Category: Inequality

SHORT TAKES ON IMPORTANT STORIES #3: CORPORATE GREED

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

BANKRUPTCY LAWS: HOW THE RICH STAY RICH AND THE REST OF US SUFFER

In the latest example of the use of bankruptcy laws by the rich to stay rich while others suffer, Rudy Giuliani just filed for bankruptcy after our justice system ordered him to pay Georgia election workers Ruby Freeman and Shaye Moss $148 million for defaming them. His public defamation of them led other Trump supporters to harass and threaten them and their family members, forcing them out of their homes and to live in fear of being assaulted.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog!)

By filing for bankruptcy, Giuliani protects himself from having to pay Freeman and Moss for now. It may well be years before they get any money from him under the court’s order and it’s likely they’ll get far less than $148 million.

As you probably know, Trump companies filed for bankruptcy on multiple occasions, which allowed him to keep his wealth while others, including small business contractors and employees, got nothing or much less than his companies owed them.

Meanwhile, over the last forty years, Congress has passed laws making it harder for average people to declare bankruptcy and get relief from debts, while they’ve made it easier for large corporations, including Wall Street financial firms and banks, to do so. [1]

For example, homeowners can’t be relieved of mortgage loans on their primary residence by declaring bankruptcy. This protects banks and financial institutions while hurting homeowners. During the 2008 financial crash, 5 million homeowners lost their homes because they couldn’t get protection from bankruptcy laws. Meanwhile, Congress and other federal agencies provided hundreds of billions of dollars to large banks and financial institutions to keep them from going bankrupt.

People with student loans also can’t be relieved of them by declaring bankruptcy. Student loans are now 10% of all debt in the U.S., more than credit card and auto loan debt. (Only mortgages are a higher portion of debt.) The law allows student loan lenders take money directly from debtors’ paychecks, including Social Security checks if people collecting Social Security still have outstanding student loans! The only way to escape student debt is to prove that repayment would impose “undue hardship,” a more difficult standard to meet than is required of gamblers trying to escape their gambling debts!

Furthermore, filing for bankruptcy costs money. Typically, it costs at least $50 to file for bankruptcy in court and potentially hundreds of dollars for other fees. The cost of a lawyer can, of course, be substantial, and because attorney’s fees, like many other debts, are wiped out in a bankruptcy, most bankruptcy lawyers require cash up-front. This all means that many people who would benefit from filing for bankruptcy can’t afford to do so.

Bankruptcy laws are a perfect example of the fact that there’s no such thing as a “free market.” The market, i.e., the operation of our economy, is determined by the laws that are enacted by legislatures, Governors, and Presidents, as well as how they are implemented by the courts.

The laws that determine how the economy and markets function reveal whose interests our policy makers are protecting and making the priority. The current bankruptcy laws make it clear that wealthy individuals and businesses are the priority for our policy makers; they are being protected while the rest of us suffer.

Senator Elizabeth Warren (D-MA) and others have introduced the Consumer Bankruptcy Reform Act in Congress (S.4980). It would simplify and streamline the personal bankruptcy process as well as reduce filing fees. It would help individuals and families facing a financial crisis, who are disproportionately women and people of color, get back on their feet. It would allow student loans to be forgiven in bankruptcy and it would help those in bankruptcy avoid eviction, keep their homes and cars, and discharge local government fines. The law would protect people in the bankruptcy process by prohibiting and punishing illegal behavior by debt collectors and others. It would also close loopholes that let the wealthy exploit the bankruptcy system. The bottom line is that the bill would improve fairness and equity in our financial system, while strengthening a key piece of the social safety net. [2]

I urge you to contact your U.S. Representative and Senators to ask them to support the Consumer Bankruptcy Reform Act (S.4980). You can find contact information for your US Representative at  http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Reich, R., 12/28/23, “Why can only the rich and powerful go bankrupt?” (https://robertreich.substack.com/p/who-gets-to-use-bankruptcy)

[2]      Warren, Senator E., 9/28/22, “Senator Warren and Representative Nadler reintroduce the Consumer Bankruptcy Reform Act,” (https://www.warren.senate.gov/newsroom/press-releases/senator-warren-and-representative-nadler-reintroduce-the-consumer-bankruptcy-reform-act)

HOW TO BECOME A BILLIONAIRE

There are basically five ways to become a billionaire and none of them are legitimate in ethical, free market capitalism. Furthermore, while it’s fine for people who work hard and are innovative to get rich, getting rich to the tune of billions has substantial social costs. Billionaires have effectively bought our policy makers (including Supreme Court justices) and have gotten incredibly favorable treatment in tax laws and other policies. They have purchased or built mainstream and social media outlets that spew right-wing propaganda. The existence of billionaires, therefore, undermines the common good and our democracy.

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

For the last 30 – 40 years, the American economy has been consistently producing and enriching billionaires while the typical worker’s wages have been nearly stagnant. As Bob Reich highlights in a recent blog, there are basically five ways to become a billionaire and none of them are legitimate in ethical, free market capitalism. [1]

One way to become a billionaire is to own or run a monopolistic business. For example, Jeff Bezos, who founded and built Amazon, is worth over $100 billion. For being innovative and a good manager, he deserves to be rich. However, the billions come from Amazon’s monopolistic practices. The federal government and 17 states have charged Amazon with using its monopolistic power to inflate prices, stifle competition, and effectively blackmail organizations that want to (and often need to) sell via Amazon’s platform. Bezos also benefits from several patents granted by the government that many potential competitors feel are too broad and contribute to Amazon’s monopolistic power.

For 40 years, the government has failed to enforce antitrust laws to prevent monopoly power. Other examples of billionaire monopolists include Larry Page and Sergey Brin of Google, Bill Gates and Steve Ballmer of Microsoft, and Mark Zuckerberg of Facebook. Under President Biden, antitrust enforcement is being reinvigorated.

A variation on this theme is to own or run a business that is deemed “too big to fail” and therefore gets bailed out by the government when business goes badly. The government spent trillions bailing out big banks during the 2008 financial collapse. As a result, Jamie Dimon, CEO of JPMorgan Chase, is worth $1.7 billion. There are dozens of other billionaires in finance and investment businesses who might well not be billionaires today if the government hadn’t bailed out the big banks and financial companies in 2008.

A second way to become a billionaire is to illegally get and use investment information not available to the public, i.e., to engage in insider trading. For example, Steven A. Cohen is worth an estimated $17.5 billion. He founded S. A. C. Capital Advisors which pleaded guilty to insider trading in 2013 and paid $1.8 billion in penalties. Cohen was banned from managing other people’s money for two years. Nine of his employees were found guilty of insider trading that the Justice Department described as “substantial, pervasive, and on a scale without known precedent in the hedge fund industry.” Cohen walked away with a fine but billions of dollars. He changed the name of the firm to Point72 Asset Management and continued to manage money, primarily his own.

Insider trading is endemic among corporate executives and board members. Frequently, they illegally sell or buy their company’s stock just before or after a major announcement that affects the stock price. Corporate executives and board members often know inside information about competitors (i.e., other companies in the same line of business as they are) and buy or sell a competitor’s stock based on this information. A previous post described what appeared to be insider trading by executives at companies developing Covid vaccines and treatments, as well as by members of Congress (who had non-public information) during the early days of the pandemic. To reduce insider trading and increase competition the Biden administration is more aggressively enforcing the existing ban on directors serving simultaneously on the boards of competitors.

A third way to become a billionaire is to get politicians to enact policies that are beneficial for wealthy people. The tax cut law of 2017 is a perfect example. Wealthy Republican donors threatened members of Congress and President Trump that if they didn’t pass tax cuts the donors would withhold contributions in the upcoming elections in 2018. For example, the Koch brothers spent $20 million in campaign contributions and lobbying to promote a tax cut. The 2017 law’s tax cuts are estimated to save them $1 billion a year in taxes. And this doesn’t include the benefits they get from favorable tax treatment of offshore profits and from cuts in the estate tax.

The fourth way to become a billionaire is to defraud investors. Adam Neumann conned investors into putting hundreds of millions of dollars into his office-sharing startup company, WeWork. While the company never made a profit, Neumann bought buildings that he leased back to the company and lived a jet-setting lifestyle, that included a $60 million private jet.

Other CEOs that have defraud investors and/or customers are Elizabeth Holmes and Sam Bankman-Fried. Holmes has been convicted of fraud via her firm, Theranos, and is now in jail. Bankman-Fried was just found guilty of fraud for his actions at the crypto currency exchange FTX. And then, of course, there’s Donald Trump, now on trial for business fraud, among other things.

The fifth way to become a billionaire is to receive money from rich parents or other relatives. It’s estimated that 60% of the wealth in the U.S. was obtained this way. Two key policies are responsible, both heavily promoted by campaign contributions and lobbying by the wealthy. First, when assets, including stocks or mutual fund shares, are passed on to heirs neither the giver nor recipient has to pay taxes on their increase in value since they were received or purchased. So, as hypothetical examples, Bill Gates or Warren Buffett can give a billion dollars of his company’s stock (that he got years ago for say $10,000) to his child and no one ever has to pay any tax on the gain in its value. Furthermore, the estate tax is so minimal and easy to dodge that less than 0.2% of estates pay any estate tax. And, of course, there is no wealth tax in the U.S.

In addition, wealthy people avoid paying the income tax they owe (despite the cutting of the top tax rate in half over the last 45 years). The Internal Revenue Service (IRS) (until very recently) has been starved of the resources it needs to enforce our tax laws and make the wealthy pay. From 2010 to 2021, Republicans cut IRS funding by 19% and currently are trying to cut the IRS’s increased funding in President Biden’s 2022 Inflation Reduction Act (IRA). A study in 2021 estimated that the 1% of people with the highest incomes failed to report more than 20% of their earnings to the IRS. With the new funding in the IRA, the IRS has, in just a few months, recovered $38 million in delinquent taxes from 175 high-income taxpayers. It is estimated that for each dollar the IRS spends auditing the top 1% of taxpayers it will recover $3.18; for the top 0.1%, it will recover $6.29 for each $1 spent. [2]

[1]      Reich, R., 10/26/23, “Do billionaires have a right to exist?” (https://robertreich.substack.com/p/billionaires-dont-have-a-right-to)

[2]      Richardson, H. C., 10/30/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/october-30-2023)

CRISIS AND HOPE FOR AMERICAN DEMOCRACY Part 3

George Packer’s book, Last best hope: America in crisis and renewal, offers an analysis of how American democracy got to its current crisis and how it will, hopefully, renew itself and survive. He points out that American democracy has gone through similar crises in the past. He identifies key elements of a functioning democracy and four cultural narratives, moral identities, or “tribes” that have emerged in the U.S. They have fractured American politics and society. This post, number 3 in a 4-part series, summarizes the decline of democracy in America and outlines the path to recovering it.

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

In Packer’s analysis, America fractured in the 1970s. From two relatively stable cultural narratives or moral identities aligned with the Democratic and Republican parties, four rival narratives emerged. Packer names and describes these four new “tribes.” Previous posts summarized the narratives of the Free America and Smart America tribes here and of the Real America and Just America tribes here.

All four tribes emerged due to America’s failure to maintain a middle-class-focused democracy and an economy that lived up to its founding principle of equal opportunity for all. Forty years of increasing economic inequality and declining social mobility have turned America into a stratified society where wealth and status are now strongly linked to heredity.

The vision of a democracy based on equality for all has been badly damaged, although it is still clung to as central to American identity. Disillusionment has grown as progress toward the ideal of equality seems to have stalled or reversed. Although this ideal has never been reached and has often been violated, without a commitment to work toward it, American democracy cannot function.

Each of the four tribes is a response to real problems and espouses values that are essential for American democracy. They shape each other, as alliances among and membership of them are in constant flux. However, their tendency is to divide us, which tends to push each tribe to its extremes.

Elections in America force a choice between two alternatives. In 2020 and 2016, the choice fractured the country and forced a strained and temporary alignment of Smart and Just America on the Democratic side and Free and Real America on the Republican side. As the national sense of a common purpose shattered, our ability to engage in self-governing democracy suffered. Individualists, even if they were all equal, feel little obligation to those outside their small, inner circles and grow indifferent to, and even distrustful of, the common good. The pursuit of happiness becomes an individual endeavor and is increasingly defined as accumulating wealth.

The vehemence of the political divide, the desire of those with political and economic power to retain it, the leaning of the American system of government in favor of the minority party (e.g., the apportionment and operation of the U.S. Senate), and the powerful role that wealth plays in our politics and economy have led the Republican Party to embrace the retention of power by undemocratic means.

American democracy has had near-death experiences before: the Gilded Age of the late 1800s, the Great Depression of the 1930s, the 1960s, and, perhaps most relevant, the Civil War. Packer states that “These years we’re living through feel like the 1850s.” (page 167)

The desire for equality, despite its link to individualism and the pursuit of wealth, is a core piece of American identity. So are the love of democracy and innovation, as well as suspicion of authority, intellect, and elitism. The way forward must embrace all of these and revive the progress toward equality for all where each person is free and able to pursue their individual dreams while having a voice in shaping our shared destiny. Packer notes that historically, Americans have used the same tools of citizenship to recover democracy that we have today: journalism, government, and activism.

As examples of people who have used these tools in the past, Packard writes about Horace Greeley, Frances Perkins, and Bayard Rustin. Greeley was “an extraordinary man who never stopped identifying with ordinary people; a journalist whose vocation was to be a citizen.” (page 172) Perkins, FDR’s Secretary of Labor and the first woman in a presidential cabinet, was “able to move between the worlds of the elites and the masses in a way that seems unthinkable today.” (page 178) She was driven by a “patriotism based on the love of the men and women who were fellow citizens.” (page 175) Packer notes that in the 1930s to be woke was apparently patriotic.

Rustin started his fight against injustice and racism well before the 1960s. In 1949, Rustin was arrested for sitting in a white seat on a bus, long before the Freedom Riders of the early 1960s. He was instrumental in organizing the 1963 March on Washington and was on the Lincoln Memorial next to Martin Luther King as King gave his “I Have a Dream” speech. Rustin was committed to justice for all, not just black Americans.

Packer summarizes the current situation this way: “Inequality destroys the sense of shared citizenship, and with it self-government.” (page 187) Democracy is not a spectator sport and, by being complacent, Americans have demonstrated how fragile it is. To rebuild America and our democracy we will “have to create the conditions of equality and [re]acquire the art of self-government.” (page 190) Packer quotes from Walter Lippman’s 1914 progressive vision in his book Drift and Mastery: “You can’t expect civic virtue from a disenfranchised class … The first item in the program of self-government is to drag the whole population well above the misery line.” (page 191)

My next post will complete my review of Packer’s book. It will discuss his specific recommendations on how we put America back together again.

THE RICH GET RICHER BUT THEY MAY HAVE TO PAY THE TAXES THEY OWE

The wealth of rich Americans is growing by leaps and bounds, but CEO’s pay raises have slowed a bit. The Internal Revenue Service (IRS) is beginning to crack down on wealthy tax dodgers, but Republicans in Congress are trying to cut the funding for this IRS crackdown.

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

The world’s wealthiest 500 people each added an average of $1.7 billion to their wealth in the first six months of 2023. The world’s wealthiest person added almost $100 billion to his wealth. For the members of the Bloomberg Billionaires Index, it was an increase of $14 million a day during the first half of the year. [1]

However, for CEOs, 2022 wasn’t such a great year as their typical compensation rose less than 1%, although median pay was still a wealth-creating $14.8 million. This was the smallest increase since 2015. However, their pay had increased a healthy 17% in 2021. [2]

The small 2022 increase for CEOs meant that the pay ratio when compared to the average worker actually narrowed a tad – for the first time in many years. Median pay for workers rose to just over $77,000, meaning CEO pay was 186 times that of workers. This pay gap is, nonetheless, extremely high by historical standards.

The CEO of Alphabet (the parent corporation of Google) had the top compensation package, which was valued at $226 million. The great majority of this was from a grant of restricted stock options, which Google gives to its CEO every three years. Underscoring that CEO pay is not linked to actual performance, this huge reward was given just before Google laid off tens of thousands of employees and after shareholder returns fell by 39% last year.

Meanwhile, the Internal Revenue Service (IRS) is showing what it can do if given the resources to audit wealthy tax dodgers. In the past few months, it has collected $38 million of back taxes owed by about 175 wealthy individuals. Many of these individuals are likely to face criminal investigations. This is just the tip of the iceberg. A report in 2021 estimated that the 1% of taxpayers with the highest incomes fail to report and pay taxes on 20% (one-fifth) of their incomes. [3]

The IRS got a new commissioner in March 2023 and was given an additional $80 billion in funding over the next ten years by the Inflation Reduction Act of 2022, passed by Democrats in Congress and President Biden. This increased funding is for IRS enforcement, customer service, and technology improvements. The IRS reports that with the increased funding it was able to answer 3 million more calls from taxpayers in the 2023 tax-filing season than in 2022, while cutting waiting times to three minutes from 28. In addition, it has processed the backlog of 2022 tax returns.

Republicans in Congress began cutting IRS funding in 2010, cumulatively cutting its annual budget by $2.5 billion (22%) by 2021. As a result, IRS enforcement staff has been reduced by about one-third (15,000 employees). Therefore, the audit rate for taxpayers with incomes over $1 million has fallen by 71% and for large corporations by 54%. The outcome has been systematic tax evasion by wealthy taxpayers and the loss of an estimated $600 – $700 billion of revenue each year that would help fund the federal government’s programs and operations. Overall, in 2021, the IRS had roughly the same number of employees (79,000) as in 1970, despite great growth in the economy and the complexity of tax laws. [4]

Republicans are continuing to work to cut IRS funding. They demanded a $1.4 billion cut to the IRS in the debt ceiling and budget deal recently passed by Congress. In a related agreement, they demanded cuts in IRS funding of another $20 billion over the next two years.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to oppose any cuts to funding for the IRS. Tell them you support the IRS’s efforts to enforce our tax laws and make everyone pay the taxes they owe. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your US Representative at  http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Business Talking Points, 7/4/23, “Musk, Zuckerberg lead surge as rich get richer,” The Boston Globe

[2]      Olson, A., 6/1/23, “Smaller raises for CEOs, but pay still towers over workers,” The Boston Globe from the Associated Press

[3]      Hussein, F., 7/8/23, “IRS says it collected $38 million from more than 175 high-income tax delinquents,” The Boston Globe from the Associated Press

[4]      Facundo, J., 1/26/23, “Reanimating the taxman,” The American Prospect (/https://prospect.org/economy/2023-01-/26-reanimating-taxman-internal-revenue-service/)

REPUBLICANS’ HYPOCRISY AND HARM OVER THE DEBT CEILING

The congressional Republicans’ demands for supporting an increase in the federal government’s debt ceiling are hypocritical and their arguments disingenuous – even more so than most people realize. For example:

  • The Republicans only care about the budget deficit and the accumulated debt when Democrats are president.
  • The Republicans’ argument that federal government spending is out of control and is the cause of the increasing debt is simply false, as well as hypocritical.
  • The Republicans are protecting tax cuts, as well as growing incomes and wealth, for their already wealthy campaign contributors and benefactors, both individuals and corporations.
  • The Republicans are more than willing to cause all this anxiety, risk, and harm because they think it will help them politically in the next election.

Therefore, I urge you to do whatever you can, at all levels of community and government, to oppose Republican candidates for elected office.

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

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

As you probably know, the congressional Republicans’ demands for supporting an increase in the federal government’s debt ceiling are hypocritical, but it’s important to underscore just how hypocritical they are and how disingenuous their arguments over the budget and the debt ceiling are.

This is a manufactured crisis because it is over whether to pay the bills of the budgets that have already been passed by Congress and how much room to give the government to pay for future budgets that will be passed. Increasing the debt ceiling, which is the total accumulated debt of all the deficits and surpluses in the budgets that have been passed to-date, does not authorize or change any spending; only the budgets that Congress passes can do that.

It is also a manufactured crisis because the Republicans only care about the budget deficit and the accumulated debt when Democrats are president. The have no problem passing budgets with big deficits or increasing the debt ceiling when Republicans are president. Under President Trump, for example, they approved four budgets with total deficits of $7.7 trillion and voted to increase the debt ceiling three times by roughly $11 trillion (about 65%) without concerns or objections.

The Republicans’ argument that federal government spending is out of control and is the cause of the increasing debt is simply false, as well as hypocritical. Under President Trump, annual federal spending grew by $3.25 trillion (roughly 82%) with no objections from Republicans. Over the last 50 years, federal discretionary spending as set by each year’s budget has fallen from 11.0% to 6.3% of the U.S. gross domestic product (GDP, the total of all goods and services produced by the U.S.  economy), a 43% decline. [1]

Furthermore, based on international comparisons, U.S. spending is far below the average of the other 37 wealthy nations of the Organization for Economic Cooperation and Development (OECD). If spending were at the average OECD level, the U.S. would be spending about $2.5 trillion more each year, a 40% increase. If the U.S. spent at the European Union average, it would be spending about $3.5 trillion more each year, a 56% increase.

Tax cuts under Presidents Trump and George W. Bush are what have driven the increase in budget deficits and the debt. They will have added $8 trillion and $1.7 trillion, respectively, to the debt by the end of fiscal year 2023 in September. These tax cuts will add another $3.5 trillion to the debt over the next 10 years. Nonetheless, the Republicans oppose any reduction in these tax cuts.

The Republicans’ have argued since the 1980s and President Reagan’s time in office that tax cuts for wealthy individuals and corporations would improve economic growth, job creation, and the well-being of everyday Americans. People’s experiences, basic economic data, and multiple academic studies have all shown that none of this has happened. [2]

Instead, economic inequality has grown dramatically. The tax cuts and other policies have shifted $50 trillion from the 90% of Americans with middle or low-incomes to the richest 10% of Americans, with much of it going to the richest 1%. In 2020 alone, the incomes of the top 1% increased by 7.3% from already astronomically high levels, while the incomes of the 90% of Americans with middle or low incomes increased by just 1.7%.

There are two key takeaways from all of this. First, the Republicans will protect tax cuts, as well as growing incomes and wealth, for their already wealthy campaign contributors and benefactors, both individuals and corporations, at any cost. For them, these ends justify the means, which include generating significant uncertainty and risk in the U.S. economy and globally too. The means also include demanding budget cuts that will hurt many middle and especially low-income workers and families. For example, cuts in funding for nutrition and food programs will increase hunger in the U.S., including for many children and babies, which will have lasting effects on their health and development.

Second, the Republicans are more than willing to cause all this anxiety, risk, and harm because they believe it will help them politically in the next election. Causing chaos, disruption, and hardship when a Democrat is president, they believe, will improve their chances of winning the next presidential and congressional elections. Again, for them, the ends (political gain and power) justify the means.

When I started this blog over eleven years ago, my intent was to focus on policy and to include the politics of policy change but to avoid getting explicitly partisan. The developments of the last seven years – the actions of Trump and what the Republican Party has become with him as its leader – have convinced me that I have to be explicitly partisan.

When the Republican Party is willing to take the well-being of our country and the majority of its people hostage in order to gain political advantage and benefit the wealthiest Americans despite their already incredible wealth, the time to speak out in a partisan fashion has come.

I urge you to do whatever you can, at all levels of community and government, to oppose Republican candidates for elected office. Yes, there may be a few decent Republican candidates out there, but unfortunately, they are part of a party infrastructure that is actively undermining our country, our democracy, and our fellow human beings. We must do all we can to stop this.

[1]      Cox Richardson, H., 5/24/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/may-24-2023)

[2]      Cox Richardson, H., 5/23/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/may-23-2023)

REINING IN GREAT WEALTH WOULD REDUCE POLITICAL CORRUPTION

Wealthy individuals and corporations are buying and corrupting our candidates for public office and our political system like never before. An increasing proportion of the record amounts of campaign spending is coming from a small number of wealthy donors. This is damaging our democracy in multiple ways. (See previous posts here and here for some details.) Changes in our campaign finance system will help, such as increasing disclosure and limiting contribution amounts in exchange for matching public funds. (See this previous post for more details.)

(Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.)

However, as Louis Brandeis once said (prior to becoming a Supreme Court justice), “we can have democracy in this country or we can have great wealth concentrated in the hands of the few, but we can’t have both.” The current accumulation of huge wealth and hence political power in the hands of a few has indeed proved to be antithetical to democracy.

Economic inequality has grown because progressivity in the American tax system has largely disappeared. This is the result of two trends:

  • Income tax rates at the federal and state levels have become less progressive, and
  • More and more government revenues are coming from regressive taxes such as state and local sales taxes, taxes on gambling, and property taxes, as well as the federal payroll tax for Medicare and Social Security.

A progressive tax or tax system is based on the taxpayer’s ability to pay. It imposes lower taxes as a percentage of income on low-income earners than on those with higher incomes, i.e., the percentage of income paid as taxes progresses from lower to higher as income increases. A regressive tax or tax system does the reverse; those with lower incomes pay a higher percentage of their incomes in taxes.

Progressive taxes are viewed as fairer because low-income households need their income to pay for necessities, such as housing, food, clothing, utilities, and transportation. Higher income households have enough income to afford luxuries; they have more discretionary income, i.e., income they can spend at their discretion rather than having to use it to pay for necessities of life. Another way of thinking about this is that an extra dollar of income is much more valuable to a low-income household than to a high-income household. Therefore, it is fair to take a higher portion of that extra dollar of income from a high-income household in taxes.

Most of the taxes we pay have a flat tax rate, such as sales taxes and taxes on alcohol and tobacco. The effect of these taxes is regressive because low-income households spend a greater portion of their incomes on purchases that are subject to these taxes. Another example of a regressive tax is the revenue governments get from gambling. Low-income households spend a greater portion of their incomes on gambling, such as lottery tickets, and, therefore, this is a regressive revenue source for government and effectively a quite regressive tax.

The only significant progressive tax in the U.S. today is the income tax. The federal income tax has become much less progressive over the last 40 years and the portion of revenue that governments at all levels get from progressive taxes has declined significantly. As a result, our overall tax system has become much less progressive over the last 40 years and, at the state and local levels, generally quite regressive.

To have a progressive income tax, multiple brackets (i.e., income ranges) with higher tax rates for higher income brackets are necessary. The federal income tax has had as many as 50 brackets and until 1986 had always had at least 15. The highest tax rate was 94%, which, in 1944, was the marginal rate on income over $200,000 (equivalent to $2.5 million today). By the way, this tax rate was in place during one of the longest periods of economic growth in U.S. history.

The top tax rate was at least 70% until 1981; today it is 37%. President Reagan and other Republicans led the effort in the 1980s that reduced the top income tax rate from 70% to 28%. They also led the reduction of the number of tax brackets from 16 to two. Needless to say, the progressivity of the U.S. tax system plummeted and the path to great economic inequality was created. Today, there are seven tax brackets and a top rate of 37%. [1] So, some progressivity has been reintroduced but it’s still much, much less than it was prior to the 1980s. (The issue of taxes on capital gains, both realized and unrealized, is also important but a topic unto itself.)

The loss of progressivity has also occurred in state and local tax systems. Washington State has the country’s most regressive overall state tax system; state and local taxes consume 17.8% of family incomes for the 20% of families with the lowest incomes and only 3% of incomes for the 1% with the highest incomes. In Massachusetts, the richest 1% pay 6.5% of income in state and local taxes while the bottom 80% pay between 9% and 10% of income in state and local taxes.

Several proposals have been put forward to change the current regressivity of the U.S. tax system and to begin to change the high and growing level of economic inequality in the U.S., in terms of both income and wealth:

  • Taxing wealth (in addition to income) is important because of the huge wealth that some individuals have accumulated over the last 40 years and because the wealthy are able to avoid income taxes by minimizing their incomes and living off their wealth. (See this previous post for more on the rationale for a wealth tax.) Two of the proposals for taxing wealth are:
    • The Ultra-Millionaire Tax, proposed by Senator Elizabeth Warren (D-MA), would put a 2% tax on wealth between $50 million and $1 billion and a 4% tax on wealth over $1 billion. The wealth of 99.9% of American households is below $50 million, so they would pay no wealth tax under this proposal. [2]
    • The OLIGARCH Act: The Oppose Limitless Inequality Growth and Restore Civil Harmony (OLIGARCH) Act, proposed by the group Patriotic Millionaires, would tax wealth in four brackets defined in relation to the median wealth of an American household, which is about $122,000. It would put a 2% tax on wealth between 1,000 and 10,000 times median wealth, or wealth of about $122 million to $1.2 billion. The tax rate would go up in 2% steps and top out at 8% on wealth over roughly $122 billion (one million times median wealth). (Note: There are two Americans with wealth of over $122 billion.) [3]
  • For the federal income tax, the End the Bracket Racket Act, also put forth by Patriotic Millionaires, would add five new brackets with one establishing a 50% tax rate on income between $1 and $5 million and progressing to a 90% tax rate on income over $100 million. It would also incentivize states to raise revenue through income taxes by providing a federal tax credit for state and local income taxes (while eliminating the deduction for property, sales, and excise taxes). [4]

I encourage to you contact President Biden and your Representative and Senators in Congress. Ask them to support the establishment of a wealth tax as well as changes to the income tax to increase progressivity. These steps would begin to reduce economic inequality and, ultimately, the ability of the wealthy to corrupt our elections and democracy. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Patriotic Millionaires, retrieved 10/22/22, “End the Bracket Racket (EBR) Act,” (https://patrioticmillionaires.org/wp-content/uploads/End-the-Bracket-Racket-Act-1.pdf)

[2]      Senator E. Warren, retrieved 10/22/22, “Ultra-Millionaire Tax,” (https://elizabethwarren.com/plans/ultra-millionaire-tax)

[3]      Patriotic Millionaires, retrieved 10/22/22, “Oppose Limitless Inequality Growth and Restore Civil Harmony (OLIGARCH) Act,” (https://patrioticmillionaires.org/wp-content/uploads/Oligarch-Act-Memo.pdf)

[4]      Patriotic Millionaires, retrieved 10/22/22, see above

STOPPING WEALTH FROM CORRUPTING OUR POLITICAL SYSTEM

Wealthy individuals and corporations are buying and corrupting our candidates for public office and our political system. Congressional races, state ballot questions, and possible 2024 presidential candidates are all raising record amounts of money. Furthermore, an increasing proportion of this money is coming from a small number of very wealthy donors. This is damaging our democracy in multiple ways. (See previous posts here and here for some details.)

(Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.)

We need to rein in the corrupting effects of huge amounts of money being spent on election campaigns by a relatively small number of very wealthy individuals and corporations. A few dozen billionaires will spend over $100 million on the 2022 elections after spending $1.2 billion on the 2020 elections, which included a presidential election. Ultimately, we need a constitutional amendment to overturn the Supreme Court’s decisions (e.g., Citizens United) that equate spending with speech and give freedom of speech rights to corporations and other organizations. But that’s a long-term strategy.

Initial steps to address this problem include:

  1. Enhancing disclosure of spending in campaigns: full disclosure of who the money is coming from, including both individuals and organizations, disclosed in a timely fashion so voters know who is trying to influence their votes,
  2. Enacting partial public financing of campaigns that will reduce dependence on wealthy donors and provide a way within current law to limit the size of contributions,
  3. Reducing the accumulation of huge wealth and hence political power in the hands of a very few people, which is antithetical to democracy, by reforming our tax system, including the implementation of a wealth tax, and
  4. Reducing corporate influence in our politics and policy making by enforcing anti-trust laws (see this post for more information) because huge corporations with huge wealth and political power are antithetical to democracy. We also need to better regulate lobbying and the revolving door of personnel between corporate and government jobs. These steps are topics for other posts.

Two bills were passed by the U.S. House that would address election system issues (items 1 and 2 above), the DISCLOSE Act and the For the People Act. Both have been blocked by Republicans and the filibuster in the Senate. (In addition, the John R. Lewis Voting Rights Advancement Act, which would restore and revitalize the Voting Rights Act (VRA) of 1965 and stop racial discrimination in our elections, passed the House but was also blocked in the Senate.)

In response, The Freedom to Vote Act (S.2747), a compromise bill, was developed and introduced in the Senate. It includes most of the key provisions of the For the People Act and the DISCLOSE Act. Unfortunately, Republicans in the Senate have blocked it as well.

The Freedom to Vote Act includes provisions that would: [1]

  • Reform the campaign finance system by a) requiring enhanced disclosure (e.g., all major donors) by any entity spending more than $10,000, b) ensuring super PACs are truly independent of candidates, and c) strengthening campaign finance enforcement,
  • Create a publicly-funded system for matching small donations to U.S. House campaigns that states and candidates can opt into, which would match small donations with $6 for every $1 contributed in exchange for limiting the size of donations, thereby eliminating the need for candidates to rely on big money donors and their corrupting influence,
  • Enhance protections for election officials, ballots, and other election records and procedures,
  • Expand opportunities to vote through mail-in voting, early voting, and making election day a holiday,
  • Reduce voter suppression by a) creating a national standard for voter IDs that allow a wide range of options, b) restoring formerly incarcerated citizens’ federal voting rights, c) requiring waiting lines to be less than 30 minutes, and d) cracking down on intimidating and deceptive election-related practices,
  • Modernize voter registration with same-day, online, and automatic registration, as well as protection against unjustifiable purges of voters from the voting rolls, and
  • Ban partisan gerrymandering and establish clear, neutral standards for redistricting.

I encourage to you contact President Biden and your Representative and Senators in Congress. Ask them to support the Freedom to Vote Act (S.2747) to ensure fair, democratic elections. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

My next post will identify some reforms to our tax system that are needed to begin to reduce the accumulation of great wealth and hence political power in the hands of a very few people, which is antithetical to democracy.

[1]      Brennan Center for Justice, retrieved 10/15/22, “The Freedom to Vote Act,” (https://www.brennancenter.org/freedom-vote-act)

WEALTH IS CORRUPTING OUR POLITICAL SYSTEM LIKE NEVER BEFORE

Wealthy individuals and corporations are buying and corrupting our candidates for public office and our policy making processes like never before. Congressional races, state ballot questions, and possible 2024 presidential candidates are all raising record amounts of money. (See this previous post for some details.) This is bad for democracy.

(Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.)

Most of this record amount of money is spent on advertising and much of that is negative advertising, i.e., attacking, undermining, discrediting, and demeaning the opposing candidate, even lying about them. One effect of all the negative ads is that they tend to depress turnout (e.g., why bother to vote for the better of the flawed candidates) and to undermine faith in our elected officials and the government. This undermines democracy and citizens’ belief in democracy.

Of particular concern, is that a big chunk of the huge amount of money being spent on our elections is coming from a relatively few individuals and corporations. A few dozen billionaires will spend over $100 million on the 2022 elections. They and the corporations they are connected with want policies that will reduce their taxes and provide other benefits to them. The 2017 tax cut bill was very directly the result of these big donors telling Trump and Republicans in Congress that they wanted a big tax cut or their donations to 2018 campaigns would be significantly curtailed. This quid pro quo is corrupt; it’s a kickback scheme.

