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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TRUMP’S INFRASTRUCTURE PLAN: A BOONDOGGLE

Trump promised during the campaign that he would stimulate up to $1 trillion of investment in rebuilding the country’s infrastructure. This sounds surprisingly like President Obama’s efforts throughout his presidency to spend a similar amount on public infrastructure. Obama’s proposal would have stimulated job growth and the economy. It would have helped the US more quickly and fully recover from the Great Recession of 2008. But the Republicans in Congress would have none of it. It will be interesting to see how Congressional Republicans react to a major infrastructure investment proposal from President Trump, assuming he does put a proposal forward.

There are major differences between what Trump has described and what Obama proposed. Obama proposed spending federal government money using a public decision-making process to determine the projects to be undertaken.

Trump’s plan, rather than spending federal money as Obama proposed, would provide big tax breaks to private developers. The private developers, not public officials, would select the projects to undertake. The projects would, of course, be ones on which the developers would make a profit. The private developers would effectively own the completed facility and would receive federal tax credits of 82% of their equity investment. [1] That is the equivalent of buying a home and receiving 82% of the cost back in tax credits, meaning the home that you now would own outright would only have cost you 18% of its value.

Thus, the projects that would be undertaken under Trump’s plan would be quite different than those of Obama’s approach. For example, it’s unlikely under Trump’s plan that many school buildings would be renovated or that new schools would be built. Many of our school buildings do need major renovation or to be replaced, but this is not a profit-making undertaking. Similarly, public transportation is not likely to receive much investment. Public facilities, including water and sewer systems and public housing, would only receive investments if private developers were allowed to effectively own the resulting facility and make a profit from it. We’ve already seen what happens if private interests are given control of water systems. For example, in Detroit, water rates were increased to the point where many customers couldn’t afford their water bills. Then, the water authority callously shut off water to those who were behind on their bills.

Investments in our deteriorated roads and bridges would occur only if private developers were allowed to effectively own them and to charge tolls so they could profit from their investment. Investments in buildings for commercial or residential use probably would occur, because developers can charge rents and make profits. Investments would likely be made in high-income, well-developed communities where the return on investment is assured, not in communities suffering from under-investment where infrastructure improvements are most needed.

Furthermore, many of the projects that would benefit from Trump’s plan would have been undertaken anyway, without the tax credit. Therefore, the tax breaks would be windfall profits for developers and nothing more. In addition, important sources of investment capital, such as pension funds, endowments, and collective investment funds, would not be incentivized to make infrastructure investments because they are tax-exempt, non-profit entities and would not benefit from the proposed tax credit.

Trump’s advisors claim that his infrastructure plan would pay for itself because the new revenue resulting from its projects would fully cover the lost revenue from its tax credits. This conclusion is based on clearly unrealistic assumptions. It assumes that all the projects that receive the tax credit wouldn’t have otherwise occurred, that all the workers on the projects would otherwise have been unemployed, that the workers would have taxable incomes 3 to 4 times that of typical construction workers, and that all the money invested in these projects would otherwise have been sitting idle rather than invested elsewhere. [2]

In summary, the Trump infrastructure plan would not produce the infrastructure investments that are needed and that would benefit the public. It would provide private developers with windfall profits from a big tax credit that would increase the federal government’s deficit. It would privatize decisions on infrastructure investments, the effective ownership of the facilities built, and most of the resulting benefits.

Direct spending by the federal government on needed public infrastructure would be an economically sound, rational policy for making needed investments. Given the very low interest rates at which the federal government can currently borrow money by selling Treasury bonds, the cost of raising money for such investments would be very low. Therefore, the return on investment would be unusually high.

I urge you to contact your Congress people and ask them to support infrastructure spending that will benefit our nation as a whole and not just line the pockets of private developers. Ask them to ensure that the projects undertaken create infrastructure that meets public, not private, needs.

[1]      Huang, C., Van de Water, P.N., Kogan, R., and Kamin, D., 12/2/16, “Trump infrastructure plan: Far less than the claimed $1 trillion in new projects,” Center on Budget and Policy Priorities (http://www.cbpp.org/research/federal-budget/trump-infrastructure-plan-far-less-than-the-claimed-1-trillion-in-new)

[2]      Huang, C., et al., 12/2/16, see above

STOP COMMERCIALIZATION OF OUR NATIONAL PARKS

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

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

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

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

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

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

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

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

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

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

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

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

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

GOOD NEWS FROM THE 2016 ELECTIONS

Believe it or not, there was quite a bit of good news in the 2016 elections. While I imagine many of us feel that the election of Donald Trump as president was bad news for our country, the frustration that fueled his election has positive aspects.

First, the election of Trump and the surprising success of Bernie Sanders in the Democratic primary both reflect a strongly-felt, deep-seated frustration that many middle class and working people have with the downward slide in their economic security and well-being. If they have been able to maintain their standard of living over the last 35 years, it has been a struggle. Often, they have had to work more hours at the same or lower pay. Many have lost jobs that moved overseas or to lower wage areas within the US. Some have had their pay or benefits cut due to overseas competition or the decline of collective bargaining through unions. Meanwhile, they have watched the income and wealth of the economic and corporate elite skyrocket.

Small businesses have struggled while giant, multi-national corporations have been bailed out and given huge tax breaks and other subsidies. Our elections and political system have produced policies that favor big corporations, while small business people struggle, just like others in the middle and working class.

Voters did not give any sort of mandate to Trump and the Republicans to enact their policy priorities. As you probably know, 3 million more people voted for Clinton than for Trump. In US Senate races, Republicans won only 46% of the popular vote – but got 52% of the seats. In the House, the Republicans won only 51% of the vote – but got 55% of the seats. [1]

Only 53% of eligible voters actually voted. This means that barely one out of four eligible voters voted for Trump and the Republicans. And the only reason Republicans won the presidency (courtesy of the Electoral College) and a majority in the US Senate is because of the disproportionate power given to small states in those bodies.

Republicans won a significant majority of US House seats only because of the gerrymandering of House districts (i.e., the drawing of district lines to gain partisan advantage). Due to this gerrymandering, it is estimated the Democrats would need to receive about 10 million more votes nationwide than Republicans (i.e., almost 55% of the vote) in House races to gain a narrow majority of the seats. [2]

Not only don’t Trump and the Republicans have any mandate, but many election results were in direct contradiction to their brand of conservatism and their policy positions. Three very progressive women of color were newly elected to the US Senate: Tammy Duckworth in IL, Kamala Harris in CA, and Catherine Cortez Masto in NV. Two very progressive women of color were newly elected to the US House: Pramila Jayapal in WA and Stephanie Murphy in FL.

In Oregon, Kate Brown, was elected Governor as a candidate of the Working Families Party. In AZ, ultra-right wing sheriff Arpaio was defeated by a Democrat. In MN, a Somali-American woman, Ihlan Omar, was elected to the legislature. And in TX four Latinos gained seats in the legislature. [3]

Important progressive policies were enacted by voters through ballot initiatives. All four states (AZ, CO, ME, and WA) that had minimum wage increases on the ballot passed them. Overall, the minimum wage will increase in 19 states on January 1st. This will increase wages for 4.3 million workers, providing them with over $4 billion of increased income over the course of the year. Millions of additional workers who earn just above the new minimum wage levels will also likely receive pay increases. The well-being of all these workers and their families will improve. [4] Income inequality will be reduced and all workers and the middle class will benefit.

AZ and WA also passed laws requiring paid sick time, while SD rejected a decrease in the minimum wage for teenagers and VA rejected an anti-union initiative.

CA and WA passed initiatives calling for overturning the Supreme Court’s Citizens United decision (which allows unlimited spending by the wealthy in campaigns). MO and SD passed new laws regulating campaign spending. SD also passed an innovative $100 annual Democracy Credit for each voter to encourage small donors to participate in funding campaigns. Voters approved citizen-funded elections in Berkeley, CA, and Howard County, MD. They approved automatic voter registration in AK with a strong 64% vote in favor, while four other states enacted automatic voter registration through their state legislatures in 2016.

Maine voted for “ranked choice voting” which allows voters to indicate their first, second, third, etc. choices on the ballot. If your first choice is out of the running, then your second choice is counted, and so forth. Therefore, you can vote for the candidate you truly believe is best, without worrying that you might be aiding the election of a candidate you really don’t like. (For example, you could have voted for Ralph Nader for President in 2000 with Al Gore as your second choice, without worrying that your vote for Nader would help George W. Bush get elected.)

In CA, MA, ME, and OR progressive values prevailed in education reform ballot initiatives. CA and OK passed significant criminal justice reforms. [5] CA, NV, and WA strengthened laws designed to reduce gun violence, while RI and SD strengthened ethics laws for elected officials. [6]

These are only a few examples of the many successes in state and local elections on ballot initiatives, as well as on the election of candidates that will stand up for middle class and working people.

The support for candidates and policies that bolster the middle class and working people is broad and deep in the US. We all need to work together to ensure that the Republican Congress and President Trump work to improve the well-being of the 99% of people in this country who aren’t wealthy. We must be vigilant to ensure that the policies they enact aren’t for the benefit of the 1%, don’t exacerbate income and wealth inequality, and don’t continue the crony capitalism that benefits our giant, multinational corporations and their senior executives at the expense of small businesses and workers.

[1]      Singer, P., 11/10/16, “Democrats won popular vote in the Senate, too,” USA Today (http://www.usatoday.com/story/news/politics/onpolitics/2016/11/10/democrats-won-popular-vote-senate-too/93598998/)

[2]      Richie, R., 11/7/14, “Republicans got only 52 percent of the vote in House races,” The Nation (https://www.thenation.com/article/republicans-only-got-52-percent-vote-house-races/)

[3]      Hightower, J., 12/8/16, “We can beat back the reign of Trump – if we unite in a movement for populist justice,” The Hightower Lowdown (https://hightowerlowdown.org/article/beat-trump-with-populist-justice/)

[4]      Jones, J., 1/3817, “The new year brings higher wages for 4.3 million workers across the country,” Economic Policy Institute (http://www.epi.org/blog/the-new-year-brings-higher-wages-for-4-3-million-workers-across-the-country/?mc_cid=d213e59597&mc_eid=2442dd3ea2)

[5]      Hightower, J., 12/8/16, see above

[6]      Politico, 12/13/16, “2016 ballot measures election results,” (http://www.politico.com/2016-election/results/map/ballot-measures)

OUR FAILING MAINSTREAM MEDIA

Our mainstream media are failing our democracy. In the last election, they provided almost no coverage of issues and policies, which should play a significant role in voters’ decisions. Even when issues or policies were mentioned, there was little fact checking or context provided, let alone analysis. Such in-depth reporting is critical to having an informed electorate, which is essential for a successful democracy.

Because the mainstream media are mostly huge, for-profit corporations, their focus is on the bottom line – on profits. Their revenue comes from advertising and is determined by how many people read or view their output. Revenue and readership / viewership are experiencing dramatic competition from on-line media. As the number of mainstream media users declines, the revenue per ad declines, so the ratio of ads to content goes up to retain as much revenue as possible. This detracts and distracts the viewer from the news that is presented.

To attract attention and eyeballs, the mainstream, corporate media have turned more and more to shocking, fear-mongering, or titillating stories at the expense of real news; in other words, to tabloid journalism. The phrase “if it bleeds, it leads,” has become all too true of the mainstream media. Crime, terrorism, violence, and tragedy are typically the leading stories because a story that engenders outrage, anger, or fear is more likely to attract viewers.

During the election, shock value was more salient than facts, in-depth details, or analysis. Coverage was more focused on generating emotional reactions than informing. As CBS’s Chairman put it, the shock value of Trump’s statements “may not be good for America, but it’s damn good for CBS.”

This focus on the sensational and lack of depth reflect not only the need to attract viewers, but also the slashing of newsrooms’ budgets. To cut costs and increase profits, our corporate, mainstream media now employ roughly 40% fewer news reporters today than they did 10 years ago; and further cuts are coming. [1]

The mainstream “news” is increasingly what is often referred to as infotainment – a cross between information and entertainment. This means less factual content and more emotional content. For political reporting, this has meant the more shocking, outrageous, and emotion-provoking the statement or story, the better. Information and factual content on issues and policies is pushed aside as too boring and too costly to report. The only facts that seem to be reported are from the horse race perspective – who’s ahead in the latest poll and who has raised more money. Ironically, we now get some of our best political analysis from our entertainers, comedians such as Stephen Colbert, Jon Stewart, John Oliver, and Bill Maher.

The bottom line is that the business model of our corporate, mainstream media is not serving the best interests of our democracy. They are not providing citizens and voters with the information and analysis they need to participate meaningfully in our democracy.

A different business model is needed where news outlets are not huge corporations and are not dependent on advertising revenue. To deliver in-depth, fact-based reporting with context and analysis, not to mention investigative journalism, news outlets will require a significant portion of their revenue to come from public funding and / or readers’ / viewers’ donations. This will ensure that content is free of the coercive effects of advertising or other funders who have a vested, special interest in the news content.

For television and radio, we need our public broadcasting system (PBS). I encourage you to listen to or watch our public broadcasts and to support them financially. I urge you to be on the lookout for and to oppose efforts to cut PBS’s public funding or undermine its independence. It is essential to our democracy and over 40 other countries have highly respected public broadcasting systems, including the BBC in Great Britain and the Canadian Broadcasting Corporation in Canada.

Finding reliable sources for print journalism (hardcopy and on-line) is not easy given all the junk and even fake news that are present on the Internet. For broad-based news coverage that includes coverage of issues of importance to our democracy, I recommend these five sources:

I hope you’ll go on-line and look at one of more of these. You may want to subscribe to their on-line news feeds or to their hardcopy publications (except for Common Dreams which is exclusively on-line). I guarantee you’ll be a better-informed citizen and voter if you do. If you don’t have time to follow one of these regularly, just keep following my blog. I’ll give you the highlights.

[1]      Bauerlein, M., 11/19/16, “How Trump played the media,” Mother Jones (http://www.motherjones.com/media/2016/11/trump-media-fail)

BIG CAMPAIGN SPENDING AT STATE-LEVEL FLIES UNDER THE RADAR

With all the focus on the Presidential and Congressional elections, the enormous amounts of money spent on state-level races and ballot questions has gone largely unnoticed. Coverage by the mainstream corporate media is minimal, in part due to cuts in budgets for reporting that increase corporate profits. But that’s a whole other topic.

According to the National Institute of Money in State Politics (NIMSP), a small Montana nonprofit that has the most detailed nationwide records, spending in state and local races is likely to exceed $3 billion this year. [1] This may not seem like a huge sum when spread across many elections in 50 states, but a relatively small amount of money can have a big impact on state races and ballot questions. For example, the cost of a campaign for the most expensive state legislative seat in the country, a Virginia Senate seat, is “only” $500,000. And $1 million or so can fund a successful campaign for a state Supreme Court seat. [2] Campaign spending that can swing the outcome of a state election represents a modest investment for a corporation or individual with a significant financial interest at stake. [3]

The portion of campaign money contributed to state and local races by individuals is typically less than half of the total and stands at 38% for the 2016 elections. The rest is donated by political groups, corporations, unions, and other organizations. [4] The amount of money coming from out-of-state sources and dark money entities is growing. The portion of spending in state elections for which voters know the true identity of the original donor has declined from three-fourths in 2006 to only one-fourth today. [5]

The most disturbing aspect of state campaign spending is the growing spending on judicial elections by those with vested interests in court decisions. (See this previous post for more details.) These inherent conflicts of interest threaten the integrity of our judicial system. In addition, growing spending on judicial races by the political parties is politicizing our state courts and undermining their impartiality.

More than $26 million was raised for judicial races in the 27 states that had judicial elections this fall. In Texas, where over $2 million was raised, the major donors are law firms who have a clear vested interest in judicial decisions. Louisiana, Ohio, and Wisconsin also had judicial races that attracted over $2 million. [6] In addition to trial lawyers, corporate-funded groups (such as energy, medical, insurance, manufacturing, and real estate interests) and unions have been big donors to judicial races. Education funding and charter school issues have emerged as important judicial issues in Washington State and Louisiana. Therefore, those with a financial stake in those decisions have emerged as large campaign donors for Supreme Court races in those states.

Many of the donors to judicial races are frequent litigants in state courts. This raises serious concerns about conflicts of interest and the possibility that judges will need to (or should) recuse themselves from significant numbers of cases. However, because of weak disclosure laws and the presence of dark money (where the true donors are hidden from the public), in many cases the presence of a conflict of interest may not be publicly known.

Furthermore, the advertising for or against judges, which is how most of the campaign money is spent, tends to focus on criminal cases, even though the real interests of those paying for the ads are in the arena of civil and commercial cases. A common strategy is to attack a judge as “soft on crime” or to highlight a high-visibility, emotional case and criticize the judge’s handling of it without discussing any of its complexities or legal issues. Not only does this affect voting in elections, but there is evidence that it affects judges’ decisions in criminal cases. [7] (See this previous post for more details.)

Donations from political party-affiliated groups politicize judicial elections, which are most often, technically, non-partisan. The Republican State Leadership Committee has been particularly active, spending over $4 million on this year’s state judicial races. Politically-affiliated donations create the perception – if not the reality – that judicial decisions are made on political grounds, rather than impartially based on the law. [8]

Allowing individuals and groups with financial or partisan interests to donate large amounts to judges’ election campaigns undermines the credibility of our court system. These donations compromise judicial impartiality, fairness, and independence, which are essential in a democracy.

There are two solutions to the problems raised by large campaign donations to judicial races:

  1. Appoint judges using a good, non-partisan process with reasonably long or lifetime terms (with a mandatory retirement provision); or
  2. Establish citizen funding and effective regulation of judges’ elections including:
    • Partial public financing through matching of individuals’ small donations in exchange for limits on spending and the size of contributions;
    • Tight regulation and full disclosure of outside, truly independent spending; and
    • Strong conflict of interest and recusal standards for judges.

(See this previous post for more details.)

A fair and impartial justice system is essential in a democracy. Judges need to serve the public interest and not be beholden to wealthy special interests. Therefore, judges should be appointed by a transparent, non-partisan process. If judges are elected, it is critical to have a well-structured and regulated campaign finance system that prevents special interests from having undue influence.

[1]      Quist, P., 10/17/16, “$1 Billion…and Counting,” National Institute of Money in State Politics (http://www.followthemoney.org/research/blog/1-billion-and-counting/)

[2]      Johnson, G., 11/1/16, “A look at notable state supreme court races in 2016,” The Washington Post

[3]      Chisun, L., Valde, K., Brickner, B.T., & Keith, D., 6/26/16, “Secret spending in the states,” Brennan Center for Justice (http://www.brennancenter.org/publication/secret-spending-states#Introduction)

[4]      Light, J., 10/13/16, “The $1 billion election no one is noticing,” Moyers and Company (http://billmoyers.com/story/candidates-state-offices-raised-one-billion-dollars/)

[5]      Chisun, L., et al., 6/26/16, see above

[6]      Light, J., 10/13/16, see above

[7]      Brennan Center for Justice, 10/18/16, “New analysis: Outside spending surges in important state judicial races as Election Day nears,” New York University School of Law (https://www.brennancenter.org/press-release/new-analysis-outside-spending-surges-important-state-judicial-races-election-day-nears)

[8]      Brennan Center for Justice, 10/18/16, see above

THE RIGHT WAY TO STOP THE OFFSHORING OF US JOBS

The US needs to stop hemorrhaging jobs to other countries. For starters, we need to do three things:

  • Impose financial disincentives for offshoring jobs,
  • Change the mindset among corporate executives that offshoring jobs is the right and acceptable thing to do, and
  • Reverse the resignation among workers and the public who believe that the offshoring of jobs is inevitable.

To create financial disincentives, we should pass laws that place special taxes or restrictions on corporations that have offshored say 100 or more jobs in the last five years. Possible examples include:

  • Bar such corporations from receiving federal contracts. Or there could be demerits subtracted from the scores of proposals from such corporations in competitive bidding situations. Or there could be financial penalties on existing federal contracts such as the deduction of $10,000 per offshored job or of 1% of a contract’s annual payment per 1,000 offshored jobs, whichever is greater.
  • A corporation’s taxes could be increased by $10,000 per offshored job or its tax rate could be increased by 1% per 1,000 offshored jobs, whichever is greater – with no offsets to allow a corporation to avoid this tax.
  • Bar such corporations from receiving government tax breaks, loans, or grants.
  • Require such corporations to pay a special, unavoidable, and substantial tax on aggregate executive compensation that is over $1 million. [1]

Senator Bernie Sanders has announced that he will introduce a bill in Congress that will include provisions similar to these to discourage the offshoring of jobs. He is calling it the Outsourcing Prevention Act. [2]

To counter the mindset that favors offshoring jobs, we should pass laws or establish executive branch procedures that publicize a corporation’s offshoring of jobs. Possible examples include:

  • Require such a corporation to hold a public hearing in the community losing the jobs 90 days before the termination of the jobs. If the number of jobs is 500 or more, a hearing in Washington before a congressional committee should be required.
  • Establish a new anti-offshoring czar in the Office of the President who would visit any such corporation’s CEO to make it clear that offshoring jobs is viewed negatively.

