and affordable housing, reduce greenhouse gas emissions by 80% by 2050, and end the “stop and frisk” tactic of the police, which many view as harassment of minorities. New York City has an innovative campaign finance system and an active, progressive, Working Families Party.

In these and other cities, interesting, innovative, and significant progressive policies are being promoted and enacted.

FULL POST: With our federal government gridlocked, many cities around the US are taking the lead in policy innovation. Progressive policies on everything from campaign financing to early education to housing and banking are bubbling up in cities from Seattle and Santa Fe to Cleveland and Minneapolis to Pittsburgh and New York. [1]

Minneapolis’s new mayor, Betsy Hodges, has championed infant health care and universal pre-kindergarten education. She identified closing the large racial gaps among Minneapolis’s growingly diverse population as a moral and economic imperative. Among other initiatives, she is pushing to route new public transit lines to better connect minority communities to places with jobs.

Pittsburgh’s new mayor, Bill Peduto, is also working to establish universal pre-kindergarten. He is building affordable housing with a low carbon footprint. He worked as a City Council member (before becoming mayor) to require local hiring and paying of prevailing wages on city-funded projects. He authored the city’s responsible-banking law, which directs the city’s funds to banks that have loaned money in poor city neighborhoods.

New York’s new mayor, Bill de Blasio, is working to institute universal pre-kindergarten too. He proposed funding it through an income tax surtax on the city’s wealthiest residents. This was blocked by the state but the pre-K program is moving ahead with other funding sources. His effort to raise the minimum wage was also blocked by the state, but he has expanded paid sick days. He is also working to expand affordable housing and to end the “stop and frisk” tactic of the police, which many view as harassment of minorities. He has committed the city to an 80% reduction in greenhouse gas emissions by 2050. [2]

New York City has an innovative campaign finance system where small contributions are matched with $6 of public money for every $1 contributed. This amplifies the voice of small donors, encourages voters to make small contributions, and, ultimately, to vote, while blunting the influence of large donors. Many analysts believe that de Blasio would not have been elected without this campaign financing system that enables grassroots candidates to run competitive campaigns. New York’s Working Families Party was also key to de Blasio’s election. It has framed election issues and mobilized voters to help elect de Blasio and a near majority of progressive candidates to the city council.

These are examples of efforts to enact progressive policies that are occurring in many cities, including Los Angeles, Phoenix, and Boston. Despite gridlock at the federal level, interesting, innovative, and significant policies are being promoted and enacted in cities around the US.

[1]       Meyerson, H., May/June 2014, “The revolt of the cities,” The American Prospect

[2]       Eskow, R., 10/3/14, “Progressive champion Bill de Blasio models populist change,” Campaign for America’s Future (http://ourfuture.org/20141003/progressive-champion-bill-de-blasio-models-populist-change)

WHAT IT WILL TAKE TO ADDRESS THE PROBLEMS WE FACE

ABSTRACT: Our country has important problems that need to be addressed. Not only aren’t they being addressed, but serious proposals (let alone efforts) to address them are not even on the table for discussion. These problems include:

  • Stagnating wages and a stagnating economy;
  • Corporations doing very well but employees losing ground and unemployment stubbornly high;
  • Parents working but their families struggling to make ends meet; and
  • Public infrastructure crumbling and public education suffering cuts.

From 1900 through the 1970s, our national government responded to these kinds of problems and challenges with job and infrastructure programs, support for families and the unemployed, labor laws, corporate regulation, and investments in education. Grassroots movements improved opportunities and justice for minorities and women.

Not everything was perfect and ultimate solutions were often not achieved, but real progress was made. The public had confidence that our country was on a path that would lead to better lives for the next generation.

Today, at a national level and in many states, our growing problems and the lack of serious discussion of solutions (let alone action) has left many of us skeptical about the future and cynical about government. To turn this around, we need strong, bold, and uncommon leaders, and an energized citizenry that is politically informed and engaged.

I encourage you to find a way to contribute to this effort. It will take small contributions from everyone and big contributions from some of us to get our country back on track.

FULL POST: Our country has important problems that need to be addressed. Not only aren’t they being addressed, but serious proposals (let alone efforts) to address them are not even on the table for discussion. [1]

Wages have been stagnant for the middle and working class for 30 years, yet even an increase in the minimum wage to reflect inflation is blocked in Congress. Corporations have record profits and stock prices, yet employees’ pay and benefits are falling. Corporations continue to move jobs overseas and hire increasing numbers of part-time employees or consultants to whom they give few benefits and no job security. Nonetheless, efforts to reign in corporations’ and executives’ power are rare. And strengthening workers’ and shareholders’ voices through unions and greater corporate democracy is barely mentioned.

Most parents, even those with young children, are in the workforce now; a dramatic change from the 1950s when most mothers stayed home with children. Yet our supports for working parent are limited and have not improved since 2000, despite declining economic security and stability for families.

Our public infrastructure – our roads, bridges, and public buildings including schools and courthouses – is crumbling but there’s no serious discussion, let alone effort, to address this problem. We face catastrophic effects from global climate change, from more severe storms and weather patterns to rising sea level, yet our only response is disaster relief.

Our public education system (including K-12, higher education, and early childhood education) is suffering from funding cuts. Tremendous inequities are present in educational opportunity and outcomes. Gaps based on race, ethnicity, and native language have shrunk a bit but remain wide; gaps based on class are growing. Students partaking of higher education are taking on unprecedented and crushing debt to do so. And afterward they face a job market with high unemployment and limited opportunities. Our efforts to reduce unemployment and provide assistance to those who are unemployed are inadequate and are major contributors to a stagnant economy.

In the period from 1900 through the 1970s, including the Great Depression, our national government responded to these kinds of problems and challenges. The New Deal, large-scale jobs programs, and the World War II mobilization provided jobs, supported families and the unemployed, and built infrastructure. Labor laws were passed that addressed pay, work hours, and safety issues and supported workers in organizing to balance employers’ power and obtain fair wages and working conditions. Corporations were regulated through anti-monopoly laws and safety regulations. In the 1930s and 1940s, new laws reformed the financial system and prevented another financial and economic crash until after their repeal in the 1980s and 1990s. In the 1960s, we engaged in a War on Poverty.

Investments in education from kindergarten through college produced a better educated and more productive workforce. Public higher education was practically free up until the 1980s. The civil rights movement and the women’s movement led to substantial national legislation and action that improved rights and opportunities for minorities and women.

Not everything was perfect and ultimate solutions were often not achieved, but real progress was made. The public had confidence that our country was on a path that would lead to better lives for the next generation.

Today, at a national level and in many states, our growing problems and the lack of serious discussion of solutions (let alone action) has left many of us skeptical about the future and cynical about government. To restore the optimism of the public, to realize the promise of democracy, and to address the problems we face, we will need two things: strong, bold, and uncommon leaders, and an energized citizenry that is politically informed and engaged. We see these key elements of change in the history of the labor movement, the Progressive Era, the civil rights movement, the War on Poverty, and the women’s movement. We need such activism and energy again today to get our great country back on track. I encourage you to find a way to contribute to this effort. It will take small contributions from everyone and big contributions from some of us to get our country back on track.

In my next post, I will share examples of leadership and citizen activism from the local level that are addressing important problems. Given the current level of dysfunction in the federal government, near-term efforts to tackle these issues will probably have to occur at the local and state levels.

[1]       Kuttner, R., 9/30/14, “In political system disconnected from society’s ills, remedies pushed to fringes of public debate,” The American Prospect (Much of this post is a summary of Kuttner’s article.)

OBAMACARE IS WORKING!!

ABSTRACT: Obamacare, or more formally the Affordable Care Act (ACA), is working: more people have health insurance. Nationwide, over 20 million people now have health insurance who didn’t before the ACA went into effect. With this and other good news about the ACA, the American public is growing more positive about it, despite continued efforts by Republicans to trash it and the failure of Democrats, including the President, to effectively get the message out about its successes and benefits.

The increase in health coverage is particularly evident in states that have fully adopted the provisions of the ACA for expanding Medicaid and establishing the clearinghouses (known as “exchanges”) where people can buy health insurance. In these states, the percentage of residents without health insurance has dropped by 4 percentage points in the last year. In states that have adopted neither or just one of these ACA provisions, the decline in the uninsured was roughly half that.

In the 24 states that have not adopted the ACA Medicaid expansion, up to 12 million of their residents will not have access to free health insurance. It is estimated that 45,000 people die each year because of lack of health insurance. The refusal of states to adopt the Medicaid expansion of the Affordable Care Act is basically for political purposes – so legislators and Governors can proclaim their opposition to Obama and Obamacare.

This refusal to provide Medicaid health coverage to low income residents is unconscionable and will be an issue in the 2014 campaigns. I encourage you to support candidates and officials who favor Medicaid expansion (and the ACA in general) and oppose those who don’t. The benefits for the millions of Americans who now have or will get health insurance due to the ACA is truly immeasurable.

FULL POST: Obamacare, or more formally the Affordable Care Act (ACA), is working: more people have health insurance. Nationwide, over 20 million people now have health insurance who didn’t before the ACA went into effect: roughly 10 million have purchased insurance through the exchanges, 7 million have been covered by the expansion of Medicaid, and 2 million children up to age 26 have been able to stay on their parents’ insurance. [1]

Another indication that the ACA is working is that the number of insurers participating in the ACA exchanges is growing, giving consumers more choices and very likely lowering premiums. The concern that many people would sign-up for health insurance but not follow through and pay for it has not been the case. With all the good news about the ACA, the American public is growing more positive about it, despite continued efforts by Republicans to trash it and the failure of Democrats, including the President, to effectively get the message out about its successes and benefits. [2]

The increase in health coverage is particularly evident in states that fully adopted the provisions of the ACA for expanding Medicaid coverage for low income individuals and establishing the clearinghouses (known as “exchanges”) where people can buy health insurance.

In these states, the percentage of residents without health insurance has dropped by 4 percentage points in the last year. Leading the way was Arkansas where the uninsured dropped from 22.5% in 2013 to 12.4% by the middle of 2014 – a 10 percentage point drop. In Kentucky, the uninsured dropped from 20.4% to 11.9% – an 8.5 percentage point decline. [3]

In states that have adopted neither or just one of these ACA provisions, the percentage of uninsured residents fell, but by only 2.2 percentage points. In other words, the decline in the uninsured was roughly half that of the states that fully adopted the ACA.

In the 24 states that have not adopted the ACA Medicaid expansion, up to 12 million of their residents will not have access to free health insurance. [4] Not having health insurance is hazardous to your health. It is estimated that 45,000 people die each year because of lack of health insurance. [5] A specific example is that women with no health insurance are 4 times more likely to die in childbirth or during pregnancy than women who have health insurance. In the US, 18.5 women die in childbirth or pregnancy for every 100,000 births. In countries with universal health coverage, the rates are much lower: in Canada the rate is 8.2, in Britain 6.1, and in Iceland 2.4. [6]

The refusal of states to adopt the Medicaid expansion of the Affordable Care Act (aka Obamacare) is harming millions of people’s health and killing some of them. The refusal is basically for political purposes – so legislators and Governors can proclaim their opposition to Obama and Obamacare. Although they will come up with other reasons for their failure to expand Medicaid, none of them really hold water. In particular, the Medicaid expansion will cost the states nothing for the first 3 years; it will be fully federally paid for. After the first 3 years, states will be asked to pick up part of the cost, but it will be less than 10%. And the benefit to the covered individuals and the state’s health care providers will far exceed the cost.

This refusal to provide Medicaid health coverage to low income residents in 24 states is unconscionable and will be an issue in the 2014 campaigns for federal and state offices. If you are in a state that hasn’t expanded Medicaid (see the Families USA reference to find out), I encourage you to ask your elected officials and candidates if they support the refusal to expand Medicaid and, if so, why. I encourage you to support candidates and officials who favor Medicaid expansion (and the ACA in general) and oppose those who don’t. The benefits for the millions of Americans who now have or will get health insurance due to the ACA is truly immeasurable.

[1]       Gaba, C., (aka Brainwrap), 5/4/14, “ACA signups: The final graph for the 2014 open enrollment period,” Daily Kos (http://www.dailykos.com/story/2014/05/04/1296851/-ACA-Signups-The-Final-Graph-of-the-2014-Open-Enrollment-Period)

[2]       McCarter, J., 6/13/14, “Obamacare’s very good week,” Daily Kos (http://www.dailykos.com/story/2014/06/13/1306811/-Obamacare-s-very-good-week)

[3]       Alonso-Zaldivar, R., 8/6/14, “Health care law paying off for states that embraced it,” The Boston Globe

[4]       Families USA, 5/30/14, “A 50-state look at Medicaid expansion: 2014,” (http://familiesusa.org/product/50-state-look-medicaid-expansion-2014)

[5]       Cecere, D., 9/17/09, “New study finds 45,000 deaths annually linked to lack of health coverage,” Harvard Gazette (http://news.harvard.edu/gazette/story/2009/09/new-study-finds-45000-deaths-annually-linked-to-lack-of-health-coverage/)

[6]       Reich, R., 5/13/14, “How the right wing is killing women,” RobertReich.org (http://robertreich.org/post/85556159055)

INEQUALITY IS NOT INEVITABLE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CAUSE FAILURE, BLAME GOVERNMENT

ABSTRACT: Government agencies perform many necessary and important functions. However, inadequate funding results in ineffective agencies. But the fault doesn’t lie with the government agencies; it lies with those who make the funding decisions. A classic strategy of the small government ideologues is to cause government agencies to be ineffective by underfunding them and then to point to their failures and say, “See government doesn’t work.” This strategy has produced the current crisis at the Veterans Administration (VA).

A similar crisis is brewing at the Social Security Administration (SSA).As millions of baby boomers are retiring, budget cuts are forcing reductions in access to SSA services. Since 2010, the SSA has closed 64 field offices, 533 temporary mobile offices, and reduced hours at the 1,245 field offices that remain open. Meanwhile, enrollment in Social Security retirement benefits has increased 27% over the last 6 years. In 2013, 43 million Americans visited SSA offices and 43% had to wait more than 3 weeks for an appointment.

Similarly, regulatory agencies that oversee public safety often suffer from insufficient funding to effectively perform their jobs. A classic example is the Federal Motor Carrier Safety Administration, which oversees the 525,000 bus and truck operators in the US. Inadequate funding cripples enforcement. While the number of buses and miles traveled have increased significantly since 2006, the agency’s under $600 million budget and 350 investigators have remained essentially unchanged. 546 interstate carriers are operating with violations above acceptable levels but 29% of them haven’t had a federal safety review in over 2 years and an additional 11% have never been reviewed. Buses receive far less scrutiny than the airlines despite 7,518 crashes in the last 4 years resulting in 171 fatalities and 9,414 injuries, while US airlines have had no fatal crashes.

Buses are but one example among many of where a regulatory agency doesn’t have the funding necessary to effectively do its job of keeping the public safe. Such agencies, as well as the VA and SSA, are classic examples of the “shrink [government] down to the size where we can drown it in the bath tub” radical right wing, libertarian strategy.

All too often the underfunding of government agencies is intentional – aimed at undermining both the effectiveness of the agencies and the public’s perception of government.

FULL POST: Government agencies perform many necessary and important functions. However, inadequate funding results in ineffective agencies. But the fault doesn’t lie with the government agencies; it lies with those who make the funding decisions.

A classic strategy of the small government ideologues is to cause government agencies to be ineffective by underfunding them and then to point to their failures and say, “See government doesn’t work.” This strategy has produced the current crisis at the Veterans Administration (VA). Responsible estimates are that the VA’s budget will need to double to effectively serve the growing number of veterans from the Iraq and Afghanistan wars. (See my post of 6/5/14 for more details on the VA crisis. https://lippittpolicyandpolitics.org/2014/06/05/find-a-crisis-demand-privatization/.)

A similar crisis is brewing at the Social Security Administration (SSA). As millions of baby boomers are retiring and requesting help from the SSA to make decisions about enrolling in Social Security, budget cuts are forcing reductions in access to SSA services. Congress has cut 14 of the last 16 budget requests from the SSA, despite the fact that its budget comes out of the Social Security Trust Fund and, therefore, has no impact on the federal budget or deficit.

Since 2010, these budget cuts have forced the SSA to close 64 field offices, 533 temporary mobile offices that serve remote areas, and reduce hours at the 1,245 field offices that remain open. [1] And its full-time workforce has been cut by about 4,000 (14%) to 25,420. [2]

Meanwhile, enrollment in Social Security retirement benefits has increased 27% over the last 6 years from 2.6 million to 3.3 million. As a result of this growing demand and declining capacity, seniors seeking information and help are experiencing increasingly long waits. In 2013, 43 million Americans visited SSA offices and 43% had to wait more than 3 weeks for an appointment, up from 10% the previous year.

Similarly, regulatory agencies that oversee public safety often suffer from insufficient funding to effectively perform their jobs. Here, the efforts of the small government, “free market,” right wing libertarians are aligned with those of the regulated corporations who push for weak regulations and enforcement.

A classic example is the Federal Motor Carrier Safety Administration, which oversees the 525,000 bus and truck operators in the US. Inadequate funding cripples enforcement. While the number of buses and miles traveled have increased significantly since 2006, the agency’s under $600 million budget and 350 investigators have remained essentially unchanged. More than 200 operators with serious violations identified by local police and other authorities have not received a full federal safety review in the last 2 years, if ever. And 546 interstate carriers are operating with violations above acceptable levels but 29% of them haven’t had a federal safety review in over 2 years and an additional 11% have never been reviewed. Buses receive far less scrutiny than the airlines despite 7,518 crashes in the last 4 years resulting in 171 fatalities and 9,414 injuries, while US airlines have had no fatal crashes. [3]

Buses are but one example among many of where a regulatory agency doesn’t have the funding necessary to effectively do its job of keeping the public safe. Others that have been in the news recently include distribution of tainted dialysis fluid, selling of contaminated drugs by a compounding pharmacy, and the chemical explosion in Texas that killed 14 and injured over 200. The responsible public safety agencies, as well as the VA and SSA, are classic examples of the “shrink [government] down to the size where we can drown it in the bathtub” radical right wing, libertarian strategy. [4]

Government is the solution to many of the challenges that face us – from providing a base level of economic security in retirement to promoting safety in our everyday lives. All too often the underfunding of government agencies is intentional – aimed at undermining both the effectiveness of the agencies and the public’s perception of government.

[1]       Ohlemacher, S., 6/19/14, “Social Security closes offices as demand is on upswing,” The Boston Globe from the Associated Press

[2]       Pear, R., 6/17/14, “Social Security agency cuts services as demand grows, Senate report says,” The New York Times

[3]       Johnston, K., & Wallack, T., 6/9/14, “Bus lapses mount, but scrutiny lags,” The Boston Globe

[4]       Quote is from Grover Norquist in 2004. He is the founder and president of Americans for Tax Reform. (http://en.wikipedia.org/wiki/Grover_Norquist)

REASONS FOR LACK OF PROSECUTIONS AFTER 2008 COLLAPSE

ABSTRACT: In Judge Rakoff’s article entitled “The Financial Crisis: Why have no high-level executives been prosecuted?” [1] he discusses the reasons given by officials of the Department of Justice (DOJ) for the failure to criminally prosecute either individuals or corporations.

Finding the publicly presented explanations for the failure to prosecute unconvincing, Rakoff then proposes some other reasons. First, he suggests that law enforcement agencies had other priorities and limited resources. Another possible explanation is the government’s own involvement in setting the stage for the 2008 financial crisis. The de-regulation of banks and the financial industry was a contributing factor. The federal government also had for years encouraged the growth of home ownership and the availability of mortgages, including to low income home buyers. It had also supported less stringent documentation and underwriting standards for obtaining a mortgage.

Finally, Rakoff notes a 30-year trend toward prosecuting corporations rather than prosecuting individuals. He states that the traditional approach was based on the fact that organizations do not commit crimes, only their human agents do. Rakoff believes that prosecuting individuals has a much stronger deterrence value than prosecuting corporations. He also believes that prosecuting just the corporation and not any individual is both legally and morally wrong.

FULL POST: In Judge Rakoff’s * article entitled “The Financial Crisis: Why have no high-level executives been prosecuted?” [2] (See previous post of 2/9/14 for more details:  https://lippittpolicyandpolitics.org/2014/02/09/too-little-punishment-for-misbehavior-in-the-financial-sector/), he discusses the reasons given by officials of the Department of Justice (DOJ) for the failure to criminally prosecute either individuals or corporations that were involved in causing the 2008 crisis. First, they argue that proving fraudulent intent is difficult. However, Rakoff points out that with clear evidence of mortgage fraud (e.g., numerous reports of suspected mortgage fraud from within the financial institutions themselves), executives couldn’t escape prosecution by claiming they didn’t know what was going on. Furthermore, convictions, despite claims ignorance, are well established in criminal law based on the doctrine that “willful blindness” or “conscious disregard” does not exonerate a defendant.

Second, Department of Justice (DOJ) officials sometimes argue that fraud couldn’t be proved because the buyers of the mortgage-backed securities were sophisticated investors who knew enough not to rely on any misrepresentations and deception by the sellers. Rakoff states that this “totally misstates the law.” The law says that if society or the market is harmed by the lies of a seller, criminal fraud has occurred.

Third, Attorney General Holder himself said in testimony to Congress that in considering a criminal prosecution the impact on the US and world economies had to be taken into consideration. This is called the “too big to jail” excuse. Holder has said that his comment was misconstrued. Rakoff notes that this rationale is irrelevant in terms of prosecuting individuals because no one believes that a large financial corporation would collapse if one or more of its high level executives was prosecuted.

Finding the publicly presented explanations for the failure to prosecute unconvincing, Rakoff then proposes some other reasons. First, he suggests that law enforcement agencies had other priorities and limited resources. He notes that in 2001 the FBI had over 1,000 agents assigned to investigating financial fraud. In 2007, there were only 120 agents working on financial fraud and they had more than 50,000 reports of possible mortgage fraud to review. The shift of agents to anti-terrorism after 9/11 and budget limitations are the two causes he cites for this reduced capacity to respond to financial fraud.

The Securities and Exchange Commission (SEC) has been focused on Ponzi schemes and misuse of customers’ funds. It too is experiencing significant budget limitations. The DOJ has been focused on insider trading cases. When the 2008 financial collapse occurred, it spread the investigation of financial fraud among numerous US Attorney’s Offices in various states, many of which had little or no previous experience with sophisticated financial fraud.

Another possible explanation of the failure to prosecute, according to Rakoff, is the government’s own involvement in setting the stage for the 2008 financial crisis. The de-regulation of banks and the financial industry, including the repeal of Glass-Steagall, was a contributing factor. Both the SEC and the Treasury Department had had their power and oversight weakened by de-regulation. The federal government also had for years encouraged the growth of home ownership and the availability of mortgages, including to low income (and therefore higher risk) home buyers. It had also supported less stringent documentation and underwriting standards for obtaining a mortgage. Hence, the federal government helped create the conditions that led to mortgage fraud and a corporate executive could, with some justification, claim in his defense that he believed he was only trying to further the government’s goals.

In addition, after the 2008 collapse, the government made little effort to hold the financial corporations accountable when it bailed them out.

Finally, Rakoff notes a 30-year trend toward prosecuting corporations rather than prosecuting individuals. He states that the traditional approach was based on the fact that organizations do not commit crimes, only their human agents do. In addition, prosecuting an organization inevitably punishes totally innocent employees and shareholders. However, in recent years “deferred prosecution agreements” and even “non-prosecution agreements” with corporations have become the standard fare. Under these, a corporation and its employees avoid prosecution by agreeing to take internal, preventive measures to protect against future wrongdoing, often while paying a fine.

Rakoff believes that prosecuting individuals has a much stronger deterrence value than the internal preventive measures of “deferred prosecution agreements” that are often little more than window dressing. He also believes that prosecuting just the corporation and not any individual is both legally and morally wrong. Under the law, a corporation should only be prosecuted if one can prove a managerial agent of the corporation committed the alleged crime. If so, why not prosecute that manager? Morally, punishing a corporation and many innocent employees and shareholders for crimes committed by an unprosecuted individual(s) seems unjust.

*    Jed Rakoff is a United States District Judge on senior status for the Southern District of New York. A full-time judge from 1996 to 2010, he moved to senior status in 2010. Senior status is a form of semi-retirement for judges over 65 where they continue to work part-time. Judge Rakoff is a leading authority on securities laws and the law of white collar crime, and has authored many articles on those topics. He is a former prosecutor with the U.S. Attorney’s office in New York. [3]

[1]       Rakoff, J.S., 1/9/14, “The Financial Crisis: Why have no high-level executives been prosecuted?” The New York Review of Books

[2]       Rakoff, J.S., 1/9/14, see above

[3]       Wikipedia, retrieved 2/5/14, “Jed S. Rakoff,” http://en.wikipedia.org/wiki/Jed_S._Rakoff

TOO LITTLE PUNISHMENT FOR MISBEHAVIOR IN THE FINANCIAL SECTOR

ABSTRACT: One person who has both spoken out and acted when he felt the punishment for misbehavior in the financial sector was too lenient or lacking is federal District Court Judge Jed Rakoff.* In 2011, he refused to approve a proposed settlement with Citigroup related to the 2008 financial crisis because he thought that it was too lenient. Currently, he is withholding approval of settlement of an insider trading case. The proposed settlement would allow two men to settle the case for $4.8 million without admitting guilt.

SAC Capital, a huge, $15 billion hedge fund, has been charged in what probably is the biggest insider trading scandal ever. Five employees of SAC have already pleaded guilty to insider trading and the company itself has agreed to a record $616 million settlement. However, it is unlikely that anyone will go to jail and the head of SAC, despite any fines and restitution he may be required to pay, is likely to remain a billionaire.

Judge Rakoff recently wrote an article entitled “The Financial Crisis: Why have no high-level executives been prosecuted?” [1] Multiple authorities, including enforcement agencies, have describe what occurred in the run up to the 2008 financial crisis as fraud. Rakoff states that if the financial crisis was the result of intentional fraud, then “the failure to [criminally] prosecute those responsible must be judged one of the most egregious failures of the criminal justice system in many years.”

Rakoff notes that in previous financial crises individual perpetrators were successfully prosecuted. In the 1980s savings and loan crisis, which has strong parallels to the 2008 crisis but at a much smaller scale, over 800 individuals were successfully, criminally prosecuted.

Rakoff concludes by writing, “if it was [fraudulent misconduct] – as various governmental authorities have asserted it was – then the failure of the government to bring to justice those responsible … bespeaks weaknesses in our prosecutorial system that need to be addressed.”

FULL POST: One person who has both spoken out and acted when he felt the punishment for misbehavior in the financial sector was too lenient or lacking is federal District Court Judge Jed Rakoff.* For example, in 2011, he refused to approve a proposed settlement by the Securities and Exchange Commission (SEC) with Citigroup related to the 2008 financial crisis because he thought that it was too lenient.

Currently, he is withholding approval of settlement of an insider trading case where two men, acting on an illegal insider’s tip, bought $90,000 worth of securities a day before the announcement of the buyout of H.J. Heinz (the ketchup maker). The next day, when the buyout was announced, the securities became worth $1.8 million. The SEC’s proposed settlement would allow the two men to settle the case for $4.8 million without either admitting or denying guilt. Such settlement language had been standard practice for insider trading cases until a public debate erupted, prompted in large part by Judge Rakoff. In June 2013, the new chair of the SEC, Mary Jo White, announced a new SEC policy that would require some defendants to admit guilt. [2]

There have been a number of insider trading cases in the news lately. These are cases where an individual buying or selling securities benefited from illegally obtained, confidential information that gave him or her an unfair opportunity to profit from securities transactions. For example, SAC Capital, a huge, $15 billion hedge fund, responsible for about 1% of all US securities exchanges’ average daily trading, has been charged in what probably is the biggest insider trading scandal ever. Five employees of SAC have already pleaded guilty to insider trading and the company itself has agreed to a record $616 million settlement for more than 10 years of trading based on illegal tips from corporate insiders. More legal action is still to come, but it is unlikely that anyone will go to jail and the head of SAC, Steven A. Cohen, despite any fines and restitution he may be required to pay, is likely to remain a billionaire. [3][4]

However, Judge Rakoff’s primary focus has not been on insider trading but on the financial industry’s misbehavior that led to the 2008 financial crisis and the Great Recession. He recently wrote an article entitled “The Financial Crisis: Why have no high-level executives been prosecuted?” [5] In it, he explores why there have been no criminal prosecutions when multiple authorities, including enforcement agencies, have describe what occurred in the run up to the 2008 financial crisis as fraud (i.e., intentional deception for financial or personal gain). Rakoff states that if the financial crisis was the result of intentional fraud (and he makes clear that he has no personal knowledge of whether that was the case or not), “the failure to [criminally] prosecute those responsible must be judged one of the most egregious failures of the criminal justice system in many years.”

Rakoff notes that in previous financial crises – the junk bond scandal of the 1970s, the savings and loan (S&L) crisis of the 1980s, and the accounting frauds of the 1990s (e.g., Enron and WorldCom) – individual perpetrators were successfully prosecuted. Specifically, in the S&L crisis, which has strong parallels to the 2008 crisis but at a much smaller scale, over 800 individuals were successfully, criminally prosecuted.

There is strong evidence of criminal fraud in the events leading to the 2008 crisis. The federal government’s Financial Crisis Inquiry Commission uses the word “fraud” 157 times in its report describing what led to the crisis. Furthermore, indications that fraud was occurring emerged well before the 2008 collapse. There were 20 times as many reports of suspected mortgage fraud in 2005 as in 1996, and the number kept growing. In 2008, the number of fraud reports was double that of 2005. As early as 2004, the FBI was publicly warning of the “pervasive problem” of mortgage fraud. In the years before the 2008 crisis, sub-prime mortgages, in other words mortgages with more risk of default than normal mortgages, increasingly provided the underpinnings for mortgage-backed securities that continued to be sold with AAA ratings. This rating is supposed to identify securities of very low risk. It seems impossible that this could have occurred without fraud taking place.

Rakoff discusses reasons given by officials of the Department of Justice (DOJ) for the failure to criminally prosecute either individuals or corporations and finds them unconvincing. He then proposes some reasons that he finds more believable. I’ll summarize all of this in my next post.

Rakoff concludes by writing, “if it was [fraudulent misconduct] – as various governmental authorities have asserted it was – then the failure of the government to bring to justice those responsible for such colossal fraud bespeaks weaknesses in our prosecutorial system that need to be addressed.”

*    Jed Rakoff is a United States District Judge on senior status for the Southern District of New York. A full-time judge from 1996 to 2010, he moved to senior status in 2010. Senior status is a form of semi-retirement for judges over 65 where they continue to work part-time. Judge Rakoff is a leading authority on securities laws and the law of white collar crime, and has authored many articles on those topics. He is a former prosecutor with the U.S. Attorney’s office in New York. [6]

 

[1]       Rakoff, J.S., 1/9/14, “The Financial Crisis: Why have no high-level executives been prosecuted?” The New York Review of Books (http://www.nybooks.com/articles/archives/2014/jan/09/financial-crisis-why-no-executive-prosecutions/?pagination=false)

[2]       Raymond, N., 1/30/14, “U.S. judge takes on SEC again, questions Heinz insider trading pact,” Reuters

[3]       Editorial, 7/27/13, “Pursuit of SAC Capital sends needed message to Wall St.,” The Boston Globe

[4]       Lattman, P., 7/31/13, “Ex-analyst charged in insider-trading crackdown,” The Boston Globe (from The New York Times)

[5]       Rakoff, J.S., 1/9/14, see above

[6]       Wikipedia, retrieved 2/5/14, “Jed S. Rakoff,” http://en.wikipedia.org/wiki/Jed_S._Rakoff

WEAK PENALTIES FOR FINANCIAL CORPORATIONS’ MISBEHAVIOR

ABSTRACT: If you follow the financial news, you regularly hear about financial corporations paying penalties as they reach settlements with regulators for their misbehavior. Although the amounts of some of the recent penalties have been noteworthy, keep in mind that to these large corporations they barely put a dent in their annual profits. Furthermore, in many cases the penalties are tax deductible as a business expense. This means that, in effect, the government and we as taxpayers are subsidizing the penalty by allowing the corporations to reduce their taxes by deducting the amount of the penalty from their income. In other cases, the corporations are allowed to take credit for having paid all or part of the settlement based on other actions they have taken.

