WHY ECONOMIC INEQUALITY IS A PROBLEM Part 1

Some conservative commentators and politicians argue that economic inequality isn’t a problem. They claim that as long as there’s opportunity and social mobility, inequality in income and wealth doesn’t matter. They’re wrong, because high levels of economic inequality mean that social mobility is limited and opportunity is far from equal. [1]

One of the conservatives’ arguments is that economic growth provides opportunity and mobility regardless of inequality. However, almost all of the income and wealth generated by economic growth is going to the already well-off. For example, since the economic recovery began in 2009, 95% of income growth has gone to the richest 1% of the population. That doesn’t leave much opportunity or mobility for the other 99%.

There are at least five reasons that high levels of economic inequality are a problem. The first three are directly linked to social mobility and opportunity. I’ll cover those in this post. The other two reasons are that high levels of inequality undermine our economy and democracy. I’ll cover those in my next post. In a third post, I’ll focus on the effects of inequality on children.

Economic inequality is a problem because low income and wealth limit the ability to invest in a better future for oneself and for one’s children (e.g., in education or in living in better housing or a better community). They increase the likelihood of being stuck in a neighborhood that lacks opportunity (e.g., good schools and jobs) and the likelihood of living in an environment that is unhealthy and stressful (which does long-term harm to a young child’s brain development and, therefore, to his or her chances for success in school and in life). [2]

High levels of inequality produce high levels of residential segregation by economic status. Low income communities don’t have the resources to provide the public safety or good schools that high income communities can. Access to jobs and a safe, clean environment are more likely to be found in high income communities. Children growing up in neighborhoods where low income families are concentrated have worse outcomes in school and in life. The reverse is true as well: children from neighborhoods of concentrated wealth do best. The portion of families living in neighborhoods of concentrated wealth or concentrated poverty more than doubled between 1970 and 2009. The portion of families living in middle-income neighborhoods declined from 65% to 42%.

Growing economic inequality leads to growing educational inequality. While the gap in educational outcomes between blacks and whites has closed somewhat in recent years, the gap based on class (i.e., socioeconomic status) has widened. This gap is evident even before children start school: rich children score much higher on tests of school readiness than poor children do. At the other end of the educational spectrum, the high cost of college impedes access to higher education and high levels of post-college debt limit economic opportunities and mobility in adulthood. Children from lower income families are more likely to leave college with high levels of debt that limit their opportunities to save, to buy a home, to invest in further education, or to start a business. Between 1995 and 2013, the bottom half of the population economically (which includes many in the middle class) had college debt more than double relative to their incomes. Meanwhile, the top 5% of the population saw no increase in college debt relative to their incomes and had debt levels that were one-seventh of those of the bottom half.

In my next post, I’ll look at the effects of inequality on our economy and democracy.

[1]       Bernstein, J., & Spielberg, B. (6/5/15). “Inequality matters,” The Atlantic

[2]       Pollak, S., et al. (July 2015). “Association of child poverty, brain development, and academic achievement,” JAMA Pediatrics

BIG MONEY IN ELECTIONS IS CORRUPTING OUR DEMOCRACY

ABSTRACT: The 2016 elections, for President, Congress, and in the states, will be the most expensive elections ever by far. All the national and gubernatorial candidates (with perhaps a couple of exceptions) will be dependent on wealthy donors and will repay them with access and favors. The policies of the winning candidates will, therefore, reflect the interests of these wealthy donors.

The big money of these wealthy donors is corrupting our elections and our democracy. We won’t get an economy that works for all of us when policy decisions are bent to favor the wealthy and powerful. In the last presidential election, 40% of campaign contributions came from 16,000 households whose average wealth was $110 million. The money of these few people drowned out the voices of the other 300,000,000 of us.

There are 3 things that we need to do to address this problem: 1) Require full and timely disclosure of the original source of all election spending, 2) Establish programs to match the campaign contributions of small donors with public funds, and 3) amend the US Constitution to reverse the Supreme Court’s decisions that have equated spending money with freedom of speech and given corporations and other organizations rights (such as freedom of speech) meant for human beings.

Our system of funding elections is broken and is undermining our democracy. A functioning democracy is essential if we are going to have an economy that works for everyone, not just the wealthy.

FULL POST: The 2016 elections, for President, Congress, and in the states, will be the most expensive elections ever by far. All the national and gubernatorial candidates (with perhaps a couple of exceptions) will be dependent on wealthy donors and will repay them with access and favors. The policies of the winning candidates will, therefore, reflect the interests of these wealthy donors, if for no other reason that their views will be the ones the elected officials hear most frequently and forcefully.

The big money of these wealthy donors is corrupting our elections and our democracy. We won’t get an economy that works for all of us when policy decisions are bent to favor the wealthy and powerful.

In the last presidential election, 40% of campaign contributions came from 16,000 households whose average wealth was $110 million. The money of these few people drowned out the voices of the other 300,000,000 of us. The views and interests of these 1 out of every 10,000 Americans holds sway with most of Congress, and with much of the agendas of the President and the Governors of our states.

There are 3 things that we need to do to address this problem; the first could be done quickly, the second in the medium-term, and the third is a long-term solution.

  1. Require full and timely disclosure of the original source of all election spending. Congress and state legislatures need to pass laws requiring this disclosure. The President should issue an Executive Order requiring all federal contractors to disclose their political spending. The Federal Elections Commission should issue strong regulations requiring disclosure of political spending. The Internal Revenue Service should require all not-for-profit, tax exempt entities to disclose their political spending. And the Securities and Exchange Commission (SEC) should require all publicly traded corporations to disclose their political spending. Furthermore, the SEC should require shareholder approval of all corporate political spending. (Please sign my petition through Sum of Us here calling on the SEC to take these steps.) Voters have a right to know who is trying to influence their votes and their elected officials. This disclosure would allow voters to hold elected officials accountable for acting in their interests and not in the interests of their big campaign donors. (See my post The Rise of Dark Money in Campaigns for more information.)
  2. Federal, state, and local governments should establish programs to match the campaign contributions of small donors. This has been done in New York City, Maine, and Arizona, among other places. This matching of small donations with public funds amplifies the voices of average citizens and through contribution limits caps the spending of the wealthy (limiting their ability to drown out others’ voices). This makes elections fairer, encourages the engagement of more voters, and is a key step to recapturing government of, by, and for the people. (See my post Democratizing Campaign Financing for more detail.)
  3. Ultimately, we need to amend the US Constitution to reverse the Supreme Court’s decisions (Citizens United, McCutcheon, and others) that gave corporations and other organizations rights (such as freedom of speech) meant for human beings and equated spending money with speech, and, therefore, with freedom of speech protections. (See my post Corporations Are Not People and Money Is Not Speech for more detail.)

Our system of elections is broken and is undermining our democracy. A functioning democracy is essential if we are going to have an economy that works for everyone, not just the wealthy. We need to stop the big money from corrupting our elections and our government. Wealthy special interests cannot be allowed to drown out the voices of the average voter and citizen if we want to have a democracy of, by, and for the people. (See my posts under the category Campaigns: Financing & Voting for more information on the topic of money in our elections.)

Getting big money out of politics is the twelfth and last (they decided that 10 ideas wasn’t quite enough) of Ten Ideas to Save the Economy: The Big Picture presented by Robert Reich and MoveOn.org. (You can watch the 3 minute video at: https://www.facebook.com/moveon/videos/vb.7292655492/10152835663535493/?type=2&theater.) None of the other 11 big ideas to save our economy that this series has presented are likely to come to fruition unless we get the big money out of our election campaigns.

MEDICARE FOR ALL WOULD CONTROL COSTS AND IMPROVE OUTCOMES

The health care system in the US is broken. It costs far more per person than other countries’ health care and its outcomes are worse – from infant mortality to life expectancy. Costs are escalating, typically faster than the general inflation in the economy. And millions of Americans don’t have health insurance and millions more have insurance with high co-payments and deductibles that could bankrupt them.

The Affordable Care Act (ACA), often called Obama Care, has taken some important steps to improve our health care system. Tens of millions of Americans now have health insurance who didn’t have it before. Elements of the ACA will improve outcomes and control costs, but these are band aids and won’t solve the real problems.

To really fix our broken health care system, we need to allow all Americans to participate in Medicare, our health insurance program for seniors. Individuals who aren’t old enough to qualify for Medicare would buy into it by paying health insurance premiums to Medicare. They would do this under the Affordable Care Act through the exchanges the ACA has setup where those without health insurance find and purchase coverage. Premium subsidies would be available for those who can’t afford the cost.

This would save money because Medicare is more efficient than private health insurance. Over 30% of health care spending in the US goes to administrative costs (e.g., advertising, marketing, paperwork, executive pay, and profits). However, Medicare’s administrative costs are only around 3%. This means that up to $400 billion a year could be saved if everyone opted to get their health insurance through a Medicare for All program. Furthermore, removing the prohibition on Medicare bargaining with drug companies for lower prices (put in place by President George W. Bush) would save additional billions of dollars. [1]

A Medicare for All program is the best way to improve health outcomes in the US while controlling costs. It incorporates many of the benefits of a single-payer system. It is effectively the “public option” that was originally part of the Affordable Care Act but was removed at the insistence of private insurers and their supporters in Congress. They didn’t want a Medicare-type program competing with private insurance because they knew Medicare for All would be more efficient and less costly for consumers.

Implementing Medicare for All is the eleventh (they decided 10 ideas wasn’t quite enough) of Ten Ideas to Save the Economy: The Big Picture presented by Robert Reich and MoveOn.org. (You can watch the 3 minute video at: https://www.facebook.com/moveon/videos/vb.7292655492/10152825520900493/?type=2&theater.)

[1]       Reich, R. (2010). “Aftershock: The next economy & America’s future,” Vintage Books.

HIGH INCARCERATION RATE IN US IS COUNTERPRODUCTIVE

ABSTRACT: The get tough on crime policies of the last 30 – 40 years have been counterproductive. They have swelled our prison population from less than 200,000 in the mid-1970s to 2,500,000 today. Our incarceration rate is the highest in the world and 5 times the world average.

This is costing us a fortune – we spend over $80 billion per year on prisons. There is no evidence that incarcerating more people leads to reduced crime. This mass incarceration is also costing us a fortune in lost human and social capital. Perhaps worst of all, our criminal justice system is blatantly racist. Some people compare today’s criminal justice system to the Jim Crow laws of the late 1800s and early 1900s that made blacks second class citizens.

To address the problems of over incarceration we need to: 1) End mandatory minimum sentences, 2) Stop discriminatory police and prosecutorial practices, 3) Stop building prisons and start closing some, and 4) Ban the box that requires job applicants to disclose if they have a criminal record.

The mass incarceration the US has engaged in over the last 30 years is wrong, ineffective, inefficient, and racist. Instead of closing doors on people, we need to open opportunities through jobs and education, as well as mental health services and drug treatment when needed.

FULL POST: The get tough on crime policies of the last 30 – 40 years have been counterproductive. These policies, such as mandatory sentences and 3-strikes-you’re-out laws, have swelled our prison population from less than 200,000 in the mid-1970s to 2,500,000 today – 12 times as many inmates. One out of every 100 adults in the US is in prison. Our incarceration rate is the highest in the world and 5 times the world average. The US has 5% of the world’s population but 25% of the world’s prisoners.

This is costing us a fortune – we spend over $80 billion per year on prisons. This has increased substantially in the last 30 years and has continued to increase despite falling crime rates for the last 20 years. State governments are spending more on prisons than on higher education. The federal government spends 6 times as much on prisons as on education. [1]

Meanwhile, there is no evidence that incarcerating more people leads to reduced crime. Crime rates, especially violent crime rates, are not linked to incarceration rates. Crime rates in states with higher incarceration rates, sometimes twice as high, do not have lower crime rates. This is because the increased incarceration is largely for non-violent, victimless crimes such as illegal drug possession.

This mass incarceration is also costing us a fortune in lost human and social capital. Many young men, particularly young black men, are sent to prison when what they really need is education and job skills, or mental health services and drug treatment. And after they have served their time, their criminal record often prevents them from getting a job or a student loan, and from voting. This loss of potentially productive human capital is bad for our economy. Furthermore, the social exclusion and high rates of incarceration in some communities, including of fathers with children, result in a huge loss of social capital that exacerbates and perpetuates disadvantage in these neighborhoods.

Perhaps worst of all, our criminal justice system is blatantly racist. People of color are more likely to be stopped by police, and are more likely to be arrested, convicted, and sent to jail than whites. For example, although all races and ethnic groups use illegal drugs at basically the same rate, far more people of color are arrested, convicted, and sent to prison for drug offenses than are whites. Some people, notably Michelle Alexander, compare today’s criminal justice system to the Jim Crow laws of the late 1800s and early 1900s that made blacks second class citizens. (She has a powerful TED talk on this topic entitled The future of race in America at https://www.youtube.com/watch?v=SQ6H-Mz6hgw. She has also written a book entitled The New Jim Crow: Mass Incarceration in the Age of Colorblindness.)

To address the problems of over incarceration we need to:

  • End mandatory minimum sentences as inflexible, ineffective, and unfair. There are much more effective and efficient alternatives to incarceration for non-violent crimes.
  • Stop discriminatory police and prosecutorial practices.
  • Stop building prisons and start closing some, so we can put the money spent on them to more productive uses, such as education, job training, drug treatment, and mental health services.
  • Ban the box that requires job applicants to check a box to disclose if they have a criminal record. Many employers have already done this. Given the breadth of mass incarceration for minor offenses, it is not a meaningful screen for many jobs.

The mass incarceration the US has engaged in over the last 30 years is wrong, ineffective, inefficient, and racist. It harms our economy and our communities, wasting lots of money and human potential. It locks people out of society even after they have served their time. Instead of closing doors on people, we need to open opportunities through jobs and education, as well as mental health services and drug treatment when needed.

Ending mass incarceration is the tenth of Ten Ideas to Save the Economy: The Big Picture presented by Robert Reich and MoveOn.org. (You can watch the 3 minute video at: https://www.facebook.com/RBReich/videos/1034546579891271/.)

[1]       Mitchell, M., & Leachman, M. (2014). “Changing priorities: State criminal justice reforms and investments in education,” Center on Budget and Policy Priorities (http://www.cbpp.org//sites/default/files/atoms/files/10-28-14sfp.pdf)

A CARBON TAX IS A WIN-WIN

Air pollution has real costs for all of us, from negative health effects (such as asthma), to climate change, to more severe weather and the damage it creates. We all suffer these effects and pay their costs while the polluters pay nothing. They are allowed to dump their pollution into our air for free. The carbon released into the atmosphere (mainly as carbon dioxide from burning fossil fuels) costs us between $40 and $100 per ton and over 5 billion tons of it are poured into our air each year. This adds up to hundreds of billions of dollars per year.

We should put a tax on carbon pollution to help pay for its costs and also to create an incentive to reduce it. The revenue a carbon tax would produce could be used to foster renewable energy sources, to address climate change, to improve and expand mass transportation, or to fund other worthwhile activities.

Instead of investing in the fossil fuel industry – oil, coal, and gas – we should be divesting. Many of us are investing in the fossil fuel industry without evening knowing it. The government should stop using our tax money to provide incentives to fossil fuel companies. We all should ask pension funds, mutual funds, and university endowments we are connected with to divest their holdings in the fossil fuel industry and instead invest in renewable energy or other investments that don’t cause harm.

A carbon tax would put market forces in place that create a win-win: polluters would be paying for at least part of the cost of their pollution and would have an incentive to reduce pollution, while at the same time governments would have revenue to address the damage caused by pollution and to invest in renewable energy.

The air belongs to all of us. And we need clean air to live healthy lives and have a healthy planet. Polluters are fouling our air for free; they should pay the price through a carbon tax.

Implementing a carbon tax is the ninth of Ten Ideas to Save the Economy: The Big Picture presented by Robert Reich and MoveOn.org. (You can watch the 3 minute video at: https://www.facebook.com/moveon/videos/vb.7292655492/10152803963545493/?type=1&theater.)

A FAIR ESTATE TAX WILL REDUCE INEQUALITY

Wealth inequality in the US is even more dramatic than income inequality. The richest 1% of Americans own 42% of all the wealth in the country. And the richest 0.1% (300,000 people) have as much total combined wealth as the combined wealth of the bottom 90% (270 million people). This is the highest concentration of wealth in this country since the Gilded Age of the late 1800s. The richest 1% have an average of $14,000,000, while the bottom 90% average $80,000.

Thomas Piketty, in his book Capital in the Twenty-First Century, analyzes wealth and economies over the last 250 years and concludes that without a progressive wealth tax wealth inequality will grow. Left unchecked, wealthy families will perpetuate and grow their wealth, while the rest of us fall farther and farther behind. This will produce a permanent, wealth-based aristocracy.

To prevent the rise of this new aristocracy, we need to raise the estate tax — a modest tax on inherited wealth. Raising the estate tax on the wealthiest Americans is one key way to slow growing inequality. Yet some lawmakers in Congress actually want to eliminate this tax on inherited wealth.

Currently, the estate tax applies only to estates over $10,860,000 for a couple. The 40% tax applies only to any amount over this threshold. This means that the wealthy can give $10,860,000 to their heirs tax-free.

If the estate tax were eliminated, for which some in Congress are advocating, the federal government would lose roughly $27 billion a year in revenue and the growth in inequality in the US would accelerate. The average household that currently pays the estate tax would get a $3 million tax cut. State governments would lose revenue as well, because many state estate taxes are tied to the federal tax. This means that our state and federal governments, that are already stretched very thin, would have even fewer resources for public safety, schools, roads and bridges, and so forth.

If the estate tax were returned to its level in 1998 (with an adjustment for inflation), couples could give $1,748,000 tax-free to their heirs and amounts over that would be taxed. The federal government would receive an additional $49 billion a year in revenue to fund important needs. A couple with an estate of $10,860,000, the current tax-free threshold, would still be able to give $7.15 million to their heirs after paying the estate tax. Clearly, restoring the estate tax to its 1998 level would reduce the ability to pass on inherited wealth, but by no means eliminate it. It would slow our growing inequality but it certainly wouldn’t stop the ability to pass on significant inherited wealth.

A reasonable estate tax would be a step in addressing the growing economic inequality in the US. Returning to the lower tax-free estate threshold of 1998 would be a step in the right direction; conversely eliminating the estate tax would be a step in the wrong direction. American democracy would be seriously undermined by a self-perpetuating, wealth-based aristocracy. Such concentrated economic and political power is antithetical to the principles of our democracy.

Raising the estate tax is the eighth of Ten Ideas to Save the Economy: The Big Picture presented by Robert Reich and MoveOn.org. (You can watch the 3 minute video at: https://www.facebook.com/moveon/videos/10152795905365493/.)

A VOICE FOR WORKERS

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

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

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

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

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

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

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

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

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

CORPORATE WELFARE IS MAKING US POOR

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

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

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

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

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

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

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

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

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

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

IMPORTANT ISSUES FOR THE 2016 PRESIDENTIAL CAMPAIGN

ABSTRACT: There’s no shortage of important issues facing the U.S. today. As candidates announce their intention to run for president, it will be interesting to see which issues they make priorities and which issues the mainstream corporate media decide to cover. Many candidates and the mainstream media are likely to avoid the issues of the struggling middle and working classes and of the growing inequality of income and wealth.

However, MoveOn.org and Robert Reich have teamed up to present 10 important issues for supporting the middle and working classes, reclaiming our democracy from moneyed interests, and saving our planet. Reich does a 3 minute video on each issue.

Senator Bernie Sanders of Vermont, a Democratic candidate for President, has a similar focus. If these issues resonate with you, I encourage you to follow Senator Sanders’ campaign. If you want these issues to be discussed in the campaign, give him some support during the primary.

FULL POST: There’s no shortage of important issues facing the U.S. today. As candidates announce their intention to run for president, it will be interesting to see which issues they make priorities. It will also be interesting to see which issues the mainstream media – the big corporate media – decide to cover. Many candidates and the mainstream media are likely to avoid the issues of the struggling middle and working classes and of the growing inequality of income and wealth. However, there are efforts to explicitly put these issues in the spotlight.

MoveOn.org and Robert Reich [1] have teamed up to present “10 Big Ideas to Save the Economy.” These are 10 important issues for supporting the middle and working classes, reclaiming our democracy from moneyed interests, and saving our planet. The corporate media and many candidates will avoid them. Therefore, MoveOn and Reich are using social media to try and bring these ten issues to voters’ attention. The issues are:

  • Enacting a $15 minimum wage
  • Supporting working families through equal pay for women, predictable work schedules, quality child care, and paid leave
  • Expanding Social Security
  • Reining in Wall Street
  • Reinventing education
  • Ending corporate welfare
  • Strengthening workers’ bargaining power through stronger unions
  • Increasing the estate tax
  • Implementing a carbon tax to cut pollution and address global warming
  • Getting big money out of politics

I’ve done blog posts on the first five and will do posts on the others soon. In the posts, I include a link to the 3 minute video that Robert Reich does to explain each one.

There’s one Democratic candidate for President, Senator Bernie Sanders of Vermont, whose campaign has a similar focus on the middle and working classes and on inequality. Although the mainstream (corporate) media tend to describe him as a fringe candidate and highlight his socialist political label, his positions on issues are very well aligned with what the voting public supports. For example, he supports: [2] [3] [4]

  • Providing universal pre-kindergarten – supported by 77% of the public
  • Reducing income and wealth inequality – supported by 63% of the public
  • Fair trade that protect workers, the environment, and jobs – supported by 75% of the public
  • Increasing taxes on the rich – supported by 52% of the public
  • Expanding Social Security – supported by 70% of the public
  • Breaking up the big banks – supported by 58% of the public
  • Making higher education more affordable – supported by 79% of the public
  • Reducing the burden of student debt – supported by 78% of the public
  • Ending tax loopholes for corporations that ship jobs overseas – supported by 74% of the public
  • Closing offshore corporate tax loopholes – supported by 70% of the public
  • Addressing climate change – supported by 71% of the public
  • Getting big money out of politics – supported by over 70% of the public across party lines

If Senator Sanders’ positions on these issues resonate with you, I encourage you to follow to his campaign. If you want these issues to be discussed in the campaign, give him some support during the primary. His campaign website is https://berniesanders.com/.

[1]       Robert Reich was President Clinton’s Secretary of Labor and MoveOn.org is the progressive, grassroots organization promoting participation in our democracy.

[2]       Moyers, B., & Winship M., 6/3/15, “Turn left on Main Street,” Moyers & Company (http://billmoyers.com/2015/06/03/turn-left-main-street/?utm_source=General+Interest&utm_campaign=512c7d35f1-Midweek12171412_17_2014&utm_medium=email&utm_term=0_4ebbe6839f-512c7d35f1-168350969)

[3]       Cole, J., 5/29/15, “Despite what corporate media tells you, Bernie Sanders’ positions are mainstream,” Common Dreams (http://www.commondreams.org/views/2015/05/29/how-mainstream-bernie-sanders)

[4]       Progressive Change Institute, Jan. 2015, “Poll of likely 2016 voters,” (https://s3.amazonaws.com/s3.boldprogressives.org/images/Big_Ideas-Polling_PDF-1.pdf)

EDUCATION FOR THE 21ST CENTURY

We need to reinvent our education system, much of which was designed to train students for an assembly line economy that is no longer with us. Early childhood care and education, K-12 schools, and higher education need to be improved. This is the fifth of the Ten Big Ideas to Save the Economy, presented by Robert Reich and MoveOn.org. [1] We need to build students’ critical thinking and other 21st century skills, while stimulating their passion for learning and reducing the dropout rate.

Six steps need to be taken:

  • Stop high stakes testing. Preparing students for today’s economy requires developing their creativity and curiosity, problem solving and teamwork skills, not honing their test-taking skills. Testing and test preparation (for multiple tests) take a significant amount of time away from important instruction and learning. Testing also enriches the for-profit corporations that sell the tests and related material, diverting funding that is sorely needed for educational purposes.
  • Reduce class sizes to 20 students so teachers can teach and students can learn appropriate skills and knowledge.
  • Increase funding, particularly federal funding, for early childhood care and education and K-12 schools. High quality early education is essential to prepare all children, especially those from families facing challenges, for success in school and life. K-12 schools need to better support students and their families by providing activities for the full work day and access to the full range of services and supports children and families need.
  • Strengthen technical training through vocational programs during the high school years and at two-year community colleges. Our economy needs skilled technicians; not every job requires a four-year college degree.
  • Make public higher education free. A high school education isn’t enough for many jobs in today’s economy; higher education is a public good that should be publicly funded. This will provide a better workforce for our economy and better informed citizens for our democracy. Saddling students in higher education with crushing debt shrinks their work options and their ability to fully participate in our economy.
  • Improve teacher pay so our best and brightest want to become our great teachers. We pay Wall Street financiers handsomely to develop our economic capital; we should pay our teachers equitably to develop our human capital. We want highly-skilled, highly-motivated teachers who love teaching and bring their full creativity, knowledge, and skills to bear, not ones who simply fulfill bureaucratic requirements and oversee testing.

By reinventing our education system with these six, sensible steps, we will all gain, today and in the future.

[1]       You can watch the 3 minute video at: https://www.facebook.com/moveon/videos/10152760137015493/.

PROTECTING OUR ECONOMY AND DEMOCRACY FROM WALL STREET

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

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

Three actions need to be taken:

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

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

PROVIDING ECONOMIC SECURITY FOR OUR SENIORS

ABSTRACT: We need to improve the economic security of today’s – and tomorrow’s – senior citizens. Strengthening and expanding Social Security is the third of the Ten Big Ideas to Save the Economy. Reliance on Social Security is increasing. Despite its maximum benefit of only $32,000 per year, for one-third of seniors it’s 90% of their income.

Some people are using scare tactics – claiming that Social Security is running out of money and that we have to cut benefits or raise the retirement age to preserve it. However, Social Security is not in serious financial trouble; a simple adjustment in how payments into Social Security are calculated will provide funding sufficient for the foreseeable future. There is $118,500 cap on the amount of annual income taxed to provide Social Security benefits. This is not sensible or fair. Scrap the cap and everyone alive today can look forward confidently to Social Security benefits.

Outside of Social Security, the federal government spends $68 billion every year on tax incentives for contributions to Individual Retirement Accounts (IRAs), Keoghs, 401(k)s, and other tax sheltered retirement accounts. However, almost all of these benefits end up in the pockets of the wealthiest Americans. So these supposed retirement savings incentives for the middle and working classes, which significantly reduce government revenue, are primarily just another tax avoidance scheme for the well-off.