Twenty-seven billionaires have given $89 million to the two Republican congressional super PACs, nearly 50% or half of the money they’ve raised for the 2022 elections. A few have given $20 million or more. Nineteen billionaires have given $26 million to the two parallel Democratic PACs, which is 17% of the money they have raised. For both parties, the bulk of the money came from people in the finance and investment business. These billionaires are also engaged in other political spending. For example, Peter Thiel, the billionaire co-founder of PayPal, who is openly anti-democracy and anti-government, has spent $15 million helping J. D. Vance win the Republican Senate primary in Ohio and $13.5 million helping Blake Masters win his Arizona Senate primary. [1] [2]

Back in the 2020 elections, billionaires collectively spent $1.2 billion, which was roughly one-tenth of all spending, despite being only 0.01% of all donors contributing over $200 (i.e., 1 out of every 10,000 donors). In 2020, the billionaires spent 40 times what they spent in 2010, due to the Supreme Court’s Citizens United and other decisions that now allow unlimited spending in our supposedly democratic elections. The political spending and influence of the billionaires has been growing election after election.

Large amounts of corporate money are also flowing into political campaigns, often through intermediary groups that make it hard to trace the connection between specific donors and specific recipients. Therefore, it is hard to hold the corporations accountable for the policies of the candidates they’re supporting. For example, eight corporations, who publicly committed to covering travel expenses for employees who needed to travel to obtain reproductive care, nonetheless have, since 2018, given almost $8 million to three Republican groups that have helped elected Governors, Attorneys General, and legislators who have worked to restrict abortion rights. The corporations are: Pfizer ($3 million), Comcast ($2.2 million), Microsoft, Citigroup, Uber, and Bank of America (between $800,000 and $400,000), and lesser amounts from Lyft and Yelp. [3]

Fifteen corporations, who publicly committed to covering travel expenses for employees who needed to travel to obtain reproductive care, nonetheless have political action committees that have given $2 million to members of Congress who voted against the Women’s Health Protection Act, which would have protected access to reproductive care. The top givers (between $501,000 and $113,000) are PricewaterhouseCoopers, Google, Microsoft, Wells Fargo, Johnson & Johnson, JPMorgan Chase, and Meta (Facebook’s parent corporation).

Frequently, these large donors, individuals and corporations, make significant efforts to avoid being identified and linked to the candidates they’re supporting. For example, the Conservative Americans Political Action Committee (PAC) filed its statement of organization with the Federal Election Commission on July 11. Then, between July 19th and 24th, it spent $2.4 million in Republican U.S. House primary races in Missouri, Tennessee, and Arizona. Because of its late registration, it’s not required to disclose its donors until August 20, weeks after the voting in the primary elections it was working to influence. [4] Therefore, voters didn’t know who was trying to influence their votes.

An insidious strategy that is seeing increased use is the spending of large sums of money by Political Action Committees (PACs) and other political groups aligned with one party in the other party’s primaries. Democratic-aligned groups have spent nearly $44 million in Republican primaries for congressional seats and governorships. They are promoting more radical candidates that Democrats think will be easier to beat in the final election. Some of the downsides of this strategy are that it doesn’t always work, that it diverts funds from Democratic candidates, and that it promotes divisive, fringe positions. [5] Similarly, the American Israel Public Affairs Committee (AIPAC) and its super PAC, heavily funded by Republican donors and the endorser of over 100 Republican candidates who are 2020 election deniers, is spending roughly $20 million in Democratic primaries. It is opposing progressive Democratic candidates and supporting more conservative alternatives.

The amount of outside money in primaries, particularly across party lines, is very unusual if not unprecedented. Given the low voter turnout in primaries for congressional seats, a few million dollars can have a significant effect on the outcome. [6]

In conclusion, the large amount of money being spent on campaigns in supposedly democratic elections is corrupting. When candidates receive large sums of money, it changes who they meet with, who they listen to, and how they weigh competing interests when making decisions on how to vote on legislation once they’re in office. It changes which issues get addressed and what legislation gets written. It means politicians have strong incentives to act in support of their wealthy donors rather than in support of the average Americans who are, nominally, their constituents. This is corruption – money given to candidates’ campaigns changes their behavior when they’re in office.

For example, Senator Joe Manchin (D-WV) refused, along with Senator Kyrsten Sinema (D-AZ) and all the Republicans in the Senate, to increase taxes on wealthy individuals and corporations as part of the recently passed Inflation Reduction Act, despite strong support for this among the public. [7] The obvious explanation for these Senators’ refusal is that they were being responsive to their wealthy donors rather than to the constituents who voted for them. (More detail on Sinema’s unusually blatant apparent quid pro quo corruption is here.)

Among other things, this means that economic inequality is likely to continue to increase in the U.S. It also means that wealthy campaign donors will have even more money to invest in future campaigns – and it is an investment, because favorable tax and other laws put far more money in their pockets than they spend on their campaign contributions, as the Senator Sinema examples makes clear. This is, in effect, a corrupt kickback scheme.

Furthermore, the exorbitant cost of a congressional campaign changes who runs for these seats. Given that in a contested race you need a minimum of $10 million to run a US Senate campaign or $2 million for a House race, who can afford to run is extremely skewed – it’s not your average citizen! This gives incumbents a huge advantage, as it often means that no one runs against them. As a result, Members of Congress are currently older than they’ve ever been with 23% of members over 70, up from 16% in 2012 and 8% in 2002. [8]

My next post will describe steps to rein in the harmful effects of current campaign spending.

[1]      Stancil, K., 7/18/22, “Just 27 billionaires have spent $90 million to buy GOP Congress: Report,” Common Dreams (https://www.commondreams.org/news/2022/07/18/just-27-billionaires-have-spent-90-million-buy-gop-congress-report)

[2]      Rice, W., Tashman, Z., & Clemente, F., July 2022, “Billionaires buying elections,” Americans for Tax Fairness (https://americansfortaxfairness.org/issue/report-billionaires-buying-elections/)

[3]      Datta, S., 8/2/22, “Corporate donations to GOP political groups boosted candidates behind anti-abortion rights laws in states,” Open Secrets (https://www.opensecrets.org/news/2022/08/corporate-donations-to-gop-political-groups-boosted-candidates-behind-anti-abortion-rights-laws-in-the-states/)

[4]      Giorno, T., 8/3/22, “ ‘Pop-up super PAC spent over $2.4 million in weeks leading up to three states’ GOP congressional primaries,” Open Secrets (https://www.opensecrets.org/news/2022/08/pop-up-super-pac-spent-over-2-4-million-in-three-states-gop-congressional-primaries-in-three-weeks/)

[5]      McCarty, D., 7/15/22, “Democrats spend millions on Republican primaries,” Open Secrets (https://www.opensecrets.org/news/2022/07/democrats-spend-millions-on-republican-primaries/)

[6]      Sammon, A., 7/14/22, “AIPAC has taken over the Democratic primary process,” The American Prospect (https://prospect.org/politics/aipac-has-taken-over-the-democratic-primary-process/)

[7]      Dusseault, D., & Lord, B., 7/19/22, “Joe Manchin just proved why we need the OLIGARCH Act,” Common Dreams and the Patriotic Millionaires Blog (https://www.commondreams.org/views/2022/07/19/joe-manchin-just-proved-why-we-need-oligarch-act)

[8]      Giorno, T., 9/15/22, “Gen Z candidate Karoline Leavitt outraised ‘establishment’ candidate in lead-up to her win in New Hampshire’s GOP House primary,” Open Secrets (https://www.opensecrets.org/news/2022/09/gen-z-candidate-karoline-leavitt-outraised-establishment-candidate-in-lead-up-to-her-win-in-new-hampshires-gop-senate-primary/)

WHY AMERICANS ARE SO PESSIMISTIC ABOUT THE ECONOMY

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

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

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

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

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

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

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

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

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

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

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

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

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

GOOD AND BAD NEWS FROM THE ECONOMY AND FOR WORKERS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

GOOD AND BAD ECONOMIC NEWS YOU MAY NOT HAVE HEARD

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SUPPORTING CHILDREN AND FAMILIES: SOMETHING EVERY DEMOCRAT OUGHT TO BE CAMPAIGNING ON NOW

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Democrats in Congress and the Biden Administration enacted a nearly universal Child Tax Credit as part of the American Rescue Plan Act (ARPA) in March 2021. It provided almost every family in America with $3,600 annually for each child under age 6 and $3,000 for each child age 6 and up. Importantly, the credit was paid on a monthly basis rather than having to wait until one filed a tax return at the end of the year to get the money. In effect, it provided a universal basic monthly income for families with kids, something most wealthy countries do. [1]

The effect of this enhanced Child Tax Credit was dramatic – the child poverty rate declined by almost half. However, ARPA authorized these payments for only one year. Many politicians and policy analysts thought that the program would prove so effective and so popular that it would be extended. This is what was proposed by the Biden Administration and most Democrats in Congress as part of the Build Back Better bill.

Last summer, as the Build Back Better (BBB) bill was taking shape, the debate between Democratic progressives and centrists was whether to make the enhanced Child Tax Credit permanent or just extend it for five years. But then, Senators Joe Manchin and Kyrsten Sinema went rogue. They claimed they were concerned about the budgetary impact, but voted for an increased defense budget many times more expensive. They claimed that families were benefiting from it that didn’t need it or deserve it. I’ll come back to these arguments below.

Now, the question is whether any form of the enhanced Child Tax Credit will survive in whatever the Build Back Better bill becomes.

Longstanding research shows substantial benefits for child outcomes from family economic support. This research was bolstered very recently by a research paper published in the prestigious Proceedings of the National Academy of Sciences. In a randomized control trial, the most definitive kind of scientific study (the same approach as is used for testing new drugs), monthly cash support of $4,000 per year given to poor mothers with infants was found to result in changes in the infant’s brain activity that are associated with better development of important cognitive skills. [2]

Despite the strong body of research that documents that economic support for families improves children’s cognitive, school success, and life success outcomes, the Republicans and a few Democrats in Congress let the enhanced Child Tax Credit expire in January. As a result, 3.7 million more children are now in families living in poverty. The overall child poverty rate increased from 12.1% to 17.0% (a 41% increase in the poverty rate) and the impact on non-White children was greater:

  • White children in poverty increased from    7.5% to 11.4% (+3.9%)
  • Black children in poverty increased from   19.5% to 25.4% (+5.9%)
  • Latino children in poverty increased from  16.8% to 23.9% (+7.1%)
  • Asian children in poverty increased from   11.9% to 15.1% (+3.2%) [3]

The Child Tax Credit is a potent anti-poverty program. It is also extremely efficient. There are no middlemen, no application hassles, and no bureaucracy required to determine who’s eligible and who’s not; the government just provides money to all families with children, the same way it provides money to all seniors through Social Security. And the benefits are taxable, so higher income families who have less need for the money pay some of it back in income tax.

Senator Manchin has said he might support an enhanced Child Tax Credit if it had strict income limits or a work requirement. This would make it an inefficient, counter-productive policy because it requires a large bureaucratic effort to determine who is eligible and who isn’t, and mistakes will undoubtedly occur. It creates complexity and confusion because parents’ work status and income can change, often frequently for low-income workers and those in part-time jobs. Furthermore, it creates what are called “cliff effects” where as a parent’s earned income increases, they fall off the eligibility cliff and lose benefits. This creates a perverse incentive for low-income workers to refuse increases in pay or hours, or even to refuse a new job, because this might reduce their eligibility for benefits from the Child Tax Credit.

It would also make the Child Tax Credit less politically popular because middle-class parents wouldn’t get it. This reduced political support means that it will be more likely to be cut or eliminated in the future.

The Child Tax Credit is an issue that exposes the hypocrisy of many Republicans and some conservative Democrats. They claim they support family values and a right to life (as well as to liberty and the pursuit of happiness), but don’t support the enhanced Child Tax Credit that supports families and improves a child’s likelihood of leading a successful and fulfilling life.

I urge you to contact President Biden and your U.S. Representative and Senators to let them know that you support the enhanced Child Tax Credit, which would provide economic support to over 36 million families and over 61 million children. Tell them that this is what family values really are all about and that this is what a right to a life is all about for children in America.

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

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

[1]      Kuttner, R., 2/18/22, “Save the Child Tax Credit,” The American Prospect blog (https://prospect.org/blogs/tap/save-the-child-tax-credit/)

[2]      Troller-Renfree, S. V., et al., 2/1/22, “The impact of a poverty reduction intervention on infant brain activity,” Proceedings of the National Academy of Sciences (https://www.pnas.org/content/119/5/e2115649119)

[3]      Center on Poverty and Social Policy, 2/17/22, “3.7 million more children in poverty in Jan 2022 without monthly Child Tax Credit,” Columbia University (https://www.povertycenter.columbia.edu/news-internal/monthly-poverty-january-2022)

SOCIALISM IS THE ANSWER FOR SAVING DEMOCRACY FROM CAPITALISM

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

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

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

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

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

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

Other examples of harmful deregulation and privatization include:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

HOW THE RICH GET RICHER #4

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The inability of the Internal Revenue Service (IRS) to enforce tax laws has resulted in a high level of tax evasion by wealthy individuals and corporations. Some experts estimate that as much as $1 billion a year in taxes owed are not paid.

As the country’s tax collector and tax enforcer, the IRS has never been a popular agency among the public or politicians. However, the importance of the IRS’s work in enforcing tax laws, maintaining a fair and functional tax system, and collecting the revenue the government needs to operate had been broadly respected.

This changed when Republicans gained control of the U.S. House of Representatives and Newt Gingrich became the House leader in 1994. Republicans began vilifying the IRS and using “abolish the IRS” as a sound bite. Republican presidential candidates, including Sen. Lugar in 1996 and Sen. Cruz in 2016, made abolishing the IRS a central policy proposal. In 1998, Republicans introduced a bill in Congress to repeal the Internal Revenue Code (the country’s tax laws) and abolish the IRS. [1]

The Republicans have held congressional hearings on alleged abuses by the IRS. Despite the fact that in most cases investigations by the Government Accountability Office (GAO) and others have debunked the alleged abuses, the IRS’s reputation has been seriously undermined. This gave Republicans cover for passing laws weakening the IRS and its tax enforcement.

Beginning in 2010, Republicans in Congress undertook a multi-year initiative to cut the IRS’s budget and enforcement capacity. Since 2010 when its budget peaked at $14 billion, the IRS’s budget has been cut by about 20% (adjusted for inflation). Its staff has been cut by nearly one-quarter to 76,000 full-time employees and the number doing enforcement has fallen from 23,500 to 6,500, a 72% reduction. [2] It has the fewest auditors it has had since the 1940s and it has the oldest computer technology in the federal government.

The IRS recently announced a backlog of 35 million unprocessed tax returns, three times the number from a year ago and four times what it was in 2019. This means taxpayers have to wait longer for their refunds, payments from the Earned Income Tax Credit to low-income families will be delayed, and some transactions, like mortgage approvals, that require current income tax documentation will be delayed. It also revealed that only 3% of the calls to its most popular, toll-free hotline reach a real person. Despite its challenges, it has processed 137 million individual tax returns and sent refunds of more than $281 billion.

Tax obligations expire (i.e., become uncollectible) after ten years if the IRS doesn’t pursue them. In 2017, $8.3 billion of tax obligations expired, up from $482 million in 2010 (a 17-fold increase). Investigations of people who didn’t file a tax return have fallen from 2.4 million in 2011 to 362,000 in 2018 (down 85%). Similarly, collections from people who file but don’t pay have dropped dramatically. In 2017, the IRS conducted 675,000 fewer audits than in 2010, a 42% drop in the audit rate. The audit rate has dropped roughly 70% on those with incomes over $200,000 and but only about 40% for those with incomes under $200,000. This is a key contributor to increased tax evasion by the wealthy.

The impact of the IRS’s budget cuts has been exacerbated by substantial new responsibilities that it has been given under the Affordable Care Act and the response to the pandemic. In responding to the pandemic, the IRS has been tasked with distributing three rounds of relief payments, implementing changed rules on unemployment benefits and tax credits, and, most recently, sending out monthly checks to most families with children. With a significantly reduced budget and staff, it has been expected to do all of these things while trying to maintain its core business of processing tax returns. [3]

President Biden has proposed increasing the budget of the IRS by $40 billion over ten years to reduce tax evasion and generate revenue to help pay for infrastructure investments. He estimates that this increased IRS funding would raise government revenue by $140 billion over those ten years. The Congressional Budget Office (CBO) estimates added revenue of $103 billion and others have other estimates, but everyone agrees that increased enforcement would generate significant revenue. It would also make our tax system fairer by reducing tax evasion, which is largely done by wealthy individuals and corporations. However, it might well take five years to make the upgrades to the IRS’s computer systems and to hire and train the new staff needed to achieve these results.

Initially, the Republicans who were part of the bipartisan group of 21 Senators working on the infrastructure investment bill endorsed the increased funding for the IRS, but now they are backing away from it after hearing opposition from some of their wealthy backers.

Support for increased funding for the IRS has come from five former Secretaries of the Treasury, from both Republican and Democratic administrations. They state that increased funding for the IRS would “raise significant revenue and create a fairer, more efficient” tax system. [4]

The IRS and our income tax system depend, in large part, on the voluntary compliance and honesty of taxpayers. If taxpayers’ come to believe that the tax system is not fairly administered, voluntary and honest tax compliance is likely to decline. This could have dire implications for government revenue and for the IRS’s ability to do its job. It is important that the public believe that people pay the taxes the law says they owe. This encourages compliance with tax laws even if the overall perception is that the wealthy are not paying their fair share under our current tax laws. Then, the focus can be on making our tax laws fairer.

I urge you to contact your U.S. Representative and Senators and to ask them to support additional funding for the IRS so it can effectively enforce our tax laws. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

Please also contact President Biden and thank him for proposing increased funding for the IRS because this will mean it can more effectively implement our tax laws. You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Kiel, P., & Eisinger, J., 12/11/18, “How the IRS was gutted,” ProPublica and The Atlantic (https://www.propublica.org/article/how-the-irs-was-gutted)

[2]      Puzzanghera, J., 7/5/21, “Aggressive IRS could help with roads bill,” The Boston Globe

[3]      Stein, J., 6/30/21, “IRS faces 35 million unprocessed tax returns as backlog swells, watchdog says,” The Washington Post

[4]      Puzzanghera, J., 7/5/21, see above

TODAY’S VOTER SUPPRESSION IS HISTORY REPEATING ITSELF

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The efforts of states to suppress voting of Blacks (and other targeted groups that tend to vote for Democrats) are an historical repeat of what happened after the Civil War. These and other efforts that assert states’ power to restrict individuals’ rights are confronting the 14th Amendments’ provisions (from 1868) that give the federal government the power to protect individuals’ rights in the face of state efforts to deny them. Historian Heather Cox Richardson’s daily blog puts these current events in the perspective of our history, which is a very valuable insight to have.

The Declaration of Independence, when it stated “that all men are created equal,” meant white men. Nonetheless, this was a radical concept at the time – that no man’s birthright made him better than any other man. The Civil War was fought, in effect, to maintain a system that elevated America’s white men above African Americans, Native Americans, other men of color, and even Irishmen. As in the mid-1800s, we are now facing efforts that reject the principle of the equality of all human beings and seek to recast America as a country where certain people are better than others. These efforts are being led by white men for the most part, and are empowered by a relatively small group of wealthy white men (and a few women). [1]

In 1865, the 13th Amendment to the U.S. Constitution banned slavery in an important step toward equality. However, this did not stop white men in the South from working to establish systems that continued to make African Americans unequal and subservient to whites. These white men worked to deny African Americans the right to vote, to testify in court, and to sit on a jury. The infamous 1857 Dred Scott Supreme Court decision furthered this effort by denying citizenship to African Americans. The contorted opinion for the 7 to 2 decision was poorly reasoned and written by Chief Justice Roger Taney. These steps to institutionalize inequality occurred despite the fact that the 1870 Census would count African Americans as whole persons for the first time. Ironically, this would give the southern states more representation and power in Congress and in the Electoral College. [2]

To counter efforts to keep African Americans subservient, in July 1868, the 14th Amendment was passed, declaring that “All persons born or naturalized in the United States … are citizens of the United States and of the State wherein they reside.” It guaranteed all citizens due process and equal protection under the law. To counter white southern men’s and the Dred Scott case’s assertion of states’ rights to write laws that determined who could vote, among other things, the 14th Amendment gave the federal government the power to protect individuals’ rights when state legislatures passed laws that were discriminatory and infringed on those rights.

Nonetheless, two months later in September 1868, the Georgia legislature voted to expel the 33 newly elected African American state legislators. In 1870, with African American voting reduced by the terrorism of the Ku Klux Klan, African Americans were not elected. Similar events took place in other southern states. [3]

In response, the federal Department of Justice was created in 1870 with a primary mission of stopping the Ku Klux Klan (KKK) and its suppression of the rights and voting of African Americans. The KKK was a domestic terrorist group then as it is today.

In February 2021, Black legislators in Georgia opposed proposed voting restrictions noting that they reminded them of the 1870s when Jim Crow laws and lynching were used to deter African Americans from voting. Nonetheless, Georgia legislators passed the voting restrictions. Although the means have changed, they are still presented as supposedly race-blind restrictions. However, the fact that white men (for the most part) are rewriting the rules of our democracy to protect white power is unchanged. Similar actions are taking place in other states, not all of which are in the South.

There are striking similarities between the voting suppression efforts of the late 1800s and what’s happening today. For example, in 1890, the U.S. House of Representatives passed a bill empowering the federal government to oversee voter registration, voting, and ballot counting in the South. Then, Senate Democrats blocked its passage by staging the first of many southern-led filibusters that killed civil rights legislation.

The civil rights laws and court decisions of the 1950s, 1960s, and 1970s are based on the 14th Amendment giving the federal government the power to protect individuals’ rights. For example, the Brown vs. Board of Education decision that outlawed public school segregation and separate but supposedly equal treatment of Blacks, and the Loving vs. Virginia decision legalizing inter-racial marriage, were possible because of the 14th Amendment.

Opponents of civil rights laws and decisions revived the post-Civil War states’ rights arguments in the 1960s and 1970s. They began advocating for “originalism” in interpreting the Constitution when making court decisions. “Originalism” asserts that the Constitution should be interpreted as its writers envisioned it at the time they wrote it and that this would mean much stronger state governments and a weaker federal government, including in the establishment and enforcement of individuals’ rights.

In 1987, President Reagan nominated an “originalist,” Robert Bork, to become a Supreme Court Justice. He was rejected on a bipartisan basis. Bork had advocated for a rollback of Supreme Court civil rights decisions and of federal protections of individuals’ rights under the 14th Amendment. As Senator Ted Kennedy pointed out, rolling back such protections would not only raise the specter of re-segregation, but also the reduction of women’s rights to reproductive health services, citizens’ protections from rogue police officers, the teaching of evolution in schools, protection from censorship, and other individual rights.

Nonetheless, today’s Supreme Court is dominated by “originalists” and the individual rights protections of the 14th Amendment for voting, women’s and LGBTQ people’s health services, and the teaching of factual material, for example, are again being challenged by state governments, led mostly by white men.

On July 1, 2021, by a 6 to 3 vote, the Supreme Court decided that the state of Arizona did not violate the 1965 Voting Rights Act or the 14th or 15th Amendments with voting restrictions that disproportionately affect non-white racial or ethnic groups. President Biden stated that this “decision by the Supreme Court undercuts voting rights in this country and makes it all the more crucial to pass the For the People Act and the John Lewis Voting Rights Advancement Act to restore and expand voting protections. … Our democracy depends on it.” [4] However, to pass these bills, which have already passed in the House, the Senate will have to either eliminate or limit the use of the filibuster to block them. The Republicans have made it clear that they have no intention of providing any support for these bills.

I urge you to contact your U.S. Senators and ask them to support the For the People Act and the John Lewis Voting Rights Advancement Act, and to support eliminating or limiting the filibuster as the only way to pass these bills. The protections for voting rights in these bills are critically important to our democracy. You can find contact information for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

Please also contact President Biden and ask him to support eliminating or limiting the filibuster as the only way to pass these bills that he’s said our democracy depends on. You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Cox Richardson, H., 7/3/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/july-3-2020-bad)

[2]      Cox Richardson, H., 7/9/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/july-9-2021)

[3]      Berman, A., 6/2/21, “Jim Crow killed voting rights for generations. Now the GOP is repeating history,” Mother Jones (https://www.motherjones.com/politics/2021/06/jim-crow-killed-voting-rights-for-generations-now-the-gop-is-repeating-history/)

[4]      Cox Richardson, H., 7/1/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/july-1-2021)

HOW THE RICH GET RICHER #3

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

The Internal Revenue Service’s webpage on Individual Retirement Accounts (IRAs) says, “IRAs allow you to make tax-deferred investments to provide financial security when you retire.” However, they allow the wealthy to do much more.

When IRAs were first created in 1974 and then expanded to all workers in 1981, the goal was to encourage saving for retirement by offering a tax incentive, given that Americans were notoriously bad at saving. Initially, the maximum annual contribution was $2,000. It’s now $6,000 or $7,000 if one is over 50. The contribution can be deducted from one’s income, so it isn’t taxed up-front. Tax on the increased value of the investments in the IRA is deferred until the money is removed from the IRA. Money had to be taken out of the IRA starting at 70 ½ years of age (now 72) at a rate the would be expected to deplete it within the lifespan of the owner of the IRA. All earnings and any contributions that had been deducted from income up-front are subject to income tax, which for most taxpayers will probably be at a low rate due to lower income in retirement than when working. This all made good sense and was good policy.

Then came the Roth IRA in 1997. Contribution limits were the same as for the traditional IRA, but the contributions were subject to income tax up-front. However, when money is taken out of a Roth IRA there is NO income tax due on the increased value of investments nor on the contributions. There also is no requirement that money be taken out in one’s lifetime.

The wealthy and their tax / financial advisers quickly recognized that this was a huge opportunity for tax avoidance. It’s clear that some policy makers were aware of this and had no problem with it; in some cases, it may have been their intent. As a further example of how tax policy in general and Roth IRA policies specifically favor the wealthy, if a U.S. citizen renounces their citizenship they are taxed on the value of their assets, including ones that have increased in value even if they have not been sold. However, there are exemptions from the tax for certain kinds of assets, one of which is assets in a Roth IRA! [1]

ProPublica’s investigative reporting on how the wealthy pay very little in income taxes, perfectly legally, while their wealth is growing by leaps and bounds, [2] has also revealed how extensively Roth IRAs are being used for tax avoidance. Their reporting reveals that, among others, investors Warren Buffett and Ted Wechsler of the Berkshire Hathaway fund, Randall Smith of the Alden Capital hedge fund, Robert Mercer of the Renaissance Technologies hedge fund, and Peter Thiel and Max Levchin of PayPal all have Roth IRAs with hundreds of millions of dollars in them. [3]

Clearly, these mega-million-dollar Roth IRAs have nothing to do with saving for retirement and everything to do with avoiding taxes. Thiel has $5 billion in his Roth IRA. He and all the others will pay NO taxes on any money they take out of their Roth IRAs. Keep in mind that these huge IRA balances have supposedly come from contributions of a few thousand dollars a year. The huge gains on the investment of those small contributions will be subject to NO income (or other) tax when they are removed from the Roth IRAs. By the way, Thiel renounced his U.S. citizenship in 2011, allowing him to take advantage of this exemption from taxation for Roth IRA assets. (He became a citizen of New Zealand, which happens to have no estate tax.)

Recognition of the abuse of Roth IRAs for tax avoidance is not new. Forbes magazine and others have written about it since at least 2012. Senator Wyden proposed legislation to reform Roth IRAs in 2016, but it went nowhere in the Republican-controlled Senate. Simple policy changes could address the problem. For example, the dollar amount of investment gains in Roth IRAs that are exempt from taxation could be limited, to say a few million dollars. And the exemption of these gains from taxation could end when the account owner dies instead of allowing them to be passed on tax-free to heirs. [4]

One strategy for creating huge IRA balances is to put knowingly under-valued assets into them. When Thiel contributed 1.7 million shares of the company that would become PayPal into his Roth IRA in 1999, he claimed that they were only worth one-tenth of a cent per share ($0.001 per share). (They were not publicly traded at the time so a fair market value was subject to interpretation.) This meant that his contribution was under the $2,000 limit in place at the time. PayPal later admitted that this per share value was “below market value.” The shares are now worth billions.

Senator Wyden’s 2016 Roth IRA reform proposal would have addressed the problem of under-valuing assets contributed to an IRA by removing the tax exemption of any IRA that received an asset for less than fair market value. Others have proposed requiring IRAs to only receive assets that are traded on a public market so their true value is clearly established.

The financial industry opposes reforms to Roth IRAs because they make significant money from them by acting as custodians for IRAs (and other retirement accounts) and by processing the transactions that these accounts generate.

The IRA was originally designed to enhance the retirement security of working Americans, but it has become another way for the wealthy to avoid paying taxes, even when passing their wealth on to their heirs. Note that there are other types of retirement savings vehicles that also provide tax avoidance and other benefits to the wealthy. “Retirement” savings policies are one example of how the wealthy have gotten elected policy makers to tip the economic playing field in their favor. This is oligarchy in America. (Oligarchy “refers to a government of and by a few exceedingly rich people or families who control the major institutions of society and therefore have power … no one should be fooled. Oligarchs wield power for their own benefit” as Robert Reich writes in his latest book, The System: Who rigged it, how we fix it. (See my previous posts summarizing the book starting here.)

I urge you to contact your U.S. Representative and Senators and to ask them to support reforms that would end the abuse of retirement savings accounts by the wealthy. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

Please also contact President Biden and ask him to support reform of retirement savings accounts. You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Elliott, J., Callahan, P., & Bandler, J. 6/25/21, “The ultrawealthy have hijacked Roth IRAs. The Senate Finance Chair is eyeing a crackdown,” ProPublica (https://www.propublica.org/article/the-ultrawealthy-have-hijacked-roth-iras-the-senate-finance-chair-is-eyeing-a-crackdown)

[2]      Eisinger, J., Ernsthausen, J., & Kiel, P. 6/8/21, “The secret IRS files: Trove of never-before-seen records reveal how the wealthiest avoid income tax,” ProPublica (https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax)

[3]      Lord, B., 6/29/21, “Peter Thiel will pay zero in federal income tax on his $5 billion in gains,” Common Dreams (https://www.commondreams.org/views/2021/06/29/peter-thiel-will-pay-zero-federal-income-tax-his-5-billion-gains)

[4]      Elliott et al., 6/25/21, see above

THE CASE FOR A WEALTH TAX

Note: I apologize for the infrequent blog posting. I’m on sabbatical with out-of-town grandchildren visiting.

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Recent revelations about how little federal income tax the ultrawealthy pay and how they legally avoid income tax liability make the case that a wealth tax is essential for a fair tax system. A fair tax system is necessary a) to provide sufficient funds for the public programs needed to serve the public and the public good, and b) to preserve public support for the tax system.

ProPublica, an independent, nonprofit newsroom that does investigative journalism in the public interest, has obtain and analyzed 15 years of data on the tax returns of thousands of the country’s wealthiest households. Its analyses show the wealthy pay very little in income taxes, perfectly legally, despite the fact that their wealth is growing by leaps and bounds. [1] (This post is largely a summary of this ProPublica reporting.)

The median American household earns about $70,000 a year and pays about 15% of this in income taxes. For the period from 2014 to 2018, a typical middle class American household paid a total (for these five years) of about $62,000 in federal income tax on total earnings of around $350,000. Meanwhile, its wealth, primarily the value of its home, grew by $65,000. Its effective tax rate on the combine total of earned income and increase in wealth was about 15%.

ProPublica’s detailed analysis of the 25 wealthiest Americans found that collectively their wealth increased by $401 billion in the five-year period from 2014 to 2018. Their earned income was tiny by comparison. They paid an aggregate total of $13.6 billion in federal income taxes. Their effective tax rate on the combined total of their earned income and increase in wealth was about 3.4% (versus the 15% paid by a typical middle-income taxpayer).

Another analysis found that in 2018, in comparison to their wealth, a typical middle-income household paid 75 times as much in income tax as those 25 ultrawealthy Americans. At the end of 2018, the 25 wealthiest Americans had an estimated wealth of $1.1 trillion and in 2018 paid federal income taxes of $1.9 billion. It would take 14.3 million typical American households to have this much wealth and those 14.3 million households paid federal income taxes of $143 billion in 2018.

This disparity in income tax paid when wealth is factored in is the result of a 1920 Supreme Court decision where the Court ruled that the income tax laws as written apply only to income received in cash and not to an increase in wealth (i.e., the value of assets), unless assets are sold and cash (or other forms of proceeds) are received. Before this decision, the income tax had applied to increases in wealth.

This decision provided the wealthy with a huge loophole for tax avoidance. The ultrawealthy own billions of dollars worth of stock, often in companies they own or control. The 25 wealthiest Americans have seen the value of their stocks skyrocket in recent years. To minimize earned income (and income tax), they often take modest salaries from their companies; some take salaries of only $1.

Some of the ultrawealthy avoid having income (and therefore paying income tax) because they are able to pay their living expenses by borrowing large sums of money, sometimes billions of dollars, using their stock wealth as collateral for loans. These loans are not considered income and therefore are not subject to income tax. Furthermore, the interest on the loans is often tax deductible and can be used to offset (i.e., cancel out) income, reducing or eliminating taxable income and the amount of income tax owed.

The wealthy often avoid income tax by reducing taxable income with deductions. Deductions can be losses on various investments or business ventures, such as real estate or sports teams. Charitable contributions are another deduction that reduces taxable income. And, of course, if they do sell some of their stock or other assets, the profits on those sales, as well as the dividends and interest they get from their investments, are unearned income, which is taxed at a lower rate than earned income (if it isn’t eliminated by deductions).

The wealthy have gotten these tax breaks (and others) written into U.S. tax laws through their spending on and donations to the political campaigns of many of our elected officials, as well as through their lobbying of elected and appointed officials. (See my previous posts on how the U.S. tax system favors the rich and what can be done to make it fairer.)

The degree to which the wealthy control the debate on tax policy is reflected in the fact that the current tax reform proposals from President Biden would have little impact on the wealthy. Nonetheless, these tax reform proposals are reported as being big and controversial changes in our income tax laws. One proposal is to raise the income tax rate on high earned incomes back to 39.6% from 37%. (For perspective, it was over 90% in the 1950s and 70% in 1980.) This would have little effect on the wealthy because only a small portion of their income is earned income and this is a small percentage increase. A second proposal, would make the income tax rate on unearned income (e.g., dividends and the gain on the sale of assets) the same as the higher rate on earned income. This would have more of an effect on the wealthy, but little effect on the ultrawealthy that ProPublica analyzed in detail as they rarely sell their assets or they have deductions that reduce or eliminate their taxable income.

The failure of the wealthy in America to pay their fair share in taxes harms our country in two main ways. First, government is under-funded and can’t do the things we need it to do – from maintaining and building infrastructure, to investing in human capital, to maintaining a just and sufficient safety net for those who fall on hard times, to building and maintaining a public health system that can save lives during a pandemic or other health crisis. Second, taxes are citizens’ collective contributions to having a civil society and supporting the public good. Such a system is viable only if citizens believe it is fair and everyone is contributing their fair share.

ProPublica’s investigative reporting on the U.S. tax system is performing a valuable public service. An informed debate about our tax system and the design of policies for a fair system can only happen if there is good data and an accurate picture of how the tax system is working.

These data and the picture they paint make it clear that the only way to have a truly fair tax system is to tax wealth (as Senators Warren and Sanders have proposed) or to tax increases in wealth as income even if assets are not sold and no cash or other proceeds are received (i.e., to tax unrealized capital gains).