This has led Senators Elizabeth Warren (MA Democrat) and Tom Coburn (OK Republican) to propose a Truth in Settlements bill in Congress that would require government regulators to disclose whether they are allowing all or part of the settlement amount to be deducted from income or paid with credits.

In most cases, the corporations are agreeing to the settlements without having to admit wrongdoing. There have been very few criminal charges against the corporations and none against any executive of any of the large financial corporations. Furthermore, the executives have continued to be lavishly rewarded despite behavior that plunged the world into a financial crisis and a recession.

If we are going to prevent another financial collapse and resulting recession, we must prevent serious misbehavior by our large financial corporations. Stronger laws, oversight, and enforcement, with stronger penalties for executives and corporations, including criminal prosecutions, are needed. These would provide the strong incentives necessary to ensure legal, ethical, and prudent behavior by executives and, hence, the corporations they run.

FULL POST: If you follow the financial news, you regularly hear about financial corporations paying penalties as they reach settlements with regulators for their misbehavior. Many of these settlements are for misbehavior that contributed to the 2008 financial collapse where enforcement actions are finally being concluded. Some are for more recent misbehavior. (See posts of 8/14/13, Large Financial Corporations Continue Illegal Activity [https://lippittpolicyandpolitics.org/2013/08/14/large-financial-corporations-continue-illegal-activity/] and 8/29/12, Big Financial Corporation Scandals Continue [https://lippittpolicyandpolitics.org/2012/08/29/big-financial-corporation-scandals-continue/] for more detail on financial corporations’ misbehavior.)

Although the amounts of some of the recent penalties – in the billions of dollars – have been noteworthy, keep in mind that to these large corporations this barely puts a dent in their annual profits. Their stocks have been performing well, despite the penalties. In many cases the penalties are tax deductible as a business expense, which means that the impact on the corporation is typically only two-thirds of the stated amount. As a result, in effect, the government and we as taxpayers are subsidizing the penalty by allowing the corporations to reduce their taxes by deducting the amount of the penalty from their income. In other cases, the corporations are allowed to take credit for having paid all or part of the settlement based on other actions they have taken. For example, in a 2013 settlement with 13 mortgage service providers for illegal foreclosures, over 60% of the announced $8.5 billion settlement could be paid through credits for modifications to existing mortgages.

This has led Senators Elizabeth Warren (MA Democrat) and Tom Coburn (OK Republican) to propose a Truth in Settlements bill in Congress that would require government regulators to disclose whether they are allowing all or part of the settlement amount to be deducted from income or paid with credits. The regulators would generally have to make settlement agreements public and for any that were kept confidential, they would have disclose that fact and their rationale for doing so. [1] Bills have also been filed to prohibit the deduction of penalties as a business expense.

In most cases, the corporations are agreeing to the settlements without having to admit wrongdoing. There have been very few criminal charges against the corporations. Most of the enforcement actions have been civil actions, which seriously limits the consequences, even if the corporation misbehaves again, even in a similar manner.

Also noteworthy, is that no executive of any of the large financial corporations has been charged with criminal activity. (My next post will explore this issue.) Furthermore, the executives have continued to be lavishly rewarded despite behavior that plunged the world into a financial crisis and a recession. A corporate culture of immunity for senior executives from the consequences of their actions appears to persist despite public outrage. [2]

For example, JPMorgan’s CEO, Jamie Dimon, will be paid $20 million for 2013. This is up substantially from the $11.5 million he was paid last year, despite the $20 billion in fines and penalties JPMorgan paid in 2013 (due to a variety of corporate misbehavior) and the very large related legal expenses. Apparently, JPMorgan’s Board of Directors feels Dimon did a great job of handling these matters with the regulators and that pay cuts in 2008 and 2012 had already punished him for having gotten the corporation into trouble in the first place. [3] The corporation’s stock did have a good year. It was up 37%, out pacing both its peers and the overall market. (Note: If JPMorgan’s Directors and shareholders feel the settlement agreements were so positive, maybe the regulators have let Dimon and JPMorgan off too lightly!) In 2008, Dimon received a $1 million salary and no bonus, presumably because of the problems that led to the financial crisis and the need for the government to bail out JPMorgan (among other financial industry corporations). However, by 2011 his compensation was up to $23 million. It was cut to $11.5 million for 2012, which was viewed as a strong rebuke by the corporation’s Board for the $6 billion loss on speculative trading that occurred in 2012.

Final figures for 2013 CEO compensation at two smaller financial corporations, Goldman Sachs and Morgan Stanley, were not available yet, but are expected to be above the 2012 levels that were $21 million and $9.75 million, respectively.

If we are going to prevent another financial collapse and resulting recession, we must prevent serious misbehavior by our large financial corporations. Stronger laws, oversight, and enforcement, with stronger penalties for executives and corporations, including criminal prosecutions, are needed. These would provide the strong incentives necessary to ensure legal, ethical, and prudent behavior by executives and, hence, the corporations they run.

 

[1]       Associated Press, 1/9/14, “Mass. Democrat: Settlements need more transparency,” in the Daily Times Chronicle

[2]       Stewart, J.B., 2/1/14, “Accounting for Dimon’s big jump in pay,” The New York Times

[3]       Silver-Greenberg, J., & Craig, S., 1/24/14, “Despite scandals, JPMorgan awards CEO raise,” The Boston Globe from The New York Times

THE IGNORED DEFICIT IN PUBLIC GOODS

ABSTRACT: The federal government’s budget deficit is getting more attention than it deserves. It is half of what it was in 2009 and is at what economists consider a manageable level. Meanwhile, our deficit in investments in public goods is being almost totally ignored. Public goods are things of value to society but in which individuals, businesses, and other private organizations don’t and won’t invest.

These public goods are essential to a prosperous society. However, the US has been under-investing in public goods for decades. The paradox of public goods is that they are forgotten, unacknowledged, and in effect invisible when they are readily available.

Government spending on public goods has been in a relatively steep decline since the 2008 economic crash. And for the 30 years before that the investment in public goods had been in a slow decline.

Those opposed to a robust government, ideologically or due to self-interest, have engaged in an active campaign to get the public to forget the personal and societal benefits they receive from government. A discussion about public goods is largely missing from our media and society.

We need to correct this omission in our discourse and our investment in order to have a prosperous society. Without necessary public goods, we cannot maintain our health and productivity as individuals; nor will we be able to maintain the health and productivity of our businesses and ultimately those of our economy and society.

FULL POST: The federal government’s budget deficit is getting more attention than it deserves. It is half of what it was in 2009 and is at what economists consider a manageable level. (See post of 4/6/13. [1]) Meanwhile, our deficit in investments in public goods is being almost totally ignored.

Public goods are things of value to society but in which individuals, businesses, and other private organizations don’t and won’t invest. Public goods provide public benefits and require collective efforts and responsibility. Therefore, the public sector, namely government, must take responsibility for them. Children’s education, from birth through high school and beyond, is a classic example. Transportation infrastructure is another, including roads, railroads, bridges, airports, and ports. Other examples include parks, libraries, scientific research, public and individual health (including healthy air and water), and public safety (including safe communities, workplaces, homes, food, and medicine). A large, thriving, economically solid middle class may be the ultimate public good.

These public goods are essential to a prosperous society. [2] However, the US has been under-investing in public goods for decades. Part of the reason for this is that when they are present and functioning effectively, we forget about them – they are out of sight and out of mind. This is the paradox of public goods: they are unacknowledged and in effect invisible when they are readily available. We forget that there was a need or problem that has been addressed. Or we don’t realize that a problem, such as polluted drinking water, could occur if we don’t invest in protective and preventive measures. We forget that public expenditures by government were what met the need, maintain the solution, and prevent problems. [3]

However, here in the US, we are beginning to notice our public goods deficit. We’ve had bridges collapse or be closed because they are unsafe. Many of our school buildings are old, out-of-date, and in some cases unsafe. Students are leaving college with huge debts. Local governments are cutting police, fire, and school personnel. Our middle class and its economic security is dwindling. And so on.

Government spending on public goods has been in a relatively steep decline since the 2008 economic crash. And for the 30 years before that the investment in public goods had been in a slow decline. Economist John Kenneth Galbraith warned us way back in the 1950s that improper government budget priorities could lead to “private opulence and public squalor.”

In addition to the invisibility of public goods, those opposed to a robust government, ideologically or due to self-interest, have engaged in an active campaign to get the public to forget the personal and societal benefits they receive from government spending and actions. They have explicitly labeled government as the problem not a solution to problems. In fact, a survey of the public found that 94% of those who reported never receiving a benefit from a government program had indeed received benefits from one or more government programs and on average from four programs. [4]

A discussion about public goods is largely missing from our media and society. The notion of air, water, parks, and so forth, as shared public goods that require and deserve public investment is mostly missing from public consciousness. Our discussion of the production of wealth and goods by the private sector is robust, but the discussion is atrophied in terms of the role of the public sector and of the public goods that it produces, maintains, and protects.

We need to correct this omission in our discourse and our public spending in order to have a prosperous society. Without necessary public goods, we cannot maintain our health and productivity as individuals; nor will we be able to maintain the health and productivity of our businesses and ultimately those of our economy and society.

[2]       Hacker, J.S., & Loewentheil, N., 2012, “Prosperity economics: Building an economy for all,” Prosperity for All (http://www.prosperityforamerica.org/wp-content/uploads/2012/09/prosperity-for-all.pdf)

[3]       Derber, C., & Sekera, J., 1/22/14, “An invisible crisis: We are suffering from a mushrooming public goods deficit,” The Boston Globe

[4]       Mettler, S., 9/19/11, “Our hidden government benefits,” The New York Times

SHORT TAKES ON CURRENT EVENTS

ABSTRACT:

CONFIRMING PRESIDENTIAL NOMINEES: The US Senate voted on 11/21 to change its rules and eliminate the use of the filibuster to block presidential nominees other than Supreme Court Justices, given that Republicans had returned to full-scale obstructionism since the deal to approve 7 nominees in July. Under the new rules, the Senate has confirmed 11 nominees and Senate Democrats are pursuing at least 10 more confirmations before the holiday recess. Roughly 70 nominees remain pending.

FINING DRUG CORPORATIONS FOR COLLUSION: The European Union has fined two giant drug corporations, Johnson & Johnson and Novartis, $22 million for colluding to delay the availability of a cheaper generic drug.

FDA REDUCING ANTIBIOTIC OVERUSE AND DRUG-RESISTANT INFECTIONS: The Food and Drug Administration (FDA) is taking steps to reduce the unnecessary use of antibiotics in meat production. This overuse of antibiotics used for treating infections in humans is linked to the development of antibiotic-resistant infections in humans. 23,000 people are dying each year from such infections. The FDA is asking drug corporations to voluntarily stop labeling drugs used to treat human infections as acceptable for growth promotion in animals. The FDA is using this voluntary approach and giving the drug corporations 3 years to comply because it believes the complex regulatory process a mandatory rule would require would take many years and might not be successful.

FULL POST:

CONFIRMING PRESIDENTIAL NOMINEES

The US Senate voted on 11/21 to change its rules and eliminate the use of the filibuster to block presidential nominees other than Supreme Court Justices. Democrats in the Senate exercised this option, the so-called “nuclear option”, because after a deal in July that allowed the approval of 7 nominees for executive branch positions, Republicans had returned to full-scale obstructionism. With roughly 90 judicial vacancies and some key executive branch openings, the Democrats threatened again to change the filibuster rule and proceeded to do so when the Republicans refused to relent from their obstructionism.

Since then, the Senate has confirmed 11 nominees including the Secretary of Homeland Security, an Assistant Secretary of State, the Secretary of the Air Force, and 2 judges, despite continuing Republican use of delaying tactics. Interestingly, once the Republican blockade of the first two of these was overcome, they were confirmed by 78-16 votes.

Senate Democrats are pursuing at least 10 more confirmations before the holiday recess, including the Chair of the Federal Reserve and the head of the Internal Revenue Service. Roughly 70 nominees remain pending and some of them may have to be re-nominated and start the process all over again in the new year. (1. Alman, A., 12/16/13, “Jeh Johnson confirmed by Senate as Secretary of Homeland Security, The Huffington Post.  2. Reuters, 12/13/13, “U.S. Senate confirmation marathon approves two more Obama nominees,” Reuters) (See my post A Respite from Obstructionism on 7/25/13 at https://lippittpolicyandpolitics.org/2013/07/25/a-respite-from-obstructionism/, as well as those of 7/21/13 and 7/16/13, for more details on the July deal and obstruction of nominees’ confirmations.)

 

FINING DRUG CORPORATIONS FOR COLLUSION

The European Union has fined two giant drug corporations, Johnson & Johnson (J&J) and Novartis, $22 million for colluding to delay the availability of a cheaper generic drug. A patent on a J&J pain killer expired in 2005 but J&J paid Novartis to delay for 17 months production of a cheaper generic version of the drug. Both corporations were more profitable as a result. (Daily Briefing, 12/11/13, “EU fines drug firms over delay,” The Boston Globe)

FDA REDUCING ANTIBIOTIC OVERUSE AND DRUG-RESISTANT INFECTIONS

The Food and Drug Administration (FDA) is taking steps to reduce the unnecessary use of antibiotics in meat production. Many producers of cattle, hogs, and poultry give their animals antibiotics to make them grow faster. This overuse of antibiotics used for treating infections in humans is linked to the development of antibiotic-resistant infections in humans, which are much more difficult and expensive to treat, and can be fatal: 23,000 people are dying each year from such infections. The FDA is asking drug corporations to voluntarily stop labeling drugs used to treat human infections as acceptable for growth promotion in animals. This would make such use illegal without a prescription for use in a sick animal. The FDA is using this voluntary approach and giving the drug corporations 3 years to comply because it believes the complex regulatory process a mandatory rule would require would take many years and might not be successful. (Jalonick, M.C., 12/12/13, “FDA working to phase out some antibiotics in meat,” The Boston Globe from the Associated Press)

 

NOTE: There are so many issues and events that I think those of us trying to be well informed citizens and voters should know about that I can’t write full posts on all of them. And I’m sure you don’t have time to read full posts about them. Therefore, I’ll use this format to complement the full posts: Short Takes on current events. Please let me know if you find these valuable by commenting on them. I will provide references or links to more information for the topics, so you can pursue them in more depth if you have the interest and time.

REPUBLICANS OBSTRUCTING NOMINEES AGAIN

ABSTRACT: The Republicans are back to blocking the President’s nominees for judgeships and executive branch positions by filibustering. Currently, there are roughly 90 vacancies for judgeships. In terms of Executive Branch nominees, the Chair of the Federal Reserve and the Secretary of Homeland Security are among those waiting for Senate confirmation.

Senate Democrats are again talking about changing the filibuster rule. One Senator called this obstructionism “a government shutdown by another tactic.” I encourage you to contact your Senators and let them know that this obstructionism should stop because we need our judicial and executive branches of government to function and perform the work that we have charged them to do.

FULL POST: The Republicans are back to blocking the President’s nominees for judgeships and executive branch positions by filibustering. [1] In July, Senate Republicans agreed to approve 7 Presidential nominations, but only after Senate Democrats threatened to change the Senate’s filibuster rule to stop the on-going and pervasive obstruction of nominees. (See post of 7/25/13 for more detail.) But on Thursday, the Republicans were back to filibustering nominees, blocking a judicial nominee who had 56 votes in favor and an appointee for a housing regulatory agency who had 57 votes in favor. [2]

Furthermore, Republican Senator Graham has threatened to hold up all nominations until further hearings are held on the attack on the diplomatic post in Benghazi, Libya, a year ago. Linking approval of nominees to a totally unrelated issue is certainly unusual, if not unprecedented. Furthermore, 13 Congressional hearings and 40 staff briefings on this issue have already occurred along with the delivery to Congress of 25,000 pages of related documents. [3]

Currently, there are roughly 90 vacancies for judgeships, many of which are considered judicial emergencies. These vacancies are having a negative impact on the functioning of the federal courts and their ability to deliver justice for the American people in a timely manner. (See post of 7/21/13 for more detail.) Several nominees have been approved by the lengthy and detailed vetting of the Judiciary Committee but have not been confirmed by the full Senate.

In terms of Executive Branch nominees, the Chair of the Federal Reserve and the Secretary of Homeland Security are among those waiting for Senate confirmation. (See post of 7/16/13 for more on the blocking of executive branch nominees).

As a result of this resurgence of Republican obstructionism of nominees by filibustering, Senate Democrats are again talking about changing the filibuster rule. One Senator called this obstructionism “a government shutdown by another tactic.” [4]

I encourage you to contact your Senators and let them know that this obstructionism should stop because we need our judicial and executive branches of government to function and perform the work that we have charged them to do.

[1]       A filibuster occurs when one or more Senators refuse to end debate on a piece of legislation or other matter. It then requires a super-majority of 60 votes from the 100 Senators to close off debate (cloture) and allow a vote on the bill or other matter.

[2]       Fram, A., 11/1/13, “GOP blocks Obama picks for US court, housing agency,” The Boston Globe (from the Associated Press)

[3]       Associated Press, 11/2/13, “GOP Senator vows to block nominees,” The Boston Globe

[4]       Fram, A., 11/1/13, see above

LACK OF GOOD JOBS IS OUR MOST URGENT PROBLEM

ABSTRACT: The most urgent problem facing the US right now is a lack of jobs, especially jobs that pay middle class wages and provide benefits. Unemployment is high and long-term. The jobs being created during our 4 year old economic recovery are disproportionately low-wage, low skill jobs.

Fast food workers are emblematic of the low wage, low skill jobs being created. The typical fast food worker makes $8.69 per hour. As a result, over half of fast food workers rely on public, taxpayer funded benefits to make ends meet. The cost to taxpayers is estimated to be $7 billion per year. Meanwhile, the fast food corporations make billions of dollars in profits and pay tens of millions of dollars to their senior executives. Workers at Walmart, the largest employer in the US, are in a similar situation. These very profitable corporations can afford to raise their workers’ wages to $15 an hour – a wage they could live on without public assistance. In the meantime, taxpayers are subsidizing these corporations.

It used to be that unions and government provided workers with a voice and the power to balance that of the large employers. Today, that voice and power are largely gone. Therefore, wages, benefits, and job security have been eroding. Starting in the late 1970s, the historic link between growth in the economy and productivity on the one hand, and growth in workers’ wages on the other hand, was severed. We undid or failed to adopt rules for our economy that ensure the gains of economic and productivity growth are widely and fairly distributed.

The failure of our policy makers in Washington to focus on creating jobs, let alone good jobs, and on spurring economic growth is the clear and tragic result of the ascendancy of politics over rational policy making.

FULL POST: The most urgent problem facing the US right now is a lack of jobs, especially jobs that pay middle class wages and provide benefits. Unemployment is high and long-term – since 2010 roughly 40% of those unemployed and actively looking for work have been unemployed for more than 6 months. This is triple the rate of long-term unemployment in the period from 2000 – 2007. [1]

The official unemployment rate is 7.2% based on those who are actively looking for a job. It would be significantly higher, well over 10%, if those who have given up looking were included. And higher still if the under-employed were included – those working part-time who would like to be working full-time and those who are working at jobs for which they are over-qualified.

The jobs being created during our 4 year old economic recovery are disproportionately low-wage, low skill jobs. (See post of 9/27/13 for more detail.) High unemployment and low wage jobs are key factors in our slow economic recovery (consumers’ lack purchasing power), in the government’s budget deficit (reduced tax revenues), and in growing inequality (95% of the economic gains during the recovery have gone to the richest 1%). As a result, income and wealth inequality have increased to levels not seen since the 1920s.

Fast food workers are emblematic of the low wage, low skill jobs being created. The typical fast food worker makes $8.69 per hour. Two-thirds of them are adults, most of them bring home at least half of the family’s income, and a quarter of them have children. Only 13% get health insurance through their employers.

As a result, over half of fast food workers rely on public, taxpayer funded benefits to make ends meet. The cost to taxpayers is estimated to be $7 billion per year; much of it is for health care, but also food assistance and other economic supports. [2] You can watch a 2 minute video about this, which includes a recording of the McDonald’s help line telling a 10-year employee with 2 children to access food stamps and Medicaid, at
http://lowpayisnotok.org/mcvideo/?utm_campaign=LowPay&utm_medium=email&utm_source=mcvideo-r.

Meanwhile, the fast food corporations make billions of dollars in profits and pay tens of millions of dollars to their senior executives. For example, McDonald’s has 700,000 employees. They are estimated to get $1.2 billion a year in taxpayer funded benefits. McDonald’s is very profitable, making $5.5 billion a year and paying its CEO $13.8 million. It has just purchased a $35 million luxury jet for its executives, which costs at least $2,400 an hour to operate.

Workers at Walmart, the largest employer in the US, are in a similar situation. They make an average of $8.80 an hour. When General Motors was the largest employer in the 1950s, it paid its workers about $50 to $60 an hour (adjusted for inflation). As with the fast food workers, we taxpayers are supporting Walmart workers with multiple types of public assistance. [3]

These big, profitable corporations operate with a business model that uses low paid and part-time workers, typically without benefits, who are, therefore, unable to afford the necessities of life. This leaves taxpayers to pick up the tab for the public benefits they need. These very profitable corporations can afford to raise their workers’ wages to $15 an hour (see post of 9/8/13 for more detail)  – a wage they could live on without public assistance. In the meantime, taxpayers are subsidizing these corporations.

Nationally, the typical workers’ wages, adjusted for inflation, have barely increased over the last 30 years. (See post of 9/2/13 for more detail.) The typical male worker in 1978 was making around $48,000 (adjusted for inflation), while the average person in the top 1% earned $390,000. By 2010, the typical male workers’ pay had gone down, while the person in the 1% had their pay more than double. Today, the richest 400 Americans have more wealth than the bottom half of the country, 150 million people, combined.

It used to be that unions and government provided workers with a voice and the power to balance that of the large employers. Today, that voice and power are largely gone. Therefore, wages, benefits, and job security have been eroding. Workers are not even receiving the benefits of their increased productivity. As a result, we are losing the middle class, equal opportunity, and upward mobility. This is undermining our economy and our democracy.

In the first 4 years of the current recovery, the richest 1% of Americans took home 95% of the income gains. In stark contrast, between 1946 and 1978, as the economy doubled in size, everyone’s income doubled as well.

Starting in the late 1970s, the historic link between growth in the economy and productivity on the one hand, and growth in workers’ wages on the other hand, was severed. Income gains started going to the richest Americans and people in the middle, the typical worker, saw their wages stagnate. Part of the problem is that we didn’t adapt to globalization and technological change. We didn’t change public policies. We didn’t change the rules of our economy to continue to provide opportunity, upward mobility, and ensure that economic and productivity growth were broadly shared. We could have done so, but we didn’t. [4]

Among other things, we let the minimum wage fall behind inflation. If it had kept up with inflation, the national minimum wage would be $10.40 today instead of $7.25. If productivity improvement was included, it would be at least $15 an hour. We deregulated the financial system, both domestically and internationally, favoring investors and corporations over workers. And we didn’t include labor standards in trade treaties. Meanwhile, we cut tax rates on high incomes and wealth substantially.

If we had a democracy that was working for the people, the average citizen and worker would have the voice and power to see that their interests and the greater good were served. Instead, we undid or failed to adopt rules for our economy that ensure the gains of economic and productivity growth are widely and fairly distributed – without sacrificing efficiency or innovation. The failure of our policy makers in Washington to focus on creating jobs, let alone good jobs, and on spurring economic growth is the clear and tragic result of the ascendancy of politics over rational policy making. This failure may put their political careers at risk because every poll shows that the public is much more concerned about jobs and the economy than any other issue, including the deficit.

[1]       Woolhouse, M., 10/22/13, “Long search finally ends,” The Boston Globe

[2]       Johnston, K., 10/16/13, “Public aid crucial to fastfood workers,” The Boston Globe

[3]       Moyers, B. with Reich, R., 9/20/13, “Inequality for all,” http://billmoyers.com/episode/full-show-inequality-for-all/

[4]       Moyers, B. with Reich, R., 9/20/13, see above

WHY IS THE GOVERNMENT SHUTDOWN?

ABSTRACT: The federal government’s shutdown for lack of a budget has nothing to do with the deficit or democracy; rather, it has everything to do with politics, ideology, and the tyranny of a minority. The extreme wing of the Republican Party, without the support in Congress to pass legislation and having lost the last election, is trying to impose its ideology on the country by taking the government’s budget hostage.

The federal government’s budget deficit is at its lowest level in 5 years and roughly half of what it was in 2009. The Republicans’ primary policy target is the Affordable Health Care law, also known as Obama Care. They ideologically oppose this expansion of the government’s role in health care, even though it is built on conservative principles and will provide health insurance to tens of millions of Americans who don’t have it now.

There’s a bill sitting in the House that funds the government for a few weeks – a so-called Continuing Resolution (CR). With a simple yes or no vote, it would pass. But because it doesn’t have the support of the majority of Republicans, Speaker Boehner won’t allow a vote on it.

800,000 federal employees will lose their paychecks and millions of Americans will lose services funded by the government. Nonetheless, members of Congress will continue to get their paychecks and their good, taxpayer-subsidized health insurance.

As recent history has shown, if the extremists in Congress get what they want, or any part of it, they’ll just be back at the next opportunity, creating another crisis, and asking for more. Therefore, negotiation with this extortion, blackmail, hostage taking, or bullying, whatever you want to call it, should not and cannot be undertaken.

FULL POST: The federal government’s shutdown for lack of a budget has nothing to do with the deficit or democracy; rather, it has everything to do with politics, ideology, and the tyranny of a minority. The extreme wing of the Republican Party, without the support in Congress to pass legislation and having lost the last election, including the presidency and seats in both houses of Congress, is trying to impose its ideology on the country by taking the government’s budget hostage.

This extreme faction is not willing to abide by the last election, by legislation previously passed (such as the Affordable Care Act), or by the will of the American public. And they are not willing to engage in meaningful negotiations because they believe they know what is best for the country and for all of us. They are willing, however, to disrupt the lives of millions of Americans and to harm our weak economic recovery by shutting down the federal government.

And this is not about the deficit. The federal government’s budget deficit is at its lowest level in 5 years and roughly half of what it was in 2009. [1] The deficit is projected to continue to fall as the economy recovers, which increases government revenue and reduces expenses. Many economists expect that in 2 years it will have decreased to a sustainable level. [2]

The Republicans’ primary policy target is the Affordable Health Care law, also known as Obama Care. They ideologically oppose this expansion of the government’s role in health care, even though it is built on conservative principles: 1) it uses private health insurers and providers, and 2) it requires personal responsibility through the mandate that individuals purchase health insurance (an idea born in a conservative think tank). They oppose it despite the fact that it will provide health insurance to tens of millions of Americans who don’t have it now, and the fact that the more the public knows about Obama Care’s specific provisions, the more they like it. (See my posts of 8/21/13 and 8/19/13 for more information.)

Various budget proposals from the Republicans identify their other policy targets. They have included cuts to other social programs that their extreme wing opposes, including cuts to Social Security, the Medicare and Medicaid health programs, and food and nutrition assistance, among others. On the other hand, most of them would increase military spending on top of its significant increases in recent years, which already mean that we are spending more on the military (adjusted for inflation) than at any time since World War II. [3]

The Republicans in the House of Representatives, who are the roadblock to passage of a budget, are refusing to bring to a vote any budget that does not have the support of a majority of Republicans. Therefore, the most extreme 117 Republicans in the House, 27% of its overall membership, can and are blocking progress and forcing this shutdown. (See post of 7/27/13 for more information on obstructionism in the House.)

There’s a bill sitting in the House that funds the government for a few weeks – a so-called Continuing Resolution (CR). It’s simple and straightforward; it simply funds the government at current levels without making any policy changes. If the Republican leadership in the House would allow a simple yes or no vote on this bill, it would pass with support from members of both parties – as it did in the Senate. But because it doesn’t have the support of the majority of House Republicans, Speaker Boehner won’t allow a vote on it.

800,000 federal employees will lose their paychecks and millions of Americans will lose services funded by the government, including meals for seniors, Head Start classes for preschoolers, and access to national parks for all of us. Nonetheless, members of Congress will continue to get their paychecks and their good, taxpayer-subsidized health insurance.

This is the second time in 20 years that an extreme Republican agenda has forced a government shutdown. Democrats have never done this when they were in the minority or did not hold the presidency.

As recent history has shown, if the extremists in Congress get what they want, or any part of it, they’ll just be back at the next opportunity, creating another crisis, and asking for more. Therefore, negotiation with these extortionists, blackmailers, hostage takers, or bullies, whatever you want to call them, should not and cannot be undertaken. [4]

Long before blocking Obama Care was linked to a government shutdown, Norm Ornstein, the political scientist at the conservative America Enterprise Institute, wrote that “What is going on now to sabotage Obamacare is not treasonous – just sharply beneath any reasonable standards of elected officials with the fiduciary responsibility of governing.” [5] I wonder what he would say now about those in Congress whose behavior has led to this government shutdown.

[1]       Klimasinska, K., 9/12/13, “U.S. budget gap narrows as stronger growth boosts revenues,” Bloomberg

[2]       Lowrey, A., 4/22/13, “The incredible shrinking budget deficit,” The New York Times

[3]       Bilmes, L., 7/31/13, “Pentagon a ripe target for cuts,” The Boston Globe

[4]       Reich, R., 9/30/13, “Why Obama and the Democrats shouldn’t negotiate with extortionists,” The Huffington Post

[5]       Light, J., 7/25/13, “Obstructionism for the recordbooks,” Moyers & company (billmoyers.com/2013/07/25/obstructionism-for-the-recordbooks)

“TRADE” AGREEMENTS & CORPORATE POWER

ABSTRACT: The Trans-Pacific Partnership (TPP) “trade” treaty that is currently being negotiated (see post of 9/10) would give corporations the right to sue governments if their laws, regulations, or actions negatively affect current or expected future profits. Under existing trade agreements, over $380 million has already been paid to corporations by governments. Furthermore, there are 18 pending suits by corporations against governments for $14 billion. Corporations will use or set up foreign subsidiaries to file suits under investor-state dispute resolution provisions of trade treaties (corporations are referred to as “investors”), thereby avoiding a country’s legal system and relying instead on the international tribunals (i.e., courts) created by the treaties.

The TPP would require countries to allow corporations to compete for the delivery of public services. The result could well be that some people cannot afford a corporation’s fees for basic, formerly universal, public services (such as water).

If ratified, the Trans-Pacific Partnership treaty would enhance the power and rights of corporations while weakening US sovereignty. Given its unlimited term and the virtual impossibility of making changes (which require the unanimous consent of the parties), it amounts to a Constitutional change that gives foreign corporations equal (if not greater) legal status and power than the US and other governments. Furthermore, it would foster a race to the bottom for public health, the environment, and workers, especially well-paid blue and white collar workers, as jobs continue to move overseas and compensation and safety are attacked as limiting profits.

