US CAPITALISM IS OUT OF CONTROL

ABSTRACT: Of all the developed countries, the United States has the most unequal distribution of income and wealth. 1928 and 2007 were the peak years for income and wealth inequality in the US. In the periods leading up to these two peaks, the wealthy invested and speculated in financial markets. Speculative bubbles were created. The middle class saw their incomes stagnate. This led to economic instability, the Great Depression of the 1930s, and the Great Recession of 2008.

So where should we look for an example of greater economic stability and equality? The answer is the United States after World War II from 1946 to 1978. So what do we need to do to return to greater economic stability and equality? We need to keep and encourage the creation of jobs that pay middle class wages and have benefits.

We need to change the rules of our economy so the gains of economic growth are more widely shared. Capitalism needs rules, otherwise it runs out of control. A well-functioning democracy can create and enforce appropriate rules (laws and regulations). But if the democratic process of electing officials and making laws and regulations is corrupted by money and lobbying from wealthy capitalists and their corporations, the appropriate rules won’t be in place and capitalism can run out of control.

Currently, the huge amounts of money being spent by wealthy capitalists and their corporations on elections and lobbying are determining the rules of our economy. Americans are losing faith in our democracy, which is our most precious gift and our most important legacy for future generations. What the powerful moneyed interests would like, is for us all to get so cynical about politics and government that we basically give up. But if we’re mobilized, if we’re energized, if we take citizenship to mean not simply voting, paying taxes, and showing up for jury duty, but actually participating actively and knowledgeably, we can make our democracy – and capitalism – work.

FULL POST: Of all the developed countries, the United States has the most unequal distribution of income and wealth. 1928 and 2007 were the peak years for income and wealth inequality in the US. [1] What happened a year after 1928? The Great Crash. And what happened a year after 2007? Another financial system crash. The parallels are breathtaking if you look at them carefully. [2]

In the periods leading up to these two peaks, the wealthy invested and speculated in financial markets. Both times, speculative bubbles were created. In both periods, the middle class saw their incomes stagnate, so they went deeper and deeper into debt to maintain their living standard, creating a debt bubble. These bubbles and the undermining of the middle class led to economic instability, the Great Depression of the 1930s, and the Great Recession of 2008.

Today, many in the middle class are one crisis away from being poor. If they lose a job, have a health crisis, or have a serious accident, they can find themselves suddenly in need of public assistance, which may be unemployment benefits, food stamps or food pantries, or subsidized health insurance from Medicaid. They may find themselves deep in debt and at risk of losing their home.

We seem to be close to the point where the middle class doesn’t have the purchasing power to keep the economy going and where the majority of people feel like the economic and political systems are rigged against them. There may be a tipping point, where the degree of inequality and economic insecurity actually threaten our economy, our society, and our democracy.

So where should we look for an example of greater economic stability and equality? The answer is the United States in the decades after World War II. From 1946 to 1978, the economy doubled in size, everybody’s income doubled, and inequality was low. Although the top income tax rate was as high as 91% and was never below 70%, we had greater annual economic growth than we’ve had since. With today’s top tax rate under 40%, anybody who says that we have to reduce taxes to foster economic growth, simply doesn’t know our own history.

So what do we need to do to return to greater economic stability and equality? We need to keep and encourage the creation of jobs that pay middle class wages and have benefits. We need to increase the minimum wage and we need to include labor standards in our trade treaties. We need to give workers and the middle class the voice and power to stand up to the wealthy and ensure that our economy works for all people, not just for the 1% at the top. We need to change the rules of our economy so the gains of economic growth are more widely shared. (For more detail see my post of 10/29/13 at https://lippittpolicyandpolitics.org/2013/10/29/lack-of-good-jobs-is-our-most-urgent-problem/. )

The rules of our economy are largely set by the federal government. Capitalism needs rules, otherwise it runs out of control, resulting in financial collapses; air and water that are harmful; cars that are unsafe; drugs and food are tainted; industrial accidents where oil wells blow out, chemical plants explode, and trains crash and burn; and so forth.

A well-functioning democracy can create and enforce appropriate rules (laws and regulations) that balance public safety (including environmental safety) and corporate profitability. But if the democratic process of electing officials and making laws and regulations is corrupted by money and lobbying from wealthy capitalists and their corporations, the appropriate rules won’t be in place and capitalism can run out of control.

Currently, the huge amounts of money being spent by wealthy capitalists and their corporations on elections and lobbying are determining the rules of our economy. They are using their economic power to gain political power. They are using this political power to entrench and enrich themselves economically and politically by obtaining laws and regulations that are tilted to benefit their self-interest. This is not a matter of partisan politics; both Democratic and Republican politicians and policy makers receive the money and do the bidding of these powerful economic elites.

Examples of laws and regulations that are tilted to favor capitalist interests include individual and corporate tax laws; bankruptcy laws; antitrust laws and enforcement; intellectual property laws on copyrights, patents, and trademarks; health and safety laws; campaign finance laws; laws and regulations for the financial industry; and priorities for government spending.

Americans are losing faith in our democracy, which is our most precious gift and our most important legacy for future generations. We are losing faith in equal opportunity and upward mobility as practical realities, and we’re feeling real anxiety over our lack of economic security.

Americans need to understand what’s at stake and push good people in government to do the right thing. If we don’t, eventually the moneyed interests will win because they are persistent and there won’t be anybody who can speak loudly enough to be heard over the bullhorn of their money.

What the powerful moneyed interests would like, is for us all to get so cynical about politics and government that we basically give up and say, “Okay, you want our democracy? Take it.” Then they win everything. But if we’re mobilized, if we’re energized, if we take citizenship to mean not simply voting, paying taxes, and showing up for jury duty, but actually participating actively and knowledgeably, we can make our democracy – and capitalism – work.

We can do it if we understand the nature of the problem. Time and again, in the early 1900s and again in the 1930s, for example, we have saved capitalism from its own excesses. We made sure that rules were in place to make capitalism work as it should: as an engine of prosperity for everyone and with a brake on the excesses of greed and power, as well as on the money that can otherwise corrupt our democratic process.

I encourage you to watch, listen to, or read the transcript of Bill Moyers’ show with Bob Reich (http://billmoyers.com/episode/full-show-inequality-for-all/). And I encourage you to go see Bob Reich’s movie, Inequality for All. It’s entertaining and informative. You can see the trailer for the movie, get lots more information, and find opportunities to take action at http://inequalityforall.com/.

[1] The latest data appear to show that inequality was even greater in 2012 than 2007 as the great majority of the benefits of our weak economic recovery are going to the richest people. For more detail, see my post of 9/27/13 at https://lippittpolicyandpolitics.org/2013/09/27/whats-up-with-the-economic-recovery/.

[2] Moyers, B., with Reich, R., 9/20/13, “Inequality for all,” http://billmoyers.com/episode/full-show-inequality-for-all/ (This post is a summary of this Bill Moyers show. You can view, listen to, or read the transcript of it at the link provided.)

REPUBLICANS OBSTRUCTING NOMINEES AGAIN

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

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

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

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

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

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

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

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

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

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

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

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

LACK OF GOOD JOBS IS OUR MOST URGENT PROBLEM

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

REPUBLICAN SABOTAGE

ABSTRACT: Republicans are sabotaging democracy and the United States of America. Republicans in both the US House and Senate have used obstructionist tactics to block progress on a budget to keep the government operating and on an increase in the debt ceiling to avoid a financial default. In efforts to get policy changes that they don’t have the votes to pass in Congress and didn’t convince the American public to support in the last 3 elections, they have shut down the government and are on the verge of causing an unprecedented financial default.

Republicans in the US House of Representatives have blocked a vote on a simple, straight-forward bill extending the budget, which passed in the Senate, and would keep the government operating. In the Senate, a bill to increase the debt ceiling received a favorable majority vote but the Republicans filibustered, blocking progress.

An extremist minority has taken over the Republican Party because the rest of the Republicans refuse to stand up to them and say, “No.” These extremists have escalated their demands every time President Obama and the Democrats have compromised with them. For example, the extremists are demanding more budget cuts, even though the deficit has shrunk to half its size of 4 years ago.

Every compromise put forth on the budget or debt ceiling that has any chance of passage is torpedoed by the extremists, often with new demands. The track record makes it clear that these extremists won’t be satisfied with any concessions they get. In fact, anything they get will just embolden them to create another crisis so they can demand more.