I urge you to contact your U.S. Representative and Senators and to ask them to support a tax on wealth or increases in wealth as the only way to make our tax system fair. You can find contact information for your U.S. Representative at  http://www.house.gov/representatives/find/ and for your U.S. Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

Please also contact President Biden and ask him to support a tax on wealth or increases in wealth, in addition to his current proposals, as such a tax is essential to making our tax system truly fair. You can email President Biden via http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.

[1]      Eisinger, J., Ernsthausen, J., & Kiel, P. 6/8/21, “The secret IRS files: Trove of never-before-seen records reveal how the wealthiest avoid income tax,” ProPublica (https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax)

OPPOSITION TO “SOCIALISM” IS A DOG WHISTLE FOR RACISM

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

As I imagine you’ve heard, Republicans are attacking President Biden’s and Democrats’ policy proposals as “socialism.” I thought, naively, that Republicans were just trying foster opposition based on Cold War fears by conflating socialism with communism and identifying it as the existential threat to American democracy.

Heather Cox Richardson, with her historical perspective, has opened my eyes to the fact that the opposition to “socialism” has deeper roots in our history and is a dog whistle for racism. (If this use of the term dog whistle is new to you, please see this footnote. [1])

First, socialism is formally defined as an economic and political system where workers own the means of production (e.g., factories, farms, and organizations that provide services as well as the raw materials, machines, tools, and physical facilities used in producing goods and services). This is NOT, by any stretch of the truth, what Biden and Democrats are proposing. Socialism recognizes workers as the essential input to the economy and, therefore, posits that they should own the means of production and be the beneficiaries of the fruits of the economy.

Social democracy, on the other hand, is a political and economic system where a democratic government manages and regulates capitalism (i.e., private ownership of the means of production) to ensure social and economic justice. In our democracy, the government’s commitment to social and economic justice for all is stated in our founding documents – that all people are created equal, that all people should be guaranteed life, liberty, and the ability to pursue happiness, and that all people have the rights delineated in the Bill of Rights.

The explicit recognition that equal opportunity and true freedom require economic security was stated by President Franklin D. Roosevelt in his proposal for an economic bill of rights [2] and by Senator Bernie Sanders in his statements on what democratic socialism means to him (although technically speaking, he was describing social democracy and not democratic socialism). [3] [4] (See this footnote for a definition of democratic socialism and communism. [5])

Currently, Republicans are using “socialism” as a dog whistle to mean the use of government resources to promote racial equity and justice. Their dog whistle definition of “socialism” is the use of taxes paid by hardworking white men (and women) to benefit lazy people of color who are happy to live on government benefits. Today’s Republicans claim this “socialism” will undermine American democracy and freedom. The dog whistle is that these policies will undermine the “freedom” and privilege of white people.

This use of “socialism” goes back to 1871 when southern Democrats claimed they opposed voting by Blacks, not due to racism, but because Black voters would elect policy makers who would promote “socialism,” i.e., taxing white property owners to pay for roads, schools, and hospitals that would benefit Blacks. [6] They argued that Black voting would lead to “socialism” that would destroy America (namely the America of white supremacy). [7] [8]

After the Brown v. Board of Education decision in 1954, which found racial segregation in public schools unconstitutional, the use of government resources to enforce desegregation and civil rights was attacked as “socialism” because the costs of implementing desegregation and civil rights (for “undeserving” Black people) would be paid for by taxes on hardworking white men (and women). In 1958, Republican Senator Barry Goldwater accused his own party’s President Eisenhower of succumbing to “the siren song of socialism” for his use of government resources (troops) to enforce desegregation of Little Rock, Arkansas, High School. The irony was that the Goldwater family had made its money from government funding for dam construction in Arizona. [9]

Republican attacks on government, on a public safety net, and on beneficiaries of public assistance (inaccurately stereotyped as people of color) took on new strength and significance with the election of President Reagan in 1980. Remember Reagan’s attack on the mythical “welfare queen” with her Cadillac and mink coat? The attacks on “socialism” as a dog whistle for racism have only escalated since then.

Today, Republicans are vigorously charging that President Biden and Democrats are working to bring “socialism” to America. They claim that a no-holds-barred fight is necessary to save American from “socialism.” They are even willing to dispense with a commitment to democracy to “save” America. This disregard for democracy dates to at least 1980 when Republican strategist Paul Weyrich stated, “I don’t want everybody to vote …our leverage in the elections quite candidly goes up as the voting populace goes down.” That’s why Republicans have been and are actively engaged in voter suppression efforts. (Weyrich was a co-founder of the Heritage Foundation, which today is deeply involved in promoting state voting suppression laws and with the “audit” of voting in Arizona and elsewhere.) In October 2020, Utah Senator Mike Lee tweeted, “Democracy is not the objective … liberty, peace, and prosperity are. … democracy can thwart that.” [10]

Republicans are claiming today, as white southern Democrats did after the Civil War, that keeping “socialism” from coming to America requires keeping Black and other likely Democratic voters from voting; democracy, our Constitution, and our founding principles (which make America exceptional) be damned. The racism of the post-Civil War white Democrats’ attacks on “socialism” was made clear by the brutal Jim Crow laws they implemented to keep Blacks in their place and to prevent them from voting.

The implications of today’s Republicans’ claims of needing to prevent “socialism” in America aren’t completely clear, but civil rights, police reform, and social and economic justice are definitely targets. However, the racism behind their attacks on “socialism” is clear and these attacks should no longer be a dog whistle; every American should hear the racism in their attacks on “socialism” loudly and clearly.

[1]      The term dog whistle here is a political adaptation of the fact that a dog whistle can’t be heard by humans but can be heard by dogs. In politics, it refers to language that will be heard as supporting white privilege and supremacy by those people attuned to such sentiments, but won’t be heard by many other people as being racist and where the politician opposing “socialism” – or using other dog whistles – can deny racist intent.

[2]      President Franklin Delano Roosevelt, 1/11/44, “The economic bill of rights,” retrieved from the Internet 5/22/21 at https://www.ushistory.org/documents/economic_bill_of_rights.htm

[3]    Senator Bernie Sanders, 11/19/15, “Senator Sanders on Democratic Socialism and Defeating ISIS,” retrieved from the Internet 5/22/21 at https://www.c-span.org/video/?400961-1/senator-bernie-sanders-address-democratic-socialism (Sanders begins speaking at 8 mins., defines socialism at 12 mins., and presents his and FDR’s vision at 30 mins. into this 1 hr. 40 min. video)

[4]    Golshan, T., 6/12/19, “Bernie Sanders defines his vision for democratic socialism in the United States,” Vox (https://www.vox.com/2019/6/12/18663217/bernie-sanders-democratic-socialism-speech-transcript)

[5]     Democratic socialism is socialism where both the economy and society are governed democratically, with decision making by citizens with a focus on economic and social justice. Democratic socialism is not compatible with capitalism, which is based on private ownership of the means of production and, therefore, where the benefits, economic and also social and political power, flow to the owners of capital, i.e., the owners of physical and monetary assets.

Communism is formally defined as an economic and political system where the workers own the means of production and that is dedicated to equality for all, implemented through an authoritarian government. The main difference between communism and socialism is that socialism is compatible with democracy and liberty, while communism requires authoritarianism and denies basic individual liberties.

[6]      Cox Richardson, H., 4/19/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/april-19-2021)

[7]      Cox Richardson, H., 5/14/21, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/may-14-2021)

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

[9]      Cox Richardson, H., 4/19/21, see above

[10]     Cox Richardson, H., 5/14/21, see above

KEEPING THE RICH FROM GETTING EVEN RICHER

The rich have been getting dramatically richer, generally at the expense of the rest of us, for the last 40 years. My previous post identified four ways the U.S. tax system favors the rich:

  • Lower tax rates on the types of income (i.e., unearned income) that are prevalent among the wealthy,
  • Weak enforcement of tax laws that allows the wealthy to engage in substantial illegal tax evasion,
  • The lack of a wealth tax on anything other than one’s home, and
  • Tax loopholes that allow the wealthy to significantly reduce the amount of income tax they pay.

Federal tax laws and regulations are, obviously, the result of policy decisions made by elected officials (i.e., Congress and the President) and bureaucrats in the executive branch who report to the President. Therefore, these four ways that the tax system is tilted in favor of the wealthy can and should be changed.

First, the tax rates on unearned income should be raised. There’s a strong argument for making the tax rates on unearned income the same as on earned income and there’s no good reason to tax unearned income at a lower rate than earned income. It would be fairer to treat all kinds of income the same and this would eliminate the perverse incentive to manipulate income to have it fall into a category with a lower tax rate.

Tax rates in general, for both unearned and earned income, should be made more progressive. This would make our tax system fairer. The current top income tax rate is 37%. In the 1950s, the top tax rate was over 90% and in 1980, it was 70%. [1] So, the rich have gotten huge tax cuts over the last 70 years. And by the way, the economy was doing just fine in the 1950s with those higher tax rates. Raising the top rate by 1% would increase government revenue for needed programs and investments by about $12 billion per year. President Biden has proposed increasing the top rate to 39.6% (where it was before the 2017 Republican tax cut). This would generate about $31 billion in annual revenue.

Second, the budget of the IRS needs to be increased to strengthen enforcement of tax laws. It is estimated that every dollar spent on enforcement will reduce tax evasion by about $10. President Biden has proposed increasing IRS funding by about $8 billion per year and estimates that this would decrease tax evasion and increase government revenue by about $70 billion per year.

The IRS’s funding has been cut dramatically in recent years. This has reduced its ability to enforce tax laws and stop tax evasion. According to a Congressional Budget Office (CBO) report, from 2010 to 2018, the IRS’s annual budget declined by 20% and its staff decreased by 22%. Funding for enforcement fell by nearly 33%. Reviews of individual tax returns fell by 46%, while reviews of corporate tax returns fell by 37%. With less money and fewer staff, the IRS has had reduced capacity to enforce tax laws. [2] Nonetheless, the IRS is auditing low-income households, particularly those claiming the Earned Income Tax Credit for low-wage workers, at about twice the average rate that it audits the overall population.

The CBO estimated that $381 billion per year of taxes owed are not collected, mostly because of under-reporting of income by wealthy Americans. Because nearly all wage income is reported to the IRS by employers, unearned income and business income are far more likely to be under-reported. Wealthy Americans receive far more of these kinds of income than middle- and lower-income households. Therefore, the wealthy are the primary ones guilty of tax evasion by under-reporting income and are the beneficiaries of reduced IRS enforcement.

Third, a wealth tax would be an important step in making our tax system fairer, reducing economic inequality, and limiting the ability of families to perpetuate multi-million-dollar fortunes across generations, which is contributing to the emergence of an oligarchy in American society and politics. (See my previous posts on oligarchy in America here and here.) Senators Warren and Sanders have proposed a wealth tax that would place a 2% annual tax on wealth over $50 million, rising to 3% on wealth over $1 billion. It is estimated that such a wealth tax would raise $300 billion a year in revenue for the federal government.

Fourth, tax loopholes for the wealthy should be closed. There are too many of them to go into detail or provide an exhaustive list. As a starting point, we should:

  • Eliminate the “carried interest” loophole for managers of real estate, venture capital, private equity, and hedge funds that lets them pay the lower unearned income tax rates on the income they earn from their jobs,
  • Reduce the amount of money that can be given as tax-free gifts,
  • Reduce the amount of money that can be put tax-free into retirement accounts,
  • Reduce the amount of money that can be transferred tax-free in an estate, and
  • Eliminate the “stepped up basis” law that allows for tax-free transfers of assets that have increased in value. (See my previous post for more details on these tax loopholes.)

I encourage you to contact your U.S. Representative and Senators and tell them you support policy changes such as those above that would make our tax system fairer, stop the runaway increase in economic inequality, and generate revenue to pay for needed government programs, such as improving infrastructure and providing better supports for children and families. You can find contact information for your US Representative at  http://www.house.gov/representatives/find/ and for your Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

I also encourage you to contact President Biden and to tell him you support his policy changes and others that would make our tax system fairer, reduce economic inequality, and generate revenue to pay for needed government programs. Contact the White House at https://www.whitehouse.gov/contact.

[1]      Reich, R., 4/2/21, “Tax the rich. Here’s how,” Common Dreams (https://www.commondreams.org/views/2021/04/02/tax-rich-heres-how)

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

HOW THE RICH GET RICHER #2

Here’s number 2 in a series of posts on how the rich get richer, generally at the expense of the rest of us. (See number 1 here.)

The U.S. tax system favors the rich with:

  • Lower tax rates on the types of income (i.e., unearned income) that are prevalent among the wealthy,
  • Tax loopholes that allow the wealthy to significantly reduce the amount of income tax they pay,
  • Weak enforcement of tax laws that allows the wealthy to engage in substantial illegal tax evasion, and
  • The lack of a wealth tax on anything other than one’s home.

First, unearned income (e.g., income from dividends and the increased value of investments, aka capital gains) is generally taxed at a lower rate than earned income (i.e., income from wages). The wealthy, of course, receive the lion’s share of unearned income.

The overall federal tax rate on earned income for a typical household is 29.65%. The income tax rate is 22% on middle income households. The tax for Social Security is 6.2% and is matched by one’s employer. The tax for Medicare is 1.45% and is also matched by one’s employer. Income tax rates on earned income begin at 10% for lower income households and increases to 37% (on income over $622,000). Social Security only taxes earnings up to $142,800, so the effective tax rate for those with higher incomes declines as income increases. Therefore, the highest overall federal tax rate on earned income today is just about 40%. (Historically, the maximum federal income tax rate was 70% in 1980 and over 90% in the 1950s, compared with 37% today.)

The federal tax rate on most unearned income is roughly half of that on earned income – 15% for middle income taxpayers and a maximum of 20% for high income taxpayers. The tax on long-term capital gains (i.e., the increase in value of investments owned for more than one year) is zero for lower income households and increases to 20% (on income over $434,550). Most dividend income is taxed at the same rates as long-term capital gains. Unearned income  is not subject to Social Security and Medicare taxes. By the way, billionaires in the U.S. gained about $1 trillion in wealth due to the increased values of their investments during the pandemic year from March 2020 to March 2021.

In early 2011, the very wealthy investor Warren Buffett publicly stated that he believed it was wrong that rich people, like himself, paid a smaller portion of their incomes in income taxes than  middle class people, like his secretary. President Obama and some in Congress proposed changes in income tax laws to ensure that the wealthy paid more in income tax, but these proposals were not enacted.

Second, the broad variety of tax loopholes that benefit the wealthy constitute a form of welfare for the wealthy that is rarely discussed using this terminology. One of the most egregious loopholes is the so-called “carried interest” loophole. It allows managers of real estate, venture capital, private equity, and hedge funds (who are invariably wealthy) to claim the income they earn from their jobs to be capital gains (i.e., unearned income), which cuts the income taxes they pay roughly in half. This loophole is estimated to cost the federal government about $1.4 billion a year in lost tax revenue. [1]

An individual can make a gift of up to $15,000 per year to anyone they want to (e.g., children and grandchildren) and to as many people as they want to. The recipient(s) do not have to pay any tax on the gift they receive. Only the wealthy can afford to make gifts of this magnitude, of course.

An individual can contribute up to $19,500 ($26,000 if over 50) to a 401k retirement savings account and reduce their taxable income by the amount of their contribution. In some cases, an individual could also contribute $6,000 ($7,000 if over 50) to an Individual Retirement Account (IRA) and reduce their taxable income by this amount as well. Clearly, only wealthy individuals can afford to make contributions of this magnitude to retirement accounts, so this is another way the rich can dodge income taxes.

When a wealthy individual dies, roughly $11 million of their estate can be passed on tax-free. As a result, only about 3,000 estates are subject to the federal estate tax each year. The maximum tax rate on the assets passed on by an estate is 40%. Some in Congress have proposed eliminating the estate tax completely.

If investments or assets are left to children when a wealthy parent dies, the children never have to pay any tax on the increased value of the investment during the parent’s lifetime. If they were to sell the investment or asset on the day they received it, they would owe no tax. So, for example, Bill Gates can leave his billions of dollars of Microsoft stock to his children and they can sell it when they receive it and owe no tax, so no tax would ever be paid on the billions of dollars of increase in its value from the day Bill Gates got the stock.

Any homeowner can deduct the interest paid on up to $1 million of mortgages to reduce the amount of income on which they owe tax. (This limit has been reduced to $750,000 for mortgages obtained after 2017.) This applies to mortgages on first and second homes. This tax break costs the federal government more than it spends helping poor families pay rent and avoid homelessness. Homeowners can also reduce their taxable income by up to $10,000 for property taxes they paid. [2] This $10,000 limit was imposed in 2017; the deduction used to be unlimited. These tax breaks have the greatest benefit for the wealthy, of course.

The cost to the federal government of lost revenue due to the various income tax breaks (aka loopholes) is huge – more than $1.5 trillion a year, which is more than the cost of Social Security or of Medicare and Medicaid combined. The bulk of the benefits from these income tax breaks or loopholes goes to wealthy individuals, of course.

Third, the wealthiest 1% of U.S. households don’t report over one-fifth of their income costing the federal government an estimated $175 billion every year. Some simply don’t report all their income, but many use complex tax strategies to dodge income taxes. Because the IRS rarely audits wealthy taxpayers (only 6% of those with income over $10 million), much of this tax avoidance is never subject to enforcement actions. Budget cuts and staff shortages at the IRS are partly to blame, but policy decisions have also contributed to the fact that the poor are audited at about twice the rate (roughly 0.7%) of the overall population. [3]

Finally, wealth is not taxed in the U.S., with the exception of the major asset or investment of the middle-class – one’s home. The property tax on one’s home, typically levied by local government, is the only wealth tax in America. It ranges from a high of 2% per year to a low of an effective rate of 0.3%. Ownership of all other wealth, other assets or investments (e.g., stocks, bonds, and other financial instruments), which are mostly owned by the wealthy, are not taxed.

The wealthy and their political supporters have lots of rationales for why they shouldn’t pay more taxes. Many of these rationales contradict ones they present to argue against public assistance for the poor or increased unemployment benefits or an increase in the minimum wage.

The bottom line is that by pretty much any measure and also from an historical perspective, the wealthy are not paying their fair share. The U.S. tax system is rigged in favor of the wealthy. When the wealthy and their political supporters say the country can’t afford to help low- and middle-income people with health care, child care, higher education, or housing costs, or that Social Security benefits need to be cut, remember that the wealthy are getting hundreds of millions of dollars of benefits each year from the provisions or loopholes of our tax laws. On top of this, there would be additional hundreds of millions of dollars of revenues for the federal government each year if the wealthy were paying their fair share.

My next post will present a variety of proposals and strategies to make our tax system fairer.

[1]      Reich, R., 4/2/21, “Tax the rich. Here’s how,” Common Dreams (https://www.commondreams.org/views/2021/04/02/tax-rich-heres-how)

[2]      Buchheit, P., 3/22/21, “The boundless advantages of the welfare state – for the rich,” Common Dreams (https://www.commondreams.org/views/2021/03/22/boundless-advantages-welfare-state-rich)

[3]      Johnson, J., 3/22/21, “ ‘This is tax evasion’: Richest 1% of US households don’t report 21% of their income, analysis finds,” Common Dreams (https://www.commondreams.org/news/2021/03/22/tax-evasion-richest-1-us-households-dont-report-21-their-income-analysis-finds)

THE GAMES OLIGARCHS PLAY

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

In three previous posts, I’ve summarized the three major systemic changes identified by Robert Reich in his latest book, The System. These systemic changes have occurred since 1980 and have shifted power, both economic and political, to a small group of very wealthy Americans. As a result, our democracy operates in many ways like an oligarchy. (Oligarchy “refers to a government of and by a few exceedingly rich people or families who … have power … . Oligarchs may try to hide their power … . But no one should be fooled. Oligarchs wield power for their own benefit.” pages 13-14) [1]

Reich’s three systemic changes have shifted power:

  • From a broad set of corporate stakeholders to shareholders (see this previous post for details),
  • From workers and their unions to large employers (see this previous post for details), and
  • From manufacturing and a broad set of stakeholders in our economy to the financial sector and Wall Street (see this previous post for details).

A dramatic result of these shifts in power has been rapidly growing inequality in income and wealth. A cause and symptom of this inequality is that a small number of wealthy people dominate as the sources of funding for the campaigns of elected officials. These are the oligarchs. In the 2016 election cycle, the wealthiest 25,000 people in America (0.01% of the population) made a record-breaking 40% of all campaign contributions – up from 15% in 1980. Over the period from 2009 through 2020, twelve very wealthy individuals and their spouses gave a total of $3.4 billion to federal candidates and political groups. This is over 7% of the total money raised. The 100 highest giving zip codes hold less than 1% of the U.S. population, but were responsible for 20% of the $45 billion that federal candidates and political groups raised from 2009 through 2020. The increasing amount and share of campaign money coming from oligarchs was accelerated by a series of U.S. Supreme Court decisions, including the 2010 Citizens United decision. [2]

This high level of campaign spending gives these oligarchs access to our elected officials that you and I don’t have. When one of them calls or requests a meeting, that call is answered or that meeting is scheduled. Because their voices are heard and elected officials want the money to keep flowing to them, these oligarchs generally get the policies they want and that benefit them.

Throughout the book, Reich uses Jamie Dimon, the CEO of JPMorgan, as an example or case study of how the oligarchs operate; how they have abandoned public responsibility and advance their self-interest. Dimon appears to believe that corporations do have social responsibilities and not just responsibility to maximize returns for shareholders (as pure shareholder capitalism asserts). Dimon touts JPMorgan’s financing of $2 billion in affordable housing annually, its lending in low- and moderate-income neighborhoods and to small businesses, its 5-year $350 million job training program, and its $500 million AdvancingCities initiative to help financially-strapped large cities.

Although JPMorgan’s social responsibility efforts are notable, they are small relative to the size of the problems they are tackling and small in comparison to JPMorgan’s yearly profits of $30 billion. Moreover, they are contradicted by other actions of JPMorgan and Dimon. Dimon has not supported raising the minimum wage or paying all JPMorgan workers a livable wage, which would do a lot to help many of the people targeted by JPMorgan’s philanthropy, despite his 2018 compensation package worth $31 million and his wealth of around $1.5 billion. In addition, JPMorgan paid $55 million in 2017 to settle charges that it discriminated against minority mortgage borrowers.

Furthermore, Dimon personally lobbied hard for the 2017 tax cut that reduced the corporate tax rate from 35% to 21% and increased JPMorgan’s profits by billions of dollars annually. The tax cut increased the federal deficit by $190 billion annually; a figure that has to be covered, sooner or later, by cuts in federal government programs or increased taxes on others.

JPMorgan, with Dimon in charge, paid $13 billion to settle claims that it defrauded borrowers and investors in the mortgage scandal that led to the 2008 economic collapse. In 2019, it required forced arbitration for credit card disputes, preventing aggrieved customers from suing in court or through a class action lawsuit.

Although Dimon publicly opposed President Trump pulling the U.S. out of the Paris Climate Agreement, JPMorgan is the biggest bank investor in fossil fuels, to the tune of $196 billion between 2016 and 2018. A 2019 report by an environmental coalition named Dimon the “world’s worst banker of climate change.” JPMorgan is also the largest U.S. bank providing financial services to the gun industry and loans to gun buyers.

So, a few hundred million dollars a year of philanthropy is a good investment in public relations for a wealthy Wall Street bank that has had numerous ethical lapses and that was a significant contributor to the economic collapse in 2008, resulting in millions of people losing their jobs, homes, and savings, while it got hundreds of millions of dollars in bailouts.

However, Dimon and JPMorgan are just one example. In 2019, the Business Roundtable, in an effort to counter unfavorable publicity about corporations being solely focused on benefiting shareholders, issued a highly publicized corporate responsibility statement signed by CEOs of 181 major U.S. corporations (including Dimon) stating they believed in “a fundamental commitment to all our stakeholders.” The statement included a commitment to treat employees fairly, support communities, and embrace sustainable practices. [3]

However, actions speak louder than words. Just weeks after the statement appeared, Whole Foods, a subsidiary of Amazon, announced it would cut health benefits for its part-time workers, despite multi-billionaire Jeff Bezos, CEO of Amazon, having signed the corporate responsibility statement. During the pandemic, billionaires did very well and big corporations did well (45 of the 50 biggest were profitable). Despite this, 27 of the 50 big corporations laid off workers, totaling more than 100,000 workers. For example, Walmart, whose CEO was a corporate responsibility statement signer, distributed $10 billion to shareholders while laying off over 1,200 workers. [4]

If the CEOs (i.e., oligarchs) signing the corporate responsibility statement were serious about their commitment to all stakeholders, they would support federal legislation to make those commitments laws (i.e., legally binding). Or, at least, they’d pay a fair share of taxes to the federal government so it could support workers, communities, and a sustainable economy. However, in 2020, 55 of the largest U.S. corporations paid no federal income tax on $40 billion in profits. Moreover, they received more than $3 billion in federal tax rebates, giving them an effective tax rate of negative 9%; a bit different than the stated tax rate of 21%. Twenty-six of them have paid no federal income tax since the 2017 tax cut (and received $5 billion in rebates) while generating $77 billion of profits.

In actuality, the corporate responsibility statement appears to be part of a PR campaign by oligarchs that, along with corporate philanthropy, is designed to slow or stop proposed legislation and regulations that would require oligarchs and their corporations to:

  • Share their power and wealth by treating workers and communities more fairly, and
  • Engage in sustainable business practices.

Reich quotes the theologian Reinhold Niebuhr as noting that “ The powerful are more inclined to be generous than to grant social justice.”

These are the games that oligarchs play to try to hide their power and to try to fool the rest of us into believing that they care about fairness and social responsibility.

[1]      Reich, R.B., 2020, The System: Who rigged it, how we fix it. NY, NY: Alfred A. Knopf.

[2]      Beckel, M., retrieved 4/21/21, “Outsized influence,” Issue One (https://www.issueone.org/wp-content/uploads/2021/04/Issue-One-Outsized-Influence-Report-final.pdf)

[3]      Business Roundtable, 8/19/19, “Statement on the Purpose of a Corporation,” https://system.businessroundtable.org/app/uploads/sites/5/2021/02/BRT-Statement-on-the-Purpose-of-a-Corporation-Feburary-2021-compressed.pdf

[4]      MacMillan, D., Whoriskey, P., & O’Connell, J., 12/16/20, “America’s biggest companies are flourishing during the pandemic and putting thousands of people out of work,” The Washington Post

OLIGARCHY OR DEMOCRACY: CORPORATIONS VS. WORKERS

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Robert Reich’s latest book, The System, presents his analysis of how our democracy is more like an oligarchy these days, how it got that way, and how to fix it. Oligarchy “refers to a government of and by a few exceedingly rich people or families who … have power … . Oligarchs may try to hide their power … . But no one should be fooled. Oligarchs wield power for their own benefit.” (page 13-14) [1]

Reich identifies three major systemic changes that have occurred since 1980 that have shifted power, both economic and political, to a small group of very wealthy Americans. They are:

  • The shift of big corporations from stakeholder to shareholder capitalism (see my previous post for a summary of this change),
  • The shift in bargaining power from unions to large employers and corporations (see below), and
  • The shift in power in our economy and politics to the financial sector and Wall Street.

The shift in power from workers and their unions to large employers and corporations began in the 1980s. It included three components:

  • The increased size and marketplace power of corporations,
  • The increased influence of large corporations and employers in policy making, and
  • The weakening of the power of workers and their unions.

The increased size, marketplace power, and political influence of corporations has occurred in large part because the federal government has, starting in the 1980s under President Reagan, basically abandoned enforcement of anti-trust laws limiting mergers and acquisitions. As a result, two-thirds of the business sectors of our economy have become more concentrated since the 1980s. This means that ever larger corporations have gained monopolistic power, allowing them to raise prices or reduce customer service or quality without losing business to the competition, because there is little or no competition in many local markets.

The resultant large companies have the resources to engage in extensive political activity including lobbying, making sizable campaign donations and expenditures, and moving employees through the revolving door to positions in government (and often back again). This has provided them with substantial political power and influence.

Because payroll costs are typically 70% of a business’s costs, reducing personnel costs is the quickest way to increase profits and share prices, the goals of shareholder capitalism. The increased size and reduced number of employers inherently suppress worker pay by leaving workers fewer choices of whom to work for in many locales. This means there is less competition among employers in hiring workers, and therefore less need to increase pay or benefits to attract workers.

On the policy front, a central focus of large companies’ political influence has been on undermining and weakening enforcement of laws supporting unionized workers. In addition, relaxed laws governing international trade have allowed employers to shift jobs overseas to cheaper labor markets. Finally, a bankruptcy filing, a technique frequently used by vulture capitalists (i.e., private equity investors and corporate raiders), allows employers to void union contracts, as well as benefits for retirees. Simply the threat of bankruptcy has become enough to get unions and workers to agree to cuts in pay and benefits. All of these factors mean that large employers have gained the ability to undermine and eliminate unionized workers, as well as to block the formation of new unions.

As a result, unionization of private sector U.S. workers has dropped precipitously from 35% in the 1950s to 6% today. Reduced unionization leaves employees with less power to bargain for good pay and benefits. It also means employers are able to effectively require workers to agree to disadvantageous employment conditions such as signing agreements prohibiting them from working for a competitor (i.e., non-compete agreements) and agreeing to engage in arbitration rather than going to court with a lawsuit when mistreatment or other grievances occur. Moreover, the economy-wide boost to pay and benefits due to employers having to compete against unionized jobs to attract workers, has effectively disappeared as unionization has dropped to today’s very low levels.

In addition, large employers have gotten states to enact so-called “right-to-work” laws. These laws allow workers at a unionized workplace to refuse to pay union dues, even though they benefit from the union’s negotiation of pay, benefits, working conditions, and grievance procedures. This undermines the financial resources and bargaining power of unions.

The increased size and reduced number of businesses has increased corporate profits and economic inequality. It has also stifled innovation as large companies block access to customers for newer companies and buy up smaller companies that are seen as threats to their monopolistic dominance. The rate of new business formation today is half of what it was in 1980.

The economic result is that today a greater share of businesses’ income goes to profits and a smaller share to workers’ compensation than at any time since World War II.

The societal result is that workers are economically insecure, frustrated, and angry. Therefore, they are susceptible to demagogues like Donald Trump selling racism, xenophobia, and oligarchic authoritarianism as the solution to their insecurity and anger.

The declining value of the minimum wage since 1968 is indicative of the decline of workers’ power and compensation. Increasing the federal minimum wage to $15 an hour in 2025, as is currently being proposed in Congress, would be a step in the right direction but would still not give workers the full value of their increases in productivity. Using 1968 as the reference point, today’s current federal minimum wage of $7.25 would be roughly:

  • $11.00 if it had kept up with inflation. (In other words, the minimum wage today has roughly 1/3 less purchasing power than it had in 1968.)
  • $22.00 if it had kept up with the increases in workers’ productivity, i.e., the increases in the value of the output of today’s workers over those in 1968. Instead, this increased value is going to profits and shareholders. [2]

I will summarize Reich’s book’s description of the shift in power in our economy and politics to the financial sector and Wall Street, the last of his three big systemic changes, in a subsequent post.

In the meantime, I urge you to read Reich’s book or check out his writing and videos at https://robertreich.org/ and/or https://www.inequalitymedia.org/. His analysis of the current economic and political landscape is always insightful and clear, and often entertaining as well.

[1]      Reich, R.B., 2020, The System: Who rigged it, how we fix it. NY, NY: Alfred A. Knopf.

[2]      Lee, T.M., 2/25/21, “Our deeply broken labor market needs a higher minimum wage,” Economic Policy Institute (https://www.epi.org/publication/our-deeply-broken-labor-market-needs-a-higher-minimum-wage-epi-testimony-for-the-senate-budget-committee/)

OLIGARCHY OR DEMOCRACY: THE SYSTEM BY ROBERT REICH

Note: If you find my posts too long or too dense to read on occasion, please just read the bolded portions. They present the key points I’m making and the most important information I’m sharing.

Robert Reich’s latest book, The System: Who rigged it, how we fix it, presents his pointed, insightful, and relatively succinct analysis of how our democracy is more like an oligarchy these days, how it got that way, and how to get back to democracy. Oligarchy “refers to a government of and by a few exceedingly rich people or families who control the major institutions of society and therefore have power over other people’s lives. Oligarchs may try to hide their power behind those institutions, or … through philanthropy and ‘corporate social responsibility.’ But no one should be fooled. Oligarchs wield power for their own benefit.” (page 13-14) [1]

Reich identifies three major systemic changes that have occurred since 1980 that have shifted power, both economic and political, to a small group of very wealthy Americans. They are:

  • The shift of big corporations from stakeholder to shareholder capitalism,
  • The shift in bargaining power from unions to large employers and corporations, and
  • The shift in power in our economy and politics to the financial sector and Wall Street.

The shift of big corporations from stakeholder to shareholder capitalism began in the 1980s with “corporate raiders,” who were wealthy investors who would buy enough shares of a corporation’s stock to force the Chief Executive Officer (CEO) to make changes to increase the stock price or lose his job due to the raider taking control of the Board of Directors in what was called a hostile takeover. There were 13 hostile takeovers in the 1970s of corporations worth over $1 billion; there were 150 in the 1980s.

In addition, financial entrepreneurs or engineers, as they were referred to then and who more recently have been labeled vulture capitalists, developed the leveraged buyout technique that has been widely adopted by private equity funds. This technique, made possible by our tax and financial laws and regulations, allows the “investor” to borrow the huge sums of money needed to buy a corporation and then put the debt and risk on the corporation that was purchased, while receiving favorable tax treatment for the huge interest payments on the debt. In the 1980s, there were more than 2,000 leveraged buyouts of corporations worth over $250 million.

During the 1980s and 1990s, almost one out of every four U.S. corporations was the target of a hostile takeover and another quarter were the target of a takeover that was not deemed hostile because the CEO supported it (sometimes reluctantly).

As a result of all of this, CEOs shifted to focusing solely on maximizing the short-term price of the corporation’s stock and, therefore, the wealth of shareholders. Previously, the CEO’s job had been seen as having responsibility to a range of stakeholders, including employees, customers, the communities employees lived in, and the public, in addition to shareholders.

This shift from stakeholder to shareholder capitalism could not have occurred without tax and financial laws and regulations that allowed it or without lax enforcement of laws and regulations that could have stopped it. Some laws and regulations were changed to allow the corporate raiders’ practices. President Reagan’s administration in the 1980s failed to take enforcement actions that could have stopped or slowed corporate raiders and leverage buyouts, such as enforcement of anti-trust laws or a crackdown on large, risky loans by federally regulated and insured banks. Furthermore, the Reagan administration testified before Congress in opposition to laws that would have curbed the practices used by the corporate raiders.

Starting in the 1970s and growing in the 1980s, academic economists including Milton Friedman (University of Chicago) and Michael Jensen (Harvard Business School) gave academic and theoretical support to the takeovers (and threatened takeovers), asserting that they were increasing economic efficiency. They ignored the costs to workers and communities, focusing narrowly on the corporation, its profits, and its stock price. In other words, their focus was benefits to stockholders while ignoring costs to other stakeholders.

As a result, the mantra for CEOs, the business community, and many economists has become that the sole purpose of the corporation and its management is to maximize shareholder value at the expense of any and all other stakeholders.