Our country both needs to and can afford to provide Social Security to its seniors. With all the challenges the middle and working classes are facing in saving for retirement, we should be strengthening Social Security and increasing its benefits, not cutting them as some people say we should.

FULL POST: We need to improve the economic security of today’s – and tomorrow’s – senior citizens. Strengthening and expanding Social Security is the third of the Ten Big Ideas to Save the Economy presented by Robert Reich and MoveOn.org. [1] We all want to be able to maintain a reasonable standard of living in retirement. However, fewer and fewer workers have pensions from their employers. And saving for retirement is harder than ever because middle class wages have been stagnant for 40 years while living expenses keep going up. In addition, student debt has grown dramatically and most Americans lost substantial income or savings (or both) in the Great Recession of 2008.

A recent study found that more than half of all American households with someone 55 or older have no retirement savings. Among those with some retirement savings, the median amount of those savings is only about $104,000 for those 55-64 and $148,000 for those 65-74 – nowhere near enough to maintain a reasonable standard of living in retirement. [2]

Therefore, reliance on Social Security is increasing. Despite its maximum benefit of only $32,000 per year, for two-thirds of seniors, Social Security represents half of their income; for one-third of seniors, it’s 90% of their income. Nearly half of seniors would be living in poverty if they weren’t receiving Social Security. So Social Security benefits should not be cut; they should be increased.

Some people are using scare tactics – claiming that Social Security is running out of money and that we have to cut benefits or raise the retirement age to preserve it. However, Social Security is not in serious financial trouble; a simple adjustment in how payments into Social Security are calculated will provide funding sufficient for the foreseeable future. Right now, we pay into Social Security on up to $118,500 of annual income; nothing is paid into Social Security on income over that amount. Therefore, a CEO or hedge fund manager making $10 million or more in a year pays the same amount into Social Security as someone who makes $118,500. If this cap on the income taxed for Social Security were lifted, and everyone paid the same rate on all their income (as we do for Medicaid), Social Security would have plenty of money to pay its promised benefits – and more.

The $118,500 cap on the amount of income taxed for Social Security is not sensible or fair. Scrap the cap and everyone alive today can look forward confidently to Social Security benefits when they are senior citizens.

Some people go so far as to say we can’t afford Social Security. However, they conveniently ignore the fact that the federal government spends $68 billion every year on tax incentives for contributions to Individual Retirement Accounts (IRAs), Keoghs, 401(k)s, and other tax sheltered retirement accounts. Although these policies are presented as promoting retirement savings for average Americans, the way these tax breaks are designed results in almost all of these benefits ending up in the pockets of the wealthiest Americans. These wealthy individuals would be saving anyway, so rather than functioning as effective retirement savings incentives, these tax breaks are largely giveaways to the already well-off. [3] The maximum amounts that can be contributed to these accounts are something only the well-off can afford to take advantage of. For example, the maximum contribution one can make to a 401(k) or 403(b) plan is $18,000 per year or $24,000 if one is over 50. (For the sake of comparison, the median annual household income in the US is $52,000.) The huge amounts of money that can be accumulated in these accounts are far more than are needed to maintain a reasonable standard of living in retirement. The result is that these supposed retirement savings incentives for the middle and working classes, which significantly reduce government revenue, are primarily just another tax avoidance scheme for the well-off.

Our country both needs to and can afford to provide Social Security to its seniors. With all the challenges the middle and working classes are facing in saving for retirement, we should be strengthening Social Security and increasing its benefits, not cutting them as some people say we should.

[1]       You can watch the 3 minute video at: http://civic.moveon.org/expandsocialsecurity/share.html?id=116037-5637721-y4jZ7Rxn.

[2]       U.S. Government Accountability Office. 5/12/15. “Most Households Approaching Retirement Have Low Savings,” GAO-15-419: http://www.gao.gov/products/GAO-15-419

[3]       Ghilarducci, T., Spring 2015, “Senior class: America’s unequal retirement,” The American Prospect

BIG IDEAS TO HELP WORKING PARENTS

ABSTRACT: Working parents in the U.S. are struggling both to make ends meet and to be good parents. They need to be paid a reasonable wage so that full-time work provides a decent standard of living for their families (as it used to). Furthermore, employers and government should work together to ensure that workplaces are family-friendly. These are the first two topics of Ten Big Ideas to Save the Economy, presented by MoveOn.org and Robert Reich in 3 minute videos.

The first Big Idea is the Fight for $15 – the campaign for a $15 minimum wage. If the minimum wage had kept up with increases in productivity since 1968, the minimum wage would be over $21 per hour. If it had simply kept up with inflation it would be over $10 per hour. If we want to be a decent and fair society, we need to pay working parents a decent and fair wage. Also, a higher minimum wage would save employers money be reducing turnover.

The second Big Idea is a set of policies and practices that make work family-friendly. Working parents need:

  • Equal pay for women
  • Predictable schedules with regular hours
  • Reliable, high quality child care
  • Paid family leave

We don’t have a healthy society if we don’t have healthy families and we can’t have a strong country if we don’t have strong families. Providing basic economic security and family-friendly workplaces for our working parents is critical to having strong, healthy families. This is not only an essential investment in families and our economy, but also in our future – our children.

FULL POST: Working parents in the U.S. are struggling both to make ends meet and to be good parents. They need to be paid a reasonable wage so that full-time work provides a decent standard of living for their families (as it used to). Furthermore, employers and government should work together to ensure that workplaces are family-friendly. These are the first two topics of Ten Big Ideas to Save the Economy, presented in 3 minute videos by Robert Reich (President Clinton’s Secretary of Labor) and MoveOn.org (the progressive, grassroots organization promoting participation in our democracy).

The first of these ten commonsense ideas to make our economy work for everyone is the Fight for $15 – the campaign for a $15 minimum wage. A $15 per hour wage would mean that a full-time worker would make about $30,000 a year. [1] Even at this level, many families would still be struggling to make ends meet. Currently, with the federal minimum wage at $7.25, a third of all families live paycheck to paycheck. If, since 1968, the minimum wage had kept up with increases in workers’ productivity (how much the output of their work is worth), the minimum wage would be over $21 per hour. If it had simply kept up with inflation it would be over $10 per hour. If we want to be a decent and fair society, we need to pay working parents a decent and fair wage.

Minimum wage workers are not kids making a little spending money; half of them are over 35 years old, many are women, and many are supporting families. A higher minimum wage would save employers money be reducing turnover, which reduces the costs of recruiting and training new workers. A number of cities (e.g., Seattle, San Francisco, and Los Angeles) have made the commitment to raising their minimum wages to $15 an hour; the rest of the country should follow suit.

The second Big Idea is a set of policies and practices that make work family-friendly. [2] For starters, women should receive equal pay. Also, working parents need predictable schedules with regular hours so they can plan their families’ schedules and know how much income they will have. In some business sectors (such as retail sales, food service, and home care), the majority of workers don’t know their schedules a week in advance. Some only get a few hours’ notice and some show up at work and are told to go home (without any pay) because it’s a slow day. Many employers manage part-time workers’ schedules to make sure they don’t earn any overtime or qualify for benefits. [3]

Reliable, high quality child care, including for out-of-school time when parents are working, needs to be universally available and affordable. Parents (both mothers and fathers) should receive paid family leave when a new child joins the family and if a health emergency occurs.

The benefits of raising the minimum wage and instituting family-friendly workplace policies are broad and reach well beyond workers and their families. Employers would benefit from having more reliable, productive employees. Society (i.e., taxpayers) would also benefit, not only from improved economic efficiency, but also because the children of working parents would be more likely to be successful in school and in life. Other developed countries have implemented most if not all of these policies; we can too if we have the public will to make this a priority.

We don’t have a healthy society if we don’t have healthy families and we can’t have a strong country if we don’t have strong families. Providing basic economic security and family-friendly workplaces is critical to having strong, healthy families. Family values means supporting working parents, which also gives their children a fair chance to succeed. Helping working parents is not only an essential investment in our families and our economy, but also in our children who are the future of our nation and our economy.

[1]       You can watch the 3 minute video at: http://civ.moveon.org/fightfor15/share.html?id=114907-5637721-4VHTwex#watch.

[2]       You can watch the 3 minute video at: http://civic.moveon.org/helpworkingfamilies/share.html?id=115612-5637721-L2wvmQx#watch.

[3]       Loth, R., 5/29/15, “For workers, ‘flexible’ schedule means unpredictability,” The Boston Globe

WHY GOVERNMENT DOESN’T GET CREDIT FOR ITS SUCCESSES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

GOVERNMENT SUCCESSES RARELY GET ATTENTION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

STOP “TRADE” TREATIES THAT FAVOR BIG MULTINATIONAL CORPORATIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

OUR ELECTIONS ARE ALL ABOUT THE MONEY

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

PROGRESSIVE VALUES ARE ALIVE AND WELL IN THE U.S.

ABSTRACT: Despite Republicans taking over control of the U.S. Senate, progressive values are alive and well in the U.S. In a recent poll of likely 2016 voters, over 70% supported the following policies:

  • Medicare should be allowed to negotiate drug prices
  • Student loans should have lower interest rates
  • Pre-kindergarten and Medicare should be available to all
  • Trade agreements should protect workers, jobs, and the environment
  • Corporations that ship jobs overseas shouldn’t get tax breaks
  • The government should establish a $400 billion / year infrastructure-building jobs program
  • Public higher education should be debt-free and Social Security benefits should be expanded.

The full set of poll questions and results are available at: https://s3.amazonaws.com/s3.boldprogressives.org/images/Big_Ideas-Polling_PDF-1.pdf.

There also were many positive results on progressive ballot measures in the 2014 election. The question is, how did conservative Republicans get elected when they don’t reflect the will of the people? The four main answers are:

  • Turnout in the November election was very low
  • Many Democrats didn’t campaign on the progressive issues that are popular with voters
  • Gerrymandered electoral districts and our primary election system produce very ideological candidates who are not representative of the larger population
  • Voter suppression efforts by Republicans have succeeded in reducing voting by groups that tend to favor Democrats.

FULL POST: Despite Republicans taking over control of the U.S. Senate and therefore both branches of Congress, progressive values are alive and well in the U.S. The progressive policies that President Obama put forward in his State of the Union speech are much closer to what Americans want from their government than the conservative policy proposals the Republicans are espousing.

In a recent poll of likely voters in the 2016 election, over 70% supported the following policies:

  • Medicare should be allowed to negotiate drug prices with the pharmaceutical corporations
  • Student loans should have the same low interest rates as the big bank corporations get
  • Universal pre-kindergarten should be provided
  • Trade agreements should protect workers, jobs, and the environment
  • Corporations that ship jobs overseas shouldn’t get tax breaks
  • Medicare should be available to anyone who is willing to pay for it
  • Corporations should have to disclose spending on elections and lobbying
  • The government should establish a $400 billion / year infrastructure-building jobs program
  • Public higher education should be available to all debt-free
  • Social Security benefits should be expanded

There were other issues with over 70% support and many more with majority support. The full set of poll questions and results are available at: https://s3.amazonaws.com/s3.boldprogressives.org/images/Big_Ideas-Polling_PDF-1.pdf.

There also were many positive results on progressive ballot measures in the 2014 election, some of which I covered in my 11/25/14 post. Here are some more, thanks to Jim Hightower and his Hightower Lowdown newsletter (http://www.hightowerlowdown.org/).

In dozens of communities in at least five states (Florida, Illinois, Massachusetts, Ohio, and Wisconsin), voters supported overturning the Supreme Court’s Citizens United and related decisions that have allowed unlimited sums of money to be spent on election campaigns. These voters called for a Constitutional amendment that would state that corporations do not have the same rights as human persons and that money is not equivalent to speech and therefore can be regulated in election campaigns. Voters in Wisconsin, who re-elected conservative, Republican Governor Walker, nonetheless, voted overwhelmingly in 12 communities for this Constitutional amendment (between 70% and 83% in favor). [1]

Voters statewide in Massachusetts; in Oakland, CA; and in two New Jersey cities voted overwhelmingly to require employers to provide paid sick time (between 59% and 86% in favor). In Alaska, Florida, and New Jersey voters approved conservation initiatives.

Local bans on fracking [2] passed in two counties in California; in Athens, Ohio; and in Denton, Texas. In Denton, the supporters of the ban were out-spent almost 30 to 1, but, nonetheless, won 59% of the votes; a resounding victory, especially because Texas is a major oil and gas state.

Republicans have accused President Obama of being political in his State of the Union speech because he proposed policies that are popular with the public but not with the conservative Republicans who control Congress. This seems like convoluted logic to me. Isn’t democratic, representative government supposed to put in place policies that are popular with the public? It sounds like the Congressional Republicans are admitting that they are out of step with what the public wants. The polling and results of ballot measures cited above confirm this apparent admission.

The question is, how did conservative Republicans get elected when they don’t reflect the will of the people? The four main answers are:

  • Turnout in the November election was very low (only 25% of those eligible to vote actually voted),
  • Many Democrats didn’t campaign on the progressive issues that are popular with voters,
  • Gerrymandered electoral districts, particularly for the US House, and our primary election system where turnout is even lower than in the final election (less than 15% of eligible voters) tend to produce very ideological candidates for the final election who are not representative of the larger population, and
  • Voter suppression efforts by Republicans have succeeded in reducing voting by groups, such as minorities, the young, and the elderly, that tend to favor Democrats.

If you know of other examples of progressive local ballot initiatives that were approved by voters or other examples of Congress not representing the will of the people, please share them in a comment on this post. Thanks!

[1]       Hightower, J., Dec. 2014, “As majorities tossed meek, dodgy Democrats, even more said “Yes” to populist ballot measures,” The Hightower Lowdown (http://www.hightowerlowdown.org/

[2]       Fracking is short for hydraulic fracturing and is the process of drilling and injecting liquid made of water, sand, and chemicals into the ground at a high pressure in order to fracture shale rocks and release natural gas or oil.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE UNDERMINING OF THE MIDDLE CLASS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

GOVERNMENT BY THE BIG WALL ST. CORPORATIONS

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

CORPORATIONS ARE NOT PEOPLE AND MONEY IS NOT SPEECH

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SECRETS OF THE FY15 FEDERAL SPENDING BILL

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

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

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

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

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

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

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

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

Other provisions include:

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

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

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

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

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

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

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

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

WALL STREET BAILOUT REVIVED

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(You can contact your Representative and Senators by calling the Congressional switchboard at 202-224-3121. You can find contact information for your US Representative at http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm. You can email the President at http://www.whitehouse.gov/contact/submit-questions-and-comments. You can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PROGRESSIVE SUCCESSES IN THE 2014 ELECTION

ABSTRACT: Perhaps surprisingly, in the context of Republican and conservative candidates’ victories in the 2014 election, many ballot initiatives that were decidedly liberal or progressive passed. Democrats running clearly progressive campaigns for the US Senate won in 3 states. The Republican victories in many very close races were made possible by very low voter turnout. Only 35% of those registered to vote and 25% of those eligible to vote actually voted.

Voters in four Republican states – Arkansas, Alaska, Nebraska and South Dakota – raised the minimum wage despite concerted and well-funded opposition. In Richmond, California, progressives defeated mayoral and city council candidates heavily funded by Chevron, the nation’s third largest corporation. In Arkansas, despite a sweep by Republican candidates, a ballot initiative passed that reformed campaign finance and ethics laws. In Tallahassee, Florida, voters also approved reforms in campaign finance and ethics laws. In dozens of communities in four states (Florida, Illinois, Massachusetts, and Ohio), voters overwhelmingly favored ballot measures supporting a federal constitutional amendment that would state that corporations do not have the same rights as human persons and that money is not equivalent to speech and therefore can be regulate in election campaigns.

This all makes it clear that Republican candidates’ election victories do not reflect public opinion on many important policy issues. Rather, they were the result of a failure of many Democrats to campaign on popular progressive policies. Furthermore, the election outcomes reflect Republicans’ successes in changing the rules of our elections to suppress voter turnout and allow the spending of huge sums by wealthy corporations and individuals.

FULL POST: Perhaps surprisingly, in the context of Republican and conservative candidates’ victories in the 2014 election, many ballot initiatives that were decidedly liberal or progressive passed – sometimes even in the same jurisdictions that were electing conservatives. Furthermore, Democrats running for the US Senate who ran some of the most clearly progressive campaigns won: Senator Jeff Merkley (Democrat of Oregon), Senator Al Franken (D-Minn.), and incoming Senator Gary Peters (D-Mich.).

The Republican victories in many very close races were made possible by very low voter turnout – the lowest since 1942 – which favors Republicans and conservatives. Only 35% of those registered to vote and 25% of those eligible to vote actually voted. In the Congressional elections, Republicans won 52% of the vote, which represents only 17% of those registered to vote and 13% of those eligible to vote. [1] Hardly a mandate by normal standards. The Republican’s large majority in the US House is largely due to extreme gerrymandering of House districts.

Despite the context, every major progressive or Democratic ballot initiative won, even in Republican states. Every minimum wage increase won and every personhood amendment failed (CO & ND). (These are amendments to state Constitutions that confer personhood and all its rights on embryos at fertilization.) [2] Across the nation, voters also passed measures against fracking, for paid sick leave, for criminal justice sentencing reform, and for gun purchase background checks. [3]

Voters in four Republican states – Arkansas, Alaska, Nebraska and South Dakota – raised the minimum wage against the concerted and well-funded opposition of national and local big business groups. This will raise the pay levels for over 1.7 million workers. Alaska and South Dakota linked the minimum wage to inflation, so it will increase automatically in the future. San Francisco and Oakland voters also overwhelmingly increased the minimum wage in those cities. Illinois voters strongly supported a non-binding referendum to raise the minimum wage.

In Richmond, California, progressives defeated mayoral and city council candidates funded by Chevron, the nation’s third largest corporation. Chevron, which owns a huge refinery in the city, poured at least $3 million into the local elections in this working class city of 105,000 people (about $150 for each likely voter). It sought to oust a progressive local government that was requiring it to clean up its pollution, pay more taxes into city coffers, and be a more responsible and accountable corporate citizen. Wall St. corporations also participated in the attempt to throw out the progressives because the city government, faced with a decade of predatory lending and an epidemic of foreclosures and “underwater” mortgages, demanded that Wall Street banks help troubled homeowners save their homes. In the election, community groups, labor unions, the Richmond Progressive Alliance (RPA), and others mobilized a grassroots campaign to re-elect a progressive city government. [4]

A California ballot initiative reformed sentencing laws and one in Washington State expanded criminal background checks for gun purchases. In Arizona, voters defeated a right wing attempt to undermine public employee pensions. In Denton, Texas, the heart of oil and gas country, voters banned fracking, the controversial drilling method for extracting gas from rock formations.

In Arkansas, despite a sweep by Republican candidates, a ballot initiative passed that reformed campaign finance and ethics laws. It bans direct corporate and union campaign contributions to candidates, forbids lawmakers from accepting gifts of any kind from lobbyists, and increases the amount of time departing lawmakers must wait before lobbying from one to two years.

In Tallahassee, Florida, voters overwhelmingly approved an anti-corruption initiative limiting campaign contributions, creating a $25 tax rebate for small contributions, and boosting ethics reforms by creating an ethics panel and a tough conflict-of-interest policy for city officials. In dozens of communities in four states (Florida, Illinois, Massachusetts, and Ohio), voters overwhelmingly favored ballot measures supporting a federal constitutional amendment overturning Supreme Court decisions including Citizens United and McCutcheon. The amendment would state that corporations do not have the same rights as human persons and that money is not equivalent to speech and therefore can be regulated in election campaigns. [5]

This all makes it clear that Republican candidates’ election victories do not reflect public opinion on many important policy issues. Rather, they were the result of a failure of many Democrats to campaign on popular progressive policies. Furthermore, the election outcomes reflect Republicans’ successes in changing the rules of our elections to favor big business and conservative interest groups by suppressing voter turnout and allowing the spending of huge sums by wealthy corporations and individuals. [6]

[1]       Murphthesurf3, 11/20/14, “GOP columnist: The VERY bad news for the GOP in the GOP’s midterm victory,” The Daily Kos

[2]       Ladd, C., 11/10/14, “The missing story of the 2014 election,” Houston Chronicle

[3]       Dreier, P., 11/7/14, “Progressive Midterm Victories You Didn’t Hear About — And Some That Could Still Happen,” The American Prospect

[4]       Dreier, P., 11/7/14, see above

[5]       Blumenthal, P., 11/14/14, “Where campaign finance reformers actually won on election day,” The Huffington Post

[6]       Dreier, P., 11/7/14, see above

2014 ELECTION RETROSPECTIVE PART 1: THE MONEY

ABSTRACT: In the 2014 election, the influx and impact of huge amounts of money was clearly evident and the growth of “dark money” – money where the actual contributor is unknown – was a very significant factor. This was the most expensive non-presidential election ever – estimated at $3.7 billion. Outside spending, that is money not spent by the candidates’ campaigns themselves but by supposedly independent groups and the political parties, was more than the spending by the candidates themselves for the first time. This means that accountability for much of what’s said during campaigns no longer rests with the candidates. One facet of this is that a predominant portion of the ads paid for by outside money are negative ads that attack a candidate. These campaign practices undermine both the functioning of and the faith in our democracy.

Roughly a billion dollars was spent on the 36 US Senate races alone – an average of about $30 million each. In the 11 most competitive races for the US Senate, $342 million of non-party outside money was spent with $203 million of this (59%) being “dark money” where the true donor is unknown. The typical contribution to the 5 largest non-party outside spending entities that disclose donors was over $100,000.

The real money story of this election was not which side had more resources, but that such a large chunk of the cost was paid for by a small group of ultra-wealthy donors. By super-sizing contributions that benefit specific candidates, the likelihood of corruption escalates because elected officials are pressured to repay big donors after the election.

The results of the Supreme Court’s Citizens United and other decisions couldn’t be clearer. Hundreds of millions of dollars from undisclosed donors are flooding our elections. Very wealthy donors are contributing millions of dollars. There is very strong evidence that this money is influencing who wins our elections, because the candidate supported by the most money usually wins. This was true for 94% of US House races and 82% of US Senate races in 2014.

There is also strong evidence that our Congress returns the favor by supporting the wealthy interests that funded their elections and put them in office – to the detriment of the middle and working classes. We need look no further than Wall St. to see the evidence: corporate profits, stock prices, CEO pay, and investors’ wealth have never been higher. Yet, the middle and working class still struggle to make ends meet.

This is not democracy. We need to reverse the Supreme Court’s decisions through a Constitutional Amendment. In the meantime we need much stronger disclosure laws for campaign spending so we know who is trying to influence our votes. More on this next time.

FULL POST: In the 2014 election, the influx and impact of huge amounts of money was clearly evident and the growth of “dark money” – money where the actual contributor is unknown – was a very significant factor.

In this post, I will review the role of money in the 2014 national election. In a subsequent post, I’ll identify ways we can address the corrupting and undemocratic flow of huge sums of money into our elections. Further analysis of the 2014 election in future posts will cover some state and local elections results, as well as the success of progressive candidates and ballot initiatives (despite the general, national success of “conservative” and Republican candidates).

This was the most expensive non-presidential campaign ever – estimated at $3.7 billion. Outside spending, that is money not spent by the candidates’ campaigns themselves but by supposedly independent groups and the political parties, was more than the spending by the candidates themselves for the first time. This means that accountability for much of what’s said during campaigns no longer rests with the candidates. They can – and do – say that they have no control over the outside groups. With increasing amounts of outside spending, and especially the growth of spending by groups that do not have to disclose contributors, accountability for and constraints on what is said vanish. One facet of this is that a predominant portion of the ads paid for by outside money are negative ads that attack a candidate. This tends to discourage people from voting and lowers their opinions of our elected officials and government. These campaign practices undermine both the functioning of and the faith in our democracy.

Roughly a billion dollars was spent on the 36 US Senate races alone – an average of about $30 million each. North Carolina’s Senate race was the most expensive ever with $116 million spent, including $84 million of outside spending – which shattered the previous outside spending record of $52 million. Spending on the 10 most expensive US House races averaged over $16 million each. [1]

In the 11 most competitive races for the US Senate, [2] $342 million in non-party outside money was spent, plus $89 million from the political parties. The non-party, outside spending on just these 11 races is one-third more than the outside spending on all 33 Senate races in 2012. Of the $342 million of non-party outside money, $203 million (59%) was “dark money” where the true donor is unknown. And this “dark money” may have tipped these elections, as winners of these races received twice as much “dark money” as the losers. For the 8 Republican winners, an average of 78% of their non-party, outside money was “dark money.” [3]

Non-party outside spending is NOT funded by regular voters. The typical contribution to the 5 largest non-party outside spending entities that disclose donors was over $100,000. For sake of comparison, this is more than the average household income in the US, which is $73,000. Of the top 20 outside spending groups, which together spent over $300 million, 7 provide no disclosure of donors, 5 provide partial disclosure, and only 8 provide full disclosure (2 of which are the national parties). [4]

To get an idea of the huge amounts these large donors give:

  • The top 20 individual donors to outside groups gave an average of $8.4 million each, while
  • The top 20 organizations donating to outside groups gave an average of $5.8 million each.

All told, these two groups of 40 donors gave a combined $284.7 million, which far exceeds the projected spending of either of the national parties. [5]

This election documented again that money is a deciding factor. When “conservative” outside groups outspent “liberal” groups, the “conservative,” i.e., Republican, candidate won every time. [6] However, the real money story of this election was not which side had more resources, but that such a large chunk of the cost was paid for by a small group of ultra-wealthy donors. [7]

A particular type of outside spending that is of special concern is candidate-specific super PACs. Big donors are using these groups to evade limits on contributions directly to candidates. By super-sizing contributions that benefit specific candidates, the likelihood of corruption escalates because elected officials are pressured to repay big outside donors after the election. [8]

The results of the Supreme Court’s Citizens United and other decisions couldn’t be clearer. Hundreds of millions of dollars from undisclosed donors are flooding our elections. Very wealthy donors are contributing millions of dollars. There is very strong evidence that this money is influencing who wins our elections, because the candidate supported by the most money usually wins. This was true for 94% of US House races and 82% of US Senate races in 2014.

As others have said, we have the best Congress money can buy. There is also strong evidence that our Congress returns the favor by supporting the wealthy interests that funded their elections and put them in office – to the detriment of the middle and working classes. We need look no further than Wall St. to see the evidence: corporate profits, stock prices, CEO pay, and investors’ wealth have never been higher. Yet, the middle and working class still struggle to make ends meet.

This is not democracy. We need to reverse the Supreme Court’s decisions through a Constitutional Amendment. In the meantime we need much stronger disclosure laws for campaign spending so we know who is trying to influence our votes. Unfortunately, Congress is very unlikely to strengthen disclosure laws, so it will be up to each state to do so.