Providing financial rewards to corporations to keep jobs in the US is not an efficient way to stop offshoring. Typically, state or local governments provide tax abatements or other tax benefits to corporations to keep jobs. However, state and local taxes are generally only 2% or so of a corporations’ costs. Labor costs are a far greater portion of operating costs. Therefore, tax abatements are not likely to offset the savings in labor costs provided by offshoring. For example, in the recent United Technologies / Carrier (UT/C) case in Indiana, the state will provide $7 million in tax benefits over 10 years. However, UT/C estimated was that it would save $65 million per year ($650 million over 10 years) for offshoring 2,100 jobs. [3]

Corporations’ demands for financial benefits from state and local governments to keep or create jobs are really just blackmail. To stop this job-based blackmail, which robs states or municipalities of needed tax revenue, the federal government should put a 100% tax on these financial benefits, so there is no overall financial incentive for the corporation. The federal government should also reduce grants to state and local governments that give financial incentives to corporations to keep jobs. For example, awards under the Community Development Block Grant or other economic development programs could be cut for states or municipalities that agree to pay job blackmail to corporations. The federal government has used a similar strategy in other instances to get states to change policies. For example, the federal Transportation Department used cuts in federal transportation grants to get states to raise their alcohol drinking ages to 21. This reduced car accidents and saved thousands of lives. [4]

I encourage you to contact your US Representative and Senators and ask them what they plan to do to reduce the offshoring of US jobs. Request that they support a systematic approach to discouraging offshoring such as that offered by Senator Sanders’ Outsourcing Prevention Act.

[1]       Greenhouse, S., 12/8/16, “Beyond Carrier: Can Congress end the green light for outsourcing?” The American Prospect (http://prospect.org/article/beyond-carrier-can-congress-end-green-light-outsourcing)

[2]       Sanders, B., 11/26/16, “Sanders statement on Carrier and outsourcing,” Press release from Senator Bernie Sanders (http://www.sanders.senate.gov/newsroom/press-releases/-sanders-statement-on-carrier-and-outsourcing)

[3]       Leroy, G., 12/7/16, “Can Trump’s wild one-off at Carrier combat corporate welfare?” The American Prospect (http://prospect.org/article/can-trumps-wild-one-carrier-combat-corporate-welfare)

[4]       Leroy, G., 12/7/16, see above

THE WRONG WAY TO STOP THE OFFSHORING OF US JOBS

President-elect Trump received a lot of good publicity for his claim that he saved 1,100 jobs at a United Technologies / Carrier (UT/C) plant in Indiana. Although the focus of his claim and effort – to keep good, middle income jobs in the US – is laudable, the facts of this case and the implications for the larger, systemic policy issue are not very favorable.

In fact, only about 730 jobs that were slated to move to Mexico were kept in the US. The other 350 research and development jobs at the facility were never slated to move to Mexico. Meanwhile, another UT/C plant in Indiana will close and roughly 700 jobs will be lost. [1]

UT/C responded to the President-elects’ strong-arming because it has $56 billion in federal contracts it didn’t want to jeopardize and it received $7 million in taxpayer-funded subsidies from the state of Indiana, where Trump’s vice president, Mike Pence, is Governor. [2]

We do need to change the mindset and incentives that make it not only acceptable but a preferred and successful business strategy to ship American jobs overseas. We need to do this through systemic changes in policies. However, what Trump is doing isn’t policy-making and it doesn’t change the underlying market incentives. Furthermore, it’s a drop in the bucket in terms of jobs. [3]

Many economists have been very critical of Trump’s actions because they undermine the rules, predictability, and consistency on which companies and our economy rely. These economists, including former Treasury Secretary Lawrence Summers, argue that the resultant uncertainty could lead to reduced investment, fewer jobs, and slower economic growth. [4]

Trump’s ad hoc, company-by-company approach reflects the arbitrary and capricious use of the personal power of the President’s bully pulpit. While it can affect individual company’s actions – through effects on stock prices, public opinion, federal government contracts, etc. – it is driven by random, autocratic whims. The result is a bullying style of ad hoc capitalism that reflects a personal agenda and a person who wants corporate America to be beholden and deferential to him. [5]

The likely result is that corporations and their senior executives will work to curry favor with Trump by contributing to his re-election campaign and taking other actions that will please him. This is pay-to-play crony capitalism and plutocracy; it is not how a democracy is supposed to work.

My next post will present some systemic, policy-based approaches that we should be taking to counter incentives for offshoring American jobs.

[1]       Nichols, J., 12/8/16, “Chuck Jones is a better president than Donald Trump will ever be,” Common Dreams (http://www.commondreams.org/views/2016/12/08/chuck-jones-better-president-donald-trump-will-ever-be)

[2]       Greenhouse, S., 12/8/16, “Beyond Carrier: Can Congress end the green light for outsourcing?” The American Prospect (http://prospect.org/article/beyond-carrier-can-congress-end-green-light-outsourcing)

[3]       Reich, R., 12/7/16, “The Art of the Autocrat,” Common Dreams (http://www.commondreams.org/views/2016/12/07/art-autocrat)

[4]       Greenhouse, S., 12/8/16, see above

[5]       Reich, R., 12/7/16, see above

HOW CAMPAIGN DONOR SECRECY IS MAINTAINED AND WHAT YOU CAN DO ABOUT IT

Republicans in Congress, and particularly Senate leader Mitch McConnell, have made preventing increased disclosure of campaign donors a top priority. They have refused to act on the DISCLOSE Act that would require disclosure of donors to political spending by outside groups. They have added riders to must-pass bills prohibiting the Securities and Exchange Commission (SEC) from issuing a rule requiring disclosure of corporate political spending. They have blocked the Internal Revenue Service (IRS) from regulating the political activity of non-profits that do not have to disclose donors. They are also attempting to block a presidential executive order that would require federal contractors to disclose political spending. Furthermore, they have actually proposed weakening existing regulations on campaign spending, including allowing coordination between super PACs and candidates’ campaigns, as well as removing limits on how much political parties can spend in coordination with candidates’ campaigns. [1]

The Securities and Exchange Commission has failed to write rules for corporate disclosure of political activity, which it was required to do by the financial sector reforms after the 2008 crash. The head of the SEC has delayed work on these rules despite investors’ interest in having corporate political spending disclosed. The SEC’s failure to write these disclosure rules led Senator Elizabeth Warren to call on President Obama to fire Mary Jo White, the head of the SEC. [2]

The US Chamber of Commerce, a top source of dark money and a close ally of Congressional Republicans, is a strong opponent of any disclosure of corporate political spending, even voluntary disclosure. Nonetheless, nearly half of the S&P 500 largest corporations have voluntary disclosure policies. They see transparency as an antidote to possible negative repercussions and as a buffer against pressure from various groups and individuals to contribute to political activity. [3] The Chamber of Commerce apparently believes that secrecy is necessary to allow it to continue to wield power and influence with our elected officials.

A final indication of the desire for secrecy by wealthy campaign donors, as well as the lengths they will go to to maintain secrecy, was the drop-off in activity, particularly TV ads, by dark money groups when the Federal Election Commission’s (FEC) more stringent reporting requirements went into effect. Sixty days before the election, spending on all TV ads that mention a candidate must be reported to the FEC. Prior to that cut-off date, only ads that explicitly call for voting for or against a candidate have to be reported.

The non-profit called One Nation is the most dramatic example of avoidance of this expanded reporting. It is run by a former top aide to Republican Senate leader McConnell and through August it had spent over $23 million running TV ads in competitive Senate races – spending more than any other entity active in Senate races. However, since the Sept. 9th cut-off date for stricter FEC reporting, it has spent only $2 million despite the increasing competitiveness of the Senate races and shrinking time until Election Day. [4]

Overall, the drop-off in activity by dark money groups is reflected in their having paid for 42.5% of the TV ads by outside groups in competitive Senate races through 9/15, but only 11% of ads since then. In the tight Pennsylvania Senate race, dark money sponsorship of ads has dropped from 33% to 9%. In Ohio and Illinois, rates have dropped from 28% and 36%, respectively, to zero.

Reducing activity when it would have to be reported to the FEC helps preserve the secrecy of the groups’ activities. It also helps these non-profit groups claim to the IRS that political activity is not their primary activity, because activity reported to the FEC is clearly political. Some of these group are shifting their activity to on-line ads because these ads are exempt from FEC reporting due to a regulatory loophole.

Anonymous campaign spending is anathema to democracy. All campaign donors should be disclosed so voters can make informed decisions with full knowledge of who is trying to influence their votes and curry favor with candidates. Apparently, our elected officials who are blocking disclosure of donors believe that secrecy allows them to continue to reap the financial support that leads to their election or re-election and the power that comes with it. Given the secrecy, it is impossible for voters and even law enforcement to know what favors elected officials are doing for donors and whether outright corruption is occurring. However, you can be certain that the donors make sure the politicians know of their financial support.

I encourage you to contact your US Representative and Senators to urge them to pass the DISCLOSE Act and ensure full disclosure of all campaign donors.

[1]       Miller, J., 12/11/15, “GOP budget rider takes aim at campaign-finance rules,” The American Prospect (http://prospect.org/blog/checks/gop-budget-rider-takes-aim-campaign-finance-rules)

[2]       Prupis, N., 10/14/16, “Sen. Warren urges Obama to fire ‘unapologetic’ SEC chief for ‘brazen conduct,’” Common Dreams (http://www.commondreams.org/news/2016/10/14/sen-warren-urges-obama-fire-unapologetic-sec-chief-brazen-conduct)

[3]       Miller, J., 10/28/16, “More corporations embrace disclosure, despite conservative opposition,” The American Prospect (http://prospect.org/blog/checks/more-corporations-embrace-disclosure-despite-conservative-opposition)

[4]       Balcerzak, A., 10/19/16, “Dark money ads plunged when reporting requirement kicked in,” Center for Responsive Politics, OpenSecrets blog (https://www.opensecrets.org/news/2016/10/dark-money-ads-plunged-when-reporting-requirement-kicked-in/)

CAMPAIGN DONOR SECRECY IS ESCALATING

The disclosure of who is giving money to candidates for public office has long been a basic tenet of our elections. Even with the rise of outside spending, (supposedly) independent of candidates’ campaigns, disclosure of donors was assumed. In the Supreme Court’s 2010 Citizens United decision (which ruled that wealthy individuals, corporations, and other organizations could engage in unlimited outside spending), the five justices who supported the ruling believed that the independence of the spending and the disclosure of the donors would prevent corruption of candidates who benefitted from the unlimited campaign spending.

However, wealthy individual and corporate campaign donors are typically anxious to hide their identities. This protects them from negative repercussions from, for example, sponsoring TV ads that are typically negative and sometimes outright nasty or untruthful.

As a result, “dark” money spending in campaigns, where the true donors are hidden, is growing dramatically. Dark money in the 2016 elections is up 34% over this point in the 2014 Congressional elections and is 5 times what it was at this point in the last presidential election in 2012. [1] Donor secrecy means there is no accountability, typically for negative or questionably truthful TV ads. It also prevents voters from knowing who is behind the political ads and messages that are trying to influence their votes. This means voters can’t assess the interests and biases of the sponsors of the ads, or even tell if there are conflicts of interest or a potential for corruption.

Large donors have found multiple ways to keep their identities secret. The two main strategies are engaging in political activity through non-profit organizations that don’t have to disclose their donors and laundering money through multiple entities to make it hard (if not impossible) to trace the actual donor. These strategies come on top of the fact that enforcement of existing disclosure laws has been weak at best. The Federal Election Commission (FEC), the primary enforcer of election laws, is hamstrung by the intense partisanship in Washington.

As required by Internal Revenue Service (IRS) regulations, the non-profit organizations that are being used for political activity maintain that political activity is not their primary purpose. However, for many of them, this fiction can only be maintained because the IRS’s regulations and enforcement are weak. The IRS’s efforts in this area have been undermined by political attacks, including claims that its efforts to control the illegal political use of non-profit groups reflect partisan bias.

The other major strategy for hiding the identities of donors is money laundering. This is accomplished by passing money for political spending through a series of groups, typically non-profits and super PACs. When the final entity that actually engages in political activity (e.g., pays for the TV ads) reports its donors, they are super PACs and non-profits not the actual original donors.

Some of the campaign money laundering is done through “ghost” organizations. These are typically corporations that are established solely for the purpose of channeling money to super PACs. Many of these ghost corporations make large donations, e.g., hundreds of thousands or millions of dollars, only days after they are created. Little information is available about them and sometimes they are disbanded shortly after making their donations. Hence, tracing the donors of this money is extremely difficult if not impossible. [2]

Many election law experts consider the use of ghost organizations a violation of the long-standing federal ban on straw donors, i.e., one person giving money to another person or entity to use to make a political contribution. However, with the regulatory agencies, particularly the FEC, politically deadlocked, enforcement and even investigation of such activity is lacking.

The explosion of campaign spending where donors are secret is particularly insidious and damaging to democracy. Voters are not be able to consider the credibility and motives of the funders behind these efforts to sway their votes. Moreover, the megaphone that unlimited outside money provides to wealthy corporations and individuals can drown out other voices that provide important information to voters.

Unlimited election spending by a tiny slice of our society, coupled with secrecy about who is paying for the messages being disseminated, means that voters will receive skewed information and will be unable to evaluate its credibility. Furthermore, they may be discouraged from voting because the bulk of these messages tend to be negative messages that attack the quality of candidates and the effectiveness of our government.

To support well informed voting, full disclosure of all donors to campaign spending is essential. Furthermore, unlimited spending by wealthy interests in our elections undermines the basic principle of democracy – that government is of, by, and for all the people.

My next post will provide more information on how wealthy campaign donors are maintaining their secrecy and what you can do about it.

[1]       OpenSecrets.org, retrieved 10/22/16, “Top election spenders: Who are the biggest dark money spenders?” Center for Responsive Politics (https://www.opensecrets.org/dark-money/top-election-spenders)

[2]       Gold, M. & Narayanswamy, A., 3/18/16, “How ‘ghost corporations’ are funding the 2016 election,” The Washington Post

HOW OUR ELECTIONS ARE RIGGED

Donald Trump has been claiming that our elections are rigged. He’s right. They are rigged – but not in the manner he suggests. Our elections are rigged to benefit wealthy interests and Republicans in three ways:

  1. Campaign finance laws allow unlimited and even secret spending by wealthy interests,
  2. States have made voting more difficult for low-income citizens, minorities, students, and some elders, and
  3. Republicans have gerrymandered Congressional Districts and state legislative districts to their benefit.

I’ve covered the first topic in a recent post (and other posts under the Campaigns category), so I’ll address the other two topics here.

Making voting more difficult: 20 states have put new laws making voting more difficult in place since 2010. The new laws range from photo ID requirements to reductions in early voting. These new laws are part of a broad effort to curtail voting by Democratic-leaning groups and individuals. [1] State lawmakers spanning almost all states have introduced hundreds of measures that would make it harder to vote. This is part of a strategic plan by conservatives and Republicans to shift election results. The effort has been spearheaded by the American Legislative Exchange Council (ALEC), a right-wing and corporate-funded organization that develops templates for state legislation, including ones on voter suppression. [2] In a democracy we should be encouraging voting, not suppressing it!

Laws requiring specific types of IDs to vote are a key tactic. The supposed rationale for the voter ID laws has been to prevent voter fraud. However, every credible source that has examined this has documented that voter fraud is non-existent. In addition, to requiring IDs to vote, some states have made it hard or expensive to get an acceptable ID. For example, Texas does not allow the use of a student ID (but a firearm ID card is acceptable). These laws can be quite effective in suppressing voting. Wisconsin’s voter ID law is estimated to have kept 300,000 citizens from voting. [3]

In addition to changes in law, there are numerous examples of other efforts to suppress voting. Some states have reduced the number of polling places in minority neighborhoods, resulting in long waiting lines that prevent some people from voting. This was evident in Arizona’s September primary elections where the number of polling places in Latino neighborhoods was greatly reduced and created 5-hour waiting lines. North Carolina has reduced the number of hours and locations for early voting for the November 8th election. [4]

Another tactic has been to purge names from lists of registered voters, thereby preventing people from voting when they show up at the polls. This tactic is used in ways that target Democratic voters, as it was in Florida before the Bush vs. Gore election in 2000. So, it’s not a new technique, but it continues to be used today. Most recently, it has surfaced in multiple counties in North Carolina. [5] In Ohio, the Secretary of State is being sued for having improperly purged 2 million voters from the voting lists.

Trump has repeatedly talked about having “poll monitors” in certain (minority) areas. His “Vote Protectors” effort reportedly plans to send volunteers to monitor polling places in nine cities with high minority populations. The group is creating official-looking ID badges for its volunteers to wear and they plan to videotape voters. Using volunteer “poll monitors” is an old tactic but election experts say it does intimidate voters and keeps them from voting. [6]

Gerrymandering: Republicans and corporate America engaged in a very concerted effort to gain control of state redistricting efforts that followed the 2010 Census. They created the Redistricting Majority Project (REDMAP) and raised $30 million to fund it. State legislatures typically redraw district lines based on new Census data every ten years. So, in 2010, REDMAP’s creators succeeded in taking control of legislatures in 20 states. They then used this control of the redistricting process to gerrymander state legislative districts and the 193 Congressional districts in those states (out of 435 nationwide) to favor Republicans. While gerrymandering of districts is not a new phenomenon, they took it to new levels of aggressiveness, aided by computer mapping technology not previously available. [7]

Their gerrymandering significantly skewed results for the US House of Representatives in 2012. For example, in Pennsylvania, Democratic House candidates statewide had 100,000 more votes than Republicans, but Republicans won 13 House seats to the Democrats’ 5. In Michigan, Democrats won 240,000 more votes overall, but only 5 House seats to 9 for Republicans. In Ohio, Republicans got 52% of the overall vote, but 12 of 16 House seats. And so forth. This was accomplished by designing districts that Republicans could win comfortably but with a relatively small margin, while leaving a few districts where Democrats would win overwhelmingly. In other words, they crammed as many Democrats as possible into as few districts as possible. The result was that, despite President Obama’s overwhelming 2012 Democratic national victory, Republicans had a 234 to 201 advantage in the House of Representatives – even though Democratic House candidates nationwide garnered 1.7 million more votes than Republicans.

To fix this, the redistricting process should be performed by a non-partisan redistricting commission so that election results fairly reflect voters’ overall preferences. Eight states have already done this: Arizona, California, Hawaii, Idaho, Iowa, Montana, New Jersey, and Washington. The others need to follow suit.

To stop targeted voter suppression efforts, key provisions of the Voting Rights Act (VRA) that were rendered unenforceable by a 5 to 4 Supreme Court vote in 2013 need to be reinstated. These would prevent states from enacting discriminatory voting laws and practices, which the VRA did quite effectively before the Supreme Court’s ruling.

[1]       Brennan Center for Justice, retrieved 10/29/16, “New Voting Restrictions in Place for 2016 Presidential Election,” New York University School of Law (https://www.brennancenter.org/voting-restrictions-first-time-2016)

[2]       Center for Media and Democracy, retrieved 10/29/16, “ALEC exposed,” (http://www.alecexposed.org/wiki/ALEC_Exposed)

[3]       Fitrakis, R.J., & Wasserman, H., Fall 2016, “War on the dispossessed,” Justice Rising, Alliance for Democracy (http://www.thealliancefordemocracy.org/pdf/AfDJR6404.pdf)

[4]       Pitney, N., 10/26/16, “This is what actual voter suppression looks like, and it’s appalling,” The Huffington Post (http://www.huffingtonpost.com/entry/voter-suppression-2016_us_581028c2e4b02b1d9e63bcd2)

[5]       Berman, A., 10/27/16, “North Carolina Republicans tried to disenfranchise a 100-year-old African-American woman,” The Nation (https://www.thenation.com/article/north-carolina-republicans-tried-to-disenfranchise-a-100-year-old-african-american-woman/)

[6]       Wilkie, C., 10/25/16, “Trump loyalists planned voter intimidation using fake id badges, fake exit polling — until Huffpost asked them about it,” The Huffington Post (http://www.huffingtonpost.com/entry/vote-protectors-voter-intimidation_us_580e4e63e4b0a03911ee03bc?section=us_politics)

[7]       Tarbell, J., Fall 2016, “Gerrymandering: The civil war over public policy,” Justice Rising, Alliance for Democracy (http://www.thealliancefordemocracy.org/pdf/AfDJR6405.pdf)

UNLIMITED, UNACCOUNTABLE CAMPAIGN SPENDING EXPLODES

Traditionally, campaign spending has been done by a committee set up and overseen by a candidate running for election. A candidate’s campaign committee is governed by state or federal laws depending on the office for which the candidate is running. These committees are required to publicly report donors and the size of contributions is limited. Currently, at the federal level, contributions to candidates’ committees are capped at $2,700 per person per election.

This all began to change 25 years ago when groups and sometimes individuals other than a candidate’s campaign committee started spending money to influence the outcomes of elections. This spending is referred to as “outside spending” or “soft” money because it occurs outside of the candidate’s official campaign committee. It is supposed to be independent of the candidate’s committee and its efforts are not supposed to be coordinated with those of the candidate’s campaign. However, this independence is very questionable in many, if not most, cases. The regulations defining the standard for independence and the enforcement of them have been weak at best. The Federal Election Commission (FEC), the primary regulator of campaign spending, is hamstrung by the intense partisanship in Washington.