FULL POST: Republicans are sabotaging democracy and the United States of America. Republicans in both the US House and Senate have used obstructionist tactics to block progress on a budget to keep the government operating and on an increase in the debt ceiling to avoid a financial default. In efforts to get policy changes that they don’t have the votes to pass in Congress and didn’t convince the American public to support in the last 3 elections, they have shut down the government and are on the verge of causing an unprecedented financial default. [1]

Republicans in the US House of Representatives have blocked a vote on a simple, straight-forward bill extending the budget, which passed in the Senate, and would keep the government operating. They used an unprecedented parliamentary procedure to block any chance that the bill would get voted on in the House. They did so by making a very specific change in the normal rules of operation of the House. Under normal procedure, any House member would have been able to request that the Senate bill be voted on. On the night of September 30, the eve of the shutdown, Republicans changed the normal rule to say that any request to vote on the Senate bill would have to be made by the Republican majority Leader or with his approval. “I’ve never heard of anything like that before,” said Norm Ornstein, resident scholar at the conservative American Enterprise Institute. As a result, efforts by Democratic House members to bring the Senate bill up for a vote and keep the government operating, were blocked. If the bill had been voted on it almost certainly would have passed because at least 28 House Republicans have publicly said they would support such a bill if it were brought to a vote, which, when combined with Democratic votes, would be a majority. [2][3]

Meanwhile in the Senate, a bill to increase the debt ceiling was brought to a vote. A majority voted in favor of it but the Republicans filibustered, making a 60 vote super-majority necessary to move forward. [4]

An extremist minority has taken over the Republican Party because the rest of the Republicans refuse to stand up to them and say, “No.” These extremists have escalated their demands every time President Obama and the Democrats have compromised with them. In 2010, they wanted the Bush tax cuts for the wealthy extended through 2012 so they could make their case for the tax cuts to voters. They made their case and lost the election. Did they then let the tax cuts expire? No. As part of the fiscal cliff negotiations they demanded they be extended permanently. The President and the Democrats compromised and extended them permanently for incomes up to $400,000. And now the Republicans are back demanding tax cuts for the wealthy.

On spending cuts, they demanded large spending cuts and held the financial credibility of the country hostage to their demand in the summer of 2011. When the President and the Democrats compromised and made significant cuts, they demanded more. So a Super Committee was created to find ways to reduce the deficit but the extremists refused any compromise. They presented their case for budget cuts to the voters in 2012 and lost. Nonetheless, the extremists refused to compromise and the automatic, across the board cuts that the Super Committee was supposed to find a way to avoid went into effect in March. But the extremists are demanding more budget cuts, even though the deficit has shrunk to half its size of 4 years ago and is continuing to shrink.

The extremists have also demanded that the Affordable Care Act, which they have dubbed Obama Care, be repealed, even though it would provide health insurance to tens of millions of Americans who don’t have it now. Having campaigned on this issue in 2012 and lost, and without the votes to repeal it in Congress, they are now holding our democracy hostage to their demand to stop it.

Every compromise put forth on the budget or debt ceiling that has any chance of passage is torpedoed by the extremists. Often, they put forward new demands such as restrictions on health insurance coverage of women’s reproductive health or shifting the sequester’s budget cuts to cut social programs rather than the military.

The track record makes it clear that these extremists won’t be satisfied with any concessions they get. In fact, anything they get will just embolden them to create another crisis so they can demand more. Hopefully, the country, President Obama, the Democrats, and perhaps even the majority of Republicans have learned that extortionists’ demands escalate if you give in to them. Furthermore, keeping the government running and paying the nation’s bills should never have been negotiable in our democracy in the first place. [5] This is sabotage of the democratic process and the democratic principle of majority rule.

It is frustrating to see a minority in Congress and in the country creating such hardship and inconvenience for so many in their pursuit of political goals that have been rejected repeatedly by the majority in Congress and multiple times by the voters. It’s particularly frustrating to see Congress people getting paid (although some have committed to donate their salaries to charity), keeping their staffs on at full pay in some cases, keeping their gym and pool open, and even keeping their special little subway running between the House and Senate office buildings, while so many others are harmed or inconvenienced. Meanwhile, among other things, toxic waste clean-ups have stopped, accepting new patients into clinical trials at the National Institutes of Health has stopped, access to National Parks is blocked (except where states are paying to keep them open), contractors and programs that depend on federal government funding are shutting down, people who depend on, need, or expect government services or information are having to go without, and, of course, hundreds of thousands of government employees are not getting paid, creating real hardships for many families. [6]

It’s past time to raise our voices and demand that our democratic principles be honored by the extremist minority and their Republican enablers in Congress. I urge you to contact your Representative and your Senators to tell them to reopen our government and raise the debt ceiling so our government can pay its bills.

[1] Moyers, B., 10/4/13, “On the sabotage of democracy,” http://billmoyers.com/segment/bill-moyers-essay-shutdown-showdown/

[2] McCarter, J., 10/10/13, “How House Republicans guaranteed a shutdown: by changing the rules, “ Daily Kos

[3] Alman, A., 10/13/13, “House Republicans changed the rules so a majority vote couldn’t stop the government shutdown,” The Huffington Post

[4] Laing, K., 10/12/13, “White House slams Senate Republicans,” The Hill

[5] Reich, R., 10/12/13, “Why giving Republican bullies a bloody nose isn’t enough,” The Huffington Post

[6] Terkel, A., 10/9/13, “Congressional perks deemed essential during government shutdown while public sacrifices,” The Huffington Post

CORPORATIONS’ TAX AVOIDANCE

ABSTRACT: Large corporations are dodging taxes by using offshore tax havens. They use them to avoid paying about $90 billion a year in US income taxes. Of the 100 largest US corporations with publicly traded stock, 82 maintain subsidiaries in offshore tax havens and they are holding $1.2 trillion in them, on which they have avoided paying US income tax. If all 82 of these corporations reported their $1.2 trillion stashed offshore as US income and paid the 35% rate, the federal government would receive $420 billion, which would cut the deficit by more than half.

For the 2010 tax year, profitable US corporations that filed a US income tax return paid an average of only 13% of their worldwide profits in income tax, despite the stated US corporate income tax rate of 35%.

The loss of this revenue for the federal government hurts all of us. It means that we, as individual taxpayers, and small businesses either have to pay more taxes to make up the difference or that our federal government (and state governments too) have less to spend on things we count on government to do.

Closing this offshore tax haven loophole would be a step toward tax fairness. There are bills in Congress to do so. I urge you to contact your Senators and Representative to urge them to support closing the offshore tax haven loophole.

FULL POST: Large corporations are dodging taxes by using offshore tax havens. They use them to avoid paying about $90 billion a year in US income taxes. This costs the US government more than was saved ($85 billion a year) by the ill-conceived, across-the-board budget cuts in March (known as the sequester) and far more than the proposed cut in food stamps (known as SNAP) would save ($4 billion a year). (See posts of 9/16 and 9/19 for some of the effects of the sequester.)

Of the 100 largest US corporations with publicly traded stock, 82 maintain subsidiaries in offshore tax havens and they are holding $1.2 trillion in them, on which they have avoided paying US income tax. Fifteen corporations hold two-thirds of this cash in 1,900 subsidiaries. [1] Many of these subsidiaries are officially housed in the Cayman Islands where the corporations maintain a legal address but no other physical presence. Ironically, roughly half of this offshore money is invested in US securities or through US accounts. [2]

In part because of the use of these offshore tax havens and accounting tricks that shift income to them, for the 2010 tax year, profitable US corporations that filed a US income tax return paid an average of only 13% of their worldwide profits in income tax. Even when state, local, and foreign income taxes are included, they paid only around 17% of profits, despite the stated US corporate income tax rate of 35%. [3] (See post of 11/5/11 for more information on corporate income taxes.)

A few specific examples help to put this in perspective.