The secrecy and potency of the TPP make it feel like a conspiracy among our corporate and political elite to give corporations the ultimate power in our society. I strongly urge you to call your US Senators, and your Representative as well, to ask them to oppose “fast-track” rules for consideration of the Trans-Pacific Partnership “Trade” Treaty and to demand full disclosure and discussion of its provisions in Congress and with the public.

FULL POST: The Trans-Pacific Partnership (TPP) “trade” treaty that is currently being negotiated (see post of 9/10) would give corporations the right to sue governments if their laws, regulations, or actions negatively affect current or expected future profits. The North American Free Trade Agreement (NAFTA) between the US, Canada, and Mexico and other treaties that are already in place give corporations similar rights. Under existing trade agreements, over $380 million has already been paid to corporations by governments. Furthermore, there are 18 pending suits by corporations against governments for $14 billion. [1] For example, Chevron is suing Ecuador over its environmental laws, Eli Lilly is suing Canada over its patent laws, and European investment firms are suing Egypt over its minimum wage laws. [2]

Philip Morris is suing Australia over its cigarette labeling laws. However, because the US – Australia trade agreement doesn’t include investor-state dispute resolution provisions (corporations are referred to as “investors”) that allow such suits, Philip Morris is using other trade treaties and its Swiss and Hong Kong subsidiaries to file its suits. [3] Corporations will use or set up foreign subsidiaries to file suits under investor-state dispute resolution provisions of trade treaties, thereby avoiding a country’s legal system and relying instead on the international tribunals created by the treaties.

Other examples of corporations suing governments include:

  • Under NAFTA, a US corporation sued and received $13 million from Canada, which then reversed its ban on a gasoline additive that contains a known human neurotoxin.
  • Another US corporation has filed a $250 million investor-state suit against Canada under NAFTA because of its ban on fracking.
  • A French and a US company have succeeded in separate suits totaling close to $300 million against Argentina because its federal government failed to override 2 provinces’ limits on water rate increases after water systems were privatized in a period of economic distress, even though it would have been an unconstitutional intervention in provincial affairs for the federal government to do so. [4]
  • (There are many more examples and much more information on the TPP at www.citizen.org/TPP.)

The TPP language would require countries to allow corporations to compete for the delivery of public services, such as water and sewer, electricity, education, and transportation services. The result could well be, as has occurred in Argentina and other South American countries, that some people cannot afford a corporation’s fees for basic, formerly universal, public services (such as water), or that a distinctly two-tiered system emerges with high quality services for those who can afford to pay and poorer quality services for those who can’t. [5]

If the TPP is ratified by the US, it would, for example, undermine efforts to make the giant international mining corporation Rio Tinto abide by the Clean Air Act at its massive copper mine west of Salt Lake City. [6] Under the TPP, US and local regulations could be nullified or forced to change in areas such as:

  • Worker safety and the minimum wage
  • Importation of food and food labeling
  • Fracking for and exportation of natural gas
  • The length of patent protection on drugs (which could raise drug prices by delaying availability of generic versions of drugs)
  • The separation of banking from financial speculation that has been proposed as part of the answer to the 2008 financial collapse (i.e., reinstating Glass-Steagall provisions). Furthermore, TPP would prohibit a transaction tax on the buying and selling of securities, derivatives, and other financial instruments (as has been proposed in the US and as is being implemented in Europe).

If ratified, the Trans-Pacific Partnership treaty would enhance the power and rights of corporations while weakening US sovereignty. Given its unlimited term and the virtual impossibility of making changes (which require the unanimous consent of the parties), it amounts to a Constitutional change that gives foreign corporations equal (if not greater) legal status and power than the US and other governments. This is in total contradiction to the design of US democracy where there is a balance of power, checks and balances, elections every two years, and law making that can change policies and the course of the country on a regular basis.

Furthermore, it would foster a race to the bottom for public health and the environment by giving corporations the right to challenge health and environmental laws and regulations in pursuit of ever higher profits. Similarly, it would foster a race to the bottom for workers, especially well-paid blue and white collar workers, as jobs continue to move overseas (as they have done under NAFTA), and compensation and safety are attacked as limiting profits.

I’m not one who generally buys conspiracy theories, but the secrecy and potency of the TPP make it feel like a conspiracy among our corporate and political elite to give corporations, which are totally focused on maximizing profits, the ultimate power in our society. Therefore, corporations, not our governments or other civic organizations, would determine our well-being as individuals, communities, and nations, as well as, ultimately, the well-being of our planet. I strongly urge you to call your US Senators, and your Representative as well, to ask them to oppose “fast-track” rules for consideration of the Trans-Pacific Partnership “Trade” Treaty and to demand full disclosure and discussion of its provisions in Congress and with the public.

(You can find out who your Congress people are and get their contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm for your Senators and http://www.house.gov/representatives/find/ for your Representative.)

[1]       Public Citizen, retrieved 9/9/13, “TPP’s investment rules harm public access to essential services,” www.citizen.org/TPP

[2]       Hightower, J., August 2013, “The Trans-Pacific Partnership is not about free trade. It’s a corporate coup d’état – against us!” The Hightower Lowdown

[3]       Public Citizen, retrieved 9/9/13, “TPP’s investment rules harm public health,” www.citizen.org/TPP

[4]       Public Citizen, retrieved 9/9/13, “TPP’s investment rules harm the environment,” www.citizen.org/TPP

[5]       Hightower, J., August 2013, “The Trans-Pacific Partnership is not about free trade. It’s a corporate coup d’état – against us!” The Hightower Lowdown

[6]       Moench, B., 6/25/12, “America: A fire sale to foreign corporations,” Common Dreams (http://www.commondreams.org/view/2012/06/25-0)

“TRADE” AGREEMENT SUPERSIZES CORPORATE POWER

ABSTRACT: The US is currently negotiating a trade agreement known as the Trans-Pacific Partnership (TPP). The negotiations have been so secretive that most members of Congress have never seen a draft of the treaty and the public is mostly unaware of its existence. The mainstream (corporate) media have hardly mentioned the TPP, despite its target date for completion of December 2013.

Much of the TPP has nothing to do with trade; its focus is largely on providing legal rights to multi-national corporations so they can make profits without interference from government laws, regulations, or sovereignty. Foreign corporations would have the right to sue national or local governments if their laws, regulations, or actions negatively affected current or expected future profits. These suits would be resolved by an Investor-State Dispute Resolution system using an international tribunal (i.e., court).

Interestingly, conservatives have generally objected to the use of international precedents and tribunals that might impinge on US sovereignty and initiatives. However, they are generally supportive of the rights and power given to foreign corporations and international tribunals by the TPP.

The Trans-Pacific Partnership treaty puts corporate interests ahead of American interests. I strongly urge you to call your US Senators to ask them to oppose “fast-track” rules for consideration of the Trans-Pacific Partnership “Trade” Treaty and to demand full disclosure and discussion of its provisions in Congress and with the public.

FULL POST: The US is currently negotiating a trade agreement known as the Trans-Pacific Partnership (TPP). The negotiations have been so secretive that most members of Congress have never seen a draft of the treaty and the public is mostly unaware of its existence. Yet, Congress is going to be asked soon to vote on considering the treaty under “fast-track” rules that mean it would get a yes or no vote in Congress with limited debate and no amendments allowed. And once the treaty is approved, it has no expiration date and changes can only be made with the unanimous agreement of the participating countries. [1]

The mainstream (corporate) media have hardly mentioned the TPP, despite the fact that it includes 40% of the global economy, involves 12 (and potentially more) countries [2], has had 18 negotiating sessions, and has a target date for completion of December 2013.

Given that the tariffs among the participating countries are already low and that the US already has trade agreements with many of them (Canada, Mexico, Chile, Peru, Australia, and Singapore), there would seem to be little need for the TPP. However, much of the TPP has nothing to do with trade – only 5 of its 29 sections actually deal with trade. Its focus is largely on providing legal rights to multi-national corporations so they can make profits without interference from government laws, regulations, or sovereignty. It has been described as the most business-friendly “trade” agreement in history and as NAFTA (the North American Free Trade Agreement between the US, Canada, and Mexico) on steroids. (Most people view NAFTA as having been good for US corporations but as not having lived up to the promise that it would create jobs in the US, let alone good jobs with good wages.)

The only people with access to the negotiations and draft treaty language have been members of the US Trade Representative’s official Trade Advisory Committees. These individuals are sworn to secrecy, as are the negotiators for the other countries. Of the roughly 700 US advisory committee members, about 600 represent the business community, about 20 represent workers, and none represent citizens’ or civic groups.

The TPP benefits corporations, particularly foreign corporations, by

  • Strengthening patent, copyright, and intellectual property rights
  • Banning government contracting rules that favor domestic businesses (e.g., Buy America incentives)
  • Allowing government regulations to be challenged and overridden if they reduce a foreign corporation’s profits, including, for example, regulations of food safety, environmental impact, the financial system, public utilities and services, and working conditions (including minimum wage, overtime, safety, and child labor laws)
  • Giving special international tribunals (i.e., courts) the ability to overrule domestic laws and regulations if they would hurt foreign corporations profits
  • Creating a special visa program for highly-paid, white-collar professionals that bypasses all other immigration regulations and processes. [3]

Corporations would have a legal status equal to or superseding that of countries. Foreign corporations would have the right to sue national or local governments if their laws, regulations, or actions negatively affected current or expected future profits. [4] These suits would be resolved by an Investor-State Dispute Resolution system using an international tribunal (i.e., court). (Corporations are referred to as “investors.”) Basically, this is an alternative legal system that supersedes US courts and laws. The three person tribunals would operate behind closed doors and be made up of private lawyers. The same lawyers who serve as judges in one case might represent corporations in other cases. There is no appeal process and when a corporation wins, the losing government must pay the corporation for its “lost” profits and legal costs. (My next post will provide examples of how corporations are using similar rights under existing treaties and of the effects TPP is likely to have.)

Interestingly, conservatives have generally objected to the use of international precedents in making court decisions and writing US laws, and to the United Nations, treaties, and international human rights tribunals that might impinge on US sovereignty and initiatives. However, they are generally supportive of the rights and power given to foreign corporations and international tribunals by the TPP, despite the fact that they would clearly limit US sovereignty. The TPP would give foreign corporations greater rights than domestic firms and would expand incentives for US corporations to move investments and jobs overseas. [5]

The Trans-Pacific Partnership treaty puts corporate interests ahead of American interests. And it is widely viewed as benefitting large, international corporations, while hurting small businesses, small farmers, and workers, especially well paid blue and white collar workers. I strongly urge you to call your US Senators, and your Representative as well, to ask them to oppose “fast-track” rules for consideration of the Trans-Pacific Partnership “Trade” Treaty and to demand full disclosure and discussion of its provisions in Congress and with the public.

(You can find out who your Congress people are and get their contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm for your Senators and http://www.house.gov/representatives/find/ for your Representative.)

[1]       Hightower, J., August 2013, “The Trans-Pacific Partnership is not about free trade. It’s a corporate coup d’état – against us!” The Hightower Lowdown

[2]       The negotiations currently include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Other countries are allowed to join in the future and China, Indonesia, and Russia are likely to join at some point.

[3]       Stangler, C., 9/2013, “MBAs without borders,” In These Times

[4]       Hauter, W., 8/22/13, “The un-American way: The Anti-democratic Trans-Pacific Partnership threatens food safety and public health,” OtherWords (www.commondreams.org/view/2013/08/22-3)

[5]       Moench, B., 6/25/12, “America: A fire sale to foreign corporations,” Common Dreams (http://www.commondreams.org/view/2012/06/25-0)

UPDATES ON POSTS ON LOW PAY FOR FAST-FOOD WORKERS, PESTICIDES AND BEES, & DETROIT

PAY FOR WORKERS IN THE FAST-FOOD INDUSTRY (A follow-up to my 9/2/13 post)

As the portion of the jobs in our economy that are in the retail sector grows, it is important to the well-being of individuals and families, as well as the health of the economy, that these jobs provide better pay. But could the fast-food industry, for example, afford to pay higher wages?

Franchisees in the fast-food industry, in other words your local outlets, have profit margins of only 4% to 6% – 4 to 6 cents on every dollar they take in. Their parent companies, the 5 big, publicly-traded fast-food companies, have profit margins of 16% – 16 cents on every dollar they take in. That is 73% higher than the average big US company’s profit margin. In other words, they are VERY profitable. Last year, McDonald’s reported a profit of $5.5 billion on sales of $27.6 billion – a 20% profit margin. And its CEO got $13.8 million. McDonald’s, and the others, could cut the fees they charge their franchisees so the franchisees could increase pay for their workers. (Choi, C., & Fahey, J., 9/2/13, “Fast-food workers face a big problem: Who’ll fund raises?” The Boston Globe (from the Associated Press))

 

PESTICIDES AND BEES (A follow-up to my 8/10/13 post)

The good news is that the Environmental Protection Agency (EPA) has released new rules and requirements for labels for pesticides containing neonicotinoids, which are linked to mass killing of bees. These labels feature a special warning and prohibit use of these products where bees are present. (Boyd, V., 8/21/13, “EPA issues new label rules for neonicotinoids to protect bees,” The Grower) (Aren’t bees present everywhere?)

However, there are three pieces of bad news. First, a recent study found that some home garden plants sold at Home Depot, Lowe’s and other garden centers have been pre-treated with the neonicotinoids. (Friends of the Earth, 8/14/13) Second, one of Florida’s biggest citrus growers, Ben Hill Griffin, Inc., has been fined only $1,500 after illegally spraying pesticides multiple times that killed millions of bees. (Salisbury, S., 8/28/13, “Ben Hill Griffin Inc. accused of killing honeybees, faces fine,” Palm Beach Post) Third, the chemical corporations Syngenta and Bayer have submitted legal challenges to the European Union’s 2 year suspension of the use of several neonicotinoid pesticides, which is scheduled to begin in December. (Boyd, V., 8/28/13, “Syngenta, Bayer challenge EU’s ban on neonicotinoids,” The Grower)

 

MORE ON DETROIT’S BANKRUPTCY (A follow-up to my 9/1/13 post)

The factors contributing to Detroit’s bankruptcy include suburban sprawl, the lack of regional planning or coordination, Michigan’s declining economy, and the state’s reneging on revenue sharing (to the tune of $700 million). In addition, people have moved out of the city – since 2000 the city’s population has declined by about 200,000 to 687,000 – eroding the tax base. Residents in blighted neighborhoods have sold homes for $5,000 that were once worth $100,000; others have simply abandoned their houses.

Since 2007, Detroit’s median income has fallen from $30,000 to $25,000; less than half of the national figure. 40% of those remaining in Detroit are in poverty. Almost 20% of Detroit households have no access to a car.

As public services have been cut over many years, living conditions have declined, including increased crime in part due to a police force reduced by roughly 35% (4,000 officers to 2,600). The murder rate is the 2nd highest of any city in the country (Flint, MI is 1st).

The 9,700 city employees are taking unpaid furloughs and wage cuts, some as much as 20%. And the 21,000 retirees know their pensions are at risk. Meanwhile, Detroit’s bankruptcy process is expected to cost the city $100 million in legal fees and costs.

While the downtown is thriving with business activity and gentrification (and a new sports arena on its way), the neighborhoods, as little as a half mile away, are eviscerated. The neighborhoods are 80% black and the homes of thousands of current and retired city employees.

The city’s receiver proposes privatizing trash, electricity, and water and sewer services. Although that will save the city money, it is unclear how many of the residents would be able to afford the fees private providers would charge, and lower quality services are likely, one way or the other. The state has taken over running 15 low performing schools, but the initial results have not been promising. (Felton, R., 9/2013, “Is there Detroit after bankruptcy?” In These Times)

LABOR DAY AND THE MIDDLE CLASS

ABSTRACT: Labor Day is a time to celebrate the contributions working people make to our country. But with unemployment still high, inequality on the uptick, and the middle class shrinking and under serious financial strain, many working families just don’t have much to celebrate. For 30 years, wages for the middle and lower income workers have barely kept up with inflation and have not kept up with their significant productivity increases. This means that they aren’t being paid fairly for what they produce. From 1979 to 2012, a typical worker’s wages grew only 5.0% despite a 74.5% increase in productivity.

Efforts are building at the federal level and in a number of states to raise the minimum wage, which has not kept pace with inflation or productivity growth. Low wage workers at fast food chains, big box retailers, and elsewhere have been organizing rallies and strikes to protest low wages and poor working conditions.

President Bill Clinton’s Labor Secretary, Robert Reich, has put together a short video (under 3 minutes) that explains how we can turn things around. (http://front.moveon.org/how-workers-can-get-a-fair-shake-a-labor-day-message-from-robert-reich/#.UiSXAknD_IU)

Jobs with wages that support a middle class life are essential to the well-being of individuals, families, our economy, and our country. Such jobs have been disappearing for 30 years. We need to reverse this trend. And we can, through our actions as citizens and through the policies of our government.

FULL POST: Labor Day is a time to celebrate the contributions working people make to our country. They power our economy both through what they produce and what they consume. (Consumer spending is about two-thirds of economic activity.)

But with unemployment still high, inequality on the uptick, and the middle class shrinking and under serious financial strain, many working families just don’t have much to celebrate. The recovery is weak and the jobs that are being created are largely low wage jobs. So far in 2013, 61% of new jobs have been in low-wage industries and 77% have been part-time. [1] Many of the laid off workers who are getting jobs are earning much less than they used to and many are only working part-time; many of them, especially older workers, are experiencing long-term unemployment with unemployment benefits running out and the loss of health insurance. [2]

For 30 years, wages for the middle and lower income workers have barely kept up with inflation and have not kept up with their significant productivity increases. This means that they aren’t being paid fairly for what they produce. Their increases in productivity are not rewarding them, but instead are going to corporate profits, executive pay, and shareholders. Between 2007 and 2012, wages fell for the 70% of workers at the bottom of the income distribution, despite productivity growth of 7.7%. From 1979 to 2012, a typical worker’s wages grew only 5.0% despite a 74.5% increase in productivity. [3] If the minimum wage had kept pace with productivity growth since the 1960s, it would be $16.54 instead of $7.25. [4]

Since 2008, corporate profits are up 25% – 30% while wages have fallen to their lowest portion of corporate revenue since the 1940s. Part of this is due to the continuing trend of employers changing full-time jobs with benefits into part-time or contracted jobs, typically without benefits. [5]

Efforts are building at the federal level and in a number of states to raise the minimum wage, which has not kept pace with inflation or productivity growth. More than 7 million children live in homes whose income would increase if we raised the minimum wage and more than 10 million Americans, including 4% of full-time workers, qualify as the “working poor.” That means they spent at least half the year working yet still live below the poverty line ($19,530 for a family of three, which might be a single parent and two children). [6]

Low wage workers at fast food chains, big box retailers, and elsewhere have been organizing rallies and strikes to protest low wages and poor working conditions.[7] If you didn’t see The Daily Show’s piece on fast food workers and the minimum wage (with John Oliver subbing for Jon Stewart) it’s, as usual, both informative and entertaining. It’s at: http://www.thedailyshow.com/watch/thu-august-1-2013/can-t-you-at-least-wait-until-jon-stewart-gets-back. (It’s 10 minutes long with short ads at the beginning and in two breaks.)

President Bill Clinton’s Labor Secretary, Robert Reich, has put together a short video (under 3 minutes) that explains how we can turn things around. It lists 6 policies that are needed to make sure workers’ get a fair return for their labor and that would support the middle class. It’s at: http://front.moveon.org/how-workers-can-get-a-fair-shake-a-labor-day-message-from-robert-reich/#.UiSXAknD_IU.

As an initial step, the site includes a petition you can sign that calls on two very profitable companies – McDonald’s and Walmart – to pay their workers fair wages. Walmart, for example, pays its typical employee less than $9 an hour and many of its jobs are part-time, while its profits in 2013 were $28 billion. Most people who work for big-box retailers like Walmart, as well as those who work in the fast-food industry, are adults, not teenagers. They are responsible for bringing home a significant share of their family’s income and they should be paid enough to lift them and their families out of poverty.

When Martin Luther King, Jr., led the March to Washington for Jobs and Justice fifty years ago, one of the objectives was to raise the minimum wage to $2 an hour. $2 an hour in 1963, adjusted for inflation, comes to over $15 an hour today. (You can read more on this and many other topics at Bob Reich’s excellent blog at: http://robertreich.org.)

Jobs with wages that support a middle class life are essential to the well-being of individuals, families, our economy, and our country. Such jobs have been disappearing for 30 years. We need to reverse this trend. Increasing the minimum wage is one step. Increasing investments in human capital are another, including high quality, affordable early care and education, good schools, and affordable, quality post-secondary education. Universal access to good health care and steps to increase compensation and conditions for workers here in the U.S., as well as around the globalized world (for example, through trade treaties), are essential. We can affect these matters through our actions as citizens and through the policies of our government.

[1]       Wiseman, P., 8/5/13, “Most new jobs in July were low paying, part time,” The Boston Globe (from the Associated Press)

[2]       Winerip, M., 8/26/13, “Set back by recession, shut out of rebound,” The New York Times

[3]       Mishel, L., & Shierholz, H., 8/21/13, “A decade of flat wages: The key barrier to shared prosperity and a rising middle class,” Economic Policy Institute

[5]       Garson, B., 8/20/13, “How corporate America used the Great Recession to turn good jobs into bad ones,” TomDispatch

[6]       Eskow, R.J., 8/26/13, see above

[7]       Johnston, K., 8/27/13, “Local rally part of nationwide call,” The Boston Globe

DETROIT’S BANKRUPTCY

ABSTRACT: Detroit’s bankruptcy is the result of a long term decline with many contributing factors. Detroit’s bankruptcy proceeding will favor the big financial corporations because of federal bankruptcy laws, which give priority to paying off financial firms’ interest rate swaps before paying pensions or bond holders. If Detroit ends up cutting workers’ pensions and defaulting on its municipal bonds, it will create dangerous precedents. Other financially ailing cities and municipalities may consider filing for bankruptcy, too, to relieve pension and debt costs.

It will be interesting to watch how the state and federal governments respond. Many precedents will be set. We will learn whether our big corporations and their executives and employees are more important from the federal government’s perspective than our cities, their residents and municipal workers, and their municipal bond holders.

FULL POST: Detroit’s bankruptcy is the result of a long term decline with many contributing factors. Since the financial system collapse of 2008, the federal government has done little to help municipalities that took a double hit from the loss of tax revenue due to the recession itself, as well as from the decline of property tax revenue due to falling property values and homeowners in distress. Certainly, state and federal policies for urban America and trade agreements that let manufacturing jobs, especially in the auto industry, move out of the country played a role. Mismanagement by and corruption of Detroit’s elected leadership played a role as well.

Detroit’s bankruptcy proceeding will favor the big financial corporations because of the 2005 changes in federal bankruptcy laws. Those changes, lobbied for heavily by Wall Street, give priority to paying off financial firms’ interest rate swaps before paying pensions or bond holders. (These interest rate swaps are sold by the big financial firms to cities as insurance to protect them from increases in interest rates. However, unlike insurance, they are really interest rate speculation because they require the cities to pay the financial corporations if interest rates fall. And they have fallen dramatically in the wake of the 2008 financial collapse, which was caused by the big financial corporations.) So the financial firms that speculated on interest rates with Detroit will get paid first and its bondholders and employees’ pensions will get whatever is left over. [1]

If Detroit defaults on its municipal bonds, in other words pays less than it owes, it would set a dangerous precedent for the municipal bond market. Other financially ailing cities and municipalities may consider filing for bankruptcy too, to reduce what they owe bondholders. And it is likely to make borrowing more expensive for states, municipalities, and school districts as municipal bonds will no longer be viewed as virtually risk-free. [2]

Similarly, if Detroit ends up cutting workers’ pensions, it will create a scary precedent for other municipal and government employees. (The average pension owed to Detroit municipal workers, incidentally, is less than $23,000 per year. [3]) Other cities, municipalities, or even states could declare bankruptcy as a way to reduce pension costs. [4] In the private sector, declaring bankruptcy has become a standard tactic for cutting pensions and other benefits for retirees. The airline industry has done this and it has been a standard tactic in leveraged buyouts of private companies. (This was a tactic used by Bain Capital, Mitt Romney’s firm, and became an issue when he ran for President.) In many cases, when a corporation declares bankruptcy, the pensions of its workers become the responsibility of the federal government’s Pension Benefit Guaranty Corporation (PBGC). In 2012, PBGC paid for monthly retirement benefits for nearly 887,000 retirees in 4,500 pension plans that could not pay promised benefits. However, it does not cover state or municipal pension plans. [5] (This is another example, along with bailouts, of how the federal government picks up the pieces when corporations fail to meet their commitments.)

It will be interesting to watch how the state and federal governments respond. Here are two interesting tidbits:

  • While the Michigan state government is doing little to help the city itself, it has approved $450 million in bonds to build a new arena for the Red Wings hockey team and its billionaire owners (who also own Little Caesars Pizza and the Tigers baseball team). Decades of studies have shown that sports facilities’ subsidies are massive wastes of taxpayer money. There is no evidence of a return to the public (as opposed to the private owners of the teams) and they are not an efficient way to create jobs. [6]
  • The federal government has been providing about $100 million a year to Detroit under a variety of federal programs. By way of comparison, US aid to Columbia (the South American country) is about $323 million a year to combat drug trafficking and violence. However, Detroit’s homicide rate is 81% higher than Columbia’s. [7]

Many precedents will be set as Detroit moves through the bankruptcy process. It will be interesting to see who the big winners and losers are, as well as whether the federal government steps in to help out the city as it did the big financial corporations and the big auto companies. We will learn whether our big corporations and their executives and employees are more important from the federal government’s perspective than our cities, their residents and municipal workers, and their municipal bond holders.

[2]       Brown, E., 8/6/13, see above

[3]       Kuttner, R., 8/11/13, “We are all Detroit,” The Huffington Post, (http://www.huffingtonpost.com/robert-kuttner/we-are-all-detroit_b_3741418.html?utm_hp_ref=email_share)

[4]       Brown, E., 8/6/13, see above

[5]       The Pension Benefit Guaranty Corporation, A U.S. Government Agency, http://www.pbgc.gov/home.html

[6]       Jackson, D. Z., 7/31/13, “Motor City hustle,” The Boston Globe

[7]       Christoff, C., & McCormick, J., 8/1/13, “US aid to Colombia tops help for Detroit, but more is unlikely,” The Boston Globe (from Bloomberg News)

THE AFFORDABLE CARE ACT PART II

ABSTRACT: Other than the individual mandate (see 8/19 post), the biggest focus of resistance to the Affordable Care Act (ACA) has been the expansion of Medicaid, the health insurance program for low income individuals. If all states implement the Medicaid expansion called for by the ACA, over 21 million individuals, including 4.5 million children, who don’t have health insurance will gain coverage.

The resistance has been based on the assertion that the expansion will cost states money. However, for the first three years, the federal government will pay 100% of the cost and at least 90% thereafter. Because the newly covered individuals would have cost the states about $18 billion for uninsured, uncompensated care, overall the states will save $10 billion.

Republican Governors and state legislators, looking for a symbolic and substantive way to express their opposition to the ACA, have taken steps to refuse to participate in the Medicaid expansion, refusing significant federal funding. As a result, nationwide, hundreds of thousands of low-income residents will not receive health insurance.

Although it is too soon to know for certain, the bottom line is likely to be that the Affordable Care Act will provide very significant benefits to those who don’t have health insurance and get it, and that there are likely to be real benefits for those who already have health insurance as well. States that are focused on making the ACA work will see good results; states that work to undermine the law will not see good results. The sad thing about this self-fulfilling prophecy is that it will be the residents of those states who will suffer with no, or less effective, health insurance and probably worse health.

FULL POST: Other than the individual mandate (see 8/19 post), the biggest focus of resistance to the Affordable Care Act (ACA) has been the expansion of Medicaid, the health insurance program for low income individuals paid for jointly by the states and the federal government. If all states implement the Medicaid expansion called for by the ACA, over the next 10 years over 21 million individuals, including 4.5 million children, who don’t have health insurance will gain coverage. But when the Supreme Court upheld the overall ACA, it ruled that states couldn’t be required to participate in the expansion of Medicaid included in the law.

Aside from the political opposition, the resistance has been based on the assertion that the expansion will cost states money. However, for the first three years the federal government will pay 100% of the cost and at least 90% thereafter. Over 10 years, it is estimated that if all states implement the expansion, they would spend an additional $8 billion, which would be a 0.3% increase over their spending without the expansion. Furthermore, because the newly covered individuals would have cost the states about $18 billion for uninsured, uncompensated care, overall the states will save $10 billion. There may be other savings to states from the implementation of the ACA as well, although the impact will vary by state. [1]

Republican Governors and state legislators, looking for a symbolic and substantive way to express their opposition to the ACA, with encouragement from the Tea Party and other staunch Obama opponents, have taken steps to refuse to participate in the Medicaid expansion, refusing significant federal funding. As a result, nationwide, hundreds of thousands of low-income residents will not receive health insurance, despite the fact that there would be no cost to the states for 3 years and a 10% maximum share of the cost after that. In some states, such as Florida, after a hard look at the numbers and some grassroots activism, Republican elected officials have reversed their original stand and have decided to participate. However, New Hampshire, for example, currently is refusing to participate. This means that 58,000 low-income residents will not receive health insurance and, for many of them, it will likely mean they don’t get care they need. [2]

Republicans, and especially Tea Partiers, are making wild claims about how Obama Care will hurt small businesses and the economy. These claims have been soundly refuted as false by independent groups such as FactCheck.org and PolitiFact.com. The latter notes that economists generally believe that the federal budget cuts due to the sequester have done much more harm to the economy.

Undoubtedly, there will be bumps in the road during implementation of the Affordable Care Act. There always are challenges in implementing complex legislation, and the ACA was made more complex by the compromises Obama made in trying to get Republican support, which they then never gave to him or to the law.

Although it is too soon to know for certain, the bottom line is likely to be that the Affordable Care Act will provide very significant benefits to those who don’t have health insurance and get it, and that there are likely to be real benefits for those who already have health insurance as well. Most experts believe that states that are focused on making the ACA work will see good results. But that in states that work to undermine the law the results will not be good. [3] For example, some states are refusing to set up the exchanges to help the uninsured buy coverage and some are refusing to provide information to help residents make informed decisions on which plan to buy. Elected officials in these states are likely to then say, “See it doesn’t work!” The sad thing about this self-fulfilling prophecy is that it will be the residents of those states who will suffer with no, or less effective, health insurance and probably worse health.

[1]       Holahan, J., Buettgens, M., Carroll, C., & Dorn, S., 11/1/12, “The cost and coverage implications of the ACA Medicaid expansion: National and state-by-state analysis,” The Urban Institute and the Kaiser Commission on Medicaid and the Uninsured (http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8384_es.pdf)

[2]       Editorial, 8/7/13, “GOP stance against Obamacare hurts thousands of NH families,” The Boston Globe

[3]       Lehigh, S., 8/14/13, “The GOP’s Obamacare whale hunt,” The Boston Globe

THE AFFORDABLE CARE ACT PART I

ABSTRACT: As implementation of another key piece of the Affordable Care Act (ACA) (also known as Obama Care) approaches, the information and disinformation in the media and from the opposition builds. On January 1, 2014, the “exchanges” – where individuals can purchase health insurance if they don’t have it – will begin operation. On October 1, 2013, individuals can beginning selecting the health insurance plans they want to enroll in.

No one disputes that if the ACA is implemented as intended roughly 30 million Americans will have health insurance who don’t have it now. From a worldwide perspective, the US has the most expensive health care system but ranks 37th in overall health outcomes. Nearly 45,000 deaths annually are associated with not having health insurance.