The lack of accountability for outside spending has been a major contributor to the growth of negative campaigning. Outside spending is typically used to attack an opponent rather than to support a candidate. The attacks can be nasty and stretch the truth or worse. Because outside spending is technically independent of the candidate, he or she can plausibly claim that it is out of his or her control. Therefore, no one can be effectively held accountable for the content of ads or other material.

Outside spending had been growing relatively modestly until the Supreme Court’s 2010 Citizens United decision that ruled that wealthy individuals, corporations, and other organizations could engage in unlimited outside spending. The five Supreme Court justices who supported this ruling felt that such spending was part of free speech. They believed that the independence of the spending and the disclosure of its sources would prevent the corruption of elected officials who benefited from it. However, there is now significant evidence of collaboration between outside spenders and candidates, as well as evidence of corruption. (See my previous posts on illegal coordination and the corrupting effects of unlimited spending.)

Outside spending has already hit $1 billion in the 2016 federal elections – up from $225 million at this point in the pre-Citizens United 2010 elections. There’s been $621 million in outside money spent on the presidential race, $426 million spent on Senate races, and $187 million spent on House races. [1]

Outside spending now exceeds the spending by candidates’ committees in many of the high profile, tightly contested Congressional races. [2] Outside spending is spreading to state-level elections, which I’ll discuss in a future post.

Super political action committees (super PACs) are the primary vehicle for outside spending. Super PACs have spent $847 million to-date in the 2016 federal elections and they will spend hundreds of millions more by Election Day. There are no limits on the size of contributions they can receive, but they are required to disclose their contributors.

In addition to super PACs, two types of non-profit organizations are used for outside spending because they are not required to disclose their donors. (I’ll discuss donor secrecy in my next post.) One type is business associations like the US Chamber of Commerce, the American Medical Association, and the Pharmaceutical Research and Manufacturers of America. These groups are referred to as 501(c)(6) organizations because that is the section of the IRS rules that governs them. They may engage in political activities, as long as these activities are not their primary purpose. However, the IRS has not defined “political activity” nor “primary” so some of these organizations easily skirt this limitation. [3]

So far in the 2016 elections, 6 of these business associations have reported $26 million in political spending to the Federal Election Commission (FEC), including almost $25 million spent by the US Chamber of Commerce. The FEC reporting does not represent all the political spending by these groups because only certain kinds of activity are required to be reported, most notably activity, usually ads, that explicitly encourages the election or defeat of a specific candidate.

The second type of non-profit organization that is widely used for political purposes is commonly referred to as a social welfare organization. Examples include the National Rifle Association (NRA), Planned Parenthood, and the Sierra Club. These groups are referred to as 501(c)(4) organizations because that is the section of the IRS rules that governs them. Their primary purpose is supposed to be promoting the social welfare of our society. However, as with business associations, they may engage in political activities, as long as these activities are not their primary purpose. Again, because of the lack of clear regulations, some of these organizations easily skirt this limitation.

So far in the 2016 elections, 95 of these groups have reported $93 million in political spending to the Federal Election Commission (FEC), including $25 million spent by the NRA, the biggest spender among them by far. As with business associations, the FEC reporting does not represent all the political spending by these groups because only certain kinds of activity are required to be reported.

In addition to the significant potential for corruption, outside money is problematic because the unlimited spending it allows gives a megaphone to wealthy corporations and individuals that can drown out other voices that provide important information for voters. For our democracy to function as the founders envisioned it, citizens must vote and be well-informed. Unlimited election spending by a tiny slice of our society means that voters will receive skewed information and may be discouraged from voting because they feel their voices and votes are meaningless.

As a result, a democracy built on the principle of one person, one vote, is fundamentally undermined. All voices should be heard in a relatively balanced manner during election campaigns. Given the constraints of the Supreme Court’s campaign finance decisions, the value and impact of small campaign contributions must be enhanced by matching them with public funds. Ultimately, the Supreme Court’s campaign finance decisions must be overturned and limits established on contributions and spending in our elections.

[1]       OpenSecrets.org, retrieved 10/22/16, “2016 outside spending, by race,” Center for Responsive Politics (https://www.opensecrets.org/outsidespending/summ.php?disp=R)

[2]       OpenSecrets.org, retrieved 10/22/16, “Races in which outside spending exceeds candidate spending,” Center for Responsive Politics (https://www.opensecrets.org/outsidespending/outvscand.php?cycle=2016)

[3]       OpenSecrets.org, retrieved 10/22/16, “Dark money basics,” Center for Responsive Politics (https://www.opensecrets.org/dark-money/basics)

CAMPAIGN SPENDING GROWING BIGGER AND DARKER

Campaign spending on the 2016 presidential and Congressional elections will exceed $7 billion, beating the previous record from 2014 by about $1 billion. This will continue the trend of ever increasing campaign spending.

Unfortunately, the three forums (or “debates”) for the presidential candidates included no meaningful discussion of campaign financing, despite strong and broad-based concern about this issue among the public. For example, across party lines, 78% of the public believes the Supreme Court’s 2010 Citizen United decision should be overturned because it has allowed unlimited spending on our elections by wealthy individuals, corporations, and other entities. [1]

The big growth in campaign spending is coming from outside groups that are (supposedly) independent of candidates’ campaigns. By the end of August, super PACs had already collected more than $1 billion, which exceeds the $853 million they raised through the whole 2012 election. And additional mountains of money will be contributed before Election Day.

This record amount of campaign funding is increasingly coming from a small number of extremely wealthy individuals and is increasingly being funneled through a small number of super PACs and non-profit groups. It is driven by huge contributions from a handful of donors. Just 10 individuals or couples, who have each contributed between $38 million and $14 million, have contributed a combined total of $200 million. [2]

The top 100 donors have already contributed $558 million for the 2016 elections. The growth in the amount contributed by the top 100 donors in the 6 years since the Citizens United decision (which allowed them to make unlimited contributions) is astounding: from $70 million in 2010 to $380 million in 2012 to $558 already in 2016. [3] In other words, the average contribution of each of the 100 largest donors has grown from $700,000 in 2010 to $5.6 million so far in 2016 with many more dollars expected before Election Day.

Furthermore, a growing portion of this outside money is “dark” money, meaning that the true donors of the funds are kept secret. Hundreds of millions of dollars have been contributed to politically active non-profit organizations that keep their donors’ names secret. (More on this in my next post.)

Huge donations by wealthy donors, which are dominating our elections, are a major contributing factor to voters’ belief that our elections, political system, and policies are rigged in favor of wealthy individuals and corporations.

My next posts will examine the growth of “dark” money where donors’ identities are concealed, efforts to block increased donor disclosure, and the presence of unlimited contributions and dark money in state-level elections.

[1]       Editorial, 10/15/16, “The other campaign madness: Mega-donors,” The New York Times

[2]       Gold, M. & Narayanswamy, A., 10/5/16, “How 10 mega-donors already helped pour a record $1.1 billion into super PACs,” The Washington Post

[3]       Kim, S.R., 10/13/16, “Liberal big money is  pouring into elections,” Center for Responsive Politics (https://www.opensecrets.org/news/2016/10/liberal-big-money-is-pouring-into-elections/)

DRUG PRICE GOUGING CONTINUES

Valeant Pharmaceuticals is price gouging again. Having acquired the rights to the drug used to treat severe lead poisoning in 2013, it has increased the price from $950 to $27,000. There is no reason other than greed for this huge price increase on a decades-old drug. The cost is limiting availability of the drug to children with lead poisoning, including those from Flint, Michigan. [1] Lead poisoning can be life-threatening, but more often causes problems with growth and development, including anemia, neurological damage, and cognitive impairments.

Valeant is the corporation that acquired two heart drugs in 2014 and more than doubled the price of one and quintupled the price of the other. This was on top of a quintupling of their prices in 2013 by the previous owner (who had recently purchased the rights to the drugs). So, overall their prices have jumped to 10 and 25 times what they were in 2013.

Valeant has been one of the poster children for pharmaceutical greed. It has repeatedly purchased drug companies and then dramatically boosted the prices of their medicines. [2]

My previous post, Drug Prices: A Big Problem in Our Privatized Health Care System, provides more information on the problem of unrestrained drug price increases. It also gives 8 more examples of dramatic drug price increases where the only explanation is greed coupled with a lack of regulation.

Drug prices in the U.S. are not regulated or routinely negotiated as they are in other countries. Therefore, the pharmaceutical corporations, which often have monopolistic power, can increase drug prices more or less at will.

In September 2015, Senator Bernie Sanders filed a bill in the U.S. Senate to address price gouging by pharmaceutical corporations. The Prescription Drug Affordability Act would allow the Medicare prescription drug program to negotiate prices with drug companies, a practice that is currently banned by a 2003 law. It would also require the pharmaceutical corporations to report information about the factors affecting their drug pricing, such as research and development costs.

I encourage you to contact your U.S. Senators and Representative to urge them to support the Prescription Drug Affordability Act and efforts to control drug prices in general.

[1]       Prupis, N., 10/14/16, “As Flint suffers, big pharma slammed for lead poisoning drug price hike of 2,700%,” Common Dreams (http://www.commondreams.org/news/2016/10/14/flint-suffers-big-pharma-slammed-lead-poison-drug-price-hike-2700)

[2]       Silverman, E., 10/11/16, “Huge Valeant price hike on lead poisoning drug sparks anger,” Stat (https://www.statnews.com/pharmalot/2016/10/11/valeant-drug-prices-lead-poisoning/)

PROBLEMS WITH PRIVATIZED PRISONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PRISON PRIVATIZATION: A FAILED EXPERIMENT

The risks of privatizing government services have been highlighted by the recent bad experience with private prisons. The Bureau of Prisons (BOP) in the federal Department of Justice (DOJ) recently announced that it will end its 20 years of using privately-run, for-profit prisons due to significant, clear cut problems.

A DOJ Inspector General’s report in August 2016 found that private prisons were less safe, less secure, and more costly than the BOP’s own government-run prisons. Among other problems, dozens of deaths linked to substandard medical care were documented. [1] Private prisons also had higher rates of assaults and 9 times more lockdowns (used to quell disturbances and punish prisoners) than government-run facilities.

Earlier reports on the BOP’s privatized prisons had found that any cost savings were negated by the costs of oversight and that the quality of services was lacking. These are common problems with privatization. Frequently, the cost of oversight is not factored into the cost-benefit analysis of privatization. Therefore, privatization may appear to save money when in actuality it doesn’t. Furthermore, the oversight that occurs is often unsuccessful in ensuring efficient and high quality performance by the private provider, as occurred with the BOP’s private prisons.

Despite these earlier findings, the use of private prisons grew and by fiscal year 2015 the BOP was paying private prison contractors $1.05 billion a year. [2] Today, the BOP houses about 22,000 of its prisoners in 13 private prisons out of a total of roughly 175,000 prisoners under its jurisdiction. Its announcement stated that it will phase out the use of these private prisons as their contracts expire over the next few years.

The US Department of Homeland Security, on the other hand, has said nothing about its future use of private detention facilities, which house about 25,000 immigrants. These detention centers have also been found to provide substandard medical care linked to deaths. They also have experienced high suicide rates. [3]

Turning over a public service to a private, for-profit corporation often creates perverse and counterproductive incentives. Privatization at the BOP, as in most cases, was focused on reducing public sector costs. The goals of minimizing cost and maximizing profit often conflict with the social mission of a public service. In the case of privatized prisons, the goals of humane treatment and rehabilitation are undermined.

In private prisons, the corporate providers cut costs (and increase profits) by increasing the number of inmates in a facility (resulting in overcrowding); decreasing the services provided to them (including rehabilitation, education, job training, and medical care); providing cheap (and sometimes unhealthy) food; using substandard facilities; and decreasing the number, pay, and training of staff (including guards, supervisors, and medical staff). In addition, to generate revenue, they charge fees to inmates and their families (that are often unaffordable), and also sell inmate labor typically without paying the inmates for it. [4] Another frequent problem with privatization is that private providers bill government for services that were not needed or in some cases were not actually provided in order to increase revenue and profits.

Because the for-profit prison corporations are private entities, they are not subject to public information laws. This lack of transparency is another frequent problem with privatization. Not surprisingly, the for-profit prison corporations tend to be quite secretive, which makes public scrutiny of them and their service delivery difficult.

The private prison business began in the 1980s. The war on drugs was underway; tough on crime and strict sentencing laws were in their political heyday. Between 1980 and 1990, state spending on prisons quadrupled and still many prison were over-crowded. [5]

At the federal level, detention of undocumented immigrants exploded in the 1990s. Until then, border crossing was treated as a civil offense, punishable by deportation. But then, as part of the tough on crime and anti-immigrant politics, Congress changed that. By 1996, crossing the border was a federal crime. Prosecutions for illegal entry rose from fewer than 4,000 in 1992, to 31,000 in 2004 under President George W. Bush, to a high of 91,000 in 2013 under President Obama.

Privatization of public services was a hot topic in the 1980s as it was purported to be more efficient, to reduce costs, improve quality, and reduce government expenditures. It also provided opportunities for private profit.

Therefore, it wasn’t surprising that privatization of prisons blossomed as a way to meet a growing need and, supposedly, reduce governments’ costs. To handle the flood of undocumented immigrants into its prisons, the BOP turned to private corporations to operate a new type of facility: low-security prisons designed to hold only non-citizens. As of June 2015, these facilities — which are distinct from immigration detention centers, where people are held pending deportation — housed nearly 23,000 people. Three private corporations now run 11 immigrant-only prisons for BOP: five are run by the GEO Group, four by the Corrections Corporation of America, and two by the Management & Training Corporation. [6]

The Corrections Corporation of America (CCA) began operation in 1983 and grew from 5 facilities in 1986 to 60 today. It houses 66,000 inmates and in 2015 reported revenue of $1.9 billion with net income of $221 million. Its main competitor is GEO Group, which has 70,000 inmates in its private facilities.

The problems with private prisons have come to public attention largely due to investigative journalism by The Nation and Mother Jones. My next post will provide an overview of their reporting. The failures of the BOP’s 20-year experience with private prisons hold many lessons for efforts to privatize other government services including roads, bridges, and public transportation; schools; water and sewer systems; and trash collection.

[1]       Wessler, S.F., 8/18/16, “The Justice Department will end all federal private prisons, following a ‘Nation’ investigation,” The Nation (https://www.thenation.com/article/justice-department-to-end-all-federal-private-prisons-following-nation-investigation/)

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

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

[4]       Vanden Heuvel, K., 8/23/16, “On private federal prisons, a victory for independent journalism,” The Washington Post

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

[6]       Wessler, S.F., 1/28/16, “ ‘This man will almost certainly die’,” The Nation (https://www.thenation.com/article/privatized-immigrant-prison-deaths/)

SOLVING THE PROBLEMS OF OUR PRIVATIZED HEALTH CARE SYSTEM

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

COUNTERACTING THE LOW-WAGE BUSINESS MODEL OF PARASITIC CORPORATIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

LOW-WAGE BUSINESS MODEL CREATES PARASITE ECONOMY

The term the parasite economy is being applied to employers whose business model is built on low-wage jobs. These corporations take more out of their employees and society than they put in, hence they are parasites. The low incomes of their workers mean that the workers can only survive with the support of the publicly-funded safety net, including subsidized food, housing, child care, and health insurance, as well as the Earned Income Tax Credit. [1] And to make matters worse, some of these corporations are ones that use loopholes in the tax code to avoid paying their fair share of taxes.

As Henry Ford realized 100 years ago, if you don’t pay your workers enough to buy the products you make, your business model will struggle to be sustainable. In 1914, Ford began paying his employees $5.00 a day, over twice the average wage in the auto industry. He also reduced the work day from 9 hours to 8 hours. Ford believed he would get higher quality work and less turnover as a result. He stated, “The owner, the employees, and the buying public are all one and the same, and unless an industry can so manage itself as to keep wages high and prices low it destroys itself, for otherwise it limits the number of its customers. One’s own employees ought to be one’s own best customers.” [2]

As Henry Ford acknowledged in the early 1900s, the U.S. economy is driven by consumers. About two-thirds of our economic activity today is consumer spending. However, low-wage workers have a very limited ability to purchase goods and services, either to support themselves and their families or to sustain our consumer economy. A strong middle class is essential for the vitality for our consumer economy.

Although some of our politicians deride those who use public assistance as “takers” (as contrasted with “makers”), the real “takers” in our economy and society are the low-wage paying corporations. These low-wage employers are subsidized by the tax dollars that pay for the public assistance programs their low-paid workers (and their families) rely on to survive. [3] This is corporate welfare and these corporations are truly “takers,” as opposed to “makers” who contribute to our economy and society. [4]

Low-wage corporations are parasites, making nice profits and typically paying high compensation to their executives while relying for their success on low pay and public subsidies for their workers. Walmart and McDonald’s are classic examples.

It is estimated that American taxpayers pay roughly $153 billion a year for public assistance programs that support low-wage workers and their families. Seventy-three percent or almost three out of every four people who use public assistance programs live in families where at least one person is working. Forty-eight percent of home care workers rely on public assistance, along with 46% of those providing child care and 25% of part-time college faculty. [5]

A large part of the restaurant industry is a classic example of the parasite economy. The industry association, the National Restaurant Association, is a leading advocate for the low wages of the parasite economy. It has lobbied hard and is actively engaged in election campaigns in its efforts to keep industry wages low by opposing increases in the minimum wage and supporting the existence of an even lower, special minimum wage for tipped workers. The federal minimum wage for tipped workers – most restaurant employees – is $2.13 per hour and hasn’t been changed since 1991. The median wage for restaurant servers including tips is just $9.25 per hour. As a result, restaurant servers are three times as likely to be in poverty as the average worker.

The effects of moving to a low-wage business model were seen in the 2009 outsourcing of hotel housekeeping by Hyatt Hotels in the Boston area. Ninety-eight housekeepers were fired and replaced by contracted temp workers at half the pay, with no benefits, and with almost twice the workload. The fired housekeepers, some of whom had worked for Hyatt for 25 years, had had average pay of $17 per hour with good benefits. They were financially stable and appeared secure – able to pay their bills, support their children including with college costs, and help aging parents. Today, seven years later, the effects are still being felt by some of them, who have depleted their savings, defaulted on loans, and have poor credit ratings. Some have experienced high levels of stress and health consequences. Taxpayers had to provide unemployment benefits, as well as food, housing, and health care subsidies. [6]

The low-wage business model is pervasive in the U.S. today. Seventy-three million Americans (nearly a quarter of our population) live in working poor households that are eligible for the Earned Income Tax Credit (EITC). This public program, the primary replacement for “welfare as we know it” that President Clinton ended in 1996, provides subsidies to workers who are paid so poorly they and their families cannot survive without public assistance. The federal government spent $57 billion on EITC benefits in 2014 and many states provided their own additional EITC benefits (roughly another $10 billion). Most of these workers – and you have to be working to qualify for this benefit – work for large, profitable corporations.

Between 2003 and 2013, wages (after adjusting for inflation) actually fell for the 70% of workers at the lower end of the U.S. income spectrum. Further contributing to the need for public assistance, fewer and fewer Americans have health insurance through their employers. As a result, working-poor families (as opposed to the unemployed) receive more than half of all federal and state public assistance. Beyond the EITC, public subsidies that go primarily to the working poor include ones for food and nutrition ($86 billion), child care ($71 billion), housing ($38 billion), and health insurance ($475 billion).

My next post will discuss why the parasite economy is so prevalent in the U.S. today and what we can and should do about it.

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

[2]       Nilsson, J., 1/3/14, “Why did Henry Ford double his minimum wage?” The Saturday Evening Post (http://www.saturdayeveningpost.com/2014/01/03/history/post-perspective/ford-doubles-minimum-wage.html)

[3]       Hanauer, N., Summer 2016, see above

[4]       Johnson, J., 5/3/16, “McDonald’s, the corporate welfare moocher,” Common Dreams (http://www.commondreams.org/views/2016/05/03/mcdonalds-corporate-welfare-moocher)

[5]       Jacobs, K., 4/15/16, “Americans are spending $153 billion a year to subsidize low-wage workers,” The Washington Post (https://www.washingtonpost.com/posteverything/wp/2015/04/15/we-are-spending-153-billion-a-year-to-subsidize-mcdonalds-and-walmarts-low-wage-workers/?utm_term=.7120f83f959f)

[6]       Boguslaw, J., & Trotter Davis, M., 9/5/16, “Lessons from the Hyatt 100,” The Boston Globe

THE BENEFITS OF RAISING THE MINIMUM WAGE

Our mainstream media rarely present the numerous benefits of increasing the minimum wage. The benefits more than offset any negative effects and include:

  • Increased incomes for workers at and just above the minimum wage,
  • Benefits for children in families where income increases,
  • Health benefits for workers whose income increases,
  • Reduced need for publicly-funded safety net programs,
  • Stimulation of the local economy,
  • Reduced income inequality,
  • Increased incentive to work for low-wage workers, and
  • Reduced turnover, less absenteeism, and improved worker productivity in businesses where workers’ pay increases.