Pfizer, the world’s largest drug maker, has 40% of its sales in the US but reported no taxable income in the US over the last 5 years. It has $73 billion sitting untaxed in 172 subsidiaries in offshore tax havens.
Microsoft has an untaxed $61 billion in 5 offshore tax havens.
Citigroup, which US taxpayers bailed out during the 2008 financial collapse, has $43 billion sitting untaxed in 20 offshore subsidiaries. [4]
Apple Computer made $30 billion in supposedly offshore profits over the past 4 years on which it paid no taxes to any national government, largely by exploiting technicalities in US and Irish tax laws. [5]
The Bank of America, also bailed out by US taxpayers during the 2008 financial collapse, has $17 billion sitting untaxed in 316 offshore subsidiaries.
Oracle has an untaxed $21 billion in 5 offshore subsidiaries.
Google has $33 billion sitting untaxed in 25 offshore subsidiaries. [6]

If these 7 corporations reported this $278 billion as US income and paid the 35% tax rate on it, the federal government would receive $97 billion. This would be more than enough to reverse the sequester’s cuts and continue food stamp benefits. If all 82 of the largest corporations with offshore tax haven subsidiaries reported their $1.2 trillion stashed offshore as US income and paid the 35% rate, the federal government would receive $420 billion, which would cut the deficit by more than half.

The loss of this revenue for the federal government hurts all of us, including small and local businesses. It means that we, as individual taxpayers, and small businesses either have to pay more taxes to make up the difference or that our federal government (and state governments too) have less to spend on education and job training, transportation and other infrastructure, safety and security, and all the other things we count on government to do.

Closing this offshore tax haven loophole would be a step toward tax fairness. There are bills in Congress to do so: in the US Senate, the Cut Unjustified Tax (CUT) Loopholes Act (bill # S.268) and in the US House, the Stop Tax Haven Abuse Act (bill # H.R. 1554). I urge you to contact your Senators and Representative to urge them to support closing the offshore tax haven loophole.

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

[1] US PIRG, 7/31/13, “Offshore shell games,” (http://www.uspirg.org/reports/usp/offshore-shell-games)

[2] Clark, K., 10/4/13, “Crackdown on offshore tax havens,” Daily Times Chronicle

[3] US General Accounting Office, May 2013, “Corporate income tax: Effective tax rates can differ significantly from the statutory rate,” (http://www.gao.gov/products/GAO-13-520)

[4] MASSPIRG, 4/4/13, “Picking up the tab,” (http://masspirg.org/reports/map/picking-tab-2013)

[5] The Balance Sheet, 5/21/13, “Apple slips through $30 billion tax-code hole,” The American Prospect

[6] US PIRG, 7/31/13, see above

WHY IS THE GOVERNMENT SHUTDOWN?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WHAT’S UP WITH THE ECONOMIC RECOVERY?

ABSTRACT: According to economists, our economy has been in a recovery for 4 years. However, most people’s income and wealth are down. Inequality of both income and wealth are up. The stock market and corporate profits are up, but unemployment and under-employment are high, and the poverty rate and economic insecurity are up.

Government policy does affect all of these. The policy changes that occurred after the Great Depression reduced income and wealth inequality until the 1970s and addressed many of these economic issues as well. However, the federal government’s actions since the collapse in 2008 have rescued the big financial corporations and the wealthy, but not the economy that all the rest of us live in.

Income insecurity and high levels of inequality are undermining the values of American democracy and belief in the American Dream, equal opportunity, and a merit based society. They are seen as unfair and as fostering a plutocracy instead of a democracy. It seems that the privileges of wealth (including for the children of the wealthy) are closing the door on opportunity in America for many.

FULL POST: According to economists, our economy has been in a recovery for 4 years; the Great Recession officially ended in June 2009. However, most people’s income and wealth are down; they have not recovered to their pre-recession levels. Inequality of both income and wealth are up because the income and wealth of the rich have recovered much more quickly than those of middle and lower income households. The stock market and corporate profits are up – stocks have more than doubled in value and have reached new record highs.

Average household income (adjusted for inflation) is $3,400 below what it was in December 2007, before the Great Recession. It is currently at $52,100, up $1,400 from its low point in August 2011 but recovering very slowly. [1]

Income inequality is up dramatically. The income gap between the richest 1% (incomes above $394,000) and the other 99% is the widest it’s been since 1927. During the 4 years of the recovery, the top 1% have seen their incomes grow by 31% while the 99% have seen their incomes grow by only 0.4%. In other words, the richest 1% of Americans have recovered almost all their income losses from the Great Recession, while all the rest of us have barely started to recover. This is a continuation of the trend of the last 20 years, where the top 1% have gotten two-thirds of all the growth in incomes. [2] A similar picture is seen if one looks at the top 10%, who now have over half of all income, a higher level than at any time since 1917 when record keeping began. (See posts of 9/2/13 and 11/13/11 for more information.)

Government policy does affect income inequality. The policy changes that occurred “after the Great Depression during the New Deal … reduced income concentration until the 1970s [and addressed many other economic issues as well]. … The policy changes [after] the Great Recession … are not negligible but are modest … Therefore, it seems unlikely that US income concentration will fall much in the coming years.” [3] Government policy also affects the recovery more broadly. See posts of 9/13/12, 5/15/12, and 3/31/12 for more information.

The picture is similar when household wealth is studied. In the financial collapse, $16 trillion of household wealth was lost. While $14.7 trillion of that has now been regained – 91% of the loss – the wealthy have regained most if not all of their wealth while the average household has regained only 45% of its wealth. In the 4 years of the recovery, two-thirds of recovered wealth has been in the value of stocks, which are at record highs. However, 80% of stocks are owned by the wealthiest 10% of households. Home values, which are the biggest component of middle and lower-income households’ wealth, are still 30% below their peak values. The average household wealth of $540,000 is roughly $100,000 below its peak. [4][5]

The poverty rate is up – to 15%, meaning 46.5 million people are living at or below the poverty line (yearly income of $23,492 for a family of four). This is 2.5 percentage points or 20% higher than in 2007, before the Great Recession, meaning that 7.8 million people have fallen into poverty in the last 5 years. [6]

Unemployment is high, although it has been declining. Furthermore, many of those who are working are under-employed – working part-time when they would like to be full-time or working at jobs that don’t require the training and experience they have. Many workers who lost a job but have a new one, are earning much less than they were. So far in 2013, 61% of new jobs have been in low-wage industries and 77% have been part-time. [7] (See post of 9/2/13 for more information.)

Many people – over a third of the working age population – have simply dropped out of the job market because jobs, especially good jobs with good wages are hard to find. Only 59% of the working age population is employed. [8] Despite workers’ significant increases in productivity (75% over the last 30 years), workers’ wages have only increased by 5% over those 30 years. The rewards of their increased productivity have instead gone to corporate profits and executives’ pay.

Economic insecurity is up. Four out of five adults in the US will experience economic insecurity in their lifetimes, Economic insecurity is defined as experiencing unemployment, relying on government assistance for at least a year, or having income below one and a half times the poverty line. [9]

The federal government’s actions since the collapse in 2008, which was due to reckless behavior by the big financial corporations, have rescued the big financial corporations and the wealthy, but not the economy that all the rest of us live in. The policies that have contributed to this included bailouts and low interest loans for the financial corporations and tax policies that over 30 years have dramatically reduced the taxes paid by corporations and the wealthy. Meanwhile, the value of the minimum wage has been significantly reduced by inflation. Cuts in government spending have resulted in lost jobs in both the public and private sectors. [10]

Studies have shown that the top personal income tax rate could return to the level it was in 1980 (70% instead of today’s 39.6%) without any negative effects on the overall economy. (See post of 12/29/12 for more information.) History also shows that corporate tax rates, which are at a 60 year low, can also be increased significantly without harmful effects. [11]

In summary, stock prices, corporate profits, poverty, and inequality of income and wealth are up. Income and wealth for the typical American household are still down from what they were before the Great Recession, despite 4 years of “recovery”. Economic insecurity is up, social mobility is down, and unemployment and under-employment are both high.

Income insecurity and high levels of inequality are undermining the values of American democracy and belief in the American Dream, equal opportunity, and a merit based society. [12] This is having a demoralizing effect on Americans and building resentment of what is increasingly seen as unfair domination of economic and political life by the wealthy, in other words as fostering a plutocracy [13] instead of a democracy. It seems that the privileges of wealth (including for the children of the wealthy) are closing the door on opportunity in America for many.