More on what’s being done to address these issues, and on what you can do, in an upcoming post.

[1]       Waldman, P., 11/11/14, “This year’s biggest spenders,” The American Prospect

[2]       Alaska, Arkansas, Colorado, Georgia, Iowa, Kansas, Kentucky, Louisiana, Michigan, New Hampshire, and North Carolina.

[3]       Vandewalker, I., 11/10/14, “Outside spending and dark money in toss-up Senate races: Post-election update,” Brennan Center for Justice (http://www.brennancenter.org/analysis/outside-spending-and-dark-money-toss-senate-races-post-election-update)

[4]       Vandewalker, I., 11/10/14, see above

[5]       OpenSecrets.org, 10/29/14, “Overall Spending Inches Up in 2014: Megadonors Equip Outside Groups to Capture a Bigger Share of the Pie,” Center for Responsive Politics (http://www.opensecrets.org/news/2014/10/overall-spending-inches-up-in-2014-megadonors-equip-outside-groups-to-capture-a-bigger-share-of-the-pie/)

[6]       Miller, J., 11/5/14, “Top 5 Senate races where dark money and outside spending ran wild,” The American Prospect

[7]       Choma, R., 11/5/14, “Money won on Tuesday, but rules of the game changed,” Center for Responsive Politics (https://www.opensecrets.org/news/2014/11/money-won-on-tuesday-but-rules-of-the-game-changed/)

[8]       Vandewalker, I., 10/21/14, “Election Spending 2014: 9 Toss-Up Senate Races,” Brennan Center for Justice (http://www.brennancenter.org/publication/election-spending-2014-9-toss-senate-races)

AN ALTERNATIVE ECONOMIC MODEL

ABSTRACT: Worker cooperatives, where a business is owned and run by its workers, are gaining attention as a way to provide jobs and better pay for low wage workers. New York City recently established a Worker Cooperative Business Development Initiative and provided $1.2 million in funding for it.

According to the US Federation of Worker Cooperatives (http://www.usworker.coop/), there are more than 300 co-ops in the US today. One of the largest is the 2,300 member Cooperative Home Care Associates in the Bronx. Internationally, perhaps the best known worker co-op is the Mondragon Cooperative Corporation in Spain, which employs over 80,000 people in 289 companies, 110 of which are co-ops.

In New York City, in the aftermath of the 2008 Great Recession, the Federation of Protestant Welfare Agencies (FPWA), a 90-year old anti-poverty association of 200 religious groups and community organizations, sought new ways to address high unemployment and poverty. FPWA studied co-ops around the world and concluded that to get a strong co-op economy going a public investment was needed. It used its contacts, clout, and political savvy to lobby city government to provide seed money. When Bill de Blasio became Mayor in 2014, he proclaimed June 21 “New York Worker Cooperative Day.” On June 26, the City Council voted $1.2 million for the Worker Cooperative Business Development Initiative.

This seed funding is needed because worker co-ops are more difficult to start than regular businesses. However, once established, they tend to be very sustainable. New York City hopes worker co-ops will reduce unemployment, poverty, and inequality while promoting democracy in the workplace.

FULL POST: You don’t hear much about worker cooperatives as an alternative economic model in the US. However, these co-ops, where a business is owned and run by its workers, are gaining attention as a way for social service agencies and city governments to provide jobs and better pay for low wage workers.

New York City recently established a Worker Cooperative Business Development Initiative and provided $1.2 million in funding for it. It will establish 28 new worker cooperatives, create 234 jobs, and provide education, training, and support to 20 existing co-ops. [1] (See more information on this initiative below.)

The history of worker cooperatives in the US goes back to the Knights of Labor in the late 1800s. At that time, roughly 200 co-ops existed in industries from clothing mills to mines, and from foundries to manufacturing. By the turn of the century, they were crushed by big business’s drive to eliminate competition. The for-profit businesses accomplished this by refusing to ship the co-ops’ goods, sell them materials or machinery, or give them loans.

African Americans, particularly farmers, needing an alternative to the corporate economy that largely excluded them, had established well over 100 co-ops by early in the 20th century. These co-ops faced numerous obstacles and opponents, however efforts in the Black community to support an alternative economy persisted throughout much of the 20th century.

The federal government fostered co-ops as part of the New Deal after the Great Depression, but these faded away after World War II. Worker cooperatives enjoyed a resurgence in the rebellion against the establishment of the 1960s and 70s. Some of the co-ops founded then survive today.

According to the US Federation of Worker Cooperatives (http://www.usworker.coop/), there are more than 300 co-ops in the US today, ranging from taxi, engineering, architecture, and computer businesses to ones in cleaning and construction. They are spread across the country, with 56 in California, 40 in New York, and 35 in Massachusetts.

One of the largest worker co-ops is the 2,300 member Cooperative Home Care Associates in the Bronx. One of that received quite a bit of attention not too long ago is the Chicago-based New Era Windows Cooperative. It was formed after laid off workers occupied the factory that Republic Windows and Doors announced it was closing in 2008 when the company tried to move the factory’s work to a different company with a non-unionized workforce.

Internationally, perhaps the best known worker co-op is the Mondragon Cooperative Corporation in Spain. Started in 1956, today it employs over 80,000 people in 289 companies, 110 of which are co-ops. During the Great Recession of 2008, it fared better than most companies and instead of laying off workers, it engaged in creative solutions and re-training to keep all its workers employed.

In New York City, in the aftermath of the 2008 Great Recession, the Federation of Protestant Welfare Agencies (FPWA), a 90-year old anti-poverty association of 200 religious groups and community organizations, sought new ways to address high unemployment and poverty. It contacted the Center for Family Life, which had incubated 4 successful worker cooperatives since 2006. One of those co-ops, Si Se Puede (Yes, we can), a home and office cleaning company with 64 member-owners, has tripled wages for its mostly female, minority members while growing to a $1 million a year business in 8 years.

FPWA studied co-ops around the world and concluded that to get a strong co-op economy going a public investment was needed. It used its contacts, clout, and political savvy to lobby city government to provide seed money. It formed the Coalition for Worker Cooperatives for New York City, produced a policy report “Worker Cooperatives for New York City: A Vision for Addressing Income Inequality,” and organized a conference targeting city officials. The Coalition worked to gain the support of city councilors and organized a Co-op Advocacy Day held on the steps of City Hall.

When Bill de Blasio became Mayor in 2014, he proclaimed June 21 “New York Worker Cooperative Day.” On that day, the first annual NYC worker co-op conference was held, titled “Economic democracy and economic justice: A tale of a new city.” On June 26, the City Council voted $1.2 million for the Worker Cooperative Business Development Initiative.

This seed funding is needed because worker co-ops are more difficult to start than regular businesses. Typically, their members have little business experience or training and tend to be low-income, immigrants and minorities, and often women. However, once established, they tend to be very sustainable. The workers tend to have lower turnover, be more productive, and report greater satisfaction with their jobs. In Canada, where there is a sizable cooperative business sector, worker co-ops have lifespans four times longer than conventional businesses.

New York City’s government has taken an innovative step to promote economic development targeting the people who need it the most. It hopes worker co-ops will reduce unemployment, poverty, and inequality while promoting democracy in the workplace. Hopefully, they’ll be successful and other cities and states in the US will follow suit in building worker cooperatives as an alternative economic model to corporate capitalism.

[1]       Ifateyo, A.N., Sept. 2014, “A co-op state of mind,” In These Times (This post is largely a summary of this article.)

POLICY INNOVATION IN OUR CITIES

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

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

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

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

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

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

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

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

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

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

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

VOTING MATTERS

ABSTRACT: Election Day is just over a week away. Although it’s easy to look at the dysfunction in Washington and the huge amounts of money being spent on campaigns and feel that voting and participating in the election doesn’t matter, that would be wrong. There will be lots of close elections this year all across the country – both for elected officials and for citizen’s initiatives that will be on the ballot. There are vested interests, usually corporations and wealthy individuals, and in many cases the Republicans have been their allies, who are trying to keep or discourage people from voting. Therefore, it is important to get out and vote, and to encourage others to do so, to send a message that these efforts to suppress voting, which are blatantly anti-democratic, won’t work.

There are many good candidates and important citizens’ initiatives on the ballot that deserve and need our votes. Even if there aren’t candidates or ballot questions that are important to vote for in your district, you can make phone calls to encourage people to vote (in your district or others) and you can donate money to out-of-your-district candidates that share your views or to organizations that support your views. If you want to support progressive candidates, an easy way to do so is through the Progressive Change Campaign Committee (PCCC) at http://boldprogressives.org/. Move On.org is another, similar organization that you can support through donations, signing their petitions on a range of issues, or supporting out-of-your-district candidates through them: http://front.moveon.org/.

This is going to be a close election at the local level and nationally. The implications for our democracy are extremely significant. We need to send a message to our politicians that we, the voters, are the voice of democracy and that we want government that works. They need to know that we want them to represent our interests, not those of large corporations and the very wealthy.

FULL POST: Election Day is just over a week away. Although it’s easy to look at the dysfunction in Washington and the huge amounts of money being spent on campaigns and feel that voting and participating in the election doesn’t matter, that would be wrong.

There will be lots of close elections this year all across the country – both for elected officials and for citizen’s initiatives that will be on the ballot – where a few voters will make all the difference. The results in these races will matter. Moreover, there are vested interests, usually corporations and wealthy individuals, and in many cases the Republicans have been their allies, who are trying to keep or discourage people from voting. They do so because they know that their supporters will vote and the lower they can keep the voter turnout, the more likely they are to win.

They work to keep voting down in two main ways. First, they enact laws and voting procedures that make it harder to vote. These voting barriers primarily affect low income and minority voters. They also disproportionately affect seniors and women. These groups are more likely to vote for progressive politicians and policies, as well as for Democrats. Therefore, these wealthy and corporate interests want to reduce voting by people in these groups. [1] [2] [3]

Second, the wealthy and corporate interests engage in massive funding of negative campaign ads. These discourage voters and make them cynical. They also introduce doubts into voters’ minds about good candidates. The huge number of these negative ads and their repetition drowns out other information and shifts voters’ perceptions even when the message presented is distorted or false. This applies to ballot questions as well as candidates.

Therefore, it is important to get out and vote, and to encourage others to do so, simply to send a message that these efforts to suppress voting, which are blatantly anti-democratic, won’t work. The higher the voter turnout, the closer we are to having the true democracy that is America’s ideal.

There are many good candidates on the ballot that deserve and need our votes. In some cases, it may not be an ideal candidate, but there often are significant differences between the candidates, nonetheless. There also are important citizens’ initiatives or questions on the ballot that will make important policy changes. [4]

Even if there aren’t candidates or ballot questions that are important to vote for in your district, there are two things you can do to help candidates in other districts, if you are so motivated. You can make phone calls to encourage people to vote (i.e., get out the vote or GOTV calls) in your district or others. These are very important because without a Presidential election on the ballot turnout tends to be low, and, as I mentioned above, there are active efforts to keep and discourage people from voting. Therefore, encouragement to get out and vote can make a difference.

The other thing you can do is donate money to out-of-your-district candidates that share your views or to organizations that support your views. Any amount helps. If many people give just $5.00, it can add up to a significant amount.

If you want to support progressive candidates – what some people are referring to as the Elizabeth Warren wing of the Democratic Party – an easy way to do so is through the Progressive Change Campaign Committee (PCCC) at http://boldprogressives.org/. Key issues for PCCC are taking back our democracy from wealthy individuals and corporations, expanding Social Security, fixing Wall St., and addressing the burden of student loan debt. If you click on the collage of four faces at the top of their web page, you will get a list of candidates they support. You can easily decide which ones you’d like to support and how much to contribute (as little as $3). If you click on the Call Out The Vote box right next to the faces, you’ll be given information on how you can make GOTV calls.

Move On.org is another organization that you can support through donations, signing their petitions on a range of issues, or supporting out-of-your-district candidates through them: http://front.moveon.org/. They support issues and candidates that are similar to those of PCCC.

This is going to be a close election at the local level and nationally. The implications for our democracy are extremely significant. We need to send a message to our politicians that we, the voters, are the voice of democracy and that we want government that works. They need to know that we want them to represent our interests, not those of large corporations and the very wealthy.

[1]       Moyers, B., 10/24/14, “The Fight — and the Right — to Vote,” Moyers & Company (http://billmoyers.com/episode/fight-right-vote/)

[2]       Boston Globe Editorial, 10/18/14, “Voter ID laws: Study proves the obvious,” The Boston Globe

[3]       Dubose, L., 9/1/14, “The party of Lincoln takes aim at Black voters,” The Washington Spectator

[4]       Hightower, J., Oct. 2014, “Election 2014: A politics that matters is bubbling up,” The Hightower Lowdown (http://www.hightowerlowdown.org/)

HOLDER’S FAILURE AT JUSTICE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WHAT IT WILL TAKE TO ADDRESS THE PROBLEMS WE FACE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE CORPORATE EDUCATION INVASION Part 2

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE CORPORATE EDUCATION INVASION Part 1

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TITLE: CORPORATOCRACY OR DEMOCRACY?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

40 YEARS OF CLASS WARFARE

ABSTRACT: Class warfare has been going on in the US for 40 years, but most people either haven’t realized that it is class warfare, or deny its existence. Inequality between the wealthy, elite class and the middle and working class has grown dramatically. This is the result of policy decisions made by federal and state governments not the accidental or inevitable result of non-political events or changes in our economy.

Since 1979, workers’ productivity has grown by 65% but their median pay has grown by only 8%. Large employers’ profits after taxes have increased 239% since 1980.

Since the 1970s, changes in government policies have tended to reward corporations, their executives and investors, at the expense of workers. Trade policies, deregulation, tax policies, and labor laws are key examples. As the incomes of the richest 1% have grown dramatically, the income tax rate for those with the highest incomes has been reduced from 70% to 39%, with even lower rates on income from investments (as opposed to income from work). Meanwhile, the minimum wage has failed to even keep up with inflation.

Increasing incomes for the working and middle class doesn’t just benefit them and their families, it will benefit the whole economy by increasing the purchasing power of the average consumer. Consumer spending is two-thirds of our economy.

It’s time to acknowledge that 40 years of class warfare has occurred, that government policies have been its weapons, and that tremendous (and growing) inequality has been the result. It’s time to work to improve the pay, benefits, and job security of the working and middle class. And it’s time for our wealthy individuals and corporations to pay their fair share of our taxes. Policy changes to achieve these results are possible and will be essential to strengthening our economy and reducing the startling inequality present in America today.

FULL POST: Class warfare has been going on in the US for 40 years, but most people either haven’t realized that it is class warfare, or deny its existence. The incomes and wealth of the wealthiest individuals and families in the US have grown dramatically, while the vast majority of Americans have seen their incomes stagnate, at best, and their wealth fall with the crash of home prices and the financial system in 2008. Large employers’ profits have grown significantly as well, while workers’ pay has stagnated or fallen.

As a result, inequality between the wealthy, elite class and the middle and working class has grown dramatically. This is the result of policy decisions made by federal and state governments, driven by wealthy campaign donors and lobbyists. It is not the accidental or inevitable result of non-political events or changes in our economy.

It used to be that as our economy and worker productivity grew, the rising tide lifted all boats. From 1947 to 1973, workers’ productivity grew by 97% and their median pay grew by 95%. That changed in the 1970s when the 40 years of class warfare began. Since 1979, workers’ productivity has grown by 65% but their median pay has grown by only 8%. The share of the national economy’s income going to workers in wages and salaries has declined from 67% (where it had been for decades) to 58% (the lowest level since this statistic has been recorded). Meanwhile, the share going to corporate profits is at a record high. [1] Large employers’ profits after taxes have increased 239% since 1980. [2]

Since the 1970s, changes in government policies have tended to reward corporations, their executives and investors, at the expense of workers. Trade policies, deregulation, tax policies, and labor laws are key examples. These policy changes have allowed and provided incentives for corporations to shift jobs overseas, reducing jobs and wages in the US. Financial deregulation has benefited Wall St. corporations and executives while hurting average American homeowners, credit card holders, and borrowers. Small businesses have been hurt by trade policies, deregulation, and tax policies that favor big corporations.

Changes in labor laws have shifted the balance of power toward employers, especially large employers, at the expense of workers. The use of part-time workers, “temporary” employees, and “independent” contractors instead of full-time employees has stripped workers of job security, benefits, and labor law protections, including the ability to unionize.

During the first 30 years of this class warfare, workers made up for the lack of income growth by working more hours (especially by women in two-parent households) and by borrowing, most notably against their homes (mortgages, second mortgages, and home equity loans), through their credit cards, and for the costs of higher education. Then, the Great Recession hit and the incomes and assets (primarily homes) of the middle and working class crumbled.

The result of this multi-faceted warfare against the working and middle class is the following (all figures adjusted for inflation):

  • Bottom 90% of the US population
    • Average household income: $31,000, down 24% since 1980
  • Top 10%
    • Average household income: $175,000, up 46% since 1980
  • Top 1%
    • Average household income: $700,000, up 124% since 1980

The top 10% of Americans as a group now have as much income as the bottom 90% for the first time in 100 years. And the average US CEO’s salary is now 331 times the average workers’ pay. [3] The inequality in wealth is even greater than the inequality in income; the top 1% have 76% of wealth in the US.

If the incomes of all classes had grown at the same rate since 1979, low and middle income families would be earning $6,000 – $8,000 more each year than they are. [4]

In perhaps the starkest example of this class warfare, as the incomes of the richest 1% have grown dramatically, and as inequality has grown dramatically, the income tax rate for those with the highest incomes has been reduced from 70% to 39%. And many of those with the highest incomes pay a far lower effective income tax rate because of tax loopholes (such as offshore tax havens) and even lower rates on income from investments (as opposed to income from work).

Another stark example of this class warfare is that as upper incomes have soared, the minimum wage has failed to even keep up with inflation. This is a clear example of the eroding power of workers and a significant factor underlying their eroding incomes. Although successful efforts to increase the minimum wage have recently occurred in some states and cities, this is only one piece of a much larger puzzle. Much more will need to be done if workers are to regain the financial well-being and stability they enjoyed from the end of World War II until the 1970s.

Increasing incomes of the working and middle class doesn’t just benefit them and their families, it will benefit the whole economy by increasing the purchasing power of the average consumer. Consumer spending is two-thirds of our economy and the current economic recovery has been slow and weak because consumers simply don’t have money to spend.

It’s time to acknowledge that 40 years of class warfare has occurred, that government policies have been its weapons, and that tremendous (and growing) inequality has been the result. It’s time to work to improve the pay, benefits, and job security of the working and middle class. And it’s time for our wealthy individuals and corporations to pay their fair share of our taxes. Policy changes to achieve these results are possible and will be essential to strengthening our economy and reducing the startling inequality present in America today.

[1]       Meyerson, H., July / August 2014, “Why Democrats need to take sides,” The American Prospect

[2]       Gilson, D., Sept. / Oct. 2014, “Survival of the richest,” Mother Jones

[3]       In These Times, Sept. 2014, “Just the facts,” In These Times

[4]       Horowitz, E., 8/23/14, “Mass. Economy still hasn’t rebounded,” The Boston Globe

OBAMACARE IS WORKING!!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WHERE O WHERE HAS INVESTIGATIVE JOURNALISM GONE?

ABSTRACT: Investigative journalism, especially by the mainstream media, is rare these days. Yet it is critical to an informed citizenry, which in turn is critical to a successful democracy. On a recent Bill Moyers TV show, “The lies that lead to war,” Moyers and his guest, investigative journalist Charles Lewis, explore the value of investigative journalism and the reasons for its scarcity. Currently, Lewis says, the media largely just report what those in positions of authority and power tell them, with very little analysis or commentary.

Part of the reason for this is that the corporate, for-profit mainstream media have cut the budgets and staffing of news operations and investigative journalism. The media also have a conflict of interest: they don’t want to alienate elected and corporate officials because they want them as sources for stories and appearances on TV shows.

The Obama administration has been very aggressive in discouraging the leaking of information to members of the media. It has prosecuted leakers. The likelihood that leakers will be caught is high given the extensive surveillance that’s in place. In addition, the Obama administration has been very aggressive in prosecuting investigative journalists. Obama has used the Espionage Act against journalists far more than any other president.

We need good and unintimidated investigative journalism. The whole reason for including freedom of the press in the Bill of Rights was so that the media could report information that those in power and with authority might want to keep hidden. Knowledge in the hands of an informed citizenry is essential to the success of democracy.

FULL POST: Investigative journalism, especially by the mainstream media, is rare these days. Yet it is critical to an informed citizenry, which in turn is critical to a successful democracy. Investigative journalism uncovers and publicizes revealing information not available elsewhere that often has been purposely kept from the public.

According to Wikipedia, “Investigative journalism is a form of journalism in which reporters deeply investigate a single topic of interest, such as serious crimes, political corruption, or corporate wrongdoing. An investigative journalist may spend months or years researching and preparing a report. … In many cases, the subjects of the reporting wish the matters under scrutiny to remain undisclosed. … [Investigative journalists work] to discover the truth and to identify lapses from it.” [1]

On a recent Bill Moyers TV show, “The lies that lead to war,” Moyers and his guest, investigative journalist Charles Lewis, explore the value of investigative journalism and the reasons for its scarcity. [2] Lewis’s recent book, “935 Lies: The future of truth and the decline of America’s moral integrity,” documents the lies that led to the Vietnam and Iraq wars. In both cases, there was a pattern of knowing deception and an orchestrated campaign of lies by Presidents Johnson and G.W. Bush and their administrations that led to these wars of choice. And in both cases, the mainstream media failed, for the most part, to engage in the timely investigative journalism that would have exposed the deception.

Lewis states that the failure of the media to expose deception by public and private officials has gotten worse over time. Currently, he says, the media largely just report what those in positions of authority and power tell them, with very little analysis or commentary.

Part of the reason for this is that the corporate, for-profit mainstream media, in the interests of profitability, have cut the budgets and staffing of news operations and investigative journalism. The media also have a conflict of interest: they don’t want to alienate elected and corporate officials because they want them as sources for stories and appearances on TV shows. Therefore, the media avoid asking them tough questions or engaging in reporting that would embarrass them or cast them in a negative light.

The Obama administration has been very aggressive in discouraging the leaking of information to members of the media. It has prosecuted leakers. The likelihood that leakers will be caught is high given the extensive surveillance of phone calls and emails, the ability to track cell phones’ locations, and the thousands of surveillance cameras in Washington (and elsewhere). Leaked information is essential to investigative journalism, so these aggressive anti-leaking efforts make investigative journalism much more difficult.

In addition, the Obama administration has been very aggressive in prosecuting investigative journalists. Obama has used the Espionage Act against journalists far more than any other president. Nixon used it only once, against Daniel Ellsberg who leaked the Pentagon Papers. Obama has used it eight times. Obama says he supports a shield law for reporters that would protect the confidentiality of their sources, but he is criminalizing investigative reporting by prosecuting leakers and the journalists with whom they share information.

Currently, James Risen, an investigative journalist for the New York Times, is being threatened with jail by the Obama administration for refusing to identify a source he used in his book, “State of War,” about the secret campaign against the Iranian nuclear program. Risen, one of only about a dozen reporters that focus on national security issues, co-authored stories about domestic surveillance that won him a Pulitzer Prize in 2005.

The Obama administration wants to prosecute the person who leaked information to Risen. It knows who the leaker is, but it doesn’t want to have to reveal the intelligence and surveillance tools it used to identify him. Those tools may be illegal or may appear to be unseemly ways of monitoring government employees. Therefore, it wants to force Risen to reveal his source.

In the case of Eric Snowden, who leaked the information on the National Security Agency’s (NSA) extensive surveillance of Americans and others, he has had to take asylum in Russia to avoid prosecution. The investigative journalists who have published his material have had to work from and remain overseas, while taking extraordinary steps to keep their phone and email communications, as well as their computers and the leaked files on them, from being hacked into by the NSA and the US intelligence agencies.

We need good and unintimidated investigative journalism. The whole reason for including freedom of the press in the Bill of Rights was so that the media could report information that those in power and with authority might want to keep hidden. Knowledge in the hands of an informed citizenry is essential to the success of democracy.

[1]       Retrieved from Wikipedia on 8/5/14, “Investigative journalism,” http://en.wikipedia.org/wiki/Investigative_journalism

[2]       Moyers, B., with Lewis, C., 6/27/14, “The lies that lead to war,” Moyers and Company (http://billmoyers.com/episode/the-truth-vs-dcs-propaganda-machine/)

THE BIGGEST LOSERS IN DETROIT’S BANKRUPTCY

ABSTRACT: The biggest losers in Detroit’s bankruptcy appear to be school children, current and former city employees, and poor residents. The emergency plan for Detroit’s public schools calls for increasing class sizes from 38 to 43 students in grades 6 – 12. Spending on classroom instruction has been cut 19% (falling from 58% of the school budget to 47%), while spending on central administration has grown by 64%. Detroit’s workers and retirees have agreed to accept cuts in their pensions.

Since March, over 15,000 households in Detroit have had their water cut off. While residents’ water has been shut off if they owe more than $150, 40 commercial users that owe a total of $9.5 million have not been shut off.

This country spent hundreds of billions of dollars to bail out huge financial corporations (that had engaged in egregious misconduct) so that they wouldn’t go bankrupt. We should be able to help poor and unemployed residents of Detroit so their water isn’t shut off, to ensure Detroit’s children get a good education, and to provide reasonable cost of living increases for city employees’ pensions – all for a tiny fraction of the cost of the bank bailout.

FULL POST: The biggest losers in Detroit’s bankruptcy appear to be school children, current and former city employees, and poor residents.

The emergency manager of Detroit’s public schools has put forward his emergency plan. It calls for increasing class sizes from 38 to 43 students in grades 6 – 12. Since control of the budget was removed from the elected school board, spending on classroom instruction has been cut 19% (falling from 58% of the school budget to 47%). Meanwhile, spending on central administration has grown by 64%. [1]

Detroit’s workers and retirees have agreed to accept cuts in their pensions (reluctantly I’m sure). Regular municipal employees’ pensions would be cut by 4.5% and they will get no annual inflation adjustments. (The average municipal workers’ pension is less than $23,000 per year.) Police and firefighters will lose only a portion of their annual inflation adjustment. [2]

Since March, over 15,000 households in Detroit have had their water cut off. The Detroit Water and Sewage Department has announced plans to shut off up to 3,000 households per month. A recent 15 day moratorium on some shutoffs was announced, but it is temporary and some shutoffs will continue. A human rights complaint has been filed with the United Nations, where a spokesperson noted that, “when there is genuine inability to pay, human rights forbids disconnections.” While residents’ water has been shut off if they owe more than $150, 40 commercial users that owe a total of $9.5 million have not been shut off. For example, the water is still on at a golf course that owes $200,000 and two sports venues that owe $80,000 and $55,000. [3]

Water bills in Detroit have more than doubled in the last 10 years and an 8.7% increase was recently approved. Meanwhile, over 40% of Detroit residents live below the federal poverty line (roughly $20,000 for a family of 3) and unemployment is at record levels.