Under the shift to shareholder capitalism, the “efficiency” gains go to shareholders, who are generally wealthy investors (including CEOs), while other stakeholders suffer the costs and burdens. This “efficiency” ignores any acknowledgement of a broader common good or the general welfare (which the preamble to the Constitution says our country was created to promote).

I will summarize Reich’s book’s description of the other two big systemic changes in subsequent posts:

  • The shift in bargaining power from unions to large employers and corporations, and
  • The shift in power in our economy and politics to the financial sector and Wall Street.

In the meantime, I urge you to read Reich’s book or check out his writing and videos at https://robertreich.org/ and/or https://www.inequalitymedia.org/. His analysis of the current economic and political landscape is always insightful and clear, and often entertaining as well.

[1]      Reich, R.B., 2020, The System: Who rigged it, how we fix it. NY, NY: Alfred A. Knopf.

POLICIES FOR UNIFYING AMERICA

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

UNIFYING AMERICA

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Specific executive actions could include:

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

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

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

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

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

BIDEN’S OPPORTUNITY TO IMPROVE ECONOMIC SECURITY WITH PROGRESSIVE POLICIES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

HOW THE RICH GET RICHER Part 1

I’m planning on doing a series of, hopefully, short posts (although this one’s on the long side) with anecdotes on how the rich get richer, often at the expense of the rest of us. Here’s the first installment with three examples.

Example #1: At least 18 large companies have given executives large payouts just before filing for bankruptcy. These companies have laid off tens of thousands of workers but gave a collective $135 million to executives just before filing for bankruptcy. Bankruptcy attorneys note that the payouts were timed to skirt a 2005 law intended to prevent executives from prospering as their companies failed. The intent was to ban payouts that unfairly enrich the executives who drove their companies into bankruptcy. Such huge payouts are particularly egregious during an economic crisis when employees of the companies are suffering severe hardships. [1]

Example #2: Some members of Congress and some Trump administration supporters, who were privy to private early briefings on the seriousness of the coronavirus, made investment decisions that appear to have  been based on this non-public, inside information. Under the Stock Act of 2012, members of Congress are barred from using non-public information they get as a member of Congress to buy or sell personal stock holdings. However, at least four members of Congress made significant stock transactions in late February just before the stock market crashed. The private briefings they received on the potential seriousness of a pandemic would be considered insider information because this information was not available to the public. Moreover, at that time, the public information from the Trump administration and from an Op-Ed written by Senator Burr was reassuring the public that the U.S. was well prepared for a pandemic and had the coronavirus under control.

Senator Burr of North Carolina, as chair of the Senate Intelligence Committee, had received multiple briefings on the seriousness of the coronavirus. On February 13, 2020, less than a week after publishing his upbeat Op-Ed, he sold 33 stocks worth over $600 thousand (and perhaps as much as $1.7 million) in several industries likely to be hard hit by a pandemic. Senator Kelly Loeffler of Georgia made 29 stock transactions in late February, including buying over $100,000 worth of a company providing software tools for working remotely. Senator Inhofe of Oklahoma sold up to $750,000 worth of stock and Senator Dianne Feinstein of California sold millions of dollars of stocks. All four Senators have denied doing anything illegal. Senator Burr’s brother-in-law also sold significant stock holdings on the same day as the Senator. Providing investment tips to others based on inside information is illegal. [2]

On February 24 and 25, at a private meeting of the conservative Hoover Institution’s board, senior members of Trump’s economic team expressed uncertainty about how the coronavirus would affect the economy. However, on these same days, President Trump and the same economic advisers were saying publicly that the coronavirus was under control and that the economy and the stock market looked good. The president’s advisers appear to have been giving an early warning to wealthy party donors that contradicted their public statements. A hedge fund consultant, William Callanan, who is a Hoover board member and attended the meeting, circulated a memo about this to a hedge fund founder and others that gave them the ability to make investment decisions based on this non-public information. [3] This would appear to be illegal insider trading facilitated by the Trump administration’s private briefings.

Example #3: Insiders at companies developing COVID vaccines and treatments have been selling their companies’ stock and making millions of dollars. Insiders, including executives and board members, at a dozen of these companies have sold more than $1.3 billion in company stock since March 2020 when the seriousness of COVID became evident. In the same period last year, insiders at these companies sold just $74 million of stock, less than 6% of 2020 sales. Over $1.1 billion of these stock sales occurred at just three companies – Moderna, Regeneron Pharmaceuticals, and Vaxart. In particular, the chief medical officer (CMO) at Moderna is systematically liquidating all his stock, including stock obtained by exercising stock options granted to him, through planned weekly trades that are making him $1 million a week. Moderna’s chief executive officer (CEO) has sold nearly $58 million in stock, although he still retains substantial company stock.

Insiders are not allowed to sell company stock based on insider information, but can legally sell company stock under plans that schedule the stock sales in advance. However, these plans are relatively easy to change on short notice, which can make them at least appear to be an end run around illegal insider trading. Moderna’s CMO modified his plan on March 13 and its CEO did so on May 21 shortly after the company announced positive preliminary results from its vaccine development. Insiders have an incentive to exaggerate and hype good news while downplaying possible challenges or uncertainties in order to inflate their company’s stock price and increase their personal profit from sales of company stock. Vaxart is being sued by shareholders for misleading them while a hedge fund with ties to a board member was selling hundreds of millions of dollars of company stock.

This insider stock selling at companies working on COVID responses is particularly concerning because many of these companies have received substantial funding from the federal government under Operation Warp Speed, the government’s initiative to accelerate development of a COVID vaccine. Moderna is receiving $1 billion to support the clinical trial of a possible vaccine and has been promised another $1.5 billion to manufacture and distribute a successful vaccine. Taxpayers are paying for the risky up-front investments while executives and shareholders are (already) reaping the financial benefits even though no vaccine has yet completed testing. [4]

These last two examples indicate that selling (and buying) stocks based on non-public information is not uncommon. Some of it is clearly illegal but enforcement is sometimes difficult or lax and some of it either isn’t illegal or has been given a gloss of legality by allowing company insiders to engaged in scheduled stock sales.

In any case, it appears that the Trump Administration and federal government regulations have effectively institutionalized insider trading. Those investing in the stock market without insider connections should stand forewarned.

[1]      Washington Post, 10/28/20, “Failing firms’ executives got millions,” The Boston Globe

[2]      Burns, K., & Millhiser, I., 5/14/20, “Sen. Richard Burr and the coronavirus insider trading scandal, explained,” Vox (https://www.vox.com/policy-and-politics/2020/5/14/21258560/senator-richard-burr-coronavirus-insider-trading-scandal-explained)

[3]      Kelly, K., & Mazzetti, M., 10/15/20, “As virus spread early on, briefings from Trump administration fueled sell-off,” The Boston Globe from The New York Times

[4]      Wallack, T., 10/24/20, “Drug company insiders are profiting handsomely from the world’s desperate hope for a COVID-19 vaccine,” The Boston Globe

OUR FEDERAL COURTS HAVE BEEN PACKED WITH RIGHT-WING JUDGES

Republicans are rushing confirmation of a Supreme Court nominee just before the election, which is emblematic of their packing of the federal courts at all levels with right-wing judges. [1] (See my previous post for more details.) Rushing through the confirmation of Judge Barrett threatens to complete the delegitimization of the Supreme Court – and to some extent the whole federal judiciary – by making it clear that the federal court system is not an  impartial arbiter of the law, but a fully politicized institution.

Over 200 federal judges have been confirmed since Trump took office (including over 100 that were carried over from the Obama administration due to Republican blocking of confirmations) and basically all of them are proponents of the extreme right-wing legal philosophy of the Federalist Society. [2] Right-wing Republicans have used a Federalist Society endorsement as a litmus test for nominees while ignoring input from the American Bar Association, which always used to provide an independent analysis of the qualifications of nominees. [3]

This packing of the federal courts with right-wing jurists, which is the result of McConnell and the Republicans breaking the norms of our democratic processes, will benefit Republicans and their wealthy, corporatist backers for a generation or longer because their right-wing judicial philosophy favors corporations and the wealthy over workers, consumers, and the middle and lower classes.

These right-wing, Federalist Society-endorsed judges typically claim to support “originalism,” a legal philosophy that claims the original intent and meaning of the Constitution, written in 1787, should determine judicial decisions. “Originalists” claim that government cannot constitutionally do anything that is not explicitly provided for in the Constitution. This legal philosophy has been very effective in driving right-wing legal politics, although the appropriateness of applying the meaning of the words of the Constitution to today’s technology strains credulity; its writers couldn’t have dreamed of our current medical and health care capabilities, our transportation and communications systems, our financial instruments and guns, or our huge, multi-national corporations.

An alternative legal interpretation of the Constitution, as a living document that requires interpretation in the context of current times, was prevalent from the late 1930s into the 1980s. In the late 1930s, during the recovery from the Depression, judges interpreted the law and the Constitution to allow American democracy to live up to its principles. Right-wing politicians and legal theorists labeled this “judicial activism” or “legislating from the bench.”

The “originalist” legal philosophy was developed by right-wing scholars in the 1970s and 1980s in reaction to laws and judicial support for economic and civil rights. The New Deal worked to level the economic playing field, to regulate business, to provide voice and a balance of power for workers through unions, and to provide a social safety net. After World War II, these efforts continued with more of a focus on leveling the social playing field and treating all people as equals before law, by ending segregation and discrimination, protecting the rights of prisoners and those accused of breaking the law, and providing access to contraception and abortion. The judicial-established principle of one person, one vote and the Voting Rights Act worked to level the political playing field. Judicial decisions supporting economic and civil rights, many of them made by the Supreme Court under Republican Chief Justices Earl Warren and Warren Burger between 1953 and 1986, were, at the time, largely viewed as non-partisan. They reflected a belief that the Bill of Rights applies to state laws and governments, as well as at the federal level. [4] This dramatically expanded civil rights and overturned the “states’ rights” doctrine that had allowed states to, among other things, engage in discrimination, particularly against Black Americans.

“Originalist” judges have ignored and will continue to ignore precedents and are reversing 80 years of legislation and legal decisions on individual and civil rights, as the hearings on the latest Supreme Court nominees and recent Supreme Court decisions have made clear. While the attention of these hearings has been focused on social and religious issues, from abortion to affirmative action and discrimination to LGBTQ rights, the often-overlooked issues about our economy and capitalism, such as the balance of power between employers and workers, the ability to earn a living wage, and the availability of an economic safety net, are critically important as well.

Under “originalist” legal theory, the federal government has little power and much of what it currently does should be left to state governments. Under “originalism,” the federal government does not have the power to regulate corporations or the wealthy, including restricting their use of their money in our elections, as the spending of money is viewed as exercising free speech. Decisions by the federal judiciary at all levels make it clear that “originalist” theory favors private interests over public interests, corporations and employers over consumers and workers, law enforcement over defendants’ rights, and gun rights over voting rights. Such decisions deprive employees and other vulnerable populations of their civil rights. [5] [6]

Moreover, the “originalist” judges assert that the rights of the Bill of Rights, such as freedom of speech, are rights that belong to corporations as well as to natural human beings. I find it hard to believe that this was the intent of the writers of the Constitution and the Bill of Rights. They clearly were focused on the rights of individual human beings. Furthermore, corporations, in anything approaching their current form, were unknown in those times.

Americans for Prosperity and other pro-business groups, many of them backed by billionaire, fossil-fuel businessman Charles Koch (and his deceased brother), have spent tens of millions of dollars on campaigns to pressure Senators to back controversial, right-wing judicial nominations, often using “dark money” (whose donors are hidden from the public).

The weak federal government response to the coronavirus pandemic is emblematic of “originalist” thinking. Some in the Trump administration simply didn’t believe it was the role of the federal government or within the legitimate powers of the federal government to respond, and, therefore, the response should be left to the states and the private sector.

President Trump and the Republicans in the Senate have packed the federal court system from top to bottom with hundreds of right-wing, Federalist Society-endorsed, “originalist” judges who are on the fringe of what was previously considered appropriate for a federal judge. If our Founding Fathers had intended an “originalist” interpretation of the Constitution, I have to believe they would have realized frequent amendments would be required and they would have made it much easier to amend it. I believe that “originalism” is a rationalization for public relations purposes developed by wealthy corporations and individuals as a way to “justify” laws and court decisions that work to their benefit. This is just like their claim of non-existent voter fraud as the public relations rationale for voter suppression tactics.

Our federal court system is currently unbalanced and biased in favor of corporations and the wealthy. Right-wing judges will skew court decisions and harm the well-being of everyday Americans for the next 20 to 30 years unless Democrats are elected and actively work to rebalance the federal courts toward mainstream legal philosophy and historical precedent. This will not be easy given how skewed the system currently is.

Dramatic steps will need to be taken, including expanding the number of judges in the federal court system, possibly including the number of justices on the Supreme Court, given that removing judges is basically impossible. This is the only way to return to laws and government programs that protect and support a fair and just society with civil, political, and economic rights for all, women able to make decisions about their reproductive health, workers able to support their families and have safe working conditions, consumers able to use products and services safely, and a safety net that protects people when they hit hard times.

[1]      Richardson, H. C., 10/11/20, “Letters from an American blog post,” (https://heathercoxrichardson.substack.com/p/october-11-2020)

[2]      The Federalist Society for Law and Public Policy Studies, most frequently called the Federalist Society, is an organization of conservatives and libertarians that advocates for a textualist and originalist interpretation of the United States Constitution. (https://en.wikipedia.org/wiki/Federalist_Society)

[3]      Heer, J., 10/14/20, “Barrett’s evasions show why expanding the Court is necessary,” The Nation (https://www.thenation.com/article/politics/barrett-confirmation-court-packing/)

[4]      Richardson, H. C., 10/23/20, “Letters from an American blog post,” (https://heathercoxrichardson.substack.com/p/october-23-2020)

[5]      Richardson, H. C., 10/14/20, “Letters from an American blog post,” (https://heathercoxrichardson.substack.com/p/october-14-2020)

[6]      Dayen, D., 10/13/20, “Judge Barrett’s record: Siding with businesses over workers,” The American Prospect (https://prospect.org/justice/judge-barretts-record-siding-with-businesses-over-workers/)

EXAMPLES OF CONTINUAL CORRUPT CORPORATE BEHAVIOR

Here are three recent examples of corrupt corporate behavior. They show the breadth of the corruption – the leveraging of undeserved power and wealth – from corrupting government policy making to exacerbating economic inequality to corruptly maximizing profits.

U.S. Representative Richie Neal (Democrat of Massachusetts) received $54,000 in a two-month period from lobbyists for corporations with a financial stake in his actions that blocked meaningful control of health care costs. In December 2019, a bipartisan, House and Senate compromise on controlling health care costs was all set to pass as part of a larger appropriations bill. Among other things, the Lower Health Care Costs Act would have eliminated exorbitant surprise medical bills for out-of-network services by limiting their cost to that of equivalent in-network services. It also would have required pharmaceutical firms to disclose information related to increases in drug prices. [1]

Three days after the Lower Health Care Costs Act was finalized and on track to become law, Neal, Chairman of the powerful Ways and Means Committee, undermined it and got it dropped from the larger appropriations bill that was destined to pass into law. He did this by announcing that he and his Republican counterpart would draft a counterproposal, although no details were presented.

On February 7, 2020, less than two months later, Neal released his alternative bill. Key provisions of the Lower Health Care Costs Act had been eliminated or weakened. For example, rather than eliminating surprise medical bills, it included a weak substitute: voluntary negotiations and arbitration. The previous requirement for disclosures relevant to drug price increases was eliminated. In the two-month window from Neal’s blocking of the original bill to the release of his own much weaker bill, he collected $54,000 in donations from 12 lobbyists who worked for clients opposed to the original Lower Health Care Costs Act. These 12 donations represented two-thirds of his campaign contributions in the first quarter of 2020.

If this isn’t corruption, I don’t know what is. It appalls me that this is a legal and accepted campaign fundraising pattern. Clearly, we need to strengthen our campaign finance laws.

On a different front, a report from the Economic Policy Institute [2] found that in 2019 average pay was $21 million for Chief Executive Officers (CEOs) at the 350 largest corporations in the U.S. This is up 14% from the year before and 1,167% since 1978, while a typical worker’s pay has grown by only 14% since 1978. In other words, each $1.00 of a worker’s pay grew to $1.14 over those 40 years while each $1.00 of a CEO’s pay grew to $12.67. The ratio of CEO pay to the average worker’s pay is now 320 to 1, having grown dramatically from 61 to 1 in 1989 and 21 to 1 in 1965.

Skyrocketing CEO pay is a significant contributor to economic inequality, which continues to rise to unprecedented levels. The economy would not be harmed in the slightest if CEOs were paid less and/or taxed more.

There are many policy changes that would address excessive CEO pay if policy makers had the will to enact them, including:

  • The income tax rate on high incomes could be increased to previous levels (which in the 1970s were roughly double current rates),
  • Corporate tax rates could be increase for firms with high CEO-to-worker pay ratios, and
  • A vote by shareholders could be required annually to approve CEO pay.

And then there’s the pharmaceutical industry that continually engages in corrupt corporate behavior, which displays its greed, market power, and lack of concern for stakeholders other than shareholders and executives. Two recent examples are summarized below.

First, Teva Pharmaceuticals is being sued by the federal government for illegally funneling $300 million through two charitable foundations to support the price and sales of its multiple-sclerosis drug, Copaxone. The Justice Departments suit claims the company used the foundations to insulate some patients from big price increases in order to prop up the excessive price of Copaxone for others. From 2007 to 2015, Copaxone’s price more than quadrupled from roughly $17,000 per year to over $73,000. [3]

In addition, in January 2020, Teva had paid a $54 million settlement for bribing doctors with fraudulent “speaking fees” to prescribe Copaxone and other drugs it makes.

Second, Gilead Sciences announced recently that it will charge patients with private insurance $3,120 for the five-day course of treatment with the experimental COVID-19 drug remdesivir. Some government programs may get a lower price and other developed countries will pay about 75% of the U.S. price. Reaction to the price has been mixed with some advocates and members of Congress saying Gilead is taking advantage of Americans during a pandemic. Taxpayers have invested about $100 million in the drug and some feel it should be public owned and not in private hands as a result. The U.S. Department of Health and Human Services (DHHS) recently purchased 500,000 treatment courses, three months’ worth of Gilead’s production, for an estimated $1.5 billion. DHHS will distribute the drug to hospitals around the country. [4]

Clearly, the U.S. needs stronger regulation of pharmaceutical firms, including disclosures relevant to drug pricing (like those in the Lower Health Care Cost Act). We also need to allow and empower Medicare and Medicaid to negotiate drug prices paid to pharmaceutical corporations, as the U.S. Veterans’ Administration, private insurers, and other countries do.

[1]      Shaw, D., 5/5/20, “Neal took big bucks from lobbyists while killing a surprise medical bill fix,” Sludge (https://readsludge.com/2020/05/05/neal-took-big-bucks-from-lobbyists-while-killing-a-surprise-medical-bills-fix/)

[2]      Mishel, L., & Kandra, J., 8/18/20, “CEO compensation surged 14% in 2019 to $21.3 million,” Economic Policy Institute (https://www.epi.org/publication/ceo-compensation-surged-14-in-2019-to-21-3-million-ceos-now-earn-320-times-as-much-as-a-typical-worker/)

[3]      Bloomberg News, 8/19/20, “Talking points: Pharmaceuticals,” The Boston Globe

[4]      Lupkin, S., 6/29/20, ”Remdesivir priced at more than $3,100 for a course of treatment,” National Public Radio (https://www.npr.org/sections/health-shots/2020/06/29/884648842/remdesivir-priced-at-more-than-3-100-for-a-course-of-treatment)

PERSONNEL IS POLICY AND LARRY SUMMERS IS A DISASTER Part 2

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

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

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

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

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

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

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

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

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

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

If you believe that:

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

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

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

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

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

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

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

PERSONNEL IS POLICY AND LARRY SUMMERS IS A DISASTER

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

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

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

As background, his resume includes:

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

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

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

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

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

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

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

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

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

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

RECENT EXAMPLES OF A RIGGED ECONOMIC SYSTEM

Here are some recent examples of how our rigged economic system favors wealthy individuals and big corporations.

In the CARES Act, the $2.2 trillion coronavirus pandemic response, Republican Senators slipped in a tax break that will give each of 43,000 wealthy business owners a $1.6 million tax cut, on average. Hedge fund investors and owners of real estate businesses (including President Trump and his family) will receive the great majority of this tax cut windfall. [1]

Overall, the CARES Act provides $135 billion in tax cuts for the richest 1% of Americans. This is money that could have been used to provide aid to workers who lost their jobs or to buy personal protective equipment for front-line workers.

Moreover, the Trump Administration and Republicans in Congress are considering a variety of additional tax cuts for investors and businesses for the next pandemic relief bill. [2] Supposedly, these tax cuts will stimulate the economy and help it return to normal, but what they really do is make the rich richer. And while Trump and the Republicans claim that there should be no more spending on unemployment and payments to individuals because we’ve spent enough, tax cuts are simply spending before the fact of revenue collection rather than after the fact. Conceptually, there is no difference, other than who gets the money.

Perhaps the ultimate indication of how rigged our economic system is, is that the wealth of billionaires in the U.S. increased almost $600 billion or 20% between March 18 and June 17 as the pandemic crushed the lives and livelihoods of mainstream Americans. The 643 U.S. billionaires, who are overwhelmingly white males, saw their aggregate wealth increase from $2.9 trillion to $3.5 trillion, an increase of about $1 billion a piece, on average. [3] [4]

Meanwhile, working and middle-class households lost $6.5 trillion in wealth and over 45 million Americans applied for unemployment insurance. The 643 billionaires’ increase in wealth was twice as much as what the federal government spent on the one-time stimulus checks that went to 150 million Americans.

The billionaires and other wealthy individuals have used their incredible wealth to gain extraordinary influence over our politics and policy making. This led to the tax cuts in the CARES Act, in the 2017 Tax Act, and on numerous other occasions. As a result, the taxes paid by these billionaires decreased by 79% as a percentage of their wealth from 1980 to 2018. [5]

As another indicator of a rigged economic system, as the pandemic hit in early 2020 only the richest 20% of U.S. households had regained the same level of wealth that they had had prior to the Great Recession of 2008. The other 80% of households were still struggling with the economic hangover of the 2008 financial industry crash. The 400 wealthiest billionaires, on the other hand, recovered their wealth in three years and in ten years had increased their wealth by over 80%.

On the corporate front, corporations are rewarding their investors, i.e., shareholders, while laying off their workers. For example, Caterpillar closed three facilities in late March and two weeks later made a $500 million distribution to shareholders. Levi Strauss announced on April 7th that it would stop paying workers and furloughed about 4,000 over the following month. Nonetheless, it paid $32 million to shareholders in April. Stanley Black & Decker announced furloughs and layoffs on April 2nd, but within two weeks issued a $106 million dividend to shareholders. [6]

You may recall that in August 2019 the chief executives of 181 companies from the Business Roundtable released a statement announcing that companies should deliver value to customers, workers, and suppliers, as well as shareholders. To-date, three of the executives who signed that statement – ones from Caterpillar, Stanley Black & Decker, and Steelcase – have furloughed workers while paying dividends to shareholders.

In our rigged economic system, the capitalists in government bailout capitalists (i.e., business owners and investors), not workers, home owners, parents, students, schools, states and cities, our social services, or our so-called safety net. Even small businesses get left behind as wealthy investors and corporations are taken care of first and foremost. This was evident in the 2008 bailout after the collapse of the financial and mortgage sectors and it’s evident again in the response to this pandemic.

I urge you to contact your U.S. Representative and Senators and to tell them that pandemic relief should go to workers, middle-class and low-income households, and small businesses. Not only is this what would be fair and democratic, this would support our economy because two-thirds of economic activity is consumer purchases. If consumers can buy, they will keep the economy going and create demand for the goods and services businesses produce. Bailouts to corporations and investors will make them wealthier but will do little to keep the economy going and very little to help the mainstream residents of America.

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

[1]      Stein, J., 4/14/20, “Tax change in coronavirus package overwhelmingly benefits millionaires, congressional body finds,” The Washington Post

[2]      Tankersley, J., 5/6/20, “Trump considers tax-cut proposal for new bill,” The New York Times

[3]      McCarthy, N., 6/22/20, “U.S. billionaire wealth surged since the start of the pandemic,” Forbes

[4]      Americans for Tax Fairness, 6/18/20, “3 months into COVID-19 pandemic: Billionaires boom as middle class implodes,” (https://americansfortaxfairness.org/issue/3-months-covid-19-pandemic-billionaires-boom-middle-class-implodes/)

[5]      Collins, C., 5/11/20, “Billionaires are getting even richer from the pandemic. Enough is enough,” CNN Business (https://www.cnn.com/2020/04/28/perspectives/inequality-coronavirus-billionaires/index.html)

[6]      Whoriskey, P., 5/6/20, “Amid layoffs, investors reap dividends,” The Boston Globe from The Washington Post

EFFECTS OF RACISM Part 2

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

The effects of racism – of racial prejudice and discrimination – on black people today are broad and pervasive. They are the aggregation of current policies, practices, and characteristics of the U.S. economy and society, as well as the cumulative effects of 400 years of racism. I can’t do justice to all the effects in a couple of posts (Even long ones. My apologies.), but I will start by highlighting some of them. Some, particularly the better-known ones, I will just mention and for some I will present more detail. They are presented in no particular order, in part because they are all intertwined and the relative importance or severity of them is difficult, if not impossible, to determine. (See my previous post for effects in Education and Health and health care.)

Some of the detrimental effects of racism on black people that are evident today include:

Economic inequality

  • The median income for black households is only 60% of that of white households ($37,000 vs. $60,000).
  • Median wealth (assets minus liabilities) for black households is only 8% of that of white households ($11,000 vs. $134,000).
  • Most Blacks were excluded from many of the benefits of the New Deal legislation of the 1930s, including the minimum wage, union membership, and participation in Social Security. Much of this was corrected in the 1960s and 1970s, but the loss of 30 to 40 years of these economic benefits is a big contributor to today’s economic inequality. (See more detail in this previous post.)
  • One-third of low-income black households (incomes under $30,000) do not have a bank account (versus one-ninth of low-income white households). This means they must rely on check cashing services and payday lenders for financial transactions, which involve high fees and often usurious interest rates. This made it difficult (or expensive) for them to get their coronavirus relief checks, for example. [1]

Housing (See my previous post for an overview of government policies and practices that led to housing segregation and low levels of black home ownership.)

  • The effects of federal government and bank redlining are still discernible in the segregation patterns of our cities. Black people disproportionately live in areas with high concentrations of low-income households, poor air quality, and low social capital. These neighborhood characteristics are strongly linked to a whole range of negative life outcomes, including lower educational attainment, more unemployment and lower-wage jobs, shorter life spans, higher stress, and worse health and health care. On the other hand, the (white) suburbs created wealth for their residents and provided strong social capital and healthy, low-stress environments. [2] For example, in the post-World War II period, homes in the suburbs, which typically excluded Blacks, were purchased by whites for around $15,000. Those homes are now worth hundreds of thousands of dollars, a substantial increase in wealth that was denied to Blacks.
  • The home ownership rate for black households is over 30 percentage points lower than for white households. This home ownership gap has increased from just over 20% to over 30% during the last 40 years. It had been relatively stable at just over 20% for the previous 30 years. Given that equity in a home is the primary source of wealth for middle-class and working families in the U.S., the lower rate of home ownership among black households is a significant contributor to racial economic inequality, as well as other unequal outcomes. Equity in one’s home is frequently used to pay for college for children or to cover a short-term financial setback such as the loss of a job or a medical emergency. It is also a key source of retirement savings and inheritance for children. The lack of the economic security that home equity provides also is presumably linked to the higher levels of stress that black people experience.
  • Today, in 2020, interest rates on mortgage loans for black home buyers tend to be higher than for whites because the Federal Housing Finance Agency requires that mortgage interest rates be adjusted based on the borrower’s credit score, down payment, and mortgage type. These adjustments may double the interest rate on a mortgage loan and disproportionately harm black borrowers, either by pricing them out of the market or making the cost of home ownership significantly higher. These mortgage rate adjustments are a dysfunctional and discriminatory holdover from the early 2000s and could and should be changed. [3]

Criminal justice (The pervasive racism of the U.S. criminal justice system – from policing to prosecution and sentencing – that has led to mass incarceration of black males is well known, so I won’t go into it here. I have written about it previously here and here.)

  • Lynching is not a federal crime. Although bills to make it a crime have been introduced in Congress multiple times, no bill has ever been passed and become law.
  • Black people are 23% of those shot and killed by police but are only 13% of the population. Recently released statistics show that in 2019, 69% of the people subject to stop-and-frisk by police in Boston were Black, although Blacks are only 25% of the population. [4]
  • The police (and others) tend to presume that black people, particularly black men and boys, are dangerous and criminals. Being stopped for driving while black is a frequent experience for Blacks, especially if driving a nice car or in a white neighborhood. Former Massachusetts Governor Deval Patrick experienced this while he was Governor, riding in an official car. [5] This racial profiling also occurs when shopping while black, walking down the street in a white neighborhood while black, and on and on. In May 2020, a tall, (6’ 8”) black man, a home owner in Newton, MA, an upper-middle class, largely white, Boston suburb, was walking to the supermarket with his wife when four police cruisers descended them. One of the five officers drew his gun. When asked for identification, the black man knew better than to reach into his pocket – a motion police officers in other situations claimed they found threatening and a reason to shoot. He told the officers that his wallet was in his back pocket and let them retrieve it. [6]

Voting

  • Republicans have been leading efforts for decades to make it harder or impossible for black people to vote – stealing an essential democratic right they were supposedly given after the Civil War. Multiple states have enacted laws that make it harder to register to vote and harder to vote through onerous voter ID requirements. States have also imposed what are effectively poll taxes, reduced the number of polling places in black neighborhoods, and reduced the hours for voting (including early voting that many blacks took advantage of, in part because it can be difficult for them to get to the polls on a work day). All these disproportionately harm black voters. In addition, states have purged lists of registered voters in ways that, again, disproportionately remove black voters. States have banned convicted criminals from voting, sometimes for life, which again disproportionately affects black voters. Finally, the boundaries of voting districts, especially for the U.S. House of Representatives and state legislatures, have been manipulated (i.e., gerrymandered) to reduce the impact of black voters.

The documentation of the detrimental effects of racism is not new. For example, the 1968 Kerner Commission Report on the “race riots” of the 1960s, stated that “Segregation and poverty have created in the racial ghetto a destructive environment totally unknown to most of white Americans. … White institutions created it, white institutions maintain it, and white society condones it.” It noted that not only had the racism of white society created this situation, but that the (white) public and policy makers were apathetic to the issue of black poverty. The Report recommended large-scale government programs to undo segregation and build wealth for black communities. Obviously, the Report was largely ignored. [7]

As one Boston Globe columnist recently wrote of the racism in the U.S., “I’ve spent years calling the system broken, but it wasn’t. This system was designed to dehumanize and exploit Black folk and other people of color.” [8] As former Massachusetts Governor Deval Patrick, who is black noted, “For America, where freedom was the point from the start, only equality, opportunity and fair play make freedom possible.” [9] He probably should have clarified this by saying freedom for ALL or for black people.

It is long past time to address the racism that has persisted in the U.S. for the 140 years since the Civil War and indeed for the last 400 years since black slaves were first brought to America. We need to reform our police and criminal justice system, our housing policies and practices, and all the factors that lead to economic, environmental, and social injustice.

We need to have a serious discussion about reparations – remedies for the enduring harm that past and current policies and practices have caused to Blacks in the U.S. More on this in a future post.

I encourage each and every one of us to think long and hard about how we can contribute to the effort to end racism in our society and to erase its enduring scars. I’d appreciate your comments and questions on this post, including about:

  • Other policies and practices that need to be remedied,
  • Steps we should take to change policies and practices, and
  • How we should tackle the question of reparations for the enduring, cumulative harm that racism has done to Blacks in the U.S.

Thank you for your comments with reactions, suggestions, and questions. This is a discussion we need to have – and to turn into action.

[1]      Guzman, L., & Ryberg, R., 6/11/20, “The majority of low-income Hispanic and Black households have little-to-no bank access, complicating access to COVID relief funds,” National Research Center on Hispanic Children and Families (https://www.hispanicresearchcenter.org/research-resources/the-majority-of-low-income-hispanic-and-black-households-have-little-to-no-bank-access-complicating-access-to-covid-relief-funds/)

[2]      Baradaran, M., 6/17/20, “No justice. No peace. Underlying the nationwide protests for black lives is the racial wealth gap,” The American Prospect (https://prospect.org/civil-rights/no-justice-no-peace-fix-the-racial-wealth-gap/)

[3]      Levitin, A.J., 6/17/20, “How to start closing the racial wealth gap,” The American Prospect (https://prospect.org/economy/how-to-start-closing-the-racial-wealth-gap/)

[4]      Osterheldt, J., 6/17/20, “An oppression that should have been so clear,” The Boston Globe

[5]      Patrick, D., 6/16/20, “America is awakening to what it means to be Black. Will we also awaken to what it means to be American?” (https://medium.com/@DevalPatrick/america-is-awakening-to-what-it-means-to-be-black-3eb938969f7f)

[6]      Krueger, H., 6/6/20, “A walk to the grocery store, interrupted,” The Boston Globe

[7]      Baradaran, M, 6/17/20, see above

[8]      Osterheldt, J., 6/17/20, see above

[9]      Patrick, D., 6/16/20, see above

EFFECTS OF RACISM Part 1

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

The effects of racism, of racial prejudice and discrimination, on black people today are broad and pervasive. They are the aggregation of current policies, practices, and characteristics of the U.S. economy and society, as well as the cumulative effects of 400 years of racism. I can’t do justice to all the effects in a couple of posts, but I will start by highlighting some of them. Some, particularly the better-known ones, I will just mention and others I will present in more detail. They are in no particular order, in part because they are all intertwined and the relative importance or severity of them is difficult, if not impossible, to determine.

Some of the detrimental effects of racism on black people evident today include:

Education

  • Black students, on average, attend K-12 schools of lower quality (e.g., less experienced and qualified teachers, less funding, lower quality materials and facilities) than white students. Housing segregation has been widely acknowledged for decades as the driver of racially unequal access to a good K-12 education. This is a result, in large part, of the fact that funding for K-12 schools comes primarily from local property taxes. As a result:
    • Black students have less success in our K-12 school systems than white students. Notably, their graduation rates are lower.
    • After their K-12 education, black students attend and succeed at lower rates in higher education than their white peers.
  • Good, development-nurturing early care and education (aka child care) is generally less accessible for black families and children than for white ones. Except for the federal Head Start program, good quality early care and education (ECE) is unaffordable and often not conveniently located for black families. The Head Start program, which targets children in families below the federal poverty line (about $22,000 in annual income for a family of three, which could be a single parent with two young children), only receives enough funding to serve about half of the eligible 3 and 4 year olds and about one in ten of the eligible infants and toddlers.