From the first days of the Congressional debate on the ACA, its supporters have done a horrible job of presenting its benefits: millions already have better health insurance, $7 billion has been saved by those with health insurance, lifetime caps on benefits are prohibited, and denying coverage for pre-existing conditions will be banned.

The primary target of the opposition has been the individual mandate, which originally was promoted by the conservative Heritage Foundation and Republicans as part of personal responsibility. However, once Obama adopted the individual mandate as part of the ACA, it became anathema to Republicans. The Republicans’ focus on repealing, obstructing, and undermining the ACA has been described by Norm Ornstein, a long-time political scientist at the conservative American Enterprise Institute, as “monomaniacal.” He went on to write, “What is going on now to sabotage Obamacare is not treasonous – just sharply beneath any reasonable standards of elected officials with the fiduciary responsibility of governing.”

FULL POST: As implementation of another key piece of the Affordable Care Act (ACA) (also known as Obama Care) approaches, the information and disinformation in the media and from the opposition builds. On January 1, 2014, the “exchanges” – where individuals can purchase health insurance if they don’t have it – will begin operation. On October 1, 2013, individuals can beginning selecting the health insurance plans they want to enroll in.

There has been good news on the cost of the new plans to be offered through the exchanges: so far 5 states’ plans will cost less than expected. Where the plans cost more than current options, it is often because they provide more comprehensive coverage than current insurance, where coverage has often been narrowed to reduce costs and increase profits.

To put all of this in some context, no one disputes that if the ACA is implemented as intended roughly 30 million Americans will have health insurance who don’t have it now. Further, many of us who have health insurance will get better and, in many cases, more affordable coverage. From a worldwide perspective, the US has the most expensive health care system (at over $8,300 per person) but ranks 37th in overall health outcomes, and worse for infant mortality and life expectancy. And we have the most people without health insurance. In the US, nearly 45,000 deaths annually are associated with not having health insurance. [This estimate takes into account the effects of the education level, income, health behaviors (for example smoking and drinking), and baseline health (for example, obesity) of those who don’t have insurance.] [1]

From the first days of the Congressional debate on the ACA, its supporters have done a horrible job of presenting its benefits, including: [2]

  • 3 million young adults up to age 26 have had health insurance because they could continue to be covered by their parents’ health insurance
  • 13 million Americans with insurance have received $1 billion in rebates because their insurance companies spent more than is allowed under the ACA on expenses other than health care (for example, administration and advertising)
  • 54 million Americans have gotten free access to preventive services, such as checkups and cancer screenings
  • 6 million seniors have saved over $6 billion on their prescription drugs
  • Lifetime caps on benefits are prohibited (Isn’t the whole purpose of insurance to cover catastrophic losses? At least that used to be the case before the profit motive took over.)
  • Denying coverage for pre-existing conditions or denying renewal of an insurance policy when a health condition or accident occurs will be banned

The primary target of the opposition, particularly from the Tea Party types, has been the individual mandate – the requirement that everyone have health insurance or pay a penalty. Historically, the individual mandate was promoted by the conservative Heritage Foundation and Republicans as part of personal responsibility, i.e., being self-reliant and not depending on government or others for support. Democrats and progressives were cool to the idea because they were concerned that it would pose a burden on lower income families and individuals. The individual mandate was a centerpiece of the Republican alternative to the universal health care proposed by President and Hillary Clinton. And it was the centerpiece of Massachusetts’ universal health care law that Republican Governor Mitt Romney spearheaded and was so proud of (when he was Governor).

However, once Obama adopted the individual mandate as part of the ACA, it became anathema to Republicans. Ironically, as the Tea Party holds town hall forums and rallies today, the headline speaker against the ACA and the individual mandate is often Jim DeMint, the President of the Heritage Foundation, despite it having been the original promoter of the individual mandate. [3]

The Republicans’ focus on repealing, obstructing, and undermining the ACA has been described by Norm Ornstein, a long-time political scientist at the conservative American Enterprise Institute, as “monomaniacal.” The US House has voted 40 times to cut funding or repeal all or part of the ACA, knowing full well that it was a waste of time and effort given that the Senate would never pass such legislation and that the President would veto it and there weren’t the votes to override a veto. (This is one reason why Congress over the last 2 ½ years has been the least productive it’s been in the 75 years that records have been kept.)

Ornstein notes the contrast with President George W. Bush’s Medicare prescription drug plan. The Democrats, led by Senator Ted Kennedy, negotiated a compromise bill with the President. (Something Republicans refused to do with Obama on the ACA.) Then Republicans in Congress removed all of the provisions Kennedy and the Democrats had negotiated for and passed the stripped down legislation. Nonetheless, Democrats worked with Republicans and the Bush administration to make the law work.

In contrast, to undermine the ACA, Republicans refused for 3 years to confirm anyone to head the Center for Medicare and Medicaid Services, which was responsible for implementing the ACA, as it had been for the Bush Medicare drug plan. In addition, they have worked to discourage states from participating in the Medicaid expansion and the exchanges where the uninsured would obtain insurance. They are now threatening to shut down the entire government on September 30 when the fiscal year ends unless Obama stops all implementation of the ACA.

Ornstein went on to write, “What is going on now to sabotage Obamacare is not treasonous – just sharply beneath any reasonable standards of elected officials with the fiduciary responsibility of governing.” [4]

[1]       Cecere, D., 9/17/09, “Uninsured, working-age Americans have 40 percent higher death risk than privately insured counterparts,” Harvard Gazette

[3]       Lehigh, S., 8/14/13, “The GOP’s Obamacare whale hunt,” The Boston Globe

[4]       Light, J., 7/25/13, “Obstructionism for the recordbooks,” Moyers & company (billmoyers.com/2013/07/25/obstructionism-for-the-recordbooks)

LARGE FINANCIAL CORPORATIONS CONTINUE ILLEGAL ACTIVITY

ABSTRACT: The large US financial corporations, whose illegal and unethical activities caused the 2008 financial crash and recession, continue to engage in a wide variety of illegal activity. Clearly, the fines and penalties they’ve paid to-date, although hundreds of millions of dollars, haven’t been sufficient to deter them. Or they are so large and so impossible to manage that they are just out of control. The only way to reduce the risk to our financial system and economy, and to stop these illegal activities, is to break them up and institute much tighter regulation.

Their past behavior includes fraudulent creation of mortgages and the fraudulent packaging and selling of risky mortgage-backed securities, fraudulent foreclosures on home owners, manipulation of interest rates in multiple settings, money laundering for criminals and countries under international sanctions, and out-of-control speculative trading. Despite this, it doesn’t look like any senior managers will be charged with criminal activity.

More recently uncovered activities include speculation in and manipulation of commodities markets that costs consumers billions, fraudulent debt collection practices, and the selling of inappropriate securities to, among others, elderly investors seeking secure investments.

These are highlights of what we know about, and, therefore, are the tip of an iceberg of unknown size. The executives who profit (through pay, bonuses, and stock options) from these criminal and unethical activities currently have no reason to stop committing or allowing them.

The variety of illegal activities, the involvement of literally all the large financial corporations, and the scale of the impact on our economy and us individually is breathtaking. We need better laws and regulation overseeing these large financial institutions. See my posts of 8/6 and 8/4 for steps that are needed to move in that direction, including petitions of support you can sign.

FULL POST: The large US financial corporations, whose illegal and unethical activities caused the 2008 financial crash and recession, continue to engage in a wide variety of illegal activity. Clearly, the fines and penalties they’ve paid to-date, although hundreds of millions of dollars, haven’t been sufficient to deter them. Or they are so large and so impossible to manage that they are just out of control. In either case, they present a significant risk for another financial collapse, another possible bailout, and another recession. The only way to reduce the risk to our financial system and economy, and to stop these illegal activities, is to break them up and institute much tighter regulation. This is what the 21st Century Glass Steagall Act, recently proposed in the US Senate (see post of 8/6/13), and the Dodd-Frank Act (if appropriately implemented) would go a long way toward doing.

You probably remember the fraudulent creation of mortgages and the fraudulent packaging and selling of risky mortgage-backed securities as “safe” investments. These activities were key contributors to the 2008 financial system collapse. You may remember that these same handful of corporations engaged in fraudulent foreclosures on home owners, manipulation of interest rates in multiple settings, money laundering for criminals and countries under international sanctions, and out-of-control speculative trading (which cost JPMorgan $6 billion in early 2013). Many of these activities are still under investigation with penalties still to be finalized, but it doesn’t look like any senior managers will be charged with criminal activity. (In the Savings and Loan crash of the late 1980s, which was less than one-tenth the size of the 2008 crash, over 1,000 senior managers were convicted of felonies.) (See posts of 8/29/12 and 7/12/12 for more detail.)

Here are some other examples of illegal or unethical behavior by the large financial corporations that have come to light more recently.

Their speculation in and manipulation of commodities markets costs consumers billions. This includes oil and gasoline (see post of 3/5/12 for more detail), electricity, aluminum, wheat, cotton, coffee, and other commodities. [1] In the last year, US regulators have accused three financial corporations of manipulating electricity prices, including JPMorgan, which recently agreed to a $410 million settlement. [2][3]

In the commodities market for aluminum, Goldman Sachs and others make millions in profits that end up costing consumers many times that. Using special exemptions from the Federal Reserve and relaxed regulations approved by Congress, the large financial corporations have purchased much of the infrastructure used to store and deliver aluminum (and other commodities) as they are traded on commodities exchanges. Three years ago, Goldman Sachs bought one of the largest firms storing and delivering aluminum; almost a quarter of the supply of 1,500 pound aluminum bars bought and sold on commodities exchanges is in its 27 warehouses (1.5 million tons). Goldman, over the last three years, has increased the delivery wait time for customers from an average of six weeks to roughly 70 weeks. This significantly increases the rent and fees paid to Goldman for the storage and delivery of the aluminum in its warehouses. [4][5][6]

JPMorgan and other big financial corporations are under investigation for their debt collection practices. It has recently come to light that their efforts to collect delinquent credit card debt have suffered from faulty or forged documents, improperly reviewed documentation, and failure to notify debtors of legal filings. These are some of the same practices that resulted in the lawsuits and settlements over improper home foreclosures! [7]

Morgan Stanley just settled claims that it sold inappropriate securities to, among others, elderly investors seeking secure investments. [8]

These are highlights of what we know about, and, therefore, are the tip of an iceberg of unknown size. The amounts of the fines and settlements sound large, but they’re just a cost of doing business when compared to the revenue and profits at these mega-financial corporations. (See post of 2/20/12 on the mortgage foreclosure settlement for an example with more detail.) Because shareholders and not corporate executives bear the cost of these settlements, and, furthermore, they are subsidized by us as taxpayers because they are typically considered a business expense (which reduces taxable income), the executives who profit (through pay, bonuses, and stock options) from these criminal and unethical activities have no reason to stop committing or allowing them. And the record shows they are continuing. [9]

The variety of illegal activities, the involvement of literally all the large financial corporations, and the scale of the impact on our economy and us individually is breathtaking. We need better laws and regulation overseeing these large financial institutions. See my posts of 8/6 and 8/4 for steps that are needed to move in that direction, including petitions you can sign to support such actions. (See posts of 7/31/12, 5/31/12, 5/29/12, 3/25/12, 3/23/12, and 2/29/12 for more on the need for regulation of these giant financial corporations.)

[1]       Kocieniewski, D., 7/21/13, “Aluminum shuffle is pure gold to the banks,” The Boston Globe (from The New York Times)

[2]       Silver-Greenberg, J., & Protess, B., 8/8/13, “JPMorgan Chase faces civil, criminal inquiries,” The Boston Globe (from The New York Times)

[3]       Associated Press, 7/31/13, “JPMorgan owes $410 million in energy suit,” The Boston Globe

[4]       Kocieniewski, D., 7/21/13, see above

[5]       Morgenson, G., 8/1/13, “Goldman Sachs offers to speed up metal delivery,” The Boston Globe (from The New York Times)

[6]       Chan, K., 8/6/13, “Goldman Sachs, LME sued over aluminum storage,” The Boston Globe (from the Associated Press)

[7]       Silver-Greenberg, J., & Wyatt, E., 7/10/13, “Big lenders face scrutiny on collections,” The Boston Globe (from The New York Times)

[8]       Associated Press, 7/31/13, “Morgan Stanley settles EFT claims,” The Boston Globe

[9]       Eskow, R.J., 8/7/13, “7 Things About Prosecuting Wall Street You Wanted to Know (But Were Too Depressed to Ask),” The Huffington Post

BANNING BEE KILLING PESTICIDES

ABSTRACT: Pesticides and other toxic chemicals are ubiquitous in our environment and even in our blood. Regulation of them is weak. One of the unintended consequences of widespread pesticide use is the harming or killing of animals, other than those targeted. Last month, 50,000 bumblebees died after a spraying of the pesticide dinotefuran. The class of pesticides called neonicotinoids, of which dinotefuran is one, is the likely culprit in a broad decline in bee populations. Europe has already implemented restrictions on the use of neonicotinoids.

A bill has been introduced in the US House to restrict the use of these chemicals until we can be sure that they are safe and being used properly. The bill is H.R. 2692, the “Save America’s Pollinators Act”.

I urge you to join me as a citizen co-sponsor of this important legislation by signing the petition at: http://org.credoaction.com/petitions/tell-congress-stop-the-pesticide-that-is-killing-bees?akid=8530.653385.cfRZJV&rd=1&t=5.

FULL POST: Pesticides and other toxic chemicals are ubiquitous in our environment and even in our blood. Regulation of them is weak at best because the chemical corporations are very active in lobbying, making campaign contributions, and using the revolving door to move personnel between the industry and government regulatory agencies. (See posts of 6/29, 6/21, and 6/10/13 for more information.) One of the unintended consequences of widespread pesticide use is the harming or killing of animals, other than those targeted. Birds were the victims of DDT 50 years ago and today bees appear to be a victim.

Last month, 50,000 bumblebees died after trees in Wilsonville, Oregon were sprayed with the chemical dinotefuran, the key ingredient in Safari pesticide. This was the largest bee die-off ever recorded. Bee populations are declining across the country at an alarming rate, and a class of pesticides, called neonicotinoids, of which dinotefuran is one, is the likely culprit.

Both our environment and food supply are inextricably tied to the welfare of bees, making the decrease in bee populations a cause for alarm. Many crops, including fruit trees, rely on bees for pollination. The Oregon Department of Agriculture is investigating the die-off and is temporarily restricting the use of 18 pesticide products containing dinotefuran and the Environmental Protection Agency is currently reviewing the use of neonicotinoid pesticides. However, that review is not scheduled to be completed for another five years. Europe has already implemented restrictions on the use of neonicotinoids.

A bill has been introduced in the US House of Representatives by Congressmen Earl Blumenauer and John Conyers to restrict the use of these chemicals until we can be sure that they are safe and being used properly. The bill, H.R. 2692, the “Save America’s Pollinators Act”, would suspend certain uses of neonicotinoids until the Environmental Protection Agency reviews these chemicals and makes a new determination about their proper application and safe use. This will increase pressure on the EPA to speed its review before another mass bee die-off occurs. One strategy for getting the bill passed is to include it in the reauthorization of the Farm Bill, which is currently under active consideration.

I urge you to join me as a citizen co-sponsor of this important legislation by signing the petition linked to below. You can also contact your Representative and urge him or her to support this legislation.

Will you join me and add your name to this petition to the United States Congress asking it to pass legislation suspending use of the pesticides that are killing bees?
This petition was created on org.credoaction.com, a new people-powered platform that allows activists to start and run petition campaigns. org.credoaction.com helps activists like you make progressive change and fight regressive policies by creating online petitions.

NOTE: Please let me know by submitting a comment on this post if you would like me to continue sharing links to on-line petitions on issues I have written about. These petitions are an easy way to express your opinion and increase its weight by combining it with that of others. The effectiveness of these petitions varies greatly based on a wide range of factors, but there’s little downside given how quick and easy it is to do. Each petition also will give you a link to the advocacy organization sponsoring it. If it’s an issue you are particularly interested in, you may want to engage directly with the organization. One forewarning: in many cases when you sign a petition the sponsoring organization will put you on their email list. In some cases, there is a check box on the petition that you can uncheck if you don’t want the organization to start sending you information. You can, of course, always unsubscribe via any email you get from such an organization

FINANCIAL SYSTEM REFORM

ABSTRACT: The need for financial system reform was made clear by the 2008 crash. One of the goals of the Dodd-Frank financial reform law was to end speculative trading by large financial corporations that are also banks because it has the potential to jeopardize consumer deposits. However, speculative trading has continued.

Therefore, a tri-partisan group of Senators, led by Sen. Elizabeth Warren, has recently proposed new legislation, the 21st Century Glass Steagall Act, that would require the separation of speculative trading and consumer bank deposits. You can sign on as a citizen sponsor of this proposed federal legislation at: http://my.elizabethwarren.com/page/s/glass-steagall?source=20130711emf.

Senator Warren was on CNBC to talk about the importance of this new legislation. You can watch the informative and entertaining video clip (under 3 minutes) at: http://gawker.com/nbc-censors-video-of-elizabeth-warren-taking-cnbc-to-th-837411782.

FULL POST: The need for financial system reform was made clear by the 2008 crash. We are now at the third anniversary of the passage of the Dodd-Frank financial reform law. However, implementation has been slow, due to the complexity of the law, efforts by the large financial corporations to block and delay it, and obstructionism by Republicans, particularly in the Senate. For example, a Director for the Consumer Financial Protection Bureau, created by Dodd-Frank, was finally approved by the Senate on July 17. (See post of 7/26/12 for background.)

One of the goals of the Dodd-Frank financial reform law was to end speculative trading by large financial corporations that are also banks. Such trading has the potential to generate large losses that could jeopardize consumer deposits at these banks, requiring a federal government bailout. Dodd-Frank and the so-called Volcker Rule were supposed to end such trading. However, speculative trading has continued. (See posts of 5/31/12 and 5/29/12 for more details.)

Therefore, a tri-partisan group of Senators, led by Sen. Elizabeth Warren, has recently proposed new legislation, the 21st Century Glass Steagall Act, that would require the separation of speculative trading and consumer bank deposits.

You can sign on as a citizen sponsor of this proposed federal legislation at: http://my.elizabethwarren.com/page/s/glass-steagall?source=20130711emf. It will reduce risk-taking by big financial corporations that enjoy federal insurance of depositors’ money, thereby reducing the risk of another government bailout of these huge corporations and enhancing the safety of consumer deposits.

Senator Elizabeth Warren (Democrat, MA), an expert on the financial system, states that we need to learn from the financial crisis of 2008 and, moving forward, to prevent the kinds of high-risk activities that made a few people rich but nearly destroyed our economy. She has joined forces with Senators John McCain (Republican, AZ), Maria Cantwell (Democrat, WA), and Angus King (Independent, ME) to introduce the 21st Century Glass Steagall Act to modernize core banking safety.

This legislation would reinstate some of the protections of the original Glass Steagall Act put in place after the Great Depression but repealed in 1999. For over 50 years before this repeal, the banking system was stable and our middle class grew stronger. Wall Street had spent 66 years and millions of dollars lobbying for repeal, and, eventually, the big financial corporations won.

This new law will rebuild a firewall between the banks where American families have checking and savings accounts, and the investment banks that engage in risky financial speculation. It will make sure Wall Street doesn’t gamble with your money, and will help prevent another financial crisis. The bill will give a five year transition period for financial institutions to split their business practices into distinct entities – shrinking their size and taking an important step toward ending “Too Big to Fail” once and for all, while minimizing the risk of future bailouts.

The Federal Deposit Insurance Corporation (FDIC) insures our banks to keep your money safe. That way, when you want to withdraw your money, you know the money will be there. That’s what makes our banking system safe and dependable. But the government should NOT be insuring hedge funds, swaps dealing, and other risky investment banking activities. When the same institutions that take these huge risks are also the ones that control your savings account, the entire banking system is riskier.

This is an important bill that will implement the lessons we learned from the 2008 crisis and make sure we hold Wall St. accountable. Click here to become a citizen sponsor of the new 21st Century Glass Steagall Act. (Paste the following address into your web browser if the link doesn’t work: http://my.elizabethwarren.com/page/s/glass-steagall?source=20130711emf.)

Senator Warren was on CNBC to talk about the importance of this new legislation. The video clip of Warren’s appearance was on You Tube, but CNBC and NBC in effect censored it, claiming copyright infringement. They did so, apparently, because Warren did such a good job of defending the legislation and, in the process, made the CNBC commentators look bad because they were critical of the legislation and tried to attack Warren and her arguments for the legislation. This is a reflection of how our mainstream media, which are all big corporations themselves, report on – or in many cases don’t report on – news that is not favorable to corporate America.

You can read an article about this censorship and watch the informative and entertaining video clip (under 3 minutes) at: http://gawker.com/nbc-censors-video-of-elizabeth-warren-taking-cnbc-to-th-837411782. (Paste the address above into your web browser if the link doesn’t work automatically.)

NOTE: Please let me know by submitting a comment on this post if you would like me to continue sharing links to on-line petitions on issues I have written about. These petitions are an easy way to express your opinion and increase its weight by combining it with that of others. The effectiveness of these petitions varies greatly based on a wide range of factors, but there’s little downside given how quick and easy it is to do. Each petition also will give you a link to the advocacy organization sponsoring it. If it’s an issue you are particularly interested in, you may want to engage directly with the organization. One forewarning: in many cases when you sign a petition the sponsoring organization will put you on their email list. In some cases, there is a check box on the petition that you can uncheck if you don’t want the organization to start sending you information. You can, of course, always unsubscribe via any email you get from such an organization

OVERSIGHT OF FINANCIAL CORPORATIONS – PETITIONS YOU CAN SIGN

INTRO: The need for strong oversight of our large financial corporations was made starkly clear by their collapse in 2008. Nonetheless, necessary changes have not happened. The six huge financial corporations are bigger than ever, despite concern that they were too big to fail back in 2008. News of illegal activity in the financial sector continues to surface regularly and financial corporations are increasingly engaging in activities similar to those that led up to the 2008 crash. [1] (See posts of 8/29/12 and 7/12/12 for background.)

Strong oversight and regulation are needed from the Federal Reserve and the Securities and Exchange Commission, among others. (See posts of 7/31/12, 5/31/12, and 5/29/12 for background.) The government bailout (trillions of dollars in total) and the economic recession (that we still haven’t recovered from) that followed must not be allowed to happen again.

Here are two steps that should happen to increase oversight and accountability, while reducing risk of a re-occurrence of the 2008 crash. I include (see below) links to petitions you can sign (each in a minute or less) that will register your support for them:

  • President Obama should NOT to nominate Larry Summers as the next head of the Federal Reserve (the Fed)
  • The Securities and Exchange Commission (SEC) should implement and enforce disclosure of the compensation given to the heads of the big financial corporations

TELL PRESIDENT OBAMA NOT TO APPOINT SUMMERS AS FED CHAIRMAN

Larry Summers is apparently Obama’s leading candidate to replace Ben Bernanke as the chairman of the Federal Reserve in January. Summers is a former Treasury Secretary, Obama economic advisor, and Harvard University President. He is currently a paid consultant to Citigroup, one of the six huge Wall St. financial corporations.

Summers contributed to the financial collapse — he helped lead the charge to deregulate Wall Street in the 1990s, he blocked efforts to regulate derivatives (which were a key cause of the 2008 collapse), and he dismissed concerns about deregulation just before the 2008 crash that tanked the economy. [2]

We need strong leadership at the Fed. We need someone willing to stand up to Wall Street instead of letting them play by their own rules and bailing them out when the going gets tough. Larry Summers is not that man.

Please email President Obama via the Daily Kos website now — tell him not to appoint Larry Summers to lead the Fed. (from Michael Langenmayr, Campaign Director, Daily Kos blog site. Paste the following address into your web browser if the link doesn’t work: http://campaigns.dailykos.com/p/dia/action3/common/public/?action_KEY=505)

TELL THE SECURITIES AND EXCHANGE COMMISSION TO IMPLEMENT DISCLOSURE OF CEOs’ PAY

Please urge the Securities & Exchange Commission (SEC) to enforce the law on disclosure of CEO’s salaries. Excessive CEO salaries contributed to the reckless financial culture that nearly ruined our economy.

The Dodd-Frank financial reform law, which Congress passed in 2010, requires publicly traded corporations to disclose how much their executives make and compare it to their average worker’s pay. Three years later, the law still hasn’t been implemented. Why? Because the SEC has not produced the regulations needed to implement the law. Meanwhile, big corporations are putting pressure on the SEC and Congress to quietly kill this requirement.

This is basic public information that we have the right to know, and will help prevent the next financial crisis. Join Daily Kos and USAction by signing this petition to the SEC, urging them to enforce Dodd-Frank’s provision on disclosing CEO salaries. (from Paul Hogarth, Daily Kos blog site. Paste the following address into your web browser if the link doesn’t work: http://campaigns.dailykos.com/p/dia/action3/common/public/?action_KEY=518)

My next post will describe, and give you the opportunity to be a citizen co-sponsor of, Congressional legislation to reduce risk and improve stability at our big bank corporations. It will reduce the risk of a future government bailout while enhancing the safety of your deposits.

NOTE: Please let me know by submitting a comment on this post if you would like me to continue sharing links to on-line petitions on issues I write about. These petitions are an easy way to express your opinion and increase its weight by combining it with that of others. The effectiveness of these petitions varies greatly based on a wide range of factors, but there’s little downside given how quick and easy it is to do. Each petition also will give you a link to the advocacy organization sponsoring it. If it’s an issue you are particularly interested in, you may want to engage directly with the organization. One forewarning: in many cases when you sign a petition the sponsoring organization will put you on their email list. In some cases, there is a check box on the petition that you can uncheck if you don’t want the organization to start sending you information. You can, of course, always unsubscribe via any email you get from such an organization.

[1]       Popper, N., 4/18/13, “Wall St. redux: Arcane names hiding big risk,” The New York Times

[2]       Editorial, 8/2/13, “Tornado at the Fed? Obama has better choices than Summers,” The Boston Globe

VOTING RIGHTS AT RISK

ABSTRACT: Judicial activism by the conservative majority of the Supreme Court was on display on June 25 when by a 5 to 4 vote the Voting Rights Act (VRA) was ruled outdated and unnecessary despite: 1) Previous Supreme Court rulings upholding the law including as recently as 2009; 2) Use of the Voting Rights Act 74 times since 2000 to protect voting rights; 3) Re-enactment by Congress in 2006 by overwhelming, bipartisan votes; and 4) Extensive efforts in many of the covered states (and others) in the 2012 elections to interfere with voting rights at levels unseen for almost 50 years. The dissenting justices issued a strong critique of the decision.

It seems ironic that the Supreme Court, charged with ensuring justice in our society, has overturned the VRA, whose goal is to ensure justice for minorities in exercising that bedrock building block of our democracy, the right to vote.

The evidence for the need for the VRA has been quick in coming. Within a month after the Supreme Court decision, six states have passed or are implementing new voting requirements that will make it harder to vote. Most observers agree these requirements will disproportionately effect and reduce voting by minorities, low income individuals, the elderly, and the young. Although voter fraud will be cited as the reason for these efforts, cases of fraud are incredibly rare.

I encourage you to let your representatives in Congress know that you are outraged and that they need to pass legislation to reinstate the VRA immediately.

FULL POST: Judicial activism by the conservative majority of the Supreme Court was on display on June 25 when by a 5 to 4 vote the Voting Rights Act (VRA) was ruled outdated and unnecessary despite:

  • Previous Supreme Court rulings upholding the law including as recently as 2009
  • Use of the Voting Rights Act 74 times since 2000 to protect voting rights
  • Re-enactment by Congress in 2006 by overwhelming, bipartisan votes
  • Extensive efforts in many of the covered states (and others) in the 2012 elections to interfere with voting rights at levels unseen for almost 50 years.

The Court’s majority felt that in the covered jurisdictions – nine states, mostly in the South, and numerous smaller jurisdictions including sections of New York City – barriers to voting for racial minorities were no longer sufficient to justify the law.

The Supreme Court not only ignored its own precedents, it ignored the clear will of Congress on a law that has been in place for 48 years. The reauthorization of the VRA in 2006 passed the House by a vote of 390 to 33 and the Senate unanimously, 98 to 0, before being signed into law by President George W. Bush. It seems ironic that the Supreme Court, charged with ensuring justice in our society, has overturned the VRA, whose goal is to ensure justice for minorities in exercising that bedrock building block of our democracy, the right to vote. The VRA was a key achievement of the Civil Rights movement and a key to implementing the post-Civil War 15th Amendment, which prohibits denying the right to vote based on race.

The dissenting justices issued a strong critique of the decision, which Justice Ginsburg presented at the announcement of the ruling – an unusual event, indicating strong disagreement. She stated in part that the decision was like “throwing away your umbrella in a rainstorm because you are not getting wet.” [1]

The evidence for the need for the VRA has been quick in coming. Within a month after the Supreme Court decision, six states have passed or are implementing new voting requirements that will make it harder to vote. Most observers agree that these requirements will disproportionately effect and reduce voting by minorities, low income individuals, the elderly, and the young. Many, if not all, of these changes in voting laws would have been rejected by the US Justice Department under the VRA. Steps are being taken on the same path in other states. Although voter fraud will be cited as the reason for these efforts, cases of fraud are incredibly rare. [2]

North Carolina is poised to enact a requirement for an ID to vote, reductions in early voting, restrictions on voter registration, and increased opportunities to deny voters at the ballot box, among other provisions. This is a dramatic change for North Carolina, which, historically, has been a state where voting and registration were facilitated, and, where, as a result, voter participation has been high. The state’s own Secretary of State has acknowledged that the new laws will reduce voting by Blacks and Hispanics. [3] The new law will also increase campaign contribution limits, reduce disclosure of campaign activities, and repeal public financing for the election of judges, putting them and the state’s justice system at the mercy of large campaign contributions.

In Texas, a new voter ID law that was blocked by the Justice Department under the VRA will now go into effect. A revised map for election districts that had been blocked will now also go into effect. And in Florida, a purge of registered voters that had been blocked will now go forward, despite errors made in previous such purges. [4]

As a result of the Supreme Court decision, the Justice Department or individuals will now have to file lawsuits challenging changes in voting procedures after the fact on a case by case basis, a much less timely and efficient remedy than the pre-approval of changes previously required by the VRA.

The fact that this Supreme Court decision abets the active and growing efforts to throw up barriers to voting that will disenfranchise minorities and those with low incomes, groups that disproportionately vote for Democrats, makes it hard not to view the decision as ideological and political activism. The fact that it undermines the right to vote – the foundation of our democracy – in the face of clear attacks on that right makes it particularly egregious.

I encourage you to let your representatives in Congress know that you are outraged and that they need to pass legislation to reinstate the VRA immediately. I know that passage in this Congress, given the partisanship and obstructionism that I have written about, probably isn’t likely, but if no one tries it definitely won’t happen and this issue needs to be put on the agenda of our policy makers, the public, and the media.

[1]       Gerson, S., & Sopoci-Belknap, K., 6/28/13, “Constitutional right to vote needed more than ever after Supreme Court guts Voting Rights Act,” Common Dreams (www.commondreams.org/view/2013/06/28-5)

[2]       Berman, A., 7/26/13, “North Carolina passes the country’s worst voter suppression law,” The Nation

[3]       Drum, K., 7/26/13, “Supreme Court’s gutting of the Voting Rights Act unleashes GOP feeding frenzy,” Mother Jones

[4]       Reeve, E., 7/26/13, “As states rush to restrict voting rights, Justice Ginsburg says, ‘I told you so,’” Associated Press in The Atlantic Wire

OBSTRUCTIONISM AND EXTREMISM BLOCK PROGRESS IN THE US HOUSE

ABSTRACT: While the use of the filibuster in the US Senate gets more attention, the obstructionism and extremism in the US House is more insidious. And it is no less harmful. One of the tactics in the House is the so-called “Hastert rule.” It stipulates that no piece of legislation will be voted on unless over half the members of the Republican majority support it. Therefore, 27% of the members of the House – barely over one quarter – can stop progress. The bipartisan immigration reform bill that the Senate passed is a current example of legislation that this conservative minority has blocked from consideration. It has meant that bipartisan compromises negotiated by the current Republican House Speaker John Boehner are rejected. Legislation that does pass the House is generally so conservative that it has no chance of becoming law. This is a major contributor to the current gridlock in our federal government.