First and foremost, increasing the minimum wage would increase the incomes of many workers, both those earning the minimum wage and those earning just above the current and new minimum wage levels. And these aren’t teenagers working part-time: 91% are over 20 and 57% work full-time. More than half of minimum wage workers are the primary sources of income for their families and over 20% have a college degree. [1]

Nationally, 42% of all workers earn less than $15 per hour. The commitments in New York and California to increase their minimum wages to $15 are estimated to increase the incomes of over a third of workers in those states. [2] Even at $15 per hour (i.e., $30,000 per year based on 50 weeks at 40 hours per week), in many areas of our country a single person would have a barely adequate income to live on after taxes. A family with one or more children and one parent working full-time at $15 would be struggling to get by, let alone to provide the kind of experiences that support good child outcomes. At the current federal minimum wage of $7.25, a parent working full-time is in poverty.

The evidence is very strong that children’s outcomes improve when their family’s income increases. Children, and especially young children, are disproportionately in low income families. In Massachusetts, 22% of working parents would benefit from a $15 minimum wage, while 31% of children would. Parents experiencing less economic stress are more likely to have the time and energy to be nurturing parents. And they have more money to purchase all the things that support strong child development, from good food to books.

Raising the minimum wage improves workers’ health according to studies in the U.S. and in Great Britain. Workers who benefited from an increase in the minimum wage have been found to have reduced anxiety and depression. Increased income has been found to reduce the number of low birthweight babies and neonatal deaths. Low income has been linked to higher rates of obesity, high blood pressure, heart disease, smoking, diabetes, and arthritis. [3]

Health may be affected by low income a) due to the increased stress of trying to make ends meet, b) because health care and medicine are not affordable, and c) because healthy food is less available and affordable. Therefore, an increase in the minimum wage and in workers’ incomes is likely to have health benefits and contribute to restraining increases in health care costs.

When a person’s or family’s income increases, they are less likely to need publicly-funded safety net programs. Therefore, taxpayers and government save money due to a reduced need for subsidies for food, housing, child care, and health insurance.

Increasing the minimum wage stimulates the economy. The increased spending and consumer demand from workers whose incomes increase has positive effects on other local workers and businesses. Because of the multiplier effect, [4] the stimulus effect on local economies is substantial. A fundamental reality of economics – not just a theory or “law” – is that when workers have more money, they consume more and, therefore, businesses have more customers and sales, so they hire more workers, reducing unemployment.

Every dollar an hour increase means $2,000 per full-time worker per year in additional income to spend. When you multiply that by millions of workers, there are billions of additional dollars that would be spent in our economy. That would contribute to strengthening our economic recovery in a significant way.

Furthermore, this increase in economic activity will increase governments’ tax revenues. Some of these revenues should be used to ameliorate any negative effects of a minimum wage increase. Unemployment benefits, job training and placement programs, and other social supports should be provided to help anyone who lost a job. Small businesses that experienced significant negative effects should receive assistance, such as low cost loans to help bridge the transition.

Because an increase in the minimum wage would raise the incomes of those at the bottom of our income distribution, it would reduce income inequality. Other policy changes are needed to address this issue, but increasing the minimum wage is one important step.

Employers will benefit, as well as workers. Workers whose wages increase because of an increase in the minimum wage (both those at and just above the new minimum wage level) will have an increased incentive to work because their time is more highly rewarded. They will work more hours and be more motivated. As a result, absenteeism will decline and productivity will be enhanced. Furthermore, increases in pay have been found to reduce turnover. This is a major benefit to employers, as recruiting and training new workers is a major expense.

The evidence is clear that an increase in the minimum wage will have significant benefits for many workers and their families, for businesses and employers, and for our economy and society as a whole. A national, $15 minimum wage, phased in over a few years and then indexed to increase with inflation, is both economically sound policy and the right thing to do.

[1]       Chaddha, A., Sept. 2016, “A $15 minimum wage in New England: Who would be affected?” Federal Reserve Bank of Boston (https://www.bostonfed.org/publications/community-development-issue-briefs/2016/a-$15-minimum-wage-in-new-england-who-would-be-affected.aspx)

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

[3]       Leigh, J.P., 7/28/16, “Raising the minimum wage could improve public health,” Economic Policy Institute, Working Economics Blog (http://www.epi.org/blog/raising-the-minimum-wage-could-improve-public-health/)

[4]       The multiplier effect refers to the fact that each dollar spent in the local economy supports additional spending by the individual or business that received it. This cycle of re-spending of every dollar spent is repeated endlessly. Therefore, the impact of each additional dollar spent in the local economy is multiplied.

THE TRUTH ABOUT RAISING THE MINIMUM WAGE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

LACK OF GOVERNMENT SPENDING LEADS TO WEAK RECOVERY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A LARGE CORPORATION BLACKMAILS OUR GOVERNMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

BLUNTING THE IMPACT OF BIG AND SECRET MONEY IN OUR ELECTIONS

Big money and secret money in our election campaigns undermines democracy. They can prevent voters from knowing who, with what interests, is trying to influence their votes. They can also unduly influence the decisions of our elected officials and lead to outright corruption. (See my previous posts here and here for more detail.)

There are two main strategies for blunting the impact of big money and secret money in our elections:

  • Disclosure of campaign contributions and spending in a complete and timely manner, and
  • Matching of voters’ small campaign contributions with public funding, coupled with strict limits on who can contribute and how much can be contributed.

Both of these strategies have been reviewed and approved by the current Supreme Court.

Three-quarters of Americans, including three-quarters of those in each political party, support disclosure of campaign spending. A number of states, including California, Delaware, Maine, Massachusetts, and Montana have strengthened disclosure requirements in the aftermath of the Supreme Court’s Citizens United decision in 2010. There are proposals in Congress to enhance disclosure for federal campaigns.

California requires any group spending more than $50,000 in a year on political activities to disclose all donors giving over $1,000. In addition, it requires that political advertisements include the names of top funders. The success of these measures is reflected in the remarkably small increase in secret (aka dark) money in California elections. [1] In Montana, a bipartisan coalition enacted strong transparency laws for campaign spending after large amounts of out-of-state dark money were spent in their elections.

A Brennan Center report [2] identifies key provisions of an effective state campaign spending disclosure law:

  • Require disclosure of all donors by all groups that spend any significant amount of money in campaigns;
  • Require disclosure by organizations that provide substantial funding to groups making significant campaign expenditures;
  • Require disclosure for all political advertising spending in a specified window before an election (e.g., a few months to a year), including issue ads (that don’t explicitly advocate for a vote for or against a candidate);
  • Require up-to-date disclosure frequently, including just before an election and in advertisements themselves;
  • Require disclosure of the individual(s) controlling any group making significant campaign expenditures; and
  • Make penalties for violations substantial but proportional to the severity of the violation.

Disclosure helps voters know who is trying to influence their votes and the election, and lets them take into account the interests of the spenders, although it does not directly affect the funding of campaigns.

Matching voters’ small campaign contributions with public funding makes small contributions more valuable to candidates. Given that the Supreme Court’s decisions (e.g., Citizens United and McCutcheon) do not allow laws limiting campaign contributions outright, this alternative amplifies the voices and influence of small donors. It can also require candidates to voluntarily limit campaign spending and the size of contributions in exchange for the public matching funds.

New York City has had a campaign financing system in place since 1988 that matches small donations with public funding. Currently, it offers a six-to-one match on donations up to $175 by city residents. An ordinary citizens making a donation of $50 or $100 now has the clout of a much larger contribution – $350 or $700, respectively – due to matching public funds. As a result, more people are donating, because their small contributions and voices are amplified. And this leads to higher voter turnout on Election Day. [3]

Candidates’ participation in this contribution matching system is voluntary. In exchange for the public matching funds, candidates agree to abide by limits on overall spending and the size of individual contributions. These limits vary with the office being sought, from Mayor to City Council. In 2013, 92% of NYC’s candidates participated in the public matching funds system. For the candidates who did participate, 61% of their funding came from small donors. Conversely, for the candidates who did not participate, 53% of their funding came from large donors of $1,000 or more. [4]

The system has changed candidates’ attitudes and approach to the voting public. It has muted the importance of large contributions. It has motivated more citizens to run for office and made races more competitive. Candidates spend less time fundraising and can, therefore, be more engaged with and responsive to their constituents.

The states of Maine, Connecticut, and Arizona have similar contribution matching systems in place. Washington, D.C., is considering implementing such a system. There are proposals in Congress that would create a similar system for our national elections.

I encourage you to contact your elected officials and ask them to take action now to blunt the impact of big money and secret money in our elections. Strengthening disclosure of the sources of funding for campaign spending is one step to take. Another is to enact a system for matching voters’ small contributions to candidates with public funding. Both of these would make our elections more democratic and can be done now within the constraints of the Supreme Court’s rulings.

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

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

[3]       Migally, A., & Liss, S., 2010, “Small donor matching funds: The NYC election experience,” The Brennan Center for Justice (http://www.brennancenter.org/publication/small-donor-matching-funds-nyc-election-experience)

[4]       McElwee, S., 6/23/16, “D.C.’s white donor class: Outsized influence in a diverse city,” Demos (http://www.demos.org/publication/dc%E2%80%99s-white-donor-class-outsized-influence-diverse-city)

SECRET MONEY IN STATE AND LOCAL ELECTIONS FACILITATES CORRUPTION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

BIG MONEY, BIG IMPACT IN STATE AND LOCAL ELECTIONS

Big money may have a bigger effect on state and local elections than federal ones. Most of my past posts on campaign finance have focused on spending on races for federal offices (here, here, here, and here). However, state and local races are less expensive and get less media attention, so some big money can have a really big impact. I have written about this before (here). Here are a couple more examples of big money’s role at the state and local level.

Missouri is one of the few states with no limits on campaign contributions directly to candidates. There are four candidates in the Republican primary for Governor. Each of the four has received over $1 million from a single source. One campaign has received almost $5 million from the candidate’s own fortune. In two cases, an individual or family (other than the candidate) has given a million or more to the gubernatorial candidate while also giving millions more to other candidates or political action committees (PACs). [1]

This big money is drowning out the voices of the average voter. It creates conflicts of interest for the candidate who is elected as these large donors have interests that are affected by policy decisions. One of the Missouri million-dollar donors is a strong advocate for repealing all Missouri taxes. He would clearly disproportionately benefit from steps in that direction while the average Missouri resident would suffer the loss of the government’s ability to support infrastructure and programming. Another of the million-dollar donors is a strong opponent of unions. Policies that weaken unions would benefit him as a business owner while hurting workers.

In the Washington, D.C., mayor’s race, the amounts aren’t as dramatic, but campaign donors of $1,000 or more are providing the bulk of campaign money. These large donors are not representative of the electorate; they are disproportionately white and male, and, of course, rich. Overall, for the three candidates in the 2014 race, two-thirds of all the money raised came from donors giving $1,000 or more. Less than 2% came from donors giving $50 or less – an amount that might be affordable for the average voter. [2]

While only 37% of D.C.’s population is white, 62% of donors to the mayoral race were white. In terms of gender, 69% of those giving more than $1,000 were male, although 54% of D.C.’s adults are women.

After the election, the winner created a PAC that took advantage of a loophole in election laws that allowed unlimited donations in non-election years. This Mayor’s PAC took in many $10,000 contributions, many from those with interests in policy and contracting decisions made by the city. An investigation into the PAC found that 11 of its largest donors received $70 million in city contracts.

Big campaign contributions by wealthy donors result in decisions and policies that disproportionately favor the white, male, wealthy, donor class. For example, Washington, D.C., has enacted a series of tax cuts, including a cut in the estate tax, that will largely benefit the wealthy, despite the city’s high poverty rate (18%) and high income inequality. The city also recently announced it will spend $55 million to build a new practice facility for the Washington Wizards basketball team. The wealthy team owner will contribute only $5 million to construction costs and an additional $10 million for community benefits. The city also gave $60 million in tax breaks to a consulting company to keep it from moving to Virginia. The company promised to hire 1,000 D.C. residents, but these jobs likely would have gone to D.C. residents in any case.

Big money is invading state and local elections as well as federal elections. It can have greater effects on the elections at the state and local levels due to smaller campaign spending and less media coverage. And its effects on government decisions and policies can be more immediate and easier to identify.

Subsequent posts will look at the invasion of secret money (where the true donor is obscured) into state and local campaigns. They will also present ways to address the problems of big and secret money in our elections within the constraints of current Supreme Court decisions (e.g., Citizens United and McCutcheon).

[1]       Miller, J., 7/20/16, “This is what happens when a state has no contribution limits,” The American Prospect (http://prospect.org/blog/checks/what-happens-when-state-has-no-contribution-limits)

[2]       McElwee, S., 6/23/16, “D.C.’s white donor class: Outsized influence in a diverse city,” Demos (http://www.demos.org/publication/dc%E2%80%99s-white-donor-class-outsized-influence-diverse-city)

CRIMINAL JUSTICE REFORM FOR WHOM??

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MONOPOLY POWER AND HOW TO STOP IT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

MORE EFFECTS OF MONOPOLY POWER AND CRONY CAPITALISM

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

EFFECTS OF MONOPOLY POWER

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ACT NOW: CORPORATE POWER BLOCKING GMO FOOD LABELING

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CRONY CAPITALISM = MONOPOLY POWER

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SOLUTIONS TO THE PROBLEMS ELECTIONS CREATE FOR JUDGES

State court judges are facing unprecedented challenges to their ability to deliver fair, impartial justice due to growing campaign spending, including the rapid increase in unlimited spending by outside groups and individuals.

There are two policy solutions to this problem:

  1. Appoint judges using a good, non-partisan process with reasonably long or lifetime terms (with a mandatory retirement provision); or
  2. Establish partial public financing and effective regulation of judges’ elections including:
    • Public financing in exchange for limits on spending and the size of contributions;
    • Regulation and disclosure of outside, truly independent spending; and
    • Strong conflict of interest and recusal standards for judges.

In 2009, Wisconsin passed the Impartial Justice bill, creating a partial public financing system for judicial elections. It provided up to $400,000 of public financing for supreme court candidates. To qualify, judicial candidates had to raise $5,000 to $15,000 in donations ranging from $5 to $100. They then received $100,000 for the primary election and $300,000 for the general election. [1]

If any opponent declined public financing and outspent them, candidates using the public financing system were eligible for up to $300,000 of additional public funding for the primary and $900,000 more for the general election. This additional funding would allow them to be competitive with the candidate opting out of the public financing system who, therefore, could spend unlimited amounts of money on the campaign. The law also reduced contribution limits for candidates who opted out of public financing from $10,000 to $1,000.

Unfortunately, the Wisconsin public financing system was defunded in 2011 as part of an intense, partisan battle over election laws, including voter ID requirements.

North Carolina passed a model campaign financing law for judicial elections in 2002. It provided candidates for the supreme court and the court of appeals with the option of partial public financing if they agreed to strict fundraising and spending limits. Candidates who did not participate in the public financing were limited to $1,000 contributions from individuals. Contributions from corporations were prohibited. Unfortunately, this campaign finance law was repealed recently in a partisan battle over voting rights and voter ID laws.

New Mexico in 2007 and West Virginia in 2013 created voluntary systems of partial public financing for judicial candidates. Under these public financing systems, candidates agree to limit their spending and to take limited funds from sources other than the public financing system.

A good appointment process is probably the best solution for avoiding the corrupting effects of large contributions and expensive campaigns. However, this may not be politically feasible in some states. Voters and wealthy campaign supporters may oppose moving from elections to appointments because of their loss of influence and power.

For elected judges, as for other elected officials, a system for financing campaigns is needed that allows candidates to effectively communicate with voters while avoiding the corrupting effects of large contributions and expensive campaigns. Given the U.S. Supreme Court’s rulings on campaign spending and free speech, currently the only solution is a public financing system. In such a system, a candidate agrees to limit spending and the size of contributions in exchange for partial public funding of campaign expenses.

A fair and impartial justice system is the bedrock of our democracy. If judges are elected, they need to serve the greater good of the public and not be beholden to wealthy special interests. Therefore, nowhere is it more important than in judicial elections to have partial public financing systems that limit spending and the size of contributions.

[1]       National Center for State Courts, 2016, “Judicial Campaigns and Elections” (http://www.judicialselection.us/)

HOW JUDICIAL ELECTIONS AFFECT CRIMINAL SENTENCING

My previous post outlined the challenges to the impartiality and integrity of state judges due to the growing spending on judicial elections. It highlighted civil cases where campaign money has the potential to influence (or appear to influence) judges’ decisions and to create conflicts of interest.

In criminal cases, there is statistical evidence that the pressures of election campaigns and negative ads affect judicial decision-making. When facing imminent re-election, judges are more likely to impose longer sentences, affirm death sentences, and change jury sentences of life in prison to death sentences.

As spending has grown in judicial elections, the use of television advertising has increased dramatically. A study of 15 years of television ads in state supreme court elections found that increasingly the ads focused on the candidate’s handling of criminal cases. In 2013-14, a record 56% of ads either attacked candidates for being “soft on crime” or touted them as being “tough on crime.” These types of ads tend to focus voters’ attention on criminal cases, often in a misleading, overly simplified, and emotional way. [1] The need for judges to be viewed as “tough on crime” to win an election has contributed to the problems of over-incarceration and disproportionately harsh sentencing of Blacks and Hispanics.

The study also compared judicial decisions of elected and non-elected (i.e., appointed) judges. And it looked at judges’ decisions in terms of their proximity to an election. It found that:

  • Appointed judges reversed death sentences roughly twice as often (26% of the time) as judges who ran in an election. Judges with contested elections reversed death sentences only 11% of the time and judges with uncontested elections reversed them 15% of the time.
  • In Alabama, judges were more likely to override jury sentences of life in prison and instead impose a death sentence in election years.
  • In Pennsylvania and Washington, judges sentenced those convicted of serious felonies to longer sentences when they were closer to an election.
  • The greater the use of TV ads in an election, the less likely judges were to rule in favor of a criminal defendant.

In summary, judges are facing unprecedented challenges to their ability to deliver fair, impartial criminal justice that is free from the influence of elections and campaign ads. The rapid increase in spending on judicial campaigns, including the unlimited spending by outside groups and individuals, has exacerbated the challenges to judicial fairness and integrity.

[1]       Berry, K., 12/2/15, “How judicial elections impact criminal cases,” Brennan Center for Justice, New York University School of Law (https://www.brennancenter.org/publication/how-judicial-elections-impact-criminal-cases)

IS JUSTICE FOR SALE IN STATE COURTS?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ILLEGAL COORDINATION BETWEEN CANDIDATES AND “INDEPENDENT” CAMPAIGN SPENDING

As I described in my last post, one of the Supreme Court’s justifications for its decisions allowing unlimited spending by outside groups in our elections was that their spending would be independent of any candidate’s campaign. Therefore, as Justice Anthony M. Kennedy wrote in the Citizens United decision, such expenditures “do not give rise to corruption or the appearance of corruption.” [1]

However, in reality, many outside groups spending large sums of money on our elections are not independent but coordinate their activities with candidates and their campaigns. One of the most blatant and well-documented examples of coordination between a candidate and outside groups is that of Wisconsin Governor Scott Walker and two non-profit, “social welfare,” 501(c)(4) groups: the Wisconsin Club for Growth and the Wisconsin Manufacturers and Commerce group. [2]

In 2012, when Governor Walker was facing a recall election, he worked closely with these two organizations to raise millions of dollars that were spent supporting his re-election and attacking his opponent. He and his staff advised donors that contributions to these groups would not be disclosed and that corporate contributions were welcome. This bypassed Wisconsin’s laws requiring disclosure of campaign donors and prohibiting corporate donations.

Walker knew where financial support for his re-election was coming from but the public did not. So he rewarded his secret supporters. For example, his top legislative priority after he won the election was passing a mining bill drafted by an out-of-state mining corporation, Gogebic Taconite. It had secretly contributed $700,000 to the Wisconsin Club for Growth. Also after the election, Menard Hardware got a $1.8 million tax credit from an economic development agency that Governor Walker chaired. Its CEO had secretly given $1.5 million to the Wisconsin Club for Growth at Walker’s behest.

These donations came to light two years later in an investigation into allegations of coordination between Walker’s campaign and these two, supposedly independent, outside groups. The investigation was led by both Republican and Democratic prosecutors, as well as Wisconsin’s non-partisan elections board.

Eventually, Walker and his campaign challenged the investigation in Wisconsin’s Supreme Court. It ruled 4 – 2 in their favor, stopping the investigation. Overturning years of precedent, it ruled that the coordination between Walker’s campaign and the two outside groups was constitutionally protected as long as the outside groups didn’t explicitly call for the election or defeat of a candidate.