Health and health care

  • Black people have a shorter life expectancy than whites: 75.5 years versus 79.1 years.
  • Black mothers experience higher pregnancy-related maternal mortality rates than whites: 4.1 vs. 1.3 deaths per 10,000 live births. This difference persists even after adjusting for potentially related factors such as age, education, and income.
  • Black infants experience higher mortality rates than whites: 109 versus 47 deaths per 10,000 live births.
  • The coronavirus pandemic has highlighted the inequities in health and health care for black Americans. Black people in the U.S. have had somewhere between 33% and 40% of COVID-19 cases despite being only 13% of the population. Their cases tend to be more severe and the black death rate is over twice that of whites (62 vs. 26 per 100,000). (See previous posts on the disproportionate impact on Blacks and the reasons for this.)
  • Research has found that respiratory conditions (including asthma) that make one more vulnerable to COVID-19 are more common among people with long-term exposure to air pollution and that a small increase in exposure to fine particulate air pollution — tiny particles in the air — leads to a significant increase in the COVID-19 death rate. Low-income and densely populated areas (whose residents are disproportionately black) have higher levels of air pollution due to higher levels of vehicular exhaust, emissions from buildings’ heating systems, and emissions from power generation and industrial facilities.
  • Hospitals that serve primarily white people have 60% higher per patient funding ($8,325) than ones that serve the highest proportions of black people ($5,197). The primarily white-serving hospitals had nearly twice as much capital spending (e.g., for new equipment and modernization) as the hospitals with the most black patients. The white-serving hospitals had more specialty services, better nurse-to-patient ratios, fewer safety hazards, and lower readmission rates. [1]
  • Black people have less access to health care, both based on the locations of services and due to lack of insurance. In addition, they receive lower quality and biased care when they receive health services. For example, a 2003 National Academy of Sciences report, “Unequal Treatment: Confronting Racial and Ethnic Disparities in Health Care” examined 480 studies and found that for every medical intervention black people received poorer-quality care than white people, even when income and insurance were equal. [2] Medical decisions, diagnoses, and treatments have been found to be racially biased with worse outcomes for black patients than white ones.
  • The high levels of stress that black people experience due to racism, economic insecurity, and other factors have been linked, for both children and adults, to chronic health problems (e.g., asthma, obesity, high blood pressure, heart disease, and diabetes) and mental / behavioral health problems (e.g., behavior and anxiety disorders and substance abuse). The stresses of what are referred to as adverse childhood experiences (e.g., child abuse or neglect, violence in the home or neighborhood, parents’ mental health problems) have been found to contribute to a higher prevalence years later of chronic adult health conditions such as high blood pressure, heart disease, diabetes, obesity, and anxiety disorders. The stresses of economic insecurity, neighborhood and household violence, and racism, collectively sometimes referred to as allostatic load, have been linked to higher rates of negative health outcomes, including shorter lifespans and more low birthweight babies. For example, the prevalence of diabetes is 66% higher among Blacks than whites and elevated blood pressure is 49% higher. Blacks have more chronic health conditions even when researchers compare them with whites with similar levels of education and income.
    • Examples of stressors that black people deal with regularly include being presumed to be dangerous or a criminal and being presumed to be in a non-professional or subservient role. For example, black people are often presumed to be staff in a hotel, restaurant, store, or golf club, rather than a customer. Or, as former Massachusetts Governor Patrick stated, “Like every other Black trial lawyer I know, I have been mistaken for a defendant awaiting trial” when arriving in a courthouse or courtroom to argue a case. [3] These types of role misidentification are commonplace. Almost every black person – if not every black person – can cite multiple times when this has happened to them. This requires them to control their anger, frustration, and sometimes their fear time after time after time. This takes a toll on one’s stress level, happiness, and well-being.
    • Black parents routinely feel anxious when their sons and daughters are not in their home because they know of the dangers that discrimination and prejudice present when they are out in public. Black parents know they must have “the talk” with their children, especially their sons, where they tell them that regardless of the situation or provocation they must stay calm, keep their hands visible, and avoid confrontation, particularly with police officers.
  • Because they are concentrated in low-income neighborhoods, black people often live in food deserts, where access to affordable, good quality food is difficult. Supermarkets are typically not located in those neighborhoods, so a long trip, often on public transportation, is required to reach them.

In my next post, I will provide an overview of the detrimental effects of racism on black people in terms of economic inequality, housing, criminal justice, and voting. I welcome your comments with reactions, thoughts, and questions relative to this post and the larger issue of racism in the U.S.

[1]      Dayen, D., 6/19/20, “Unsanitized: Structural racism and the coronavirus crisis,” The American Prospect (https://prospect.org/coronavirus/unsanitized-structural-racism-and-the-coronavirus-crisis/)

[2]      Villarosa, L., 4/29/20, “ ‘A terrible price’: The deadly racial disparities of Covid-19 in America,” The New York Times Magazine (https://www.nytimes.com/2020/04/29/magazine/racial-disparities-covid-19.html)

[3]      Patrick, D., 6/16/20, “America is awakening to what it means to be Black. Will we also awaken to what it means to be American?” (https://medium.com/@DevalPatrick/america-is-awakening-to-what-it-means-to-be-black-3eb938969f7f)

RACISM IN HOUSING HAS BEEN EXPLICIT GOVERNMENT POLICY

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

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

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

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

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

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

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

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

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

RACISM IS AND HAS BEEN EXPLICIT GOVERNMENT POLICY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WHY THE CORONA VIRUS HITS PEOPLE OF COLOR HARDER THAN WHITES

The corona virus pandemic has highlighted critical issues in the U.S. economy and society that have led to unnecessary hardship, suffering, and deaths. The infection and death rates have been higher among people of color than among whites. In addition, low-income households and people living in densely populated areas are at higher risk for COVID-19 than others. These three risk factors occur concurrently for many, resulting in a particularly high-risk population. [1] (See my previous post for more detail.)

There are multiple factors that lead to the corona virus hitting people of color harder than whites. It is important to recognize and acknowledge that these disparities are not linked to individual decisions and behaviors, but to longstanding characteristics of the social and physical environments they live in in the U.S. These social determinants of health, as they are called, are most often driven by public policies and spending patterns, as well as by institutional racism. [2]

One of the reasons for the elevated death rate among people of color, low-income households, and people living in densely populated areas is that COVID-19 is especially dangerous to people with underlying health problems, particularly respiratory conditions, given that the virus typically attacks the lungs. Chronic health problems, including asthma, are higher among these at-risk populations. Research has found that respiratory conditions that make one vulnerable to the virus are more likely among people with long-term exposure to air pollution and that a small increase in exposure to fine particulate air pollution — tiny particles in the air — leads to a significant increase in the COVID-19 death rate. Low-income and densely populated areas (whose residents are disproportionately people of color) have higher levels of air pollution due to higher levels of vehicular exhaust, emissions from buildings’ heating systems, and emissions from power generation and industrial plants. Coincidentally, less than two weeks after the research on air pollution and COVID-19 was released, the Trump administration declined to impose stricter controls on the lung-harming particulate pollution that the researchers identified as hazardous.

People of color and low-income households typically live in densely populated areas where they have more face-to-face contact with other people, which makes exposure to the virus more likely. Multi-family housing, crowded living conditions (i.e., many people for the size of the dwelling unit), and more crowded streets and stores increase contact and exposure. Non-white and low-income people are also more likely to rely on public transportation and to work in essential front-line jobs (such caregiving, public transportation, grocery store work, or delivery jobs), which put them in close contact with other people. [3] One dramatic recent example of a high exposure-risk job is work in meat processing facilities, where infection rates have been very high and where workers are primarily people of color.

Research has documented that chronic health conditions are linked to the high levels of stress that people of color experience, including the stress of discrimination and what are referred to as adverse childhood experiences (ACEs). ACEs have been found to contribute to a higher prevalence of chronic adult health conditions such as high blood pressure, heart disease, diabetes, obesity, and anxiety disorders. In addition, the stresses of economic insecurity, neighborhood and household violence, and discrimination, collectively sometimes referred to as allostatic load, have been linked to higher rates of chronic health conditions. Not surprisingly, then, people of color and those in low-income households have higher rates of these chronic health conditions. This puts them at higher risk for infection, serious illness, and death from the corona virus. For example, the prevalence of diabetes is 66% higher among Blacks than whites and elevated blood pressure is 49% higher. People of color have more chronic health conditions even when researchers compare them with whites with similar levels of education and income.

Finally, people of color and low-income households are at high risk because they have less access to health care, both based on the locations of services and due to lack of insurance. In addition, they receive lower quality and biased care when they receive health services, adding to their risk. For example, a 2003 National Academy of Sciences report, “Unequal Treatment: Confronting Racial and Ethnic Disparities in Health Care” documented bias in the medical system. It examined 480 studies and found that for every medical intervention Black people and other people of color received poorer-quality care than white people, even when income and insurance were equal. [4]

All of these factors contribute to COVID-19’s higher infection rate, greater severity of illness, and higher death rate for people of color. This makes it extremely important to have good data on race and ethnicity for COVID-19 tests and patients in order to effectively target testing, response, and treatment. These data are needed for our society as a whole to effectively control the spread of the virus and develop effective treatment. Because these data were not being captured, a group of U.S. Senators and the American Medical Association both sent letters to senior federal officials at the Department of Health and Human Services underscoring the importance of capturing data on race and ethnicity in all COVID-19 response activities.

I hope we will learn lessons from this COVID-19 pandemic and address the issues and risks faced by people of color, low-income households, and those living in densely populated areas. These lessons should include the need to address inequality and racism to make our economy and society fairer and to help our country live up to its ideal of equal opportunity. This would make access to life (literally), liberty, and the pursuit of happiness available to all Americans, both in good times and in the face of the inevitable, next pandemic. To do so, we will need to implement effective long-term fixes for the critical issues of racism and inequality in the U.S., which have been laid bare by this pandemic.

[1]      Ryan, A., & Lazar, K., 5/10/20, “Disparities drive up coronavirus death rates,” The Boston Globe

[2]      Villarosa, L., 4/29/20, “ ‘A terrible price’: The deadly racial disparities of Covid-19 in America,” The New York Times Magazine (https://www.nytimes.com/2020/04/29/magazine/racial-disparities-covid-19.html)

[3]      Osterheldt, J., 4/11/20, “With virus, racism is underlying ill,” The Boston Globe

[4]      Villarosa, L., 4/29/20, see above

CORONA VIRUS PANDEMIC HIGHLIGHTS RACISM AND INEQUALITY IN U.S.

The corona virus pandemic has highlighted critical issues in the U.S. economy and society that have led to unnecessary hardship, suffering, and deaths. These include racism and economic inequality. Despite limited data on COVID-19 by race and ethnicity (because some jurisdictions have not been collecting or reporting these data), clear patterns emerge.

The infection and death rates have been higher among people of color than among Whites. In addition, low-income households and people living in densely populated areas are at higher risk for COVID-19 than others. These three risk factors occur concurrently for many, resulting in a particularly high-risk population. The infection rate for these populations is likely to be understated because there has probably been less testing among them than among well-off, White populations who typically have better access to health care. People of color also have more severe cases when they get the virus. One study of COVID-19 patients, where 18% of the patients were Black, found that 33% of the severe cases were with a Black patient.

The death rate for these at-risk populations may well be understated as well. Research has found that the national 2020 death rate has been significantly higher than usual after adjusting for the known COVID-19 deaths. This almost certainly means there have been COVID-19 deaths that were not recognized as being caused by the virus. These unrecognized COVID-19 deaths are likely to be disproportionately among these at-risk populations because of their reduced access to health care and virus testing.

At the state level, analyses at various points in time in April and May of 2020 have found significantly higher death rates for Blacks (60% to 370% higher than their presence in the overall population): [1]

  • Wisconsin: 33% of deaths were Blacks, who make up 7% of the population
  • Michigan: 40% of deaths were Blacks, who make up 14% of the population
  • Louisiana: 70% of deaths were Blacks, who make up 33% of the population
  • Mississippi: 61% of deaths were Blacks, who make up 38% of the population

Similarly, Chicago and New York City have death rates of minorities that are roughly twice the rate of their presence in the population.

Rates of COVID-19 infections are also significantly higher for Blacks and Latinos than for Whites: [2]

  • Nationally, based on limited data, 33% of people with COVID-19 infections were Black, while they are only 13% of the population.
  • In Massachusetts,
    • 18% of people with COVID-19 infections were Black, while they are only 9% of the population.
    • 23% of people with COVID-19 infections were Latino, while they are only 12% of the population.
  • In Boston, 40% of people with COVID-19 infections were Black, while they are only 25% of the population.

Researchers in Massachusetts have also looked at the density of population and poverty based on the zip codes of COVID-19 patients’ addresses, along with data on race and ethnicity. They found that death rates were: [3]

  • 40% higher in cities or towns with the highest proportions of people of color versus those with the lowest proportions.
  • 14% higher in cities or towns with the highest population densities versus those with the lowest densities.
  • 9% higher in cities or towns with the highest poverty rates versus those with the lowest rates.

Native Americans, especially the Navajo Nation, have been extremely hard hit by the pandemic. The Navajos have experienced an infection rate higher than any U.S. state, with over 4,000 cases and over 140 deaths as-of May 17. As with other low-income communities, this reflects a lack of public infrastructure, including a lack of access to health care, shortages of protective equipment and supplies, and in some places a lack of water and/or sewer systems. [4]

There are multiple factors that lead to the higher coronavirus infection and death rates among people of color, low-income households, and people living in densely populated areas. It is important to recognize and acknowledge that these disparities are not linked to individual decisions and behaviors, but to long standing characteristics of their social and physical environments. These social determinants of health, as they are called, are most often driven by public policies and spending patterns, as well as by institutional racism. [5]

My next post will review the reasons for the disproportionate impact of COVID-19 on people of color, low-income households, and people living in densely populated areas.

[1]      Villarosa, L., 4/29/20, “ ‘A terrible price’: The deadly racial disparities of Covid-19 in America,” The New York Times Magazine (https://www.nytimes.com/2020/04/29/magazine/racial-disparities-covid-19.html)

[2]      Osterheldt, J., 4/11/20, “With virus, racism is underlying ill,” The Boston Globe

[3]      Ryan, A., & Lazar, K., 5/10/20, “Disparities drive up coronavirus death rates,” The Boston Globe

[4]      Goodluck, K., 5/21/20, “Every corner of the Navajo Nation has been hit by COVID-19,” Mother Jones (https://www.motherjones.com/politics/2020/05/every-corner-of-the-navajo-nation-has-been-hit-by-covid-19/)

[5]      Villarosa, L., 4/29/20, see above

CORONA VIRUS PANDEMIC HIGHLIGHTS WEAKNESS OF PUBLIC INFRASTRUCTURE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WORKERS’ PAY NOT GROWING AND INEQUALITY STILL HIGH

Despite what President Trump said in his State of the Union speech, workers’ pay is still not growing. While the January 2020 monthly data on the dollar amount of earnings showed an increase from a year earlier, when adjusted for inflation and fringe benefits, workers’ overall compensation has declined.

The detailed quarterly data released in December 2019 showed that the dollar amount of average wages had increased 6.8% over the last three years, but that total compensation had declined after adjusting for inflation and fringe benefits. Over the three-year period from 2016 to 2019, the average dollar amount of wages (i.e., “nominal” wages) had increased from $22.83 to $24.38 per hour (i.e., $45,660 to $48,760 per year).

After adjusting for inflation (i.e., the decline in the purchasing power of a dollar), “real” wages had increased only 0.4% over the three years from 2016 to 2019. [1]

Total compensation (including fringe benefits such as health insurance, retirement contributions, and bonuses) declined 0.2% over the three years. The inflation-adjusted value of fringe benefits declined 1.7%. Since fringe benefits are almost one-third of total compensation, their decline wiped out the small increase in wages.

Meanwhile, income inequality continues to grow as compensation for high income individuals grows substantially while the average workers’ compensation is declining.

For workers with the lowest 10% of wages, increases in the minimum wage have boosted pay. Between 2013 and 2019, 26 states and D.C. (but not the federal government) have increased their minimum wages. This led to wage growth of 17.6% over this six-year period for low-wage workers in these areas, as compared to only 9.3% growth in states that did not increase their minimum wages. [2]

The black-white wage gap is growing and is substantially larger now than it was in 2000. After adjusting for differences in education, age, and other relevant worker characteristics, the black-white wage gap as-of 2019 is 14.9%, up from 10.2% in 2000. (The gap is 26.5% without the adjustment for worker characteristics.) Meanwhile, the Hispanic-white wage gap narrowed to 10.8% in 2019, down from 12.3% in 2000 (adjusted for worker characteristics). [3]

The gender pay gap is still substantial. A woman earns 77 cents for each $1 a man earns: a 23% gap after adjusting for differences in education, age, and other relevant worker characteristics. (The gap is 15% without the adjustment for worker characteristics.) The gender wage gap narrowed slightly from 2000 to 2019.

The defining features of the U.S. labor market over the last 40 years have been slow growth in wages and rising inequality, despite steady increases in worker productivity. The median hourly wage is $19.33, less than $40,000 a year. (The median wage is the point in the distribution of wages where half of workers get less and half of workers get more. The average wage is higher than the median wage because of the very high wages at the top of the distribution.)

The slow growth of wages, despite growing productivity, cannot be explained by education levels, increases in fringe benefits, or factors other than the decreasing clout of workers and the increasing power of employers and corporate executives. This is the result of policy decisions, largely by the federal government, that have reduced the power of workers, mainly by making it harder to organize unions and more difficult for unions to bargain collectively on behalf of workers. [4]

[1]      Salkever, D., 3/1/20, “Blue collar bust,” The Boston Globe

[2]      Gould, E., 2/20/20, “State of working America wages 2019,” Economic Policy Institute (https://www.epi.org/publication/swa-wages-2019/)

[3]      Gould, E., 2/27/20, “Black-white wage gaps are worse today than in 2000,” Economic Policy Institute (https://www.epi.org/blog/black-white-wage-gaps-are-worse-today-than-in-2000/)

[4]      Gould, E., 2/20/20, see above

BIG MONEY IS ALREADY PLAYING A BIG ROLE IN THE 2020 CAMPAIGN

Big money is already pouring into the 2020 election campaigns. The spending by wealthy individuals and corporations continues to grow. Federal candidates have already raised $2.2 billion (yes, Billion) with $1.6 billion of that belonging to the presidential candidates.

Here’s a quick summary of what the major presidential candidates and (supposedly) independent outside groups have spent so far (with 264 days to go!): [1]

  • Bloomberg: $464 million (self-funded, not accepting any contributions)
  • Steyer: $271 million
  • Trump: $218 million plus $35 million of outside money
  • Sanders: $133 million plus $  4 million of outside money
  • Warren: $  92 million plus $33 million of outside money
  • Buttigieg: $  81 million
  • Biden: $  68 million plus $  8 million of outside money
  • Klobuchar: $  34 million
  • Gabbard: $  14 million
  • Weld: $    2 million

Bloomberg is spending roughly $6 million a day of his own money on his presidential campaign. The bulk of his spending, roughly $400 million so far, has gone to advertising on TV, radio, and digital media. He is paying higher compensation to campaign staff than other campaigns in order, in numerous cases, to steal them away from other campaigns. [2] He is literally trying to buy the presidency with his personal fortune.

The 2010 Citizens United Supreme Court decision allowing unlimited spending in election campaigns by (supposedly) independent, outside groups and wealthy individuals continues to exacerbate the role of money in our elections. The securities and investment industry, for example, continues to increase its campaign spending and was the top industry donor to outside groups in each of the last four election cycles. Since 2012, the industry has spent more than $80 million in each two-year federal election cycle, over $320 million in total. Before the Citizens United decision, it never spent more than $18 million in an election cycle. [3]

Much of the campaign spending by corporations and their industry associations is done through Political Action Committees (PACs). Business PACs have already contributed $179 million to federal candidates and parties in the 2020 election cycle. Business PACs account for 73% of PAC contributions, dwarfing the spending by unions and issue-focused groups. Although the contributions themselves must be made by employees, shareholders, and their family members, the business can pay for all the PAC’s expenses and provide incentives to donors for giving to the PAC. The corporation’s direct spending on PAC expenses does not have to be disclosed. Business interests couple their dominant PAC spending with dominant spending on lobbying to give them great influence in policy making. They target specific candidates, often incumbents, who will be in influential policy making positions (e.g., on committees) relevant to their interests. [4]

PACs are supposedly independent of candidates’ campaigns, but they often share office space, staff, and other resources with candidates, House or Senate leaders, or the political parties. [5]

The amount of “dark money” in campaigns is growing, which means voters know less about who’s spending money to influence their votes. (“Dark money” is money that is laundered through non-profit entities that supposedly don’t have political spending as their main purpose and therefore do not have to disclose who their donors are.) In 2019, $65 million in “dark money” has flowed into PAC spending on 2020 election campaigns. In the 2018 election cycle, $176 million in “dark money” was given to PACs. The total for the 2020 election cycle is all but certain to be higher.

A recent report from the federal Government Accountability Office (GAO) found that campaign finance laws and enforcement capabilities have not kept up with the issues presented by “dark money,” unlimited spending, and on-line political spending. The Internal Revenue Service (IRS) doesn’t have clear standards on what constitutes political activity in non-profit entities or the extent to which non-profit entities can engage in political activity. Furthermore, it is not reviewing donor lists or sharing them with other federal law enforcement agencies for review. The Federal Election Commission (FEC) is non-functional due to partisan deadlock, the President’s failure to appoint Commissioners, and under-funding. As a result, for example, the flow of illegal foreign money into our elections through “dark money” channels is not being monitored and no enforcement is occurring. [6]

One often overlooked effect of our money-driven elections is that people of color and their interests are severely underrepresented by elected officials. Ninety percent of elected officials are white, while only 63% of the population is white. The great majority of campaign money at the federal and state levels comes from less than 1% of the population who make donations of over $1,000. The bulk of these donors come from the richest 1% of the population, which is over 90% white. Money is, of course, crucial to election campaigns, with the candidate with more money winning about 90% of the time. The record spending on campaigns, especially by wealthy individuals and corporations unleashed by the Citizens United decision, has exacerbated the political marginalization of people of color. Wealth and political power have been increasingly consolidated in the hands of a very small, very white portion of the population. The bottom line is that people of color are underrepresented among elected officials, among candidates for office, among donors to campaigns, and as having their interests reflected in policies that are enacted. [7]

Given the obscene amounts of money being spent on election campaigns, voters who wish to make good decisions on candidates must now spend more time and effort to wade through the barrage of self-serving ads, misinformation, and noise to ferret out good and truthful information about candidates. If our democracy is to work, this requires all of us to pay more attention and spend more time researching candidates before we make our voting decisions. Voters will need to be consciously skeptical, so they are less swayed by paid media and slick messaging.

Ultimately, we need to change our campaign finance laws to reduce the influence of money and make it easier for voters to discern candidates’ positions on issues. But until that happens, to be informed voters, we will have to wade through the barrage of political advertising and messaging to discern between quality from quantity and differentiate truth from half-truth or outright fiction.

[1]      OpenSecrets.org, retrieved 2/23/20, “2020 presidential race,” Center for Responsive Politics (https://www.opensecrets.org/2020-presidential-race)

[2]      Evers-Hillstrom, K., 2/20/20, “Michael Bloomberg is spending nearly $6 million per day on campaign,” OpenSecrets.org, Center for Responsive Politics (https://www.opensecrets.org/news/2020/02/bloomberg-spent-6-million-per-day/)

[3]      Monnay, T., 1/23/20, “Wall Street donor influence shows unprecedented growth 10 years after Citizens United,” OpenSecrets.org, Center for Responsive Politics (https://www.opensecrets.org/news/2020/01/wall-street-donor-influence-growth-10-years-citizens-united/

[4]      Evers-Hillstrom, K., 2/14/20, “Why corporate PACs have an advantage,” OpenSecrets.org, Center for Responsive Politics (https://www.opensecrets.org/news/2020/02/why-corporate-pacs-have-an-advantage/)

[5]      Massoglia, A., 2/7/20, “ ‘Dark money’ groups steering millions to super PACs in 2020 elections,” OpenSecrets.org, Center for Responsive Politics (https://www.opensecrets.org/news/2020/02/dark-money-steers-millions-to-super-pacs-2020/)

[6]      Massoglia, A., 2/7/20, see above

[7]      Lioz, A., 12/14/19, “Stacked deck: How racial bias in our big money political system undermines our democracy and our economy,” Demos (https://www.demos.org/sites/default/files/publications/StackedDeck2_1.pdf)

NO BENEFITS FOR WORKERS FROM THE 2017 TAX CUT ACT DESPITE THE PR

The actual effects versus the claimed effects of the Tax Cuts and Jobs Act (TCJA) are becoming clearer all the time. (The TCJA is the December 2017 tax cut bill rushed into law by Republicans in Congress and President Trump.) A previous post provided a summary of what the TCJA did, the promises made about its effects, and the actual effects of the law. My last post reviewed the largely failed provisions that were supposed to tax the profits of multinational corporations more fairly.

Promised benefits for workers have failed to materialize and claims that the Tax Cuts and Jobs Act resulted in bonuses and wage increases for workers are unfounded. When President Trump signed the TCJA in December 2017, he stated that corporations would give “billions and billions of dollars away to their workers.” This has not happened.

Over the last two years, there has been no increase in workers’ compensation that can be attributed to the TCJA. In the short-term, to support the President and the rationale for the TCJA, some large corporations asserted that the bonuses they gave to workers in late 2017 were due to the TCJA. These bonuses were largely a public relations stunt. A few of those employers, such as AT&T and Walmart, engaged in major publicity around giving workers bonuses and then quietly laid off thousands of workers shortly thereafter.

The TCJA did incentivize the shifting of one-time bonuses from 2018 into 2017. Because expenses recorded in 2017 reduced 2017 profits when the tax rate was higher than it would be in 2018, it was advantageous to book as many expenses as possible in 2017. The value of the deduction of expenses, including the bonuses, from profits was more valuable under the 35% tax rate in place in 2017 than it would be in 2018 when the tax rate would only be 21%. In other words, it was cheaper for the corporations to pay the bonuses in 2017 than it would have been to pay them in 2018. Moreover, the TCJA provided a perverse incentive for the bonuses to be only a one-time occurrence, because in 2018 and beyond there would be increased incentives to maximize profits because of the reduced tax rate, which might not stay at that low level forever.

Nonetheless, bonuses accounted for only 2.7% of workers compensation in 2017, only a slight increase from 2.5% in 2016. Furthermore, this was a one-time blip as bonuses have declined since then.

If the TCJA were to have long-term or permanent effects on pay and the number of jobs, they would only be realized over a period of months or years, not immediately upon passage of the law, because making the necessary investments takes time. For the TCJA’s cut in the corporate tax rate to create a long-term, permanent increase in workers’ pay, corporations would need to use their tax savings for investments in improved equipment, worker skills training, or other steps that would improve workers’ productivity. To permanently increase the number of jobs, corporations would need to invest in increased production capacity. [1] Therefore, any compensation increases or growth in the number of jobs announced in late 2017 and early 2018 that were claimed to be results of the TCJA were public relations (PR) stunts, not effects of the TCJA.

Furthermore, corporate profits and cash reserves were high before the enactment of the TCJA, so corporations already had the resources needed to increase workers’ compensation or expand production if they wanted to. They weren’t increasing workers’ compensation or the number of jobs before the TCJA and they haven’t done so afterwards.

As background, corporate profits had risen dramatically from 5% of Gross Domestic Product (GDP, the total output of the U.S. economy) in 1990 to 9% in 2019, after having been largely in the range of 5% to 7% from 1952 to 1990. Furthermore, corporate taxes have been falling since the 1950s, so corporations have been keeping more of their profits. Taxes on corporate profits were 5% of GDP in 1952 and fell to 4% from the late 1950s to the late 1960s. They fell further to 3% of GDP from 1970 to 1980, and then to roughly 2% of GDP from 1982 until 2017. [2]

The bottom line is that the Tax Cuts and Jobs Act of 2017 has delivered none of the promised benefits for workers and low- and middle-income households, but has delivered much greater benefits than were promised (or admitted to) to wealthy individuals and to large, particularly multi-national, corporations. Increases in workers’ compensation that have occurred since the passage of the TCJA are ones that economic analysis indicates would have occurred anyway. Business investment and economic growth have not increased as promised. The promise of more fairly taxing multi-national corporations’ profits to increase tax revenue and discourage the shifting of profits and jobs overseas has been undermined. The multi-national corporations’ lobbying campaign got rules and regulations written for the implementation of the TCJA that significantly reduced the expected taxes on their profits. (See my previous post for more details on this.)

The truth about the Tax Cuts and Jobs Act is that despite the promises and public relations announcements that said otherwise, it has been a huge windfall for wealthy corporations and individuals, and of little or no benefit to workers. Historical experience and economic analysis indicated this would be the result in advance of TCJA’s enactment. The claims of benefits trickling down to workers from tax cuts for corporations and wealthy individuals had been convincingly rebutted. Nonetheless, proponents of the TCJA used this claim to argue for its tax cuts.

I believe many of the people who supported and voted for the TCJA knew what its actual effects would be. They lied about it because admitting that they wanted to enrich their political supporters and big campaign donors would have been unseemly and a political liability.

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

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

LIES ABOUT THE 2017 TAX CUT ARE NOW CLEAR

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

YEAR-END REFLECTIONS ON DEMOCRACY AND THE PROGRESSIVE MOVEMENT

For New Year’s Eve 2019, with a momentous election coming up in 2020, I’m reflecting on the state of progressivism (aka liberalism) and our democracy. One of my heroes in the world of liberal policy and political analysis is Bob Kuttner. The range and depth of his knowledge is truly incredible. His writing is clear and insightful even when covering very complex policy and political issues. A main outlet for his writing and thinking has been The American Prospect magazine, which he co-founded and has run for 30 years. When many print media outlets are disappearing, the Prospect is flourishing.

While the Democratic Party has strayed from its core beliefs and values to shift to the center and the right, especially on economic issues (to allow it to pursue contributions from corporate elites), The American Prospect magazine and Kuttner have stayed true to the progressive cause. They have consistently championed working people’s causes and exposed the abuses of the big, multinational corporations and financial industry. They have connected the dots among the structural corruption of unchecked capitalism, its inextricable link to the corruption of our politics and democracy, how these affect the everyday lives of regular people, and what’s need to reclaim our democracy and country for the people. [1] The Prospect’s most recent issue is an incredibly in-depth analysis of the Green New Deal and the need for urgent and radical, yet practical and doable, actions to address global climate change.

Bob Kuttner’s comments at the October gala celebrating the Prospect’s 30th anniversary, reflecting on the roles of “mainstream” and radical progressives or liberals, struck me as very relevant and insightful in the run-up to the 2020 elections. Here is an excerpt:

“One of the things that fascinates me is the uneasy relationship and necessary symbiosis between liberals and radicals. Liberal democracy, at its core, is about the rule of law, democratic representation, the concept of loyal opposition, free inquiry, and due process. It’s polite. But sometimes, power relations become so out of kilter that radicalism has to violate well-mannered liberalism. The industrial union movement could not have succeeded without sit-down strikes that violated property rights. The civil rights movement required sit-ins, and marches, and other forms of civil disobedience. Lyndon Johnson, when he allied himself with Martin Luther King, understood that people had to break the law as it was then understood to redeem the Constitution. And of course the anti-war movement of the 1960s had to break a lot of china.

“Just as liberals, however queasily, need radicals, it’s also the case that radicals need liberals. Because drastic change ultimately needs to be enshrined as law.” [2]

Since the 1980s, an important factor driving the shift to the right and the enhancement of the power of corporate America and the wealthy has been an imbalance in financial resources and in the way the wealthy are using them. As Kuttner notes above, liberals and the left tend to be polite, well-mannered, focused on consensus and bipartisanship, and to operate within the context of laws, institutions, and established norms and practices. The right and their wealthy funders have not been similarly constrained. They have readily adopted an extreme agenda, been willing to bend and break the truth and the facts, and have willingly, and at times apparently gleefully, ignored norms and traditions, broken the law, and trashed important institutions of our democracy. [3]

This closing reflection from Kuttner’s speech resonates strongly with me:

“… the postwar system of managed capitalism, that my generation assumed was the new normal, was in fact an anomaly. …

It takes enduring continuous political struggle to keep enriching and expanding democracy, both for its own sake and to housebreak capitalism. That is a labor of Sisyphus. You roll the rock up the hill; and the rock tumbles back down the hill. But in Albert Camus’s celebrated essay, The Myth of Sisyphus, the last line is: ‘One must imagine Sisyphus happy. The work, and the joy, is in the struggle.’” [4]

Beginning in the 1980s, the Democratic Party, and we as citizens of a democracy, let too many rocks roll too far down the hill by undoing the oversight and regulation of capitalism and letting it and the wealth of corporate elites corrupt our politics and policies. The middle class and working people got buried in the landslide of rocks rolling downhill.

Many citizens learned from the election of 2016 that democracy is not a spectator sport; citizens need to be engaged and informed for democracy to work. Some in the Democratic Party recognized and others found their voices to say that too many rocks had rolled too far down the hill of economic inequality and of other injustices in our society. Hopefully, the 2020 elections will reflect that learning, which was evident to some extent in the 2018 national elections, as well as in elections at the state and local levels.

One of my New Year’s resolutions is to do whatever I can in 2020 to advance the movement that’s reclaiming our liberal democracy of, by, and for the people. I hope it’s one of your resolutions too.

[1]      Meyerson, H., 10/24/19, “Sisyphus is happy,” The American Prospect (https://prospect.org/blogs/tap/sisyphus-is-happy/)

[2]      Meyerson, H., 10/24/19, see above

[3]      Heer, J., 9/10/19, “In an age of policy boldness, think tanks have become timid,” The Nation (https://www.thenation.com/article/think-tanks-democratic-party/)

[4]      Meyerson, H., 10/24/19, see above

CHARITARIANISM VERSUS PHILANTHROPY

At this time of year, when charity, giving, and philanthropy are receiving lots of attention, it’s appropriate to reflect on their roles, goals, and philosophies. Often, charity and philanthropy are lumped together and not differentiated, but, technically, there is a difference.

Simply put, charity is about the receiver and philanthropy, narrowly defined, is about the giver. Charity is about helping people – reducing hardship and suffering, making other people’s lives better. Philanthropy, narrowly defined, is about the donor feeling good for having done something meritorious, perhaps relieving guilt, and receiving credit, publicity, and acknowledgement for having done a good deed. Lawrence Berenson, a wealthy financier, has been promoting “charitarian” behavior as opposed to philanthropic behavior. [1]

With this perspective, it isn’t hard to see some philanthropy as self-serving, such as when donors give large amounts of money to well-established, already wealthy institutions to have their names on buildings, professorships, or other high visibility items. A current example is the attention that’s now focused on the philanthropy of the Sackler family. They are the owners of Purdue Pharma and the aggressive, unethical purveyors of Oxycontin. Their drug and their actions were huge contributors to the opioid crisis. Tufts University recently announced that it would remove the Sackler name from several facilities given the taint on how the Sacklers made the money used for their donations. The Sackler family has responded by threatening a lawsuit.

An underlying requirement for high-profile, large-scale philanthropy is great wealth in the hands of individuals. Therefore, it is inextricably linked to high levels of economic inequality. [2] This was true of the great industrial fortunes of the Gilded Age at the turn of the 20th century and is true of the large fortunes created in the last few decades from financial investing and speculation, as well as from high technology companies. The large fortunes of today (e.g., Gates, Bezos, Zuckerberg, Buffet, Waltons, etc.) are larger than those of the Gilded Age and have relatively young, living owners.