In addition to extreme policy positions, House Republicans are also engaging in procedural extremism, including efforts that amount to hostage taking and sabotage, by a group of House members that seems to have few, if any, qualms about stopping government from functioning at all. The most dramatic example has been the use of the need to raise the federal government’s authorized level of debt (known as the debt ceiling). This brinkmanship threatened to cause the US government to default on its debt obligations, which many feel would have had serious impacts on global financial markets and the global economy – not to mention the ability of the government to function.

The fallout of this no-holds barred extremism and obstructionism has been a new breed of partisanship. Any compromise or trade-off is depicted as unacceptable and as a betrayal of values and ideals. For example, even though the economy is recovering (albeit slowly) and the government’s deficit is falling (quite rapidly actually), the heated rhetoric on the deficit and on the notion that government debt undermines the economy continues totally unabated.

Unfortunately, it’s hard to envision how this dynamic can change. I just hope that one way or another we can return to functioning government before real harm has been done to people, our institutions, and our international standing.

FULL POST: While the use of the filibuster in the US Senate gets more attention, the obstructionism and extremism in the US House is more insidious. And it is no less harmful to efforts to make progress on issues our country needs to address or to efforts to make government work effectively. The filibuster is a well-known, long standing, clearly defined tactic for stopping progress in the Senate. In the House, the tactics for blocking progress are more varied and more obscure.

One of the tactics in the House is the so-called “Hastert rule.” Named for Dennis Hastert, who was the Republican House Speaker from 1999 – 2007, it stipulates that no piece of legislation will be voted on unless over half the members of the Republican majority support it. Currently, this means that 117 out of the 234 Republicans in the House can block a piece of legislation from coming to a vote. Therefore, 27% of the members of the House – barely over one quarter – can stop progress. In other words, a piece of legislation supported by 73% of the members of the House (that’s 318 members) can be blocked by the other 117. In the Senate, a filibuster requires the support of 41% of the Senators to stop progress, while only 27% of the Representatives can block progress in the House. [1]

This unwritten Hastert rule is being used by the most conservative members of the House, including the Tea Party members, to block progress. The bipartisan immigration reform bill that the Senate passed is a current example of legislation that this conservative minority has blocked from consideration. And on numerous occasions, it has meant that bipartisan compromises negotiated by the current House Speaker John Boehner are rejected by these conservative members of his own party. To cover up this embarrassing situation, House Republicans look for ways to blame the Democrats, exacerbating the partisanship in Washington.

Another result of the Hastert rule is that legislation that does pass the House, because it has to satisfy the most conservative 117 members of the Republican Party, is generally so conservative that it has no chance of becoming law by passing the Senate and being signed by the President. Therefore, it is rare that viable legislation passes in the House. This is a major contributor to the current gridlock in our federal government.

In addition to extreme policy positions, House Republicans are also engaging in procedural extremism. In Obama’s first two years as President (2009-2010), Republican leaders pressured members to oppose any Obama initiative, even ones Republicans had previously supported. Then, emboldened by their gains in the 2010 elections, even the routine business of keeping government functioning became the subject of virulent obstructionism, including efforts that amount to hostage taking and sabotage, by an extreme group of House members that seems to have few, if any, qualms about stopping government from functioning at all. [2]

The most dramatic example has been the use of the need to raise the federal government’s authorized level of debt (known as the debt ceiling), which simply allows the federal government to make good on its outstanding debts and to fund current authorized expenditures of approved budgets. (Without this, the government has to shut down because it has no cash to pay employees or make payments on contracts for goods or services. In addition, it would default on its debts and stop paying interest on outstanding government bonds.)

In the past, increasing the debt ceiling was a routine and stand-alone matter dealt with regularly by Congress, with perhaps a little posturing. The tactic of these extreme Republicans has been to hold an increase in the debt ceiling hostage to their demands for other policy changes, primarily draconian budget cuts. This brinkmanship threatened to cause the US government to default on its debt obligations, which many feel would have had serious impacts on global financial markets and the global economy – not to mention the ability of the government to function.

The fallout of this no-holds barred extremism and obstructionism has been a new breed of partisanship. To justify total resistance to Obama, the extremists have painted him not just as a liberal (which he hardly is) but as a dangerous and extreme socialist working to destroy everything that makes the US great. Any compromise or trade-off is depicted as unacceptable and as a betrayal of values and ideals. So when Obama makes efforts to reach out, compromise, and be bipartisan, the extremists tend to move even further away, sometimes even repudiating positions they previously held, particularly if Obama comes anywhere close to meeting them.

For example, even though the economy is recovering (albeit slowly) and the government’s deficit is falling (quite rapidly actually), the heated rhetoric on the deficit and on the notion that government debt undermines the economy continues totally unabated.

Unfortunately, it’s hard to envision how this dynamic can change. Obama’s efforts at bipartisanship and compromise have not only not been reciprocated, but at times seem to have led to even more extreme demands. Unless Republican leaders, in the party and specifically in the House, are willing to stand up to the extremist in their party, changes made by voters at the ballot box may be the only way to achieve change. But given state level politics, the way House districts are drawn (and gerrymandered), and the dynamics of campaigns (both in terms of money and messaging), change from the grassroots in elections doesn’t seem to be a likely scenario either.

I just hope that one way or another we can return to functioning government before real harm has been done to people, our institutions, and our international standing.

[1]       Editorial, 7/17/13, “More insidious than filibuster, ‘Hastert rule’ locks up the House,” The Boston Globe

[2]       Chait, J., 7/21/13, “Anarchists of the House,” New York Magazine

A RESPITE FROM OBSTRUCTIONISM

ABSTRACT: The US Senate reached a bipartisan agreement that ended the obstruction of confirmation for seven of the President’s nominees for executive branch positions. Votes will be held before the August recess on these seven nominees. To obtain this concession, Senate Democrats threatened to change the filibuster rule to prevent its use on executive branch nominations.

No permanent changes in the filibuster rules were made and there was no commitment to end obstruction of nominees beyond these seven positions. These positions are but the tip of the iceberg of obstructionism in the Senate. Hopefully, this respite from obstructionism will apply to other presidential nominations as well and will change the pattern of blocking and delaying confirmations of nominees. Only time will tell.

FULL POST: As you may have heard, the US Senate reached a bipartisan agreement that ended the obstruction of confirmation for seven of the President’s nominees for executive branch positions. Although this deal was greeted with widespread celebration, it is a small step and it is unclear whether it will have any long-term effects.

To obtain this concession, Senate Democrats threatened to change the filibuster rule to prevent its use on executive branch nominations. This rule change can be done with a simple majority vote, i.e., 51 Senators, and the Democrats had the votes to do so. After an extremely rare, three hour, bipartisan, closed-door meeting at which almost all of the 100 Senators spoke, followed by negotiations through the night, a deal was reached.

Votes will be held before the August recess on nominees for seven positions. [1]

  • Richard Cordray to head the Consumer Financial Protection Bureau. (He has been approved after a two year wait with a 66 to 34 vote.)
  • Gina McCarthy to head the Environmental Protection Agency.
  • Thomas Perez for Secretary of Labor.
  • Fred Hochberg for a second term as president of the Export-Import Bank.
  • Mark Pearce for a second term on the National Labor Relations Board.
  • Two nominees to the National Labor Relations Board to be named.

No permanent changes in the filibuster rules were made and there was no commitment to end obstruction of nominees beyond these seven positions. These positions are but the tip of the iceberg of obstructionism in the Senate. (See posts of July 21, 16, and 9 for more details.) Republicans in the Senate have taken the obstruction of confirmation of presidential nominees for judgeships and executive branch positions to an unprecedented level. They oppose nominees “for reasons unrelated to their basic qualifications, largely, it seems, to torment and undercut the president.” [2]

Hopefully, this respite from obstructionism will apply to other presidential nominations as well and will change the pattern of blocking and delaying confirmations of nominees in the Senate. Only time will tell.

[1]       Bierman, N., 7/17/13, “Faced with rules change, GOP relents on Obama nominees,” The Boston Globe

[2]       Keane, T., 7/21/13, “Too much transparency,” The Boston Globe

BLOCKING JUDICIAL NOMINATIONS

ABSTRACT: Senate Republicans have delayed and filibustered President Obama’s nominees to fill vacant judgeships nationwide, resulting in 87 vacancies for federal judges, 10% of the total judgeships. Even when President Obama goes out of his way to nominate what would seem to be uncontroversial choices with bipartisan support, Senate Republicans have blocked and delayed confirmation. Many words can be used to describe this: one would be obstructionist; others would be undemocratic and unpatriotic.

I encourage you to contact your Senators to express support for ending the blocking of judicial appointments. Our justice system needs these judgeships filled so it can function effectively and provide justice for all!

FULL POST: Senate Republicans have delayed and filibustered [1] President Obama’s nominees to fill vacant judgeships nationwide, resulting in 87 vacancies for federal judges, 10% of the total judgeships. A third of these vacancies are considered “judicial emergencies” because of their impact on the administration of justice. [2]

For example, four of eleven judgeships on the D.C. federal appeals court, considered one of the most important courts in the country, were vacant when Obama took office in 2009. In May, 2013, after five years of trying, one judge was confirmed on a 97 to 0 vote. The nominee had worked in both Democratic and Republican administrations and had been a clerk for former Supreme Court Justice O’Connor, who was appointed by President Reagan. So despite being a bipartisan and apparently uncontroversial nominee, it took five years to get Republicans to allow his confirmation.[3]

A second nominee for this court was filibustered for a second time this spring [4] (or the fourth time depending on how you count). The nomination was originally made in September, 2010, and Obama renominated her four times after the Senate failed to act on or filibustered her nomination. [5] President Obama then withdrew this nomination and recently nominated three others, all current judges, to fill the remaining vacancies. He challenged Senate Republicans to stop their obstructionism and at least allow a yes or no vote on these nominees. [6]

Even when President Obama goes out of his way to nominate what would seem to be uncontroversial choices with bipartisan support, Senate Republicans have blocked and delayed confirmation. These seem to be clear cases of wanting to score political points by making life difficult for Obama and slowing down the work of his administration.

As I wrote in my last post, the examples above are not isolated incidents but part of a concerted strategy of extreme partisanship and/or rigid ideology by some Republicans to prevent government from functioning, to undermine President Obama, and to bog down the Senate and the Obama administration in political fights that prevent important issues facing our country from being addressed. Many words can be used to describe this: one would be obstructionist; others would be undemocratic and unpatriotic.

I encourage you to contact your Senators to express support for ending the blocking of judicial appointments. Our justice system needs these judgeships filled so it can function effectively and provide justice for all!

[1]       A filibuster occurs when one or more Senators refuse to end debate on a piece of legislation or other matter. It requires a super-majority of 60 out of 100 votes to close off debate (cloture) and allow a vote on the bill or other matter.

[2]       Viser, M., 5/10/13, “As Obama, Senate collide, courts caught short,” The Boston Globe

[3]       Jackson, H. C., 5/24/13, “After 5 years, Senate OK’s key judicial appointment,” Associated Press in The Boston Globe

[4]       Associated Press, 3/7/13, “GOP senators block court nominee for a second time,” Political Notebook in The Boston Globe

[5]       Viser, M., 5/10/13, see above

[6]       Pickler, N., 6/5/13, “Obama pushes 3 judges for court; Challenges GOP on ‘obstruction’,” The Boston Globe

BLOCKING EXECUTIVE BRANCH APPOINTMENTS

ABSTRACT: The willingness of some Republicans to impede the effective functioning of the federal government has extended to consistent efforts to block or delay the President’s nominees to fill positions in the Executive Branch. Senate Republicans have filibustered, threatened to filibuster, or have otherwise delayed a number of Obama’s selections for cabinet posts, including the secretaries of State, Defense, and the Treasury, as well as the head of the Environmental Protection Agency. Similarly, Senate Republicans are blocking nominees to the National Labor Relations Board and for two years have refused to confirm anyone to head the Consumer Financial Protection Bureau. House and Senate Republicans have refused to appoint members to the Independent Payment Advisory Board, a health care cost control group.

Even when President Obama goes out of his way to nominate what would seem to be uncontroversial choices with bipartisan support, Senate Republicans have engaged in filibustering and delaying confirmation. Many words can be used to describe this strategy: one would be obstructionist; others would be undemocratic and unpatriotic. I encourage you to contact your Senators to express support for ending the blocking of Executive Branch appointments. Our government needs to be able to function!

FULL POST: The willingness of some Republicans to impede the effective functioning of the federal government has extended to consistent efforts to block or delay the President’s nominees to fill positions in the Executive Branch.

Senate Republicans have filibustered [1], threatened to filibuster, and otherwise delayed many of President Obama’s nominees to fill executive branch positions, including a number of Obama’s selections for cabinet posts. They threatened to filibuster and conducted such an aggressive campaign against Susan Rice, who Obama wanted to nominate for Secretary of State, that her name was never formally submitted. They threatened to filibuster Chuck Hagel’s nomination for Secretary of Defense, even though he was a former Republican Senator, and a conservative one at that. After a concerted effort to discredit him, he was eventually approved.

Senate Republicans are delaying confirmation of the President’s nominee to head the Environmental Protection Agency (EPA), Gina McCarthy, and have been for over four months. One of their delaying tactics, and part of an effort to make the delaying tactics seem justified, is their submission of over 1,000 written questions, some with multiple parts, that they demand that she answer. (The previous three EPA nominees had received between 157 and 305 written questions.) Answering these questions in writing required over 200 pages and untold hours of work over two weeks by an unknown number of government employees.

Political scientist Norman Ornstein of the conservative American Enterprise Institute said, “One thousand questions is beyond the point of absurdity … This is ratcheting up obstruction and partisan warfare to an unprecedented level.” [2]

Furthermore, Senate Republicans blocked a scheduled committee vote on her nomination by boycotting the meeting. McCarthy, who has 25 years experience in the field, was viewed as a safe, compromise choice given that she had worked for five Republican Governors (four in Massachusetts and one in Connecticut). One of those MA Governors was Jane Swift, who wrote, “I have witnessed firsthand the qualities that make McCarthy so uniquely qualified to take on the challenges of heading the nation’s top environmental department. … Obama deserves to select his own team. The Senate should swiftly approve McCarthy’s nomination.” [3]

Similarly, Treasury Secretary Jack Lew, when nominated earlier this year faced 444 written questions or 700 if each question in a multipart question is counted individually. This was far more than his predecessors, despite the fact that his Wall Street and government experience meant he was from the same mold as his predecessors. Confirmation of Obama’s nominee for Secretary of Labor is currently being delayed.

Even when President Obama goes out of his way to nominate what would seem to be uncontroversial choices with bipartisan support, such as McCarthy for the EPA and Hagel for the Defense Department, Senate Republicans have engaged in blocking and delaying confirmation. Every other president has been allowed to pick his cabinet members without much opposition in the Senate, under the premise that a president should be allowed to select his own team and then be held accountable for their performance. Currently, some Republicans are engaged in a “state of permanent partisan warfare over Obama’s Cabinet nominees.” [4]

Senate Republicans are also blocking five nominees to the National Labor Relations Board, the agency charged with protecting the rights of workers. They are also suing the President to invalidate the appointments he made without Senate confirmation when the Senate was in recess, a practice previous presidents have used when appointments have been delayed. The combination of these efforts effectively paralyzes the agency and may invalidate some of its previous actions. Part of the motivation for these obstructionist tactics is the Republicans’ effort to undermine the effectiveness of unions, given that this Board addresses formal complaints filed by unions. As Massachusetts Senator Elizabeth Warren put it, “This is about complete obstructionism because the minority senators don’t like the agencies, and they don’t like the work these agencies do.” [5]

Senate Republicans have for two years refused to confirm (by threatening a filibuster) anyone to head the Consumer Financial Protection Bureau, once again because they don’t like this agency and its role of protecting consumers from fraud and misleading practices by financial corporations. (See 7/26/12 post.)

House and Senate Republicans have refused to appoint members to the Independent Payment Advisory Board. This Board of medical experts, created by the Affordable Care Act (aka ObamaCare), works to control health care costs by evaluating drugs, treatments, and other health care measures. Because Republicans oppose the health care law, they are defying the law and refusing to appoint the members they are required to, which was part of the effort to make the law bipartisan. Board members need to be confirmed by the Senate as well, and if Senate Republicans block confirmation of appointees to the Board, its responsibilities will fall to Obama’s Secretary of Health and Human Services. This isn’t what one would think the Republicans would want to see happen. Therefore, it appears that this is an effort to delay and obstruct the functioning of government, while hoping to score political points for appearing to oppose ObamaCare. [6]

Republicans’ obstructionism, at least in part, is due to their opposition to current policies, to the established missions of some agencies, and to most government regulation in general. In our democratic system, the way to address such concerns is to change them through legislation. The Republicans resort to the undemocratic tactics of obstruction because the majority of the country does not agree with them.

The examples above are not isolated incidents but a concerted strategy of extreme partisanship and/or rigid ideology by some Republicans to undermine President Obama, to bog down Congress and the Obama administration in political fights that prevent important issues facing our country from being addressed, and, ultimately, to prevent government from functioning effectively. Many words can be used to describe this strategy: one would be obstructionist; others would be undemocratic and unpatriotic.

The Senate may well vote soon on restricting the use of the filibuster to block Executive Branch appointments. I encourage you to contact your Senators to express support for ending the blocking of Executive Branch appointments. Our government needs to be able to function!

[1]       A filibuster occurs when one or more Senators refuse to end debate on a piece of legislation or other matter. It requires a super-majority of 60 out of 100 votes to close off debate (cloture) and allow a vote on the bill or other matter.

[2]       Bierman, N., 5/16/13, see above

[3]       Swift, J., 5/25/13, “Qualified nominee for EPA,” The Boston Globe

[4]       Bierman, N., 5/16/13, “1 nominee, 1,000 questions,” The Boston Globe

[5]       Associated Press, 5/17/13, “GOP fights labor board nominees,” The Boston Globe

[6]       Editorial, 5/9/13, “Congress, the death panel’s death panel,” Ringside Seat from The American Prospect

IDEOLOGY, OBSTRUCTIONISM, AND MAKING GOVERNMENT WORK

ABSTRACT: Democrats believe in making government work. Republicans, at least many current ones, don’t exhibit a commitment to making government work. They block legislation and an unprecedented number and breadth of Presidential appointments, including judges and cabinet secretaries.

Rigid ideology and extreme partisanship are drivers of the gridlock: many Republicans seem willing to use any means available to block Obama’s initiatives, anything that would appear to be a success for him, and his administration’s efforts to govern effectively. Senate Republicans filibuster, while Republicans in the House have developed a strategy of policy hostage taking. While there are isolated examples of Democrats using some of the Republicans’ tactics, the current obstructionism by Republicans is unprecedented in both its breadth and its frequency.

Some of the Republicans, particularly those that identify with the Tea Party, are doing everything they can to sabotage government and keep it from operating effectively. Then when it falls short, they shout “See, we told you government can’t do anything right!”

Examples of Republicans impeding the functioning of Congress include: 1) in the budget process, they refused to appoint members for the conference committee that resolves differences between the House and Senate bills; 2) filibustered legislation to reduce gun violence; 3) blocked the ratification of an international treaty despite widespread, bipartisan support; and 4) blocked progress by filibustering or threatening to filibuster over 400 times since 2006.

The public’s well-being and future generations are hurt when our legislative branch doesn’t function.

FULL POST: Democrats’ ideology is that government has an important and positive role to play in our society. Republicans’ ideology is that a minimal government role is best and that government is more often a negative than a positive factor. But it goes a step further. Democrats believe in making government work, in doing the best that can be done to foster a civil and just society, despite limitations and challenges. They believe in implementing existing laws and making existing agencies work to fulfill their missions. Republicans, at least many current ones, don’t exhibit a commitment to making government work. As a consequence, they block legislation, including essential legislation, even when there is a majority in favor of it, through tactics such as filibustering in the Senate (see posts of 6/15/12 and 6/10/12) or refusing to move legislation forward in the House. [1] Senate Republicans have also used the filibuster to block an unprecedented number and breadth of Presidential appointments, including judges, cabinet secretaries, and other positions in government agencies. (See 5/20/12 post.)

In addition to rigid ideology, extreme partisanship is also a driver of the gridlock: many Republicans are of the mindset that if President Obama is for something, they will be against it – even in cases where they had previously supported the position or issue. And they seem willing to use any means available to block Obama’s initiatives, anything that would appear to be a success for him, and his administration’s efforts to govern effectively. While the Senate Republicans filibuster, Republicans in the House, led by Eric Cantor (VA), Paul Ryan (WI), and Kevin McCarthy (CA), have developed a strategy of policy hostage taking. Their most notable effort was their refusal to raise the US government’s debt ceiling, which was needed to fund the activities previously approved by Congress and the president under the country’s budget. They took hostage the full faith and credit of the US Government to pay its debts. As Thomas Mann said, “It’s hard to imagine a more destructive action.” [2] In the House, the extreme partisanship of the Republican majority means that the Democratic minority is all but ignored. [3]

While there are isolated examples of Democrats using some of these tactics, the current obstructionism by Republicans is unprecedented in both its breadth and its frequency.

Some of the Republicans, particularly those that identify with the Tea Party, do not feel a responsibility to abide by the historical rules of operation or to work to promote the successful functioning of government. A recent survey documented that Tea Party activists do not want their elected representative to compromise and are happy to have them prevent government from functioning. [4] Furthermore, some of these activists and elected officials promote their ideology by doing everything they can to sabotage government and keep it from operating effectively. Then when it falls short, they shout “See, we told you government can’t do anything right!” [5]

Examples of Republicans impeding the functioning of Congress include the following:

This spring, both houses of Congress passed budget bills. The process calls for a conference committee of both chambers to be appointed to reconcile differences between the two bills. However, the House Republicans, led by Paul Ryan, chair of the Budget Committee, refused to appoint members for the conference committee – an unprecedented act of obstructionism. After a month of negotiations, Democrats gave up on the effort to form a conference committee, so the government continues to run without a normal budget in place. [6]

Senate Republicans have filibustered * legislation to reduce gun violence by expanding background checks for gun purchases. (See 4/20/13 and 5/9/13 posts.) Senate Republicans also blocked the ratification of an international treaty on the Rights of Persons with Disabilities, despite widespread, bipartisan support, ratification by 126 other countries, and the fact that it was modeled on the American with Disabilities Act. (See post of 12/8/12.)

Senate Republicans have blocked progress by filibustering or threatening to filibuster over 400 times since they lost the majority in 2006; that’s over once a week on average. As two, bi-partisan political scientist have written, Senate Republicans are using the filibuster “to delay and obstruct quietly on nearly all matters, including routine and widely supported ones.” They have filibustered judges, top administration officials, and a wide range of legislation. [7]

The US has serious problems, short and long-term, including unemployment, stagnant wages, and global competition, that need to be addressed through legislation. The public’s well-being and future generations are hurt when our legislative branch doesn’t function because Republicans are committed to a rigid ideology, refuse to compromise, and believe that scoring political points is more important than solving problems. [8]

My next post will review the impacts of Republican obstructionism on the judicial and executive branches of government.

[1]       Starr, P., May / June 2013, “Bad faith and budget politics,” The American Prospect

[2]       Ornstein, N., & Mann, T., 4/26/13, “Why Congress is failing us,” on Bill Moyers’ public TV show, available at BillMoyers.com

[3]       Arenberg, R.A., 6/13/12, “An effective Senate needs filibusters,” The Boston Globe

[4]       Rapoport, A., May / June 2013, “Ted [Cruz] talk,” The American Prospect

[5]       Editorial, 5/24/13, “Scandal, Sequestered,” Ringside Seat, The American Prospect

[6]       Bouie, J., & Caldwell, P., May / June 2013, “Patty Murray in 19 takes,” The American Prospect

*       A filibuster occurs when one or more Senators refuse to end debate on a piece of legislation or other matter. It requires a super-majority of 60 out of 100 votes to close off debate (cloture) and allow a vote on the bill or other matter.

[7]       Mann, T.E., and Ornstein, N.J., 4/27/12, “Let’s just say it: The Republicans are the problem,” The Washington Post. Adapted from their book “It’s even worse than it looks: How the American Constitutional system collided with the new politics of extremism.”

[8]       Ornstein, N., & Mann, T., 4/26/13, see above

OUR TOXIC ENVIRONMENT AND WHAT YOU CAN DO

ABSTRACT: On a societal level, a disproportionate burden of toxic pollution is borne by Americans of color. At the specific level, every day skin care products contain toxic chemicals. Many contain formaldehyde (a known carcinogen), phthalates (linked to hormonal disruption and birth defects), and/or parabens (which mimic the hormone estrogen and have been linked to breast cancer). Lead (a neurotoxin so damaging to young children that it is banned from house paint and gasoline) is present in lipstick.

The US Food and Drug Administration (FDA) does NOT have the authority to test cosmetic ingredients before they are marketed or to order recalls. Regulation is in the hands of the industry itself, which to-date has found only 11 chemicals to be unsafe for use. In contrast, in Europe, 1,400 chemicals have been banned from personal care products. The chemical and cosmetics corporations spend millions of dollars every year on lobbying and other efforts to influence US policy.

Atrazine is a weed killer, widely used in the US but banned in the European Union. As an example of the lengths the chemical industry and its allies in Congress will go to stop any momentum to regulate toxins, they blocked a resolution honoring Rachel Carson, author of Silent Spring 50 years ago, which established a clear link between DDT and other pesticide use and the widespread deaths of birds, as well as reproductive, birth, and developmental abnormalities in mammals.

Options for what you can do at home and politically are included in the full post below.

FULL POST: Before sharing some specific examples of toxic chemicals in our everyday lives and some things you can do about them, here’s an important societal perspective. A disproportionate burden of toxic pollution is borne by Americans of color. The environmental justice movement has documented the disproportionate presence of pollution sources in and near communities with high percentages of people of color. Prominent examples are in Louisiana and Detroit. The stretch along the Mississippi River from Baton Rouge to New Orleans is dotted with oil refineries that belch a variety of toxins into the air of the surrounding, largely minority, communities. This area is known as “Cancer Alley.” Detroit’s zip code 48217 is 85% African American and is know as Michigan’s most polluted area. It is adjacent to a steel plant, a coal-fired power plant, a salt mine, and a huge oil refinery. The refinery alone emits close to 4 tons of toxins per year. Virtually every household in the area has at least one member who suffers from asthma, leukemia, cancer, or sarcoidosis (a disease in which inflammation occurs in the lymph nodes, lungs, liver, eyes, skin, or other tissues). After some homes in the area tested positive for up to 20 toxic gases, the refinery offered to buy the homes in an effort to reduce its liability. [1]

At the specific level, every day skin care products, including cosmetics, contain toxic chemicals. Many of these products, from suntan oil to makeup to hair spray to perfumes and colognes, contain formaldehyde (a known carcinogen), phthalates (linked to hormonal disruption and birth defects), and/or parabens (which mimic the hormone estrogen and have been linked to breast cancer). Lead (a neurotoxin so damaging to young children that it is banned from house paint and gasoline) is present in lipstick at concentrations 30 times higher than what the FDA allows in candy bars. Our skin is our largest organ and readily absorbs these products’ ingredients. Some of the chemicals absorbed accumulate over time because our bodies do not eliminate them or break them down. [2]

The US Food and Drug Administration (FDA), created by the Federal Food, Drug, and Cosmetic Act of 1938, does NOT have the authority to test cosmetic ingredients before they are marketed or to order recalls – as it does for drugs and medical devices. Regulation is in the hands of the industry itself, which to-date has found only 11 chemicals to be unsafe for use in its products, including for use by women of child bearing age. In contrast, in Europe, 1,400 chemicals have been banned from personal care products because they are carcinogenic, mutagenic*, or toxic to reproduction.

The chemical and cosmetics corporations spend millions of dollars every year on lobbying and other efforts to influence US policy. In 2012, they blocked federal legislation that would have required complete ingredient labels on fragrances and hair sprays, as well as banned the use in cosmetics of carcinogens and chemicals linked to reproductive disorders. In addition, these corporations attempted to pass legislation that would block state regulation, such as that in California. If you would like more information and to take action, you can go to the Campaign for Safe Cosmetics at http://safecosmetics.org.

Home cleaning products are another example of every day items that contain toxic chemicals. For information on how to keep your home clean and shiny without using products with toxic chemicals go to http://www.bostonhealthcoach.com/oilrecordings.html and select the teleclass entitled “Chemical-Free Home.”

Atrazine is a weed killer, widely used in the US but banned in the European Union. In the human body, it mimics hormones and has what are referred to as endocrine system disrupting effects. It has been shown to disrupt the reproduction and immune systems in a wide range of animals, including mammals. It is present in water everywhere, including in rain water. It can actually turn male frogs into functioning females. [3]

As an example of the lengths the chemical industry and its allies in Congress will go to stop any momentum to regulate toxins, they blocked a resolution honoring Rachel Carson, author of Silent Spring, on its 50th anniversary and what would have been her 100th birthday. They attacked her as having made “junk-science claims about DDT” and accuse her and her supporters of being responsible for the deaths of “millions of people … particularly children” because supposedly the lack of use of DDT led to deaths from malaria and other diseases. The facts are that the EPA never banned DDT for use against malaria and Carson did not support a universal ban on pesticides but advocated for use of as little as possible. In Silent Spring, Carson established a clear link between DDT and other pesticide use and the widespread deaths of birds, as well as reproductive, birth, and developmental abnormalities in mammals. DDT, other pesticides, and some of the tens of thousands of chemicals in use today will be part of the environment and in our bodies for decades to come because they decompose or are eliminated very slowly. [4]

I urge you to contact your US Representative and Senators (and your state ones too) and to ask them to support the Safe Cosmetics and Personal Care Products Act (H.R. 1385) and the Safe Chemicals Act (S. 696). (Find your Representative at http://www.house.gov/representatives/find/ and your Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.)

[1]       Brune, M., July / August 2013, “And justice for all,” Sierra Club magazine

[2]       Wasik, J.F., May / June 2013, “Beauty tips for the FDA: Did my wife’s cosmetics give her breast cancer?” The Washington Monthly

*       Mutagenic chemicals cause changes in the genetic material, usually DNA, of an organism and thus increase the frequency of mutations. As many mutations cause cancer, mutagenic chemicals are therefore also likely to be carcinogens. http://en.wikipedia.org/wiki/Mutagen

[3]       Steingraber, S., 4/19/13, “Sandra Steingraber’s war on toxic trespassers,” Bill Moyers public TV show, available at BillMoyers.com. Note: Steingraber has written multiple books including “Having faith: An ecologist’s journey to motherhood” and “Raising Elijah: Protecting our children in an age of environmental crisis.”

[4]       Mangano, J.J., & Sherman, J.D., 10/1/12, “Rachel Carson’s brave, groundbreaking ‘Silent Spring’ at 50 years,” The Washington Spectator

CHILDREN AND TOXINS

ABSTRACT: Children are continuously exposed to many toxic chemicals. None of the over 75,000 synthetic chemicals in use in the US are regulated based on their potential to affect children. Chemicals in a mother’s blood can cause a preterm birth or even a miscarriage, and do get into her fetus’s blood. After birth, breast milk can be harmful as it is the most highly chemical-contaminated of any food.