This country spent hundreds of billions of dollars to bail out huge financial corporations (that had engaged in egregious misconduct) so that they wouldn’t go bankrupt. We should be able to help poor and unemployed residents of Detroit so their water isn’t shut off, to ensure Detroit’s children get a good education, and to provide reasonable cost of living increases for city employees’ pensions. All of this, together, would cost a tiny fraction of the cost of the bank bailout – on the order of $1 for every $1,000 given to the banks.

[1]       Clawson, L., 7/18/14, “Detroit schools emergency manager raises class size to emergency levels,” Daily Kos (http://www.dailykos.com/story/2014/07/18/1314775/-Detroit-schools-emergency-manager-raises-class-size-to-emergency-levels)

[2]       Daily briefing, 7/22/14, “Detroit retirees agree to pension cuts,” The Boston Globe

[3]       Prupis, N., 7/24/14, “Canadian group delivering water to Detroit to protest shutoffs,” Common Dreams (http://www.commondreams.org/news/2014/07/24/canadian-group-delivering-water-detroit-protest-shutoffs)

DEMOCRATIZING CAMPAIGN FINANCING

ABSTRACT: We need to change our system of financing political campaigns. Candidates need to be able to run viable campaigns based on the financial support of average voters, and without the support of the small number of wealthy donors who dominate current campaign funding. Many people who would make great elected representatives don’t even run for office because they don’t have access to the money needed to run a credible campaign.

We can make small contributions more valuable by matching them with public funds. The Government by the People Act (HR 20) has been introduced in the US House and would match contributions of up to $150 with $6 of public funds for every dollar of private funds. Campaign financing systems that match small contributions are already in place in states from Maine to Arizona and in New York City. They amplify the voice of small donors and blunt the influence of large donors. As a result, the number of people running and the competition for elected offices has increased. To encourage more voters to be contributors, a voucher or tax credit could be provided to each citizen to be used to support a candidate for federal office.

By democratizing campaign financing, we regain democracy by getting our elected representatives to represent us instead of big campaign donors. In previous posts, I mentioned the effort to raise $12 million to fund the Mayday PAC, which would support candidates for Congress who support campaign finance reform. I’m happy to report that the fundraising effort was successful and the Mayday PAC is now selecting the 5 or so races that it will target in 2014.

FULL POST: We need to change our system of financing political campaigns. Candidates need to be able to run viable campaigns based on the financial support of average voters. As long as the support of the small number of wealthy donors who contribute more than $200 (less than 1% of the population) is necessary, our elected representatives are likely to at least lean toward representing those donors’ views and interests, instead of the broader, public interest. Keep in mind that not only does the candidate with the most money usually win, but many people who would make great elected representatives don’t even run for office because they don’t have access to the money needed to run a credible campaign under the current campaign financing system.

One solution would be to remove all private money from public elections. Campaigns would be paid for with public money. Proposals to do this have been put forward and such legislation has been filed in Congress, but this approach is unlikely to garner much support and would almost certainly require a Constitutional amendment.

A more feasible strategy, supported by individuals on both the right and left, wouldn’t remove private money from public elections but would make small contributions much more valuable and make campaigns based on them much more possible.

We can make small contributions more valuable by matching them with public funds. The Government by the People Act (HR 20) has been introduced in the US House and would match contributions of up to $150 with $6 of public funds for every dollar of private funds. Therefore, a $50 contribution would provide the candidate with $350. To qualify for the matching funds, a candidate for Congress would have to raise $50,000 in contributions of $150 or less from at least 1,000 donors in his or her home state. The candidate could not accept contributions of more than $1,000, could not accept PAC money, and would be strictly limited in the use of his or her own money in the campaign. Including these contribution caps is essential to limit the role of wealthy interests and is a reasonable and legal trade-off for receiving public matching funds. A similar bill, the Fair Elections Now Act, has been introduced in the US Senate.

You can get lots more information and all the details of these bills here (http://ofby.us/) and sign on as a citizen co-sponsor here (http://ofby.us/citizen-cosponsor/). Contacting your Representative and Senators to let them know you support this legislation would be valuable as well.

Forty groups have already endorsed this legislation: good government groups such as Common Cause, public interest groups such as the US Public Interest Research Group (PIRG), environmental groups such as the Sierra Club, labor unions such as the National Education Association and the Communications Workers of America, and civil rights groups such as the NAACP.

Campaign financing systems that match small contributions, as these bills in Congress would, are already in place in states from Maine to Arizona and in New York City. They amplify the voice of small donors and blunt the influence of large donors. They also allow average citizens to run competitive campaigns. As a result, the number of people running and the competition for elected offices has increased where these financing systems are in place. This results in greater representation of the common interest and reduced influence for special interests.

To increase the number of small contributions and to encourage more voters to be contributors, a voucher or tax credit could be provided to each citizen to be used to support a candidate for federal office. The voucher or tax credit, in effect, makes the contribution free for the voter. The Government by the People Act proposes a $25 tax credit. Amounts ranging from $25 to $200 have been proposed. Increased numbers of contributors results in a more engaged and committed public, as well as elected officials who are more responsive to the public good. [1]

Using matching funds, along with a voucher or tax credit, would give candidates a way to fund their campaigns through small contributions. As a result, candidates would have an incentive to work hard   from one election to the next to give the average voter (not just the wealthy ones) a reason to contribute to them. The increased number and value of small-dollar contributions can remove the influence of big money and big donors from campaigns. By democratizing campaign financing, we regain democracy by getting our elected representatives to represent us instead of big campaign donors.

We do need constitutional changes to control the spending outside of candidates’ campaigns. This will require reversing the Supreme Court’s Citizens United and McCutcheon decisions by making it clear that corporations do not have the same rights as human beings and that unlimited political spending is not the same as freedom of speech and can be regulated and limited in the interest of preserving democracy and preventing corruption. Resolutions calling for a Constitutional amendment have been introduced in both the House and Senate. In the Senate, a constitutional amendment allowing the regulation of money in politics has been approved in a committee and is headed to the floor for a vote of the full Senate.

The Constitutional amendment process is long and difficult. However, right now, we can make enormous progress on the financing of candidates’ campaigns in a much easier and quicker way   through changes in campaign finance laws. To create pressure for politicians to face up to this campaign financing crisis, we all need to communicate with our elected officials and also to support the election of candidates who will address this problem.

In previous posts, I mentioned the effort to raise $12 million to fund the Mayday PAC, which would support candidates for Congress who support campaign finance reform. I’m happy to report that the fundraising effort was successful and the Mayday PAC is now selecting the 5 or so races that it will target in 2014. [2] If you’d like to suggest a candidate it should support or oppose you can do so here: https://mayday.us/suggest-a-candidate/.

Reforms of our campaign finance system are critical to reclaiming democracy and moving back toward the fundamental principle of one person, one vote. In the current system, it’s dollars that matter; money determines who runs, who wins, and what policies are enacted. Right now, big donors – wealthy individuals and corporations – are drowning out the voices of ordinary citizens. We must fight back.

[1]       Overton, S., 11/13/12, “The participation interest,” The Georgetown Law Journal (http://georgetownlawjournal.org/articles/the-participation-interest/)

[2]       Lessig, L., 6//4/14, “What’s so bad about a Super PAC?” https://medium.com/law-of-the-land/whats-so-bad-about-a-superpac-c7cbcf617b58

POLITICAL MONEY AND INFLUENCE OF THE WEALTHY GROWS AND GROWS

ABSTRACT: The political money and influence of the wealthy grows and grows. Wealthy donors making large contributions of up to $2,600 directly to Congressional candidates’ campaigns represent the great majority of candidates’ funding. There had been an overall limit of $123,200 on the grand total any individual could contribute in a two-year federal election cycle. However, the Supreme Court just ruled that this limit is an unconstitutional violation of freedom of speech. A wealthy individual can now contribute roughly $3.6 million directly to candidates and parties in every 2-year election cycle.  (This is in addition to the unlimited money they can spend on campaign advocacy outside of candidates’ campaign accounts based on the Supreme Court’s Citizens United decision in 2010.)

Furthermore, a donor can gather checks from colleagues and friends and present them to the candidate along with his or her own check. This is a practice known as “bundling.” Often these bundlers pledge to raise $100,000 or more for a candidate.

Candidates spend 30% to 70% of their time raising money. If they can raise money in bigger chunks, they will. Therefore, candidates focus on the few big “funders” of campaigns. These big contributors or bundlers have more than an adequate incentive to contribute because it ensures that candidates hear their particular views and that candidates have an incentive to support big contributors’ views when policy is made.

The result is that our “democracy” is not representing us – the average voter. What we have here in the US is increasingly a plutocracy: government dominated by the small minority that are the wealthiest citizens. Coming up in my next post: strategies for reforming our system of financing campaigns to reclaim our democracy.

FULL POST: The political money and influence of the wealthy grows and grows. Wealthy donors making large contributions of up to $2,600 directly to Congressional candidates’ campaigns represent the great majority of candidates’ funding. Candidates for Congress raise only about 11% of their campaign contributions from donors giving less than $200.

Beyond donations to candidates’ campaigns, wealthy individuals can also give up to $32,400 per year to a national political party. There had been an overall limit of $123,200 on the grand total any individual could contribute in a two-year federal election cycle. However, the Supreme Court just ruled that this limit is an unconstitutional violation of freedom of speech in its McCutcheon decision.

Although the limit on a contribution to any candidate’s campaign or to a party remains (for now, see below), a wealthy individual can now contribute roughly $3.6 million directly to candidates and parties in every 2-year election cycle. [1] Through joint fundraisers and committees, wealthy contributors will now be solicited to write a single check for hundreds of thousands of dollars, if not a million dollars or more. (This is in addition to the unlimited money they can spend on campaign advocacy outside of candidates’ campaign accounts based on the Supreme Court’s Citizens United decision in 2010.)

A court challenge to the contribution limit on donations to party committees has been filed by the Republican National Committee [2] and a challenge to the limit on contributions to individual candidates’ campaigns is likely. If successful, these challenges would allow wealthy individuals, and perhaps corporations, to give unlimited amounts of money directly to political candidates and parties.

Furthermore, a donor can gather checks from colleagues and friends and present them to the candidate along with his or her own check. This is a practice known as “bundling,” and the donor’s sway with the candidate is, of course, enhanced by delivering these large sums to the candidate’s campaign. Often these bundlers pledge to raise $100,000 or more for a candidate – far beyond the individual limit of $2,600.

Imagine you’re a candidate running for political office. You can either try to raise $100,000 from a thousand people in $100 contributions (a big contribution for most people), or you can try to raise $100,000 from 40 wealthy individuals or via one bundler. Candidates spend 30% to 70% of their time raising money. If they can raise money in bigger chunks, they will. Therefore, candidates focus on the few big “funders” of campaigns, because with each big catch they can cover much more of their campaign costs. [3] These big contributors, now more than ever, will be national figures, not ones with any connection to a candidate’s district or state.

Edwin Bender of the National Institute on Money in State Politics notes that “contribution limits play a crucial role in … increasing the participation rate by small-dollar donors.” [4] So as the Supreme Court eliminates contribution limits as unconstitutional limits on freedom of speech, the candidates focus on fewer and fewer donors who contribute larger and larger amounts. These big contributors or bundlers have more than an adequate incentive to contribute because it ensures that candidates hear their particular views  – about regulation, government spending, limits on lawsuits, trade, workers’ protections, intellectual property right s, or whatever – and that candidates have an incentive to support big contributors’ views when policy is made.

In a recent study from Princeton (the largest empirical analysis of government policy decision making to-date), Martin Gilens and Benjamin Page conclude that “economic elites and organized groups representing business interests have substantial … impacts on U.S. governmental policy, while average citizens and mass-based interest groups have little or no … influence.” [5]

With candidates dependent on big contributors for the money necessary to run a competitive campaign, it’s not surprising that policies reflect the interests of these contributors and not the average citizen. The result is that our “democracy” is not representing us – the average voter – and therefore is not working as our founders intended. What we have here in the US is increasingly a plutocracy: government dominated by the small minority that are the wealthiest citizens.

Coming up in my next post: strategies for reforming our system of financing campaigns to reclaim our democracy by making our elected officials beholden to us. As a result, they would have incentives to represent us instead of wealthy individuals and corporations.

[1]       Lee, C., 5/5/14, “The fatter the wallet, the louder the voice,” Brennan Center for Justice (http://www.brennancenter.org/analysis/fatter-wallet-louder-voice)

[2]       Money in Politics Newsletter, 5/29/14, “The aftermath of McCutcheon v. FEC,” Brennan Center for Justice (http://www.brennancenter.org/newsletter/money-politics-newsletter-mccutcheons-aftermath-primary-fundraising)

[3]       Lessig, L., 6//4/14, “What’s so bad about a Super PAC?” https://medium.com/law-of-the-land/whats-so-bad-about-a-superpac-c7cbcf617b58

[4]       Bender, E., 5/13/13, “Evidencing a republican form of government: The influence of campaign money on state-level elections,” Montana Law Review (http://www.followthemoney.org/press/Reports/Evidencing_a_Republican_Form_of_Government.pdf)

[5]       Gilens, M., & Page, B., 4/9/14, “Testing theories of American politics: Elites, interest groups, and average citizens,” (http://www.princeton.edu/~mgilens/Gilens%20homepage%20materials/Gilens%20and%20Page/Gilens%20and%20Page%202014-Testing%20Theories%203-7-14.pdf)

INEQUALITY IS NOT INEVITABLE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CAUSE FAILURE, BLAME GOVERNMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE RISE OF DARK MONEY IN CAMPAIGNS

ABSTRACT: An increasing amount and proportion of election spending is coming from non-profit organizations that do not disclose their donors. This so-called “dark money” keeps voters in the dark about who is trying to influence their votes. Legislation to require disclosure of donors to “dark money” groups has been introduced at the federal level and in a number of state legislatures.

We need Representatives and Senators in Congress who will reform our campaign finance system. Ironically, there is a super PAC being formed to elect Congress people who will reform our campaign finance system. I urge you to join this effort now. Please go to the MAYDAY Super PAC site (https://mayday.us/old) to participate.

FULL POST: An increasing amount and proportion of election spending is coming from non-profit organizations that do not disclose their donors. They claim to be social welfare organizations [501(c)(4)s] or professional trade associations [501(c)(6)s] despite spending millions of dollars on political activity. [1] This so-called “dark money” keeps voters in the dark about who is trying to influence their votes.

In the 2014 election cycle to-date, three times as much dark money has been spent as had been spent at this point in 2012, even though that was a presidential election year. Furthermore, 2014 dark money spending to-date is almost 20 times that of the last mid-term election in 2010. [2] If the 2014 spending pattern is the same as in 2010, over $400 million of dark money will be spent by election day.

So far in the 2014 election cycle for the US Senate, groups outside and supposedly independent of candidates’ campaigns, are responsible for 59% of the TV ads aired, a big increase from 2012. More than half of those ads have been paid for by “dark money” groups that don’t disclose their donors. [3]

Legislation to require disclosure of donors to “dark money” groups has been introduced at the federal level and in a number of state legislatures. The federal DISCLOSE Act was filibustered in the US Senate in September 2010. (There were 59 votes in favor, a clear majority, but one short of the 60 needed to overcome the filibuster.) A new version of the bill was introduced in 2012 but is stalled in the Senate.

In Massachusetts, and in some other states as well, legislation is progressing that would increase the disclosure of donors to political spending and the timeliness with which it must occur. The MA law would require disclosure of all donors promptly, before the election, so voters would know who was trying to influence their votes. [4] (If you live in Massachusetts, now would be a good time to call your legislators and urge them to support the timely disclosure of contributors to political spending). Super PACs are already running ads focused on the November election for Massachusetts’ Governor. [5] And in last year’s contest for Mayor in Boston, organizations independent of the candidates’ campaigns spent over $3.8 million, much of it dark money. This spending was more than two-thirds as much as the campaigns of the two finalists spent on their own ($5.4 million). [6]

The use of dark money is growing in part because wealthy individuals’ millions of dollars of campaign spending is receiving increased attention. Many of these wealthy individuals prefer to remain anonymous and therefore prefer to channel their exorbitant campaign spending through groups that do not report their donors. [7] Corporations similarly prefer to remain anonymous when they engage in political spending. So they are channeling their contributions through dark money groups as well. [8]

The Open Secrets project of the Center for Responsive Politics (http://www.opensecrets.org/) has been digging into the money spent in the 2012 campaigns by Super PACs and non-profit organizations. It has now documented a web of over a dozen such organizations that transferred money among themselves. This served to hide the true sources of campaign spending, delay any reporting of it, and circumvent IRS limits on political activity by non-profit, tax exempt organizations. [9] (See my post of 2/28/14 for more details.)

We need Representatives and Senators in Congress who will reform our campaign finance system to:

  • Require timely reporting of all political spending and contributors, so voters know before they vote who is spending money to influence their votes;
  • Severely limit political activity by non-profit, tax exempt organizations; and
  • Improve enforcement of existing campaign finance laws.

Ironically, there is a super PAC being formed to elect Congress people who will reform our campaign finance system. I urge you to join this effort now, as there is a July 4th deadline for raising $5 million to get this effort off the ground. Please go to the MAYDAY Super PAC site (https://mayday.us/old) to participate. If you’d like to make a contribution or pledge to this effort, you can do so through my pledge page at: https://my.mayday.us/t/35e1-John-Lippitt#_=_. (See my post of 6/10/14 for more information on the MAYDAY Super PAC.)

[1]       Center for Responsive Politics, 4/30/14, “OpenSecrets.org provides testimony, data for Senate Rules hearing on dark money,” https://www.opensecrets.org/news/2014/04/opensecrets-org-provides-testimony-data-for-senate-rules-hearing-on-dark-money/

[2]       Maguire, R., 4/30/14, “How 2014 is shaping up to be the darkest money election to date,” https://www.opensecrets.org/news/2014/04/how-2014-is-shaping-up-to-be-the-darkest-money-election-to-date/

[3]       Center for Responsive Politics, 4/30/14, see above

[4]       Phillips, F., 6/18/14, “Bill would increase super PAC disclosures,” The Boston Globe

[5]       Miller, J., 4/28/14, “Super PAC launches ads against Charlie Baker, Common Cause decries outside spending,” The Boston Globe

[6]       McMorrow, P., 11/12/13, “Citizens United comes to local races,” The Boston Globe

[7]       Gold, M., 5/30/14, “Attacks drive GOP donors to stealth nonprofits,” The Boston Globe from The Washington Post

[8]       Lessig, L., 6//4/14, “What’s so bad about a Super PAC?” https://medium.com/law-of-the-land/whats-so-bad-about-a-superpac-c7cbcf617b58

[9]       Maguire, R., 12/3/13, “At least 1 in 4 dark money dollars in 2012 had Koch links,” OpenSecretsblog (http://www.opensecrets.org/news/2013/12/1-in-4-dark-money-dollars-in-2012-c.html)

THE RISE OF SUPER PACs AND THE DEMISE OF DEMOCRACY

ABSTRACT: The rise of Super PACs (Political Action Committees) in the last four years and their ability, along with that of wealthy individuals and organizations, to spend unlimited amounts of money in US political campaigns are dramatically reshaping our politics. This is a new version of a very old game  –  pay to play – where private interests buy access and influence in our political system and policy making. As a result, independent spending – spending on political campaigns separate from and independent (theoretically) of the candidates’ campaign committees themselves – skyrocketed in the 2010 and 2012 election cycles to over $400 million, ten times its level in 2008.

In the two-year 2012 election cycle, 132 wealthy Americans provided 60 percent of the Super PAC money raised. Super PACs have become the primary vehicle through which the wealthy elite exert political influence that overwhelms the common good and the voice of the vast majority of the people. Super PACS are just the latest, but certainly the most toxic, in a trend of increasing spending and influence by wealthy special interests in our political system.

FULL POST: The rise of Super PACs (Political Action Committees) in the last four years and their ability, along with that of wealthy individuals and organizations, to spend unlimited amounts of money in US political campaigns are dramatically reshaping our politics. This is a new version of a very old game  –  pay to play – where private interests buy access and influence in our political system and policy making. [1]

First, a little historical background on the rise of political spending and influence by wealthy individuals and corporations. In 1976, the Supreme Court (in the Buckley vs. Valeo decision) declared that the First Amendment gave rich people the right to spend unlimited amounts of money to influence political elections –  so long as that influence was “independent” of a political campaign. It also allowed them to spend unlimited sums on their own campaigns if they ran for an elected office.

In 2010, the Supreme Court in the Citizens United case gave corporations, unions, and other organizations the same right to spend unlimited money in political campaigns that it had given to rich people. In March, 2010, another court ruled that if rich people could spend as much as they want independently of any political campaign, they should also be free to contribute as much as they want to any independent political action committee. Thus the Super PAC was created – free to accept and spend unlimited amounts of money, so long as it did not coordinate with any candidate’s campaign (at least not openly). As a result, independent spending – spending on political campaigns separate from and independent (theoretically) of the candidates’ campaign committees themselves – skyrocketed in the 2010 and 2012 election cycles to over $400 million, ten times its level in 2008.

In the two-year 2012 election cycle, 132 wealthy Americans provided 60 percent of the Super PAC money raised. That number will go up in 2014. If it goes up to say 3,000, the funders of these Super PACs will still represent only a tiny minority of the 300 million Americans.

Super PACs have become the primary vehicle through which the wealthy elite exert political influence that overwhelms the common good and the voice of the vast majority of the people. That’s the “democracy” we have now –  a political system that has corrupted the intended representative democracy spelled out in our Constitution, Bill of Rights, and Declaration of Independence.

Super PACS are just the latest, but certainly the most toxic, in a trend of increasing spending and influence by wealthy special interests in our political system. As they learn to effectively coordinate campaigns without technically coordinating (because that would be illegal), they are becoming a critical component of any effective political campaign. Candidates quickly learn the dance that assures that funding gets directed to the Super PACs that support them. However, there is, in effect, no accountability for the statements or actions of these Super PACs, as the candidates can claim a lack of knowledge and control of their actions.

The single greatest fear of any candidate, particularly any incumbent, is that thirty days before an election, some anonymously-funded Super PAC will spend $1 million against him or her. Therefore, candidates work to ensure that a Super PAC will be there to support them if needed. Candidates will position themselves as the kind of elected official a Super PAC wants to support and protect from a last minute assault.

My next post will discuss the growing presence of secret donors and “dark” money in our political campaigns because of Super PACs that do not disclose their donors. I’ll also review the increasing ability of wealthy donors to contribute large sums directly to candidates’ campaigns and the impact that all of this big money in our politics has on who runs for office. Then, I’ll present solutions to this corruption of our democracy, in addition to the MAYDAY Super PAC strategy, which I described in my previous post on 6/10/14.

 

[1]       Lessig, L., 6//4/14, “What’s so bad about a Super PAC?” https://medium.com/law-of-the-land/whats-so-bad-about-a-superpac-c7cbcf617b58 (This blog post is, in large part, a summarized excerpt from this article.)

A SUPER PAC TO END SUPER PACs – YOU CAN HELP!

ABSTRACT: We need to elect US Senators, Representatives, and ultimately a President who will support an end to Super PACs and unlimited money in our political campaigns. Lawrence Lessig is undertaking an innovative and counter-intuitive strategy to do so: creating a Super PAC to elect Congress people who will support the needed changes in our campaign financing laws. Lessig and his organization, Rootstrikers (http://www.rootstrikers.org/#!/), have developed a well thought out plan to do this, and you can be part of it.

 

In the 2014 elections, they plan to target a small number of races with the goal of winning at least 5 of them – if they can raise the $12 million needed to fund their plan. The plan raises half of the $12 million using a crowd-funded, kickstarter-type approach. Lessig has pledged to find a match for the $6 million raised through crowd-funding. The initial campaign was launched on May 1. In thirteen days, the targeted $1 million was raised, with 13,000 contributors giving an average of $87 per contribution. In June, the second round was launched with the goal of raising the other $5 million by July 4.

For more information and to participate in this effort, please go to the MAYDAY Super PAC site (https://mayday.us/old). If you’d like to make a contribution or pledge to this effort, you can do so through my pledge page at: https://my.mayday.us/t/35e1-John-Lippitt#_=_.

FULL POST: We need to elect US Senators, Representatives, and ultimately a President who will support an end to Super PACs and unlimited money in our political campaigns. However, this seems like a Catch-22 because these elected officials have been successful using the current system. For any candidate to single-handedly fight the current system is like unilateral disarmament; it’s essentially guaranteed to be a losing strategy.

So how do we solve this conundrum? Harvard Law School Professor and campaign reform advocate, Lawrence Lessig [1], is undertaking an innovative and counter-intuitive strategy: creating a Super PAC to elect Congress people who will support the needed changes in our campaign financing laws.

Lessig and his organization, Rootstrikers (http://www.rootstrikers.org/#!/), have developed a well thought out plan to do this [2], and you can be part of it.They are creating a Super PAC to literally end Super PACs. In the 2014 elections, they plan to target a small number of races with the goal of winning at least 5 of them – if they can raise the $12 million needed to fund their plan. This would allow them to learn what it takes to win campaigns and, second, by winning, to convince others to take this effort seriously. Then, they plan to undertake a much larger effort in 2016.

The plan raises half of the $12 million using a crowd-funded, kickstarter-type approach. The money will be raised in two stages – first, by raising $1 million in thirty days, and then, if that goal is met, raising another $5 million in the next thirty days. Lessig has pledged to find a match for the $6 million raised through crowd-funding, so that by July 4 the Super PAC would have the $12 million needed for the targeted 2014 campaigns.

The initial campaign was launched on May 1. This is “May Day,” which evokes the distress call, “MAYDAY,” and provides the name of the Super PAC: the MAYDAY PAC. In thirteen days, the targeted $1 million was raised, with 13,000 contributors giving an average of $87 per contribution. (I contributed $25.) In June, the second round was launched with the goal of raising the other $5 million by July 4. If that’s successful and the additional matches are found, the campaign will be kicked off with a goal of winning at least five races in 2014. This will build the momentum needed for a much bigger Super PAC and campaign in 2016. [3]

For more information and to participate in this effort, please go to the MAYDAY Super PAC site (https://mayday.us/old). If you’d like to make a contribution or pledge to this effort, you can do so through my pledge page at: https://my.mayday.us/t/35e1-John-Lippitt#_=_.