[1] Pear, R., 8/22/13, “Median income up, but below 2009 levels,” The Boston Globe (from The New York Times)

[2] Saez, E., 9/3/13, “Striking it richer: The evolution of top incomes in the United States,” University of California, Berkeley, Department of Economics (http://elsa.berkeley.edu/~saez/saez-UStopincomes-2012.pdf)

[3] Saez, E., 9/3/13, see above, p. 1

[4] Federal Reserve Bank of St. Louis, May 2013, “How Much Household Wealth Has Been Recovered?” Section of 2012 Annual Report, pages 14-15 (http://www.stlouisfed.org/publications/ar/2012/pdfs/ar12_complete.pdf)

[5] Associated Press, 5/31/13, “Report paints darker picture of US wealth,” The Boston Globe

[6] US Census Bureau, 9/17/13, “Income, poverty and health insurance coverage in the United States: 2012”

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

[8] Hightower, J., June 2013, “How bad is the jobs crisis?” The Hightower Lowdown

[9] Yen, H., 7/29/13, “Data show widening future struggle for Americans,” The Boston Globe (from the Associated Press)

[10] Eskow, R., 9/11/13, “Recovery for the Rich, Recession for the Rest,” Campaign for America’s Future, http://ourfuture.org/20130911/recovery-for-the-rich-recession-for-the-rest

[11] Eskow, R., 9/11/13, see above

[12] Krugman, P., 9/12/13, “Rich man’s recovery,” The New York Times

[13] A plutocracy is a society ruled and dominated by the small minority of the wealthiest citizens. Wikipedia (http://en.wikipedia.org/wiki/Plutocracy)

SUPREME COURT UPDATES

ABSTRACT: Here are three quick updates related to the US Supreme Court. First, issues with the conduct and ethics of a couple of the Justices have arisen in part because Supreme Court Justices are not covered by the Code of Conduct that applies to all other US judges. A Supreme Court Ethics Act of 2013 is being proposed in Congress that would require the Court to adopt a code of conduct similar to the one for other judges.

Second, Supreme Court Justice Ginsburg recently articulated what many legal scholars have been saying: that the current Court is “one of the most activist courts in history” based on its “readiness to overturn legislation” and judicial precedents.

Third, the Supreme Court will be considering cases in the upcoming year that will produce major decisions. These will give further indications of how the Court is balancing precedent and deference to legislative intent with ideology and activism. On the campaign financing front, the Court will consider a case that challenges the total, or aggregate, contribution limit of $123,200 on what an individual can give directly to all candidates for federal offices combined over the 2 year election cycle.

FULL POST: First, issues with the conduct and ethics of a couple of the Supreme Court Justices have arisen. The Supreme Court Justices are not covered by the Code of Conduct for United States Judges. A number of situations have occurred with Supreme Court Justices that under the Code would have been prohibited or would have required Justices to refrain from participating in certain cases due to apparent conflicts of interest. For example, Justice Thomas’s wife is a highly paid lobbyist who works on issues (health care for example) that have come before the Supreme Court. Justices Thomas and Scalia have attended and spoken at fundraisers and events for groups that are politically active on issues that have come before the Court. Neither has refrained from participating in any cases despite these apparent conflicts of interest.

Therefore, a Supreme Court Ethics Act of 2013 is being proposed in Congress that would require the Court to adopt a code of conduct similar to the one for other judges. The Justices, including Chief Justice Roberts, are, of course, opposed to the proposed legislation, asserting that they are capable of policing themselves. [1]

Second, Supreme Court Justice Ginsburg recently articulated what many legal scholars have been saying: that the current Court is “one of the most activist courts in history.” Her comment was based on the Court’s “readiness to overturn legislation”. Others have also noted its readiness to overturn judicial precedents, including ones of previous Supreme Court rulings. As examples of activism, Ginsburg highlighted the overturning of the Voting Rights Act and the ruling that the Affordable Care Act (aka Obama Care) was not a constitutionally allowed use of Congress’s power to regulate interstate commerce. [2] Other examples of activism cited by other legal scholars include the Citizens United decision (and others) on campaign financing, decisions on affirmative action, and the decision stopping the recounting of ballots in Florida for the 2000 presidential election. The reasoning given with these decisions is, in many cases, so convoluted that it is hard to view them as anything but ideological activism.

On the campaign financing front, the Court will consider a case known as McCutcheon versus the Federal Election Commission (FEC) that challenges the total, or aggregate, contribution limit of $123,200 on what an individual can give directly to all candidates for federal offices combined over the 2 year election cycle. This amount is well over twice the income of the average American family. (Anyone can give unlimited amounts to Political Action Committees that are, at least theoretically, independent of the candidates themselves.) [3]

If this aggregate limit is thrown out, our campaign financing and our elections will be even further skewed toward wealthy individuals. The Supreme Court has previously upheld these aggregate contribution limits because they address both the reality and appearance that our elected officials are corrupted by the influence of money. In our democracy, every citizens’ vote and voice is supposed to be equally heard and represented. [4][5]

[1] Mencimer, S., 7/31/13, “Democrats to introduce Supreme Court ethics bill,” Mother Jones

[2] Liptak, A., 8/25/13, “Ginsburg calls court one of most activist,” The New York Times

[3] Jones, J., 9/11/13, “Supreme Court Preview: McCutcheon v. Federal Election Commission,” League of Women Voters (http://www.lwv.org/blog/supreme-court-preview-mccutcheon-v-federal-election-commission)

[4] Kennedy, L., 9/10/13, “Stop the Next Citizens United,” Demos (http://www.demos.org/publication/stop-next-citizens-united)

[5] Lioz, A., 7/26/13, “Is McCutcheon v. FEC the Next Citizens United?” The American Prospect (http://prospect.org/article/mccutcheon-v-fec-next-citizens-united)

EFFECTS OF THE SEQUESTER Part 2

ABSTRACT: The $85 billion across the board budget cuts that went into effect on March 1, known as the sequester, are significantly affecting individuals, families, children, and public sector functions. The following list of some of the sequester’s effects is a continuation of my post of 9/16/13 and is drawn from the Coalition on Human Needs extensive compilation of reports from on-the-ground, front-line service providers and other sources.

The sequester’s budget cuts are having the following effects (among others): 1) the Center for Medicare and Medicaid Services is cutting its reimbursements to community cancer clinics for cancer treatment drugs below the actual cost of the drugs; 2) civilian medical staff at military medical facilities are losing significant income because of sequestration furloughs and therefore are quitting; 3) many school districts will be increasing class sizes, reducing instructional and non-instructional staff, reducing professional development and academic programs, and/or deferring textbook purchases; 4) 57,000 fewer children will participate in Head Start and Early Head Start, services will be reduced by 1.3 million days, and 18,000 staff will either be laid off or face reduced pay or hours; 5) the federal court system’s budget has been cut by $350 million leading to layoffs of public defenders, delays in trials, and cuts in mental health treatment, drug treatment and testing, and offender monitoring; 6) hundreds of thousands of low income mothers and their young children have lost nutrition benefits; 7) roughly 300,000 students with disabilities will receive reduced services; 8) Meals on Wheels has delivered hundreds of thousands fewer meals for tens of thousands of seniors; and 9) housing assistance has been cut or denied for tens of thousands of families.