In January, the Environmental Protection Agency (EPA) issued its report America’s Children and the Environment. While there is some good news on air quality, blood lead levels, and tobacco smoke, it finds that children may be exposed to relatively higher amounts of chemicals than adults and have higher blood levels of toxins. Although definite cause and effect is hard to establish with current knowledge and data, and because of multiple risk factors, respiratory diseases, childhood and adult cancers, neuro-developmental disorders, obesity, and adverse birth outcomes are some of the negative health outcomes for which there is evidence of a link to environmental factors. The report finds, among other things, that 1) air pollution and exposure to lead are still problems; 2) mercury in women of child bearing age has not declined over the last 10 years; 3) phthalate blood levels were 10% to 33% higher in children than in women and were detected in all samples of indoor air and dust at child care centers; 4) pesticides were detected in all samples of indoor air and dust at child care centers; 5) asthma rates are up to one in 11 children and the rate for Black children is nearly double that of White children; 6) childhood cancer rates have increased over 10% over the last 15 years; 7) attention-deficit / hyperactivity disorder (ADHD) diagnoses have increased by 50%; 8) one in 100 children now exhibits autism symptoms, a ten-fold increase. Puberty is occurring about a year and a half earlier, with one in 10 girls going into puberty before age 8.

Despite the very high economic and human costs of exposure to toxins, we do not have an effective regulatory system in place to protect us – not even our children.

FULL POST: Children are continuously exposed to many toxic chemicals in the air, dust, water, and everyday items that surround them with no regulation and no evaluation of possible negative effects. None of the over 75,000 synthetic chemicals in use in the US are regulated based on their potential to affect children. The science about how chemicals can affect growth and development in children and fetuses has advanced tremendously in the last 40 years, but our laws regulating toxic substances have not changed. The chemical industry, and related industries, has blocked regulation under existing law, as well as improvements to the current law. (See post of 6/10/13 for more detail.) [1]

Thousands of consumer products for children, such as toys, car seats, bedding, and clothes, contain toxic chemicals linked to cancer, hormone disruption, developmental problems, and reproduction and immune system problems. Yet there is no national requirement to regulate, disclose, or label such products. Washington State in 2008 became the first state to require manufacturers to report the presence of toxic chemicals in their products. [2]

Chemicals in a mother’s blood can also be harmful to children. During pregnancy, toxins can cause a preterm birth or even a miscarriage, and do cross the placenta and get into her fetus’s blood, with unknown effects on her yet to be born baby. After birth, breast milk can be harmful as it is the most highly chemical-contaminated of any food. It contains dioxins, pesticides, PCBs, and the range of other chemicals that are found in human blood. (See posts of 5/22/13 and 6/2/13 for more detail.) These are examples of toxic trespass: toxic chemicals in our bodies that got there without our consent or control. [3]

In January, the Environmental Protection Agency (EPA) issued its report America’s Children and the Environment. The good news is that it finds that air quality has improved, children’s blood lead levels have declined, and children’s exposure to second hand tobacco smoke has decreased. However, it states that research is need on the causes of increased asthma rates, the potential impacts of early life exposure to chemicals, and the higher incidences of diseases in children in minority and low income families than in other families. It notes that children may be exposed to relatively higher amounts of chemicals than adults because they eat, drink, and breathe more relative to their size. Furthermore, they may be exposed to chemicals that adults are not because they play on the ground or floor and more frequently put their hands to their mouths. And children in minority and low income families generally have higher body burdens of toxic chemicals. [4]

It is often difficult to determine the impact of chemicals and the cause of adverse health outcomes because of the presence and interaction of multiple factors. For many environmental exposures, there is very little information on the potential health consequences of exposure levels typically experienced by US children. Furthermore, the impact on children of a given exposure can vary widely due to genetics; the length, avenue, and magnitude of exposure; age and developmental stage; concurrent or prior exposure to other contaminants; and the presence of other, non-chemical stressors. The prenatal period is the most sensitive, generally. Respiratory diseases, childhood and adult cancers, neuro-developmental disorders, obesity, and adverse birth outcomes are some of the negative health outcomes for which there is evidence of a link to environmental factors. The effects of harmful exposure may not be evident until years later and may contribute to the onset of chronic diseases in adulthood.

Specific findings of the EPA report, based on the most recent data available, include:

  • Virtually all children experienced hazardous air pollutant concentrations above the cancer risk benchmark in 2005. 56% experienced one pollutant over the safe level standard for health effects other than cancer, (e.g., asthma).
  • Despite the reductions in blood lead levels, 15% of children birth to age 5 still lived in homes with a lead hazard in 2005-2006. The median lead blood level of Black children was one-third higher than for other children.
  • The median concentration of mercury in the blood of women ages 16 to 49 (i.e., child-bearing age) is unchanged over the last 10 years. Hopefully, the recent regulation of mercury emissions for electric power generating plants will improve this in the future. In recent years, while mercury regulation was blocked by the electric power industry, we advised women of child-bearing age to limit their intake of certain fish to avoid excessive mercury, which is a known neurotoxin for fetuses and young children.
  • The concentrations of phthalates (which have been linked to hormonal changes and birth defects in animals) were 10% to 33% higher in children than in women, with no clear trend up or down. Phthalates were detected in all samples of indoor air and dust at child care centers.
  • Pesticides were detected in all samples of indoor air and dust at child care centers.

The EPA report also found that chronic illnesses and childhood disabilities have risen dramatically in recent years. Although some of this may be due to improved diagnosis, there clearly has been an increase in incidence. While no clear cause has been established, increased exposure to toxic chemicals is very likely to be at least a contributing cause. For example:

  • Asthma rates are up to one in 11 children, increasing from 8.7% in 2001 to 9.4% in 2010. The rate (16.0%) for Black children is nearly double that of White children.
  • Childhood cancer rates have increased over 10%, from 157 cases per million children to 173.5, over the last 15 years.
  • Attention-deficit / hyperactivity disorder (ADHD) diagnoses have increased by 50%, from 6.3% to 9.5% of children over the last 13 years.
  • One in 100 children now exhibits autism symptoms, a ten-fold increase over 13 years.
  • The child obesity rate has risen from 5% to 17% over the last 30 years, but seems to have stabilized. This is due to multiple causes, but chemical exposure is likely to be a factor.
  • One in eight births occurs prematurely, increasing from 11.0% to 12.8% over the last 15 years.
  • A sampling of birth defects has shown an increase over the last 8 years.

Puberty is occurring about a year and a half earlier, with one in 10 girls going into puberty before age 8. Early puberty raises the risk of breast cancer. Puberty marks a broad range of changes in one’s body, including brain structure and functioning. No one knows what the impacts of early puberty overall might be. But we do know that the same chemicals that can cause early sexual maturation in animals in the lab are in the bodies of our children. So it seems likely that these chemicals are at least contributing to the early puberty that is being observed in our children. [5]

We know there are very high economic and human costs to these medical problems and chronic illnesses. Despite this, we do not have an effective regulatory system in place to protect us – not even our children.

 

[1]       Steingraber, S., 4/19/13, “Sandra Steingraber’s war on toxic trespassers,” Bill Moyers public TV show, available at BillMoyers.com. Note: Steingraber has written multiple books including “Having faith: An ecologist’s journey to motherhood” and “Raising Elijah: Protecting our children in an age of environmental crisis.”

[2]       McCauley, L., 5/1/13, “Report: Toxic chemicals found in thousands of children’s products,” Common Dreams. The report cited is at http://watoxics.org/chemicalsrevealed.

[3]       Steingraber, S., 4/19/13, see above

[4]       Environmental Protection Agency, Jan. 2013, “America’s Children and the environment,” http://www.epa.gov/ace

[5]       Steingraber, S., 4/19/13, see above

BLOCKING REGULATION OF TOXINS

ABSTRACT: Corporations with a financial interest in the use and sale of toxic chemicals are engaged in a major, multi-faceted effort to prevent, weaken, and delay regulation. They work to prevent clear, unbiased, scientific information from being available to our policy makers and the public. They engage in efforts to affect the regulatory process – from the enactment of laws to the implementation of regulations – in the legislative, executive, and judicial branches of government. They work to make the whole process as long and complicated as possible. This gives them many opportunities to block, weaken, and delay the actual regulation of a toxic chemical.

The chemical industry works to limit the effectiveness of any regulations eventually implemented and of the agency enforcing them.

It achieves results by using the standard tactics of 1) Campaign contributions, 2) Lobbying, and 3) The revolving door of personnel moving between the industry and legislative and executive branch staff positions, which result in personal relationships (and potential conflicts of interest) that can benefit the chemical industry.

Given that corporations typically have more resources, a more singular focus, and greater longevity for waging the battle against regulation than those working to regulate a toxic chemical, dragging out the process and making it costly generally works to their advantage.

FULL POST: Corporations with a financial interest in the use and sale of toxic chemicals are engaged in a major, multi-faceted effort to prevent, weaken, and delay regulation, despite threats to public health and safety, as well as to the environment. These corporations work to prevent clear, unbiased, scientific information from being available to our policy makers and the public. They engage in efforts to affect the regulatory process – from the enactment of laws to the implementation of regulations – in the legislative, executive, and judicial branches of government. [1] The regulation of lead [2] (see post of 6/2/13 for more detail) and tobacco are classic examples. (Similar efforts are occurring in other arenas, such as climate change and regulation of the financial industry.)

The efforts of the chemical industry on the legislative front are both proactive and reactive, offensive and defensive, as well as high profile and hidden. Examples, for among many, include:

  • The fracking* industry proactively but quietly got legislation passed that exempted fracking from review by the Environmental Protection Agency (EPA) under the Safe Drinking Water Act. This happened in 2005 under President Bush and Vice President Cheney and is widely referred to as the “Halliburton Loophole” because a major beneficiary is Cheney’s previous employer, Halliburton Co.
  • The genetically modified organism (GMO) industry quietly attached a provision to an emergency budget bill (passed and signed into law by President Obama) that allows corporations (notably Monsanto) to sell GMO seeds for agriculture even when a federal court has ordered them not to. [3]
  • A provision in the 2013 Farm Bill, currently in the US House of Representatives, would prohibit states from enacting laws requiring the labeling of food with GMO ingredients or otherwise regulating the production of agricultural goods. [4]

The chemical industry achieves legislative results by using the standard tactics of:

  • Campaign contributions to Congress people (and state legislators) who have oversight roles,
  • Lobbying, and
  • The revolving door of personnel moving between the industry and legislative staff positions, which result in personal relationships (and potential conflicts of interest) that can benefit the chemical industry.

Then, once laws are in place, the chemical industry works to make the process of implementation through rules and regulations as long and complicated as possible. This gives it many additional opportunities (beyond those of the legislative process) to block, weaken, and delay the actual regulation of a toxic chemical.

The chemical industry also works to limit the effectiveness of any regulations eventually implemented and of the agency enforcing them. One way is to lobby to make the regulations as complex as possible with loopholes and details that make them difficult to enforce and open to court challenges. This can include putting the burden of proof on the agency as opposed to the corporation and setting a high standard of proof or harm. For example, the Toxic Substances Control Act gives the EPA just 90 days to find “unreasonable risk” if it wants to regulate a new chemical (see post of 6/2/13 for more detail). Another tactic is to require an extensive and often biased cost-benefit analysis of any new regulation.

The tactics of lobbying and the revolving door of personnel, in this case involving the regulatory agency in the executive branch rather than the legislative branch of government, are used to achieve these results.

A regulatory agency can also have its effectiveness hurt by budget cuts or legislative failure to confirm key agency personnel. And challenging regulations or regulatory decisions in court uses the judicial branch of government as another way to delay and drive up the costs of regulation.

Finally, the chemical industry engages in efforts to control the flow and clarity of information. Corporations with a stake in research on a potentially toxic chemical will create a false and parallel science by paying for biased research and will control, as much as possible, the dissemination of scientific information. They will attack scientists, sometimes directly and personally, including threatening them and suing them, when their research finds toxic effects from the corporation’s chemical. [5] An important goal of these efforts is to create false or exaggerated doubt in the minds of policy makers and the public about the harm that a chemical causes.

Trade associations like the American Chemical Council and public relations experts are used in efforts to manipulate public opinion and influence the media. Supposedly independent groups are created and funded specifically to promote the industry’s position. These allow the corporation with a vested interest to remain behind the scenes and apparently independent of public relations efforts to downplay evidence of dangers, exaggerate uncertainty, allege misconduct by scientists who find toxic effects, and plant inaccurate or biased stories in the media. [6][7]

To avoid having to share information with the public, corporations will claim that it represents “trade secrets” or “proprietary information”. For example, the fracking industry makes such claims when asked to reveal the chemicals it is pumping into the ground to release natural gas. This claim is also used to avoid labeling products with their chemical contents. Eastman Chemical Co. has used this claim to suppress information from a court case on the presence and effects of chemicals in its plastics. [8]

Given that corporations typically have more resources, a more singular focus, and greater longevity for waging the battle against regulation than those working to regulate a toxic chemical, dragging out the process and making it costly generally works to their advantage.

 

[1]       Union of Concerned Scientists, Feb. 2012, “Heads they win, tails we lose: How corporations corrupt science at the public’s expense,” http://www.ucsusa.org/scientific_integrity/abuses_of_science/how-corporations-corrupt-science.html

[2]       Rosner, D., & Markowitz, G., 5/17/13, “Toxic disinformation,” Bill Moyers’ public TV show, available at billmoyers.com

*      Fracking is shorthand for hydraulic fracturing where high pressure water and other fluids, including toxic chemicals, are injected into the ground to release natural gas.

[3]       McCauley, L., 5/20/13, “Senator leads call to repeal the ‘Monsanto Protection Act’,” http://www.commondreams.org/headline/2013.05/20-2

[4]       Sheets, C.A., 5/17/13, “’Monsanto Protection Act 2.0’ would ban GMO-labeling laws at the state level,” International Business Times

[5]       Riley, T., 5/18/13, “Blinding us from science,” http://billmoyers.com/2013/05/18/blinding-us-from-science

[6]       Rosner, D., & Markowitz, G., 4/29/13, “You and your family are guinea pigs for the chemical corporations,” TomDispatch.com

[7]       Union of Concerned Scientists, Feb. 2012, see above

[8]       Dubose, L., 6/1/13, “Silencing science: What you may never know about plastic baby bottles,” The Washington Spectator

THE REAL SCANDAL BEHIND THE IRS “SCANDAL”

ABSTRACT: Overwhelmed IRS employees, trying to sort through hundreds of applications for tax exempt status to identify ones that should be rejected because they were political rather than true social welfare organizations, used search terms that may have been tilted toward identifying conservative groups, although there were terms used that are neutral or tilted toward liberal or progressive politics. (Perhaps there was such a tilt because the number and spending of such groups on the conservative side has far outweighed those on the liberal or progressive side.)

As Republicans in Congress try to blow this up into a major scandal, it should be noted that the IRS Commissioner when this activity occurred was Douglas Shulman, who was appointed by President Bush in 2008 and served until November 2012.

Three factors have led to the growth of 501(c)(4) social welfare organizations that engage in political activity: 1) They do not have to disclose their donors; 2) Political committees have had to disclose their donors since 2001; and 3) The Supreme Court’s 2010 Citizens United decision allowed unlimited spending on political activity by wealthy individuals, corporations, and other organizations. Corporations and wealthy individuals who would like to keep their political activities secret have flocked to using these social welfare organizations.

The real scandals hiding behind the front page news are that the IRS: 1) Has not clarified the limits on political activity by tax exempt social welfare groups; 2) Has not taken enforcement actions against any politically active social welfare group; and 3) Has had the capacity of its staff to engage in appropriate oversight and enforcement activities cut.

The current “scandal” at the IRS should be the springboard for reform. Unfortunately, the Republicans in Congress seem far more intent on using the situation to score political points and to undermine the important work of the IRS.

FULL POST: If you were an overwhelmed IRS employee trying to sort through hundreds of applications for tax exempt status to identify ones that should be rejected because they were political rather than true social welfare organizations, how would you do it? Searching for political terms would make a lot of sense. The terms used should be balanced, so they look for any group with a political focus, not just ones with a certain perspective.

It appears that the search terms that were used may have been tilted toward identifying conservative groups, although there were terms used that are neutral or tilted toward liberal or progressive politics. (Perhaps there was such a tilt because the number and spending of such groups on the conservative side has far outweighed those on the liberal or progressive side.) And there were liberal or progressive organizations that were scrutinized and had their applications delayed, as some conservative ones did. Although the search terms used may have been efficient and rational, they may not have been appropriate from a political or public perception stand point. [1]

The Cincinnati office, where this work was concentrated, had fewer than 200 people working to process 70,000 applications for tax exempt status each year. Moreover, despite the complex legalities of these determinations, this group had few lawyers and only vague guidelines. The unit has been reorganized and its procedures revised multiple times over the past three years.

As Republicans in Congress try to blow this up into a major scandal, it should be noted that the IRS Commissioner when this activity occurred was Douglas Shulman, who was appointed by President Bush in 2008 and served until November 2012.

The issue of non-profit groups and their political activity has burst into the spotlight in recent years. Traditional non-profit groups are organized under section 501(c)(3) of the IRS code and are prohibited from engaging in political activity. Organizations under IRS section 501(c)(4), although originally exclusively for the promotion of social welfare, in 1960 were allowed to engage in political activity as long as their primary purpose was social welfare. The IRS has not established what “primary” or “political activity” means. Three factors have led to the growth of 501(c)(4) social welfare organizations that engage in political activity:

  • They do not have to disclose their donors.
  • Political committees have had to disclose their donors since 2001.
  • The Supreme Court’s 2010 Citizens United decision allowed unlimited spending on political activity by wealthy individuals, corporations, and other organizations. [2]

As a result, corporations and wealthy individuals who would like to keep their political activities secret have flocked to using these social welfare organizations. Crossroads GPS (the conservative group Karl Rove helped found in 2010) spent $88 million in the last two national election cycles, massively outspending all other 501(c)(4)s’ political expenditures. It has a tiny staff and no discernible social welfare purpose, and its application for tax exempt status is still pending. [3] (501(c)(4)s are allowed to operate as non-profits without IRS approval.) For the 2012 elections, based on reports to the Federal Election Commission, of the more than $256 million spent by social welfare non-profits on ads, at least 80% came from conservative groups. [4]

The real scandals hiding behind the front page news are that the IRS:

  • Has not clarified the limits on political activity by tax exempt social welfare groups (i.e., 501(c)(4)s) or even defined what is considered political activity.
  • Has not taken enforcement actions against any politically active social welfare group, despite their spending, combined, at least $500 million on political advertising during the last four years. [5] This includes groups that told the IRS in their tax exemption applications that they were not going to engage in political activity and then did so. [6]
  • Has had the capacity of its staff to engage in appropriate oversight and enforcement activities cut. (Its budget has been cut the last three years, including by the sequester, and staff levels are down from 117,000 in 1992 to 90,000 today while dollars collected have more than doubled.) This has led to overwhelmed workers as occurred in the tax exempt review group in Cincinnati.

The current “scandal” at the IRS should be the springboard for reform – for clarifying and enforcing rules on political activity by tax exempt organization, as well as for assessing and meeting the needs at the IRS for staffing and professionalization of personnel and procedures. Unfortunately, the Republicans in Congress seem far more intent on using the situation to score political points and to undermine the important work of the IRS.

 

[1]       Confessore, N., Kocieniewski, D., & Luo, M., 5/18/13, “Confusion and staff troubles rife at I.R.S. office in Ohio,” The New York Times

[2]       Norris, F., 5/16/13, “A fine line between social and political,” The New York Times

[3]       Maguire, R., 5/16/13, “Conservative groups granted exemption vastly outspent liberal ones,” Open Secrets

[4]       Barker, K. & Elliott, J., 5/22/13, “Six facts lost in the IRS scandal,” ProPublica

[5]       Confessore, N., et al., 5/18/13, see above

[6]       Barker, K. & Elliott, J., 5/22/13, see above

HOW AND WHY TOXINS ARE IN YOUR BLOOD

ABSTRACT: The dozens of toxic chemicals we all have in our blood are there because they are in the clothes we wear; the toys, furniture, fabrics, paint, and construction materials in our homes; the cleaning and personal care products we use; and the containers for our food and beverages. They are in all these places because our government regulators are failing us and the corporations that produce and use these chemicals engage in extensive efforts to block regulation.

The Toxic Substances Control Act (TSCA) of 1976 is the US law that regulates chemicals. Almost all of the 60,000 chemicals in use in 1976 when the law was passed were deemed safe without testing or review. Only a handful of chemicals have had their use restricted. For a new chemical, the EPA must act in just 90 days (!) and find an “unreasonable risk” or the chemical is deemed safe. In addition, the burden of proof lies on the EPA to show “unreasonable risk” rather than on the corporation to show that a chemical is safe.

There are numerous examples, historically and currently, of the difficulty of implementing regulations on chemicals, including lead, asbestos, pesticides, PCBs, formaldehyde, flame retardants, and BPA. Chemical exposure has been associated with a very wide range of health and developmental problems, including learning disabilities, asthma, birth defects, developmental problems in children, cancer, obesity, and problems with the immune and reproductive systems, as well as with the brain and nervous system. The effects of long-term exposure to multiple chemicals and the impacts on fetuses and young children are unknown.

Our bodies are toxic dumps and we are the guinea pigs – without our consent and often without even our knowledge – in the largest, uncontrolled experiment that has ever occurred.

FULL POST: The dozens of toxic chemicals we all have in our blood are there because they are in the air we breathe, the food we eat, and the water we drink. (See 5/22/13 post for more detail.) They get there from the clothes we wear; the toys, furniture, fabrics, paint, and construction materials in our homes; the cleaning and personal care products we use; and the containers for our food and beverages. They are in all these places because our government regulators are failing us and the corporations that produce and use these chemicals engage in extensive efforts to block regulation. Many of these chemicals are new, but some have been around for 100 years. [1]

The Toxic Substances Control Act (TSCA) of 1976 is the US law that regulates the introduction of new chemicals and the chemicals existing when it was enacted. Almost all of the 60,000 chemicals in use in 1976 when the law was passed were deemed safe without testing or review. The TSCA is administered by the Environmental Protection Agency (EPA). The EPA has tested only 200 of the more than 75,000 synthetic chemicals in use in the US. In the 37 year history of the TSCA, only a handful of chemicals have had their use restricted. This is partly because the Pre-Manufacturing Notice a corporation submits for a new chemical it wants to use has only limited information (e.g., no safety information is required). Then, the EPA must act in just 90 days (!) and find an “unreasonable risk to human health or the environment” or the chemical is deemed safe for use. Even the EPA’s own Office of the Inspector General has criticized the TSCA as weak and ineffective, noting that corporations’ assertions of trade secrets prevent effective testing and that the EPA process is predisposed to protecting industry information rather than providing the public with health and safety information. [2] The Natural Resources Defense Council says that under the TSCA “it is almost impossible for the EPA to take regulatory action against dangerous chemicals, even those that are known to cause cancer or other serious health effects.” One reason is that the burden of proof lies on the EPA to show “unreasonable risk” rather than on the corporation to show that a chemical is safe, as a drug company is required to do. [3]

Lead is a classic example of the difficulty of implementing regulation. The dangers of lead have been known for 100 years. Yet the lead industry engaged in a 60 year campaign to cover-up the effects of lead and to promote its use – in a campaign similar to that waged by the tobacco industry more recently. In wasn’t until 1971 that Congress passed a law to limit the use of lead paint in public housing and 1978 when the Consumer Product Safety Commission banned lead paint for consumer use. During the 1980’s, the EPA issued rules that eventually eliminated the use of lead in gasoline in 1995 (although it is still used in aviation fuel).

Even today, the Centers for Disease Control (CDC) estimates that children in 4 million US households are exposed to dangerous amounts of lead and that 500,000 children from birth to 5 have elevated levels of lead in their blood. No level of lead is considered safe and child exposure to lead is linked to attention and cognitive deficits, behavior problems, and learning disabilities – all of which risk putting a child on a trajectory for problems in school and later life. [4]

A similar pattern occurred with efforts to regulate asbestos. Chlorinated hydrocarbons, including pesticides such as DDT, were widely used until their detrimental effects became clear. Then they were successfully banned decades ago. However, these chemicals persist in the environment and have accumulated in our bodies. The same is true for polychlorinated biphenyls (PCBs). The non-stick coating for cookware, Teflon, is widely present in our blood and is linked to cancer.

Bisphenol A (BPA), which is used in plastics including baby bottles and water bottles, as well as the linings of food cans, has been found widely in our blood. At even very low doses, it has been shown to interact with our endocrine system and its hormones, with links to obesity, neurobehavioral problems, reproductive abnormalities, and breast and prostate cancers. Nonetheless, its regulation is being fought in the courts and elsewhere at this moment.

Currently, formaldehyde is used as a fungicide, germicide, and disinfectant in plywood and many materials used in building homes and furniture. However, as it ages it evaporates and the vapors we inhale accumulate in our bodies; it is known to cause cancer. Similarly, flame retardants are found in almost everyone’s blood and have been linked to thyroid, memory, learning, cognitive, and developmental problems, as well as early onset of puberty.

These are prominent examples of our widespread exposure to a large number of toxic chemicals. This exposure has been associated with a very wide range of health and developmental problems, including learning disabilities, asthma, birth defects, developmental problems in children, cancer, obesity, and problems with the immune and reproductive systems, as well as the brain and nervous system. The effects of long-term exposure to multiple chemicals are unknown.

When the TSCA passed in 1976, the scientific understanding of biochemistry was not nearly as sophisticated as it is today. The ways chemicals affect our health, their potential to accumulate in and have subtle, long-term effects on our bodies and how they function, were unknown. Even today, the effects chemicals have on fetuses and young children are largely unstudied and unknown. [5] In 1976, it was generally believed that the placenta filtered a mother’s blood and prevented dangerous chemicals from reaching the fetus. We now know that this isn’t true.

Our bodies are toxic dumps and we are the guinea pigs – without our consent and often without even our knowledge – in the largest, uncontrolled experiment that has ever occurred. The large corporations that produce and use these chemicals are using every tactic at their disposal and their huge treasuries to fight regulation and stop laws that would require testing of chemicals. My next post on this topic will focus on this battle.

[1]       Rosner, D., & Markowitz, G., 4/29/13, “You and your family are guinea pigs for the chemical corporations,” TomDispatch.com

[2]       Wikipedia, retrieved 6/1/13, “Toxic Substances Control Act of 1976,” en.wikipedia.org/wiki/Toxic_Substances_Control_Act_of_1976

[3]       Natural Resources Defense Council, retrieved 6/1/12, “More than 80,000 chemicals permitted in the US have never been fully assessed for toxic impacts on human health and the environment,” http://www.nrdc.org/health/toxics.asp?gclid=CPjZ66CLw7cCFYii4Aod6GwAWA

[4]       Rosner & Markowitz, 4/19/13, see above

[5]       Steingraber, S., 4/19/13, “Sandra Steingraber’s war on toxic trespassers,” Bill Moyers public TV show, available at BillMoyers.com

REDUCING GUN VIOLENCE

ABSTRACT: There’s good news and bad news after the recent obstruction by filibustering in the US Senate of a law to reduce gun violence. Information on the votes in the Senate and how to contact your Senators (and Representatives) is below.

Efforts to reduce gun violence are getting unprecedented attention. Four states have recently passed laws targeting gun violence. However, there is a continuing lack of good data and research on gun violence, largely because the gun industry and its supporters have aggressively worked to block government data collection and research, as well as to intimidate private researchers. This inhibits the solving and prevention of crimes, as well as the identification and prosecution of gun dealers who irresponsibly, if not illegally, sell guns, including guns that are used in crimes.

I urge you to contact your Senators and let them know how you feel about this issue, whether you agree with their vote or not. Good legislation, good data and research, and strong enforcement could significantly reduce the 18,000 suicides and 12,000 murders that happen with guns each year in this country. Communication to elected officials by voters – their constituents – is critical to taking advantage of this window of opportunity and achieving change that will reduce the tragedy of gun violence.

FULL POST:There’s good news and bad news after the recent obstruction by filibustering in the US Senate of a law to reduce gun violence. (See post of 4/20/13 for more details.) One piece of good news is that some Senators are saying they will continue the effort. Information on the votes in the Senate and how to contact your Senators (and Representatives) is below.

Other good news:

  • Efforts to reduce gun violence are getting unprecedented attention, including coverage in mainstream media
  • The issue is a much higher priority in voters’ minds than it was
  • Elected officials are being asked where they stand on the issue regularly
  • Elected officials who support steps to reduce gun violence are much more comfortable saying so in public
  • Four states have recently passed laws targeting gun violence: Colorado, Connecticut, Maryland, and New York. Others are considering doing so. You may want to check and see if there is such an effort in your state.

Nationally, the broad support for reducing gun violence is clear and its potential political impact has being discussed. For example, in 21 states both US Senators supported the gun background check provision that was defeated by filibuster. Those 21 states have 261 Electoral College votes, out of the 270 needed to elect a President. The 17 states where both Senators opposed the law only have 146 electoral votes. [1]

The National Academy of Sciences published a major report back in 2004, “Firearms and Violence: A Critical Review,” that found that there is a lack of good data and research on this topic. It recommended that the federal government support “a systematic program of data collection and research” (page 3). The report noted that “violence is positively associated with firearms ownership” (page 5) but that the data do not allow a conclusion about whether there is a cause and effect relationship. It stated that in comparisons among countries, “there is a substantial association between gun ownership and homicide” and that “the U.S. homicide rate is much higher than in all other developed countries.” (page 6) [2] Australia has achieved a dramatic reduction in gun violence over the last 6 years. (See post of 4/20/13 for more details.)

Despite this, there is a continuing lack of good data and research on gun violence, largely because the gun industry and its supporters, notably the National Rifle Association (NRA), have aggressively worked to block government data collection and research, as well as to intimidate private researchers. The US Centers for Disease Control and the US Department of Health and Human Services are effectively blocked from spending any money on gun violence research. In contrast, despite the fact that roughly the same number of people die each year in gun violence as in car accidents, the National Highway Traffic Safety Administration spends roughly $125 million per year to study and improve highway safety. As with highway safety, gun safety is a public health issue and should be address as such.

The blocking of the collection and use of gun data inhibits the solving and prevention of crimes, as well as the formulation of effective policies to reduce gun violence. It also inhibits the identification and prosecution of gun dealers who irresponsibly, if not illegally, sell guns, including guns that are used in crimes. [3][4]

Getting back to the gun violence prevention efforts in the US Senate, the vote on the background check provision was 54 in favor (Yeas) and 46 opposed (Nays), but because of the filibuster, 60 votes in favor were needed to move the legislation forward. It was largely a party line vote, with Republicans opposed and Democrats in favor, with the following exceptions: [5]

  • 4 Republicans in favor: Collins (ME), Kirk (IL), McCain (AZ), and Toomey (PA).
  • 4 Democrats opposed: Baucus (Montana), Begich (Alaska), Heitkamp (ND), and Pryor (Arkansas). (Reid [NV] voted “No”, but as a procedural move to allow him to call for reconsideration.)

I urge you to contact your Senators and let them know how you feel about this issue, whether you agree with their vote or not. If you support them they need to hear that, because there is pressure on them from both sides. If you’d like them to change their vote, they should hear that as well. You can find your US Senators’ names and contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm

It wouldn’t hurt to contact your US Representative while you’re at it, although there is no impending action in the House. You can find their names and contact information at: http://www.house.gov/representatives/find/

Good legislation, good data and research, and strong enforcement could significantly reduce the 18,000 suicides and 12,000 murders that happen with guns each year in this country. The attention this issue is finally getting is an important step forward. Communication to elected officials by voters – their constituents – is critical to taking advantage of this window of opportunity and achieving change that will reduce the tragedy of gun violence.