I do believe that our campaign financing system is at the root of the problems of our democracy and our society. I’ll share more information about the current state of our campaign finance system and background on this MAYDAY effort in subsequent posts. You can find past posts on this topic by clicking on the Campaigns: Financing & Voting category in the right sidebar of my blog (below the list of recent posts, the monthly archives, and the FOLLOW button).

[1]       For more information about Lawrence Lessig, see http://www.lessig.org/about/ or http://en.wikipedia.org/wiki/Lawrence_Lessig.

[2]       Listen to Lessig’s 14 minute TED talk at http://www.ted.com/talks/lawrence_lessig_the_unstoppable_walk_to_political_reform?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed:+TEDTalks_video+(TEDTalks+Main+(SD)+-+Site)&utm_content=TED+talks&utm_term=NTechMedia.

[3]       Lessig, L., 6//4/14, “What’s so bad about a Super PAC?” https://medium.com/law-of-the-land/whats-so-bad-about-a-superpac-c7cbcf617b58 (This blog post is a summarized excerpt from this article.)

FIND A CRISIS, DEMAND PRIVATIZATION

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

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

This political tactic of using a “crisis” to push for privatization is one that Republicans have used with Social Security, the US Postal Service, the public school system, road and bridge building and maintenance, the prison system, and so forth. Conservatives in Canada have used the tactic as well to attack their postal service and their universal public health care system.

Using a real, created, or perceived crisis as an excuse to allow inefficient corporate takeovers of societal functions best suited to provision by a public entity puts corporate profits ahead of the public good. Such privatization through “crisis” is a disingenuous tactic used by ideologues who want to shrink government and expand corporate profits regardless of whether or not it’s in the best interests of citizens and taxpayers.

FULL POST: Republicans are up to their old tricks: create a crisis at a public agency and then claim that privatization is the answer. Sometimes the crisis is real, sometimes it is manufactured, and sometimes it’s a perception created by a public relations campaign. However, the answer is always the same: privatize the agency because the “crisis” proves that the public sector can’t do the job.

The latest example is the Department of Veterans Affairs (VA). The cover-up of the waiting list for needed care in the VA’s Phoenix office is unforgiveable. But why was the agency unable to deliver timely care? Is it because doctors, nurses, and others were sitting around with their feet up doing nothing? Or is it because of a lack of capacity to provide the needed care? I’m willing to bet it’s the latter.

Congress hasn’t provided sufficient funding to serve the 1.5 million new veterans from the Iraq and Afghanistan wars. Many of these veterans have injuries, including traumatic body and brain injuries, that would have killed them on the battlefield in the past. However, our improved medical capabilities on the battlefield have saved their lives, but returned them home with significant health care needs. Mental health needs have grown as well.

However, when US Senate legislation proposed 27 new VA health facilities (a 2% increase) and authorized hiring additional doctors and nurses back in February, the Republicans filibustered it, obstructing progress on expanding needed health services for our veterans.

Now that the lack of capacity has come to public attention, the Republicans are claiming that privatization is the answer. Should we turn health care of our veterans over to the health care system that increases its profits by finding ways to deny coverage and care? Interestingly, most veterans give high ratings to the care they get from the VA and are opposed to privatization. The VA has unmatched expertise in traumatic brain injury, amputee care, and other combat-related health issues and it serves rural areas where private sector care is scarce. [1] It computerized medical records and undertook quality of care initiatives long before the private sector. The VA system is actually a model from which our private health care system could learn a lot. [2]

This political tactic of using a “crisis” to push for privatization is one that Republicans have used with Social Security, the US Postal Service, the public school system, road and bridge building and maintenance, the prison system, and so on. Conservatives in Canada have used the tactic as well to attack their postal service and their universal public health care system. [3] Using a real, created, or perceived crisis as an excuse to allow inefficient corporate takeovers of societal functions best suited to provision by a public entity puts corporate profits ahead of the public good.

Privatization of the VA is not good for our veterans or taxpayers. Such privatization through “crisis” is a disingenuous tactic used by ideologues who want to shrink government and expand corporate profits regardless of whether or not it’s in the best interests of citizens and taxpayers. [4]

[1]       Weisman, J., 5/30/14, “VA scandal forces Congress to study systemic change,” The Boston Globe from The New York Times

[2]       Gordon, S. 5/27/14, “Privatization won’t fix the VA,” The Boston Globe

[3]       Taliano, M., 5/16/14, “Privatization is the problem, not the solution,” Common Dreams, http://www.commondreams.org/view/2014/05/16-7

[4]       See my previous posts on privatization, especially the ones of 10/23/12 and 10/16/12, for more detail on the shortcomings of privatization.

CEO PAY: THE RACE TO THE TOP FOR THOSE AT THE TOP

ABSTRACT: CEO pay has increased over 50% in the last 4 years while pay for workers has barely increased. The typical CEO’s pay in 2013 was $10.5 million. The industry with the fastest growth in pay was the banking industry where CEO pay grew 22% in 2013 – on top of 22% growth the year before. While the economy remains weak and unemployment is high, the executives in the banking sector – that we as taxpayers bailed out after they crashed our economy – are making money hand over fist.

CEO pay has increased dramatically over not only the last 4 years but over the last 35 years for a variety of reasons. There also are a variety of reasons that the average workers’ pay has barely increased over the last 4 years and over the last 35 years as well. (See below for more detail.)

As income and wealth inequality have grown dramatically in the US over both the last 4 years and the last 35 years, the wealthy have re-invested part of their windfall in buying influence in our political system through campaign spending and lobbying. They have succeeded in tilting government policies to favor them and their large, typically multi-national, corporations.

Our elected representatives can and should change government policies and actions so that the growing inequality in the US is reduced. We, as the voters in a democratic political system, need to – and can – make them do so.

FULL POST: CEO pay has increased over 50% in the last 4 years while pay for workers has barely increased. CEO pay is now 257 times that of the average worker, up sharply from 181 times workers’ pay in 2009. The typical CEO’s pay in 2013 was $10.5 million – topping the $10 million mark for the first time. The highest paid CEO got over $68 million and the top 10 were all over $31 million. [1] CEO pay was up 8.8% last year while the average workers’ pay rose only 1.3%. [2] And CEO’s wealth is increasing dramatically too, in part because over 40% of their pay is in stock, where gains are taxed at a lower rate than regular cash income.

The industry with the fastest growth in pay was the banking industry where CEO pay grew 22% in 2013 – on top of 22% growth the year before. While the economy remains weak and unemployment is high, the executives in the banking sector – that we as taxpayers bailed out after they crashed our economy – are making money hand over fist.

CEO pay has increased dramatically over not only the last 4 years but over the last 35 years for a variety of reasons. One reason is that CEO pay is set by corporate Boards of Directors that include many current and former CEOs of other corporations and often include members hand-picked by the CEO him or herself. When friends and peers set your pay level, is it any surprise you get big increases? Furthermore, every corporation and board want to tout their CEO as the best and the brightest – and, of course, therefore, the highest paid. Hence, it becomes a race to the top for those at the top. [3] If shareholder approval were required for CEO pay, perhaps things would be different.

There also are a variety of reasons that the average workers’ pay has barely increased over the last 4 years and over the last 35 years as well. Over the last 4 years, high unemployment has meant that workers have little leverage to ask for pay raises and corporations don’t need to reward workers because there is little opportunity for workers to quit and find another job. Workers’ negotiating power has also been eroded over the last 35 years by the decline of union membership and power. In 1983, over 20% of workers were members of unions compared to 11% in 2013. Globalization and technology have played a role by reducing the number of middle class jobs in the US, which tends to increase unemployment and reduce workers’ bargaining power and wages. However, their effects could have been ameliorated through rules governing trade that better protect workers both at home and abroad, as well as by policies and programs for job retraining and retention. [4]

As income and wealth inequality have grown dramatically in the US over both the last 4 years and the last 35 years, the wealthy have re-invested part of their windfall in buying influence in our political system through campaign spending and lobbying. They have succeeded in tilting government policies to favor them and their large, typically multi-national, corporations. These policies include:

  • Tax laws that a) have dramatically reduced the income tax rate on high incomes, b) have even lower rates for unearned income (i.e., income from investments), and c) favor corporations;
  • Government spending priorities, that include bailouts for financial and banking corporations but not for homeowners and workers who were devastated by the recession caused by the financial and banking industry; and
  • Labor and other laws that weaken workers’ bargaining power and fail to increase the minimum wage to keep up with inflation.

Our elected representatives can and should change government policies and actions so that the growing inequality in the US is reduced. We, as the voters in a democratic political system, need to – and can – make them do so.

[1]       Sweet, K., 5/28/14, “Median pay for CEOs rises sharply to $10.5m,” The Boston Globe from the Associated Press

[2]       Boak, J., 5/28/14, “Why executives get lavish compensation as rank-and-file wages lag,” The Boston Globe from the Associated Press

[3]       Boak, J., 5/28/14, see above

[4]       Boak, J., 5/28/14, see above

What liberal media? Part 2

ABSTRACT: The conventional wisdom is that the mainstream media has a liberal slant. Here’s part 2 of my refutation of the liberal media myth based on the information that we do NOT receive from it. There’s been little mainstream media coverage of gerrymandering, obstructionism in Congress, Supreme Court decisions that favor the wealthy and corporations, our growing and disproportionately minority prison population, our inefficient health care system, and the consolidation of the mainstream media into six huge corporations.

Our mainstream, corporate media are for-profit corporations, focused on selling advertising and making a profit by reporting the sensational and the titillating, rather than stories of substance and significance. Where’s the coverage of what truly ails our economy and our country? Where are the stories about how, by working together, we can address important issues? That’s what a truly liberal media would cover and I don’t see much of it in our mainstream media. My blog is designed to fill that gap for those of you who don’t have the time to peruse other sources of information.

FULL POST: The conventional wisdom is that the mainstream media has a liberal slant, despite the fact that it is owned by large corporations. Here’s part 2 of my refutation of the liberal media myth based on the information that we do NOT receive from it. I don’t believe we get the information we need to be informed citizens and voters from the mainstream media. My blog is designed to fill that gap for those of you who don’t have the time to peruse other sources of information.

This post is a continuation of my summary of a listing of issues that the supposedly “liberal” media have barely covered based on a recent article on Daily Kos (http://www.dailykos.com) entitled “15 things everyone would know if there were a liberal media.” [1]

  • The manipulation of the boundaries of US House members’ districts to gain political advantage is called gerrymandering. While not a new phenomenon, it has been carried to a new extreme in the last 25 years. It is a significant contributor to the gridlock in Congress. You probably haven’t heard much about this except in my recent blog post: https://lippittpolicyandpolitics.org/2014/03/09/government-gridlock-and-gerrymandering/.
  • Speaking of gridlock in Congress, you probably haven’t read a lot about the number of bills, judges, and executive branch positions that Congressional Republicans have blocked. For my blog’s coverage of this, see, for example, https://lippittpolicyandpolitics.org/2013/10/17/republican-sabotage/.
  • Supreme Court decisions allow wealthy individuals and organizations, primarily corporations, to spend unlimited sums in our political campaigns. The Citizens’ United decision in 2010 and the McCutcheon decision in early April give wealthy individuals and organizations bullhorns for political speech and contributions, drowning out the voices of average citizens. For information on this issue, see, for example, https://lippittpolicyandpolitics.org/2014/02/28/how-money-is-corrupting-our-politics/.
  • The number of people in our prisons has grown dramatically with significant over-representation of minorities. With 2.3 million Americans in prison, we have more people incarcerated than any other country, including China which has 4 times our population but only two-thirds as many prisoners. With 5% of the world’s population, we have 25% of the world’s prisoners. The US prison population is roughly 5 times what it was in 1980, despite falling crime rates. For-profit prison corporations are one interest group that has pushed for increased incarceration. Blacks are 39% of the prison population but less than 14% of the overall population.
  • US health care costs are the highest in the world, while our health outcomes are among the worst. The US spends $8,233 per person on health care while Norway, with the second highest health care costs, spends $5,388. We spend 17.6% of GDP (our total economy) on health care while the Netherlands, in second place, spends 12%. For more information, see: https://lippittpolicyandpolitics.org/2011/12/09/medicare-and-medicaid-and-our-health-care-system/.
  • Exploiting racial and ethnic prejudices, albeit somewhat subtly, has become standard fare for some political campaigns. Built on the concepts of Nixon’s Southern strategy from the 1960s, some people refer to the current version as “dog whistle” politics, because only those sensitized to it, sometimes subconsciously, hear it. For more detail, see Bill Moyers’ website at: http://billmoyers.com/episode/ian-haney-lopez-on-the-dog-whistle-politics-of-race/.
  • Bees may well be the “canary in the coal mine” for the dangers of high tech, high pesticide agriculture. Bees, which are needed to pollinate much of our food supply, are dying in huge numbers. For information on this, see my blog post: https://lippittpolicyandpolitics.org/2013/08/10/banning-bee-killing-pesticides/.
  • There’s been a tremendous consolidation in the media industry. Six huge corporations now control roughly 90% of the media in the US: Time Warner, Disney, News Corporation (Fox), Viacom, Comcast, and CBS. This corporate consolidation and lack of competition are reasons our news coverage is narrow and not liberal. It’s ironic that as our “news” becomes more and more infotainment, we get some of our best news and analysis from our entertainers, such as Jon Stewart and Stephen Colbert.

Our mainstream, corporate media don’t have a commitment to providing the information needed to have the informed citizenry that a democracy requires. They are for-profit corporations, focused on selling advertising and making a profit by reporting the sensational and the titillating (e.g., scandals, tragedy, crime, celebrities, disasters, and the like), rather than stories of substance and significance. In-depth information, investigative journalism, and analysis, the things a truly “liberal” media would cover, are sorely lacking. Where’s the coverage of what truly ails our economy and our country? Where are the stories about how, by working together, we can address important issues? That’s what a truly liberal media would cover and I don’t see much of it in our mainstream media.

[1]       Akadjian, 8/7/13, “15 things everyone would know if there were a liberal media,” Daily Kos http://www.dailykos.com/story/2013/08/07/1229087/-15-things-everyone-would-know-if-there-were-a-liberal-media?detail=email

What liberal media?

ABSTRACT: The conventional wisdom is that the mainstream media has a liberal slant. The best refutation of the liberal media myth is the information that we do NOT receive. There’s been little mainstream media coverage of corporation-friendly “trade” agreements, outsourcing and downgrading of jobs, growing inequality of income and wealth, the power of corporations in our supposedly democratic process, the out-of-control financial industry, and the undermining of the middle class. My blog is designed to fill that gap for those of you who don’t have the time to peruse other sources of information.

FULL POST: The conventional wisdom is that the mainstream media has a liberal slant, despite the fact that it is owned by large corporations. The best refutation of the liberal media myth is the information that we do NOT receive. I don’t believe we get the information we need to be informed citizens and voters in the mainstream media. My blog is designed to fill that gap for those of you who don’t have the time to peruse other sources of information.

My favorite examples of information NOT provided by the mainstream media are the Trans-Pacific Partnership “trade” agreement and Trans-Atlantic Free Trade Agreement along with the President’s effort to have them considered under a Fast Track process in Congress. These “trade” agreements, which are more about economic, regulatory, and legal issues than trade, will benefit multi-national corporations at the expense of US workers, consumers, and citizens. These agreements will hurt local businesses, the middle class, our health, and our national sovereignty. Nonetheless, there has been very little coverage of them in the mainstream media. You can read about this in my blog. See, for example: https://lippittpolicyandpolitics.org/2014/01/20/history-and-leaks-make-case-against-trade-treaties/.

There was a nice listing of other issues that the supposedly “liberal” media have barely covered in a recent article on Daily Kos (www.dailykos.com) entitled “15 things everyone would know if there were a liberal media.” [1]

Here’s a partial summary:

  • Jobs, especially good, middle class jobs, have been outsourced or converted to temporary or part-time jobs. The result is high unemployment (despite an economic recovery) and stagnant wages. Since 2000, US multinational corporations have cut 2.9 million jobs in the US while increasing overseas employment by 2.4 million. And the number of temporary and contract workers is growing rapidly. They now represent 12% of the workforce. They typically have no job security, receive no benefits (such as health insurance or retirement), and often receive low pay. There’s been little coverage of this in the mainstream media but my blog has covered it: https://lippittpolicyandpolitics.org/2013/09/02/labor-day-and-the-middle-class/.
  • Inequality of income and wealth has grown dramatically in the last 30 years. The wealthiest 1% of Americans own over a third of all the wealth in the US. These 3 million individuals have almost 3 times as much combined wealth as all of the 240 million individuals who make up the least wealthy 80% of Americans. See my blog for more detail. For example: https://lippittpolicyandpolitics.org/2013/11/06/us-capitalism-is-out-of-control/.
  • The tax cuts and loopholes instituted in the last 30 years have provided huge benefits to the wealthy, increasing inequality. Cuts in income tax rates, special low rates on investment income, reductions in the estate tax, loopholes for off-shore investments, and other tax laws disproportionately benefit the well-off and shift the tax burden to the middle class. They also reduce government revenue, which leads to cuts in services and programs that help the middle and working class. See my blog post on how income tax rates have changed over the last 35 years: https://lippittpolicyandpolitics.org/2011/11/27/income-tax-rates-an-historical-perspective/.
  • Large corporations through lobbying, campaign spending, and organizations like The American Legislative Exchange Council (ALEC) have bent our governments, including tax policy and regulation, in their favor. ALEC is a corporate sponsored-organization that drafts laws for consideration by state legislatures. It then finds friendly legislators in multiple states whom it works with to promote these corporate-friendly proposals such as public education privatization, anti-worker laws, laws to promote gun sales, laws to block regulation of corporation behavior and products, including environmental, health, safety, intellectual property, finance, and other regulations. For more information, see Bill Moyers’ website at: http://billmoyers.com/spotlight/eye-on-alec/.
  • At the federal level, for 66 years the Glass-Steagall law kept risky financial investing by Wall St. corporations separated from government-insured deposits. Based on a multi-year, concerted campaign by Wall St., that law was relaxed and eventually repealed. As a result, a series of financial crises occurred, capped by the great crash of 2008. We haven’t heard much from the mainstream media about this pattern of deregulation and financial crises, or Wall Street’s continuing fight to avoid regulation. My blog has covered this multiple times. See, for example: https://lippittpolicyandpolitics.org/2012/03/25/the-2008-financial-collapse-context-and-follow-up/. I’ve also blogged on the minimal penalties on the financial corporations and their executives for their illegal and unethical behavior. See, for example: https://lippittpolicyandpolitics.org/2014/02/06/weak-penalties-for-financial-corporations-misbehavior/. In general, see my blog category “The banks & the financial system.”

More examples of what you do NOT learn about from the mainstream media will be in my next post.

[1]       Akadjian, 8/7/13, “15 things everyone would know if there were a liberal media,” Daily Kos http://www.dailykos.com/story/2013/08/07/1229087/-15-things-everyone-would-know-if-there-were-a-liberal-media?detail=email

GOVERNMENT GRIDLOCK AND GERRYMANDERING

ABSTRACT: The gridlock in Congress is caused by hyper-partisanship and by the extreme views and tactics of some Representatives and Senators. There are four major reasons for it. I will address each of these in upcoming posts, starting with gerrymandering in this post.

Every 10 years, the boundaries of the Congressional Districts (CDs) for US House members are redrawn to reflect shifts in population. The CD boundaries are typically determined by state legislatures. The opportunity to draw the boundaries to achieve political goals has been irresistible. This process of drawing election districts to gain political advantage often ends up creating oddly shaped districts. This is referred to as “gerrymandering.” Because of growing partisanship and improved geographical computer capabilities over the last two decades, gerrymandering after the 2000 and 2010 Censuses was taken to a new level. As a result, in the 2012 Congressional election, Democratic House candidates nationwide received 1.4 million more votes than Republican candidates but won only 201 seats in the House to the Republicans’ 234.

Gerrymandering produces “safe” districts – ones where the party that will win the election is known in advance. Competition between the parties, which tends to push both party’s candidates’ policy positions to the center in the interest of being competitive, is increasingly rare. Candidates from the ideological extremes are encouraged and it is hard to hold elected officials accountable to the voters, as opposed to special interests, especially ones with money, because a candidate’s party affiliation virtually guarantees election.

One solution to gerrymandering, is to have independent, non-partisan commissions perform re-districting after the decennial Census. Six states have created such commissions; several others are considering doing so.

Gerrymandering, in effect, allows politicians to choose their voters rather than voters choosing their politicians. It produces elected officials who are at ideological extremes and who will use extreme legislative tactics that cause gridlock. Ultimately, only the voters can stop gerrymandering and restore truly democratic elections, which are necessary for our democratic system, including Congress, to work.

FULL POST: The gridlock in Congress is caused by hyper-partisanship and by the extreme views and tactics of some Representatives and Senators. Many political scientists and others feel that this gridlock is a real crisis for American democracy. The last two sessions of Congress (2011-12 and 2013-14) have been the least productive since 1948 when such measurement was begun. There are four major reasons for the gridlock:

  • Gerrymandered Congressional Districts
  • The process for nominating and selecting candidates
  • Low voter participation
  • The huge and growing amounts of money in our political campaigns

I will address each of these in upcoming posts, providing background on them, their effects, and solutions for them. I start with gerrymandering in this post.

Every 10 years, the boundaries of the Congressional Districts (CDs) for US House members are redrawn to reflect shifts in population as measured by the decennial Census. The required goal is that each CD must have roughly the same number of residents.

The CD boundaries are typically determined by state legislatures, i.e., politicians in a political body. The opportunity to draw the boundaries to achieve political goals has been irresistible. Usually, the political goal is to benefit one of the political parties, although it can also be to produce a CD that enhances the likelihood of a specific individual winning, usually an incumbent up for re-election. The typical tactics are to spread opposition voters across multiple districts where they are in a clear minority to minimize their influence or, when necessary, to lump as many of them as possible into one or a few districts that are conceded to the opposition, preserving as many CDs as possible for the favored party.

This process of drawing election districts to gain political advantage often ends up creating oddly shaped districts, rather than compact districts (i.e., ones that are roughly circular or square) or ones that follow the boundaries of existing towns, cities, or counties. This is referred to as “gerrymandering.” The term “gerrymander” was created in reaction to a redrawing of Massachusetts state senate districts under the then-governor Elbridge Gerry in 1812. Governor Gerry signed a bill that redistricted Massachusetts to benefit his Democratic-Republican Party over the Federalists. The shape of one of the contorted districts on a map was said to resemble the shape of a salamander. Hence, the term “Gerry-mander” as it was originally written. [1]

Because of growing partisanship and improved geographical computer capabilities over the last two decades, gerrymandering after the 2000 and 2010 Censuses was taken to a new extreme. The redistricting that took place after the 2010 Census has been labeled “the most distorted and partisan redistricting in modern times.” [2] Because of the growing number of state legislatures and governorships in the hands of the Republican Party over this period, the increased gerrymandering has, at a national level, mainly benefited Republicans.

As a result, in the 2012 Congressional election, Democratic House candidates nationwide received 1.4 million more votes than Republican candidates but won only 201 seats in the House to the Republicans’ 234. Here are some examples of states where Democratic presidential candidate Obama won but most of the House seats were won by Republicans and the percentage of House seats won was at least 20% higher than the percentage of the vote received by the Republican presidential candidate Romney:

  • Ohio: Republicans won 75% of House seats (12 of 16), Romney won 48% of the vote
  • Virginia: Republicans won 73% of House seats (8 of 11), Romney won 47% of the vote
  • Pennsylvania: Republicans won 72% of House seats (13 of 18), Romney won 48% of the vote

Gerrymandering produces “safe” districts – ones where the party that will win the election is known in advance. Competition between the parties, which tends to push both party’s candidates’ policy positions to the center in the interest of being competitive, is increasingly rare. Therefore, voters’ choices are reduced and the party primaries becomes the real election. Candidates from the ideological extremes are encouraged because competition from the other party is rare and in primaries, where voter participation is often quite low, mobilizing highly motivated voters with extreme views is often the easiest way to win. And money has a bigger impact in these small, less publicized primaries.

Given the lack of competition between the parties, it is hard to hold elected officials accountable to the voters, as opposed to special interests, especially ones with money, because a candidate’s party affiliation virtually guarantees election. The weakened, typically emasculated, opposition party can’t serve as a check and balance. [3] As a result of gerrymandering, it is estimated that only 35 of the 435 House seats will have a competitive, inter-party race in 2014. Therefore, there is little to deter highly partisan and extreme behavior in Congress. [4][5]

Candidates or elected officials who personally may hold moderate views are pushed to express opinions in public and cast votes in Congress at the extremes because of the threat that their party’s primary election represents. [6] Even House Speaker Boehner and Senate Minority Leader McConnell are afraid to take moderate positions or actions because of the possibility of far right challengers in their re-election primaries.

One solution to gerrymandering, is to have independent, non-partisan commissions perform re-districting after each Census. Iowa, California, Arizona, and 3 other states have created such commissions. Several other states are considering doing so. [7]

Iowa’s non-partisan redistricting process was created in 1980. Three bureaucrats, who sequester themselves for 45 days after the Census data is available, redraw Iowa’s four Congressional Districts. They are not allowed to consider voters’ party affiliation, previous election results, or the addresses of current members of Congress, or to have any contact with any politician. The goals for the districts, other than equal population, are compactness and respect for existing county boundaries. The result has been some of the country’s most competitive races for the US House and candidates who focus on representing the people of the district, not some ideology or party. [8]

Congress could pass legislation to require states to create independent redistricting commissions, but there is no sign of a sufficiently powerful grassroots movement to force such an action, which would require Congress to act against its own perceived interests. [9]

Gerrymandering, in effect, allows politicians to choose their voters rather than voters choosing their politicians. [10] It produces elected officials who are at ideological extremes and who will use extreme legislative tactics that cause gridlock. Ultimately, only the voters can stop gerrymandering and restore truly democratic elections, which are necessary for our democratic system, including Congress, to work.