FULL POST: The $85 billion across the board budget cuts that went into effect on March 1, known as the sequester, are significantly affecting individuals, families, children, and public sector functions. The following list of some of the sequester’s effects is a continuation of my post of 9/16/13. The Coalition on Human Needs has been compiling reports of the sequester’s effects from on-the-ground, front-line service providers, as well as from national reports and sources. Here are some “highlights” from their extensive compilation: [1]

The Center for Medicare and Medicaid Services is cutting its reimbursements to community cancer clinics for cancer treatment drugs below the actual cost of the drugs. As a result, the clinics have two choices: they can send Medicare patients to the hospital for treatment or they can continue to serve patients but take a loss on drug costs. Given tight budgets, many clinics are sending their patients to hospitals where taxpayers pay $6,500 more each year for cancer care and seniors pay $650 more in co-pays than they would at community cancer clinics.
Civilian medical staff at military medical facilities are losing significant income because of sequestration furloughs and therefore are quitting. The Army and Air Force combined have lost 3,300 doctors, nurses and other medical staff, about 6 percent of their total. Medical facilities’ hours of operation have been reduced and certain non-emergency medical procedures delayed.
The sequester’s cuts will affect many school districts this fall. In a survey of 541 school districts in 48 states done by the School Superintendents Association, 86% indicated they would be implementing cuts, including: increasing class sizes (48%), reducing instructional staff (53%), cutting non-instructional staff (47%), reducing professional development (59%), reducing academic programs (33%), and deferring textbook purchases (33%).
Due to the sequester’s cuts, 57,000 fewer children will participate in Head Start and Early Head Start this fall, the early education programs designed to close the school readiness gap for disadvantaged children. In addition, services will be reduced by 1.3 million days at Head Start centers and 18,000 staff will either be laid off or face reduced pay or hours. Programs also closed early at the end of the last school year, canceled summer programs, shortened daily hours of operation, and/or reduced services such as transportation. The concentration of Head Start services in poorer states and cities means that very poor communities and their children will be hit hard by these cuts, which will likely have life-long impacts on them and increase the challenges facing their schools.
The federal court system’s budget has been cut by $350 million by the sequester. This has resulted in layoffs of public defenders and furloughs of up to twenty days without pay. There have been delays in trials, reductions in lawyer training, and less funding for research, investigation and expert help. Several courts are not holding trials on Fridays to adapt to the reductions. If cases cannot be processed in accordance with the Speedy Trial Act, they may have to be dismissed. The number of federal probation officers has declined 7 percent since 2011, to approximately 6,000, despite an increase in the number of offenders in the probation system. In 2012, 187,000 offenders were supervised by these probation officers, and the number is expected to rise to a record 191,000 by 2014. Probation and pretrial services, including mental health treatment, drug treatment and testing, and offender monitoring, have all been cut.
The sequester’s cuts to food programs have meant that hundreds of thousands of low income mothers and their young children have lost nutrition benefits, which could do long-term harm to the health and school readiness of the children.
Hundreds of millions of dollars of sequester cuts mean that roughly 300,000 students with disabilities will receive reduced services.
Because of sequester cuts, Meals on Wheels has delivered hundreds of thousands fewer meals for tens of thousands of seniors. Transportation and other services for seniors have been cut.
Housing assistance has been cut or denied for tens of thousands of families due to the sequester. Some families have lost their housing assistance, some are being asked to pay more, and already long waiting lists and times (measured in years in many places) have grown. Maintenance of public housing and staff at housing agencies have been reduced.

I strongly urge you to call your US Senators and your Representative to tell them that the sequester’s budget cuts are harmful and unwise. Tell them that there are smarter and fairer ways to reduce the federal budget’s deficit.

[1] The Coalition on Human Needs’ extensive compilation of the sequester’s effects is available at: http://www.chn.org/wp-content/uploads/2013/08/completesetofsequesterreports.pdf.

EFFECTS OF THE FEDERAL BUDGET CUTS, AKA THE SEQUESTER

ABSTRACT: The $85 billion in federal budget cuts that went into effect on March 1 have now had time to have measurable effects. Most economists agree that the cuts, known as “the sequester,” have slowed economic growth by at least 1.5 percentage points. Joseph J. Minarik, an economist, cannot remember “when fiscal [i.e., federal budget] policy was so at odds with the needs of the economy.”

Effects of the sequester are having significant impacts on people’s lives, but continue to be ignored by Congress. The budget cuts are having the following effects (among others): In July, 199,000 federal workers had work hours reduced and contractors lost work; Federal court proceedings have been dramatically slowed and the number of federal law enforcement and probation officers has been reduced; The FBI will shut its headquarters and offices on 10 weekdays over the next year; The National Institutes of Health is cutting $4 million from the $9 million core contract for the Framingham Heart Study, one of the most important and unique research projects in medical history; The decline in federal money for scientific research has been exacerbated, leading 18% of scientists to consider taking their research to another country; The Coast Guard has cut patrols, training, and purchases of new equipment; and Efforts to remove unexploded land mines have been canceled or curtailed.

FULL POST: The $85 billion in federal budget cuts that went into effect on March 1 (which were part of the so-called “fiscal cliff”) have now had time to have measurable effects. Most economists agree that the cuts, known as “the sequester,” have hurt economic growth and the creation of jobs. They estimate that the reduced federal expenditures have slowed economic growth by at least 1.5 percentage points, with more harm to the economy and jobs expected if Congress and the President allow the cuts to continue.[1]

According to a recent NBC News/Wall Street Journal survey, 22% of Americans say they have been “significantly affected” by sequestration cuts. Among people earning below $30,000, 31% say they have been affected by the sequester. [2]

Joseph J. Minarik, economist and director of research at the corporate-supported Committee for Economic Development, says he cannot remember “when fiscal policy was so at odds with the needs of the economy.” Similarly, University of Michigan economist Justin Wolfers says, “The disjunction between textbook economics and the choices being made in Washington is larger than any I’ve seen in my lifetime. … At a time of mass unemployment, it’s clear, the economics textbooks tell us, that this is not the right time for fiscal retrenchment.” Given the consensus on this in the often fragmented economics profession, he adds, “To watch it be ignored like this is exasperating, horrifying, disheartening.” Warren Buffett, billionaire investment guru, stated that the sequester “is a stupid way to enact a cut in the budget.” [3]

The economic and jobs situations would be even worse if the Federal Reserve (the Fed) wasn’t taking aggressive actions to stimulate the economy (including holding interest rates extremely low) that offset some of the drag on the economy from federal budget cuts. However, it is likely the Fed will begin reducing one of its stimulus measures soon (the one known as quantitative easing).

As you may remember, the sequester’s cuts to air traffic controllers caused flight delays (that affected members of Congress as well as all the rest of us), so Congress acted with rarely seen speed to provide funding for them (see post of 4/30/13). However, other effects of the sequester, which are having far more significant impacts on people’s lives than having a flight delayed, continue to be ignored by Congress even as the real, measureable impacts are being felt. Given that the cuts were applied across the board, the range of effects have been broad. Here are some examples:

In July, 199,000 federal workers had work hours reduced and contractors lost work due to the sequester, thereby curtailing a wide range of services. [4] As workers’ incomes are reduced, some by as much as 30%, the impact ripples through the economy, stifling economic growth and job creation. These workers run the gamut from Internal Revenue Service (IRS) employees to public defenders in the federal court system to civilian employees of the military, many of them scientists, engineers, and medical staff. In Massachusetts alone, these cuts are expected to take $45 million out of the local economy. (Woolhouse, M., 7/22/13, “State feels pinch on federal workers,” The Boston Globe)
Federal court proceedings have been dramatically slowed and the number of federal law enforcement and probation officers has been reduced, jeopardizing public safety, according to an unusual letter to Congress signed by the chief judges of the trial courts in 49 states (every state except Nevada). (Sherman, M., 8/15/12, “Judges urge Congress to avoid more sequestration cuts,” The Washington Post)
The FBI will shut its headquarters and offices on 10 weekdays over the next year, leaving only a skeleton staff on duty. Off-duty employees will not be paid for these days. Given that personnel costs are roughly 60% of the agency’s budget, this was deemed the most effective way to cope with the sequester’s budget cuts. The FBI also has implemented a hiring freeze that means it has 2,200 vacant positions. Training has been substantially cut and no new vehicles are being purchased. There are concerns that employees will leave for better pay in the private sector, that investigations will be slowed, that domestic intelligence gathering will be harmed, and that the FBI’s capabilities will be degraded over the long-term. (Schmidt, M.S., 9/12/13, “F.B.I. plans to close offices for 10 days to cut costs,” The New York Times)
The National Institutes of Health is cutting $4 million from the $9 million core contract for the Framingham Heart Study, one of the most important and unique research projects in medical history. Over the past 65 years, data from the study has been used to develop and test technologies and treatments that have saved millions of lives and hundreds of billions of dollars in health care costs. The study has monitored the health, lifestyles, and medical treatments of 15,000 people and 100 of the original participants are still alive and being followed, as are multiple generations in some families. Thanks in part to the Framingham study, deaths from heart disease have been cut by more than 70 percent over the past four decades. The study was the first to link smoking and stress to heart disease and identify cholesterol and obesity as risk factors for heart problems. In fact, the very term “risk factor” or “factors of risk” was coined by Framingham researchers. The study will continue, but researchers will be laid off and participants will answer health questions by phone instead of having an in-person medical examination by a doctor. The ultimate effect on the study and the costs to our health and health care system in terms of discoveries delayed or never made is unknown. (Gellerman, B., 9/11/13, “Sequester Puts 65-Year-Old Framingham Heart Study In Jeopardy,” WBUR)
The decline in federal money for scientific research has been exacerbated and 67% of 3,700 scientists surveyed reported receiving less federal grant funding for their research than 3 years ago. 55% reported they have a colleague who has lost or is about to lose his or her job, and 18% reported they are considering taking their research to another country. (Steinstein, S., 8/30/13, “Nearly 20 percent of scientists contemplate moving overseas due in part to sequestration,” The Huffington Post)
The Coast Guard has cut patrols, training, and purchases of new equipment. (Gellerman, B., 8/6/13, “Coast Guard Pilots In Mass. Feel Sequester Pinch,” WBUR)
Efforts to remove unexploded land mines left behind in former warzones have been canceled or curtailed. (Bender, B., 8/3/13, “Home front impasse has distant victims,” The Boston Globe)

My next post will list additional effects of the sequester’s budget cuts.