However, that’s not the end of the story, but rather the beginning of a related one. The four justices who voted to declare the coordination legal, had themselves received a combined $10 million of support in their elections from none other than the Wisconsin Club for Growth and the Wisconsin Manufacturers and Commerce group. In most cases, these two groups had spent more on the judges’ elections than the candidates themselves. For example, in 2011, the two groups spent nearly $3.7 million supporting Justice David Prosser’s election. This was five times as much as the candidate’s campaign spent and he ended up winning by just 7,000 votes (out of 1.5 million cast or less than 0.5%: 50.17% to 49.70%). In 2008, the two groups spent $2.75 million in support of Justice Michael Gableman, over six times what the candidate’s campaign spent. He won by just 20,000 votes (out of 740,000 votes cast or less than 3%: 51.2% to 48.5%). The spending by these two outside groups very likely had a decisive effect on these elections.

When the special prosecutor defending the investigation into the two groups’ coordination with the Walker campaign asked Justices Gableman and Prosser to recuse themselves because of their conflict of interest, they refused to do so. As a result, these justices not only legalized what Governor Walker had done, but also legalized the actions of these deep-pocketed supporters of their elections and coordination with these groups in their own campaigns. [3]

Their decision is now being appealed to the U.S. Supreme Court. It will be interesting to see if the U.S. Supreme Court will take this opportunity to reconsider their Citizens United decision in light of what has happened in its aftermath. The evidence clearly contradicts their rationale for allowing unlimited contributions and spending by outside groups: that it would be independent of candidates’ campaigns and would not give rise to even the appearance of corruption. There has been coordination among outside groups and candidates’ campaigns, followed by blatant corruption of public decision-making. Will the U.S. Supreme Court, therefore, clarify what is required for outside groups to operate truly independently of any candidate’s campaign? Will it recognize the clear potential for corruption and allow limits on contributions and spending? Hopefully, it will acknowledge the realities of our election campaigns and take corrective action.

[1]       Carney, E.N., 12/10/15, “Super PAC debate spotlights illegal coordination,” The American Prospect (http://prospect.org/article/super-pac-debate-spotlights-illegal-coordination)

[2]       Fischer, B., 5/19/16, “Will SCOTUS confront the results of Citizens United,” Moyers & Company (http://billmoyers.com/story/confronting-citizens-united/)

[3]       Fischer, B., 5/19/16, see above

UNLIMITED DONATIONS AND SPENDING ARE CORRUPTING OUR ELECTIONS

The unlimited donations to and spending by Super PACs and non-profit “social welfare” groups [aka 501(c)(4)s] allowed by the Supreme Court’s 2010 Citizens United and other decisions have changed the whole pattern of funding for our presidential campaigns.

These supposedly independent, “outside” entities are the dominant players in this election. Every one of the major presidential candidates except Bernie Sanders has one or more of these unconstrained groups advocating for his or her election. One study found that more than 80% of the advertising in the Republican presidential primary race was paid for by outside entities – not by the candidates’ own campaign committees. [1] Campaign funding from Super PACs and 501(c)(4)s is rapidly trickling down to US Senate and House races, to state-level elections, and even to Mayoral elections.

As of February, $607 million has been given to Super PACs. Of that huge sum, $248 million (41%) has come from just 50 mega-donors, their families, and their privately held companies. This is more money than the $161 million donated by the 1 million contributors to Hillary Clinton’s campaign committee. While donations to Super PACs and 501(c)(4) non-profit groups are unlimited in amount and source, donations to candidates’ campaign committees are limited to $2,700 per election and corporate money is prohibited. [2]

The Supreme Court justified its Citizens United decision by asserting that the unlimited spending of these outside groups would be independent of candidates’ campaigns and that donors and spending would be disclosed so that voters would know who was trying to affect their votes. As Justice Anthony M. Kennedy wrote for the majority in Citizens United: “By definition, an independent expenditure is political speech presented to the electorate that is not in coordination with a candidate.” Because the expenditures are independent, Kennedy concluded, they “do not give rise to corruption or the appearance of corruption.” [3]

These justifications for allowing unlimited spending have now been shown by reality to be wrong. Meaningful disclosure is not occurring. Super PACs’ disclosures of donors are infrequent and often not timely in terms of when an election is occurring. Furthermore, large donors have engaged in money laundering to hide the true source of their donations. They donate via a corporation or other entity that does not disclose its sources of funding and sometimes is set up for the express purpose of funneling political contributions and then disbanded once the election is over. The non-profit 501(c)(4) organizations do not have to disclose donors and hence are referred to as “dark money” groups. Money is often shuffled among these groups to hide its true source.

It is becoming increasingly well documented – although it has been suspected from the beginning – that many Super PACs and 501(c)(4) groups do NOT operate independently of the candidates and their campaign committees. Over 100 of the Super PACs, including many of the biggest ones, are single candidate Super PACs. This means they are raising and spending money on behalf of one and only one candidate. Roughly 80% of the money raised by Super PACs in this election cycle has gone to single candidate Super PACs. These Super PACs are effectively shadow campaigns. They run ads, stage events, sell candidate-branded merchandise, and even handle press inquiries. They are often run by close aides (or former aides) of the candidate.

In many cases, the candidate attends the fundraisers for the Super PAC and in some cases, the candidate launches the Super PAC and directly helps it raise money before officially becoming a candidate. Jeb Bush, former Governor of FL and Republican presidential candidate in 2016, did this with his Right to Rise Super PAC. It raised more than $100 million that was used to support his presidential campaign once he became an official candidate. [4]

One of the most blatant and well-documented cases of coordination between a candidate and outside groups is that of Wisconsin Governor Scott Walker and two non-profit, 501(c)(4) groups: the Wisconsin Club for Growth and the Wisconsin Manufacturers and Commerce group. [5] I’ll describe this example of coordination in my next post.

[1]       Carney, E.N., 12/17/15, “Democracy prospect: Omnibus battles spotlight political money fault lines,” The American Prospect (http://prospect.org/article/democracy-prospect-omnibus-battles-spotlight-political-money-fault-lines)

[2]       Gold, M., & Narayanswamy, A., 4/17/16, “41% of Super PAC money coming from 50 donors,” The Boston Globe

[3]       Carney, E.N., 12/10/15, “Super PAC debate spotlights illegal coordination,” The American Prospect (http://prospect.org/article/super-pac-debate-spotlights-illegal-coordination)

[4]       Carney, E.N., 12/10/15, see above

[5]       Fischer, B., 5/19/16, “Will SCOTUS confront the results of Citizens United,” Moyers & Company (http://billmoyers.com/story/confronting-citizens-united/)

DEMOCRACY IS AWAKENING, BUT NOT IN THE CORPORATE MEDIA

One of the goals of this blog is to provide information on policy and politics that the mainstream corporate media fails to provide. One of the most blatant examples of news ignored by the corporate media is last month’s Democracy Awakening protests.

The Democracy Awakening protests were undertaken to highlight the issues of money in politics and abridgements of voting rights. Starting on April 2 under the banner of Democracy Spring (http://www.democracyspring.org/), over 100 people marched the 140 miles from the Liberty Bell in Philadelphia, where our democracy was founded, to Washington, D.C. In conjunction with Democracy Awakening (http://democracyawakening.org/), a week of protests, meetings with Congress men and women, and civil disobedience in Washington followed. By the end of the week, over 1,200 people had been arrested for civil disobedience, the largest such protests in decades.

The coverage of any of this in the mainstream corporate media was minimal at best. The most covered element of it was that Ben and Jerry (of Ben and Jerry’s ice cream) were arrested for civil disobedience. This warranted one story each on CBS, in the New York Times, and in the Boston Globe. This was the only coverage that showed up in a search of their websites, other than a letter to the editor in the Times. NBC had one story and ABC had three.

Democracy Awakening is a broad coalition of over 100 groups, including organizations representing campaign finance reform efforts, labor, environmental issues, students, and the racial justice and civil rights movements. They have coalesced with a shared belief that progress on the broad range of policy issues they care about will not occur until we combat attacks on voting rights and the corruption of our elections and democracy by big money.

The reason for civil disobedience at the Capitol was that Congress has refused to act on the issues of voting rights and campaign finance despite the overwhelming support of the American public across party affiliation, even including many in the “Tea Party.” Presidents Obama and Clinton made campaign promises to address these issues but did not follow through.

This lack of action by Congress is not because there aren’t bills that would address these issues. Ninety members of the House have signed a letter demanding action on four bills and a resolution that reflect the Democracy Awakening agenda:

  1. HR 12: Makes it easier for citizens to vote and increases the verifiability of voting results. It would require on-line and same-day voter registration, along with early voting and voting by mail. It would require voter-verified paper ballots and audits of voting results.
  2. HR 2694: Makes voter registration automatic.
  3. HR 2867: Restores some of the protections of the Voting Rights Act that the Supreme Court voided in 2013.
  4. HR 20: Provides incentives for small contributions to candidates for Congress and takes steps to reduce the influence of big money in our elections. It establishes a 50% tax credit for small contributions, bans the joint committee fundraising that has led to contributors giving checks for hundreds of thousands of dollars to candidates, and improves disclosure by requiring candidates’ financial reports to be electronic.
  5. Resolution 22: Proposes a constitutional amendment that would reverse the Supreme Court’s ruling in Citizens United and other cases that have allowed unlimited campaign spending by wealthy individuals and corporations, and have also given corporations and other organizations rights under the Bill of Rights that were meant for human beings.

Democracy Awakening is part of a broad effort to mobilize voters and increase participation in our elections. In the 2014 Congressional elections, barely a third of eligible voters voted. The current paralysis in Washington, hyper-partisanship, and negative campaign ads have left voters so disillusioned and cynical that they see no point in participating in our democracy and, therefore, disengage.

We need to re-awaken participation in our democracy. Without informed and engaged citizens, and without high levels of participation, our democracy will not be of, by, and for the people, because special interests will take control and bend public policy to their benefit.

I encourage you to learn more about the Democracy Awakening effort and to sign-up to be informed about this effort at its website: http://democracyawakening.org/. I also encourage you to “Follow” this blog (if you haven’t already) and to sign-up for Bill Moyers’ newsletter, where much of the information for this post came from (http://billmoyers.com/; click on “Newsletter” and enter your email address to subscribe).

$200,000+ CHECKS ARE BEING GIVEN DIRECTLY TO CANDIDATES

In 2014, the Supreme Court, in a decision known as McCutcheon, ruled that it is unconstitutional to limit how much an individual can give in aggregate to all candidates’ campaigns and political parties during an election cycle. This ruling affects contributions that go directly to candidates, whereas the better known Citizens United decision allows unlimited campaign spending that is (supposedly) independent of any candidate’s or party’s campaign. Shortly after the Supreme Court ruling, Congress exacerbated the situation by slipping a provision into a must-pass budget bill that raised substantially the amount a contributor can give to a party committee and allowed them to give that amount to each of multiple party committees.

Contributors are still limited by laws capping the amount one can give to any individual candidate ($5,400 for federal candidates), but the aggregate limit, which was $123,200 per two-year election cycle, was ruled a violation of free speech. Furthermore, candidates and the parties have developed strategies that allow joint fundraising where contributors can write one check that will be split among multiple candidates and/or a variety of national and state party committees.

As a result contributors are now giving checks of well over $200,000 directly to candidates. Republican Representative Paul Ryan, the Speaker of the US House, has received at least 22 checks of $244,200 each. Democratic presidential candidate Hillary Clinton has received at least eight checks of $353,400 each. For the Hillary Victory Fund, the maximum donation is actually $356,100, based on maximum donations of $2,700 to Hillary for America for the primary election, $33,400 to the Democratic National Committee, and $10,000 to the federal accounts of each of 32 state Democratic parties. [1]

These are only the most dramatic examples of the dozens of checks over the previous limit that Ryan, Clinton, and other politicians are receiving. Several husband and wife pairs have given close to half a million dollars per couple. And some wealthy contributors have given super-sized checks to more than one of these joint fundraising efforts. [2]

While the bulk of the money from these huge checks goes to party committees, these party committees often make large donations to the candidate who sponsored the fundraiser. Basically, this is money laundering that circumvents the limit on what a contributor can give to any individual candidate.

The McCutcheon ruling is one of a series of Supreme Court decisions, almost all by 5 to 4 votes, that have undermined campaign finance laws and allowed huge sums of money to flow to candidates’ own campaigns, to party committees, and to supposedly independent expenditures meant to influence voters. These Supreme Court decisions appear to ignore the realities of campaign financing and the potential of large campaign contributions and expenditures to influence elected officials. They also appear to ignore the potential for outright corruption and bribery.

Although most of the media’s attention is focused on the fundraising of the presidential campaigns, big contributors tend to have even greater influence on congressional candidates and their campaigns. Furthermore, their influence on state level campaigns can be even more dramatic.

The bottom line is that these Supreme Court decisions, somewhat exacerbated by increases in contribution limits initiated by Congress, have increased the ability of a very small number of the very richest Americans to provide ever increasing amounts and portions of campaign funding. This shifts our political system away from democracy and toward a plutocracy, where the rich elites effectively rule our country.

[1]       Vogel, K.P., & Arnsdorf, I., 5/2/16, “Clinton fundraising leaves little for state parties,” Politico (http://www.politico.com/story/2016/04/clinton-fundraising-leaves-little-for-state-parties-222670)

[2]         Vandewalker, I., 4/25/16, “Two years later, McCutcheon fuels huge checks to politicians,” Moyers & Company (http://billmoyers.com/story/two-years-later-mccutcheon-fuels-huge-checks-to-politicians/)

FIXING ECONOMIC AND POLITICAL INEQUALITY

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

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

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

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

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

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

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

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

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

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

ECONOMIC INEQUALITY IS DUE TO SHIFTS IN POLITICAL AND MARKETPLACE POWER

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

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

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

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

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

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

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

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

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

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

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

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

A CONSENSUS ON TRADE TREATIES?

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

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

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

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

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

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

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

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

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

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

TAX BREAKS: PROMOTING SAVING FOR RETIREMENT OR PERPETUATING FAMILY WEALTH?

Our income tax system provides incentives to save for retirement. Individuals can contribute up to $5,500 per year to an Individual Retirement Account (IRA) or $18,000 to an employer-sponsored retirement plan and not pay income tax on the amount saved. (These amounts are $1,000 and $6,000 higher, respectively, for those over 50.)

This exemption from income tax is intended as an incentive to help low and moderate income individuals save for retirement. The tax exemption for IRAs is phased out as the adjusted gross income (AGI) on one’s tax return increases. The phase out varies by a taxpayers’ status (e.g., single, married, filing jointly or separately, with or without an employer retirement plan), however, for all taxpayers with an AGI over $200,000, there is no income tax exemption.

The contribution limits are sufficient to provide, along with Social Security, a modest, but reasonable retirement income even at the lowest of the contribution limits. For example, if one put $5,500 into an IRA every year over a 40 year career ($220,000) and invested it reasonably, earning a 5% – 6% annual return, one would have over half a million dollars ($500,000) saved at retirement. With an employer-sponsored retirement plan, one could save three times as much and have quite a comfortable retirement.

However, there is a loophole in our tax laws that allows highly paid executives and investment managers to avoid income tax by putting huge amounts of money into “retirement” accounts, called deferred compensation accounts. These wealthy individuals don’t need any tax incentives to save for retirement. And it makes no sense to allow them to avoid income tax on huge sums of money that far exceed what they will need in retirement.

For example, the CEO of Progressive Insurance last year put over $26 million into his deferred compensation account. He now has over $150 million in this account, which is enough to provide him with an income of $850,000 per month for the rest of his life.

The retirement savings of the top one hundred CEOs are equal to those of 50 million American families (41% of the population). Employees at some of these CEOs’ companies have no retirement plan or savings at all. Furthermore, about half of these CEOs have traditional pensions as well; something most American workers have seen vanish over the last two decades. The CEOs of the 500 largest corporations have $3.2 billion in their deferred compensation accounts and avoided roughly $78 million in income taxes in 2014 by putting almost $200 million more into their “retirement” accounts than regular employees would have been allowed to save in their retirement accounts. [1]

The tax incentives that are supposed to be promoting saving for retirement are poorly designed and inefficient. Most of the benefits go to a small number of individuals with very high incomes. [2]

This is one example of how the rich and powerful have bent our tax laws to their benefit. It is also one reason that economic inequality is growing. And it is a piece of the puzzle of why social class mobility is diminishing in the US. These wealthy individuals obviously won’t spend all of these huge tax-deferred savings during their retirements, so these “retirement” savings will be passed on to their heirs, ensuring that the next generation of these families remains part of the economic elite.

[1]       Klinger, S., & Anderson, S. (10/28/15). “A Tale of Two Retirements,” Institute for Policy Studies (http://www.ips-dc.org/tale-of-two-retirements/)

[2]       Morrissey, M. (3/3/16). “The state of American retirement: How 401(k)s have failed most American workers,” Economic Policy Institute (http://www.epi.org/publication/retirement-in-america/)

ISSUES WITH THE OPERATION OF CHARTER SCHOOLS

SUMMARY: Having looked at problems in our public schools and the problems with student selection, retention, and outcomes in charter schools, let’s take a look at some issues with the operation of charter schools. Charter schools:

  • Divert money, time, and attention from public schools;
  • Lack financial accountability and transparency;
  • Often have high administrative costs and salaries, but low instructional budgets and teacher pay; and
  • Subcontract with for-profit entities and ones with ties to senior administrators producing inefficiencies and conflicts of interest.

As a result, charter schools undermine our public schools and are not an effective strategy for improving our education system as a whole.

FULL POST: Having looked at problems in our public schools and the problems with student selection, retention, and outcomes in charter schools, let’s take a look at some issues with the operation of charter schools. Having charter schools means operating another system of schools in parallel to our public schools. This diverts money, time, and attention from operating and improving public schools. Members of the legislative and executive branches of government, as well as school system administrators, spend time and energy authorizing, overseeing, funding, and debating charter schools. Some of the money, time, and attention of parents, the public, and philanthropists is spent on charter schools instead of on our public schools.

In Massachusetts, for example, over $400 million annually comes out of local school funding and goes to charter schools. [1] At the same time, Boston is struggling with a $50 million shortfall in funding for its public schools for next year. The state provides some reimbursement to local school districts for students and funding lost to charter schools for the first few years after a student leaves, but at $80 million it doesn’t make up for the losses. [2]

Despite receiving substantial amounts of public money, charter schools’ finances typically lack the accountability and transparency of public schools. Part of the reason for this is that many facets of charter school operations are private. Most charter schools are governed by non-profit boards and many are operated by private education management organizations (EMOs). The EMO typically owns the furniture, equipment, and materials in a school and leases them back to the school. And it is common for the school’s teachers to be private employees of the EMO. A charter school’s building is often privately owned and leased or rented by the school. [3]

These contractual relationships with private entities offer multiple opportunities for private profit-making, sometimes involving governing board members or school management and, therefore, possible conflicts of interest. “A substantial share of public expenditure [for charter schools] … is being extracted inadvertently or intentionally for personal or business financial gain, creating substantial inefficiencies.” [4]

All of this adds up to a significant degree of privatization of education funding through charter schools. Some of the big players in the charter school business, “such as Imagine Schools, White Hat, and Charter Schools USA, are taking advantage of these opportunities in ways that are self-enriching and not in the public interest.” [5] These large charter school businesses, and others such as National Heritage Academies and Mosaica, are the dominant corporations in the field. However, they are not the ones that charter school advocates promote in the media, such as KIPP, Uncommon Schools, and Success Academy in New York City, which are all much smaller.

Charter schools tend to have very high administrative overhead expenses, including high salaries for heads of EMOs. In New York City, the CEO of Success Academy charter schools is paid over $475,000 annually. [6]

On the other hand, the vast majority of charter schools have low classroom instructional budgets. Teachers tend to be young and receive relatively low pay. In Pennsylvania, charter school teachers were found to have average salaries that were $18,000 lower than teachers in the local public schools.

Charter schools typically augment public funding with outside funding that may come from wealthy individuals, foundations, corporations, and even government grants. If this same outside funding were provided to public schools, they would be able to offer enhanced services that are often associated with charter schools, such as extended school days or years, tutoring and other academic supports, and enrichment activities. The outcomes of the public school students would presumably improve if these extra resources were provide to them.

A key measure for educational management, quality, and equity is spending per student. However, comparing spending per student between charter schools and public schools is difficult at best. First of all, as discussed in my previous post, students in the public schools, on average, present more challenges and therefore are more expensive to serve. Second, the costs of supportive services for charter school students, such as transportation, may be borne by the public school system. Third, the outside funding many charter schools obtain is often not clearly disclosed. Because the financial transparency of charter schools is typically much less than the complete openness of public school budgets, getting accurate data to calculate per student spending is difficult. Furthermore, because of their private nature, charter schools are often not responsive to Freedom of Information Act (FOIA) requests that would compel a public entity to release information. [7]

The bottom line is that charter school operations undermine our public schools, just as their student selection practices do. Their operations divert money, time, and attention from public schools, while their student selection practices divert the better students. Despite receiving substantial sums of public money, charter schools’ financial practices result in low instructional spending, high administrative costs, inefficiencies, and conflicts of interest. This is not an efficient strategy for improving our education system as a whole.