In both the Gilded Age and today, philanthropy has been viewed simultaneously as a social good and a social menace. The high levels of economic inequality required for large-scale philanthropy are linked to inequality in political power, as important decision-making that has significant effects on the public and society is in the private hands of a few very wealthy individuals (i.e., how to use, including in philanthropic ways, great personal wealth). This is profoundly undemocratic. [3] Large-scale philanthropy, whether directly from individuals or through foundations, is largely lacking in public transparency and accountability; the public is not involved and has no say or oversight. [4] Berenson, the promoter of charitarianism, is a founding member of Patriotic Millionaires, which is promoting discussions of solutions to political and economic inequality in the U.S. (You can watch a 28 minute YouTube interview of him on these topics here.)

By some measures, today’s philanthropy is broader than in the past; tens of thousands of new foundations have been created in the last 30 years. Both today and in the Gilded Age, the philanthropy of the wealthy has often been done through foundations. However, this recent surge in foundation creation is in part stimulated by tax avoidance because by putting money into a foundation the owner can claim it as a charitable deduction and significantly reduce income taxes. [5]

Foundation-based philanthropy can be very inefficient. Many foundations have high overhead expenses, such as nice office space and large staff expenses for running the foundation. In part, this reflects the Internal Revenue Service (IRS) requirement that for foundations’ to be tax-exempt they must spend 5% of their assets (i.e., total value) each year. In addition to donations, this required spending can include operational expenses, such as the costs of office space and staff. Furthermore, there are many examples, particularly among smaller foundations, where many of a foundation’s employees are family members or friends who are paid very nice salaries or where the foundation funds other self-serving activities. Recently, a Donald Trump foundation emerged as a prominent example of this. New York State recently ordered it to pay fines and be shut down because of its inappropriate and self-serving spending. Moreover, many small foundations, for example a family foundation that wants to help address a health issue that afflicted a family member, give their money to another foundation that actually does research or provides medical care for that health issue. Therefore, the amount of money that actually goes to doing social good is reduced by multiple iterations of foundations’ overhead expenses. [6]

A fast-growing vehicle for philanthropy that has entered the mainstream only recently is the donor-advised fund (DAF). A DAF is like a miniature foundation; an individual gives money to a personal account typically setup and managed at a community foundation or an investment manager such as Fidelity, Schwab, or Vanguard. The donor can take an immediate tax deduction for the money put into the DAF but can designate the non-profit organizations to receive the money over time. [7]

Fidelity Charitable, a donor-advised fund manager, received over $9 billion in 2018, nearly triple the amount received by the largest traditional charity, United Way Worldwide. There is no required time window for the money in DAFs to be distributed to charities (such as the requirement that foundations spend 5% of their assets annually). Critics of DAFs note that this means that billions of dollars are sitting in these DAFs that otherwise would be going directly to help those in need if DAFs didn’t exist. Moreover, the DAF managers are making money on management fees; this means they have a disincentive to see the DAF monies donated. The managers also spend significant sums on promoting and marketing the use of DAFs because they make money on them. In other words, they promote these pseudo-charities in ways that real charities don’t or can’t promote themselves.

For over a century, large-scale philanthropy and foundations have had significant effects on public policies and programs. For example, the Gates Foundation had a major influence on the development of the Common Core educational standards. In 2008 and 2009, the Gates Foundation made large grants to the association of the states’ K-12 education commissioners and to the National Governors Association to build (buy?) their political support for the Common Core standards and to facilitate their development. Subsequently, adoption of the Common Core Standards has been incentivized by federal education funding. They were adopted by 42 states (although 4 states subsequently dropped them). [8]

Philanthropy today is more policy-oriented and politically aggressive than it has been in the past. This is both fueling and being driven by the current extreme partisanship in our society linked to political parties and extreme ideologies. It is also both a contributor to and a result of the decline in the effectiveness, respect for, and resources available to our public sector. This clearly has had a negative effect on our democracy and reflects the social menace aspect of large-scale philanthropy and the inequality related to it. Some scholars have made the case that there is a cause and effect link between increased political philanthropy and decreased civic engagement by citizens.

To promote charitarianism as opposed to philanthropy (narrowly defined) and to ensure that philanthropy’s potential for doing good wins out over its potential to be a social menace, oversight is needed to:

  • Ensure that foundations and donor-advised funds are focused on doing social good rather than being self-serving and that their focus is on benefiting the receivers (i.e., helping people and making the world a better place) and not on benefiting the givers (directly or indirectly)
  • Require greater public accountability and transparency, including public input and democratic decision-making
  • Ensure that foundations and donor-advised funds are not simply a vehicle for tax avoidance by the well-off

Without oversight, philanthropy can be a self-serving, self-perpetuating capitalistic enterprise as opposed to a charitarian one. To make philanthropy more charitarian, the inextricable link between philanthropy and economic inequality must be acknowledged and understood. Policies and regulations should be put in place to ensure that charity and a focus on the receivers take precedence over the self-interests and desires for recognition and acclaim of the givers.

[1]      Heffner, A., 11/3/19, “Charitarian patriotism,” The American Prospect (https://prospect.org/power/charitarian-patriotism-lawrence-benenson/)

[2]      Cohen, R. M., 9/21/16, “Q&A: Pulling back the curtain on education philanthropy,” The American Prospect (https://prospect.org/education/q-a-pulling-back-curtain-education-philanthropy/)

[3]      Soskis, B., 8/22/17, “Gift horse or Trojan Horse?” The American Prospect (This is a review of the book The Givers: Wealth, Power, and Philanthropy in a New Gilded Age by David Callahan.) (https://prospect.org/labor/gift-horse-trojan-horse/)

[4]      Soskis, B., 8/22/17, see above

[5]      Heffner, A., 11/3/19, see above

[6]      Heffner, A., 11/3/19, see above

[7]      Preston, C., 10/28/16, “Is Wall Street taking over charity?” The American Prospect (https://prospect.org/economy/wall-street-taking-charity/)

[8]      Cohen, R. M., 9/21/16, see above

THE WEALTHY PAY A LOWER TAX RATE THAN YOU DO

It’s now official: the 400 wealthiest Americans pay taxes at a lower rate than everyone else, thanks to tax cuts, loopholes, and lax enforcement. For the first time in history, wealthy Americans’ federal, state, and local taxes are a lower percentage of their incomes, 23%, than anyone else.

The portion of income paid in taxes by the wealthy has plummeted over the last 70 years, contributing substantially to growing income and wealth inequality. In the 1950s, wealthy Americans paid 70% of their incomes in taxes. This dropped to 47% in 1980 and then was cut in half, to 23%, by 2018. Meanwhile, middle-income households’ tax burden increased, rising from 20% to 30% and then falling back to about 25%. Low-income households experienced the largest proportional increase in their tax burden, which rose from under 20% to roughly 25%.

This animated graph dramatically illustrates how the effective tax rates experienced by all households, from the lowest income households on the left to the 400 wealthiest households on the right, have shifted from 1950 to 2018 for the aggregated total of federal, state, and local taxes. [1]

Not only have tax rates on the wealthy been cut and loopholes added, but tax enforcement has been weakened. Driven by Republicans in Congress, the enforcement budget of the Internal Revenue Service (IRS) has been cut by 25% (adjusted for inflation) since 2010.

Since 2010, the auditing of high-income taxpayers has declined sharply, although the audit rate for taxpayers with under $100,000 of income has remained roughly the same. In 2015, 34.7% of taxpayers with over $10 million of income were audited; in 2018, 6.7% were audited – an 80% decline. For taxpayers with between $1 million and $5 million in income, audit rates fell from 8.4% to 2.2% – a 74% decline. This reduction in audits is happening at the same time as tax avoidance schemes used by the rich, such as using overseas accounts and business entities, are proliferating. Partnerships, which are typically used by high-income individuals such as lawyers and investment managers, had an audit rate in 2017 of only 0.2%, half of what it was in 2015. [2]

Audits of low-income households that are poor enough to claim the earned income tax credit [3] account for 39% of all IRS audits. The IRS claims this is because auditing the poor is quick and easy; it can often be done by mail and by lower level employees. The IRS says this is the most efficient use of limited enforcement resources and that it can’t increase audits of higher-income taxpayers until it has the money to hire more skilled employees and have them devote the time required to do more complex audits. [4] However, audits of low-income tax returns can only yield small amounts of additional taxes when mistakes or problems are uncovered. Audits of high-income returns, on the other hand, can yield millions of dollars of additional taxes and may reveal illegal tax avoidance that has been going on for years.

The share of income paid in taxes by the wealthy has declined because politicians have cut every tax that falls more heavily on those who are well-off: income tax rates on high incomes have been cut by more than half, taxes on income from investments (i.e., wealth) have been cut, and the estate tax has been dramatically cut. The justification for this has been the supply side plutocratic economics theory that the economy as a whole, and even tax revenue, would benefit. This has been proven wrong. The wealthy – and only the wealthy – have benefited. Incomes for workers and the middle class have been stagnant since 1980 and the growth of the economy has been disappointingly slow. The American economy hasn’t done well when inequality is extremely high and rising, and tax rates on the rich are low and falling. [5]

Raising income tax rates on very high incomes, implementing a small, annual wealth tax, and increasing taxes on large estates would increase the fairness of our taxes and begin to slow or reverse growing income and wealth inequality. Moreover, this would provide the public sector with the revenue needed to make critical public investments that will actually spur economic growth.

I encourage you to contact your elected officials and candidates for office to tell them you are outraged that the wealthy pay taxes at a lower rate than you do. Tell them that it’s crystal clear that income and wealth inequality are the result of policy choices made by elected policy makers. Ask them what they will do to reduce income and wealth inequality, and to make the American tax system fair again.

[1]      Leonhardt, D., 10/6/19, “The rich really do pay lower taxes than you,” New York Times

[2]      Fleischer, V., 9/26/19, “Create a more progressive tax policy,” The American Prospect (https://prospect.org/day-one-agenda/create-a-more-progressive-tax-policy/)

[3]      The earned income tax credit provides its greatest benefit of $6,400 to families with three or more children and incomes under $19,000. The benefit is then phased out at higher incomes and goes to zero at an income of $49,000 for a family with 3 or more children and at lower levels for smaller families.

[4]      Kiel, P., 10/2/19, “IRS: Sorry, but it’s just easier and cheaper to audit the poor,” Pro Publica (https://www.propublica.org/article/irs-sorry-but-its-just-easier-and-cheaper-to-audit-the-poor)

[5]      Leonhardt, D., 10/6/19, see above

REVITALIZING DEMOCRACY TO END PLUTOCRATIC ECONOMICS

This is the final post of an eight-part series on the failures of forty years of plutocratic economics that have harmed workers, the middle class, our economy, and our democracy.

The basic arguments of plutocratic economics are 1) markets work and government doesn’t and 2) markets are the best way to foster life, liberty, and the pursuit of happiness. Supporters of plutocratic economics believe that the highest form of freedom is the opportunity to engage in individual transactions in the marketplace. However, they oppose public or community-based efforts to ensure an equal opportunity for all to participate in the marketplace. (See this previous post for more details.)

Supporters of plutocratic economics believe that markets and businesses, on their own without regulation or oversight by government, are efficient and will meet human and societal needs. They believe that an individual’s lack of economic resources to buy the necessities of life is indicative of a personal failing. This means that they do not support efforts to level the playing field when structural inequities exist (or have existed), including discrimination, oppression, and subjugation. [1]

Plutocrats (i.e., people whose power comes from their wealth) believe that power and privilege are rightfully earned. Therefore, they support public policies that systematically favor wealthy individuals and business interests. They view corporations as the ultimate expression of market efficiency and believe businesses should be endowed with the rights of persons (e.g., free speech) and the powers of sovereign states.

Plutocrats use their economic power (i.e., their wealth) to control markets and policy making. They control policy making by effectively buying elected officials through campaign spending and government bureaucrats through lobbying and the revolving door (i.e., by having either themselves or their employees become government bureaucrats or by promising lucrative jobs to government bureaucrats whenever they leave their government jobs). Plutocrats also have provided a scholarly veneer to plutocratic economics by funding think tanks and academic scholars to promote supportive theories and provide supportive data.

Plutocrats use their economic power to enhance their political power in what becomes a mutually reinforcing spiral. For example, they have gotten campaign finance laws changed to allow them to engage in unlimited campaign spending and to hide their identities when they do so. They have changed the rules of the market so their businesses can become ever bigger and more powerful (e.g., by weakening the enforcement of antitrust laws). (See these previous posts for more details on the weakening of antitrust enforcement and what we should do about it.)

In addition to efforts that actively promote plutocratic economics, plutocrats actively work to undermine support for democracy. They work to discredit the belief that a democratic government can enhance life, liberty, and the pursuit of happiness for its citizens.

For example, supporters of plutocratic economics have misused antitrust laws to discredit and undermine public support for antitrust enforcement. [2] They have used antitrust laws to prevent collective actions by workers and small businesses. [3] The Trump administration recently opened an antitrust investigation into four large automakers (Ford, Honda, Volkswagen, and BMW) for agreeing to abide by California’s auto emissions standards (which are more stringent than national standards). By politicizing the use of anti-trust laws, many experts feel that the administration is trying to create the public perception that all use of antitrust enforcement is simply political.

The forty-year track record of failures for plutocratic economics has shown it to be a smoke screen for a self-serving grab for wealth and power by economic elites, i.e., a vehicle for plutocrats’ greed and desire for political influence. The failures are big and small – the 2008 financial collapse, out-of-control carbon emissions and climate change, skyrocketing inequality in incomes and wealth, and repeated failures to protect individuals’ privacy and personal data – and have harmed everyone – workers, taxpayers, small business people and entrepreneurs, and consumers – as I’ve documented in previous posts. Market failures have been widespread in the absence of effective government regulation and oversight. [4]

When plutocratic economics’ effects overwhelm society and government, preventing many residents from enjoying life, liberty, and the pursuit of happiness, there is a significant risk that citizens will turn to authoritarian and tyrannical leaders who promise a return to the good old days. Whether in the U.S. today or at other places and other times, these politicians promise resurgent economic well-being (often falsely) through nationalistic and emotional rhetoric. They typically blame immigrants, minorities (racial, ethnic, gender identity, and / or religious), and even the growing presence of women in the job market for workers’ loss of economic security. Supporters of plutocratic economics will also use other emotional, hot-button issues (such as gun control, abortion, and contraception) and even voter suppression to win political support and elections so they can implement their economic agenda.

Real freedom to pursue life, liberty, and happiness requires government and community-based entities that work to equitably balance economic and social power among all members of society. Democratic governments and institutions, including civic associations, are the vehicles that can and should serve as the guardians of this true freedom.

The antidote to the plutocrats and their plutocratic economics is the revitalization of democracy through increased participation by informed citizens. We need our democratic government institutions to assert their power over the plutocrats and their economic and political power. This will restore policy making to being of, by, and for the people and to promoting the lives, liberty, and pursuit of happiness of all residents. (See this previous post for more detail on policies to reverse plutocratic economics and its effects.)

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

[2]      Dayen, D., 9/10/19, “Is Trump’s Justice Department trying to discredit all antitrust?” The American Prospect (https://prospect.org/article/trumps-justice-department-trying-discredit-all-antitrust)

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

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

PLUTOCRATIC ECONOMICS HAS FAILED WORKERS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE PLUTOCRATS’ ECONOMIC CON

Since the late 1970s, a concerted effort has been made by right-wing, wealthy elites to promote a new brand of “free market” capitalism, which I refer to as plutocratic economics. [1] Their broad, well-funded initiative was successful in reversing and undermining the progressive, managed capitalism that was put in place in the 1930s and 40s in response to the failure of the largely unregulated markets that led to the Great Depression.

After 40 years of experience with these plutocratic policies, the results are in: they don’t work. Wealthy elites (the plutocrats) have benefited substantially, but the consequences for the economy, workers, and the middle class have been very negative.

The plutocrats’ basic argument is that markets work and government doesn’t. They assert that government is inherently incompetent, in part because it and its regulators have been “captured” by the special interests they were supposed to regulate. [2]

The wealthy individuals and large, often multi-national, corporations pushing plutocratic economics invested in politicians, academicians, think tanks, and advocacy organizations to promote their theories, rationales, and policies. Academicians and think tanks were hired and funded to give a scholarly veneer and rationale to what otherwise would have been seen for what it was – a raw power grab. The resultant public policies greatly benefited the self-interest of the wealthy elites and corporate executives.

On the political front, the plutocrats use multiple strategies to achieve their policy goals. They employ lobbyists who work to convince policy makers to support their policies. They place supporters (often former corporate employees) within the government bureaucracy (a.k.a. the revolving door). They make campaign contributions and “independent” expenditures on behalf of candidates to elect supportive individuals and to buy access to elected officials. They promote trade policies and a type of globalization that undermines American workers. They got U.S. policy makers to choose trade policy options that put the interests of multi-national corporations and investors first and those of workers last. [3]

Proponents of the plutocratic economics promised that markets and businesses would regulate themselves for the good of all, that markets would be more efficient without government regulation, and that social goals could be more effectively achieved by using market forces. They also argued that social programs that supported low income workers and families were inefficient, unnecessary, and provided disincentives to work hard and make positive contributions to our economy.

In concert with their economic and political theories, the plutocrats pushed to reduce progressive taxation, eliminate government regulation and anti-trust enforcement (which had limited the size and marketplace power of corporations), and dramatically weaken public programs that provide support for workers and a safety net (including the minimum wage, unemployment benefits, unions, and welfare payments to the poor). Their trade policies allowed U.S. multi-national corporations to ship five million jobs overseas over the last 20 years. As a result, multi-national corporations now have a smaller portion of their global workforce in the U.S. than the portion of their sales that are in the U.S. [4]

The plutocrats and their hired experts developed rationales for their policies based on economic theories and assumptions about markets that were not supported by actual experience (and have since been disproved by actual experience). For example, they assumed ideal and efficient markets where perfect information was available to buyers and sellers, where prices were set solely by supply and demand, where sellers and buyers were numerous and no one had any marketplace power, and where there were no significant externalities, such as pollution. Supply-side economics is a classic case of an economic theory with no actual evidence for it and with substantial evidence refuting it today. It claims that cutting taxes, particularly on the wealthy and businesses, will 1) stimulate economic growth and 2) do so to such an extent that government tax revenue will actually increase. Despite multiple experiences where tax cuts have been enacted and have not produced the promised effects, the plutocrats still use supply-side theory to justify tax cuts, as they did successfully with the December 2017 $150 billion a year tax cut.

It is important to note, that despite the rhetoric, markets under plutocratic economics are NOT actually free markets. All markets require rules to function, such as rules about ownership of property including patents, copyrights, and other protections for intellectual property; laws governing contracts and courts to enforce them; standards for what constitutes unfair competitive practices; laws and courts to determine liability for accidents and harm from products; and standards for credit, debt, bankruptcy, financial transactions, and investments.

The issue for policy makers is how the markets’ rules balance the power and interests of various parties. The bottom-line questions are who makes the rules and who benefits. For 40 years, plutocratic economic policies have put returns to shareholders (i.e., primarily wealthy investors) and, by implication, corporate executives, ahead of the interests of workers and also of investment in a company’s future. As a result, compensation for workers has been flat while their productivity has continued to grow. Overall, the result of these plutocratic policies has been dramatic growth in income and wealth inequality, leaving the U.S. with the most unequal income distribution of any rich democracy. [5]

Future posts will 1) summarize the evidence that plutocratic economic policy has failed, 2) discuss the politics of plutocratic economics and how the plutocrats have reacted as the failure of their policies has become clear, 3) review the harm that plutocratic economics has done to our democracy, and 4) identify progressive policies that are needed to reverse the harmful effects of plutocracy.

[1]      Technically, among policy wonks and economists, this form of capitalism has been labeled neoliberal economics. This is confusing because liberal in the economic world means something quite different than liberal means in common political usage. Although this is a bit of an oversimplification, liberal in economics refers to individualism – an every person for him or herself approach.

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

[3]      Kuttner, R., 6/4/19, “Warren’s astonishing plan for economic patriotism,” The American Prospect (https://prospect.org/article/warrens-astonishing-plan-economic-patriotism)

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

[5]      Tyler, G., 1/10/19, see above

THE U.S. SHOULD HAVE A WEALTH TAX SAY THE WEALTHY

A group of wealthy Americans who would be taxed by a wealth tax have written a letter supporting such as tax. It is a very persuasive letter explaining their reasoning. Here is a summary of it.

They call on all the presidential candidates (making it clear they are not endorsing any candidate) to support a modest wealth tax on people like them – the 19 signers of the letter who are among the richest 1/10 of 1% of Americans. By increasing taxes on the one-out-of-a-thousand wealthiest households, or about 75,000 families, our country could address many important challenges that it is facing and would, thereby, provide millions of Americans a better life and a better shot at the American dream.

They state that the U.S. has a moral, ethical, and economic responsibility to tax wealth more heavily. They note that middle income Americans already pay a wealth tax on their primary form of wealth, namely the property taxes they pay on their homes. A broader wealth tax would ask the richest Americans to pay a similar wealth tax on the primary sources of their wealth, namely stocks, bonds, and other financial investments.

The letter notes that a moderate tax on so few people raises so much money (about $300 billion a year) because the wealthiest Americans have extremely high levels of wealth. These 75,000 households have as much wealth as the least wealthy 90% of Americans. In other words, these 75,000 families have as much combined wealth as that of the 67,500,000 families with the least wealth.

The letter highlights six key reasons the signers support a wealth tax, which could do all of the following:

  • Tackle the climate crisis: The wealth tax revenue could be used to invest in accelerating innovation and implementation of a clean-energy, low-carbon economy. A wealth tax would mean that those who have benefited the most from our economic system would be helping to pay for fixing one of its most devastating flaws.
  • Strengthen our economy: The revenue could be used to invest in aging infrastructure, child care, education, and easing student debt. This would increase productivity, entrepreneurship, and homeownership, thereby promoting broad-based economic growth and prosperity. Wealth tax revenue could support innovation and job creation, strengthening our economy in ways that would benefit everyone.
  • Improve health: High economic inequality is linked to disparities in health outcomes and longevity; the wealthiest individuals have a life expectancy 15 years longer than the poorest individuals. The wealth tax revenue could be used to invest in addressing major public health challenges such as cardiovascular disease and opioid addiction.
  • Increase fairness: A wealth tax would help close the gap between the low effective tax rates paid by the wealthy and those paid by everyone else. The wealthiest 1/10 of 1% of Americans are estimated to pay 3.2% of their wealth in taxes annually, while the bottom 99% pay an estimated 7.2%. The letter states that “Taxing extraordinary wealth should be a greater priority than taxing hard work. The most fortunate should contribute more.” (p. 4)
  • Strengthen freedom and democracy: The growing concentration of wealth undermines the stability and integrity of our democracy. High levels of economic inequality have tended to concentrate political power and lead to plutocratic governments in other countries. In the U.S., major policies seldom become law without the support of wealthy interests, leading to division, dissatisfaction, and distrust of democratic institutions among the public. The wealthy signers of the letter state that “We believe instituting a wealth tax would lead to political, social, and economic stability, strengthening and safeguarding America’s democratic freedoms.” (p. 4)
  • Reflect patriotic duty: It is the patriotic duty of every American to contribute what they can to the success of the country. The letter states that the richest Americans should be proud to pay a bit more to strengthen America’s future; it’s the least they can do for the country they love.

The letter discusses the arguments against a wealth tax and concludes that they are often overstated and are mostly technical, implementation details.

The signers of the letter conclude by noting that while a wealth tax does not further their narrow economic interests, it is in their interests as Americans. Due to the strong rationale for a moderate wealth tax, they join the majority of Americans in supporting it and call on all the presidential candidates to do so as well. (For more information on a wealth tax and the rationale for it, see this previous post.)

SHOULD THE U.S. HAVE A WEALTH TAX?

Economic inequality has been growing rapidly in the U.S. over the last 40 years. The wealthiest 10% of households now have roughly 80% of all wealth in the U.S. and 50% of all income. The richest 130,000 households now have almost as much wealth as the poorest 117 million households combined. The top 0.1% of households have seen their share of all wealth nearly triple, from 7% to 20%, in the last 40 years. Changes in tax laws since the 1980s have dramatically reduced taxes on the wealthy, even though they are the ones who receive the greatest benefit from the U.S. economic system and our public infrastructure. Economic disparities in the U.S. are greater than in any of the other 36 countries with advanced economies that make up the Organisation for Economic Co-operation and Development (OECD). [1]

One way to slow the growth of inequality, and perhaps reverse it, would be to tax wealth annually, like income taxation. Income is taxed because it is one way to determine how much someone has benefited from our economic system and public infrastructure, how much they can afford to pay in taxes, and how much it would be fair for them to contribute to the maintenance of our public infrastructure and the smooth functioning of our society – our education system, our transportation systems, our public safety systems, our legal system of laws and courts, etc. As with the income tax, a wealth tax would have a standard deduction or exemption so that low-wealth households would not pay any wealth tax. For example, the current exemption in Switzerland is about $75,000 per person in wealth (i.e., savings), in Spain it’s around $800,000 per person, and Senator Warren has proposed $50 million per household for the U.S. (See below.)

Under our current tax system (including federal, state, and local taxes), wealthy households pay a smaller portion of their financial resources in taxes than poorer households. This is true whether the calculation is done based on income or wealth. For example, the 0.1% wealthiest households are estimated to pay 3.2% of their wealth in all taxes, while the bottom 99% of households are estimated to pay 7.2%. U.S. tax laws no longer reflect the core principle of fairness – that what one pays in taxes reflects his or her ability to pay.

Some current taxes share some characteristics of a wealth tax but are limited in scope or scale. At the state and local levels, the ownership of real estate is typically taxed and in some places some forms of tangible property, such as cars or business assets, are taxed. However, ownership of financial assets (e.g., stocks, bonds, etc.), of boats and planes, of jewelry and art, of collectibles, and of other forms of wealth are generally not taxed. Income from wealth held as financial assets and the profits from the sales of assets are taxed. Transfers of assets through gifts and inheritance are taxed.

For every one of the wealth-related taxes – on property, on income and gains from assets, and on inheritance – the wealthy and well-connected (often due to their campaign spending) have gotten policy makers to change and write loopholes into our tax laws that reduce the taxes wealthy individuals pay. For property ownership, real estate taxes and interest payments on mortgages are deductible when calculating federal income taxes (although the 2017 tax bill has surprisingly put some limits on these deductions). Income from wealth held as financial assets and the profits from the sales of assets are taxed at a lower rate that income earned from working. If assets are transferred to another person, through inheritance, gifts, or other means, the gain or profit on the assets is typically NOT taxed, allowing the wealthy to pass on their wealth tax-free. Furthermore, the inheritance tax has been cut and serious efforts have been made to eliminate it. Currently, it is applied only on assets over $11 million per person. In addition, loopholes in tax laws allow wealthy families and their tax experts to avoid or reduce their payment of inheritance taxes. If an asset is given to a charity, the gain or profit on it is not taxed, even though the donor can deduct the full, current value of the asset to reduce the income tax they would otherwise owe. This is a double tax avoidance scheme that provides huge benefits to the wealthy.

Four European countries have a wealth tax and back in 1990 twelve of them did. The wealth tax has been dropped in eight countries for a variety of reasons, but one was that wealthy individuals in Europe can relatively easily designate a tax-free location as their official residence to avoid the wealth tax. In addition, the wealth taxes were not generating much revenue because the tax rate was low (e.g., 1% to 2%), because exemptions for certain assets or circumstances have been written into the laws, and because of tax avoidance. Furthermore, other wealth-related taxes were viewed as preferable, e.g., taxes on gains or profits when assets are sold, inheritance taxes, property taxes, and taxes on inter-generational gifts. [2]

Senator Elizabeth Warren, as part of her presidential campaign, has proposed a wealth tax for the U.S. that she calls the Ultra-Millionaire Tax. It would apply only to the 0.1% richest households – about 75,000 households – with net wealth (i.e., assets minus debts and other liabilities) of over $50 million. They would pay an annual tax of 2% on net worth over $50 million up to $1 billion and 3% on net worth over $1 billion. This tax is estimated to generate $275 billion per year and, thereby, increase federal government revenue by about 7%. [3]

Warren’s proposed wealth tax would apply to all assets held anywhere in the world by a U.S. citizen. The IRS would be able to grant deferments (i.e., a postponement or delay) in the payment of the tax in extenuating circumstances. To calculate someone’s wealth, Warren notes that the IRS already has rules for valuing most assets for inheritance tax purposes. These rules could be used or they could be improved, and the IRS would be authorized to use cutting-edge valuation techniques for hard-to-value assets. Her proposal includes an increase in the IRS’s enforcement budget to oversee taxpayers subject to the Ultra-Millionaire Tax. A 40% exit tax would be charged on net worth above $50 million for anyone renouncing their U.S. citizenship to avoid the tax. The revenue this proposal would generate is what Senator Warren would use to pay for the programs she has proposed in other policy areas.

Economic inequality in the U.S. is spiraling to unprecedented levels because the wealthy have been using their wealth to skew public policies, such as tax policies, to their benefit. For example, some Republicans in Congress acknowledged that the 2017 tax bill, with its huge tax cuts for the wealthy, was passed to satisfy and reward donors to their campaigns, who were demanding a return on their “investment”. [4]

A wealth tax could be one strategy to address the huge and growing economic inequality in the U.S. It would ask those who have benefited tremendously from the U.S. economic system and our public infrastructure to pay something back to maintain this business environment so that the next generation has the same opportunity to succeed as they did.

[1]      Thornton, A., & Hendricks, G., 6/4/19, “Ending special tax treatment for the very wealthy,” Center for American Progress (https://www.americanprogress.org/issues/economy/reports/2019/06/04/470621/ending-special-tax-treatment-wealthy/)

[2]      Taylor, T., 2/4/19, “Why have other countries been dropping their wealth taxes?” Conversable Economist (http://conversableeconomist.blogspot.com/2019/02/why-have-other-countries-been-dropping.html)

[3]      Warren, E., retrieved 6/12/19, “Ultra-Millionaire Tax,” (https://elizabethwarren.com/ultra-millionaire-tax/)

[4]      Thornton, A., & Hendricks, G., 6/4/19, see above

EFFECTS OF THE 2017 CORPORATE TAX CUTS

There are new data on the effects of the federal tax cuts enacted in December 2017 by the Tax Cuts and Jobs Act (TCJA). They are not what their Republican proponents promised. They promised that corporations would use their big tax cuts to create new jobs, hire new workers, and improve workers’ pay and benefits. And they promised the tax cuts would pay for themselves and not increase the federal debt. (See this previous post for some background information.)

The tax cuts did dramatically increase profits for corporations. Corporate profits for the biggest 500 corporations (the S&P 500) grew by almost 21% in 2018. At the six biggest U.S. banks, profits grew almost 30% to a record $120 billion. [1] AT&T projects profits will be up $3 billion in 2018 and Amazon doubled its profits to $11.2 billion.

So, what did corporations do with their record profits?

Corporations have rewarded shareholders, first and foremost. In 2018, they spent $1 trillion buying up their own shares of stock and paid out $500 billion in dividends to shareholders. Both figures are records. Because of foreign ownership of stock in US corporations and of corporations or subsidiaries in the US, a third of the money spent on stock buybacks and dividends goes to foreign nationals. Because this money doesn’t get spent in the US economy, the tax cuts probably made America poorer, not richer. [2] US corporations also spent a record $400 billion on cash acquisitions of other companies, which doesn’t add to the economy or benefit workers.  [3]

Stock buybacks boost a stock’s prices, rewarding shareholders (not workers) and corporate executives, whose pay is almost always tied to the price of the stock. Senators Sanders and Schumer have proposed a law that would ban stock buybacks for any corporation that pays workers less than $15 per hour. [4]

Stock buybacks were illegal until 1982, which is roughly (and probably not wholly coincidentally) the same time wages stopped rising for most Americans. Before then, a bigger share of corporate profits was used to increase workers’ wages, rewarding them for their increased productivity. [5]

Given that the great bulk of the corporate tax cuts have been passed through to stockholders via dividends and stock buybacks, and given that 84% of stocks are owned by the wealthiest 10% of the population, the other 90% of residents will see little if any benefit from the corporate tax cuts. Therefore, these corporate tax cuts contribute to growing income and wealth inequality.

The creation of new jobs and the growth in wages have been modest. There certainly hasn’t been the boom in the economy or wages that Trump and the Republicans claimed would happen. Moreover, the largest corporations, which benefited the most from the tax cuts, have NOT been creating jobs or boosting workers’ wages.

The 1,000 largest public corporations in the U.S. have CUT nearly 140,000 jobs since the passage of the tax cut law. For example, General Motors recently announced plans to close several plants and cut 15,000 jobs, despite receiving a roughly $500 million benefit from the tax cuts.

AT&T cut over 10,000 jobs in 2018 and is closing three U.S. call centers, despite an estimated $3 billion annual increase in profits due to the tax cut. Although AT&T’s CEO had promised to create jobs and bolster its workforce with the benefits of the tax cuts, AT&T has only paid a one-time, $1,000 bonus to its employees at a cost of $200 million, which is only 7% of one year’s increase in profits. Meanwhile, three-quarters of its overall 2018 profits were spent on dividends and stock buybacks that benefit shareholders, including executives, and not its workforce. [6]

For the Wall Street financial corporations, profits for the first half of 2018 were up 11% at $13.7 billion, after rising 42% in 2017. The average salary in these firms jumped 13% to $422,500. Jobs in the financial industry account for less then 5% of private sector jobs in New York City, but 21% of private sector wages. [7] Wages for these highly-paid workers are rising, but not for most workers.

Due to the tax cut, federal tax revenue on corporate income plunged $130 billion (45%) from 2017 to 2018, from $290 billion to $160 billion. [8] Furthermore, Amazon, for example, paid no federal income taxes for the second year in a row despite having profits of $17 billion over those two years. [9]

The federal deficit is increasing and is estimated to be $830 billion for 2018 and to climb to $1,000 billion next year (i.e., $1 trillion) and remain at that level for subsequent years. The annual deficit had been declining under President Obama both in terms of dollars ($585 billion in 2016) and as a portion of the overall economy (i.e., 3.1% percent of Gross Domestic Product [GDP]). Under President Trump, it has jumped in dollars ($830 billion) and to 4.0% percent of GDP. [10] So, clearly the tax cuts are not paying for themselves.

Moreover, the increase in the federal deficit and the cost of interest on the growing federal debt will result in future cuts to government programs or increases in other taxes. These cuts or increases are much more likely to fall on the less wealthy 90% of the population.

Therefore, it’s a near certainty that the great majority of Americans will be worse off due to the Trump and Republican corporate tax cuts of 2017.