[1] Calmes, J., & Rampell, C., 8/2/13, “U.S. Cuts Take Increasing Toll on Job Growth,” The New York Times

[2] O’Brien, M., Chuck, E., & Lamb-Atkinson, G., 7/29/13, “Ahead of budget battle, more Americans say sequester has hurt,” NBC News

[3] Calmes, J., & Rampell, C., 8/2/13, see above

[4] Calmes, J., & Rampell, C., 8/2/13, see above

“TRADE” AGREEMENTS & CORPORATE POWER

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

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

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

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

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

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

Other examples of corporations suing governments include:

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

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

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

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

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

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

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

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

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

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

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

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

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

“TRADE” AGREEMENT SUPERSIZES CORPORATE POWER

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

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

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

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

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

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

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

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

The TPP benefits corporations, particularly foreign corporations, by

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

LABOR DAY AND THE MIDDLE CLASS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[4] Eskow, R.J., 8/26/13, “A Dream Deferred: The Minimum Wage Was Higher in 1963 Than It Is Today,” The Huffington Post (http://www.huffingtonpost.com/rj-eskow/a-dream-deferred-the-mini_b_3820416.html?utm_hp_ref=email_share)

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

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

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

DETROIT’S BANKRUPTCY

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

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

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

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

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

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

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

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

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

[1] Brown, E., 8/6/13, “Fleecing pensioners to save the banks,” CounterPunch (http://www.counterpunch.org/2013/08/06/fleecing-pensioners-to-save-the-banks/print)

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

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

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

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

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

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

INFORMED CITIZEN DISORDER

ABSTRACT: I would guess that many of you are like me: it’s been drilled into your conscience that it’s your responsibility as a citizen of a democracy and as a voter to be informed about what’s going on so you can make educated decisions. In a democracy, it’s part of being patriotic.

But boy, it can be depressing and infuriating because so many things are headed in the wrong direction. And changing direction is so difficult if not seemingly impossible. Marty Kaplan calls this “Informed Citizen Disorder (ICD).” Kaplan goes on to say, “We have to be optimists. … The only responsible thing that you can do is say that individuals can make a difference and I will try, we will try.”

There are encouraging signs, but the mainstream media (given they are mostly giant corporations) are not attuned to look for – and have some predisposition and incentive to ignore – citizen activism. Furthermore, our democracy is so controlled by money that it can feel unredeemable; our political system can leave us feeling helpless and jaded rather than empowered to make a difference.

However, our nation was built by ordinary people rising up and forging grassroots movements that achieved the extraordinary. “An American patriot is one who supports the egalitarian ideals of our country, and who is willing to challenge authority.” (Jim Hightower, see footnote)

This blog is part of my therapy for ICD. I hope it helps you.

FULL POST: I would guess that many of you are like me: it’s been drilled into your conscience that it’s your responsibility as a citizen of a democracy and as a voter to be informed about what’s going on so you can make educated decisions. Being informed about what’s going on in the world is supposed to be a virtue, the civic equivalent of exercise. In a democracy, it’s part of being patriotic.

But boy, it can be depressing and infuriating because so many things are headed in the wrong direction. And changing direction is so difficult if not seemingly impossible. You do your best to stay informed, and what you get in return is what Marty Kaplan calls “Informed Citizen Disorder (ICD).” As he puts it, “the more informed I am, the more despondent I am, because day after day, there is news which drives me crazy and I want to see the public rise up in outrage and say, no, you can’t do that, banks. You can’t do that, corporations. You can’t do that polluters, you have to stop and pay attention to the laws, or we’re going to change the laws.” But time and again, the public doesn’t rise up, and even when it does (at least somewhat as in the post-Newtown efforts to reduce gun violence), nothing changes. [1]

So Moyers asks him, “Are you an optimist or a pessimist about what’s happening to us?” And Kaplan says, “I have children. I have to be an optimist. The globe has children. We have to be optimists. There is no choice. … The only responsible thing that you can do is say that individuals can make a difference and I will try, we will try.” [2]

There are encouraging signs, although one often has to look hard to find them. Part of the problem is that the mainstream media (given they are mostly giant corporations) are not attuned to look for – and have some predisposition and incentive to ignore – citizen activism. Due to mergers and acquisitions over the last 35 years, there are now fewer than 10 giant media corporations that control over 90% of the news and information we receive.

Remember Occupy Wall Street? It was going on for weeks before it got any mention in the mainstream media. The Moral Monday’s demonstrations that are happening in North Carolina weekly are a great example. What happened in Wisconsin when the Governor and Legislature were attacking public employees and unions was another great example. What hasn’t happened yet is for this citizen activism to spark major, nationwide protest or to build to a critical mass.

Moyers and Kaplan also discuss how the mainstream media today actually undermine our efforts to be good citizens of a democracy by distracting us with infotainment and by failing to provide the depth of information necessary to be informed citizens. Furthermore, our democracy is so controlled by money that it can feel unredeemable; our political system can leave us feeling helpless and jaded rather than empowered to make a difference.

However, our nation was built by ordinary people rising up and forging grassroots movements that achieved the extraordinary. Think of the original Patriots who started and carried out the American Revolution. Think of the suffrage, Civil Rights and Gay Rights movements. Think of the New Deal. “An American patriot is one who supports the egalitarian ideals of our country, and who is willing to challenge authority” every time it strays from the ideals of our democracy and from government of, by, and for the people. [3]

This blog is part of my therapy for ICD. I hope it helps you. I try to concisely present information on issues that we need to tackle to reclaim our democracy and relieve ICD. Ultimately, I hope this supports the grassroots movement of informed citizens that is needed to return to government of, by, and for the people.

NOTE: I encourage you to listen to or watch Bill Moyers’ shows. I download the podcasts and listen to them when I’m traveling, waiting, or doing mindless things. They are incredibly informative and thought provoking. He frequently asks his activist guests, as he did Kaplan, what keeps them going and why they remain optimistic. Their answers are always inspiring. I also encourage you to take a look at Jim Hightower’s Lowdown. It’s feisty, entertaining, easy to read, and informative.

[1] Kaplan, M., 5/27/13, “Diagnosis: Informed Citizen Disorder,” The Huffington Post

[2] Moyers, B., 7/12/13, “Distracted from Democracy,” Bill Moyers & Company with Marty Kaplan, http://billmoyers.com/segment/marty-kaplan-on-the-weapons-of-mass-distraction/

[3] Hightower, J., July 2013, “America’s true history is not about ‘Great Men,’ but about grassroots rebels and movements,” The Hightower Lowdown, http://www.hightowerlowdown.org/

THE AFFORDABLE CARE ACT PART II

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

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

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

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

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

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

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

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

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

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

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

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

THE AFFORDABLE CARE ACT PART I

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[2] Favreau, J., 7/11/13, “The GOP is terrified Obamacare could be a success,” The Daily Beast (http://www.thedailybeast.com/articles/2013/07/11/the-gop-is-terrified-obamacare-could-be-a-success.html)

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

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

LARGE FINANCIAL CORPORATIONS CONTINUE ILLEGAL ACTIVITY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

BANNING BEE KILLING PESTICIDES

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

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

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

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

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

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

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

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

Will you join me and add your name to this petition to the United States Congress asking it to pass legislation suspending use of the pesticides that are killing bees?