[1]       Office of the State Auditor, Commonwealth of Massachusetts, 2014, “The Department of Elementary and Secondary Education’s oversight of charter schools,” Published by the author (http://www.mass.gov/auditor/docs/audits/2014/201351533c.pdf)

[2]       Massachusetts Budget and Policy Center, 2/5/16, “Analyzing the Governor’s FY 2017 Budget,” (http://www.massbudget.org/report_window.php?loc=Analyzing-the-Governor%27s-Budget-for-FY-2017.html)

[3]       Miron, G., Mathis, W., & Welner, K., 2015, “Review of separating fact & fiction,” National Education Policy Center (http://nepc.colorado.edu/thinktank/review-separating-fact-and-fiction) Note: This document is a rebuttal of an advocacy document from the National Alliance for Public Charter Schools entitled, “Separating fact & fiction: What you need to know about charter schools.” (http://www.publiccharters.org/wp-content/uploads/2014/08/Separating-Fact-from-Fiction.pdf)

[4]       Baker, B., & Miron, G., 2015, “The business of charter schooling: Understanding the policies that charter operators use for financial benefit,” National Education Policy Center, page 3 (http://nepc.colorado.edu/files/rb_baker-miron_charter_revenue_0.pdf)

[5]       Cohen, R., 12/22/15, “The charter school business,” The American Prospect, pages 2-3 (http://prospect.org/article/charter-school-business)

[6]       Baker & Miron, 2015, see above.

[7]       Miron, G., Mathis, W., & Welner, K., 2015, see above.

PROBLEMS WITH STUDENTS AND STUDENT OUTCOMES IN CHARTER SCHOOLS

SUMMARY: Having looked at problems in our public schools, let’s take a look at problems in charter schools. One problem has to do with claims of improved student outcomes that are confounded by issues with student selection and retention.

  • Student outcomes at charter schools are no better than those of public schools when similar students are compared.
  • There are multiple concerns about the selection and retention of students at charter schools:
    • Fewer special education, English as a second language, and low income students than in public schools;
    • Students are recruited and retained who face fewer challenges than those in public schools; and
    • Weak and difficult students who enroll in charter schools are frequently pushed out.
  • Charter schools have no accountability for the outcomes of students they fail to retain.

These strategies for “creaming the crop” leave the weaker and more challenged (and more costly) students and families to be served by the public schools. Furthermore, the funding public school systems desperately need to serve their students is diverted to charter schools. As a result, charter schools undermine the ability of some school districts to provide an education that allows students to realize their potential.

FULL POST: Having looked at problems in our public schools, let’s take a look at problems in charter schools. One problem has to do with claims of improved student outcomes that are confounded by issues with student selection and retention.

Some charter schools do produce excellent student outcomes, but so do some public schools. Some charter schools have lousy outcomes, as do some public schools. Overall, the outcomes of charter schools do not appear to be significantly different than those of public schools. The most rigorous study comparing students in charter schools to similar students in public schools (they were on the waiting lists for the charter schools but did not get in) found no better outcomes overall for students in charter schools. [1]

Similarly, in Freakonomics, Levitt and Dubner studied all the students who had applied to be in charter schools in Chicago when a lottery was held because more students applied than there was capacity to serve. Charter school advocates compared the outcomes of students in those charter schools to the outcomes of all Chicago Public Schools students and found that the charter school students did better. Levitt and Dubner compared the charter school students with the Chicago Public School students who had applied to the charter schools but had lost out in the lottery. They found that there were no significant differences between the outcomes of those two groups. [2]

The reason for this is that parents who are organized and motivated to apply to charter schools are typically more capable, engaged parents than those who don’t apply. Their children are going to have better outcomes than the average student whether they get into a charter school or not.

This makes it very difficult to accurately compare the performance of charter schools to public schools because it’s very difficult to determine if they are serving similar students. [3] The findings that claim that charter schools have much better outcomes than public schools are often comparing the charter schools to public schools that are serving a much more challenging population of students.

One of the problems with charter schools is that many of them “cream the crop.” In other words, they recruit and retain students and families who are more capable and engaged, or in other words, face fewer challenges, than those in the public schools. Compared to public schools, most charter schools have lower portions of students who are special education students, have English as a second language, or are from low income families. [4] [5] One large national study found that 4.4% of charter school students were English Language Learners compared to 11% of all students. Apart from the roughly 60 charter schools that specifically focus on serving students with disabilities, less than 7% of charter school students have a disability and most of them have mild disabilities. Nationally, 13% of students have disabilities and almost all of those with moderate to severe disabilities are served by public schools. [6]

Another reason that charter schools have better students than the typical public school is that charter schools often weed out the less capable students that initially enroll. For example, they can expel students and never have to worry about them again. The public schools, on the other hand, are required to provide services to all students. Some charter schools have much higher discipline rates than public schools and some of the disciplined students will leave and not return. For example, in Massachusetts, the Holyoke Public Schools had the highest discipline rate of any public school district, suspending 21.5% of its students. At least five other urban districts had suspension rates above 10%. However, two charter schools in Boston had suspension rates of roughly 60%. [7] Overall in Massachusetts, charter schools serve 3% of students but account for 6% of all suspensions and expulsions. [8] These disciplinary practices tend to weed out and send back to the public schools students with behavioral issues.

Charter schools also tend to push out students with poor test scores, sometimes by telling them they will have to repeat a grade if they stay at the school. Many charter schools have declining numbers in their student cohorts as they progress through the grades due to the attrition of weaker students. Therefore, when the cohort gets to graduation or test results in the later grades, the results look quite good.

There have been a series of articles in the New York Times about the Success Academy charter school network in New York City. It is the city’s largest charter school network with 34 schools and plans to grow significantly. The articles highlight the ways Success Academy weeds out weak or difficult students, such as using harsh discipline (its schools suspended 4% to 23% of their students compared to 3% for the public schools) and making parents’ lives so difficult that they withdraw their children. [9]

Charter schools are almost never held accountable for students they enroll but who later leave prior to graduation or completion of the highest grade the school offers. Charter schools also tell some students who are applying but have weak academic skills that they will have to repeat a grade if they enroll. This discourages weak students from even enrolling.

These charter school strategies for creaming the crop leave the public schools with the weakest and most challenging students. Therefore, when comparing student outcomes, the charter schools look good. However, this drives up per student costs in the public schools. If charter schools continue to expand and are allowed to continue creaming the crop, the public schools will be left with students that are ever more challenging, but with less money to serve them due to funding diverted to charter schools.

Therefore, charter schools present real costs to our public school systems where the great majority of students are served. As a result, charter schools undermine the ability of some school districts to provide an education that allows students to realize their potential, most notably large, urban districts with high portions of students facing significant challenges.

Future posts will discuss other problems with charter schools.

[1]       Miron, G., Mathis, W., & Welner, K., 2015, “Review of separating fact & fiction,” National Education Policy Center (http://nepc.colorado.edu/thinktank/review-separating-fact-and-fiction) Note: This document is a rebuttal of an advocacy document from the National Alliance for Public Charter Schools entitled, “Separating fact & fiction: What you need to know about charter schools.” (http://www.publiccharters.org/wp-content/uploads/2014/08/Separating-Fact-from-Fiction.pdf)

[2]       Levitt, S.D., & Dubner, S.J., 2005, “Freakonomics: A rogue economist explores the hidden side of everything,” NY: William Morrow

[3]       Office of the State Auditor, Commonwealth of Massachusetts, 2014, “The Department of Elementary and Secondary Education’s oversight of charter schools,” Published by the author (http://www.mass.gov/auditor/docs/audits/2014/201351533c.pdf)

[4]       Program on Human Rights and the Global Economy, 2014, “At what cost? The charter school model and the human right to education,” Northeastern Law School (http://www.northeastern.edu/law/pdfs/academics/phrge/charter-paper-2014.pdf)

[5]       Office of the State Auditor, 2014, see above.

[6]       Miron, Mathis, & Welner, 2015, see above.

[7]       Taylor, J., Cregor, M., & Lane, P., 2015, “Not measuring up: The state of school discipline in Massachusetts,” Lawyers’ Committee for Civil Rights and Economic Justice (http://lawyerscom.org/not-measuring-up/)

[8]       Miron, Mathis, & Welner, 2015, see above.

[9]       Taylor, K., 10/29/15, 1/4/16, 1/21/16, 1/23/16, 2/13/16, & 2/16/16, The New York Times (http://topics.nytimes.com/top/reference/timestopics/people/t/kate_taylor/index.html?action=click&contentCollection=N.Y.%20%2F%20Region&module=Byline&region=Header&pgtype=article

THE MASSACHUSETTS EFFORT TO PROVIDE EQUITABLE FUNDING FOR PUBLIC SCHOOLS

My previous post described the need for additional funding for schools with high numbers of at-risk children. Current school funding is inequitable because these students require greater resources to be successful than their better-off peers, but the low income communities they tend to live in typically are not able to provide those resources.

Massachusetts responded to the inequitable funding of its public schools in low income communities (highlighted by a court decision in the McDuffy case) by changing its formula for providing state funding to local school districts. The new (and quite complicated) formula, implemented in 1993, provides special funding for districts with high numbers of at-risk students. However, this special funding is inadequate. A 2011 study found, among other things, that the state’s formula underestimates the costs of educating students with special needs by about $1 billion. [1]

The state’s funding formula targets additional resources to meet the needs of low income students by 1) providing funding for 3 extra teachers for every 100 such students, and 2) allocating an extra $380 per low income student to help schools expand instructional time and provide tutoring. However, the 2011 study found little evidence that low income students are receiving these additional instructional supports. The Massachusetts funding formula also provides special funding for students who are English language learners.

Above and beyond this special funding, it was recommended that the funding formula include 1) free, half-day pre-kindergarten and full-day kindergarten for low income students, and 2) increased pay for teachers in predominantly low income schools. However, funding for these enhancements has never been provided. (In New Jersey, increased funding for pre-kindergarten programs is part of the court-ordered response in a similar case.)

The Massachusetts funding formula estimates that it costs $10,500 to provide an appropriate education for each student in the one-fifth of communities with the lowest income families. The 2011 study found that these low income communities spend almost exactly the state’s estimate of necessary per student spending, using a combination of state and local funding. The state’s estimate for the cost of an appropriate education for each student in higher income communities ranges from $8,500 to $9,500. However, many of the wealthier communities raise additional local revenue and fund their schools at levels significantly above the state’s estimate. The wealthiest one-fifth of school districts spend 39% above the state’s estimate of necessary per student spending.

Therefore, despite the state’s effort to provide a level playing field for all its public schools, high income communities are providing greater levels of resources than low income communities – and dramatically so when adjusted for students’ needs. Furthermore, because of underestimated costs for special education and employees’ health benefits, low income communities actually spend 32% less on regular classroom teachers (not including special education teachers) than the state formula’s target. On the other hand, high income districts spend significantly above targeted levels. This implies that low income school districts must have larger class sizes, less planning and meeting time for teachers during the school day, and/or fewer specialist teachers such as tutors, literacy specialists, language teachers, art teachers, etc. This is the opposite of what the funding formula intended to provide.

A similar pattern is evident in spending on professional development for teachers. The one-fifth of districts with the lowest incomes are only able to spend about half of what the state formula targets for professional development, while the one-fifth highest income districts spend about one-third more than the state target.

The Massachusetts example highlights the difficulty of achieving equitable funding for public schools among high income and low income communities. It is a politically difficult challenge because parents in high income communities have the financial means as well as the time and skills to support and effectively advocate for their children’s schools. They know how to make their voices heard, including through communication with and campaign contributions to elected officials.

If we truly want all our children to succeed in school, we need to find a way to overcome the political challenges of providing equitable funding to schools in low income communities.

[1]     Schuster, L., 2011, “ Cutting Class: Underfunding the Foundation Budget’s Core Education Program,” Massachusetts Budget and Policy Center (http://www.massbudget.org/report_window.php?loc=Cutting_Class.html)

EQUITABLE FUNDING FOR PUBLIC SCHOOL SUCCESS

Schools need the resources to provide the supports and services students need to succeed. However, our public schools are largely locally funded. Therefore, schools in poor communities often lack the necessary resources to meet their students’ needs. These communities typically have many parents with low incomes and low levels of education, i.e., low socio-economic status (SES). Therefore, children in these communities often have the highest levels of need, but their schools typically have the lowest levels of financial resources. Conversely, students in high SES communities generally have the lowest levels of need, but their schools tend to have the highest levels of resources. As a result, our public school systems vary tremendously in their abilities to meet students’ needs.

Many states (and to a small degree the federal government) do attempt to address this inequity in funding for public schools. To varying degrees, they provide special funding to public school systems with high numbers of children likely to struggle in school. They typically focus on children from low income families, from families where English is not the primary language, and students with disabilities. However, this targeted funding is rarely sufficient to provide the level of supports and services at-risk children need to match the performance of their better-off peers.

States provide 46% of the funding for kindergarten through twelfth grade (K-12) public schools with local communities providing the bulk of the rest. However, since the Great Recession of 2008, most state governments have cut their funding for public schools, despite growing numbers of students (an increase of about 800,000 from 2008 to 2014) and growing demands to improve student performance. At least 31 states were providing less funding per student in 2014 than they had in 2008.

Although some local communities were able to make up for reduced state funding, typically they did not. Nationwide, total public school funding by local communities also declined from 2008 to 2014. As a result, public school systems had about 300,000 fewer employees, primarily teachers, in 2014 than in 2008, despite the increase in the number of students. [1]

Research shows that school funding does affect student outcomes, particularly for poor children. Children who attended better funded schools are more likely to graduate from high school and to have higher earnings and lower poverty rates as adults. [2]

About 30 states have had court cases over school funding and its implications for educational equity and adequacy. [3] For example, Massachusetts and New Jersey have had successful class action lawsuits on behalf of public school students from low income communities. The courts found in both cases that inequitable funding for public schools in low income communities violated students’ rights to a free and appropriate public education as specified by their state’s constitution. (I’ll describe Massachusetts’s efforts to address this inequity in some detail in a subsequent post.)

If we truly want all our children to succeed in school, additional funding is needed from state and federal governments that targets low income and other at-risk children. Not only must we provide greater funding for public schools in low income communities, we must increase funding for the early childhood and family support programs that ensure that children arrive at school ready to learn and succeed. As my previous post described, at-risk children are not getting the supports and services they, their families, their early care and education providers, or their schools and teachers need.

[1]       Leachman, M., Albares, N., Masterson, K., & Wallace, M., 12/10/15, “Most states have cut school funding, and some continue cutting,” Center on Budget and Policy Priorities

[2]       Jackson, C.K., Johnson, R.C., & Persico, C., 2015, “The effects of school spending on educational and economic outcomes: Evidence from school finance reforms,” National Bureau of Economic Research, Working Paper No. 20847

[3]       Schneider, R.E., 9/27/07, “The state mandate for education: The McDuffy and Hancock decisions,” Massachusetts Department of Elementary and Secondary Education. Retrieved from the Internet on 1/24/16 at http://www.doe.mass.edu/lawsregs/litigation/mcduffy_hancock.html.

IMPROVING STUDENT SUCCESS IN OUR PUBLIC SCHOOLS

ABSTRACT: Students who are struggling in our public schools are ones who for a variety of reasons are experiencing barriers to learning and to succeeding in the classroom. They should be identified as early as possible, starting at birth, and effective intervention should be provided. For families who have issues that put children’s school success at risk, our public policies and programs need to do a better job of supporting these parents.

Our public school systems need to enhance their kindergarten and pre-kindergarten programs, and also to work with private providers of early care and education (ECE), to ensure that every child arrives in first grade ready to learn and succeed in school.

The primary goal of testing of children, in school and before they get to school, should be to identify issues in development and learning so that interventions can be provided. High stakes testing only serves to punish students, teachers, and schools. It does nothing to solve the problems and challenges that students, their teachers, and their schools are struggling to overcome.

Student success requires quality public schools, as well as quality early care and education programs. It also requires families that have the economic security, supports, and services necessary to nurture their children. Appropriate assessment and effective intervention, for children and families, are essential to ensuring that every child receives the developmental and educational experiences necessary for consistent progress and success at home and in school, from birth to high school graduation.

FULL POST: Students who are struggling in our public schools are ones who for a variety of reasons are experiencing barriers to learning and to succeeding in the classroom. These students need to be identified and they – and in many cases their families – need to be provided with the additional supports and services necessary to get them back on track. They should be identified as early as possible (i.e., starting at birth) and effective intervention should be provided because the costs to our education system, and to the children and families themselves, are much less if intervention occurs early on.

The research on early childhood development is clear: the school readiness of children born to parents with low income and low levels of education is at risk from the day they are born. In addition, school readiness is at risk for a child in any family with significant parental issues such as mental illness (particularly maternal depression), substance abuse, domestic violence, or incarceration. The children of first-time parents, as well as young parents, those with multiple young children, and those who are not fluent in English, are also at higher risk for not being ready when they reach school. Finally, some children have physical, cognitive, or health issues that put their school success at risk.

For families who have issues that put children’s school success at risk, our public policies and programs need to do a better job of supporting these parents. This should start with paid family leave for new parents, along with home visiting, parenting education, and other supports. It should include affordable, accessible, quality early care and education (ECE) – both so parents can work and so children receive nurturing care that supports their development and early learning. Parents need jobs that pay a living wage, provide a predictable and manageable work schedule, and offer benefits and economic security. And parents and children need specialized services to be available when they are necessary to meet crises or special needs.

Our public school systems need to enhance their kindergarten and pre-kindergarten programs, and also to work with private providers of ECE, to ensure that every child arrives in first grade ready to learn and succeed in school.

The primary goal of testing of children, in school and before they get to school, should be to identify issues in development and learning so that interventions can be provided. For those focused on improving school success for all children, this was the whole point of the requirements for testing in the No Child Left Behind federal education law of 2001. However, this goal got undermined and perverted in multiple ways. First, the resources to provide interventions for children who were struggling – that were promised as part of the law – never materialized. Second, the purpose for testing students got perverted from identifying issues and needed interventions to a focus on high stakes, judgmental testing. For students, the testing determined whether they got a high school diploma or not, or in some cases whether they advanced to the next grade or were held back. These high stakes outcomes were implemented despite the fact that the resources to help struggling students never arrived.

For schools, the high stakes judgements were whether they were declared “under-performing” and therefore subject to receivership and possible closure. For teachers, the results were mass firings when schools were declared under-performing or were closed. In some cases teachers’ pay was determined by student test scores. This is clearly unfair given that a teacher typically has taught a group of children for only one year out of their whole time in school. In many cases, failing students have been failing to achieve grade level norms throughout their whole school careers.

High stakes testing only serves to punish students, teachers, and schools. It does nothing to solve the problems and challenges that students, their teachers, and their schools are struggling to overcome.

The solution for the problem of children arriving at school not ready to learn and succeed is, first, to provide appropriate screenings and assessments starting early on – in the pediatrician’s office and in early care and education programs. And second, to ensure that when issues are identified the necessary supports and services are provided to the child and his or her family. Once children enter school, appropriate testing and needed interventions must continue in order to keep them on a successful trajectory.

Student success requires quality public schools, as well as quality early care and education programs. It also requires families that have the economic security, supports, and services necessary to nurture their children. Appropriate assessment and effective intervention, for children and families, are essential to ensuring that every child receives the developmental and educational experiences necessary for consistent progress and success at home and in school, from birth to high school graduation.

AUSTERITY AGENDA RESULTS IN THE POISONING OF FLINT MICHIGAN

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WHAT IS THE PROBLEM WITH OUR PUBLIC SCHOOLS?

SUMMARY: Every child should receive high quality educational experiences that lead to a trajectory of progress and success throughout his or her years in school, as well as in life beyond school. Many children who are educated in public schools in the US are very successful. There are, however, two problems that face US public school systems overall:

  • Our public school systems vary tremendously in their quality and funding.
  • Students arrive at school with significant variation in their school readiness.

These two problems negatively reinforce each other. As a result, many of our public schools in low socio-economic status (SES) communities are failing to adequately serve children from low SES families. Our society, not just our schools, is failing these low SES families; we frequently do not provide them with the support and services parents need to be able to nurture and support their children. As a result, their children often are not ready to learn and succeed when they enter school.

It is not the teachers who are to blame for the failure of these children. Teachers in schools and early care and education (ECE) care tremendously about their students, work extremely hard, and do everything in their power to help their students succeed. To overcome the disadvantages and learning delays many children from low SES families have, not only would they need to be great teachers, they would also need the resources and supports any professional requires to do his or her job successfully in a challenging environment. Unfortunately, many of the schools and ECE programs they work in are in low SES communities and lack the good physical facilities and learning environment that are required.

The forces pushing charter schools say that US public schools are failing and it’s because teachers are performing poorly. Neither assertion is true.

FULL POST: Every child should receive high quality educational experiences that lead to a trajectory of progress and success throughout his or her years in school, as well as in life beyond school. We all know that this does not occur for every child in our public schools. So what’s the problem?

Many children who are educated in public schools in the US are very successful. They graduate from high school and go on to selective and rigorous higher education and then to highly successful lives and careers. This is true for most children who attend public schools in communities where parents are well educated, have good jobs, and good incomes. In other words, children in communities and families with high socio-economic status (SES) are well served by our public education system. They do well in comparisons with students from around the world.

There are, however, two problems that face US public school systems overall:

  • Our public school systems vary tremendously in their quality and funding. Because they are locally based and largely locally funded, schools in high SES communities tend to have much better quality and resources than schools in low SES communities.
  • Students arrive at school with significant variation in their school readiness. Children from low SES communities and families are typically significantly behind their better-off peers.