[1]      Levitt, H., & Abelson, M., 1/16/19, “It’s official: Wall Street topped $100 billion in profit,” The Wall Street Journal

[2]      Krugman, P., 1/1/19, “The Trump tax cut: Even worse than you’ve heard,” The New York Times

[3]      Wursthorn, M., 12/16/18, “The rocky stock market stills pays dividends to investors,” The Wall Street Journal

[4]      Inequality Weekly newsletter, 2/18/19, Inequality.org (https://inequality.org/resources/inequality-weekly/)

[5]      Reich, R., 3/21/18, “The buyback boondoggle is beggaring America,” The American Prospect (http://prospect.org/article/buyback-boondoggle-beggaring-america)

[6]      Johnson, J., 1/7/19, “After promising more jobs from Trump tax cut, report shows AT&T has ‘done just the opposite’ by slashing over 10,000 jobs in 2018,” Common Dreams (https://www.commondreams.org/news/2019/01/07/after-promising-more-jobs-trump-tax-cuts-report-shows-att-has-done-just-opposite)

[7]      Talking Points, 9/18/18, “Wall Street salaries at highest level since 2008,” The Boston Globe

[8]      Krugman, P., 1/1/19, see above

[9]      Inequality Weekly newsletter, 2/18/19, see above

[10]     Amadeo, K., 2/12/19, “US budget deficit by year, compared to GDP, debt increase, and events,” The Balance (https://www.thebalance.com/us-deficit-by-year-3306306)

INVESTING IN INFRASTRUCTURE AND A GREEN ECONOMY: THE PROPOSALS

My previous post outlined the need for investing in our infrastructure while simultaneously taking advantage of opportunities to make our economy more environmentally friendly and fairer for workers. Here are overviews of some of the infrastructure investment proposals that various groups have developed to address these issues.

The Democrats have proposed “A Better Deal to Rebuild America” which calls for a $1 trillion federal investment in infrastructure that would create more than 16 million jobs. It would invest in green infrastructure and ensure opportunities for small businesses. It would incorporate strong environmental protections and labor standards. It proposes investing in roads, bridges, rail, and public transit; high-speed internet; schools; airports, ports, and waterways; and water and energy systems.

The infrastructure proposals from the Congressional Progressive Caucus, [1] the Campaign for America’s Future, [2] and Demos [3] have much in common and share similar underlying visions. The Campaign for America’s Future’s proposal is put forth as a “pledge to fight for good jobs, sustainable prosperity, and economic justice.” It incorporates investment in traditional and green infrastructure along with ensuring that workers can form unions to bargain collectively for better wages and benefits. It supports a living wage, affordable health care and child care, and paid family leave, sick and vacation time for workers. It advocates for full employment with particular attention to helping individuals and communities harmed by discrimination, de-industrialization, and privatization.

Demos proposes an economic agenda that addresses issues of race and class, while motivating working people to “engage in the civic life of their communities and our nation.” Its 25 policies mirror the goals of the Campaign for America’s Future’s pledge. They also call for investment in affordable housing and for guaranteed employment for everyone who wants to work, with the federal government as the employer of last resort (as was done during the Great Depression).

In an article in The American Prospect, Jon Rynn recommends considering health care, education, and financial infrastructure as part of the infrastructure investment paradigm. This reflects the inclusion of human capital and public goods, not just physical capital, as important components of overall infrastructure. Universal health insurance, such as Medicare for All, would expand health care infrastructure and support the productivity of human capital. Affordable public college and early care and education (aka child care) are both pieces of educational infrastructure and are investments in the current and future workforce’s human capital. Finally, regulating the financial industry and creating public banks would be ways of strengthening and democratizing financial infrastructure. [4]

A recent addition to the infrastructure proposals being promoted in Congress is the Green New Deal. It isn’t as detailed as the proposals mentioned above; it’s more of a vision statement. It envisions a substantial investment in infrastructure and the green economy. It would transform our economy by decarbonizing it to address climate change, while also making it fairer. [5]

After the October release of the Intergovernmental Panel on Climate Change (IPCC) report that presented ominous data and predictions about global warming, a series of events occurred that have pushed the Green New Deal into the spotlight. After the November election, Representative (and soon-to-be House Speaker) Pelosi announced that she planned to revive the Select Committee on Energy Independence and Global Warming to pursue bipartisan action. However, climate change activists viewed the Committee and a bipartisan approach as likely to continue to be fruitless.

So, the youth-led Sunrise Movement organized a sit-in in Rep. Pelosi’s office, calling for a committee charged with developing a plan to meet the goals deemed essential by the IPCC report. Sunrise approached Representative-elect Ocasio-Cortez, who had campaigned in support of a Green New Deal, and asked her to help publicize the sit-in. She not only agreed to do so and to reach out to other new representatives, but agreed to attend the sit-in. Roughly 200 activists occupied Pelosi’s office on November 13 with significant media attention.

Sunrise, Rep. Ocasio-Cortez, and others in or coming into Congress developed a proposal for a Select Committee on a Green New Deal. By December 10, forty members of Congress had endorsed the proposed committee and an even larger occupation of Pelosi’s office occurred.

While the specifics of a Green New Deal are to be determined, its four core elements are:

  • Decarbonizing the economy
  • Large-scale public infrastructure investment
  • Federally-guaranteed employment for everyone who wants to work
  • A just transition to a green economy with remediation for those most negatively affected by historical discrimination, climate change, and the shift to a green economy

For any infrastructure investment program, the first question usually is, can we afford it? Many people would argue that we can’t afford not to make these investments and that the cost of climate change will be much larger than these costs if we don’t take aggressive steps to green our economy.

To put the suggested costs of roughly $500 billion per year for a significant infrastructure program in perspective, the Works Progress Administration’s budget in the 1930s was roughly 2.2% of Gross Domestic Product (GDP, the size of the overall economy). This would be about $450 billion per year today with U.S. GDP at $20.66 trillion. The tax cuts passed in 2017 cost roughly $200 billion per year. Congress and President G.W. Bush approved, on short notice, a $700 billion bailout of the financial sector after the 2008 crash and, in addition, by March 2009, the Federal Reserve had committed $7.8 trillion, more than 50% of GDP at the time, to rescuing the financial system. So, the answer to whether we can afford the proposed infrastructure investments is YES; we can afford it if we have the public and political will to make the commitment to repairing and modernizing our infrastructure while greening our economy and making it work fairly for the benefit of all.

If Democrats are willing to commit to a Green New Deal (GND), which means standing up for a fair economy and taking aggressive steps to address climate change, they could reap the benefits of the current grassroots energy behind these issues. Some Democrats will resist endorsing a GND, fearing the loss of campaign donations and support from wealthy individuals and corporations. However, not supporting a GND would risk squandering a tremendous opportunity, both politically and to do what’s good for our people, our democracy, our country, and our planet.

I encourage you to communicate with your U.S. Senators and Representative about infrastructure investment and the Green New Deal. Nothing is more likely to persuade them to support a GND than hearing from constituents who care about climate change, well-maintained infrastructure, and an economy that works for everyone. I welcome your comments and feedback on steps you feel are needed to make our economy fairer and more responsive to regular Americans, as well as to tackle global warming and climate change.

[1]      Blair, H., 7/24/18, “‘The People’s Budget’: Analysis of the Congressional Progressive Caucus budget for fiscal year 2019,” Economic Policy Institute (https://www.epi.org/publication/the-peoples-budget-analysis-of-the-congressional-progressive-caucus-budget-for-fiscal-year-2019/)

[2]      Campaign for America’s Future, 2018, “The Pledge” (http://campaignforamericasfuture.org/pledge/)

[3]      Demos, 1/31/18, “Everyone’s economy: 25 policies to lift up working people” (https://www.demos.org/publication/everyones-economy)

[4]      Rynn, J., 6/28/18, “What else we could do with $1.9 trillion,” The American Prospect (https://prospect.org/article/what-else-could-we-do-19-trillion)

[5]      Roberts, D., 12/26/18, “The Green New Deal explained,” Vox (https://www.vox.com/energy-and-environment/2018/12/21/18144138/green-new-deal-alexandria-ocasio-cortez)

INVESTING IN INFRASTRUCTURE AND A GREEN ECONOMY

In previous posts, I’ve noted that with Democrats taking over control of the U.S. House in January, there’s a wide range of issues they might tackle. Even if many of the bills they propose, and hopefully pass, don’t become law (because they aren’t passed by the Senate or are vetoed by President Trump), they will frame the debate going forward and into the 2020 elections. Raising substantive issues will shift the political discussion to meaningful policies to address important problems rather than tweets and meaningless bluster.

Readers’ feedback on the list of topics in a previous post identified infrastructure investment and environmental policy issues as the two top priorities. Coincidentally, these two issues have become linked. They were described in my post as follows:

  • Infrastructure: repair roads and bridges; repair and improve mass transit including railways and airports; provide quality school buildings for all children; repair and enhance water, sewer, and energy systems; provide universal, high speed, affordable Internet access; restore and enhance public parks; provide good jobs with good wages and benefits through work on infrastructure projects.
  • The environment: move forward with the Green New Deal, which supports the development of renewable energy and green jobs while aggressively addressing climate change.

The American Society of Civil Engineers’ (ASCE) 2013 Report Card for America’s Infrastructure gave the U.S. a grade of D+ and estimated that an investment of $3.6 trillion was needed by 2020. No significant improvement has occurred since the report card was issued. (A new report card, which is done every four years, will be out on March 9, 2019.) ASCE describes infrastructure as the backbone of our economy and notes that there’s a significant backlog of maintenance and a pressing need for modernization. The overall grade is a summary of grades in 16 areas from schools to water and waste systems to transportation and energy systems.

Large portions of our deteriorating infrastructure were built in the 1930s under the New Deal’s Works Progress Administration (WPA). The WPA built electricity generation and distribution systems, constructed dams and water distribution systems, restored ecosystems, built national parks, and rescued the Midwest from the Dust Bowl. During World War II, the government built factories that produced military equipment and supplies, which after the war produced consumer goods. After WWII, the government subsidized housing construction and invested in human capital through the GI bill, which subsidized education for veterans. In the 1950s, public money built the Interstate Highway System and our aviation system. [1]

By the late 1960s, public infrastructure investment began to slow and by the 1980s, with privatization, deregulation, cutting taxes, and shrinking government at the top of the political agenda, the decline in infrastructure investment accelerated. The public seems to have quickly forgotten that it was public investments that built the infrastructure everyone takes for granted in their everyday lives.

Today, recognition is growing that our failure to invest in maintaining and modernizing infrastructure is hurting our global competitiveness and inconveniencing our everyday lives. A growing number of voices are noting that infrastructure investment is needed and would be a much better use of public funds than spending $5 billion on a wall to prevent immigration from Mexico or $1.9 trillion over 10 years on tax cuts (largely for wealthy individuals and corporations) as was done in December 2017.

Investing in green industries, particularly clean and renewable energy, thereby addressing climate change, is one component of infrastructure investment. This is also an opportunity to revitalize the U.S. economy and to foster our ability to compete in the growing international market for green technology.

Infrastructure investment can also be a means to address under-employment and inequality. Although overall unemployment figures are low, many people who lost good, blue collar, union jobs to global trade are still earning less and are less secure economically than they used to be. Many recent college graduates are struggling to find good jobs and unemployment is still high for people without college degrees, especially those who are not white. Ensuring that the many jobs created by infrastructure investment are full-time jobs with good wages and benefits would be an important step toward reducing economic inequality and insecurity.

Although President Trump has expressed support for infrastructure investment, his approach would privatize public infrastructure, unfairly enrich private developers, and fail to build much of the infrastructure that’s need. (See my earlier post, Trump’s Infrastructure Plan: A Boondoggle, for more details.) Furthermore, it would not promote the greening of our economy or reducing inequality.

My next post will review some infrastructure investment proposals, including the Green New Deal, which has been getting a lot of attention lately.

[1]      Rynn, J., 6/28/18, “What else we could do with $1.9 trillion,” The American Prospect (https://prospect.org/article/what-else-could-we-do-19-trillion)

THE DOWNSIDE OF PHILANTHROPY

Philanthropy, particularly at this time of year, is typically viewed as the ideal expression of caring for others and contributing to amelioration of social problems. However, philanthropy, particularly when tax-subsidized and done by the super-rich, has a significant downside.

Philanthropy in the U.S. is subsidized for those who itemize deductions on their income tax returns. Deducting charitable donations from taxable income means that the donation costs the donor less than its full amount. For a high-income tax payer paying roughly 40% of income in taxes, the donation only costs 60 cents for every dollar donated. For a lower-income taxpayer paying a 15% tax rate, a donation costs 85 cents for every dollar donated. Furthermore, it’s primarily high-income taxpayers and home owners who itemize deductions. So, both of these factors skew the financial benefits of philanthropy to those with high incomes and provide lower or no benefit to those with lower incomes.

Therefore, our current system of tax-subsidized philanthropy favors the giving preferences of the wealthy over those of low income or poor people. This problem was exacerbated by the 2017 tax cut. It raised the standard deduction for income tax calculation, which means that only the top 10% or so of incomes will still find it worthwhile to itemized deductions. Therefore, our tax system will now subsidize the philanthropy of only the top 10%.

Poor and middle-class people give away as high a percentage of their incomes as the wealthy, which suggests that the tax subsidies for philanthropy are rewarding the wealthy for behavior they would most likely engage in anyway. Charitable activities have occurred for centuries, but we have provided tax benefits for them only for the last 100 years. Therefore, these tax subsidies may well just be a benefit, a pat on the back, for high income people. If this is the case, it makes no sense to give away the tax revenue or to allow the wealthy to avoid paying their fair share in taxes by giving them a tax break for their charitable giving. [1]

Because of the growth of income and wealth inequality, and the huge amounts of money the super-rich can easily afford to give away, increasingly the philanthropic preferences of the wealthy are shaping our society. However, the giving preferences of the wealthy do not reflect the philanthropic preferences of the rest of society. [2]

Rob Reich, the author of “Just Giving,” would prefer to see society pursue democratically identified goals rather than private projects selected by wealthy philanthropists. The big splash that big philanthropy makes, such as Amazon’s Bezos’s recent announcement of a $2 billion commitment to address homelessness and improve early childhood education, distracts us from crafting policy solutions that will systematically address problems and help everyone who is facing a challenge rather than the subset who fall within the purview of a philanthropic project.

When the super-rich decide which institutions to support (e.g., universities, museums, hospitals) and which social problems to tackle (e.g., homelessness in the U.S., hunger and health in poor countries), they are usurping the role of public decision-making and priority setting that should be done by democratically run organizations, particularly governments. [3]

Charitable donations have been increasing since the 2008 recession, exceeding $400 billion for the first time in 2017. However, fewer households are giving, dropping from 66% in 2000 to 55% in 2014. While Giving Tuesday this year set a record with $380 million raised from 4 million individuals (an average of about $100 each), this represents only 0.1% (one tenth of one percent or one thousandth of overall giving).

Non-profit organizations are relying on fewer, larger donations. This means their support is less reliable from year to year and that they may tweak their missions to fit the interests of large donors. Overall, it means the favored institutions, causes, and projects of the wealthy are funded, while others struggle to survive. For example, it may mean that there is one awesome charter school for a hundred or so children, but that quality public education for all gets left behind.

Large-scale philanthropy can cause public organizations, such as public schools, to alter policies and procedures to qualify for philanthropic funding. For example, billionaire Bill Gates’s foundation’s grants for public schools have pushed school systems and states to adopt the Common Core learning standards and to internally subdivide schools into “schools-within-a-school” in accordance with grant requirements.

Super-sized philanthropy can’t replace broad-based public programs and investments that improve overall public well-being. An irony is that the super-rich may oppose public policies that would address issues they tackle through their philanthropy. The most dramatic and recent example is that of Amazon’s Bezos. He announced $2 billion in philanthropy to tackle homelessness and early education, but vehemently opposed, successfully, a per person tax on employment in Seattle to address the growing homelessness there. [4] Seattle’s homelessness problem is exacerbated by escalating housing prices driven in significant part by the need for housing for the growing number of Amazon employees in the Seattle area.

A more equitable and democratic system would stop providing a tax benefit for the philanthropy of the rich and more fairly tax the high incomes and wealth of individuals and corporations. The increased public revenue could be used to broadly and equitably improve societal well-being. For example, if we had increased the minimum wage to keep up with inflation and productivity since the 1960s, if we had reduced executive salaries and shareholder rewards in order to benefit employees, and if we provided affordable, quality health care for all, maybe we wouldn’t need super-sized philanthropy to help people afford a place to live or child care.

Charitable giving is not a bad thing, although giving of one’s time can be as valuable and more rewarding than giving money. However, our current system of tax-subsidized charitable giving and super-sized philanthropy based on great disparities in wealth is not good for democracy nor the best way to maximize social welfare.

[1]      Ortiz, A., 12/2/18, “The price of philanthropy,” The Boston Globe (This article is an interview with Rob Reich, the author of the new book “Just Giving.”)

[2]      Ortiz, A., 12/2/18, see above

[3]      Loth, R., 12/10/18, “We can’t privatize our way out of poverty,” The Boston Globe

[4]      Loth, R., 12/10/18, see above

WHY WE NEED A POLITICAL REVOLUTION

Bill Moyers – one of the most savvy and respected commentators on US politics and society over the last 40+ years – just published an interview with the author of a book Moyers describes as the best political book of the year. [1] The author is Ben Fountain and the book is Beautiful Country Burn Again.

Fountain, an acclaimed novelist, was hired by The Guardian (a respected British daily newspaper with a US edition) to cover the 2016 US presidential race. His reflections on and analysis of the current US political environment are poignant and very relevant to this fall’s election.

Fountain found that millions of Americans are experiencing significant confusion, frustration, and anger. Working and middle-class people are finding it harder and harder to make ends meet and, therefore, are feeling more and more beleaguered. Their financial and psychological security has been undermined by the shredding of the social contract of the 1950s – 1970s, which promised that if they worked hard and played by the rules, they would have a secure middle class life. They are working harder than ever but, nonetheless, are falling further behind in their efforts to have a decent life, provide for their children, and have a secure retirement. Meanwhile, they see the wealthy doing better and better, getting richer and richer.

Fountain states that this is “not a situation that can be sustained long-term in a genuine democracy.” (p. 3 of the interview transcript). The tremendous increase in the inequality in income and wealth over the last 40 years has led many Americans to have a “basic, pervasive sense that the system is not fair.” (p. 4) Given this legitimate sense of grievance among the millions living economically precarious lives, the declaration by candidate Trump, Senators Bernie Sanders and Elizabeth Warren, and others that “The system is rigged” resonated strongly.

These beleaguered, aggrieved Americans are resentful and looking for an explanation for why they are experiencing such hard times. This makes them vulnerable to false narratives and scapegoating from politicians. This resentment is exacerbated by the fact that for many white Americans their position of power and privilege has been (rightfully) challenged over the last 50 years. The uncomfortable truths of the racism of America have presented “a challenge to some people’s identity and sense of personal integrity.” (p. 4)

Trump was a master at playing on this resentment, vulnerability, and discomfort. He gave many white Americans “psychological, emotional affirmation as an antidote for all the anxiety, all the resentment they’d been feeling.” (p. 5) Despite the obvious contradictions of Trump’s wealth, New York background, and anti-worker business practices, he provided easy-to-digest explanations and solutions for beleaguered white, working people (especially men). Fountain describes this as the “classic con man dynamic” that shows “how easily we’re taken in when we’re hearing what we want to hear … [which has] more to do with emotion and raw attraction than anything that might be called rational thought.” (p. 7)

Fountain says that the gullibility of the American public is in part due to what he calls the “Fantasy Industrial Complex.” The public believes in the possibility of the fantasy lifestyle we see in the advertisements and commercial propaganda that bombard us day and night from our screens in movies, TV, celebrity news, and social media. The cumulative effect is that this “numbs us out and dumbs us down.” (p. 8) As a result, “it takes a supreme effort of will on the individual’s part to distinguish advertising and propaganda from facts,” (p. 8) lies from truth, and fantasy from reality.

Fountain states that both of our political parties have lost their way. Trump, with the help and acquiescence of many others, has taken the Republican Party’s “politics of paranoia and racism, cultural resentment, xenophobia, misogyny and all the rest” to new extremes. The Democrats, during the 1990s with leadership from the Clintons, maintained their commitment to civil rights and diversity, including based on sexual orientation, but abandoned their commitment to workers, the poor, and Main Street for financial support from Wall Street and the wealthy. They stopped making the case for the important roles of government in maintaining a safety net and regulating business and the economy. As a result, the economic security of working and middle-class people collapsed, while income and wealth inequality skyrocketed.

The political power of the wealthy has been super-charged by changes in laws governing the financing of our political campaigns. Unlimited amounts of money can now be spent on campaigns and the sources of much of it may be kept secret. Without wealth, everyday citizens are left speechless in our elections and, therefore, underrepresented in the halls of government. The big campaign spenders have unprecedented access to and influence on policy makers, resulting in policy outcomes they favor and that benefit them further.

Democracy is overwhelmed by the hyper-capitalism in the US today with its great concentrations of wealth and power, both in our economy and in our political system and government. This is the result of the deregulation of business and the economy over the last 40 years, which has been supported by both political parties. The big corporations and the capitalists will overreach if they are unregulated and unrestrained. The 2008 crash demonstrated this again, as the savings and loan crash of the 1980s had, along with the dot com bubble crash and the crash that led to the Great Depression. Today, the system is indeed rigged, and the result is plutocracy – where the wealthy elites rule.

The American identity, and the exceptionalism of the US that the right-wing asserts, are based on democracy and the foundational principles of equality and representative government that is responsive to all the people. This is not the America we have today. Citizens can’t be equal with corporate CEOs and wealthy investors if they can’t earn enough to support a family and don’t have time to devote to public civic and political responsibilities, often because they are working multiple jobs or long hours.

Fountain concludes that “corporate power and concentrations of wealth have such a hold over our economic system that for the country to wrest some of that power from them, it can’t be incremental. It will take a political revolution.” (p. 12) The New Deal, responding to the 1929 financial crash and the Great Depression, was, in fact, a bloodless political revolution. It saved capitalism from itself, building the regulatory infrastructure that we relied on with great success for 50 years. It also built the physical infrastructure of sewers and water mains, parks, libraries, public buildings, the power grid, and many of the roads and bridges that we rely on to this day. We take all this largely for granted today, forgetting about the trauma that triggered it and the public sector response that turned the country around and built the foundation for the future.

Fountain notes that the American commitment to and understanding of the importance of public civic, political, and physical infrastructure “has been stunted the last 40 years by a very aggressive sales program on behalf of free-market fundamentalism and hard-core capitalism.” (p. 13) The subtitle of his book, Democracy, Rebellion, and Revolution, highlights his belief that we need a political revolution to save our democracy – and to save capitalism from itself.

You can be part of the political revolution:

  • By being an informed voter in this fall’s election, and
  • By encouraging and helping everyone you know to also be an informed voter this fall.

As I’ve written about previously, voter participation in the US is dismally low and higher voter turnout will produce different election and policy results. This is how the political revolution must happen.

[1]      Moyers, B., 10/12/18, “The bold bravery of ‘Beautiful Country Burn Again’”, Common Dreams (https://www.commondreams.org/views/2018/10/12/bold-bravery-beautiful-country-burn-again)

EVEN THE RICH RECOMMEND TAXING THE RICH

There are many arguments for increasing taxes on the rich. It’s interesting and noteworthy when the rich themselves argue for higher taxes on themselves and others like them. Warren Buffet, one of the richest men on the planet and an investor without peers, has been stating since 2011 that he pays a lower income tax rate than his secretary and that this isn’t fair. [1]

Other wealthy individuals also argue that the rich should pay more. First, there’s Douglas Durst, a billionaire New York City real estate magnate, who recently stated that he supports “higher taxes on people like me.” He noted that the US “has more of a revenue problem than a spending problem.” His father, also a real estate man, created the National Debt Clock (that displays the federal government’s overall debt) and put it on a building he owned near Times Square in New York in 1989. Durst, the son, maintains it today as the US government’s debt is growing by almost $1 trillion per year. Republicans, who campaigned on balancing the budget, have increased the annual deficit to this level (and even higher in the future) by cutting taxes and increasing spending. The US hasn’t had this high a debt level in comparison to the size of the overall economy (i.e., Gross Domestic Product [GDP]) since World War II.

Durst is baffled that President Trump and the Republicans in Congress would give a tax cut to wealthy people like him. “We’re mortgaging our children’s future. … The tax cut was an overall step in the wrong direction. Nobody who has any background in economics thought the tax bill was a good idea.” [2]

Over the last 40 years, President Clinton is the only President who has balanced the federal budget and reduced the overall debt.

Second, there’s Nick Hanauer, a billionaire, venture capitalist, and serial entrepreneur, who recorded a 6-minute TED Talk in 2012 and this summer wrote an article in The American Prospect magazine, both of which argue that taxes on the rich should be increased. [3] He argues that “taxing the rich is the only plan that would increase investment, boost productivity, grow the economy, and create more and better jobs.” He states (correctly) that there is no observable evidence or plausible economic mechanism to support the claim that cutting taxes for the rich will spur economic growth. This did not happen when President Reagan cut taxes on the rich; it did not happen when President G. W. Bush did it. However, when President Clinton raised taxes on the rich, the economy boomed and the federal government balanced the budget. President Trump and the Republicans cut taxes on the rich in December 2017 and the economy has not boomed; it has continued its slow growth that began under President Obama. Furthermore, well over 90% of the benefits of current economic growth are going to the wealthy.

In Kansas in 2012, Governor Brownback and Republicans in the state legislature dramatically cut taxes on the rich, promising unprecedented economic growth. The reality has been that Kansas’s economy has under-performed neighboring states and the country. Because of the loss of state revenue, spending on schools (and everything else) has been cut dramatically and the state’s courts stepped in and ordered the state to spend more on K-12 education. The legislators have now overridden a gubernatorial veto and reversed some of the tax cuts.

Many (if not all) credible studies of the interaction between tax rates for the wealthy and economic outcomes show either that 1) increasing taxes on the rich increases economic growth and other indicators of economic success and well-being or 2) there is no link between top tax rates and the economic benefits the proponents of tax cuts and trickle-down economics claim.

In the 1950s, the top tax rate was 91% – and the economy was booming. It was 70% in 1980 when President Reagan took office and he cut it to 50%. The 2017 tax cut cut the top rate to 37%! As Hanauer states in his TED Talk, if cutting tax rates on the rich led to economic growth and job creation, our economy would be exploding and everyone would have great jobs given that today’s top rate is only 37%.

Finally, Hanauer notes (accurately) that consumer spending is what drive the US economy; it accounts for 70% of GDP. Current levels of inequality mean that rich people (and corporations) literally have more money than they know what to do with. With income and wealthy that is over 1,000 times that of the average American, they can’t buy 1,000 houses, or 1,000 times as many cars, clothes, and food items.

Therefore, putting more money in the hands of the middle class, workers, and low-income people will boost the economy because they will spend it in the local economy. They will also invest some of the money in human capital development, i.e., education and training, for themselves and their children. These investments in human capital are key to spurring future growth and success for our economy.

Hanauer states that anything governments spend money on will pump more money into our economy that what the rich do with their excessive amounts of money. Low wages and high levels of inequality cause slow growth. Therefore, increasing inequality by cutting taxes on the rich will not spur economic growth. A 2014 report from the Organisation for Economic Cooperation and Development (OECD) concluded that growing economic inequality in the US had reduced its economic growth by 9% over the previous 20 years.

In conclusion, we need to reduce economic inequality in the US as a matter of fairness and to live up to our ideals of equal opportunity and that all people are created equal. We also need to reduce inequality to spur economic growth today and in the future.

To reduce economic inequality, we need to increase taxes on the rich and invest the revenue in good jobs (e.g., rebuilding our infrastructure), in human capital (e.g., education and training from birth and throughout careers), and in a safety net (e.g., unemployment insurance and guaranteed healthcare) to support people who fall on hard times.

These steps will allow the United States to live up to its ideals and principles of equal opportunity, will boost our economy, and will contribute to creating a fairer, more just society that supports all children and families.

[1]      Isidore, C., 3/4/13, “Buffet says he’s still paying lower tax rate than his secretary,” CNNMoney (https://money.cnn.com/2013/03/04/news/economy/buffett-secretary-taxes/index.html)

[2]      Long, H., 9/17/18, “‘I support higher taxes’: the billionaire behind the National Debt Clock has had it with Trump,” The Washington Post

[3]      Hanauer, N., Summer 2018, “Want to expand the economy? Tax the rich!” The American Prospect (http://prospect.org/article/want-expand-economy-tax-rich)

A BETTER DEAL: A WIDE-RANGING POLICY AGENDA FROM THE DEMOCRATS

The Democratic National Party has been rolling out a series of policy proposals it calls A Better Deal. Its goal is to provide a campaign message that will win the votes of middle-income workers, many of whom voted for Trump because they felt they’d been forgotten by the Democratic Party. [1]

The first piece, presented in July 2017, focused on the economic well-being of workers and the middle class. It was subtitled: Better Jobs, Better Wages, Better Future. It’s three major components are:

  • Higher wages and better jobs. Raise the minimum wage to $15 an hour by 2024. Create 15 million good jobs by spending $1 trillion on infrastructure and supporting small businesses. Ensure that workers can retire with dignity by protecting Social Security, pensions, and Medicare. Fight the loss of jobs to other countries.
  • Lower the cost of living for families. Lower the costs of drugs, post-secondary education, child care, cable TV and Internet service, and credit cards. Curtail the monopolistic practices of large corporations that lead to higher prices and reduced consumer choice. Provide paid leave for a new child or a family member’s illness.
  • Tools workers need to succeed in the 21st century. Expand public investment in education, training, and other tools workers need to succeed in the 21st Provides incentives to employers to invest in their workers’ skills and knowledge, including through apprenticeships.

(See a more detail summary these policy proposals in my previous post and my post critiquing them.)

The second piece, unveiled on May 8, 2018, focused on housing and communities and was subtitled: Public Housing & Ladders of Opportunity for American Families. It has four major components:

  • Repair America’s aging public housing. Invest $6 billion a year for five years to eliminate the deferred maintenance in public housing, including eliminating all major lead and mold hazards, improving energy efficiency, and making units accessible for residents with disabilities. Provide $9 billion a year in ongoing operations and maintenance funding.
  • Empower residents to fully participate in governance of their public housing. Facilitate the active involvement and participation of public housing residents in governance and increase tenant protections during relocation for renovations.
  • Ensure public housing agencies have the tools to connect residents to opportunity. Provide resources and tools to improve employment opportunities, earnings potential, and health outcomes for public housing residents by investing in job training and counseling services; educational programs; after-school enrichment programs; and access to other services.
  • Provide comprehensive solutions for the communities surrounding public housing. Invest $2 billion annually to rehabilitate and transform neighborhoods where public housing is located, while leveraging private resources as well.

The third piece, unveiled on May 21, 2018, focused on elections and ethics and was subtitled: Fixing our broken political system and returning to a government of, by, and for the people. Its three major components are:

  • Empower the American voter. Protect every citizen’s right to vote and the security and accuracy of our voting systems. End partisan gerrymandering.
  • Strengthen our nation’s ethics laws. End the influence of big money in election campaigns and of lobbyists. Close the revolving door between government jobs and positions working for private sector special interests.
  • Fix our broken campaign finance system. Break the stranglehold of wealthy campaign donors on our democracy. Pass a constitutional amendment to overturn Citizens United and end the undue influence of big money in our elections, especially of unaccountable “dark” money from undisclosed donors. Increase and multiply the power of small campaign donors, while supporting new and diverse candidates. Improve enforcement of existing campaign finance laws.

The most recent piece, unveiled on May 22, 2018, focused on education and was subtitled: A Better Deal for Teachers and Students. It had five components, which it proposes paying for by rescinding the recent tax cuts for wealthy individuals and corporations:

  • Dedicate $50 billion over 10 years to increasing teachers’ compensation. Recruit and retain a strong, diverse workforce.
  • Establish a $50 billion fund for school infrastructure. Invest in up-to-date buildings and classrooms, as well as educational technology and materials, for all students.
  • Provide additional support to schools serving children from low-income families. Ensure all students have access to academic opportunities and a rich curriculum, including computer science, music, and civics.
  • Protect teachers’ right to join a union. Ensure that teachers can collectively negotiate for better pay and conditions.
  • Fulfill the federal promise to fund 40% of the cost of special education.

While A Better Deal’s four proposals present a wide-range of policy proposals and are fairly specific about some of them, they do not present a vision or comprehensive policy agenda in the way An Economic Agenda for America’s Future does. (See my previous post on this proposal from the Campaign for America’s Future.)

While A Better Deal’s proposals could excite some voters and increase voter turnout by addressing issues that matter to working Americans, they are less inspiring and more policy wonkish than An Economic Agenda for America’s Future. They present a set of nuts-and-bolts, pragmatic, and sometimes bold steps, rather than a vision.

There are gaps in A Better Deal. For example, it doesn’t address climate change and greening the economy; support for unions (other than for teachers); a more progressive, fairer tax system to address economic inequality; reducing the power of the huge corporations including on Wall Street; and reforming our health care system.

A Better Deal is viewed by some as timid and underwhelming. It doesn’t clearly renounce growing economic inequality and the greed of corporate executives. It doesn’t provide a truly inspirational message such as the one Senator Bernie Sanders delivered in the 2016 primary.

The support for A Better Deal from Democratic members of Congress and the Party’s leadership isn’t strong and solid, and, therefore, the Party’s messaging is not consistent and effective. Similarly, Democratic candidates don’t yet appear to have widely, let alone enthusiastically, adopted A Better Deal for their campaign messaging.

I’m interested in your comments on this post. Do you think A Better Deal will motivate voters to vote for Democrats this fall?

[1]      Cottle, M., 7/31/17, “Democrats pitch a kinder, gentler populism,” The Atlantic (https://www.theatlantic.com/politics/archive/2017/07/the-struggle-to-sell-a-better-deal/535410/)

AN ECONOMIC AGENDA FOR AMERICA’S FUTURE

The policy agendas of progressive candidates (see my previous post for some examples) tend to be presented in a piecemeal fashion that makes it hard to grasp an overarching progressive vision or set of goals. In this post I will summarize the proposal from the Campaign for America’s Future for an overall progressive policy agenda for the US. This proposal highlights policies that could excite voters and increase voter turnout by addressing issues that truly matter to working Americans.