This petition was created on org.credoaction.com, a new people-powered platform that allows activists to start and run petition campaigns. org.credoaction.com helps activists like you make progressive change and fight regressive policies by creating online petitions.

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

FINANCIAL SYSTEM REFORM

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

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

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

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

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

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

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

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

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

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

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

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

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

OVERSIGHT OF FINANCIAL CORPORATIONS – PETITIONS YOU CAN SIGN

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

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

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

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

TELL PRESIDENT OBAMA NOT TO APPOINT SUMMERS AS FED CHAIRMAN

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

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

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

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

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

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

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

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

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

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

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

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

VOTING RIGHTS AT RISK

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

OBSTRUCTIONISM AND EXTREMISM BLOCK PROGRESS IN THE US HOUSE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A RESPITE FROM OBSTRUCTIONISM

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

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

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

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

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

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

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

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

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

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

BLOCKING JUDICIAL NOMINATIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

BLOCKING EXECUTIVE BRANCH APPOINTMENTS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[2] Bierman, N., 5/16/13, see above

[3] Swift, J., 5/25/13, “Qualified nominee for EPA,” The Boston Globe

[4] Bierman, N., 5/16/13, “1 nominee, 1,000 questions,” The Boston Globe

[5] Associated Press, 5/17/13, “GOP fights labor board nominees,” The Boston Globe

[6] Editorial, 5/9/13, “Congress, the death panel’s death panel,” Ringside Seat from The American Prospect

IDEOLOGY, OBSTRUCTIONISM, AND MAKING GOVERNMENT WORK

ABSTRACT: Democrats believe in making government work. Republicans, at least many current ones, don’t exhibit a commitment to making government work. They block legislation and an unprecedented number and breadth of Presidential appointments, including judges and cabinet secretaries.

Rigid ideology and extreme partisanship are drivers of the gridlock: many Republicans seem willing to use any means available to block Obama’s initiatives, anything that would appear to be a success for him, and his administration’s efforts to govern effectively. Senate Republicans filibuster, while Republicans in the House have developed a strategy of policy hostage taking. While there are isolated examples of Democrats using some of the Republicans’ tactics, the current obstructionism by Republicans is unprecedented in both its breadth and its frequency.

Some of the Republicans, particularly those that identify with the Tea Party, are doing everything they can to sabotage government and keep it from operating effectively. Then when it falls short, they shout “See, we told you government can’t do anything right!”

Examples of Republicans impeding the functioning of Congress include: 1) in the budget process, they refused to appoint members for the conference committee that resolves differences between the House and Senate bills; 2) filibustered legislation to reduce gun violence; 3) blocked the ratification of an international treaty despite widespread, bipartisan support; and 4) blocked progress by filibustering or threatening to filibuster over 400 times since 2006.

The public’s well-being and future generations are hurt when our legislative branch doesn’t function.

FULL POST: Democrats’ ideology is that government has an important and positive role to play in our society. Republicans’ ideology is that a minimal government role is best and that government is more often a negative than a positive factor. But it goes a step further. Democrats believe in making government work, in doing the best that can be done to foster a civil and just society, despite limitations and challenges. They believe in implementing existing laws and making existing agencies work to fulfill their missions. Republicans, at least many current ones, don’t exhibit a commitment to making government work. As a consequence, they block legislation, including essential legislation, even when there is a majority in favor of it, through tactics such as filibustering in the Senate (see posts of 6/15/12 and 6/10/12) or refusing to move legislation forward in the House. [1] Senate Republicans have also used the filibuster to block an unprecedented number and breadth of Presidential appointments, including judges, cabinet secretaries, and other positions in government agencies. (See 5/20/12 post.)

In addition to rigid ideology, extreme partisanship is also a driver of the gridlock: many Republicans are of the mindset that if President Obama is for something, they will be against it – even in cases where they had previously supported the position or issue. And they seem willing to use any means available to block Obama’s initiatives, anything that would appear to be a success for him, and his administration’s efforts to govern effectively. While the Senate Republicans filibuster, Republicans in the House, led by Eric Cantor (VA), Paul Ryan (WI), and Kevin McCarthy (CA), have developed a strategy of policy hostage taking. Their most notable effort was their refusal to raise the US government’s debt ceiling, which was needed to fund the activities previously approved by Congress and the president under the country’s budget. They took hostage the full faith and credit of the US Government to pay its debts. As Thomas Mann said, “It’s hard to imagine a more destructive action.” [2] In the House, the extreme partisanship of the Republican majority means that the Democratic minority is all but ignored. [3]

While there are isolated examples of Democrats using some of these tactics, the current obstructionism by Republicans is unprecedented in both its breadth and its frequency.

Some of the Republicans, particularly those that identify with the Tea Party, do not feel a responsibility to abide by the historical rules of operation or to work to promote the successful functioning of government. A recent survey documented that Tea Party activists do not want their elected representative to compromise and are happy to have them prevent government from functioning. [4] Furthermore, some of these activists and elected officials promote their ideology by doing everything they can to sabotage government and keep it from operating effectively. Then when it falls short, they shout “See, we told you government can’t do anything right!” [5]

Examples of Republicans impeding the functioning of Congress include the following:

This spring, both houses of Congress passed budget bills. The process calls for a conference committee of both chambers to be appointed to reconcile differences between the two bills. However, the House Republicans, led by Paul Ryan, chair of the Budget Committee, refused to appoint members for the conference committee – an unprecedented act of obstructionism. After a month of negotiations, Democrats gave up on the effort to form a conference committee, so the government continues to run without a normal budget in place. [6]

Senate Republicans have filibustered * legislation to reduce gun violence by expanding background checks for gun purchases. (See 4/20/13 and 5/9/13 posts.) Senate Republicans also blocked the ratification of an international treaty on the Rights of Persons with Disabilities, despite widespread, bipartisan support, ratification by 126 other countries, and the fact that it was modeled on the American with Disabilities Act. (See post of 12/8/12.)

Senate Republicans have blocked progress by filibustering or threatening to filibuster over 400 times since they lost the majority in 2006; that’s over once a week on average. As two, bi-partisan political scientist have written, Senate Republicans are using the filibuster “to delay and obstruct quietly on nearly all matters, including routine and widely supported ones.” They have filibustered judges, top administration officials, and a wide range of legislation. [7]

The US has serious problems, short and long-term, including unemployment, stagnant wages, and global competition, that need to be addressed through legislation. The public’s well-being and future generations are hurt when our legislative branch doesn’t function because Republicans are committed to a rigid ideology, refuse to compromise, and believe that scoring political points is more important than solving problems. [8]

My next post will review the impacts of Republican obstructionism on the judicial and executive branches of government.

[1] Starr, P., May / June 2013, “Bad faith and budget politics,” The American Prospect

[2] Ornstein, N., & Mann, T., 4/26/13, “Why Congress is failing us,” on Bill Moyers’ public TV show, available at BillMoyers.com

[3] Arenberg, R.A., 6/13/12, “An effective Senate needs filibusters,” The Boston Globe

[4] Rapoport, A., May / June 2013, “Ted [Cruz] talk,” The American Prospect

[5] Editorial, 5/24/13, “Scandal, Sequestered,” Ringside Seat, The American Prospect

[6] Bouie, J., & Caldwell, P., May / June 2013, “Patty Murray in 19 takes,” The American Prospect

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

[7] Mann, T.E., and Ornstein, N.J., 4/27/12, “Let’s just say it: The Republicans are the problem,” The Washington Post. Adapted from their book “It’s even worse than it looks: How the American Constitutional system collided with the new politics of extremism.”

[8] Ornstein, N., & Mann, T., 4/26/13, see above

OUR TOXIC ENVIRONMENT AND WHAT YOU CAN DO

ABSTRACT: On a societal level, a disproportionate burden of toxic pollution is borne by Americans of color. At the specific level, every day skin care products contain toxic chemicals. Many contain formaldehyde (a known carcinogen), phthalates (linked to hormonal disruption and birth defects), and/or parabens (which mimic the hormone estrogen and have been linked to breast cancer). Lead (a neurotoxin so damaging to young children that it is banned from house paint and gasoline) is present in lipstick.