 

[1]       Wikipedia, retrieved 3/3/14, “Gerrymandering,” http://en.wikipedia.org/wiki/Gerrymandering

[2]       Drew, E., 9/26/13, “The stranglehold on our politics,” The New York Review of Books

[3]       Rapoport, A., Nov. / Dec. 2013, “Fifty shades of purple,” The American Prospect

[4]       Drew, E., 9/26/13, see above

[5]       Potomac Chronicle, Dec. 2013, “Angry about partisan gridlock in Washington? Blame the states,” Governing http://www.governing.com/columns/potomac-chronicle/gov-redistricting-gone-mad.html

[6]       Stockman, F., 10/8/13, “Shutdown: Join the club,” The Boston Globe

[7]       Potomac Chronicle, Dec. 2013, see above

[8]       Jan, T., 12/8/13, “Iowa keeping partisanship off the map,” The Boston Globe

[9]       Drew, E., 9/26/13, see above

[10]     Fair Vote, retrieved 3/2/14, “Redistricting,” The Center for Voting and Democracy, http://www.fairvote.org/research-and-analysis/redistricting/

HOW MONEY IS CORRUPTING OUR POLITICS

ABSTRACT: Huge contributions and expenditures from wealthy special interests were front and center in the 2012 campaigns because of the unlimited spending allowed by the Supreme Court’s Citizens United decision. The 32 biggest donors to Super PACs spent as much money as the total of all the donations by the 3.7 million Americans who made small donations to the Obama or Romney campaigns.

The Open Secrets project of the Center for Responsive Politics (http://www.opensecrets.org/) investigates and reports on money in campaigns. It has now documented a web of over a dozen organizations that transferred money among themselves to hide the true sources of campaign spending, so-called “dark money.” Dark money has been used in state, local, and national campaigns. Adding an international element to the dark money issue, federal prosecutors say a Mexican businessman illegally funneled more than $500,000 into U.S. political races through Super PACs and various shell corporations.

The amounts of money that candidates for Congress have to raise for their campaigns is staggering. A member of the US House needs to raise, on average, $15,000 each and every week; a Senator needs to raise $33,000 every week. Time spent fundraising is time that doesn’t get spent working on legislation or listening to and representing average constituents.

The dominance of money in campaigns, and of wealthy special interests in providing this money, skews the priorities and policy positions of elected officials. It corrupts the making of public policy. Reforms of our campaign finance system are needed and can be done now (within the context of the Supreme Court’s rulings) that:

  • Amplify the voices of average citizens and their small contributions to campaigns,
  • Require timely reporting of all campaign spending and contributions, and
  • Severely limit political activity by tax exempt organizations.

FULL POST: Huge contributions and expenditures from wealthy special interests were front and center in the 2012 campaigns because of the unlimited spending allowed by the Supreme Court’s Citizens United decision. Private watchdog groups are continuing to trace and expose the sources and convoluted paths of money going from wealthy donors to campaign spending. This both exposes the donors (who often wish to remain secret) and illustrates the need for reform. Here are a few examples of their extensive findings.

The 32 biggest donors to Super PACs spent as much money as the total of all the donations by the 3.7 million Americans who made small donations to the Obama or Romney campaigns. [1] The two Koch brothers, billionaires due to their oil and industrial corporations, spent at least $400 million on campaigns in 2012, which is more than John McCain’s entire presidential campaign spent in 2008. [2] And fewer than 300,000 individuals (one-tenth of one percent of the 300 million Americans) provided the majority, roughly 60%, of the money raised by Congressional candidates from individuals. [3]

The Open Secrets project of the Center for Responsive Politics (http://www.opensecrets.org/) investigates and reports on money in campaigns. It has been digging into the money spent in the 2012 campaigns by Super PACs and social welfare groups (tax exempt 501(c)(4) organizations). It has now documented a web of over a dozen organizations that transferred money among themselves to hide the true sources of campaign spending, delay any reporting of it, and circumvent IRS limits on political activity by non-profit, tax exempt organizations. It has also documented that at least one quarter of the so-called “dark money” – money where the source was hidden – was linked to the two Koch brothers. [4]

Dark money was used in state as well as national campaigns. In California, an $11 million campaign contribution of dark money by a non-profit, tax exempt organization opposing a tax increase sparked an inquiry by the state’s Fair Political Practices Commission and a grand jury investigation into violations of campaign finance laws and money laundering. A judge forced the Americans for Responsible Leadership, the apparent source of the contribution, to reveal the original source of the money. The money had come from the Center to Protect Patient Rights, another Arizona non-profit, which received the money from Americans for Job Security, a Virginia non-profit. Both of these organizations are connected to the Koch brothers’ political money network. The organizations have agreed to disgorge the $11 million contribution and pay a record $1 million fine. The investigation also uncovered a separate $4.1 million illegal contribution that now will also be disgorged. California is working to improve disclosure of campaign contributions and strengthen laws and regulations to stop dark money activity. [5]

Dark money has arrived at the local level as well. In the recent Boston mayoral election, organizations independent of the candidates’ campaigns spent over $3.8 million, much of it dark money. This spending had a significant impact as it was more than two-thirds as much as the campaigns of the two finalists spent on their own ($5.4 million). As a result, Massachusetts elected officials are working on laws that would tighten regulation of campaign spending, and, in particular, require disclosure of all donors promptly, before the election, so voters would know who was responsible for the spending. [6][7]

Adding an international element to the dark money issue, federal prosecutors say a Mexican businessman illegally funneled more than $500,000 into U.S. political races through Super PACs and various shell corporations. This is the first known instance of a foreign national exploiting the Supreme Court’s Citizens United decision to spend money on U.S. elections. The allegations surrounding Jose Susumo Azano Matsura, the owner of multiple construction companies in Mexico, include bankrolling a handful of southern California candidates. The scandal involves a U.S. congressman, a Washington, D.C.-based campaign firm, and the consequences of the Citizens United decision. That decision, which gives corporations the right to funnel donations to US candidates, allowed Matsura to obscure the true source of the donations and, therefore, the citizenship of the donor. [8]

The amounts of money that candidates for Congress have to raise for their campaigns is staggering. In 2012, the average cost of a wining campaign for the House was over $1.6 million and over $10.4 million for the Senate. That means that a member of the House, who runs for re-election every two years, needs to raise, on average, $15,000 each and every week. And a Senator needs to raise, on average, $33,000 every week. Newly elected members of Congress are typically told to spend four hours each day raising money. Time spent fundraising is time that doesn’t get spent working on legislation or listening to and representing average constituents. [9]

The dominance of money in campaigns, and of wealthy special interests in providing this money, skews the priorities and policy positions of members of Congress, and other elected officials, to favor the wealthy and special interests over the common good. In other words, it corrupts the making of public policy. Democracy – government of, by, and for the people – is perverted by the current role of money in our political system, where big money drowns out the voices and overwhelms the interests of average citizens.

Reforms of our campaign finance system are needed and can be done now (within the context of the Supreme Court’s rulings) that:

  • Amplify the voices of average citizens and their small contributions to campaigns;
  • Require timely reporting of all campaign spending and contributions (including bundling), so that voters know before they vote where the money is coming from;
  • Limit contributions that elected officials can receive from interests they oversee, from political committees, and from lobbyists;
  • Prohibit fundraising by elected officials during normal working hours;
  • Severely limit political activity by tax exempt organizations and require them to report donors; and
  • Improve enforcement of existing campaign finance laws.

[1]       U.S. PIRG, 2/5/14, “US PIRG applauds the introduction of the Government by the People Act,” U.S. PIRG

[2]       Hight, C., 2/6/14, “Government by the people, not the polluters,” The Huffington Post

[3]       Lioz, A., Feb. 2014, “The Government by the People Act,” Demos (http://www.demos.org/publication/government-people-act)

[4]       Maguire, R., 12/3/13, “At least 1 in 4 dark money dollars in 2012 had Koch links,” OpenSecretsblog (http://www.opensecrets.org/news/2013/12/1-in-4-dark-money-dollars-in-2012-c.html)

[5]       Blumenthal, P., 10/24/13, “California settles ‘dark money’ case,” The Huffington Post

[6]       McMorrow, P., 11/12/13, “Citizens United comes to local races,” The Boston Globe

[7]       Levenson, M., 11/12/13, “Bill would order fast disclosure of donors,” The Boston Globe

[8]       ManfromMiddletown, 2/13/14, “This is how Citizens United dies,” Daily Kos (http://www.dailykos.com/story/2014/02/13/1277252/-This-is-How-Citizens-United-Dies#)

[9]       Jan, T., 5/12/13, “They go to lead, but courting cash is now job 1,” The Boston Globe

STOPPING THE CORRUPTION OF MONEY IN POLITICS

ABSTRACT: There’s good news on multiple fronts in the effort to stop the corruption of big money in US political campaigns. In the US House, the Government by the People Act (HR 20) has been introduced. It would match small donations – up to $150 – from individuals 6 to 1 so that, for example, a $25 donation would be worth $175 to a candidate running for Congress. In addition, every person who files an income tax return could get a $25 credit for small donations to Congressional candidates. A similar bill, the Fair Elections Now Act, has been introduced in the US Senate.

Meanwhile, last November, the IRS put out proposed regulations to severely limit political activity by tax exempt, non-profit organizations, which spent $300 million on political activities in the 2012 elections. Such regulations would be a huge step toward ending the huge amounts of “dark money” – where the source was hidden – that flowed into campaigns in 2012.

These reforms of our campaign finance system are a critical step in moving back toward the fundamental principle of one person, one vote. In the current system, it’s dollars that matter. In various ways, big donors buy election results. The Supreme Court has ruled that the money of the wealthy and corporations cannot be limited or regulated, because it is speech. Therefore, we must amplify the voices of the rest of us and require disclosure of all campaign contributions and spending. Otherwise, the integrity and legitimacy of our democracy is threatened, and people will justifiably conclude that the system is rigged and that their voices and interests are being drowned out by the money of wealthy individuals and corporations.

FULL POST: There’s good news on multiple fronts in the effort to stop the corruption of big money in US political campaigns. Bills have been filed in Congress to amplify and encourage the voices and money of small donors. The IRS has proposed rules that would require greater disclosure and limit political spending by tax exempt groups.

In the US House, the Government by the People Act (HR 20) has been introduced with 130 House members as co-sponsors (out of 435 total members). It would match small donations – up to $150 – from individuals 6 to 1 so that, for example, a $25 donation would be worth $175 to a candidate running for Congress.

To qualify for the matching funds, a candidate would have to raise $50,000 in contributions of $150 or less from at least 1,000 donors in their home state. The candidate could not accept contributions of more than $1,000, could not accept PAC money, and would be strictly limited in the use of their own money in the campaign.

In addition, every person who files an income tax return could get a $25 credit for small donations to Congressional candidates. (A similar tax credit existed from 1972 to 1986.) Disclosure laws would be tightened so the source of all contributions would have to be publicly disclosed. [1][2]

A similar bill, the Fair Elections Now Act, has been introduced in the US Senate. It shares the goal of super-sizing the influence of small donors and allowing candidates to run competitive races for Congress while relying on small donations from regular people.

You can get lots more information and all the details of these bills here (http://ofby.us/) and sign on as a citizen co-sponsor here (http://ofby.us/citizen-cosponsor/).

Forty groups have already endorsed this legislation: good government groups such as Common Cause, public interest groups such as the US Public Interest Research Group (PIRG), environmental groups such as the Sierra Club, labor unions such as the National Education Association and the Communications Workers of America, and civil rights groups such as the NAACP.

Campaign funding systems that match small contributions, as the bills in Congress would, are already in place in states from Maine to Arizona and in New York City. They amplify the voice of small donors and blunt the impact of large donations. This allows average citizens to run competitive campaigns. As a result, the number of people running and the competition for elected offices has increased where these matching systems are in place. This results in greater representation of the common interest and reduced influence for special interests.

Meanwhile, last November, the IRS put out proposed regulations to severely limit political activity by tax exempt, non-profit organizations. Abetted by the Supreme Court’s Citizens United decision, non-profit, tax exempt “social welfare” organizations spent $300 million on political activities in the 2012 elections. They can accept unlimited donations and do not have to disclose donors. They can run political ads, engage in other political activities, and make grants to other “social welfare” groups. Although the tax code says these organizations, known as 501(c)(4)s, cannot be engaged primarily in political activity, they easily got around this by claiming the ads and other activities were not political and had some kind of educational or civic purpose.

After ignoring this political activity for years, the IRS has now proposed excluding “candidate-related political activity” from the definition of social welfare activities. This would ban a wide range of political activities, unless they meet a strict nonpartisan test. Such regulations would be a huge step toward ending the huge amounts of “dark money” – where the source was hidden – that flowed into campaigns in 2012. These regulations on political activity should apply to any group, organized under any section of the IRS rules, that doesn’t have to disclose contributors, including business leagues (such as chambers of commerce) and unions. [3]

These reforms of our campaign finance system are a critical step in moving back toward the fundamental principle of one person, one vote. In the current system, it’s dollars that matter; 84% of the time the candidate with the most money won election to the House in 2012. Money also determines who runs and big donors drown out the voices of ordinary citizens in campaigns. In various ways, big donors buy election results.

The Supreme Court has ruled that the money of the wealthy and corporations cannot be limited or regulated, because it is speech. Therefore, we must amplify the voices of the rest of us (which the two bills in Congress will do) and require disclosure of all campaign contributions and spending. Otherwise, the integrity and legitimacy of our democracy is threatened, and people will justifiably conclude that the system is rigged and that their voices and interests are being drowned out by the money of wealthy individuals and corporations.

My next post will give examples of campaign spending that illustrate the need for reforms.

 

[1]       Hight, C., 2/6/14, “Government by the people, not the polluters,” The Huffington Post

[2]       Lioz, A., Feb. 2014, “The Government by the People Act,” Demos (http://www.demos.org/publication/government-people-act)

[3]       The Editorial Board, 2/18/14, “Change the rules on secret money,” The New York Times

REASONS FOR LACK OF PROSECUTIONS AFTER 2008 COLLAPSE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TOO LITTLE PUNISHMENT FOR MISBEHAVIOR IN THE FINANCIAL SECTOR

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

WEAK PENALTIES FOR FINANCIAL CORPORATIONS’ MISBEHAVIOR

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

THE IGNORED DEFICIT IN PUBLIC GOODS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

HISTORY AND LEAKS MAKE CASE AGAINST “TRADE” TREATIES

ABSTRACT: Twenty years of experience with previous “trade” treaties and the recent leaks of draft language for the Trans-Pacific Partnership (TPP) make the case that the “trade” treaties currently in negotiation will not benefit the US economy, our workers, or our middle class. These treaties focus on and benefit multi-national corporations and investors, rather than trade and the public interest. (See my previous posts of 1/13, 1/8, 9/13/13, and 9/10/13 for more detail.)

The growing resistance to Fast Track authority and these new “trade” agreements in Congress and the public is fueled by growing data on the damaging impacts of the 20 year history of the North American Free Trade Agreement (NAFTA). The same claims are being made for the current trade treaties as were made for NAFTA: that they will promote economic growth, increase jobs, and reduce trade deficits or increase trade surpluses. However, the Mexican trade surplus ($2 billion in 1993) quickly turned into growing deficits, totaling $1 trillion over the 20 year life of NAFTA. With Canada, the other country in NAFTA, the story is similar.

It is estimated that NAFTA has eliminated almost 700,000 jobs in the US. NAFTA established the principle that US corporations could move production out of the US but import the goods produced back into the US without any tariffs or other disincentives. This undermines the wages and benefits of American workers and the middle class. In all three NAFTA countries, wages and benefits for workers have not kept up with increased worker productivity over the last 20 years.

Since NAFTA, the US has entered into trade agreements with Korea, China, and others. While the promise has always been growth in US jobs, our economy, and our trade balance, the result has typically been the opposite. The trade agreements of the past 20 years have cost our economy more than $1 trillion through increased trade deficits and close to a million jobs.

I urge you to contact your elected officials in Washington and tell them you have serious concerns about the “trade” agreements being negotiated. And that these “trade” agreements are too important and too far reaching to be approved quickly and quietly.

FULL POST: Twenty years of experience with previous “trade” treaties and the recent leaks of draft language for the Trans-Pacific Partnership (TPP) make the case that the “trade” treaties currently in negotiation will not benefit the US economy, our workers, or our middle class. These treaties focus on and benefit multi-national corporations and investors, rather than trade and the public interest. (See my previous posts of 1/13, 1/8, 9/13/13, and 9/10/13 for more detail.)

The latest leak has been of the environmental provisions of the TPP. They lack mandated standards and have weak enforcement provisions. They are even weaker than the provisions in previous trade agreements, such as the North American Free Trade Agreement (NAFTA). [1]

Those arguing for Fast Track consideration of the TPP and other treaties by Congress (i.e., short timeframe, no amendments, and no filibuster) argue that treaties should be negotiated by the President and the Executive Branch (and not fiddled with by Congress) and that treaties are generally negotiated behind closed doors. [2] However, the current trade negotiations have included extensive involvement and input from corporate interests but virtually no input from the public; from advocates for workers, the environment, or ordinary citizens; or from Congress and other elected officials (other than the President). Furthermore, the Fast Track process is not necessary to pass trade agreements. President Clinton implemented more than 130 trade agreements without the Fast Track process. [3]

The growing resistance to Fast Track authority and these new “trade” agreements in Congress and among the public is fueled by growing data on the damaging impacts of the 20 year history of the North American Free Trade Agreement (NAFTA). The same claims are being made for the current trade treaties as were made for NAFTA: that they will promote economic growth, increase jobs, and reduce trade deficits or increase trade surpluses. And TPP has specifically been described as NAFTA on steroids.

When NAFTA was being promoted for approval by Congress in 1993, it was stated that it would expand our trade surplus with Mexico, thereby creating 200,000 US jobs in two years and a million in 5 years. However, the Mexican trade surplus ($2 billion in 1993) quickly turned into growing deficits (of $16 billion in 1995, $65 billion in 2008, and $50 billion in 2013). Our trade deficit with Mexico has totaled $1 trillion over the 20 year life of NAFTA.

With Canada, the other country in NAFTA, the story is similar: our trade deficit of $11 billion in 1993 grew to $78 billion in 2008 and $28 billion in 2013. (The dramatic drop in the deficit after 2008 is due to reduced imports because of our Great Recession.) [4]

It is estimated that NAFTA has eliminated almost 700,000 jobs in the US, with 60% of them being in manufacturing. Most of the workers who lost jobs have experienced a permanent loss of income; if they have found other jobs, they pay significantly less. [5] Many workers have experienced long-term unemployment (more than 6 months), which is at historically high levels. Numerous other workers have simply dropped out of the labor force. All of this has led to increases in the costs of government assistance programs, including unemployment benefits and food assistance. [6]

NAFTA established the principle that US corporations could move production out of the US but import the goods produced back into the US without any tariffs or other disincentives. This undermines the wages and benefits of American workers and the middle class. It increases job insecurity and weakens labor unions’ ability to negotiate because of the threat that jobs will be moved out of the US. The result has been stagnant wages for all but the richest Americans and, therefore, growing income inequality. In all three NAFTA countries, the US, Canada, and Mexico, wages and benefits for workers have not kept up with increased worker productivity over the last 20 years. [7]

Even Mexican workers have not experienced any significant increase in wages. An important reason for this is that the export of cheap, subsidized corn from the US to Mexico undermined the livelihoods of an estimated 2.4 million Mexican farmers. This displaced Mexican farmers and led to increased immigration (legal and illegal) to the US. Due to the abundant supply of desperate workers, it also pushed down wages in the maquiladora factory zone (the area just south of the US border). [8]

Although Mexico has experienced increased trade and some job growth under NAFTA, the jobs, even those in manufacturing, have been at low wages. The average Mexican manufacturing wage is only 18% of the US wage and that percentage has grown only slightly. The poverty rate in Mexico is 51%, down only slightly from the 52% when NAFTA went into effect. There has been an increase in the availability of consumer goods, but environmental protections have had mixed results at best. Disposal of US waste in Mexico has increased, including, for example, a 500% increase in US exports of highly toxic, spent lead-acid car batteries, with minimal control to ensure environmentally safe handling of them. [9]

Under NAFTA, US corporations have attempted to weaken Canadian regulations on a range of issues, including offshore oil drilling, fracking, pesticides, and drug patents. [10] Mexico and Canada have paid $350 million to foreign corporations for claims that their laws, rules, regulations, or other actions reduce current and expected profits.

Since NAFTA, the US has entered into trade agreements with Korea, China, and others. While the promise has always been growth in US jobs, our economy, and our trade balance, the result has typically been the opposite. Since the 2012 agreement with Korea, the US trade deficit with Korea has increased by $8.5 billion and an estimated 40,000 jobs have been lost. Our trade deficit with China has soared to $294 billion in 2013 from $83 billion in 2001 when China was permitted to join the World Trade Organization. [11]

The trade agreements of the past 20 years have cost our economy more than $1 trillion through increased trade deficits and close to a million jobs. They are key reasons that unemployment is high and the economic recovery is so weak. Furthermore, the mitigation provisions for these past trade agreements, such as retraining for workers who lost their jobs, have been woefully inadequate and ineffective.

I urge you to contact your elected officials in Washington and tell them you have serious concerns about the “trade” agreements being negotiated. And that these “trade” agreements are too important and too far reaching to be approved quickly and quietly. Full disclosure and debate of their provisions is what democracy requires.

[1]       Queally, J., 1/15/14, “Leaked TPP ‘Environment Chapter’ shows ‘Corporate Agenda Wins,’” Common Dreams (http://www.commondreams.org/headline/2014/01/15)

[2]       Boston Globe Editorial, 1/19/14, “Pacific, EU trade deals need up-or-down votes,” The Boston Globe

[3]       Johnson, D., 1/10/14, “New Fast-Track bill means higher trade deficits and lost jobs,” Campaign for America’s Future

[4]       US Census Bureau, retrieved 1/7/14, “U.S. trade in goods by country,” http://www.census.gov/foreign-trade/balance/

[5]       Johnson, D., 12/18/13, “Will we fast-track past the lessons of the NAFTA trade debacle?” Campaign for America’s Future (http://ourfuture.org/20131218/obama-administration-to-push-fast-track)

[6]       Folbre, N., 8/5/13, “The free-trade blues,” The New York Times

[7]       Faux, J., 1/1/14, “NAFTA, twenty years after: A disaster,” Huffington Post

[8]       Wallach, L., 12/30/13, “NAFTA at 20: ‘Record of damage’ to widen with ‘NAFTA-on-steroids’ TPP,” Global Trade Watch, Public citizen

[9]       Stevenson, M., 1/3/14, “20 years after NAFTA, a changed Mexico,” The Boston Globe from the Associated Press

[10]     Carter, Z., 12/8/13, , “Obama faces backlash over new corporate powers in secret trade deal,” The Huffington Post

[11]     Johnson, D., 12/18/13, see above

STOP FAST TRACK FOR CORPORATE POWER GRAB

ABSTRACT: Bipartisan legislation was introduced in Congress last Thursday to allow the President to submit “trade” agreements to Congress and require expedited consideration of them. There is opposition to this Fast Track consideration (formally known as Trade Promotion Authority) in both parties. There is also opposition to the “trade” agreements currently being negotiated themselves. One reason for this opposition is concern that the agreements benefit multi-national corporations (including foreign corporations) at the expense of local businesses, US workers and citizens, and national sovereignty.

Corporations, who have had access to the agreements’ negotiations (while the public has been kept in the dark), are lobbying to weaken current standards for food safety, labor, health, Internet freedom, the environment, and the financial industry. According to leaked documents, the US is pushing for multi-national corporations to be able to challenge countries’ laws and regulations in privately run international courts or tribunals. Concerns about such provisions stem in part from experiences under existing “trade” agreements. For example, under current “trade” treaties, tobacco corporations are suing or threatening to sue a range of countries over existing or proposed smoking reduction efforts. These legal actions are undermining the World Health Organization’s tobacco control efforts.

I urge you to contact your Representative in the US House and your Senators and tell them you do not want Fast Track authority approved. Full disclosure and debate of the provisions of “trade” agreements is what democracy requires, especially given the essentially irreversible nature of them.

FULL POST: Bipartisan legislation was introduced in Congress last Thursday to allow the President to submit “trade” agreements to Congress and require expedited consideration of them – on a quick timetable, with no amendments, and no filibuster. The bill would require that Congress have access to draft language as agreements are being negotiated (which is currently being kept secret); would specify protections for labor, the environment, and intellectual property; and would require provisions in agreements against currency and exchange rate manipulation. There is opposition to this Fast Track consideration (formally known as Trade Promotion Authority) in both parties, so it is unclear when or if this bill will move forward. Alternative bills that give Congress more say over “trade” agreements are likely to be introduced. (I put trade in quotes because recent “trade” agreements, such as the North American Free Trade Agreement [NAFTA], go well beyond trade issues and cover a broad range of legal and regulatory issues. The provisions for reducing trade barriers and increasing trade are only a small part of the agreements.)

The President and the supporters of the “trade” agreement (largely corporate America) want Fast Track authority for the two broad “trade” agreements mentioned in my previous post (1/8/14): the Trans-Pacific Partnership (TPP) among a dozen Pacific Rim countries and the Trans-Atlantic Free Trade Agreement (TAFTA) [1] with 28 European countries. In addition, there is a global agreement on services (as opposed to manufactured goods) with about 50 countries that is currently being negotiated that would also be covered by the Fast Track authority. [2]

As I noted in my previous post (1/8/14), there is opposition to the “trade” agreements currently being negotiated and Fast Track consideration of them for 3 main reasons, one of which is concern that they benefit multi-national corporations (including foreign corporations) at the expense of local businesses, US workers and citizens, and national sovereignty (our ability to control what happens within the boundaries of the US). For example, a goal of TAFTA is to establish health and safety rules and regulations that would be standard across the US and EU. [3] Many people are concerned that this will lead to a race to the bottom, with the weakest standards winning out. For example, the US is demanding that the EU reduce restrictions on importation of genetically modified foods and hormone-treated beef. Europeans, however, want strong regulation of their food. Corporations, who have had access to the agreements’ negotiations (while the public has been kept in the dark), are lobbying to weaken current standards for food safety, labor, health, the environment, and the financial industry. [4]

In the TPP, according to leaked documents, the US is pushing for multi-national corporations to be able to challenge countries’ laws and regulations in privately run international courts or tribunals. This would result in a significant loss of national sovereignty. (This is a change to current rules under the World Trade Organization where countries’ own courts rule on such matters, although NAFTA included a similar but narrower provision for international tribunals.) The US is also advocating for expanded intellectual property protections, including long-term patents, and therefore monopolies, on drugs (similar to current US laws). It is also pushing to ban government agencies from negotiating lower drug prices with pharmaceutical corporations. (Such a ban is included in the US Medicare program and costs the program billions of dollars every year.) There is widespread concern that such provisions would increase drug prices, pharmaceutical corporations’ profits, and health care costs. This would seem to be borne out by the fact that drug prices are much higher in the US than in other countries. The US is also pushing for weak regulation of the financial industry. Leaked TPP documents have raised concerns among health, Internet freedom, environmental, and labor advocates over provisions supported by the US, the US Chamber of Commerce, and corporations in general. [5]

These concerns stem in part from experiences under existing “trade” agreements. For example, under existing “trade” treaties, tobacco corporations are suing or threatening to sue a range of countries (including Australia, Canada, Gabon, Namibia, New Zealand, Norway, Togo, Uganda, and Uruguay) over existing or proposed smoking reduction efforts. These legal actions are undermining the World Health Organization and its Framework Convention on Tobacco Control, a public health treaty signed by 170 countries, whose goal is to reduce smoking and its negative health effects by limiting and controlling advertising, packaging, and sale of tobacco products. As a specific example, Philip Morris is suing Australia for its cigarette packaging law claiming it will reduce current and future profits. The suit is brought under a treaty between Australia and Hong Kong, and the case will be decided in a private, non-public proceeding of a private international tribunal of arbitrators in Singapore. Although the US says it wants the new TPP to promote public health, and specifically named tobacco as a concern, the US Chamber of Commerce objected because it felt that such public health provisions could allow the regulation of other products such as sugar and soda. [6]

My next post will focus on our 20 year experience with NAFTA and some of its implications for what could be expected with these new “trade” agreements.