These two problems negatively reinforce each other because children who arrive at school behind in their school readiness, often arrive at schools that are low in quality and resources. As a result, many of these children never catch up to their better-off peers. And when the US public schools are viewed as a whole, these children drag down the US averages so that our public education system appears to generate mediocre results when international comparisons are done.

Many of our public schools in low SES communities are failing to adequately serve children from low SES families. Moreover, our society, not just our schools, is failing these low SES families. We frequently do not provide them with the support and services parents need to be able to nurture and support their children. As a result, their children are often not ready to learn and succeed when they enter school; they do not have appropriate cognitive skills in early literacy and numeracy nor the social-emotional skills for working in groups and controlling emotions, and the often have health issues (e.g., asthma, obesity) or nutritional issues (e.g., they are hungry, undernourished, or have unhealthy diets). As a result, they are unable to succeed when they enter school and that failure typically continues throughout their school years.

It is not the teachers who are to blame for the failure of these children. The great, great majority of teachers, including those in low quality schools in low SES communities, care tremendously about their students, work extremely hard, and do everything in their power to help their students succeed. (In the interests of full disclosure, I attended high quality public schools in high SES communities from kindergarten through high school and taught in private schools for three years in the 1970s when I was just out of undergraduate school. My wife recently taught for ten years in the Boston Public School system.)

The same can be said for the teachers in our early care and education (ECE) system that serves children from birth until school entry. They work hard and often make heroic efforts to nurture children, particularly those from disadvantaged backgrounds, whether they are in private ECE centers or home-based child care programs, or in Head Start programs (which are for children from families living in poverty), or in public school pre-kindergarten programs. And these early childhood teachers are poorly paid – often making under $25,000 per year – and typically with few if any benefits (e.g., health insurance, paid sick time, vacation time, retirement plan).

To overcome the disadvantages and learning delays many children from low SES families have, teachers in schools and early care and education would not only need to be great teachers, they would also need the resources and supports any professional requires to do his or her job successfully in a challenging environment. Unfortunately, many of the schools and ECE programs they work in are in low SES communities and lack the good physical facilities and learning environment that are required – and that schools and programs in high SES communities typically have.

These teachers also need the support of colleagues to help them respond to the challenges and stress they experience, and to maintain high morale. My guess is that an average teacher with great morale is a more effective teacher than a great teacher with low morale because the stress and challenges can be overwhelming in the absence of a supportive, highly qualified supervisor, supportive peers, and a positive working environment.

The forces pushing charter schools say that US public schools are failing and it’s because teachers are performing poorly. Neither assertion true. Most of the failure in our public schools is because the schools are attempting to educate students who arrive at school not ready to learn. And neither the schools nor the children’s families have the special resources needed to make up this deficit. The proof that our public schools and teachers aren’t the problem is the fact that the charter advocates aren’t pushing charter schools in high SES communities and there isn’t much demand for them from parents in these communities either. Our schools and teachers are doing fine with these students.

In my next post on our education system, I will discuss real solutions to these problem.

WHO IS BEHIND THE PUSH FOR CHARTER SCHOOLS?

There are multiple, powerful forces behind the push for charter schools. Some of them like to avoid the spotlight. In no particular order, the four major forces behind the charter school movement are the following:

Those who are looking to make a profit by tapping into the funding for public education, which is a good chunk of money, approximately $600 billion annually in local, state, and federal spending. There are profit opportunities in developing, administering, and grading tests; developing and selling curriculum materials and textbooks; and ultimately in the privatization of schools themselves, i.e., charter schools.

Those who, for ideological reasons, want to shrink government and the public sector, including public education. Privatization is a core strategy for them. So private charter schools that receive public funding are the goal.

Those who want to weaken the bargaining power of workers and unions in our economy. They also want to weaken the political power of workers and that power is most effectively exercised through unions. They want to shift power to employers, especially large corporations. They have been quite successful in doing this in the private sector and have now set their sights on weakening public sector unions, and teachers’ unions are some of the strongest and most vocal of the public sector unions. Therefore, criticizing teachers and teachers’ unions, while advocating for non-union charter schools, is aligned with their goals.

Those who sincerely want to improve education and student outcomes. They are a small force among those that are truly driving the charter school movement. Many members of the staffs of charter schools and parents who support charter schools do have this as their goal, but they tend to be blind to the larger forces and interests at work behind the scenes.

The forces behind the charter school push have been pitching a narrative forcefully and effectively for 30 years or so now that states that US public schools are failing and that teachers and teachers’ unions are to blame. And that the solution is charter schools, preferably private, non-union ones, but that are funded with public tax dollars. Some charter schools are for-profit and many of them have links to for-profit corporations.

The first three of the four forces listed above have coalesced into a powerful, unified voice pushing this narrative and the implementation of their solution. They use the rationale of innovation to improve education and student outcomes to hide their real motives. They very effectively persuade the public and parents that not only do they have altruistic motives but that parents and the public should support their charter school movement.

Everyone believes that every child should receive high quality educational experiences that lead to success in school and a trajectory of progress and success throughout his or her years in school, as well as in life beyond school. However, those who believe public schools are the best vehicle to realize this vision, have not developed, let alone promoted, an alternative narrative to that of the charter school proponents. They have not mounted an effective, coherent rebuttal of the charter advocates’ statement of the problem or their solution. Without a counter narrative, public school supporters are confused and torn about whether to oppose or support charter schools – and even about how to talk about them.

My next post on our education system will identify the real problems with our public schools. A subsequent post will present some solutions.

THE TRANS-PACIFIC PARTNERSHIP SHOULD BE REJECTED

In addition to the concerns about the Trans-Pacific Partnership (TPP) treaty raised in my two previous posts (see list below), it lacks provisions for addressing currency manipulation. This has brought criticism from many parties, including some in the corporate world. Although China (which is not a participant in the TPP) is the most notorious manipulator of its currency’s exchange rate, Japan and a number of other countries in the TPP have also manipulated their exchange rates. These countries manipulate the exchange rate between their currency and others to make imports more expensive and their exports cheaper. This has been a significant contributor to the positive balance of trade these countries have with the US and to our trade deficit.

Given the weakness of other arguments for the TPP, the Obama administration is promoting the TPP as a geopolitical response to the growing power of China. The administration says that the TPP will allow the US and the other TPP participants to balance China’s economic and hegemonic power in the region. However, China is already part of the World Trade Organization, has free trade agreements with half of the TPP participants, is the main trading partner of a number of them, and is currently negotiating separate economic partnerships with the others. So the TPP will have little impact on China’s growing influence.

Furthermore, China’s growing economic power is already clearly present even here in the US. It has negotiated the transfer to its shores of manufacturing and technology from the US in a number of areas, including wind and solar energy, high technology batteries, and the building of aircraft (from none other than General Electric).

China manipulates its currency to maintain a very favorable balance of trade with the US and it uses its holdings of $3.5 trillion of US dollar investments (primarily US Treasury bonds) as a strategic global investment fund. In short, China has a comprehensive, global trade and investment strategy that will move forward regardless of the TPP. [1]

Given the problems with the TPP:

  • Enshrining corporate power, particularly through the Investor-State Dispute Resolution tribunals,
  • Lack of effective and enforceable protections for workers and the environment,
  • Excessive patent and copyright protections, for example for prescription drugs,
  • Failure to prevent currency manipulation, and
  • Ineffectiveness as a counterbalance to China’s growing regional and global power,

and that it will have a miniscule impact on actual trade, it should be rejected. I urge you to contact your US Senators and Representative to encourage them to oppose the TPP.

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]       Prestowitz, C., Fall 2015, “Our incoherent China policy: The proposed Trans-Pacific Partnership is bad economics – and even worse geopolitics as containment of China,” The American Prospect

THE TRANS-PACIFIC PARTNERSHIP: CORPORATE POWER GRAB Part 2

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

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

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

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

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

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

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

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

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

THE TRANS-PACIFIC PARTNERSHIP: CORPORATE POWER GRAB

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

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

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

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

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

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

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

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

My previous posts on the TPP and related matters include:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PRESIDENTIAL CANDIDATE SANDERS ON DEMOCRATIC SOCIALISM

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

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

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

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

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

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

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

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

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

BIG CORPORATIONS BEHAVING BADLY PART 2

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

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

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

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

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

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

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

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

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

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

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

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

BIG CORPORATIONS BEHAVING BADLY

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

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

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

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

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

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

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

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

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

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

STOPPING THE SECRET MONEY IN OUR ELECTIONS

ABSTRACT: Dark money organizations – non-profit, tax exempt groups that do not have to disclose their donors – are spending tens of millions of dollars every year in our election campaigns. This means that when voters go to vote they don’t know who paid for the dark money funded ads, mailings, and other political activity that has tried to influence their voting.

Seventy-five percent of the public, including equal shares of Republicans and Democrats, believe that contributors should be disclosed. There are multiple ways to address the problem of large amounts of anonymous, dark money being spent in our election campaigns:

  • Pass a federal Constitutional amendment to overturn the Citizens United and related Supreme Court decisions that allow unlimited spending in our election campaigns
  • Require clear and timely disclosure of donors to dark money organizations
  • Implement a Securities and Exchange Commission (SEC) rule requiring corporations to disclose their political spending
  • Strengthen IRS regulation of non-profit, tax-exempt organizations that engage in political activity
  • Strengthen Federal Election Commission requirements for disclosure of political spending

In a democracy, voters have a right and a need to know who is trying to influence their votes and who is supporting or opposing candidates for office. Therefore, clear and timely disclosure of the sources of funds for political activity is essential.

FULL POST: In my last post, I discussed the increasing significance dark money organizations – non-profit, tax exempt groups that do not have to disclose their donors – are playing in our election campaigns and politics at the federal, state, and even local levels. They are spending tens of millions of dollars every year, which will probably grow to over $100 million in the 2016 presidential campaign.

This means that when voters go to vote they don’t know who paid for the dark money funded ads, mailings, and other political activity that has tried to influence their voting. Therefore, they aren’t able to make an informed judgment about the interests or purposes behind these political messages.

Seventy-five percent of the public, including equal shares of Republicans and Democrats, believe that contributors should be disclosed. Even Supreme Court Justice Kennedy, in the majority opinion in the Citizens United case [1] that allows unlimited corporate spending in our elections, wrote that “disclosure permits citizens and shareholders to react to the speech [i.e., spending] of corporate entities in a proper way.”

There are multiple ways to address the problem of large amounts of anonymous, dark money being spent in our election campaigns. [2] Ultimately, I believe we need a federal Constitutional amendment to overturn Citizens United and related Supreme Court decisions. Such amendment would state that 1) The rights protected by the Bill of Rights and the U.S. Constitution are the rights of human beings only and not of corporations or other organizations, and 2) Congress and the states may place limits on political contributions and spending to ensure that our elections are fair and that all citizens can participate and have their voices heard in a reasonably equitable manner.

Given that a Constitutional amendment will not happen quickly, there are a number of steps that could and should be taken in the short-term:

  • Require clear and timely disclosure of donors to dark money organizations through federal and state laws and executive action by the President.
  • Implement a Securities and Exchange Commission (SEC) rule requiring corporations to disclose their political spending.
  • Strengthen Internal Revenue Service (IRS) regulation of non-profit, tax-exempt organizations that engage in political activity.
  • Strengthen Federal Election Commission requirements for disclosure of political spending.

Shortly after the Citizens United ruling in 2010, Congress considered the DISCLOSE Act that would have mandated disclosure and reporting of all spending in federal election campaigns. The bill passed the House but failed by one vote to overcome a Republican filibuster in the Senate. [3] Congress should consider this legislation again in light of the tremendous growth of dark money spending and it should pass the bill this time. States should pass similar legislation to cover state and local elections.

In the meantime, President Obama should sign an Executive Order requiring all federal contractors to disclose their political spending. In addition, the Securities and Exchange Commission (SEC) should act expeditiously to implement a proposed disclosure rule. It would require publicly traded corporations to disclose their political spending. Given the SEC’s mission of protecting shareholders through corporate accountability and transparency, such a rule would be very appropriate. [4]

Along the same lines, in 2013, after years of development, the IRS proposed a rule for non-profit, tax exempt organizations that defined political activity and required timely reporting of donors. The goal was to increase transparency so voters in the 2016 elections would know who was paying for political ads and other campaign activity before entering the voting booth. There was lots of pushback over the proposed rule. Conservative advocacy groups and their supporters in Congress went so far as to manufacture a crisis surrounding the IRS’s oversight of such organizations to pressure the IRS into delaying the transparency rule and to discredit the IRS’s efforts to regulate dark money. [5]

Finally, the other entity that could and should require disclosure of the sources of campaign spending, the Federal Election Commission (FEC), is effectively paralyzed. Its members are required to be split equally between Democrats and Republicans and must be confirmed by the Senate. With a politicized confirmation process in the Senate and the current hyper-partisanship in Congress filtering down to FEC members, the FEC is gridlocked and basically unable to function.

In a democracy, voters have a right and a need to know who is trying to influence their votes and who is supporting or opposing candidates for office. Therefore, clear and timely disclosure of the sources of funds for political activity is essential. I urge you to let your elected officials and candidates for office at all levels know that you support disclosure of the sources of political spending so you can be an informed voter.

[1]       In Citizens United and related decisions the Supreme Court ruled that individuals and organizations can spend unlimited amounts of money in our election campaigns. Therefore, these dark money organizations can accept unlimited donations and spend unlimited sums. Specifically, the Court ruled that corporations and other organizations are people and have the same first amendment rights of free speech as actual human beings under the Bill of Rights and the U.S. Constitution. The rulings also said that spending money in elections (and elsewhere) is speech and is protected by freedom of speech rights.

[2]       People for the American Way and coalition partners, July 2015, “Fighting big money, empowering people: A 21st century democracy agenda,” (http://www.pfaw.org/sites/default/files/PresidentialPolicy831.pdf)

[3]       Kuns, K., 7/1/15, “The dark politics of dark money,” The Washington Spectator

[4]       U.S. PIRG, 10/12/15, “Members of Senate Banking Committee, former SEC Commissioner urge SEC nominees to support political disclosure rule,” Common Dreams (http://www.commondreams.org/newswire/2015/10/21/members-senate-banking-committee-former-sec-commissioner-urge-sec-nominees)

[5]       Kuns, K., 7/1/15, see above

SECRET MONEY FOR THE PRESIDENTIAL CANDIDATES

ABSTRACT: The fastest growing and perhaps the most troublesome of the four main avenues for presidential campaign fundraising and spending are the “dark money” organizations. These are non-profit organizations that can accept unlimited amounts of money and keep their donors secret. They are social-welfare groups that are supposed to work exclusively to further the common good and general welfare. However, the Internal Revenue Service (IRS) has interpreted “exclusively” to mean “more than 50%,” which still means that political activity shouldn’t be their primary purpose. In addition, an IRS rule prohibits social-welfare organizations from benefiting a single individual.

Some of the politically active social-welfare organizations have pushed against these limitations. In the 2014 congressional elections, dark money expenditures grew tremendously. Because of the lack of oversight and enforcement by either the IRS or the Federal Election Commission (FEC), dark money organizations started ignoring operating rules and reporting requirements. In the 2016 presidential race, single-candidate dark money organizations have surfaced that seem to violate the IRS’s single individual rule. Dark money organizations have also been active at the state and local levels.

Allowing secret donors to pay for millions of dollars of campaign spending means that voters cannot make informed decisions and raises the specter of serious corruption. Without timely disclosure of donors, our democracy cannot have the informed electorate that is essential to its effective functioning.

FULL POST: The fastest growing and perhaps the most troublesome of the four main avenues for presidential campaign fundraising and spending are the “dark money” organizations. [1] These are non-profit organizations that can accept unlimited amounts of money from wealthy individuals, corporations, unions, and other organizations. However, unlike Political Action Committees (PACs) and Super PACs, they can keep their donors secret, hence their money is “dark money.” Like PACs and Super PACs, they are supposed to operate independently of candidates’ official campaign committees.

In exchange for their non-profit, tax-exempt status, these social-welfare groups are supposed to work exclusively to further the common good and general welfare of the people of the community. However, the Internal Revenue Service (IRS) has interpreted “exclusively” to mean that “more than 50%” of an organization’s activities have to be for social-welfare purposes. [2] [3] Therefore, political activity shouldn’t be the primary purpose of these organizations, which are registered under sections 501(c)(4), (c)(5), and (c)(6) of the IRS Code. In addition, an IRS rule prohibits social-welfare organizations from benefiting a single individual – the so-called “private benefit” rule. However, the IRS has been lax in defining political activity and in enforcing the focus on a social-welfare purpose and the private benefit rule.

Some of the politically active social-welfare organizations have pushed back against these limitations. Given the lack of enforcement from the IRS, some of them are basically ignoring operating rules and reporting requirements. In addition, some of these organizations have laundered their contributions through other entities to complicate any attempts to identify actual donors.

In the 2014 U.S. Senate race in North Carolina, a social-welfare organization called Carolina Rising, spent 97% of the $4.9 million it raised helping Thom Tillis win the seat. It received $4.8 million from a single donor whom it did not, and did not have to, disclose. The organization had no employees and spent $4.7 million through a single advertising firm for TV and cable ads. Because some of these ads aired close to the election in a time window that requires reporting to the Federal Election Commission (FEC), Carolina Rising reported $3.3 million in election spending to the FEC. The contracts it signed with the TV and cable companies airing its ads, which are filed with the Federal Communications Commission, identified the ads as pro-Tillis. However, it reported to the IRS that it had conducted no political activity. Carolina Rising would appear to have clearly violated the IRS rules on benefiting a single individual and on political activity having to be less than 50% of a social-welfare organization’s activity. Furthermore, it may well have knowingly lied to the IRS in stating it had not engaged in political activity. [4]

In the 2016 presidential race, single-candidate dark money organizations have surfaced. At least four Republican presidential candidates have dedicated dark money organizations, although they would appear to violate the IRS’s single individual rule. [5]

A dark money organization, the Conservative Solutions Project, is spending heavily on behalf of Republican presidential candidate Marco Rubio. So far, every Rubio TV ad in the early primary states of Iowa, New Hampshire, and South Carolina, as well as mailings to voters in those states, has been paid for by this dark money, non-profit organization. After spending $3 million over the summer promoting Rubio, it was spending almost $1 million a week in late September and early October on pro-Rubio TV ads. [6] Supposedly, it is doing all of this totally independently of the Rubio campaign.

There are plenty of examples of politically active social-welfare nonprofits flouting rules and reporting. And dark money organizations have been active at the state and local levels as well as at the national level. For example, they have opposed California ballot initiatives and blocked the start-up of a new bus line in Nashville, Tennessee, that would have linked poorer, gentrifying neighborhoods with downtown and wealthier, upscale neighborhoods. [7]

Allowing secret donors to pay for millions of dollars of campaign spending means that voters cannot make informed decisions and raises the specter of serious corruption. Without timely disclosure of political donors, our democracy cannot have the informed electorate that is essential to its effective functioning.

My next post will discuss ways of addressing this lack of disclosure of major donors to election spending.

[1]       See my previous post, Big money for the presidential candidates, for information on the other 3 avenues for campaign fundraising and spending.

[2]       Kuns, K., 7/1/15, “The dark politics of dark money,” The Washington Spectator

[3]       Bykowicz, J., 10/8/15, “Rubio’s presidential bid boosted by secret-money commercials,” The Associated Press (http://bigstory.ap.org/article/5926406673b047a7a34f1177e01014da/anonymous-donors-send-millions-pro-rubio-group)

[4]       Maguire, R., 10/20/15, “Political nonprofit spent nearly 100 percent of funds to elect Tillis in ’14,” Center for Responsive Politics (http://www.opensecrets.org/news/2015/10/political-nonprofit-spent-nearly-100-percent-of-funds-to-elect-tillis-in-14/)

[5]       Maguire, R., & Tucker, W., 9/21/15, “Five-fold upsurge: Super PACs, dark money groups spending far more than in ’12 cycle at the same point in campaign,” Center for Responsive Politics (http://www.opensecrets.org/news/2015/09/five-fold-upsurge-super-pacs-dark-money-groups-spending-far-more-than-in-12-cycle-at-same-point-in-campaign/)

[6]       Bykowicz, J., 10/8/15, see above

[7]       Kranish, M., 10/11/15, “A city’s immovable roadblock,” The Boston Globe

BIG MONEY FOR THE PRESIDENTIAL CANDIDATES

ABSTRACT: Tracking the tons of money already flowing into the 2016 presidential campaign is not easy. There are four main avenues for presidential campaign fundraising and spending today, when as recently as 2008 there was really only one major one – the candidate’s official campaign committee. A candidate’s official committee is limited to donations from individuals of up to $2,700.

Super Political Action Committees (PACs) are one of the new fundraising vehicles. They can accept unlimited donations from individuals, corporations, and other entities. As-of June 30, single-candidate, presidential Super PACs had raised $258 million. This is 16 times the amount such Super PACs had raised at this point in the last presidential campaign. And it is double the amount raised by the official campaign committees.