[1]       Green, J., 5/1/13, “A matter of time? Congress failed to act, but the gun control tides are shifting,” The Boston Globe

[2]       Wellford, C.F., et al., 2004, “Firearms and Violence: A Critical Review,” Committee on Law and Justice, National Research Council, National Academy of Sciences

[3]       Bender, M.C., 2/12/13, “Gun lobby blocks data collection by crimefighters,” Bloomberg

[4]       Thacker, P.D., 12/19/12, “Congress and the NRA suppressed research on gun violence,” Slate Magazine

FIXING THE SEQUESTER’S BUDGET CUTS

ABSTRACT: The impacts of the $85 billion, 5% across the board budget cuts that went into effect on March 1st (known as the Sequester) are being felt. The cuts to air traffic controllers caused flight delays, so Congress acted with rarely seen speed to provide funding for them.

However, other impacts of the sequester, which are having far more significant effects on people’s lives than having a flight delayed, are being ignored by Congress. It is estimated that almost 60,000 young children will lose or receive reduced Head Start and Early Head Start services. Grants for child care subsidies have been cut, which will undermine the ability of parents to work and the school readiness of an estimated 28,000 children. The estimated impacts of other cuts include: lost nutrition benefits for 600,000 mothers and their young children, reduced K-12 education supports for 1.2 million disadvantaged children, fewer meals for tens of thousands of seniors, and 4,000 fewer AmeriCorps and VISTA volunteers. Unemployment benefits, vouchers for rental housing assistance, and health care funding have also been cut.

I urge you to email, write, or call your representatives in Congress and the President to say that it’s nice to fix the sequester’s impact on flight delays, but it’s much more important to fix the significant, negative impacts the sequester is having on people’s daily lives, on our children and their education from birth onward, on seniors’ ability to live independently, and on the ability of low income families and the unemployed to make ends meet.

FULL POST: The impacts of the $85 billion, 5% across the board budget cuts that went into effect on March 1st (known as the Sequester) are being felt. As you’ve probably heard, the cuts to air traffic controllers caused flight delays. So Congress acted with rarely seen speed and in just two days passed a bill that shifts money from airport improvement projects to provide funding for the controllers. The meat industry, the Pentagon, and the Homeland Security and Justice Departments also got some relief from the sequester’s cuts in the bill. [1]

However, other impacts of the sequester, which are having far more significant effects on people’s lives than having a flight delayed, are being ignored by Congress. Here are some examples: [2][3]

  • Early childhood care and education:
    • Head Start and Early Head Start, which provide families in poverty with school readiness enrichment for children under 5 and other support, are cutting services. Some are closing early and some are shutting down for 2 – 3 weeks. Others are laying off staff and serving fewer children, with some conducting lotteries to determine which children will be asked to leave. This is potentially harmful to children’s brain development, which is likely to negatively affect their success in school and their ability to be productive workers in the future. Nationally, it is estimated that almost 60,000 young children will lose or receive reduced services.
    • Grants to the states for child care subsidies have been cut. Therefore, states will offer less help to low income families to pay for child care. This will undermine the ability of parents to work and the school readiness of an estimated 28,000 children.
  • Nutrition for mothers and their young children: It is estimated that 600,000 low income mothers and their young children will lose nutrition benefits. This could do long-term harm to the health and school readiness of these children.
  • K-12 Education: School teachers, aides, and literacy and remedial specialists are being laid off. In particular, the Title I program that provides funding to schools serving high numbers of low income families has been cut by $726 million, which is estimated to affect 1.2 million disadvantaged students and 10,000 school staff members.
  • Unemployment benefits: The federal government advised states to cut their unemployment benefits to the long-term unemployed by 10.7% in the first week of April or make larger percentage cuts later. In California, for example, where unemployment is 9.6%, 400,000 long-term unemployed workers, whose average weekly check is $297, will receive a cut of $52 a week.
  • Housing: Vouchers for rental assistance are being cut. Some recently issued vouchers are being rescinded and some subsidized tenants are being asked to pay more toward their rent. Waiting lists and times (measured in years in many places) for housing assistance are growing. Tens of thousands of families will be affected.
  • Services for seniors: Transportation services for seniors are being cut and some senior centers are being closed. Meals on Wheels will deliver hundreds of thousands fewer meals for tens of thousands of seniors.
  • Health care: Local clinics, the most convenient and cost-effective places to get health care, are cutting services, forcing patients to travel longer distance to access more expensive services at hospitals. Hospitals and health care organizations will lose $11 billion this year. Non-profit hospitals that serve large Medicare populations will be disproportionately affected.
  • Community service: 4,000 of 80,000 AmeriCorps and VISTA volunteers will be cut.

The impacts of the sequester’s cuts to social and human service programs are difficult to quantify and describe because they are in numerous programs and grants, and are happening differently in each state, in each city, and in each agency and program as these entities struggle to implement the cuts with the least harm possible.

Meanwhile, Congress, including prominent deficit hawks, is insisting that the military spend almost half a billion dollars on tanks that the Pentagon doesn’t want to save 700 jobs at a General Dynamics plant in Ohio. General Dynamics, by the way, spent $11 million on lobbying last year. [4]

I urge you to email, write, or call your representatives in Congress and the President to say that it’s nice to fix the sequester’s impact on flight delays, but it’s much more important to fix the significant, negative impacts the sequester is having on people’s daily lives, on our children and their education from birth onward, on seniors’ ability to live independently, and on the ability of low income families and the unemployed to make ends meet.

[1]       Grant, D., 4/16/13, “Before members rush for airports, Congress ends sequester flight delays,” The Christian Science Monitor

[2]       Zero to Three, 4/26/13 and 4/8/13, “The sequester’s pain: Air travelers get relief, little kids not so much,” and “When babies share the burden – How the sequester is affecting young children,” Baby Policy Blog of Zero to Three

[3]       Coalition on Human Needs, April, 2013, “Sequester impact factsheets,” http://www.chn.org/background/save-state-fact-sheets/

[4]       Lardner, R., 4/29/13, “Army says no to tanks, but Congress insists,” Associated Press in Daily Times Chronicle

SOCIAL SECURITY AND CHAINED CPI

ABSTRACT: In his federal government budget, President Obama has proposed cutting future Social Security benefits. He has done so in a way that is probably meant to obscure this fact. The Social Security Administration estimates that the result would be a 5% cut in benefits over every 12 year period.

It would not reduce the annual deficit, because SS has its own, dedicated funding stream. Social Security (SS) does not have a major funding problem; its shortfall 20 years from now is easily remedied.

Therefore, it seems that the only reason President Obama is proposing this cut in SS benefits is to offer a political olive branch to Republicans who want to cut SS because they are ideologically opposed to it.

An average 77 year old is receiving $23,832 per year from SS. If chained CPI had been used over the last 12 years, this person would be receiving $22,560 instead. Despite the very modest level of income that SS provides, one-third of seniors rely on SS for at least 90% of their income and another third for over 50% of their income.

The use of chained CPI as the government’s new, official measure of inflation will also, over time, reduce low income families’ eligibility for benefits and push low and middle income taxpayers into higher income tax rate brackets. Thus, it will disproportionately hit low and moderate income families. This would be morally and ethically questionable in the best of times, but with low and middle income families still suffering from the effects of the Great Recession, and income and wealth inequality at levels unseen for at least 80 years, this is unconscionable.

I urge you to contact the President, your Senators, and your Congressperson in the House of Representatives and ask them to oppose this change – or to explain why they support it.

FULL POST: In his federal government budget, President Obama has proposed cutting future Social Security benefits. He has done so in a way that is probably meant to obscure this fact or at least muddy the waters so his proposal isn’t describe as a benefit reduction.

Obama has proposed that the annual inflation adjustment for Social Security (SS) benefits be calculated differently. Instead of using the current Consumer Price Index (CPI), he proposes using a figure called the “chained CPI.” [1] It gives a lower estimate of inflation than CPI, so benefits would increase more slowly. The Social Security Administration estimates that the result would be a 5% reduction in benefits over every 12 year period.

This would cut total SS payments by $10 – $20 billion per year over the next 10 years. However, it would not reduce the annual deficit (which is roughly $800 billion), because SS has its own, dedicated funding stream and is not part of the regular federal budget. Furthermore, SS does not have a major funding problem; its shortfall 20 years from now is easily remedied by other steps that don’t reduce future payments to retirees. (See posts of 1/7/13 and 12/4/11 for more details.)

Therefore, it seems that the only reason President Obama is proposing this cut in SS benefits is to offer a political olive branch to Republicans who want to cut SS because they are ideologically opposed to it.

An average 77 year old is receiving $23,832 per year from SS. If chained CPI had been used over the last 12 years, this person would be receiving $22,560 instead, $1,272 less or a little over a 5% reduction. [2]

Despite the very modest level of income that SS provides, one-third of seniors rely on SS for at least 90% of their income and another third for over 50% of their income. Chained CPI won’t keep up with the inflation that seniors actually experience, given the high portions of their incomes that go for the necessities of food and health care. [3]

And if that isn’t bad enough, remember that SS was meant to be one leg of a three legged stool of retirement security that included employer pension plans and personal savings. Employer pensions have disappeared for most workers and have, at best, been turned into personal savings plans, such as 401ks, where workers have all the risk, just like other personal savings. Given this, now is not the time to be cutting SS, the only guaranteed retirement benefit left in what is now a much less stable and riskier two legged stool.

The use of chained CPI as the government’s new, official measure of inflation will also, over time, reduce low income families’ eligibility for benefits and push low and middle income taxpayers into higher income tax rate brackets. For example, the federal poverty rate is adjusted annually for inflation. Using chained CPI, it will rise more slowly and, in the future, fewer families will fall below the poverty line, which is used to determine eligibility for programs from Head Start to health care, food, and heating assistance. The federal income tax brackets are also adjusted annually for inflation. With the cut off amounts for higher income tax rate brackets rising more slowly, more taxpayers will fall into higher brackets, increasing their income tax. This doesn’t affect the wealthy, of course, because they are already in the top bracket. [4]

The bottom line is that this change in the measure of inflation that is used to calculate Social Security benefits, eligibility for many anti-poverty programs, and income tax rate brackets will disproportionately hit low and moderate income families. This would be morally and ethically questionable in the best of times, but with low and middle income families still suffering from the effects of the Great Recession, and income and wealth inequality at levels unseen for at least 80 years, this is unconscionable.

In reality, this is a backdoor way to cut benefits for SS recipients and low income families, and to have low and middle income taxpayers pay more in income taxes – without having to say that’s what you’re doing. Obfuscation is the name of this game.

I urge you to contact the President, your Senators, and your Congressperson in the House of Representatives and ask them to oppose this change – or to explain why they support it.

 

[1]       Chained CPI assumes that as the prices of goods and services rise, consumers substitute less costly alternatives. For example, if gas prices rise, consumers use their cars less or buy (usually smaller) cars that get better gas mileage. Or if the price of beef goes up, they buy less beef and more chicken or less meat overall. Or if the price of heating oil goes up, consumers turn down the heat and use electric space heaters to heat only the rooms in which they spend time. First, this sounds, in many cases, like a decline in one’s standard of living or quality of life. Second, in some cases buying a cheaper substitute isn’t really an option. When the cost of health insurance and health care goes up, there often isn’t a way to buy a less costly alternative. And for seniors, this is a big part of their budget.

[2]       Matthews, D., 12/11/12, “Everything you need to know about Chained CPI in one post,” The Washington Post

[3]       Warren, E., 4/10/13, Newsletter from Senator Elizabeth Warren

[4]       Ohlemacher, S., 4/8/13, “Obama plan hits seniors, low-income taxpayers,” Associated Press (in the Reading Daily Times Chronicle)

CUTTING SPENDING TO REDUCE THE DEFICIT Part 2

ABSTRACT: Medicare and Medicaid do present significant funding challenges. This is because they reflect the costs of our health care system, which spends 2 ½ times what other advanced economies spend on average – and our health outcomes are worse. Obamacare takes initial steps to make our whole health care system more cost effective. One proposal to save money in Medicare is to raise the age at which one is eligible for coverage from 65 to say 67. This would save only $13 billion per year over 10 years and would only shift the cost for health insurance somewhere else.

Cuts to Medicaid mean that fewer low income individuals, primarily low income children and seniors, would have health insurance.

It is unfair and unnecessary to cut services and benefits for low income families and seniors when other options for reducing the deficit are available.

FULL POST: Medicare and Medicaid do present significant funding challenges. This is because they reflect the costs of our health care system, which spends over $7,500 per person per year. This is 2 ½ times what other advanced economies spend on average – and our health outcomes are worse. (See post of 12/9/11 for more details.)

The real issue is the need to make our whole health care system more cost effective. Obamacare takes initial steps to do just that. It includes cuts in payments to Medicare health insurers and health care providers of $700 billion, requiring them to be more efficient, but not cutting any benefits to seniors. Nonetheless, during the 2012 campaigns, Republicans attacked this as a cut to Medicare, despite the fact that their Vice Presidential candidate, Paul Ryan, the chairman of the House Budget Committee, had included these cuts in his budget the previous two years. Ironically, Republicans have also taken steps to eliminate the cost control board created by Obamacare that is charged with limiting the growth of Medicare spending. [1]

President Obama has continued his efforts to reduce Medicare costs by proposing giving Medicare the right to negotiate with drug makers for lower prices. [2] The Veterans Administration and large health insurers already do this and save significant amounts of money, but President Bush’s Medicare drug benefit prohibited Medicare from doing so, providing a windfall to the pharmaceutical corporations.

Another proposal to save money in Medicare is to raise the age at which one is eligible for coverage from 65 to say 67 and increase premiums for high income recipients. The Congressional Budget Office reviewed these proposals and concluded that they would save only $13 billion per year over 10 years. Moreover, increasing the eligibility age would only shift the cost for health insurance somewhere else and would leave some people without health insurance.

Cuts to Medicaid mean that fewer low income individuals would have health insurance or that their benefits would be cut. Medicaid beneficiaries are primarily low income children and seniors, with Medicaid paying for many seniors’ nursing home care. An expansion of Medicaid is an essential part of reducing the number of Americans without health insurance under Obamacare.

It is unfair and unnecessary to cut services and benefits for low income families and seniors when other options for reducing the deficit are available. Despite our riches, the US is less generous in its benefits for seniors and low income families than other countries with advanced economies. Surely, we can find the will and a way to maintain, if not improve, our benefits for these members of our society.

[1]       New York Times editorial, 11/18/12,  “A bad idea resurfaces,” The New York Times

[2]       Krugman, P., 12/3/12,“The GOP’s big budget mumble,” The New York Times

CUTTING SPENDING TO REDUCE THE DEFICIT

ABSTRACT: A deal was reached to address the year-end “fiscal cliff” or austerity crisis. Spending cuts were postponed for two months and most of the tax increases were eliminated, while some tax and revenue increases were enacted. The deficit reduction focus will now largely shift to spending cuts. We should be focusing on job creation and strengthening the economy, but somehow the deficit is the hot topic.

 The discussion of spending cuts will probably focus on the military and on entitlement programs, specifically Social Security and the health care programs, Medicare and Medicaid. Much of the discussion of cutting military spending will be on avoiding cuts. However, military spending can be reduced up to $200 billion per year – without jeopardizing national security.

 Turning to calls for cuts in Social Security and our public sector health programs, keep in mind that every other advanced economy has health care for all and a retirement support system. Social Security has its own funding stream and does not contribute to the deficit, so rationally it shouldn’t be part of this discussion. Ideologues are using the deficit issue to target Social Security because of their doctrinaire opposition to it. Minor changes to its funding would cover benefits for the next 75 years.

 My next post will review proposed cuts to Medicare and Medicaid.

 FULL POST: As you probably know, a deal was reached to address the year-end “fiscal cliff” or austerity crisis. Spending cuts were postponed for two months and most of the tax increases were eliminated, while some tax and revenue increases were enacted. The cap on the US government’s debt was not addressed and will be hit in about two months. Here’s a quick summary of what was enacted: [1]

  • Income tax rates on incomes over $400,000 will increase from 35% to 39.6% and some reductions in deductions will start at $250,000 in income, but there is no “Buffett Rule” requiring 30% be paid on incomes over $1 million. The net result is that new revenue from income taxes will be only about $60 billion per year as opposed to up to $450 billion with the rates increased on incomes over $250,000 and the “Buffet Rule”.
  • The Social Security payroll tax reduction was NOT extended, so all workers will have an additional 2% taken out of their paychecks on earnings up to $110,000.
  • Tax benefits for low income households were extended: a child credit and the Earned Income Tax Credit, which supplements income from low paying jobs. The tuition credit was extended as was the corporate research and development credit. The Alternative Minimum Tax, which originally was to function like the “Buffett Rule”, was adjusted so it won’t affect middle income taxpayers.
  • Unemployment benefits for the long-term unemployed were extended for a year.
  • The estate tax was increased slightly but not nearly as much as some had proposed and only on individual estates of over $5 million or joint estates of over $10 million.

The deficit reduction focus will now largely shift to spending cuts. We should be focusing on job creation and strengthening the economy, given high unemployment and slow economic growth, but somehow the deficit is the hot topic. As the current experience in Europe is clearly showing, cutting government spending weakens the economy and job growth and can put countries back into a recession.

Having said that, the discussion of spending cuts will probably focus on the military and on entitlement programs, specifically Social Security and the health care programs, Medicare (for seniors) and Medicaid (for low income people including low income seniors).

Unfortunately, much of the discussion of cutting military spending will be on avoiding cuts, including the $50 billion per year cut that is now scheduled for March 1. Military spending can be reduced this much and more – up to $200 billion per year – without jeopardizing national security. (See blog posts of 9/29/12 and 11/17/11 for more information.) For example, Lawrence Korb, an assistant defense secretary under President Reagan, has itemized $150 billion in annual cuts to the military budget. [2]

In the recently enacted $633 billion Defense Department spending bill, there was widespread criticism of inclusion of unnecessary spending. The dollar amount was more than the Department or President requested.  The Pentagon complained that it is required to keep weapons, as well as bases and units, that are not needed or efficient. Defense Secretary Panetta decried meddling by Congress that required “excess force structure and infrastructure.” [3][4]

Turning to calls for cuts in Social Security and our public sector health programs, keep in mind that every other advanced economy has health care for all and a retirement support system. So the issue is not whether it is possible to have these programs, it is are we willing to pay for them and are we willing to control health care costs.

Social Security has its own funding stream and does not contribute to the deficit, so rationally it shouldn’t be part of this discussion. Ideologues are using the deficit issue to target Social Security because of their doctrinaire opposition to it. Furthermore, its current funding will cover its benefits for roughly the next 20 years and after that minor changes to its funding would cover benefits for the next 75 years without any cuts in benefits. (See post of 12/4/11 for more details.)

The most prominent proposal for cutting Social Security spending is to reduce the annual increase in benefits that adjusts for inflation. This would save less than $20 billion per year over 10 years. [5] Ask any senior you know if the inflation adjustment is sufficient to keep up with their cost of living and I bet they’ll say, “No.” So cutting this will only hurt our seniors and reduce Social Security’s ability to keep seniors out of poverty. Furthermore, Social Security has become an increasingly important part of retirement income as private sector pensions have largely disappeared; cutting its rather modest benefits seems inappropriate in this environment.

My next post will review proposed cuts to Medicare and Medicaid.

[1]       New York Times, 1/1/13, “Highlights of the agreement,” The Boston Globe

[2]       Dubose, L., 11/15/12, Book review of Ralph Nader’s “The seventeen solutions: Bold ideas for our American future,” The Washington Spectator

[3]       Bender, B., 1/5/13, “A reprieve for local military bases: New Congressional funding flouts Pentagon’s plan for cutbacks,” The Boston Globe

[4]       Boston Globe Political Notebook, 12/21/12, “House approves defense bill despite Pentagon objections,” The Boston Globe

[5]       Krugman, P., 12/3/12, “The GOP’s big budget mumble,” The New York Times

REBUTTING ARGUMENTS AGAINST INCREASING INCOME TAXES ON THE WEALTHY

ABSTRACT: The Bush tax cuts, and the even larger cuts in the income tax rates for high incomes over the last 30 years, have contributed to creating the federal government’s deficit (see post of 12/22/12) and to dramatically widening income and wealth inequality in the U.S. There has been a dramatic shift of the tax burden from the well-off and corporations to middle and lower income households. This shift in the tax burden has contributed to stagnant incomes for middle and lower income earners while incomes at the top have skyrocketed.

 Despite the Republican rhetoric that high income individuals are “job creators,” the fact is that increased income for them is far less effective in stimulating job growth than increased incomes for low and middle income individuals. There is strong evidence, from multiple perspectives, that increasing taxes on the wealthy and redirecting the funds to productive investments or to lower income individuals, for example through unemployment benefits, will benefit the economy and job creation. It would also reduce inequality and address a root cause of the deficit.

FULL POST: The Bush tax cuts, and the even larger cuts in the income tax rates for high incomes over the last 30 years, have contributed to creating the federal government’s deficit (see post of 12/22/12) and to dramatically widening income and wealth inequality in the U.S., which are at their highest levels since the 1930s.

The 400 richest individuals in the US, as identified by Forbes magazine, have pocketed $1.3 trillion because of the Bush tax cuts. The best estimates are that these individuals actually pay only about 18% of their income in taxes, while their predecessors in 1960 paid more than 70%. Not only have their tax rates fallen dramatically (from 91% in 1960 and 70% in 1980 to 35% today [see 11/27/11 post for more detail]), but their increased use of offshore tax havens and other tax reduction strategies has further reduced the taxes they actually pay. For example, the tax return Mitt Romney released shows that he, and presumably his partners at Bain Capital, reported their management fees as capital gains rather than earned income. Assuming they all did, they saved an estimated $200 million on income taxes and another $20 million on the Medicare payroll tax. [1] Also since the 1960s, corporate taxes have fallen from over 27% of federal government revenue to about 10% today. [2]

These reductions in government revenue from high income individuals and corporations have dramatically shifted the tax burden from them to middle and lower income households at the federal, state, and local levels. This shift to regressive revenue sources [3] includes flat rate payroll taxes (i.e., Social Security and Medicare), and in the case of Social Security a cap so that no tax is paid on earnings over $110,000. It also includes most state and local revenue sources, such as sales and excise (e.g., cigarette, alcohol, and car) taxes; flat rate state income taxes; and state revenue from gambling (i.e., lotteries and casinos), all of which are quite regressive. [4] This shift in the tax burden has contributed to stagnant incomes for middle and lower income earners while incomes at the top have skyrocketed. [5] (See my post of 11/13/11 for more detail.) Both fairness and reversing causes of the deficit would argue for increased income tax rates on high incomes.

Despite the Republican rhetoric that high income individuals are “job creators,” the fact is that increased income for them is far less effective in stimulating job growth than increased incomes for middle and low income individuals. The US economy is driven by consumer spending; it’s 70% of our Gross Domestic Product (GDP), a measure of overall economic activity. The lower an individual’s income, the more likely he or she is to spend any additional income to buy goods and services in the local economy. On the other hand, the wealthy are more likely to save additional income or to spend or invest it outside of the US. Furthermore, they are much more likely than the less well-off to use the money for speculative rather than productive investments. Speculative investments do not help the economy or create jobs; they actually harm the economy by increasing prices for consumer goods (e.g., food and gasoline [see my post of 3/5/12]) and by contributing to speculative bubbles (e.g., Internet stocks and mortgage investments) that eventually burst and harm the economy.

Republicans have opposed an increase in the tax rate on high incomes, claiming it will hurt small businesses. But only about 2 – 3% of “small businesses” would be affected and many of these aren’t really small or aren’t businesses at all. Republicans also claim that such a tax increase would hurt the economy and job creation, but “yearly gains in employment, GDP growth, and small business job growth were all greater after the Clinton tax hikes of 1993 than after the Bush tax cuts of 2001.” [6]

In summary, there is strong evidence, from multiple perspectives, that increasing taxes on the wealthy and redirecting the funds to productive investments (such as infrastructure building) or to lower income individuals (who will spend it in their local economies), for example through unemployment benefits, will benefit the economy and job creation. [7] It would also reduce inequality and address a root cause of the deficit.

In my next posts, I’ll take a look at cutting the deficit through spending cuts, the spending cuts in the austerity package, and alternatives to them.

[1]       Peters, C. Nov./Dec. issue, “The Bain of my existence,” Washington Monthly

[2]       Van Gelder, S., 12/8/12, “4 ways to leap the ‘fiscal cliff’ to a better USA,” YES! Magazine

[3]       Regressive revenue sources place a greater burden, relative to one’s ability to forego the income, on middle and lower income households than on higher income individuals.

[4]       Jacoby, J., 12/9/12, “Biggest lottery winner? That’d be the Treasury,” The Boston Globe

[5]       Appelbaum, B., & Gebeloff, R., 11/29/12, “Tax burden is lower for most Americans than in the 1980s,” The New York Times

[6]       Lehigh, S., 12/14/12, “Points of clarity through the fiscal cliff fog,” The Boston Globe

[7]       Judis, J.B., 12/12/12, “Rein in the rich: How higher taxes could lift the economy,” The New Republic

INCREASING REVENUE TO CUT THE DEFICIT

ABSTRACT: Increased revenue needs to be part of the effort to reduce the federal government’s budget deficit. Two revenue sources that are not included in the austerity package are closing corporate tax loopholes and enacting a financial transactions tax. They could eliminate over half the deficit with little negative impact on the economy.

 The highest profile revenue issue in the austerity package is the personal income tax. Given that the 2001 – 2003 tax cuts on earned and unearned income were significant contributors to creating the deficit, reversing them for high income individuals would seem appropriate. Maintaining the Bush tax cuts on high incomes would cost up to $160 billion per year in lost revenue. Alternatively, using these funds on high impact spending will reduce the deficit over the long-term while strengthening the economy and creating jobs in the short-term.

FULL POST: Increased revenue needs to be part of the effort to reduce the federal government’s budget deficit. However, the increased or new taxes that produce the revenue should not be so large or so quickly implemented that they put the economy back into recession. Here’s a look at the revenue increases that are part of the current austerity package (aka the “fiscal cliff”), some of the negotiations that have occurred on them, and some alternatives that are not included in the package.

First, two revenue sources that are not included in the austerity package are closing corporate tax loopholes and enacting a financial transactions tax (as 10 European countries are doing). These could provide $250 billion and $350 – $500 billion annually, respectively, in new revenue, and eliminate over half the deficit with little negative impact on the economy. (See my post of 9/29/12 for more detail.) An alternative minimum tax for highly profitable corporations that would ensure that they pay a minimum tax rate – similar to the Buffet Tax proposal for high income individuals – would seem quite reasonable. Roughly a quarter of our large and profitable corporations pay NO federal income tax despite multi-billion dollar annual profits. (See my post of 11/5/11 for more detail.) Google, for example, avoided paying $2 billion in taxes in 2011 by funneling profits to overseas shell companies. [1]

The highest profile revenue issue in the austerity package is the personal income tax. The tax cuts enacted by President Bush in 2001 and 2003 are scheduled to expire. President Obama originally proposed letting the cuts expire on income over $250,000 per year, but keeping the cuts on income under that amount. The Republicans proposed a $1 million cut off and Obama has countered with a $400,000 cut off. As the cut off gets higher, the amount of revenue (and deficit reduction) is reduced. The difference between a $250,000 and a $400,000 cut off is estimated to be $40 billion per year in revenue (i.e., $160 billion versus $120 billion in increased revenue).

Expiration means the tax rate on upper incomes would increase from the current 35% to 39.6%, the rate that was in place in the late 1990s. (Note that for an individual with $20 million in taxable income, the Bush tax cuts of 2001 – 2003 have put roughly $1 million in their pockets each year for the last 10 years.) In addition, increasing the tax rate on unearned income – capital gains, dividends, and interest – back to 1990s rates is another hot topic. Given that the 2001 – 2003 tax cuts on earned and unearned income were significant contributors to creating the deficit, reversing them for high income individuals would seem appropriate.

The bottom line is that maintaining the Bush tax cuts on high incomes would cost up to $160 billion per year in lost revenue. Alternatively, using these funds on high impact spending, such as infrastructure investments or unemployment benefits, would generate an estimated net gain of 1.2 million to 1.5 million jobs and add 1.0% to 1.5% to economic growth. The growth in jobs and the economy will, in and of itself, reduce the deficit because taxes and revenue grow when the economy grows. Therefore, this approach will reduce the deficit over the long-term while strengthening the economy and creating jobs in the short-term. The only revenue increase in the austerity package that has a greater positive effect on jobs and the economy than letting the tax cuts on high incomes expire is terminating the cuts in the estate and gift taxes. [2]

In my next post, I’ll review the arguments against raising tax rates on high income individuals. In subsequent posts, I’ll take a look at cutting the deficit through spending cuts, the spending cuts in the austerity package, and alternatives to them.

[1]       Brown, C., 12/13/12, “Google on ‘immoral’ tax evasion: ‘It’s capitalism’,” Common Dreams

[2]       Bivens, J., & Fieldhouse, A., 9/18/12, “A fiscal obstacle course, not a cliff,” Economic Policy Institute

STOP THE GUN MASSACRES

ABSTRACT: Gun massacres must stop. We must enact sensible gun laws. Automatic weapons with magazines that hold over a dozen bullets turn tragic murder into horrifying massacre. Sensible gun laws would make a difference; they lead to much lower gun violence in other countries, and the federal assault weapon ban made a difference in the 10 years it was in effect.

The profits of gun and ammunition makers are at stake. The right to bear arms the framers of our Constitution had in mind was not unfettered access to weapons that fire a dozen bullets per second.

We must seize this moment to loudly and collectively demand that our elected leaders enact strong, sensible gun laws (detail below). To take action, start by going to the White House petitions site (https://petitions.whitehouse.gov/petitions). Find a petition calling for action on gun laws and sign it.

FULL POST: Gun massacres must stop. We must enact sensible gun laws. Yes, guns don’t kill people, people kill people. But automatic weapons with magazines that hold over a dozen bullets turn tragic murder into horrifying massacre. There is no reason anyone other than law enforcement or military personnel should have automatic weapons with high capacity magazines. The federal bans on assault weapons and high capacity magazines that were in place from 1994 to 2004 need to be reinstated.

Why is getting a driver’s license so much more rigorous than getting a gun, including an automatic? With over 4 times as many civilians murdered each year with guns (over 12,000) as died in the September 11 attacks, why do we do so much to prevent terrorism and so little to prevent gun violence? Why do we allow gun homicides in the US at almost 20 times the rate in similar countries with similar overall crime and violence rates? [1]

Sensible gun laws would make a difference; they lead to much lower gun violence in other countries and the federal assault weapon ban made a difference in the 10 years it was in effect. In the struggle for sensible gun laws, remember that the profits of gun and ammunition makers are at stake. They support loose gun laws and the National Rifle Association so they can maximize their profits.

The right to bear arms (as part of a well regulated militia) that is in the second amendment to the Constitution was written when guns were muzzle loaders and the time per bullet – to reload and fire again – was measured in minutes. Today we measure the number of bullets fired per second. The right to bear arms the framers of our Constitution had in mind was not unfettered access to weapons that fire a dozen bullets per second.

We must seize this moment to loudly and collectively demand that our elected leaders – our President and Members of Congress, our Governors and State Legislators – enact strong, sensible gun laws including 1) a ban on assault weapons and high capacity magazines, 2) limits on the number of guns and amount of ammunition an individual can buy, 3) reasonable requirements for obtaining a gun license, and 4) strong background check requirements for all gun purchases. In addition, the penalties for violating gun laws should be tough; any gun or ammunition seller who violates the law and allows an individual to obtain guns or ammunition illegally should be treated as an accomplice to murder, under criminal and civil law.