In the meantime, I urge you to email, call, write, and, if you can, meet with your Representative in the US House and your Senators [7] and tell them you do not want Fast Track authority approved. These “trade” agreements are too important and too far reaching to be approved quickly and quietly. Full disclosure and debate of the provisions of “trade” agreements is what democracy requires, especially given the essentially irreversible nature of them.

[1]       Also known as the Trans-Atlantic Trade and Investment Partnership

[2]       Calmes, J., 1/9/14, “A proposal to speed up action on trade accords,” The New York Times

[3]       Dahlburg, J., 11/12/13, “US, EU restart trade talks,” The Boston Globe from the Associated Press

[4]       Todhunter, C., 10/4/13, “The US-EU Transatlantic Free Trade Agreement (TAFTA): Big business corporate power grab,” Global Research (http://www.globalresearch.ca/the-us-eu-transatlantic-free-trade-agreement-tafta-big-business-corporate-power-grab/5352885)

[5]       Carter, Z., 12/8/13, “Obama faces backlash over new corporate powers in secret trade deal,” The Huffington Post

[6]       Tavernise, S., 12/13/13, “Tobacco firms’ strategy limits poorer nations’ smoking laws,” The New York Times

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

TRADE TREATIES NEED OPEN DEBATE, NOT FAST TRACK

ABSTRACT: Action in Congress on requiring Fast Track consideration of trade treaties is likely to happen soon. Two broad “trade” agreements are scheduled for Congressional action this year: the Trans-Pacific Partnership (TPP) with a dozen Pacific Rim countries and the Trans-Atlantic Free Trade Agreement (TAFTA) with the European Union (EU). Fast Track authority requires that Congress consider and act on a treaty in a short timeframe with no amendments or changes allowed and with no filibustering.

I urge you to email, call, write, and, if you can, meet with your member of Congress and your Senators and tell them you do not want them to approve Fast Track authority. These “trade” agreements are too important and too far reaching to be approved quickly and quietly.

Business groups are pushing hard for Fast Track consideration in Congress. They are supporters of the treaties, which are widely viewed as very favorable to corporate interests. The growing resistance to Fast Track authority is fueled in large part by:

  • Secrecy on the negotiations and agreement provisions, which breeds suspicion;
  • Concern that they benefit multi-national corporations at the expense of others; and
  • Growing data on the damaging impacts of 20 years with the North American Free Trade Agreement (NAFTA), on which these treaties are modeled.

The indirect effects of the past and these possible new “trade” agreements on the balance of power in employer-employee relations and in our political system, as well as on economic inequality, may be more significant than the direct effects, such as job losses. The TPP and the TAFTA, based on what is known about them, will likely benefit corporations and investors, while hurting US workers and citizens. Moreover, if approved, these treaties will be very difficult to change, as the consent of all the parties is required. At the least, a full discussion of their provisions, based on full disclosure, is warranted.

FULL POST: Action in Congress on requiring Fast Track consideration of trade treaties is likely to happen soon. President Obama would like to have Fast Track authority, formally known as Trade Promotion Authority, for two broad “trade” agreements that are scheduled for Congressional action this year: the Trans-Pacific Partnership (TPP) with a dozen Pacific Rim countries and the Trans-Atlantic Free Trade Agreement (TAFTA) [1] with the European Union (EU). (I put trade in quotes because these “trade” agreements, like NAFTA, go well beyond trade issues and cover a broad range of legal and regulatory issues. The provisions for reducing trade barriers and increasing trade are only a small part of the agreements.)

Fast Track authority requires that Congress consider and act on a treaty in a short timeframe with no amendments or changes allowed and with no filibustering. Fast Track authority was first used in 1974 and has been used on a number of occasions since then.

I urge you to email, call, write, and, if you can, meet with your member of Congress and your Senators and tell them you do not want them to approve Fast Track authority. [2] These “trade” agreements are too important and too far reaching to be approved quickly and quietly. Full disclosure and debate of the provisions of “trade” agreements is what democracy requires.

The Democratic and Republican leaders of the Senate Finance Committee, along with the Republican chairman of the House Ways and Means Committee, have reportedly reached an agreement on a Fast Track authority bill, although they have not yet released its details. The argument for Fast Track consideration of trade treaties is that it means other countries will be more likely to make concessions and reach agreement on the treaty if they are confident that the US Congress can’t change it.

Business groups, including the US Chamber of Commerce and the Business Roundtable, are pushing hard for Fast Track consideration in Congress. They are supporters of the treaties, which are widely viewed as very favorable to corporate interests, [3] and are presumably worried that debate in Congress and the public on the treaties would reduce their chances for approval.

There is significant opposition to granting Fast Track authority in Congress and outside of it. Nearly 200 members of the US House, mostly Democrats but some Republicans, have signed letters strongly questioning the granting of Fast Track authority for these treaties. [4]

The growing resistance to Fast Track authority for these new “trade” agreements in Congress and the public is fueled in large part by:

  • Secrecy on the negotiations and agreement provisions, which breeds suspicion;
  • Concern that they benefit multi-national corporations at the expense of local businesses, workers and citizens, and national sovereignty; and
  • Growing data on the damaging impacts of 20 years with the North American Free Trade Agreement (NAFTA), on which these treaties are modeled.

Both treaties are being negotiated in great secrecy. For the TPP, the Obama administration has deemed the negotiations classified information, restricting Congressional access to documents and banning discussion of the negotiations and treaty provisions with the press or the public. [5] In 2013, Senator Elizabeth Warren opposed the confirmation of the US Trade Representative because he refused to share any of TPP’s provisions. She noted the important need for transparency and public debate on the treaty. [6]

These treaties are seen by many advocates for health, labor, safety, environmental, and financial industry standards and regulations as a masquerade for a corporate power grab, designed to weaken regulation and run roughshod over workers’ and citizens’ interests. [7] These “trade” agreements would enable multi-national corporations to operate with weakened oversight by national governments, free of nations’ court systems, and with reduced consumer and citizen protections. Corporations would become supra-national entities and would answer only to a separate system of rules and courts, administered by new international tribunals. In essence, an international system, parallel to the United Nations system of international governance for nations, would be created for international governance of corporations – a United Multi-national Corporations system, if you will. (More on this in a subsequent post.)

The same claims are being made for these two trade treaties that were made for NAFTA: they will promote economic growth, reduce trade deficits or increase trade surpluses, and increase jobs. The actual experience with NAFTA is that it has done none of these things, which is probably the best indicator of the likely effects of these new trade treaties. And the TPP has specifically been described as NAFTA on steroids. (More on this in a subsequent post.)

The indirect effects of the past and these possible new “trade” agreements on the balance of power in employer-employee relations and in our political system, as well as on economic inequality, may be more significant than the direct effects, such as job losses. The corporations and investors who have been the winners in this globalization of trade and commerce can invest their winnings (i.e., profits) in campaign contributions, lobbying, and political strategies that ensure they are the victors in next round of “trade” agreements. [8]

Although President Obama recently described growing economic inequality in the US as a major issue, NAFTA has increased inequality and the new trade treaties are likely to as well. NAFTA and other recent “trade” agreements have provided benefits to corporations and investors globally, while hurting workers and the middle class in the US, and sometimes hurting workers in other countries. The TPP and the TAFTA, based on what is known about them, will similarly benefit corporations and investors, while hurting US workers and citizens. Moreover, if approved, these treaties will be very difficult to change, as the consent of all the parties is required. At the least, a full discussion of their provisions, based on full disclosure, is warranted.

 

[1]       Also known as the Trans-Atlantic Trade and Investment Partnership.

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

[3]       For more information see my previous posts, “Trade” Agreement Supersizes Corporate Power, 9/10/13, (https://lippittpolicyandpolitics.org/2013/09/10/trade-agreement-supersizes-corporate-power/) and “Trade” Agreements & Corporate Power, 9/13/13 (https://lippittpolicyandpolitics.org/2013/09/13/trade-agreements-corporate-power/).

[4]       Politi, J., 12/13/13, “US Senate deal sets up fierce trade battle,” Financial Times

[5]       Carter, Z., 12/8/13, , “Obama faces backlash over new corporate powers in secret trade deal,” The Huffington Post

[6]       Loth, R., 12/21/13, “Take trade agreement off fast track,” The Boston Globe

[7]       Todhunter, C., 10/4/13, “The US-EU Transatlantic Free Trade Agreement (TAFTA): Big business corporate power grab,” Global Research (http://www.globalresearch.ca/the-us-eu-transatlantic-free-trade-agreement-tafta-big-business-corporate-power-grab/5352885)

[8]       Folbre, N., 8/5/13, “The free-trade blues,” The New York Times

GOOD NEWS FROM THE GRASSROOTS

ABSTRACT: The dysfunction in Washington is discouraging. However, there is good news from the grassroots. Every day people are standing up and taking action when government policies and corporate practices are favoring special interests over the interests of the average citizen and worker.

Workers at Wal-Mart and in the fast food industry are taking action to improve their wages and working conditions. On the day after Thanksgiving, protest rallies were held at roughly 1,500 Wal-Mart stores around the country, about a third of their stores. On December 5th, fast food workers went on strike for a day and were joined by supporters at rallies in roughly 200 cities across the country. They are asking for more full-time jobs, more regular schedules, better pay and benefits, and to stop retaliating against workers who speak out or participate in strikes. They want to ensure they do not have to rely on government assistance to make ends meet.

Efforts to increase the minimum wage are occurring at the federal, state, and local levels, driven by strong grassroots support and activity. In 13 states, the minimum wage increased on January 1, 2014. A number of jurisdictions passed laws in 2013 mandating current or future increases. A push is underway to increase the federal minimum wage from $7.25 per hour to perhaps $10.10, as President Obama has proposed. Analyses indicate that this could lift about 5 million people out of poverty. It would grow the economy by $22 billion and 85,000 jobs because the increased income would be spent in the local economy. Polls show that over 70% of the public, including a strong majority of Republicans, support increasing the minimum wage.

FULL POST: As we enter the New Year, the dysfunction in Washington is discouraging. However, there is good news from the grassroots. Every day people are standing up and taking action when government policies and corporate practices are favoring special interests over the interests of the average citizen and worker. Examples include the following:

  • Workers at Wal-Mart and in the fast food industry are taking action to improve their wages and working conditions. (See below for more information.)
  • Efforts to increase the minimum wage are occurring at the federal, state, and local levels, driven by strong grassroots support and activity. (See below for more information.)
  • State efforts to require the labeling of food containing genetically modified organisms (GMOs) are gaining traction.
  • State and local efforts in opposition to fracking are gaining momentum.
  • In North Carolina, grassroots protests are occurring every week at the capitol, known as Moral Mondays protests, to oppose policies that hurt the middle and working class.
  • Teachers, parents, and other supporters of public education are protesting the top-down, corporate-style “reform” and privatization of our schools.
  • Communities are supporting home owners and fighting back against foreclosures with eminent domain takings of homes that financial corporations are trying to foreclose on.

Wal-Mart workers: On the day after Thanksgiving, so-called “Black Friday,” protest rallies were held at roughly 1,500 Wal-Mart stores around the country, about a third of their stores. The protesters were striking Wal-Mart employees and their supporters, who have been organizing under the banner of OUR Walmart (Organization United for Respect at Walmart). The first strike occurred in Los Angeles in October 2012 and the movement has been growing ever since. OUR Walmart is asking the corporation for more full-time jobs, more regular schedules, better pay and benefits, and to stop retaliating against workers who speak out or participate in strikes. [1] Ultimately, their goal is to ensure that Walmart associates do not have to rely on government assistance, such as food stamps and subsidized health insurance, to support their families. Multiple studies have found that the average Wal-Mart employee receives $2,000 – $3,000 per year in government assistance. Nationwide, that means taxpayers are supporting Wal-Mart employees to the tune of $3 – $4 billion annually. [2] (In 2012, Wal-Mart had $444 billion in revenue and profits of $26.6 billion.)

Fast food workers: On December 5th, fast food workers went on strike for a day and were joined by supporters at rallies in roughly 200 cities across the country. These protests for better wages, targeting $15 per hour, began about a year ago and have been gaining momentum. They target McDonald’s, Burger King, Wendy’s, Yum Brands (which owns Kentucky Fried Chicken [KFC], Taco Bell, and Pizza Hut), and others. [3] (See my previous post, Pay for Workers in the Fast-Food Industry, 9/8/13, https://lippittpolicyandpolitics.org/2013/09/08/updates-on-posts-on-low-pay-for-fast-food-workers-pesticides-and-bees-detroit/ for more information on the affordability of worker pay raises.) Low wage fast food workers are estimated to receive $7 billion a year in government assistance to help them make ends meet.

The minimum wage: These efforts to improve wages and working conditions for low wage workers are also reflected in efforts to increase the minimum wage. In 13 states, the minimum wage increased on January 1, 2014. A number of jurisdictions passed laws in 2013 mandating current or future increases, including California ($9/hour), Connecticut ($8.70), New Jersey ($8.25/hour), New York ($8/hour), Rhode Island ($8/hour), two counties in Maryland ($11.50/hour), the city of Seatac in Washington state ($15/hour), and the District of Columbia ($11.50/hour). [4] A push is underway to increase the federal minimum wage from $7.25 per hour to perhaps $10.10, as President Obama has proposed. Analyses indicate that this could lift about 5 million people out of poverty. It would grow the economy by $22 billion and 85,000 jobs because the increased income would be spent in the local economy. [5] Numerous other efforts to raise the minimum wage are underway in states and communities across the country. Polls show that over 70% of the public, including a strong majority of Republicans, support increasing the minimum wage. (If the minimum wage had kept up with inflation since 1968, it would be $10.50 not $7.25. If it had kept up with productivity gains, it would be over $15 and perhaps close to $22.) (See my previous posts, Lack of Good Jobs is Our Most Urgent Problem, 10/30/13, https://lippittpolicyandpolitics.org/2013/10/29/lack-of-good-jobs-is-our-most-urgent-problem/, and Labor Day and the Middle Class, 9/2/13, https://lippittpolicyandpolitics.org/2013/09/02/labor-day-and-the-middle-class/, for more information.)

There is also a growing effort to institute a “living wage” of $15 per hour. The fast food workers and low wage retail workers, and the unions supporting them, are the core of this effort, along with Kshama Sawant, a Seattle City Council member. The 15Now Campaign (http://15now.org) is also supported by newly elected Seattle mayor, Ed Murray. [6]

I’ll provide more information on these and other promising grassroots activity in future posts.

[1]       Berfield, S., 11/29/13, “On Black Friday, strikes and counter strikes at Wal-Mart’s stores,” Bloomberg Businessweek

[2]       Mitchell, S., 6/7/13, “New data show how big chains free ride on taxpayers at the expense of responsible small businesses,” Institute for Local Self-Reliance (http://www.ilsr.org/chains-walmart-foods-free-ride-taxpayers-expense-responsible-small-businesses/)

[3]       Choi, C., & Hananel, S., 12/6/13, “Fast-food workers, advocates rally in US cities for more pay,” The Boston Globe from the Associated Press

[4]       Davidson, P., 12/30/13, “13 states raising pay for minimum-wage workers,” USA Today

[5]       Berman, J., 1/2/14, “A $10.10 minimum wage could lift 5 million out of poverty,” The Huffington Post

[6]       Queally, J., 1/3/14, “The fight for $15: Campaign for Living Wage readies national push,” Common Dreams (http://www.commondreams.org/headline/2014/01/03)

ENDING THE CORRUPTION OF AMERICAN DEMOCRACY

ABSTRACT: Whatever your politics – Democratic, Republican or independent; conservative, moderate, or progressive – most people are frustrated that issues they believe are important aren’t being addressed by Congress. The fuel that is really driving this paralysis is Big Money in our political campaigns. It is distorting the operation of government and corrupting our democracy. This corruption is the result of concentrated wealth and power in corporations and wealthy individuals who use their money to buy influence over our government and its politics and policies. Many members of the House and Senate spend more time meeting with lobbyists and special interest groups and fundraising for their next campaign than they do on legislation and representing the people who voted to send them to Washington.

The most immediate action we can take is to push for passage of a carefully designed law that reduces and exposes the flow of political money and influence without violating the Supreme Court’s rulings on freedom of speech. The American Anti-Corruption Act (AACA) is a bold, comprehensive law that does this. I urge you to support it by learning more about it (see below for a summary) and becoming a citizen co-sponsor at http://anticorruptionact.org.

FULL POST: Whatever your politics – Democratic, Republican or independent; conservative, moderate, or progressive – most people are frustrated that issues they believe are important aren’t being addressed by Congress. For some it’s fracking or climate change. For others it’s the federal debt, income inequality, gun violence, immigration, health care, regulation of the financial industry (or other corporations), military spending, trade treaties, or something else. Each is an important issue that can evoke strong debate and real passion.

All of these issues deserve a full and open debate, require compromise, and should receive votes on meaningful pieces of legislation. None is receiving it. The system is broken. The pundits and the media say this dysfunction and gridlock in Congress reflect the deep partisan divide in the U.S. However, the fuel that is really driving this paralysis is Big Money in our political campaigns. It is distorting the operation of government and corrupting our democracy.

This corruption is the result of concentrated wealth and power in corporations and wealthy individuals who use their money to buy influence over our government and its politics and policies. We cannot expect action on important issues until we end this corruption, which is deep and pernicious, and threatens the heart of our democratic system. Today, many members of the House and Senate spend more time meeting with lobbyists and special interest groups and fundraising for their next campaign than they do on legislation and representing the people who voted to send them to Washington.

The most immediate action we can take is to push for passage of a carefully designed law that reduces and exposes the flow of political money and influence without violating the Supreme Court’s rulings on freedom of speech. The American Anti-Corruption Act (AACA) is a bold, comprehensive law that does this. The campaign to promote it has been launched nationally by a nonpartisan group, Represent.Us (https://represent.us).

Here is what the American Anti-Corruption Act would do:

1)  Prohibit members of Congress from a) receiving contributions from the interests they oversee, and b) fundraising during congressional working hours;

2)  Build the influence of small contributors by creating a $100 tax rebate that registered voters can use to contribute to federal candidates;

3)  Require candidates to disclose the names of individuals (known as “bundlers”) who gather and package together multiple contributions, thereby presenting large sums of money to candidates;

4)  Limit the amount that lobbyists and their clients can contribute to federal candidates, political parties, and political committees to $500 per year;

5)  Limit political action committees’ contributions and their coordination with political campaigns and parties;

6)  Mandate full, timely reporting of all spending of $10,000 or more on political activities;

7)  Expand the legal definition of a lobbyist so anyone trying to influence our lawmakers has to play by the lobbying rules;

8)  Close the “revolving door” through which former elected officials and their staffs capitalize on their connections and influence in high-paying lobbying jobs when they leave office; and

9)  Strengthen enforcement of campaign finance laws.

I urge you to support the American Anti-Corruption Act by learning more about it and becoming a citizen co-sponsor at http://anticorruptionact.org.

SHORT TAKES ON CURRENT EVENTS

ABSTRACT:

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

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

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

FULL POST:

CONFIRMING PRESIDENTIAL NOMINEES

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

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

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

 

FINING DRUG CORPORATIONS FOR COLLUSION

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

FDA REDUCING ANTIBIOTIC OVERUSE AND DRUG-RESISTANT INFECTIONS

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

 

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

THE FEDERAL BUDGET DEAL

ABSTRACT: As you probably know, Congress will vote this week on a budget deal for fiscal years 2014 and 2015. If the budget deal doesn’t pass, the government would shut down again on Jan. 15. The deal could fail to pass in Congress. Without a deal, the phase 2 sequester cuts take effect and would be much more painful than the phase 1 cuts were this year. Under the sequester, the 2013 cap on discretionary domestic and military spending is $986 billion. This cap is slated to drop to $967 billion for 2014.

The budget negotiators are proposing spending $1,012 billion in 2013 and $2,014 billion in 2015, claiming deficit reduction of $23 billion over 10 years and smarter budget cutting than the across-the-board sequester’s cuts. However, some of the shrink-the-government diehards are opposed to this increase in spending.

To cut costs, the contributions new federal civilian employees pay into their pension fund will increase and military pensions will receive smaller cost of living increases. To increase revenue, airlines’ fees to pay for the TSA will go up, resulting in a $5 increase in add-on fees on each airline ticket. This consumer fee increase has been criticized and some in Congress have suggested closing the private jet tax loophole as an alternative.

A bone of contention is that the deal does not extend the emergency unemployment benefits for the long-term unemployed. These benefits will expire on Dec. 28 for 1.3 million workers. Without an extension, an additional 850,000 workers’ will lose benefits in the first quarter of 2014. This would have an estimated impact on the economy of 300,000 fewer jobs in 2014 and a reduction in economic growth of 0.4%.

If there are issues in these budget negotiations that you feel strongly about, now is the time to contact your Congress people and get your two cents (or more) into the discussion.

FULL POST: As you probably know, Congress will vote this week on a budget deal for fiscal years 2014 (which started last Oct. 1) and 2015. Their deadline is this Friday because Congress is planning to adjourn and go home for the holidays then. Other deadlines are lurking behind this one: the temporary extension of the fiscal year 2013 budget in October expires on Jan. 15, the second round of automatic budget cuts (phase 2 of the sequester) goes into effective Jan. 1, and long-term unemployment benefits expire on Dec. 28.

If the budget deal doesn’t pass, the government would shut down again on Jan. 15, a result almost no one appears to want. The deal could fail to pass in Congress because the negotiating has been done by a small group and there is opposition to the deal from multiple sides. [1]

Without a deal, the phase 2 sequester cuts would take effect and would be much more painful than the phase 1 cuts were this year. Many federal agencies and programs were able to use surplus or reserve funds that are now exhausted. In the case of air traffic controllers, airport construction funds were used to fund them and aren’t available again. And some one-time accounting maneuvers were used. Therefore, the second round of cuts will have much greater impacts. [2] The phase 2 sequester cuts in government spending would also hurt the economy and cost an estimated 800,000 jobs in 2014. [3]

Nonetheless, a number of issues could derail the budget deal. One such issue is the overall spending caps currently in place under the sequester, officially known as the Budget Control Act (BCA) of 2011. The 2013 cap on discretionary domestic and military spending is $986 billion. This cap is slated to drop to $967 billion for 2014.

The budget negotiators are proposing spending $1,012 billion ($1.012 trillion) in 2013 and $2,014 billion in 2015. Military spending would be $521 billion and non-military spending $492 billion. [4][5] With some offsetting revenue increases and future cuts in spending, they are claiming deficit reduction of $23 billion over 10 years and smarter budget cutting than the across-the-board sequester’s cuts. [6] However, some of the shrink-the-government diehards are opposed to this increase in spending. Spending that Obama called for in his State of the Union speech on education and infrastructure (in part to create jobs) is not part of the budget deal.

To cut costs, the contributions new federal civilian employees pay into their pension fund will increase ($6 billion over 10 years). This is causing some pushback given that federal workers have already experienced a 3 year pay freeze, unpaid furloughs due to the sequester, and delays in receiving their pay during the government shutdown. [7] Military pensions will receive smaller cost of living increases ($6 billion over 10 years). A cut in payments to Medicare health care providers is extended 2 years to 2023 ($23 billion). [8] Costs of mineral leases and petroleum extraction research will also be cut.

To increase revenue, airlines’ fees to pay for the Transportation Security Administration (TSA) will go up, resulting in a $5 increase in add-on fees on each airline ticket. This consumer fee increase has been criticized and some in Congress have suggested closing the private jet tax loophole as an alternative way to raise revenue. [9] Companies’ premiums for insuring pension plans will increase, however, the closing of corporate tax loopholes, including the use of offshore tax havens (which alone could generate over $20 billion a year in revenue), that some in Congress had called for, are not part of the deal. [10]

A bone of contention is that the deal does not extend the emergency unemployment benefits for the long-term unemployed. These benefits will expire on Dec. 28 for 1.3 million workers who have been out of work for longer than the usual 26 week limit on benefits. An extension of benefits would cost $25 billion for 2014. Not only do such benefits help the workers and their families, but they also support the economy by helping to maintain household incomes and consumer spending, which is two-thirds of our economy. [11] Without an extension, an additional 850,000 workers’ will lose benefits in the first quarter of 2014 when their regular 26 weeks of benefits run out, and 4.8 million workers would be affected by expiring benefits over the course of 2014. This would have an estimated impact on the economy of 300,000 fewer jobs in 2014 and a reduction in economic growth of 0.4% (from a current level of 2.4% for 2013) in the first quarter of 2014. [12] Some Democrats would still like to see this in the budget deal, while others are planning to push it separately in the near future.

Although unemployment is down to 7.0%, long-term unemployment is still a serious problem. Furthermore, the emergency long-term unemployment benefits were started under President George W. Bush when unemployment was only 5.6%. Over 37% of the unemployed have been unemployed for over 26 weeks, and this percentage is still rising. [13]

If a budget deal is successfully passed by Congress and signed by the President, it will be the first official budget since 2011. However, a number of issues could present challenges to passage in the House or the Senate.

If there are issues in these budget negotiations that you feel strongly about, now is the time to contact your Congress people and get your two cents (or more) into the discussion.