The Campaign for America’s Future calls its proposal An Economic Agenda for America’s Future. It consists of 11 components and at their website you can sign on and pledge to support their agenda. Here are its 11 components or planks:

  • Jobs of all. Provide jobs with good wages and benefits by investing in the rebuilding and modernization of our roads, railroads, water and sewer systems, energy systems, and public buildings including schools. These investments will make our economy more productive and reduce economic inequality. Public service jobs would also be a part of this initiative.
  • Invest in a green economy. Strategic public policies can support renewable energy and energy efficiency while moving us away from polluting, carbon-based fuels. The results will be good jobs in growing industries and sustainable energy sources that will reduce emissions linked to climate change.
  • Empower workers to reduce inequality. Workers need to be able to bargain collectively with employers through membership in unions. Otherwise, the power of employers overwhelms that of workers and the profits from workers’ labor are given to corporate executives and stockholders, not workers. As workers’ power has declined over the last 38 years, their wages have stagnated while executives pay has skyrocketed; their benefits have languished – pensions have disappeared, health insurance is more expensive if available, paid sick and vacation days are less common as part-time and contingent work has expanded – while perks for executives are ever more lavish. Policies that allow executives to benefit from short-changing workers need to be changed.
  • Opportunity and justice for all – with a focus on communities harmed by racism. Starting with Jobs for all (see above), targeted investments are needed to provide economic opportunity for all people and communities. Neglected urban and rural communities, along with workers victimized by trade policies and employment practices that benefit large corporate employers, should be targeted by policy changes and economic investments. Ending mass incarceration and racism in all phases of our criminal justice system, along with enhancing rehabilitation and re-entry for those incarcerated, are essential to providing justice for all. Fair and humane policies and treatment for all people regardless of immigration status, race or ethnicity, nationality, gender, or sexual orientation are required to live up to the promises of our democracy.
  • Guarantee women’s economic equality. Women should earn the same pay and have the same opportunities in the workplace as men. Women must have the supports necessary to balance motherhood, parenting, and work, including access to paid leave for childbirth and affordable, high quality child care. Women must be free from all forms of sexual harassment and must have the right to make their own choices about health and reproductive issues. Women should be able to look forward to a secure retirement, in part based on being awarded Social Security credit for work done in the home supporting a family.
  • High-quality public education – pre-k to university. Education is a public good that benefits all of society. Governments at the local, state, and federal level must together provide equitable financing so all children have access to high-quality public schools and educational opportunities across the age spectrum. Post-secondary education or skills development should be free at public institutions – as it was in many states in the 1950s and 1960s – and student debt should be canceled. This will stimulate economic growth and unleash the potential of students who are now restricted in their life choices by their education debt.
  • Medicare for all – and shared economic security. Health care is a right, which requires moving to a universal, Medicare for all health care system. Furthermore, everyone deserves a secure retirement and economic security in their working years through a publicly-funded safety net that supports them if they lose their job, have an accident, or suffer a medical problem. No one in America should be homeless, hungry, or without access to health care.
  • Make corporations and the wealthy pay their fair share. Large, often multinational, corporations and rich individuals are not paying their fair share in taxes. Nonetheless, they reap the greatest benefits from public investments. Their tax rates have been lowered time and again over the last 38 years and the portion of government revenue they provide has fallen dramatically. Furthermore, tax rates on income based on wealth – income from stocks and other investments – are lower than the tax rates on income earned through work, so the wealthy get wealthier and workers struggle to make ends meet. Closing tax loopholes and exemptions that benefit wealthy individual and corporations, along with a small sales tax on purchases of financial instruments, will make our tax system fairer, reduce economic inequality, and provide the revenue needed for public investments and a fair safety net.
  • A global economic strategy for working people. Our global trade and tax policies benefit multinational corporations. We need to change these policies to protect workers, consumers, and the environment. Our national security policies benefit the military-industrial complex and are biased toward military interventions. We need to change these policies to make war a last resort and to focus on diplomacy and the global threats of climate change, poverty, and inequality. We should reduce the military budget and support humanitarian programs at home and abroad instead.
  • Close Wall Street’s casino. Deregulation of Wall Street left us with huge financial corporations that devastate our economy when they fail, are too complex to manage, and are too powerful to seriously punish, as with jail time for executives. Their financial speculation presents risks to our economy and is economically unproductive. Meanwhile, workers and small businesses suffer from the financial corporations’ business practices and the volatility they create in the economy. We need to break up the giant financial corporations, institute a speculation tax, and provide safe, affordable banking services through local banks and the postal system. Payday lenders and others who exploit low-income and vulnerable working families should be shut down.
  • Rescue democracy from special interests. The great wealth and hence power of wealthy individuals and corporations are being used to corrupt our elected officials and public policies. Through campaign spending, lobbying, and other strategies, the wealthy have rigged our economy to their benefit, resulting in dramatically increasing economic inequality. We must reassert democratic values through 1) public financing for elections that rewards small contributions by large numbers of people, 2) banning huge expenditures by the wealthy, and 3) through voting procedures that encourage everyone to vote, not ones that place barriers in front of voters, particularly people of color, young people, and low-wage working people. We need progressive candidates who will work to take back our democracy and economy for everyday working people.

I’m interested in your comments on this post. Is there a particular plank of this proposal that would make you more inclined to vote for a candidate?

My next post will summarize the Democratic National Party’s A Better Deal proposal.

PROGRESSIVE POLICIES BUILT ON FDR’S ECONOMIC BILL OF RIGHTS

The policy agendas of progressive candidates (see my previous post for some examples) tend to be presented in a piecemeal fashion that makes it hard to grasp an overarching progressive vision or set of goals. In this and my two next posts, I will summarize proposals for an overall progressive policy agenda for the US. These proposals highlight policies that could excite voters and increase voter turnout by addressing issues that truly matter to working Americans.

The American Prospect magazine, the premier journal for US progressive policy analysis and proposals, recently published an article entitled “An Economic Bill of Rights for the 21st century” by Paul, Darity, and Hamilton. [1] It builds on President Franklin D. Roosevelt’s 1944 proposal for a Second Bill of Rights, a set of economic rights that would complement the political rights guaranteed by the original Bill of Rights. FDR’s proposal was never adopted, of course, but the need for an economic bill of rights is as clear today as it ever was.

As FDR noted, people who struggle to make ends meet are not free to engage in the pursuit of happiness that our Declaration of Independence promises. He went on to say that “Necessitous men are not free men. People who are hungry and are out of a job are the stuff of which dictatorships are made.” True freedom, according to FDR, requires the following economic rights:

  • The right to a useful and remunerative job,
  • The right to earn enough to provide adequate food and clothing and recreation,
  • The right of every businessman … to … freedom from unfair competition and domination by monopolies,
  • The right of every family to a decent home,
  • The right to adequate medical care and the opportunity to achieve and enjoy good health,
  • The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment, and
  • The right to a good education. [2]

FDR died before he could enshrine these economic rights in policies let alone the Constitution. Moreover, his New Deal, which had rewritten many of the rules of our economy to increase economic fairness and security, was the result of a political deal with southern segregationists, probably out of necessity for getting the New Deal passed, that excluded Blacks. US government policies since then have often explicitly, and almost always at least implicitly, excluded Blacks from economic justice and opportunity. The Jim Crow policies in the south exacerbated the racial discrimination of federal policies.

The civil rights movement, Martin Luther King’s Poor People’s Campaign (which linked economic justice with civil rights), and President Johnson’s War on Poverty of the 1960s marked a resurgence of a focus on economic justice and security. Nonetheless, highly unequal economic outcomes are clearly evident today, especially by race and ethnicity but also to a growing degree by class.

For the past 40 years, our two major political parties have both embraced policies that rely on market forces and market-based solutions for meeting social and human needs, while reducing the role of government, deregulating business’s activities, and moving toward uncontrolled capitalism.

As a result, the middle class is under siege. Its incomes have stagnated for 40 years (when adjusted for inflation) and it is experiencing high levels of economic insecurity due to the instability of employment and reduced pay and benefits from the jobs that are available. Economic inequality has sky rocketed and economic mobility has declined. Poverty remains high, especially for children (who are most vulnerable to its long-term negative effects); 43 million Americans live below the official government poverty line, which is out-of-date and dramatically understates the cost of living in most, if not all areas, of the country.

This economic reality is the result of policy choices not inevitable economic evolution. FDR’s economic rights above are clearly still very relevant. Furthermore, the authors identify three additional economic rights that are necessary today to ensure an economy that provides opportunity and security for everyone:

  • The right to sound banking and financial services,
  • The right to a safe and clean environment, and
  • The right to a meaningful endowment of resources as a birthright.

This birthright endowment is an innovative proposal by the authors to address the high levels of economic inequality in both income and wealth. (Wealth is even more unevenly distributed, particularly across race and ethnicity, than income.) Wealth (i.e., savings or economic reserves) is an essential component of economic security and social well-being. The ability to be resilient when an economic shock occurs – a sudden loss of a job, a health emergency, an accident – is critical. Yet almost half of American households do not have $400 of wealth or savings to see them through an economic shock. Moreover, for every dollar of wealth or savings held by whites, Blacks and Latinos have only 5 cents and 6 cents respectively. In other words, white household wealth is, on average, 20 times that of Blacks and almost 17 times that of Latinos.

The authors’ proposal addresses this dramatic inequality by giving every American, at birth, an endowment that would be held in trust until he or she reaches adulthood. Then, the individual could spend the money on an asset building activity such as paying for higher education, buying a home, or starting a business.

The endowment would be universal, but its amount would vary: babies born into the wealthiest families would receive $500 and those born into families with no or minimal wealth would receive $50,000. This would attempt to level the playing field, given the implicit endowment that affluent families are able to provide to their children. Estimates indicate that the cost would be about 2% of the federal budget. The federal budget currently spends a similar amount on another policy that supports households in building wealth: the home mortgage interest deduction. By reducing this support for wealth building through home ownership, which provides its biggest benefits to already wealthy households, the federal government could pay for the proposed “baby bonds.” This would go a long way toward providing economic opportunity and security for every baby born in America, as well as reducing wealth inequality. As another option, the “baby bonds” could be paid for, in whole or in part, by cutting the budget of the Defense Department (which is about 15% of the federal budget), by up to 13%. (Many analysts believe the defense budget is bloated with unnecessary expenditures and waste that primarily benefits the wealthy corporations of the military-industrial complex.) Another option to pay for the “baby bonds” would be to reduce the tax cuts that were passed in December 2017; they will cost over twice as much as these “baby bonds” would and, rather than reducing economic inequality, the tax cuts will exacerbate inequality because they primarily benefit already wealthy corporations and individuals.

I’m interested in your comments on this post. What do you think of this proposal for “baby bonds” – a birthright endowment to give every new baby a more or less equal opportunity for success in life? In particular, would you be more inclined to vote for a candidate who supported “baby bonds”?

My next post will summarize the proposal of the Campaign for America’s Future, which it calls: An Economic Agenda for America’s Future.”

[1]      Paul, M., Darity, Jr., W., & Hamilton, D., 3/5/18, “An economic bill of rights for the 21st century,” The American Prospect (http://prospect.org/article/economic-bill-rights-21st-century)

[2]      Wikipedia, retrieved 7/28/18, “Second Bill of Rights,” (https://en.wikipedia.org/wiki/Second_Bill_of_Rights)

LOCAL POLICIES SERVING RESIDENTS BLOCKED BY RIGHT WING CONSERVATIVES

Right wing conservatives supposedly, ideologically, support local political control. Their actions, however, are first and foremost, designed to benefit the special interests that provide their financial support. They are using their political power at the state and federal levels to block and preempt progressive policies at the local level. Policies that benefit workers and the public good are blocked if they are opposed by the large corporations and wealthy executives who provide campaign funding. Right wing conservatives loudly proclaim their support and allegiance to the Constitution and democracy, but willingly undermine both when it serves the interests of their plutocratic backers. [1]

Right wing conservatives block the will of the majority using multiple strategies:

  • Passing laws or taking executive actions that block progressive policies of local communities,
  • Limiting the ability of judges and the courts to uphold the Constitution and laws that protect political, social, economic, and civil rights, and
  • Manipulating voting and representation through gerrymandering, voter suppression, and rigging of the Census.

This post will focus on laws and executive actions that block progressive policies. Subsequent posts will cover efforts to limit the independence of judges and the courts, as well as gerrymandering. Previous posts have discussed the rigging of the Census and voter suppression.

The plutocrats (i.e., those who have power due to their wealth) have used their money over a period of 40 years to buy political influence and elections. The resultant political shift to the right in Congress and the White House, and in many state legislatures and governorships, has meant that local communities are more frequently finding themselves at odds with policies established by right wing conservatives at the state and federal levels. In particular, large cities, which are substantially more diverse and politically progressive than the non-urban population, are having their progressive policies blocked by conservative, elected officials in state and federal offices.

One of the more notable conflicts between the Trump administration and local communities is over the treatment of immigrants, particularly undocumented immigrants. Over 150 cities or counties have directed their police forces not to arrest or hold residents based solely on federal immigration law violations. Local law enforcement needs to have positive relationships with all residents, including undocumented immigrants, so it can keep everyone safe and ensure that everyone is comfortable interacting with the police for their own and others’ safety.

The Trump administration uses multiple tactics (e.g., threats to cut off funding and engaging in aggressive actions by federal immigration enforcement forces in those communities) to attempt to discourage and punish local initiatives to maintain good relationships between undocumented immigrants and police. The Trump administration is trying to coerce local communities into undermining local law enforcement and public safety.

At the state level, there are many examples of state governments blocking local policies that serve residents. These have gotten little attention in the mass media. For example, states have passed laws that prohibit municipalities from:

  • Raising their minimum wage (25 states, including almost every Southern state),
  • Requiring local employers to provide paid sick time and / or establishing a paid family and medical leave program (at least 17 states),
  • Providing local Internet service (typically at lower cost or higher speed than available from private providers) (at least 17 states),
  • Regulating ride-sharing services such as Uber and Lyft (at least 37 states),
  • Implementing local taxes to meet local needs (at least 42 states),
  • Regulating consumer and public health safety (e.g., tobacco products, food labeling, plastic bag bans, and fracking and other environmental threats),
  • Removing or altering Confederate monuments (at least 6 states),
  • Regulating short-term home rentals such as Airbnb (at least 3 states),
  • Protecting the rights of gay and lesbian people (at least 3 states), and
  • Taking steps to reduce gun violence by regulating guns and ammunition. [2] [3] [4] [5]

Nonetheless, local communities are asserting their progressive values. For example, 21 states and 32 localities have raised their minimum wage above the federal level since 2014. In response, the corporate-funded and run American Legislative Exchange Council (ALEC) has drafted and provided to state legislators across the country model legislation called the “Living Wage Preemption Act” designed to block local increases in the minimum wage.

In some cases, states have overridden and reversed policies and programs after they have been established at the local level. For example, in Austin, Texas, the state struck down a local ordinance requiring fingerprinting of Uber and Lyft drivers. And Texas legislators have promised to introduce legislation to repeal Austin’s recently passed paid sick time law. In Ohio, the state retroactively canceled Cleveland’s increase in its minimum wage.

These efforts at preemption of local progressive policies are occurring because right wing conservatives and their wealthy backers know that the successes of these policies and programs represent a powerful refutation of their ideology and political arguments. The right wing also knows it is outnumbered if there is broad participation in elections and political activity. Therefore, one of their goals is to suppress voting and political engagement. Limiting the success of grassroots initiatives is key to preventing the building of a truly powerful, larger and broader progressive movement.

State and federal preemption of local policies usurps communities’ power and right to control their own destinies. Although preemption can play a positive role in setting a floor or minimum standard for policies on safety, environmental standards, human rights, and labor standards, its current use by right wing conservatives is anti-democratic because it is pushing the interests of the plutocracy – wealthy individuals and large corporations – and undermining democratic self-determination.

[1]      Doonan, M., 12/14/17, “Opportunistic federalism and a liberal resurgence,” The American Prospect (http://prospect.org/article/opportunistic-federalism-and-liberal-resurgence)

[2]      Miller, J., 2/21/18, “In the face of preemption threats, Austin passes paid sick leave,” The American Prospect (http://prospect.org/article/face-preemption-threats-austin-passes-paid-sick-leave)

[3]      Miller, J., 8/22/17, “On monuments and minimum wages,” The American Prospect (http://prospect.org/article/monuments-and-minimum-wages)

[4]      Von Wilpert, M., 3/13/18, “Preemption laws prevent cities from acting on everything from labor and employment to gun safety,” Economic Policy Institute (https://www.epi.org/blog/preemption-laws-prevent-cities-from-acting-on-everything-from-labor-and-employment-to-gun-safety/)

[5]      Hightower, J., May 2017, “GOP state legislatures are attacking local democracy,” The Hightower Lowdown (https://hightowerlowdown.org/article/gop-state-legislatures-are-attacking-local-democracy/)

THE EFFECTS OF THE FEDERAL TAX CUT

The initial effects of the federal tax cuts enacted in December 2017 by the Tax Cuts and Jobs Act (TCJA) are now visible; they are not what their Republican architects promised.

Although it’s too early to know definitively if the tax cuts will have an effect on the overall economy, growth in the first quarter of 2018 was steady but not noteworthy. There is no evidence of the tax-cut-fueled acceleration of economic growth the Republicans promised. [1] The latest projections, as well as experiences elsewhere, strongly suggest that the effects on economic growth will be small at best.

The effects of the tax cut on the deficit are becoming clearer. The latest projections from the non-partisan Congressional Budget Office (CBO) are that the federal government’s revenue will be reduced by $1.3 trillion over the next 10 years. When the costs of paying interest on the growing debt are included, the CBO projects that the cumulative deficit will increase by $1.9 trillion over the period from 2018 to 2028 due to the tax cuts, despite the Republicans’ promise of no increase in the deficit. [2] Furthermore, the growth in the deficit will be exacerbated by the spending bill that was enacted in early 2018, which increases spending by $300 million over the next two years.

The CBO projects the federal government’s deficit will be $804 billion for fiscal year 2018, up 21% from 2017. Furthermore, it projects the deficit will be over $1 trillion a year by 2020, despite President Trump’s campaign promise to eliminate the deficit. From 2021 to 2028, the CBO estimates the deficits will average 4.9% of Gross Domestic Product (GDP), the total of all economic activity in the U.S. This is higher than at any time since World War II, except during the Great Recession of 2008 – 2009 when tax revenue slumped with the collapsing economy and spending was high to bail out Wall St. and to stimulate the economy.

The growing deficit reflects the gap between what the Republicans who control the federal government want to spend and their unwillingness to enact the taxes necessary to pay for it. This is blatant fiscal irresponsibility. Moreover, growing deficits are of serious concern when the economy is doing well and unemployment is low. In this situation, many economists and responsible officials recommend reducing the deficit and even generating a surplus, as President Clinton did, so that the country has the capacity to weather the next economic downturn.

Analysis of the individual tax cuts finds that the wealthiest households will receive the biggest tax cuts, both in terms of dollars and percentage increase in after-tax income. Households with incomes under $25,000 will receive an average tax cut of $40. Meanwhile, those with incomes from $49,000 to $86,000 will receive an average tax cut of about $800, those with incomes of $308,000 to $733,000 will get about $11,200, and those with incomes over $733,000 will get a tax cut of about $33,000. [3]

As an example of the benefits of the corporate tax cuts, the six biggest, multi-national banking corporations (JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley, and Bank of America) together paid at least $3.6 billion less in taxes for the first quarter of 2018 than they would have without the 2017 tax cut law. Before the tax cut, these corporations had paid 28% to 31% of their income in taxes; for the first quarter of 2018 they paid between 17.2% and 23.7%. Their tax rate is estimated to be 20% – 22% for the full year, meaning they will receive a tax cut of $19 billion for this year. [4] By the way, the tax cut law also provides benefits, and therefore incentives, to corporations to move jobs and profits overseas to dodge U.S. income taxes. [5]

The Economic Policy Institute projects that roughly 80% of the benefits of the corporate tax cuts will be passed on to shareholders and executives, and not used to pay employees or re-invest in the business. Although some corporations gave small raises or bonuses to their workers – thanks to intense public visibility and pressure – a huge chunk of the tax cut has been used to buy back company stock.

In just the four months since the tax cuts were enacted in December, corporations have announced more than $250 billion in stock buybacks. This rewards stockholders and executives as it pushes up the price of the corporation’s stock. These buyback announcements are an acceleration from an already record-high, $5.1 trillion of buybacks over the previous decade. Virtually all the profits of the country’s 500 largest corporations from 2005 to 2015 went to share buybacks and dividends, and not to workers’ wages or investments that would increase productivity, both of which have stagnated. [6]

Stock buybacks give huge rewards to corporate executives because much of their compensation is paid in shares of stock. For example, the CEO of Wells Fargo bank got a $4.6 million raise for the year due to the increase in the corporation’s stock price from stock buybacks.

Stock buybacks were illegal until 1982, which is roughly (and probably not wholly coincidentally) the same time wages stopped rising for most Americans. Before then, a bigger share of corporate profits was used to increase workers’ wages and re-invest in the business, rather than for less economically productive stock buybacks. [7]

Some corporations have announced bonuses or pay increases for workers. However, so far these announcements have applied to only 4.1% of workers and roughly 80% of them are one-time bonuses not on-going pay increases, even though the corporations’ tax cuts are permanent and on-going. [8] In some cases, the workers have not received (and may never receive) actual increases in pay. For example, some corporations have made the pay increases the subject of negotiations with unions. Corporations have announced spending 42 times as much on stock buybacks as on increases in employees’ pay. [9]

To put all this in some perspective, it is estimated that the Koch brothers, extremely wealthy corporate executives, will see their incomes increase by about $27 million per week or $1.4 billion per year. Not coincidentally, they have pumped hundreds of millions of dollars into Republican election campaigns over the last four years. Meanwhile, the few workers lucky enough to get a pay increase are typically getting, at most, a one-time bonus of a few hundred or maybe a thousand dollars for the year. [10]

I encourage you to contact your U.S. Representative and Senators and to ask them to support the Reward Work Act. This bill would significantly limit stock buybacks, give employees of publicly traded corporations the power to elect one-third of the corporation’s Board of Directors, and force corporations to use their tax cuts to reward their workers, instead of executives and stockholders.

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

[1]      Horowitz, E., 4/28/18, “So far, tax cuts aren’t noticeably driving growth,” The Boston Globe

[2]      Stein, J., 4/9/18, “Deficit to top $1 trillion per year by 2020, CBO says,” The Washington Post

[3]      Sammartino, F., Stallworth, P., & Weiner, D., 3/28/18, “The effect of the Tax Cuts and Jobs Act individual income tax provisions across income groups and across the states,” Tax Policy Center (http://www.taxpolicycenter.org/publications/effect-tcja-individual-income-tax-provisions-across-income-groups-and-across-states/full)

[4]      Sweet, K., 4/20/18, “Big banks saved $3.6 billion in taxes last quarter under new law,” Associated Press

[5]      Thomhave, K., “Even the CBO says the GOP tax reform will incentivize corporate offshoring,” The American Prospect (http://prospect.org/article/even-cbo-says-gop-tax-reform-will-incentivize-corporate-offshoring)

[6]      Heath, T., 4/13/18, “America’s biggest companies are announcing buybacks. But whose cash is it, anyway?” The Washington Post

[7]      Reich, R., 3/21/18, “The buyback boondoggle is beggaring America,” The American Prospect (http://prospect.org/article/buyback-boondoggle-beggaring-america)

[8]      Madrid, M., 4/13/18, “Waiting — and waiting– for corporate tax cuts to deliver those wage hikes,” The American Prospect (http://prospect.org/article/waiting-and-waiting-corporate-tax-cuts-deliver-those-wage-hikes)

[9]      Americans for Tax Fairness, retrieved 4/28/18, “Trump tax cut truths,” (https://americansfortaxfairness.org/trumptaxcuttruths/)

[10]     Hoxie, J., 4/18/18, “Five tax myths debunked,” Institute for Policy Studies (http://otherwords.org/five-tax-myths-debunked/)

FIGHTING TAX AVOIDANCE BY THE WEALTHY

A recent Op Ed in the Boston Globe caught my attention and I couldn’t resist sharing it. If you want to understand how wealthy individuals and corporations use off-shore tax havens to avoid paying their fair share of taxes and what we can do about it, this article provides answers. [1]

  • The best estimate is that 11.5% of personal wealth (i.e., $8.7 trillion), globally, is stashed in off-shore tax havens.
  • This costs the U.S. government an estimated $32 billion a year in lost tax revenue from individuals. (Other countries’ governments probably lose $140 billion a year in tax revenue.)
  • In addition, corporations dodge about $70 billion a year in U.S. taxes by using off-shore tax havens. This represents about 20% (one-fifth) of what the U.S. does collect in corporate income taxes each year. (Other countries’ governments probably lose $60 billion a year in tax revenue.)
  • The roughly $100 billion per year the U.S. is losing to off-shore tax dodging is what the federal government spends on Food Stamps, other nutrition programs (such as school lunches), the Children’s Health Insurance Program (CHIP), Head Start, child care subsidies, and welfare COMBINED.
  • Taxing corporate income based on what is called formulary apportionment would stop this tax avoidance. Under this approach, a corporation would pay U.S. taxes based on the portion of its sales that are in the U.S., regardless of any accounting gimmicks or other strategies that made it look like the income from those sales was in another country. This tax approach is in wide use today; many states use it to calculate state corporate income taxes. It is a tax approach that has been used since the days of multi-state railroad construction in the 1800s.
  • Stopping individuals from using offshore accounts to avoid paying taxes would require international cooperation. Today, the IRS has a comprehensive system for tracking earned income. Even if you move from state to state or out of the country, the income you earn is reported to the IRS and you pay income taxes based on your total income. States with income taxes track income that you earn out-of-state and require you to pay state income tax on it. A similar approach should be applied to tracking other kinds of income and ownership of financial securities or assets that produce income. The U.S. passed the Foreign Account Tax Compliance Act in 2010 that requires foreign banks, including the notoriously secretive Swiss and Cayman Island banks, to share information with the IRS on accounts held by American clients. This is a starting point for the international cooperation needed to reduce tax dodging by the wealthy that hurts the U.S. and many other countries.

Tax avoidance by the wealthy contributes to the astronomical and growing inequality of wealth and income. It also means that everyone else must pay more in taxes to make up for the lost taxes when wealthy individuals and corporations don’t pay their fair share.

[1]      Scharfenberg, D., 1/21/18, “A world without tax havens,” The Boston Globe

GENERATING THE REVENUE NEEDED TO INVEST IN AMERICA

The People’s Budget, an alternative budget for the US, presents a coherent vision and a detailed plan for generating the revenue needed to invest in America’s infrastructure and people. It includes specific proposals for increasing revenue, decreasing tax expenditures (i.e., loopholes and deductions), and increasing efficiency in the public and private sectors. These will more than pay for its spending proposals (which I summarized in my previous post). [1]

Current tax policy is failing in multiple ways. Tax cuts and tax avoidance have reduced government revenue so that it is insufficient to pay for needed spending. Tax policy changes over the last 35 years have exacerbated economic inequality and created complexity that favors politically powerful special interests and those who can afford sophisticated tax accountants and lawyers. The theoretical progressivity of income taxes has been lost through tax cuts, tax deductions, tax avoidance, and favored tax rates and loopholes for high-income individuals.

The People’s Budget addresses the inequities in our tax system through changes in individual and corporate tax laws. Income taxes on the richest individuals would be increased. The tax on income from investments would be raised so it is at the same rate as income earned from working. The People’s Budget also would reduce tax deductions that favor the wealthy, such as interest deductions for mortgages on vacation homes and yachts. It maintains a tax on estates worth over $3.5 million, which current proposals would eliminate. It would also reduce income inequality by increasing tax deductions for low-income families. [2]

Inefficient corporate tax loopholes would be eliminated. Corporate tax benefits from moving jobs, profits, and a corporation’s legal home overseas would be ended. The People’s Budget would ensure that corporations pay their fair share of taxes and that large, multi-national corporations do not enjoy more favorable tax treatment than small, US-based companies. Current tax loopholes make it hard for small businesses to compete with large multi-national corporations.

A small tax would be placed on financial transactions. This is essentially a small sales tax on the buying and selling of financial products, like (but at a much lower rate than) the sales taxes many of us pay on non-financial products we buy. In addition to generating hundreds of millions of dollars in annual revenue, it would also discourage quick turnaround, high-volume, speculative trading of securities that can destabilize markets and that provide no benefit to our economy.

The People’s Budget would close tax loopholes and end subsidies for fossil fuel corporations, while putting a price on carbon pollution. This would end the unjustifiable public subsidies of fossil fuel extraction and use, requiring those burning carbon fuels to pay the true costs of doing so. In addition, the People’s Budget would invest in energy efficiency and clean, renewable energy production.

Income and wealth inequality would be reduced by the tax reforms in the People’s Budget, as well as by its spending proposals, which were summarized in my previous post. The Economic Policy Institute’s (EPI) analysis of the People’s Budget concludes that it “would have significant positive impacts, including improving the economic well-being of low- and middle-class families, … and increasing tax progressivity and adequacy while reducing the deficit in the medium term.” [3]

The People’s Budget would reduce the federal government’s projected debt level by trillions of dollars over the next 10 years. This makes it clear that we can afford investments in our human and physical capital if we reform our individual and corporate tax systems. Furthermore, we can simultaneously reduce income and wealth inequality.

I believe that candidates and the party(ies) who fully embrace the vision and goals of the People’s Budget will find that the American public and voters will strongly support them. Senator Bernie Sanders’ presidential campaign was built on a very similar vision and received tremendous grassroots support. Although President Trump’s rhetoric supported elements of the People’s Budget and many people voted for him believing or hoping that he would bring this kind of change in direction to Washington, his actions to-date have not reflected the vision or goals of the People’s Budget. The Republican Party appears to have a totally different vision for America – one where the rich and large corporations do very well and where everyone else struggles to make ends meet.

The Democratic Party would seem to have every reason to embrace the People’s Budget’s vision and goals. Although the Congressional Progressive Caucus has 75 Democratic members in the House (out of 194 Democratic Representatives), the national Democratic Party has not adopted many of the key proposals of the People’s Budget. The Party has not committed itself to goals and a vision for America that puts the working and middle class before wealthy individuals and large corporations.

Our democracy is threatened. Plutocracy, where a relatively small number of wealthy individuals control the government, might be a more accurate description of our current political system. Currently, neither of our major political parties is committed to government of, by, and for the people, as opposed to wealthy individuals and corporations. The People’s Budget would change this.

I encourage you to contact your Representative and Senators in Congress to encourage them to support the Congressional Progressive Caucus’s comprehensive, well thought out proposals that make up the People’s Budget. We need to support the working and middle class, decrease income and wealth inequality, and invest in preparing America and Americans for the future. The People’s Budget makes it clear we can do this and lays out a realistic plan to do so.

[1]      Vanden Heuvel, K., 5/9/17, “Trump’s budget betrays his supporters. Here’s one that doesn’t.” The Washington Post

[2]      Congressional Progressive Caucus, retrieved 7/7/17, “The People’s Budget: A roadmap for the resistance,” https://cpc-grijalva.house.gov/uploads/FINAL%20CPC%20Budget%20FY18%20Executive%20Summary.pdf

[3]      Blair, H., 5/2/17, “‘The People’s Budget’: Analysis of the Congressional Progressive Caucus budget for fiscal year 2018,” Economic Policy Institute Policy Center (http://www.epi.org/publication/the-peoples-budget-analysis-of-the-congressional-progressive-caucus-budget-for-fiscal-year-2018/)

AN ALTERNATIVE BUDGET FOR THE U.S.

Meaningful alternatives to the policies being put forward in Washington, D.C., are available, but do not get the attention they deserve, particularly from our mainstream, corporate media. For example, the Congressional Progressive Caucus has prepared a detailed, well thought out alternative budget for the country.

The People’s Budget, as it is called, presents a coherent vision and plan for making our democracy and economy work for everyone, not just the wealthy. It promotes true full employment (i.e., full utilization of the workforce’s skills) and reduces income and wealth inequality. It is a comprehensive ten-year plan that provides much more detail than the budget document presented by the Trump administration. [1] It includes specific dollar amounts for all major budget items for fiscal year 2018, which starts Oct. 1, 2017, as well as for the next 10 years.

The Economic Policy Institute (EPI) has analyzed the People’s Budget and concluded that it would make our tax system more progressive (i.e., fairer) and increase revenue so we can afford to address national needs and priorities. In addition, it “would have significant positive impacts, including improving the economic well-being of low- and middle-class families, making necessary public investments, strengthening the social safety net, and … reducing the deficit in the medium term” (i.e., in 2-3 years). [2] The EPI estimates that the People’s Budget would bring the US economy to a full recovery from the Great Recession of 2008, increasing Gross Domestic Product (GDP, the total of all the goods and services produced by the US economy) by 2% and employment by 2.4 million jobs in the near term (i.e., over the next 1-2 years). It would end the under-use of productive resources, particularly the under-employment of the workforce, and improve productivity, which would produce growth in workers’ incomes and living standards.

The People’s Budget would spend $2 trillion over 10 years to repair our crumbling infrastructure and provide jobs. It would repair and modernize our energy, water and sewer, and transportation systems, while increasing access to reliable, high-speed internet services. The infrastructure spending would cover 92% of what the American Society of Civil Engineers has estimated is needed to make our infrastructure safe and up-to-date.

It would also invest in our human capital through spending on our education system. It would make health care and child care affordable. It would support the working and middle class and improve their economic security. It would strengthen our safety net programs while reducing the need for them. It would provide support to the strained budgets of state and local governments, supporting, for example, local public safety and K-12 education systems.

While the spending in the People’s Budget would increase the deficit in fiscal year 2018 (FY2018), it includes increases in revenue and decreases in tax expenditures that would not only pay for its spending proposals, but reduce the federal budget deficit in subsequent years. [3] (More detail on this in my next post.)

The People’s Budget would reverse the reductions in domestic spending that have been made over the last 10 years of austerity budget cutting and the previous 25 years of cuts and failure to keep up with inflation. These cuts have reduced spending for education, job training, research, aid to state and local governments, and just about every other type of non-defense public spending. Current non-defense discretionary spending is near a historical low and current budget plans would have it continue to decline over the next 10 years to new all-time lows. The government spending cuts of the last 10 years have been a major – if not the major – cause of the slow recovery from the 2008 Great Recession. The People’s Budget would gradually increase non-defense discretionary spending to its historical level as a percentage of GDP by 2022.

In the health care arena, the People’s Budget strengthens and improves the Affordable Care Act (aka Obama Care). It would provide a public, Medicare-like option in each state’s insurance market, providing competition for the private insurers. This would ensure that the private insurers must provide good coverage at reasonable rates to be competitive. It would also allow states to transition to a single-payer, Medicare-for-All type health care system if they would like to. It would expand access to mental health services and to drug addiction treatment. It would lower prescription drug costs by allowing Medicare to negotiate drug prices (as Medicaid, veterans’ health care, and private insurers currently do) and by reforming laws covering drug patents and pricing.

The People’s Budget invests in our human capital by supporting our education system from birth to career. It makes quality early care and education (aka good child care) affordable for all families. It invests in our K-12 education system and in special education from birth through age 21. It increases educational opportunities in computer science, allows refinancing of student debt, and makes debt free college a possibility for all students.

Workers are supported by increasing the minimum wage, strengthening collective bargaining rights, and addressing gender pay equity. It would increase funding for the safety net where needed, especially for assistance to workers whose jobs have been moved overseas. Support for small businesses would be increased to support job creation.

Overall, the People’s Budget is projected to cut the number of people living in poverty in half in 10 years. As part of its comprehensive plan, the People’s Budget also addresses problems with our support for veterans, our criminal justice system, our immigration system, and voting rights and elections. It would modernize and increase efficiency in the Defense Department, reducing military spending while increasing funding for diplomacy and international humanitarian programs.

Some people say we can’t afford the investments in our human and physical capital that the People’s Budget calls for. However, it includes specific proposals for increasing revenue, decreasing tax expenditures (i.e., tax loopholes and deductions), and increasing efficiency in the public and private sectors that will more than pay for its spending proposals. I’ll summarize these proposals in my next post.

[1]      Vanden Heuvel, K., 5/9/17, “Trump’s budget betrays his supporters. Here’s one that doesn’t.” The Washington Post

[2]      Blair, H., 5/2/17, “‘The People’s Budget’: Analysis of the Congressional Progressive Caucus budget for fiscal year 2018,” Economic Policy Institute Policy Center (http://www.epi.org/publication/the-peoples-budget-analysis-of-the-congressional-progressive-caucus-budget-for-fiscal-year-2018/)

[3]      Congressional Progressive Caucus, retrieved 7/7/17, “The People’s Budget: A roadmap for the resistance,” https://cpc-grijalva.house.gov/uploads/FINAL%20CPC%20Budget%20FY18%20Executive%20Summary.pdf