To take action, start by going to the White House petitions site (https://petitions.whitehouse.gov/petitions). Find a petition calling for action on gun laws and sign it. (If you don’t already have an account you will need to go through the quick process of obtaining one.) There are multiple petitions on the firearms issue, which you can scroll down to find or select the “Filter by issue” button and select “Firearms”. I urge you to sign at least one and as many as you support if you have the time. This will send a strong signal of support for this issue. The two I’d suggest starting with are:

  • “Immediately address the issue of gun control through the introduction of legislation in Congress” (http://wh.gov/RN6U). It already has over 100,000 signers; please add your voice.
  • “Today IS the day: Sponsor strict gun control laws in the wake of the CT school massacre” (http://wh.gov/RRkn). It has over 19,000 signers and you can add your support.

Also, call, email, and / or write your federal and state elected officials and demand gun laws that will end the massacres now. Participate in local or on-line actions to express your support for sensible gun laws.

It’s past time to take serious steps to reduce and hopefully eventually eliminate the occurrence of gun massacres. We must insist that our elected officials pass sensible gun laws.

[1]       Brady Center to Prevent Gun Violence, retrieved 12/15/12, “Facts: Gun violence,” www.bradycampaign.org/facts/gunviolence

A MANUFACTURED AUSTERITY CRISIS, NOT A FISCAL CLIFF

ABSTRACT: The so-called fiscal cliff you’ve been hearing so much about is actually a manufactured austerity crisis. There is widespread agreement that if nothing is changed by or relatively soon after December 31 that our economy is extremely likely to fall into a recession and unemployment is likely to increase to over 9%, an increase of between 1% and 1.5%.

 

The federal government’s deficit does need to be addressed, but doing so precipitously and in the wrong ways will hurt the economic recovery. The immediate problems are not the government deficit, but the lack of jobs, particularly middle class jobs, and the lack of consumer spending, which represents two-thirds of our economic activity. We should use strategies for addressing the deficit that minimize negative effects on jobs and the economy, and phase them in over time to reduce their impact on our weak economy.

 The austerity package bundles together a variety of measures that are largely unrelated. Addressing these complex issues individually and with time for thoughtful consideration would make more sense than doing so in a bundle under severe time constraints. The austerity package’s cuts to social programs would be 8.4% across the board, with a few programs exempted. These cuts would have very significant negative effects on low income families and on education.

FULL POST: The so-called fiscal cliff you’ve been hearing so much about is actually a manufactured austerity crisis. [1] Congress and the President agreed on this package of spending cuts and tax increases (which take effect on December 31) because the Republicans demanded it in exchange for their votes to increase the federal government’s debt cap back in August 2011. As you may remember, they pushed the government to the brink of default – which hurt its credit rating and the economy – in order to extract these austerity measures. (By the way, I believe this brinksmanship and the harm it caused is incredibly UNpatriotic; but that’s a separate discussion.) A Congressional “Super-committee” was created to find alternative ways to reduce the deficit but was unable to come to a consensus recommendation, so we are left with this “fiscal cliff.” However, the effects of the austerity package would occur over time, so it is actually more of a “slope” than a “cliff.” [2]

There is widespread agreement that if nothing is changed by or relatively soon after December 31 that our economy is extremely likely to fall into a recession and unemployment is likely to increase to over 9%, an increase of between 1% and 1.5%. The roughly $100 billion per year in spending cuts and $350 billion in annual tax increases would reduce the deficit from about $1 trillion per year to about $600 billion. But taking this $400 billion out of the country’s economic activity would almost certainly turn slow economic growth into a recession. (See my post, The “Fiscal Cliff” and the Economy of 9/19/12 for more details.) As we’ve seen in Europe, austerity measures have pushed Greece, Spain, and Britain into a recession and the whole Eurozone is teetering on the edge of recession.

The federal government’s deficit does need to be addressed, but doing so precipitously and in the wrong ways will hurt the economic recovery. The immediate problems are not the government deficit, but the lack of jobs, particularly middle class jobs, and the lack of consumer spending, which represents two-thirds of our economic activity. [3] In addressing the deficit, we should use strategies that minimize negative effects on jobs and the economy. (See my post, Addressing the Deficit on 9/29/12 for four specific policy changes that would eliminate the roughly $1 trillion per year deficit with minimal impact on jobs and the economy.) Furthermore, spending cuts and increased tax revenue should be phased in over time to reduce their impact on our weak economy. [4]

The austerity package bundles together a variety of measures that are largely unrelated other than they have some impact on the federal government’s revenue or spending; although some actually have no impact on the deficit. Therefore, some view this “fiscal cliff’ as more of a “fiscal obstacle course.” [5] Major changes to both the personal and corporate tax codes are included, as well as significant changes to spending on a wide range of government programs from defense to social programs. Addressing these complex issues individually and with time for thoughtful consideration would make more sense than doing so in a bundle under severe time constraints.

In addition to the expiration of the Bush tax cuts, which expire for all income levels in the austerity package, other benefits for middle and low income households are scheduled to expire as well. These include:

  • Unemployment benefit extensions beyond the traditional 26 weeks (2 million individuals would lose benefits in December and another 1 million in April)
  • The reduction in the Social Security and Medicare payroll tax (by 2% of pay, which puts about $1,000 a year in the average worker’s pocket)
  • An enhancement to the Child Care Tax Credit
  • The expansion of the Earned Income Tax Credit, which augments incomes of low income workers
  • An exemption from income tax on mortgage debt that is forgiven

The austerity package’s spending cuts come 50% from the military and 50% from social programs. Many members of Congress oppose the cuts to the military. However, there are strong arguments for cutting military spending: 1) it has more than doubled (to $733 billion per year) since 2001, 2) we are winding down the wars in Iraq and Afghanistan, 3) we have far and away the largest military budget in the world, and 4) it’s widely acknowledged that there is significant waste in the military budget. Furthermore, military spending is not an efficient way to create jobs and at 58% of the federal government’s discretionary spending, it would be difficult and unfair to significantly reduce spending without cutting the military budget. (See posts of 9/29/12 and 11/17/11 for more details.)

The austerity package’s cuts to social programs would be 8.4% across the board, with a few programs exempted, such as Medicaid and the Children’s Health Insurance Program. These cuts would have very significant negative effects on low income families and on education. It is estimated that: [6]

  • 75,000 3 and 4 year old, disadvantaged children would lose the enriched preschool services of Head Start;
  • 25,000 young children would lose subsidies for early care and education (aka child care);
  • 16,000 teachers and other school staff would lose their jobs;
  • 460,000 students would lose special education services and 12,500 special education staff would lose their jobs;
  • 20,000 youth would lose job training;
  • 734,000 households would lose heating (or cooling) assistance;
  • Community health centers would lose $55 million; and
  • 1.3 million college students would lose tuition support.

If cuts to military spending are reduced, but overall spending reductions are maintained, cuts to social programs would be even more severe.

In my next two posts, I’ll discuss reducing the deficit through alternatives to the current austerity package, including reviewing various alternative proposals that have been put forth. I’ll focus first on options for increasing revenue and second on options for cutting spending.

[1]       Klein, E., 11/28/12, “It’s not a fiscal cliff, it’s an austerity crisis,” Bloomberg

[2]       Stone, C., 9/24/12, “Misguided ‘fiscal cliff’ fears pose challenges to productive budget negotiations. Failure to extend tax cuts before January will not plunge economy into immediate recession,” Center on Budget and Policy Priorities

[3]       Krugman, P., 11/12/12, “On deficit hawks and hypocrites,” The New York Times

[4]       Woolhouse, M., 11/19/12, “Phase in deficit cuts, economists say,” The Boston Globe

[5]       Bivens, J., & Fieldhouse, A., 9/18/12, “A fiscal obstacle course, not a cliff,” Economic Policy Institute

[6]       Every Child Matters Education Fund, 11/16/12, “The pending threat of Congressional actions to children’s safety net programs,” Every Child Matters, http://everychildmatters.org

IRRATIONAL EXTREMISM BLOCKS PROGRESS

ABSTRACT: The irrational extremism associated with the Tea Party faction of the Republican Party has just blocked progress for disabled people around the world by defeating ratification of a treaty. Radical Republicans used scare tactics and lies to defeat it. They ignored the support of 61 Senators including John McCain, of former President G. W. Bush, of every veterans group in America, and of former Senator Dole, who came to the Senate chamber to support the treaty in a wheelchair as an 89 year old, disabled veteran, and former Republican Presidential nominee. They ignored the fact that it would improve opportunities for 4.5 million children worldwide who don’t attend school because they are blind.

This is an example of how a small number of extremists in Congress is blocking progress for millions of people in the U.S. – and around the world.

FULL POST: The irrational extremism associated with the Tea Party faction of the Republican Party has just blocked progress for disabled people around the world by defeating ratification of a treaty. The treaty, the United Nations Convention on the Rights of Persons with Disabilities, is:

  • Based on the Americans with Disabilities Act (ADA) passed 22 years ago.
  • Supported by 61 Senators including John McCain as well as former President G. W. Bush and former Senator Bob Dole.
  • Ratified by 126 other countries.

Despite 61 votesin favor of ratification, radical Republicans used scare tactics and lies to defeat it. (Treaty ratification requires a 2/3s majority or 66 votes.) [1]

Because it is based on the ADA, the U.S. is already basically in compliance. But because it conflicts with Tea Party ideology that views cooperation with the United Nations and other countries as surrendering U.S. sovereignty, arguments were fabricated to defeat it. Tea Party types argued that it would threaten parents and home schooling because it says that disabled children have a right to education, and that it would promote abortion because it says that disabled people have a right to health care including reproductive health. They argued both that the treaty was toothless in forcing other countries to provide access for disabled persons and that it would tie the hands of the U.S. and force unwanted changes here despite the fact that the ADA is already in place. [2]

They ignored the support of every veterans group in America, who viewed it as supporting disabled veterans, and of former Senator Dole, who came to the Senate chamber to support the treaty in a wheelchair as an 89 year old, disabled veteran, and former Republican Presidential nominee. Among other potential treaty benefits, they ignored the fact that it would improve opportunities for 4.5 million children worldwide who don’t attend school because they are blind.

This is an example of how a small number of extremists in Congress is blocking progress for millions of people in the U.S. – and around the world.

[1]       Calvan, B.C., 12/5/12, “Treaty for disabled rights falls short in Senate,” The Boston Globe

[2]       Boston Globe Editorial, 12/6/12, “Tea Party scare tactics doom disabled treaty in the Senate,” The Boston Globe

CAMPAIGN SPENDING: THE FUTURE

ABSTRACT: The huge sums of money in our political system are corrupting it, in subtle and not so subtle ways, and are undermining the promise of democracy of, by, and for the people. We the people need to work to blunt the impact and eventually stop the flow of these huge amounts of money. Steps that could and should be taken include: 1) Legislation at the federal and state levels should be enacted promptly that requires disclosure on a timely basis of all political spending and the sources of the funds; 2) Lobbyists’ contributions to candidates must be severely restricted and perhaps prohibited; 3) Tougher rules and enforcement are needed of the ban on coordination between Super PACs or other groups and candidates’ campaigns; and 4) Ultimately, a Constitutional Amendment is needed to overturn the Supreme Court’s Citizens United decision.

 I urge you to communicate to your elected representatives at the federal and state levels your concern about the corrupting influence of huge amounts of money in our political system. Ask them what remedies they support and encourage them to support the steps listed above.

FULL POST: The huge sums of money in our political system are corrupting it, in subtle and not so subtle ways, and are undermining the promise of democracy of, by, and for the people. Despite the fact that all the outside money and all the advertising it bought were less effective in the 2012 election than was anticipated and than was hoped for by those paying for it, the big spenders learned some valuable lessons. They won’t give up on their efforts to influence and control government and its policy making. They will find more effective ways to use their money and will have substantial impacts in the future. [1] Therefore, we the people need to work to blunt the impact and eventually stop the flow of these huge amounts of money.

First, some of the lessons the big spenders learned:

  • Advertising, and particularly negative advertising, has diminishing returns as the amount of it and repetition of it increases.
  • Grassroots efforts to identify and turn out supporters can have a big impact.
  • Grassroots, person-to-person communications can be more effective than advertising.
  • Untested candidates or ones with extreme positions are more likely to lose.
  • Money can have a bigger impact in less visible, lower cost races.

The less visible, lower cost races include primary, US House of Representatives, and state office races (as opposed to the final Presidential election and final US Senate races). In the Republican Presidential primary, the big money from Super PACs clearly had an effect. Money from the Super PAC supporting Romney deluged state primary elections with negative advertising against whichever competitor was threatening Romney at that point. This clearly allowed Romney to win state primaries he wouldn’t have won otherwise. Huge Super PAC expenditures by extremely rich individuals single-handedly kept Gingrich and Santorum in the primary race longer than they would have been otherwise. [2]

In lower cost races, a given amount of money (e.g., $100,000) is more significant, may overwhelm other campaign spending, and can have a disproportionate impact, especially if spent late in the election period and as a surprise. State office races such as those for Governor, state legislative seats, and elected judges can be dramatically affected by relatively small amounts of money. State ballot initiatives can also be significantly altered by relatively small sums of money.

Given the corrosive effects of huge amounts of money in our political system, a New York Times Editorial stated, “A backlash against the damaging power of big money cannot come too soon.” [3] Steps that could and should be taken include:

  • Legislation at the federal and state levels should be enacted promptly that requires disclosure on a timely basis of all political spending and the sources of the funds. The DISCLOSE Act that has been introduced in Congress is one example. (It was filibustered by Senate Republicans multiple times.) Disclosure must cover all entities engaged in political spending, including non-profit, “social welfare” groups, known as 501(c)(4)s to the IRS.
  • Lobbyists’ contributions to candidates must be severely restricted and perhaps prohibited, especially for an elected official sitting on the legislative committee that oversees the special interest the lobbyist represents. The definition of a lobbyist must be expanded to cover all individuals and entities that work to influence government policies, rules, and regulations. The ability of lobbyists and others to deliver aggregated contributions from multiple individuals or groups, often referred to as “bundling,” and which can occur through fundraising events organized by a lobbyist, should be banned or at least fully disclosed.
  • Tougher rules and enforcement are needed of the ban on coordination between Super PACs or other groups and candidates’ campaigns. The overlap and connections between candidates’ current and former campaign staff and the staff of the supposedly independent groups, and the use of the same consultants, provide clear evidence that these groups are not, in fact, independent. [4]
  • Ultimately, a Constitutional Amendment is needed to overturn the Supreme Court’s Citizens United decision, to make it clear that corporations are not persons with Constitutional rights, that money is not the same as speech, and that corporations and political spending can be regulated.

 I urge you to communicate to your elected representatives at the federal and state levels your concern about the corrupting influence of huge amounts of money in our political system. Ask them what remedies they support and encourage them to support the steps listed above.

[1]       New York Times Editorial, 11/10/12, “A landslide loss for big money,” The New York Times

[2]       Boston Globe Editorial, 11/8/12, “Billionaires: Now, mind your own business(es),” The Boston Globe

[3]       New York Times Editorial, 11/10/12, “A landslide loss for big money,” The New York Times

[4]       Boston Globe Editorial, 9/29/12, “As super PACs link arms, mega-donors’ clout increases,” The Boston Globe

CANDIDATES’ BUDGET PROPOSALS AND THE DEFICIT

ABSTRACT: Both Presidential candidates, Obama and Romney, have put forward tax and budget proposals that they say will reduce the deficit. Obama’s tax and spending proposals would reduce the deficit by about one quarter. Romney’s proposals cannot be reasonably expected to reduce the deficit. Furthermore, they are likely to increase the deficit and the already high levels of inequality in income and wealth.

FULL POST: Both Presidential candidates, Obama and Romney, have put forward tax and budget proposals that they say will reduce the deficit. Obama has specified tax increases and a cut to military spending that would begin to reduce the deficit. Romney says his tax proposals would be revenue neutral, although he fails to specify how he would offset his tax cuts, and he promises to increase military spending. He asserts that his proposals would produce economic growth that would increase tax revenue and reduce the deficit; however, there is no credible evidence for that assertion. (Note: President G. W. Bush’s tax cuts, increases in military spending, and promises of economic growth that would pay for them are what began the process of turning a federal government surplus into deficits.)

Obama would let the Bush tax cuts on income over $250,000 expire and would also restore or increase taxes on unearned income (i.e., capital gains, dividends, and interest). He has also proposed limiting deductions and exclusions from income, as well as implementing the “Buffett Rule,” so that households with incomes over $1 million would at least pay taxes at the rate that middle class families do. These measures would generate roughly $200 billion per year in additional revenue, reducing the deficit by one-fifth. [1]

Obama has also proposed reducing the $700 billion military budget by about $50 billion per year as the wars in Afghanistan and Iraq wind down. Together, these tax and spending proposals would reduce the deficit by about one quarter.

Romney proposes keeping the Bush tax cuts and further reducing tax rates on earned income by one-fifth. He would maintain even lower tax rates on unearned income than earned income. Overall, these proposals would reduce income tax revenue by about $400 billion per year. Romney says he will make up for the lost revenue by reducing tax deductions and credits, and that the well-off will continue to pay at least the same amount in taxes. He says would do this by limiting total deductions and credits on a tax return to a fixed dollar amount and has mentioned amounts ranging from $17,000 to $50,000. [2]

While it is theoretically possible to achieve the same amount of revenue (i.e., revenue neutrality) under Romney’s proposals, it would be challenging and would require significantly cutting very popular deductions. [3] Four deductions account for 80% of all deductions and credits; in order of size they are the deductions for 1) home mortgage interest, 2) state and local taxes paid, 3) real estate taxes paid, and 4) charitable contributions. If an across the board cut to deductions were used to offset the loss in revenue, Romney would have to cut all these deductions by about one-third. Clearly, this would be unpopular and would also hit the middle class as well as high income families.

Romney has also proposed eliminating the estate tax, while Obama proposes maintaining an estate tax on estates over $3.5 million. Romney has also stated that he will increase the military budget. Here again, Obama’s proposal clearly reduces the deficit and these Romney proposals would clearly increase the deficit. The benefits of eliminating the estate tax, of course, go to wealthy families.

With a backdrop of 30 years of decreasing income tax rates that have seen dramatic increases in income and wealth in our best-off households and middle class families struggling to keep their heads above water, further cuts in tax rates do not seem at all likely to reverse this trend or benefit the middle class. Further, to provide some perspective on Romney’s proposal, looking at the cuts in tax rates alone, a family with taxable income of $100,000 or less, whose tax rate is cut from 25% to 20%, would see a benefit of $5,000 or less. A family with taxable income of $1 million, whose rate is cut from 35% to 28%, would see a benefit of $70,000; and if income is $10 million, a benefit of $700,000. This just doesn’t seem fair, especially on top of the huge tax cuts these high income households have seen over the last 30 years.

In addition, Romney’s proposal maintains lower rates on all unearned income (i.e., capital gains, dividends, and interest), while Obama’s has lower rates only on long-term capital gains (i.e., investments held for over one year). Having lower rates on all unearned income also doesn’t seem fair, especially given that the great bulk of unearned income goes to high income, high wealth households. Moreover, one of Romney’s arguments for lower tax rates is that by letting taxpayers keep more of what they earn, they will be rewarded for working. If we want to reward work, then income tax rates on work, namely earned income, should be lower (not higher) than the rates on non-work (unearned) income.

Finally, Romney’s assertion that cuts in tax rates will spur economic growth does not have any credible evidence. [4] This rationale has been used for the tax rate cuts that have occurred over the last 30 years. The strongest economic growth of the past 30 years (and the only elimination of the federal government’s deficit) occurred under President Clinton when he increased tax rates on high incomes. Furthermore, the rationale for tax cuts spurring growth has been that they put more money in consumers’ pockets and, with consumer spending being two-thirds of our economy, their spending will grow the economy. However, Romney has said his tax cuts will be offset by reducing deductions so that there will be no loss in government revenue or increase in the deficit. Therefore, there is no increase in the money in consumers’ pockets and no increased spending to spur economic growth.

If Romney’s tax cuts are indeed offset by reducing deductions so the result is revenue neutral, and if he lives up to his commitment to cap federal government spending at 20% of the overall economy (i.e., of gross domestic product), which would require significant spending cuts, Romney’s plans are likely to lead to job losses and a recession, not economic growth. Overall, Obama’s budget and tax proposals are highly likely to do more to spur near-term growth in jobs and the economy than Romney’s. [5]

In conclusion, Obama’s tax and budget proposals do take steps that can be reasonably expected to reduce the deficit by about one-quarter. Romney’s proposals cannot be reasonably expected to reduce the deficit. Furthermore, they are likely to increase the deficit and the already high levels of inequality in income and wealth.

[1]       Tax Policy Center, Oct. 2012, “Major tax proposals by President Obama and Governor Romney”

[2]       Wirzbicki, A., & Borchers, C., 10/5/12, “Questions on challenger’s idea to cap tax deductions,” The Boston Globe

[3]       Kranish, M., 9/21/12, “Candidates leave much unsaid on tax plans,” The Boston Globe

[4]       Rowland, C., 10/15/12, “GOP faith unshaken in supply-side tax policies,” The Boston Globe

[5]      Bivens, J., & Fieldhouse, A., 9/26/12, “Who would promote job growth most in the near term?” The Century Foundation

PRIVATIZATION EXAMPLES I

ABSTRACT: Currently, privatization of public sector functions is being looked to to generate badly needed immediate cash. First example: the city of Chicago, desperate for cash to cover a budget shortfall, sold its parking meter revenue for the next 75 years for $1.2 billion. Parking rates in some neighborhoods have quadrupled. The city is prohibited from engaging in any activity that could be competition for the parking meters and has to reimburse the private owners for any lost revenue due to a street closing, a meter being out of commission, and free parking provided to the disabled. Chicago has given up the ability to make decisions about parking for 75 years and appears to have in effect guaranteed substantial profits to the private investors.

Second example: Indiana received $3.8 billion in 2006 from an international consortium in exchange for the right to maintain, operate, and collect tolls for 75 years on 157 miles of Interstate 90. The 400 page lease agreement is indicative of both the thought that went into it and the complexity of such an arrangement.

A danger in these high-value, long-term privatization deals is that sophisticated investors will take advantage of government officials desperate for short-term revenue, who often don’t take the time or have the expertise to perform appropriate, long-term, cost-benefit analyses. Because of their significant impact on the public, any privatization deal should require public hearings, and those with a longer time span than the term of office of the person signing it should require super-majority approval (say 2/3) by the relevant legislative body, while those over 10 years should require a voter referendum with a super-majority (say 2/3) needed for approval.

FULL POST: In my previous post (10/16/12), I provided an overview of privatization of public sector functions and evidence that there’s no guarantee of improved performance. Privatization doesn’t always meet its stated goals of saving taxpayers’ money, improving public services, and/or increasing accountability. It only tends to be successful if there is good oversight and regulation, as well as real competition.

Currently, privatization is being looked to, not for those traditional reasons, but to generate badly needed immediate cash. This is occurring because the public sector is being squeezed by falling revenues (largely due to the recession and in some cases due to tax cuts) and rising costs (generally due to inflation). Here are two examples of privatization to raise immediate cash.

First, in 2009, the city of Chicago, desperate for cash to cover a budget shortfall, sold its parking meter revenue for the next 75 years for $1.2 billion. The private consortium of investors was led by the huge Wall Street financial corporation, Morgan Stanley (one of the companies responsible for the collapse of the financial sector and the recession that contributed to Chicago’s severe budget shortfall).

The deal will allow the private owners to increase parking fees substantially and parking rates in some neighborhoods have quadrupled. [1] It prohibits the city from any activity, such as building a new parking garage, that could be competition for the parking meters. The city has to reimburse the private owners for any lost revenue due to a street closing for repairs or a street festival. If a meter is out of commission for six hours, the city must reimburse the owners for a full day’s worth of revenue. In May 2012, the private owners had billed the city for $50 million for reimbursements for out of service meters and free parking provided to the disabled. [2]

Not only will this deal cost Chicago substantial money for 75 years, it also means it has given up the ability to make decisions about parking and its cost for 75 years. Furthermore, it appears to have in effect guaranteed substantial profits to the private investors, as there is no competition and little risk.

Second, Indiana received $3.8 billion in 2006 from an international consortium in exchange for the right to maintain, operate, and collect tolls for 75 years on 157 miles of Interstate 90 as it crosses Indiana. The 400 page lease agreement has limits on toll increases, requires the state to reimburse the private owners if tolls are waived during an emergency (such as a natural disaster), and covers details such as how quickly the consortium must remove dead animals from the highway. While the length of the agreement is indicative of both the thought that went into it and the complexity of such an arrangement, it is hard to imagine that every issue that could come up in 75 years has been identified.

In the short run, with the economy in recession and traffic down on the highway, it appears that Indiana taxpayers are coming out ahead. Indiana wisely used the funds for investments in infrastructure rather than short-term spending. [3] But it’s only six years into a 75 year lease and lots can happen over that time. For example, if traffic levels don’t increase and the consortium of owners goes into bankruptcy or defaults on their debt, what will happen? Could a bankruptcy court throw out the limits on toll increases?

Experiences with highway privatization in California, Virginia, and San Diego have all had significant problems. These privatization contracts are typically long-term, generally limit competition, and, therefore, result in significant limits on future public decisions and policies. [4]

A danger in these high-value, long-term privatization deals is that sophisticated investors and corporations will take advantage of government officials desperate for short-term revenue, who often don’t take the time or have the expertise to perform appropriate, long-term, cost-benefit analyses. A 75 year commitment clearly goes long beyond the longevity in office of the public officials who make the deal and it’s hard to believe that such a deal can be known to be in the public’s best interest over that time span.

“[P]rivatization can undermine good public policy and democratic decision making. Turning tax dollars and control of public services over to companies whose overriding incentive is to maximize profits can lead to long-term costs and sometimes devastating consequences.” (p. 4) [5]

Because of their significant impact on the public – on public services, on public policy and flexibility, on accountability, and on transparency – I would suggest that any privatization deal should require public hearings before (and after) the fact. Furthermore, those with a longer time span than the term of office of the person signing it should require super-majority approval (say 2/3) by the relevant legislative body. Privatization contracts of over 10 years should require a voter referendum with a super-majority (say 2/3) needed for approval.

[1]       Rusnak, K., retrieved 10/21/12, “Privatization plans lack long-term focus,” economyincrisis.org/content//privatization-plans-lack-long-term-focus

[2]       People for the American Way, retrieved 7/31/12, “Predatory privatization: Exploiting financial hardship, enriching the 1 percent, undermining democracy,” http://www.pfaw.org

[3]       Daniels, M., 5/10/12, “Indiana didn’t ‘sell’ its toll road,” The Washington Post

[4]       Dannin, E., 3/15/11, “The toll road to serfdom,” American Constitution Society (www.acslaw.org/acsblog/node/18553)

[5]      People for the American Way, retrieved 7/31/12,, see above

AN OVERVIEW OF PRIVATIZATION

ABSTRACT: Privatization of public services or “outsourcing” has been promoted for decades as a way to save taxpayers money, improve public services, and increase public sector accountability. A resurgence is occurring as the public sector is being squeezed by falling revenues and rising costs. In this environment, privatization is often looked to to generate badly needed cash immediately. As a result, privatization is big business these days.

As background for a detailed look at current privatization activity, municipal level privatization has been used significantly and studied quite extensively, especially for water and sewer systems and for solid waste collection and disposal. From 1997 – 2002, more services were brought back in house or deprivatized than were outsourced. Services were deprivatized because of unsatisfactory results. Most studies of water, sewer, and solid waste privatization (21 of 35) found no cost or efficiency difference between public or private delivery. The other 14 studies were split.

Competition and careful monitoring are required to obtain benefits from privatization and to ensure that profit maximization doesn’t result in a loss of quality. A review of privatization by The Century Foundation [1] states that “public monopoly or government regulation is a more effective approach to ensuring efficient service delivery than privatization or deregulation.”

The delivery of public services must incorporate the fact that citizens are more than consumers. They frequently want to be engaged and have a voice. Public services are not just part of a market but part of a community.

FULL POST: Privatization of public services or “outsourcing” has been promoted for decades as a way to save taxpayers money, improve public services, and increase public sector accountability. A resurgence is occurring as the public sector is being squeezed by falling revenues and rising costs, much of which are due to inflation. In this environment, privatization is often looked to not for the traditional reasons of saving money or improving services and accountability, but to generate badly needed cash immediately. In this environment, privatization of public assets (e.g., buildings, parking facilities, roads, and land), which has been used in the past to cover short-term cash problems, has taken on new importance.

The privatization resurgence is bolstered by rhetoric from the right, which favors smaller government, and by lobbying from corporations, which are always looking for new ways to make profits.

As a result, privatization is big business these days. Wall Street firms and the big management consulting companies have public sector or public private partnership business divisions to pursue privatization deals. Financial corporations are setting up “Infrastructure Funds” that create pools of money to buy privatization deals as investments. Over $100 billion is available to Infrastructure Funds run by large financial corporations such as Goldman Sachs and JPMorgan Chase.

As background for a detailed look at current privatization activity, municipal level privatization has been used significantly since the 1960s and surged in the 1990s. It has been studied quite extensively, especially for water and sewer systems and for solid waste collection and disposal. These studies have tracked privatization, the contracting out of services, and deprivatization, the bringing of services back in house into the public sector. An overall review of privatization of 67 basic local services with a focus on water, sewer, and waste services was conducted by The Century Foundation. [2]

Up until 1997, privatization of water, sewer, and waste services was growing, but from 1997 – 2002 more services were brought back in house or deprivatized than were outsourced. The reasons for deprivatization were tracked. In 2002, among 245 cases of deprivatization the following reasons were given, including multiple reasons in many cases:

  • Service quality not satisfactory                                            73% of cases
  • Cost savings insufficient                                                       51%
  • In house efficiency improved                                               36%
  • Problems with contract monitoring or specifications             35%

In summary, services were deprivatized because of unsatisfactory results. Furthermore, despite the fact the privatization is promoted as reducing costs and saving taxpayers money, most studies of water, sewer, and solid waste privatization (21 of 35) found no cost or efficiency difference between public or private delivery. The other 14 studies were split with 9 of the 35 finding private delivery cheaper or more efficient and 5 finding public delivery cheaper or more efficient.

The Century Foundation report notes that competition and careful monitoring are required to obtain benefits from privatization and to ensure that profit maximization doesn’t result in a loss of quality. However, it noted that in many cases, such as water and sewer services, there was no competition and privatization merely substituted a private monopoly for a public one. The report states that “public monopoly or government regulation is a more effective approach to ensuring efficient service delivery than privatization or deregulation.” (page 12)

The delivery of public services, even when privatized, must incorporate the fact that citizens are more than consumers. They frequently want to be engaged and have a voice in what, how, and the quality with which services are delivered. From a citizen’s perspective, more than just efficiency is involved; safety, reliability, transparency, and other values; local control; public accountability; and community identity can all be important. Public services are not just part of a market but part of a community.

Future posts will build on this overview and review specific examples of current and proposed privatization of public services and assets.

[1]       The Century Foundation describes itself as a progressive, non-partisan think tank, founded in 1919. It convenes and promotes the best thinkers and thinking across a range of public policy questions and produces timely and critical analyses of major economic, political, and social institutions and issues.

[2]      Warner, M., 2009, “Local government infrastructure and the false promise of privatization,” The Century Foundation, http://government.cce.cornell.edu/doc/pdf/Warner_2009_TCF.pdf