[1]       Everett, B., & Gibson, G., 12/8/13, “Budget talks worry those not in the room,” Politico

[2]       Taylor, A., 11/12/13, “Mandated cuts expected to be more painful in ’14,” The Boston Globe

[3]       Montgomery, L., 12/6/13, “Congressional GOP may be willing to let emergency unemployment benefits lapse,” The Washington Post

[4]       Weisman, J., 12/11/13, “Congressional negotiators reach deal on federal budget,” The Boston Globe from The New York Times

[5]       Przybyla, H., 12/11/13, “Budget deal easing spending cuts faces Republican ire,” Bloomberg

[6]       Weisman, J., 12/6/13, “Congress appears near a modest accord on the budget,” The Boston Globe from The New York Times

[7]       Montgomery, L., 12/9/13, “Budget deal expected this week amounts to a cease-fire as sides move to avert a standoff,” The Washington Post

[8]       Espo, D., & Taylor, A., 12/10/13, “Congressional negotiators reach budget pact,” The Boston Globe

[9]       Przybyla, H., 12/6/13, “Budget negotiators seek limited deal as opposition mounts,” Bloomberg

[10]     Tong, J., 12/5/13, “Representatives Doggett and DeLauro introduce legislation to end sequestration and corporate offshore tax havens,” Common Dreams (www.commondreams.org/newswire/2013/12/05-4)

[11]     Krugman, P., 12/8/13, “The punishment cure,” The New York Times

[12]     Lowrey, A., 11/17/13, “Extension of benefits for jobless set to end,” The New York Times

[13]     Needham, V., 12/8/13, “Advocates see hope for renewal of unemployment benefits extension,” The Hill

THOUGHTS ON SOCIAL AND ECONOMIC JUSTICE

FULL POST: Social and economic justice have been in the news lately. Here are some quotes from Nelson Mandela, the Pope, and President Obama that appeared in the news over the last week.

Nelson Mandela [1]

“Overcoming poverty is not a task of charity, it is an act of justice. Like Slavery and Apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings. Sometimes it falls on a generation to be great. YOU can be that great generation. Let your greatness blossom.”

“Gandhi rejects the Adam Smith notion of human nature as motivated by self-interest and brute needs and returns us to our spiritual dimension with its impulses for nonviolence, justice and equality. He exposes the fallacy of the claim that everyone can be rich and successful provided they work hard. He points to the millions who work themselves to the bone and still remain hungry.”

Pope Francis [2]

“… some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. … Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor … as though all this were someone else’s responsibility and not our own. … In the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.”

 “How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.”

“While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. … To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market … Behind this attitude lurks a rejection of ethics and a rejection of God.”

President Obama

President Obama spoke about the issue of growing income equality, saying “dangerous and growing inequality and lack of upward mobility … has jeopardized middle-class America’s basic bargain — that if you work hard, you have a chance to get ahead. I believe this is the defining challenge of our time. … I am convinced that the decisions we make on these issues over the next few years will determine whether or not our children will grow up in an America where opportunity is real. … The problem is that alongside increased inequality, we’ve seen diminished levels of upward mobility in recent years. … The idea that so many children are born into poverty in the wealthiest nation on Earth is heartbreaking enough. But the idea that a child may never be able to escape that poverty because she lacks a decent education or health care, or a community that views her future as their own, that should offend all of us and it should compel us to action. We are a better country than this. … we can make a difference on this. In fact, that’s our generation’s task — to rebuild America’s economic and civic foundation to continue the expansion of opportunity for this generation and the next generation.” [3]

 

These thoughts have particular resonance for me during this holiday season. Perhaps they do for you as well.

[1]       Common Dreams, 12/7/13, “Mandela quotes that won’t be in the corporate media obituaries,” http://www.commondreams.org/headline/2013/12/06-0

[2]       Pope Francis, 11/24/13, “Evangelii Gaudium,” as published in The Washington Post

[3]       President Obama, 12/4/13, “Remarks by the President on Economic Mobility,” http://www.whitehouse.gov/the-press-office/2013/12/04/remarks-president-economic-mobility

FUNDING SOCIAL SECURITY

ABSTRACT: Advocates for cutting Social Security benefits claim that cuts are needed because of a future funding shortfall. However, Social Security’s projected shortfall is small and 20 years in the future. Moreover, there are adjustments to the funding for Social Security that will easily eliminate the future funding shortfall.

The two most frequently mentioned ways of cutting Social Security’s costs are reducing future benefit payments and increasing the retirement age. The leading proposal would cut benefits by reducing the annual cost of living increases that seniors receive. However, to most accurately reflect the change in the cost of living that seniors actually experience, the annual increase in benefits should be greater than it is currently, not less. Cutting benefits will hurt retirees who rely on their modest Social Security benefits to make ends meet.

Another way to reduce Social Security’s cost is by increasing the age for receiving Social Security. The age for collecting full Social Security benefits is being increased from 65 to 67. People are living longer on average, but those with low incomes and less education have seen very little change in their life expectancy. Therefore, it hardly seems fair to increase the Social Security retirement age further.

The simplest and probably fairest way to address the Social Security shortfall would be to eliminate or increase the cap on the earnings that are subject to the Social Security tax. If the cap were eliminated, Social Security’s shortfall would be solved for at least 75 years.

FULL POST: Advocates for cutting Social Security benefits claim that cuts are needed because of a future funding shortfall. However, Social Security’s projected shortfall is small and 20 years in the future. It has no impact on the federal deficit because Social Security has its own, dedicated funding stream. So cutting benefits will do nothing to reduce the deficit but would hurt retirees who rely on their modest Social Security benefits to make ends meet. (See my post The Retirement Crisis and Social Security of 11/26/13 for more information. https://lippittpolicyandpolitics.org/2013/11/26/the-retirement-crisis-and-social-security/) Moreover, there are adjustments to the funding for Social Security that will easily eliminate the future funding shortfall.

The two most frequently mentioned ways of cutting Social Security’s costs are reducing future benefit payments and increasing the retirement age. The Republican budget and President Obama and some Democrats have proposed that benefits be cut by reducing the annual cost of living increases that seniors receive. This would be accomplished by using a different and lower measure of the Consumer Price Index (CPI) to calculate the annual adjustment in benefits – the “Chained CPI” instead of the regular CPI. (See my post Social Security and Chained CPI of 4/13/13 for more information. https://lippittpolicyandpolitics.org/2013/04/13/social-security-and-chained-cpi/)

However, the most accurate measure of the change in the cost of living for seniors is the CPI-E (for Elderly), and it is typically higher than either of the regular CPI (which is currently used) or the proposed “Chained CPI”. This means that to most accurately reflect the change in the cost of living that seniors actually experience, the annual increase in benefits should be greater than it is currently, not less. The bills in Congress to strengthen Social Security generally include the use of CPI-E for the annual cost of living adjustment. [1]

Another way to reduce Social Security’s cost is by increasing the age for receiving Social Security. The age for collecting full Social Security benefits is being increased from 65 to 67. (One can get Social Security benefits at younger ages but the amount received is reduced.) The major argument for this is that people are living longer on average. They are, but it is the well educated and affluent who are living longer. Those with low incomes and less education have seen very little change in their life expectancy and those with the least education have seen their life expectancy decline. [2] Therefore, it hardly seems fair to increase the Social Security retirement age further.

The simplest and probably fairest way to address the Social Security shortfall that’s 20 years in the future would be to eliminate or increase the cap on the earnings that are subject to the Social Security tax. (This Social Security tax is the dedicated and sole funding source for Social Security.)

Currently, Social Security tax is only paid on the first $113,700 of earnings. Amounts above that are untaxed. For workers earning up to that amount, they pay a 6.2% tax that is deducted from their paychecks and their employers match that amount. But because of the cap, someone making $1 million only pays tax on $113,700 of earnings, meaning that overall they pay less than 1% (instead of 6.2%) of their earnings into Social Security. If the cap were eliminated, Social Security’s shortfall would be solved for at least 75 years.

The bills in Congress to strengthen Social Security generally solve the funding shortfall by increasing the funding from the Social Security tax. Some raise or eliminate the cap on earnings subject to the tax. Others apply the tax to earnings over $250,000 but not to earnings between the current cap and $250,000 to avoid increasing taxes on people in that upper middle class earning range. It seems fairer and simpler to me to eliminate the cap and cut the tax rate slightly. This would give a small tax cut to everyone earning less than the $113,700 cap.

There are other ways to increase Social Security funding. One that has been suggested is to increase income taxes on high income individuals getting Social Security benefits and putting this revenue back into Social Security. Another is to use some of the revenue from the estate tax to fund Social Security. There are other options, but raising or eliminating the cap on earnings subject to the Social Security tax is the simplest and most straight forward solution to Social Security’s long-term funding shortfall. (See my post Social Security: Facts and Fixes of 12/4/11 for more information. https://lippittpolicyandpolitics.org/2011/12/04/social-security-facts-and-fixes/)

[1]       McAuliff, M., 11/18/13, “Elizabeth Warren: Expand Social Security,” The Huffington Post

[2]       Krugman, P., 11/21/13, “Expanding Social Security,” The New York Times

THE RETIREMENT CRISIS AND SOCIAL SECURITY

ABSTRACT: There is a retirement crisis in America. Both current and soon-to-be retirees are more dependent on Social Security than ever, yet some politicians and corporate executives are arguing that Social Security should be cut. Senator Elizabeth Warren of Massachusetts recently gave a speech in the Senate where (in only five and a half minutes) she did an excellent job of summarizing the retirement crisis and making the case for strengthening Social Security (http://ourfuture.org/20131118/elizabeth-warren-on-social-security-its-values-not-math).

Retirees’ reliance on Social Security is only going to increase because the other two legs of the three-legged retirement security stool, pension plans and personal savings, have been weakened. With Social Security as the only strong leg of retirement security, this is not the time to be reducing its benefits.

Given that 70% of Americans indicate in polls that they oppose Social Security cuts and 65% support increasing benefits, who is pushing for these cuts? Many Republicans are ideologically opposed to social welfare programs and cuts to Social Security are in the Republican budget. President Obama and some Democrats have signed on to the idea of the cuts as a compromise in pursuit of a “Grand Bargain” to resolve the federal budget’s deficit.

Prominently promoting the cuts in Social Security benefits have been two groups of corporate executives: the Business Roundtable and Fix the Debt. There’s great irony here from two perspectives. First, the corporate executives on the Business Roundtable have retirement accounts worth $14.5 million on average. Second, if the current Social Security tax cap were eliminated, corporate executives with $10 million in income, for example, would pay $1.24 million into Social Security instead of $14,000 and Social Security’s future funding problem would disappear.

Bills have been introduced in Congress to strengthen Social Security and its benefits. I encourage you to contact your Senators and Representative to ask them where they stand on Social Security cuts and these bills.

FULL POST: There is a retirement crisis in America. Both current and soon-to-be retirees are more dependent on Social Security than ever, yet some politicians and corporate executives are arguing that Social Security should be cut. This makes no sense from a budget perspective or a retirement policy perspective. There are bills currently in Congress to strengthen Social Security, by improving both its finances and its benefits, without any impact on the federal budget or the deficit. [1]

Senator Elizabeth Warren of Massachusetts recently gave a speech in the Senate where (in only five and a half minutes) she did an excellent job of summarizing the retirement crisis and making the case for strengthening Social Security. I encourage you to listen to her speech at http://ourfuture.org/20131118/elizabeth-warren-on-social-security-its-values-not-math.

Although the average recipient gets less than $15,000 a year from Social Security, many seniors are highly dependent on it. For 36% of seniors, Social Security is 90% of their income and for two-thirds of seniors, Social Security is more than half of their income. The current poverty measure indicates that 9% of seniors live in poverty, but an updated measure that most experts consider more accurate puts that figure at almost 15%. [2] Cutting Social Security benefits would clearly increase poverty among seniors.

Retirees’ reliance on Social Security is only going to increase because the other two legs of the three-legged retirement security stool, pension plans and personal savings, have been weakened. Only 18% of private sector workers have pensions (which pay a guaranteed monthly benefit for life as Social Security does). In 1975, 50% of workers had pensions. A combination of factors including expanded foreign trade and competition, along with weakened unions (which had made pensions a standard part of workers’ benefits) contributed to this dramatic decline in pensions.

Personal retirement savings are relatively small and have been hurt by the economic collapse, which cut the value of homes (where the middle class had most of its savings) and the value of investments. Some employers have replaced pension plans with personal savings accounts such as 401ks. However, only half of workers have such accounts and 80% of those accounts have less than $67,000 in them. [3]

With Social Security as the only strong leg of the three-legged stool of retirement security, this is not the time to be reducing its benefits. Given the current state of affairs, 53% of workers are at risk for having a lower standard of living in retirement than they had while working. And this percentage is up from 38% in 2001.

Given that 70% of Americans indicate in polls that they oppose Social Security cuts and 65% support increasing benefits, [4] why is there a push to cut Social Security benefits? The only reason that seems to make any sense is that those pushing a cut are ideologically opposed to Social Security – and often to social welfare programs in general.

So specifically who is pushing for these cuts? As mentioned above, it is in the Republican budget and reflects many Republicans’ ideological opposition to social welfare programs. President Obama and some Democrats have signed on to the idea of the cuts as a compromise in pursuit of a “Grand Bargain” to resolve the federal budget’s deficit.

Prominently promoting the cuts in Social Security benefits have been two groups of corporate executives: the Business Roundtable and Fix the Debt (a project of The Committee for a Responsible Federal Budget). These groups have been spending tens of millions of dollars on campaigns to build support for cutting Social Security (and Medicare, our health insurance program for seniors). There’s great irony here from two perspectives. First, the corporate executives on the Business Roundtable have retirement accounts worth $14.5 million on average. That would generate a monthly retirement check of over $86,000 compared to the typically monthly Social Security check of $1,237. [5] Second, the current Social Security tax (Social Security’s dedicated and only funding source) is only paid on the first $113,700 of earnings. Amounts above that are untaxed. If this Social Security tax cap were eliminated, corporate executives with $10 million in income, for example, would pay $1.24 million into Social Security instead of $14,000 and Social Security’s future funding problem would disappear.

Bills have been introduced in Congress to strengthen Social Security and its benefits. The Keeping Our Social Security Promises Act has been introduced in the Senate by Senator Sanders (S.1558) and in the House by Representative DeFazio. The Strengthening Social Security Act has been introduced in the Senate by Senator Harkin (S.567) and in the House by Representative Sanchez (H.R.3118). I encourage you to contact your Senators and Representative to ask them where they stand on Social Security cuts and these bills. [6]

[1]       Sargent, G., 11/5/13, “Liberal push to expand Social Security gains steam,” The Washington Post

[2]       Krugman, P., 11/21/13, “Expanding Social Security,” The New York Times

[3]       Democracy for America, 11/24/13, “Expand Social Security,” http://act.democracyforamerica.com/sign/social_security_infographic/?source=ptnr.ssw_ssinfo.20131105 (You can get more information and sign their petition to support expanding Social Security here.)

[4]       Alman, A., 11/19/13, “Voters in key states really don’t want Social Security cut,” The Huffington Post

[5]       Anderson, S., 11/21/13, “CEOs against grandmas,” Daily Times Chronicle

[6]       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.

CHARITY ISN’T THE ANSWER

ABSTRACT: Some people advocate for reducing government spending on social welfare programs by arguing that private charity should and could address social needs. However, when people’s needs are essential and time sensitive, charity is insufficient and undependable. For example, charities won’t be able to fill the $5 billion hole left by the recent cuts to the $78 billion federal Food Stamps program. This amount is equal to the total amount of annual contributions to all food banks in the country.

Charity or philanthropy can also serve as a smoke screen for activities that do far more harm than the benefits of the charitable giving. An example is the recent $20 million gift by the billionaire corporate executive, David Koch, to provide child care for 126 children at MIT. He spent easily ten times this amount on political activism in the last federal elections, supporting politicians who have been leaders in cutting the federal budget. Such cuts have meant that 57,000 poor children have been denied Head Start child care services, and, in addition, in Massachusetts alone, there are over 30,000 low income children on the waiting list for largely federally-funded child care subsidies. As Joan Vennochi wrote in her column in the Boston Globe about Koch’s gift, “The generosity of individuals is a blessing, but it’s no substitute for national policy.”

There are many examples of philanthropy, similar to this Koch case, where the givers, both individuals and corporations, have much greater negative impacts on society than the positive effects of their charity. In the case of McDonald’s, history indicates that from the start the goal of its philanthropy has been positive public relations for the corporation, not helping those in need. Its aggressive marketing of unhealthy food to children does far more harm than the good its very modest philanthropy does.

FULL POST: Some people advocate for reducing government spending on social welfare programs by arguing that private charity should and could address social needs. While charity or philanthropy plays an important role in our communities and country, when people’s needs are essential and time sensitive, charity is not dependable enough to be relied on. Charity can meet some people’s needs some of the time but it doesn’t – and can’t – meet all people’s needs, even their critical needs, all the time. The public sector must serve as the resource of last resort and ensure that critical needs are met in a timely fashion.

Charity is insufficient and lacks the consistency necessary to meet critical needs on a regular and timely basis. For example, access to sufficient and nutritious food is essential to well-being for adults and especially for children. However, charities won’t be able to fill the $5 billion hole left by the November 1 cuts to the $78 billion federal Food Stamps program. This reduction in food assistance from the federal government is equal to the total amount of annual contributions to all food banks in the country, according to a study by the Washington-based anti-hunger advocate Bread for the World. [1] Therefore, charitable donations for food would need to double instantaneously to fill this gap. Furthermore, Congress is likely to cut federal funding for food assistance even further in the next budget. (See my post Starving America on 11/11/13 for more detail at https://lippittpolicyandpolitics.org/2013/11/11/starving-america/.)

Clearly, there is no way that private charity can make up for the recent lost funding let alone for future cuts. Therefore, these cuts mean that nutrition will suffer and hunger will increase. For some young children, this may well have long lasting effects on their developing brains.

Charity or philanthropy can also serve as a smoke screen for activities that do far more harm than the benefits of the charitable giving. An example is the recent $20 million gift by the billionaire corporate executive, David Koch, to provide child care for 126 children at MIT. [2] Child care is essential for working parents and quality early education and care is critical for young children due to the foundational brain development that occurs in the first five years of life.

Koch is a generous philanthropist, but he is better known for his political activism. He spent easily ten times this $20 million on his political activism in the last federal elections. The politicians he supports have been leaders in cutting the federal budget. The cuts in March, 2013, known as the sequester, meant that 57,000 poor children nationwide have been denied Head Start child care services. In addition, in Massachusetts alone, there are over 30,000 low income children on the waiting list for child care subsidies, which are largely federally funded. This number has grown significantly due to cuts in federal funding. So, while Koch’s philanthropy got him a very positive story on the front page of the Boston Globe, its impact is far, far outweighed by the negative effects on national child care policies of his political activism.

There are two lessons to be learned from this example. First, charity is not and will not be sufficient to ensure affordable, quality early care and education for every child of working parents. Substantially increased spending by state and federal governments is needed to meet this critically important need. As Joan Vennochi wrote in her column in the Boston Globe about Koch’s gift, “The generosity of individuals is a blessing, but it’s no substitute for national policy.” [3]

The second lesson to be learned from this example is that it is often important to look at the context of charity and the overall impact of the giver. There are many examples of philanthropy, similar to this Koch case, where the givers, both individuals and corporations (or other organizations), have much greater negative impacts on society than the positive effects of their charity. Walmart and McDonald’s are two classic examples from the corporate world. In some cases, the charitable activities are a relatively blatant attempt at public relations; an effort to get favorable stories in the media and divert attention from the negative effects of other activities. (See my post Lack of Good Jobs is Our Most Urgent Problem on 10/29/13 for more information on how low pay and part-time jobs at Walmart, McDonald’s, and other large corporations are costing taxpayers billions of dollars in public assistance for their employees. https://lippittpolicyandpolitics.org/2013/10/29/lack-of-good-jobs-is-our-most-urgent-problem/)

In the case of McDonald’s, history indicates that from the start the goal of its philanthropy has been positive public relations for the corporation, not helping those in need. Its philanthropy is less that 0.5% of its profits and it spends 25 times as much on advertising. Its aggressive marketing of unhealthy food to children does far more harm than the good its very modest philanthropy does. It also spends far more lobbying for favorable public policies than it spends on philanthropy. [4]

This is the first of a couple of posts on charity or philanthropy (terms I use interchangeably). There are a number of other issues about charity that I plan to discuss, including:

  • Decisions about charitable or philanthropic spending are made by private individuals or organizations. They may not reflect public priorities and often lack public input and accountability.
  • Charity can exacerbate inequality. Richer communities generally have greater capacity to raise money than poorer communities, so communities where the need is the greatest, both rural and urban, often have less capacity for charitable activity.
  • Philanthropic activity can affect public policies and programs. It may undermine the democratic decision-making process and community involvement.

[1]       Wallbank, D., & Bjerga, A., “Wal-Mart to widows will feel U.S. Food Stamp cuts,” Bloomberg

[2]       Johnson, C.Y., 10/4/13, “Scientists at MIT get prized gift of day care,” The Boston Globe, front page

[3]       Vennochi, J., 10/10/13, The two David Kochs,” The Boston Globe

[4]       Simon, M., 10/29/13, “Clowning around with charity,” Corporate Accountability International and Small Planet Fund (http://www.eatdrinkpolitics.com/2013/10/29/clowning-around-with-charity-how-mcdonalds-exploits-philanthropy-and-targets-children/)

STARVING AMERICA

ABSTRACT: On November 1, federal food assistance to poor Americans was cut by $5 billion. The $78 billion Food Stamps program, officially known as the Supplemental Nutrition Assistance Program (SNAP), currently serves 48 million low income Americans, including 21 million children. This reduction in food assistance from the federal government is equal to the amount donated to churches, synagogues, and private food banks.

A family of four receiving the maximum amount will have their benefit fall from $668 to $632 per month. It is estimated that the typical SNAP beneficiary will receive $1.40 per meal. The Institute of Medicine found that the SNAP allotment, which is critically important for nutrition and health for both adults and children, was inadequate even before this cut.

The number of Americans receiving SNAP benefits has increased mainly due to the large number of people who lost jobs during the Great Recession. In addition, many Americans in low wage and / or part-time jobs qualify for Food Stamps.

Food, obviously, is a necessity and SNAP’s food stamps are a vital support for poor families with children, low income seniors, some people with disabilities, and some unemployed workers. Nonetheless, Congress actually wants to cut food assistance even more! This cut and the additional cuts being discussed will cause real harm to recipients by reducing a meager but essential support. There are many better and fairer ways to cut spending or increase revenue so these cuts to SNAP can be avoided.

FULL POST: On November 1, federal food assistance to poor Americans was cut by $5 billion. The $78 billion Food Stamps program, officially known as the Supplemental Nutrition Assistance Program (SNAP), currently serves 48 million low income Americans, including 21 million children. The cut is caused by the expiration of supplemental funding from the 2009 stimulus package. Although many politicians had pledged to extend this funding if it was still needed, that has not happened. On top of the hardships of the Great Recession and a weak recovery, this is another blow to people who are already among the most vulnerable citizens in our nation. [1]

Despite its significant impact on households that struggle to put food on the table, this event received scant attention in the mainstream, corporate media. This reduction in food assistance from the federal government is equal to the amount donated to churches, synagogues, and private food banks, according to a study by the Washington-based anti-hunger advocate Bread for the World. [2]

SNAP benefits will be cut by about 5.5%. A family of four receiving the maximum amount will have their benefit fall from $668 to $632 per month. It is estimated that the typical SNAP beneficiary will receive $1.40 per meal. [3] The Institute of Medicine found that the SNAP allotment, which is critically important for nutrition and health for both adults and children, was inadequate even before this cut. The cut means that nutrition will suffer and more families will run out of food by the end of the month. And more families will be in poverty because in 2012 SNAP lifted 4 million people above the poverty line ($18,300 for a family of 3, which often is a single mother with 2 children), making it one of the most effective anti-poverty programs we have. [4]

The $5 billion SNAP cut will have an effect on the overall economy. It is projected to slightly reduce our slow economic growth (from 2.0% to 1.9%) and has retail food stores and other consumer outlets worried about reduced sales. It is estimated that every $1 of Food Stamp benefits generates $1.74 of economic activity. [5]

The number of Americans receiving SNAP benefits has increased to roughly 48 million from about 26 million in 2007. This growth is mainly due to the large number of people who lost jobs during Great Recession, and especially those who either didn’t qualify for unemployment benefits or whose benefits have run out due to long-term unemployment. (Fewer than half of unemployed workers are currently receiving unemployment benefits.) In addition, many Americans in low wage and / or part-time jobs qualify for Food Stamps, including many workers at our large fast food corporations and at Walmart. (See my post of 10/30/13, Lack of Good Jobs is our Most Urgent Problem, for more information: https://lippittpolicyandpolitics.org/2013/10/29/lack-of-good-jobs-is-our-most-urgent-problem/.)

SNAP is a Department of Agriculture program and historically has been part of the Farm Bill. Renewal of the Farm Bill is currently stalled in Congress, in part over differences in how much more to cut SNAP. (That’s not a typo; Congress actually wants to cut food assistance even more!) House Republicans are proposing additional cuts of about $4 billion a year that would remove about 3 million people from the program, while Senate Democrats would cut one tenth of that, or $400 million a year. The Farm Bill also includes subsidies to multi-billion dollar agricultural corporations, billionaire investors in farms, and 14 members of Congress. However, these subsidies apparently won’t be cut; they will continue or increase. [6][7]

Food, obviously, is a necessity and SNAP’s food stamps are a vital support for poor families with children, low income seniors, some people with disabilities, and some unemployed workers. This cut that went into effect on November 1 and the additional cuts being discussed as part of the Farm Bill are tiny amounts in terms of the overall federal budget but will cause real harm to recipients by reducing a meager but essential support. There are many better and fairer ways to cut spending or increase revenue so these cuts to SNAP can be avoided. [8]

 

[1]       Kaufmann, G., 10/28/13, “This Week in Poverty: No Time to Wait on a Movement,” The Nation

[2]       Wallbank, D., & Bjerga, A., “Wal-Mart to widows will feel U.S. Food Stamp cuts,” Bloomberg

[3]       Dayen, D., 11/6/13, “The Democrats’ original Food-Stamp sin,” The American Prospect

[4]       Kaufmann, G., 10/28/13, see above

[5]       Rampell, C., 10/31/13, “As cuts to Food Stamps take effect, more trims to benefits are expected,” The New York Times

[6]       Alman, A., 7/23/13, “George Miller Criticizes House Republicans Over Farm Subsidies,” The Huffington Post

[7]       Nixon, R., 11/7/13, “Billionaires Received U.S. Farm Subsidies, Report Finds,” The New York Times

[8]       Weinstein, D., 11/6/13, “Time to tell the truth about Food Stamps,” The Huffington Post