Fewer than 400 families have given almost half of the $388 million raised by the presidential candidates’ campaigns and Super PACs. While 48,000 Americans have donated $130 million to the presidential candidates’ campaigns, just 65 donors have given an equal amount – $132 million – to the candidates’ Super PACs. Having a wealthy backer or a few, makes a candidate viable today when in the past they wouldn’t have made it to the starting gate.

What all this means is that a small number of the wealthiest people in the US are exercising enormous influence over who our presidential candidates are and what policies they espouse. The rest of us are sitting on the sidelines watching and wondering if our votes or voices matter – and whether our country is still a democracy or not.

FULL POST: Tracking the tons of money already flowing into the 2016 presidential campaign is not easy. Court decisions, creative campaign lawyers, and lax enforcement have all contributed to opening up new avenues for campaign fundraising and making it impossible in some cases to identify the source of the money.

There are four main avenues for presidential campaign fundraising and spending today, when as recently as 2008 there was really only one major one – the candidate’s official campaign committee. [1] Today we have:

  1. Candidates’ official campaign committees – limited to donations from individuals of up to $2,700. Have to disclose donors of over $250.
  2. Candidate-specific Super Political Action Committees (PACs) – unlimited donations from individuals, corporations, and other entities. Have to disclose donors.
  3. Other PACs and Super PACs – some can receive unlimited donations from a wide variety of entities; others are limited. Have to disclose donors.
  4. “Dark money” organizations, usually not-for-profit entities – unlimited donations from a wide variety of entities. Do not have to disclose donors.

While any viable presidential candidate today must raise staggering amounts of money, different candidates have different patterns in their fundraising. For example, the Clinton and Sanders campaigns recently reported raising similar amounts of money over the last 3 months, $28 million and $26 million respectively. However, Clinton raised $19 million, roughly two-thirds of her money, through 60 fundraising events where the typical contribution was $2,700. Sanders has held only 7 fundraising events throughout the entire campaign and they typically cost $100 to attend. The bulk of his money came from online contributions where the average contribution was $30 and 99% of his contributions were $100 or less. [2] [3]

The use of candidate-specific Super PACs also varies. While they are supposed to operate independently of the candidate’s official campaign, in reality their operations are complementary if not actually coordinated, so analysis of a candidate’s campaign’s financial status typically combines figures for the candidate’s campaign and his or her Super PAC(s). These Super PACs, while technically barred from coordinating tactics and plans with the official campaign, are increasingly paying for core costs of a campaign, including, for example, the candidate’s travel, polling, and, of course, advertising. Furthermore, candidates are often directly involved with their Super PACs’ fundraising. The Super PACs have effectively eviscerated laws on contribution limits that were put in place to prevent bribery and corruption. [4]

Official data are available on the campaigns’ fundraising through June 30. At that point, the single-candidate, presidential Super PACs had raised $258 million. This is 16 times the amount such Super PACs had raised at this point in the last presidential campaign. And it is double the amount raised by the campaigns themselves. [5] Four of the top 7 candidates in terms of fundraising had raised more money through their Super PACs than through their campaigns, while one had raised no Super PAC money and another had essentially only raised Super PAC money: [6]

  • Jeb Bush:                Total raised: $115 million             Super PAC: $103 m          Campaign: $11 m
  • Hillary Clinton:     Total raised:  $68 million             Super PAC: $20 m            Campaign: $48 m
  • Ted Cruz:                Total raised: $53 million              Super PAC:   $39 m           Campaign: $14 m
  • Marco Rubio:         Total raised: $27 million              Super PAC:   $17 m           Campaign: $10 m
  • Ben Carson:            Total raised: $17 million              Super PAC:   $7 m             Campaign: $11 m
  • Bernie Sanders:     Total raised:   $16 million            Super PAC:   $0 m            Campaign: $16 m
  • Chris Christie:        Total raised: $14 million             Super PAC:   $14 m           Campaign:  $0 m

Fewer than 400 families have given almost half of the $388 million raised by the presidential candidates’ campaigns and Super PACs. Much of the Super PAC money is coming from a small handful of individuals and families. While 48,000 Americans have donated $130 million to the presidential candidates’ campaigns, just 65 donors have given an equal amount – $132 million – to the candidates’ Super PACs. These wealthy contributors not only have great access to the candidates they support, they are often confidantes and sometimes have business dealings with the candidates or entities that the candidates run. Having a wealthy backer or a few, makes a candidate viable today when in the past they wouldn’t have made it to the starting gate. [7] For example:

Cruz: 6 people, 4 individuals from one family and 2 other individuals, have contributed the $36 million his Super PACs have received. Under our previous campaign laws, it would have required over 13,000 individuals giving the maximum $2,700 to raise this much money.

Rubio: 4 donors have contributed $12.5 million.

Mike Huckabee: 1 individual gave $3 million.

Bush: 26 individuals or corporations have given over $1 million each.

Clinton: 9 individuals have contributed over $1 million each.

Rand Paul: 2 individuals have given a combined $3 million.

What all this means is that a small number of the wealthiest people in the US are exercising enormous influence over who our presidential candidates are and what policies they espouse. The rest of us – 300 million Americans – are sitting on the sidelines watching and wondering if our votes or voices matter – and whether our country is still a democracy or not. [8]

To put the current presidential campaign’s fundraising in some perspective, the $388 million raised by the presidential candidates’ campaigns and Super PACs already – over a year before the final election – is more than the $331 million that Bill Clinton, George H.W. Bush, and their rivals spent in the whole 1992 election. And it is almost 5 times the amount that had been raised at this point in the 2012 presidential campaign. In the 2016 presidential election, spending will be over 20 times what it was just 24 years ago in the 1992 election.

[1]       Pindell, J., 10/1/15, “Evaluating campaign money reports gets more complicated,” The Boston Globe

[2]       Campaign Notebook, 10/2/15, “Sander’s war chest fills fast,” The Boston Globe from the Associated Press

[3]       Bykowicz, J., 9/30/15, “Clinton, Bush steady fundraising amid GOP summer Trump slump,” Associated Press

[4]       Confessore, N., Cohen, S., & Yourish, K., 8/1/15, “Small pool of rich donors dominates election giving,” The New York Times

[5]       Kranish, M., 9/13/15, “In national politics, big money drowning out everyone else,” The Boston Globe

[6]       OpenSecrets.org, 10/4/15, “Behind the candidates: campaign committees and outside groups,” Center for Responsive Politics (http://www.opensecrets.org/pres16/raised_summ.php)

[7]       Confessore, et al., 8/1/15, see above

[8]       Kranish, M., 9/13/15, see above

GOOD NEWS FOR US WORKERS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WORKING HARD, GAINING LITTLE

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

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

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

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

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

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

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

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

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

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

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

SUPPORTING FAMILIES IS AN INVESTMENT IN HUMAN CAPITAL Part 2

ABSTRACT: More than one out of every five American workers is working a non-standard work schedule. This increases stress for parents, hurts their ability to be good parents, and adversely affects child and adolescent outcomes. Providing predictable work schedules for parents and allowing them flexibility to meet parenting responsibilities is good for them and their children.

The prevalence of non-standard work schedules is increasing. For hourly workers, over half (including 44% of those who are mothers with a child under 13) know their work schedules less than 2 weeks in advance and for almost three-quarters of them the number of hours they work (and hence their income) varies from week to week. The lack of a consistent work schedule often prevents these workers from being able to take a second job to increase their typically low incomes.

Non-standard work schedules can prevent parents from being able to adequately care for, supervise, and be engaged with their children. As a result, their children’s cognitive and behavioral outcomes are likely to suffer.

Changes in labor policies could benefit workers with non-standard work schedules and provide incentives for employers to give workers more consistent work schedules. Because these policy changes are almost certain to improve worker morale, absenteeism and turnover are likely to go down and productivity is likely to go up. The cost savings these produce for employers will offset some if not all of any costs to employers of these policy changes. These policies would be a step toward implementing genuine family values for America’s working parents.

FULL POST: More than one out of every five American workers is working a non-standard work schedule. These work schedules include hours outside of the normal 9 to 5 work day or that vary from week to week. In some cases, the number of hours worked varies from one week to the next making income uncertain and managing a budget difficult at best. Non-standard work schedules increase stress for parents, hurt their ability to be good parents, and adversely affect child and adolescent outcomes. [1]

Providing predictable work schedules for parents and allowing them flexibility to meet parenting responsibilities is good for them and their children – an investment in our human capital. If our society truly values families, we will support them with work schedules that allow them to be good parents. (See my post Big ideas to help working parents for a set of policies, including predictable work schedules, that would help working families.)

The prevalence of non-standard work schedules is increasing. One reason is that the number of part-time and temporary or contingent jobs is increasing as the number of full-time jobs is decreasing. Another reason is that computerized scheduling programs now allow employers to match staffing levels to customer demand with greater precision and, therefore, to engage in “just-in-time” scheduling of employees. In some cases, employers call employees to come into work on short notice or require them to work beyond their scheduled shift if there is unexpectedly high demand. They also may send employees home (without pay) when they show up for scheduled work if business is slow.

For hourly workers, over half (including 44% of mothers with a child under 13) know their work schedules less than 2 weeks in advance and for almost three-quarters of them the number of hours they work (and hence their income) varies from week to week. For hourly food service workers, over 80% know their schedules less than 2 weeks in advance and for 90% of them the number of hours worked varies from week to week. The lack of a consistent work schedule often prevents these workers from being able to take a second job to increase their typically low incomes.

Non-standard work schedules can prevent parents from being able to adequately care for, supervise, and be engaged with their children. They may not be able to be home when children leave for school or arrive home – resulting in latch-key children who are home alone. Similarly, they may not be able to make regular child care arrangements, which is likely to decrease the quality of care a child receives. Scheduling doctors’ appointments and teacher meetings may be difficult as well.

In general, parents working non-standard work schedules cannot provide children the consistent schedules and nurturing that are critical to healthy child growth and development. As a result, their children’s cognitive and behavioral outcomes are likely to suffer. For example:

  • Their toddlers exhibit problems with language development, problem solving, and learning.
  • Their preschoolers have more negative behaviors – anxiety, withdrawal, and aggression.
  • Their adolescents are more likely to exhibit delinquent, aggressive, and other negative behaviors. [2]

Non-standard work schedules are more common for younger, less educated, lower income, and minority workers. In addition, they are more common for single mothers. All of these characteristics of parents increase the risk of compromised child outcomes, and the higher likelihood of non-standard work schedules further increases this risk.

Changes in labor policies could benefit workers with non-standard work schedules and provide incentives for employers to give workers more consistent work schedules. Labor laws could require employers to give workers at least 4 weeks’ notice of their work schedules and require that they be paid for scheduled hours even if business is slow. Employers could be required to pay time and a half for extended shifts or work hours outside of the standard 9 to 5 window.

Because these policy changes are almost certain to improve worker morale, absenteeism and turnover are likely to go down and productivity is likely to go up. The cost savings these produce for employers will offset some if not all of any costs to employers of these policy changes. These policies would be a step toward implementing genuine family values for America’s working parents.

[1]       Morsy, L., & Rothstein, R. (8/6/15). “Parents’ non-standard work schedules make adequate child rearing difficult,” Economic Policy Institute (http://www.epi.org/publication/parents-non-standard-work-schedules-make-adequate-childrearing-difficult-reforming-labor-market-practices-can-improve-childrens-cognitive-and-behavioral-outcomes/)

[2]       Morsy, L., & Rothstein, R. (8/6/15). See above.

SUPPORTING FAMILIES IS AN INVESTMENT IN HUMAN CAPITAL Part 1

ABSTRACT: Parents with a child under 18 years of age make up over 22% of the of the US labor force. These parents represent an important part of the human capital of our economy, and their children represent the human capital of our future economy. Therefore, supporting these families with paid leave when a new child arrives is an investment in our current and future human capital. The US is one of only three countries in the world that does not require paid parental leave.

Many mothers return to work very shortly after the birth of their child: 23% return to work within 2 weeks of having a child. A quick return to work is unhealthy for both the mother and the child, but many families need the income to make ends meet.

Some states and cities in the US have adopted paid family leave programs. Despite employers’ dire warnings at the time of their enactment, a recent study found that that these paid leave requirements have not hurt profitability, productivity, or turnover.

It’s time for the US to catch up with the rest of the world and do what’s only humane for our families and children, require paid parental leave when a new child joins a family. This would be a step toward implementing genuine family values for America’s families. Paid family leave has been shown to work – it benefits children and families substantially, while it has no negative effects on employers and may actual benefit them.

FULL POST: Parents with a child under 18 years of age make up over 22% of the of the US labor force. In these families, 93% of fathers and 70% of mothers work. [1] In 60% of these households, both parents are working, and this is only slightly lower for families with a child under 1 year old. [2] These parents represent an important part of the human capital of our economy, and their children represent the human capital of our future economy.

Therefore, supporting these families with paid leave when a new child arrives is an investment in our current and future human capital, no less so than education and job training. If our society truly values families, we will support them with paid family leave. (See my post Big ideas to help working parents for a set of policies, including paid leave, that would help working families.) The US is one of only three countries in the world that does not require paid parental leave. (The other two are Papua New Guinea and Suriname.) Some Scandinavian countries offer over a year of paid parental leave.

Only 13% of US workers have access to paid family leave and they are typically highly paid, salaried employees. The federal Family and Medical Leave Act (FMLA) provides 12 weeks of unpaid leave but only for the roughly 60% of US workers that are at companies with over 50 employees and who have been at their current job for over a year. However, many of the eligible employees cannot afford to go 12 weeks without pay and therefore don’t take the FMLA leave.

Many workers – usually mothers – stitch together vacation time, sick time, and personal days to take time off at the birth of a child. Some buy disability insurance policies that cover maternity leave. Some take unpaid leave or quit working, but many mothers return to work very shortly after the birth of their child: 23% return to work within 2 weeks of having a child. [3]

A quick return to work is unhealthy for both the mother and the child. In particular, mothers who take longer maternity leaves are less likely to experience depression. Mothers who go back to work sooner, breastfeed their children less, which leads to increased illness, obesity, allergies, and even sudden infant death syndrome in their children. Shorter maternity leaves also can negatively affect the child’s development of motor skills, social skills, and language. A study in Europe found that paid leaves and longer paid leaves were correlated with a decrease in the death rate for young children, especially infants under 1 year old.

Some states and cities in the US have adopted paid family leave programs. California’s has been in place since 2002 and New Jersey’s since 2008. Despite employers’ dire warnings at the time of their enactment, a recent study found that that these paid leave requirements have not hurt profitability, productivity, or turnover. Other studies have found that paid leave and workplace flexibility for parents increase productivity, profitability, the ability to recruit talented workers, and the stock performance for companies; improve job satisfaction and work-family balance for workers; and reduce absenteeism, turnover, and worker replacement costs for employers. [4]

The Obama administration has recently announced grants to help states establish paid family leave programs and a number of the 2016 presidential candidates, notably Hillary Clinton and Bernie Sanders, have put forth strong proposals for paid family leave.

It’s time for the US to catch up with the rest of the world and do what’s only humane for our families and children, require paid parental leave when a new child joins a family. This would be a step toward implementing genuine family values for America’s families. It’s also an investment in the human capital of our current and future workforce. Despite employers’ dire warnings about its impacts, paid family leave in other countries, as well as in states and cities here in the US, has been shown to work – it benefits children and families substantially, while it has no negative effects on employers and may actual benefit them.

[1]       Bureau of Labor Statistics, 4/23/15, “Employment characteristics of families,” US Dept. of Labor (http://www.bls.gov/news.release/famee.nr0.htm)

[2]       Council of Economic Advisers, June 2014, “Nine facts about American families and work,” Executive Office of the President of the United States (https://www.whitehouse.gov/sites/default/files/docs/nine_facts_about_family_and_work_real_final.pdf)

[3]       Lerner, S., Aug. 2015, “The real war on families,” In These Times

[4]       Council of Economic Advisers, June 2014, see above

WHY ECONOMIC INEQUALITY IS A PROBLEM Part 3

The lack of equal opportunity and upward mobility when there are high levels of economic inequality is most dramatically clear when looking at children. Children born and raised in low income families are more likely to have:

  • health problems at birth,
  • worse living conditions including toxins in their environment (e.g., lead and air pollution),
  • worse nutrition, and
  • less nurturing and stimulating care from parents and non-parental caregivers.

Therefore, the opportunity for children in low income households to achieve their full potential – the foundation of equal opportunity and mobility – is compromised literally from day one. Growing up in an environment that is likely at times to be unhealthy and stressful can do long-term harm to a young child’s developing brain and, therefore, to his or her chances for success in school and in life. [1]

The relationship between a child’s family’s income during childhood and his or her life outcomes is well-established. Decades of research have established that a child’s family’s socioeconomic status is the strongest predictor of a child’s success in school and in life.

Without a very robust safety net and system of supports for low income families – which conservatives oppose both philosophically and fiscally – high levels of income and wealth inequality leave lower income children behind from birth (and probably even pre-natally).

Children from families with lower incomes and wealth also receive much less financial support from parents, both during parents’ lifetimes and through inheritance. Many parents who have the means provide financial assistance to their children to further their education, to buy a home or a car, to start a business, or to weather a health or job-related setback. The ability to support children’s opportunities and upward mobility is inherently lower for families with less income and wealth than it is for well-off families.

The lack of opportunity and upward social mobility for those with middle class and lower incomes, not to mention those in poverty, is not a separate problem from the inequality of income and wealth, but part and parcel of it. For example, children who graduate from college but are from the 20% of families with the lowest incomes are two and a half times less likely to be in the top 20% of income earners as adults than children from wealthy families who did not even graduate from college. [2]

If we and our democracy are committed to equal opportunity and social mobility, we must address economic inequality. Public policies created the Great Prosperity of the post-World War II economy. Back then everyone shared in the benefits of economic growth, and income and wealth gaps shrank. The public policies of the last 40 years have undermined the middle class and fostered the growing economic inequality that now rivals that of any point in American history. Changes in public policies can reverse our economic inequality and restore the equal opportunity and social mobility that are cornerstones of our American democracy. [3]

[1]       Pollak, S., et al. (July 2015). “Association of child poverty, brain development, and academic achievement,” JAMA Pediatrics

[2]       Bernstein, J., & Spielberg, B. (6/5/15). “Inequality matters,” The Atlantic

[3]       Reich, R. (2010). “Aftershock: The next economy and America’s future,” Random House books.

WHY ECONOMIC INEQUALITY IS A PROBLEM Part 2

Economic inequality is a problem because it undermines our economy and our democracy. High levels of economic inequality make the US economy fragile, and perhaps unsustainable. Our economy is built on consumer spending, which accounts for about two-thirds of our economic activity. However, the rich don’t spend as much of their incomes as those with lower incomes do. They save more, they invest more (including in speculative investments that add no value to our economy), and they save, invest, and spend overseas, which does not support the American economy. Envision the difference between a) a large corporation’s CEO or a Wall St. hedge fund manager taking home $100 million for a year’s work and b) 2,000 middle class families taking home the same $100 million, which would be $50,000 each (perhaps in unemployment benefits or to support continued education). Which income distribution is going to result in more spending in our local economies and more support for local businesses, their employees, and their suppliers? Which income distribution is better for American workers and businesses, or in other words, for the US economy? [1]

The 90% of us who aren’t wealthy have a smaller and smaller share of the income and wealth of our society. Therefore, we simply do not have the consumer purchasing power needed to keep our economy running at full speed. Without sufficient demand for consumer products and services, businesses reduce production and lay off workers. This ripples through the whole economy as these laid-off workers don’t have money to spend in their local economies. Furthermore, related businesses feel the downturn, including the companies that build the equipment that manufacturers of consumer goods use, those that transport the goods, and those that build and furnish the buildings that house consumer businesses. As a result, unemployment (and under-employment) increase, and a vicious cycle of declining prosperity ensues.

There is also a political dimension to economic inequality. The wealthy donate money (and lots of it) to candidates for elected offices. Therefore, elected officials hear the voices of the wealthy much more loudly than they do the voices of lower income voters. As a result, policies tend to favor the wealthy, such as cutting their taxes, including the estate tax, income tax rates on high incomes, and corporate taxes (especially for large and multi-national firms). These tax cuts mean government has less revenue to spend on safety net programs and for investments in basic infrastructure such as education, mass transportation, and roads. Furthermore, many of the well-off advocate for cuts to safety net programs that support stability, if not opportunity and upward mobility, for those working in low paying jobs or facing adverse circumstances such as loss of a job or a health crisis. Therefore, economic inequality begets political inequality that begets even greater economic inequality.

Inequality and lack of social mobility are intimately linked; we can’t increase mobility and opportunity without reducing inequality. Those with low income and wealth simply are unable to make the investments in themselves, their children, and their neighborhoods that are needed to foster mobility and opportunity. In addition, unequal political power perpetuates and exacerbates economic inequality. As a result, the ability of the middle class and poor to build better lives for themselves and their children has become very limited indeed. [2]

[1]       Reich, R. (2010). “Aftershock: The next economy and America’s future,” Random House books.

[2]       Bernstein, J., & Spielberg, B. (6/5/15). “Inequality matters,” The Atlantic