The US Food and Drug Administration (FDA) does NOT have the authority to test cosmetic ingredients before they are marketed or to order recalls. Regulation is in the hands of the industry itself, which to-date has found only 11 chemicals to be unsafe for use. In contrast, in Europe, 1,400 chemicals have been banned from personal care products. The chemical and cosmetics corporations spend millions of dollars every year on lobbying and other efforts to influence US policy.

Atrazine is a weed killer, widely used in the US but banned in the European Union. As an example of the lengths the chemical industry and its allies in Congress will go to stop any momentum to regulate toxins, they blocked a resolution honoring Rachel Carson, author of Silent Spring 50 years ago, which established a clear link between DDT and other pesticide use and the widespread deaths of birds, as well as reproductive, birth, and developmental abnormalities in mammals.

Options for what you can do at home and politically are included in the full post below.

FULL POST: Before sharing some specific examples of toxic chemicals in our everyday lives and some things you can do about them, here’s an important societal perspective. A disproportionate burden of toxic pollution is borne by Americans of color. The environmental justice movement has documented the disproportionate presence of pollution sources in and near communities with high percentages of people of color. Prominent examples are in Louisiana and Detroit. The stretch along the Mississippi River from Baton Rouge to New Orleans is dotted with oil refineries that belch a variety of toxins into the air of the surrounding, largely minority, communities. This area is known as “Cancer Alley.” Detroit’s zip code 48217 is 85% African American and is know as Michigan’s most polluted area. It is adjacent to a steel plant, a coal-fired power plant, a salt mine, and a huge oil refinery. The refinery alone emits close to 4 tons of toxins per year. Virtually every household in the area has at least one member who suffers from asthma, leukemia, cancer, or sarcoidosis (a disease in which inflammation occurs in the lymph nodes, lungs, liver, eyes, skin, or other tissues). After some homes in the area tested positive for up to 20 toxic gases, the refinery offered to buy the homes in an effort to reduce its liability. [1]

At the specific level, every day skin care products, including cosmetics, contain toxic chemicals. Many of these products, from suntan oil to makeup to hair spray to perfumes and colognes, contain formaldehyde (a known carcinogen), phthalates (linked to hormonal disruption and birth defects), and/or parabens (which mimic the hormone estrogen and have been linked to breast cancer). Lead (a neurotoxin so damaging to young children that it is banned from house paint and gasoline) is present in lipstick at concentrations 30 times higher than what the FDA allows in candy bars. Our skin is our largest organ and readily absorbs these products’ ingredients. Some of the chemicals absorbed accumulate over time because our bodies do not eliminate them or break them down. [2]

The US Food and Drug Administration (FDA), created by the Federal Food, Drug, and Cosmetic Act of 1938, does NOT have the authority to test cosmetic ingredients before they are marketed or to order recalls – as it does for drugs and medical devices. Regulation is in the hands of the industry itself, which to-date has found only 11 chemicals to be unsafe for use in its products, including for use by women of child bearing age. In contrast, in Europe, 1,400 chemicals have been banned from personal care products because they are carcinogenic, mutagenic*, or toxic to reproduction.

The chemical and cosmetics corporations spend millions of dollars every year on lobbying and other efforts to influence US policy. In 2012, they blocked federal legislation that would have required complete ingredient labels on fragrances and hair sprays, as well as banned the use in cosmetics of carcinogens and chemicals linked to reproductive disorders. In addition, these corporations attempted to pass legislation that would block state regulation, such as that in California. If you would like more information and to take action, you can go to the Campaign for Safe Cosmetics at http://safecosmetics.org.

Home cleaning products are another example of every day items that contain toxic chemicals. For information on how to keep your home clean and shiny without using products with toxic chemicals go to http://www.bostonhealthcoach.com/oilrecordings.html and select the teleclass entitled “Chemical-Free Home.”

Atrazine is a weed killer, widely used in the US but banned in the European Union. In the human body, it mimics hormones and has what are referred to as endocrine system disrupting effects. It has been shown to disrupt the reproduction and immune systems in a wide range of animals, including mammals. It is present in water everywhere, including in rain water. It can actually turn male frogs into functioning females. [3]

As an example of the lengths the chemical industry and its allies in Congress will go to stop any momentum to regulate toxins, they blocked a resolution honoring Rachel Carson, author of Silent Spring, on its 50^th anniversary and what would have been her 100^th birthday. They attacked her as having made “junk-science claims about DDT” and accuse her and her supporters of being responsible for the deaths of “millions of people … particularly children” because supposedly the lack of use of DDT led to deaths from malaria and other diseases. The facts are that the EPA never banned DDT for use against malaria and Carson did not support a universal ban on pesticides but advocated for use of as little as possible. In Silent Spring, Carson established a clear link between DDT and other pesticide use and the widespread deaths of birds, as well as reproductive, birth, and developmental abnormalities in mammals. DDT, other pesticides, and some of the tens of thousands of chemicals in use today will be part of the environment and in our bodies for decades to come because they decompose or are eliminated very slowly. [4]

I urge you to contact your US Representative and Senators (and your state ones too) and to ask them to support the Safe Cosmetics and Personal Care Products Act (H.R. 1385) and the Safe Chemicals Act (S. 696). (Find your Representative at http://www.house.gov/representatives/find/ and your Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.)

[1] Brune, M., July / August 2013, “And justice for all,” Sierra Club magazine

[2] Wasik, J.F., May / June 2013, “Beauty tips for the FDA: Did my wife’s cosmetics give her breast cancer?” The Washington Monthly

* Mutagenic chemicals cause changes in the genetic material, usually DNA, of an organism and thus increase the frequency of mutations. As many mutations cause cancer, mutagenic chemicals are therefore also likely to be carcinogens. http://en.wikipedia.org/wiki/Mutagen

[3] Steingraber, S., 4/19/13, “Sandra Steingraber’s war on toxic trespassers,” Bill Moyers public TV show, available at BillMoyers.com. Note: Steingraber has written multiple books including “Having faith: An ecologist’s journey to motherhood” and “Raising Elijah: Protecting our children in an age of environmental crisis.”

[4] Mangano, J.J., & Sherman, J.D., 10/1/12, “Rachel Carson’s brave, groundbreaking ‘Silent Spring’ at 50 years,” The Washington Spectator

CHILDREN AND TOXINS

ABSTRACT: Children are continuously exposed to many toxic chemicals. None of the over 75,000 synthetic chemicals in use in the US are regulated based on their potential to affect children. Chemicals in a mother’s blood can cause a preterm birth or even a miscarriage, and do get into her fetus’s blood. After birth, breast milk can be harmful as it is the most highly chemical-contaminated of any food.

In January, the Environmental Protection Agency (EPA) issued its report America’s Children and the Environment. While there is some good news on air quality, blood lead levels, and tobacco smoke, it finds that children may be exposed to relatively higher amounts of chemicals than adults and have higher blood levels of toxins. Although definite cause and effect is hard to establish with current knowledge and data, and because of multiple risk factors, respiratory diseases, childhood and adult cancers, neuro-developmental disorders, obesity, and adverse birth outcomes are some of the negative health outcomes for which there is evidence of a link to environmental factors. The report finds, among other things, that 1) air pollution and exposure to lead are still problems; 2) mercury in women of child bearing age has not declined over the last 10 years; 3) phthalate blood levels were 10% to 33% higher in children than in women and were detected in all samples of indoor air and dust at child care centers; 4) pesticides were detected in all samples of indoor air and dust at child care centers; 5) asthma rates are up to one in 11 children and the rate for Black children is nearly double that of White children; 6) childhood cancer rates have increased over 10% over the last 15 years; 7) attention-deficit / hyperactivity disorder (ADHD) diagnoses have increased by 50%; 8) one in 100 children now exhibits autism symptoms, a ten-fold increase. Puberty is occurring about a year and a half earlier, with one in 10 girls going into puberty before age 8.

Despite the very high economic and human costs of exposure to toxins, we do not have an effective regulatory system in place to protect us – not even our children.

FULL POST: Children are continuously exposed to many toxic chemicals in the air, dust, water, and everyday items that surround them with no regulation and no evaluation of possible negative effects. None of the over 75,000 synthetic chemicals in use in the US are regulated based on their potential to affect children. The science about how chemicals can affect growth and development in children and fetuses has advanced tremendously in the last 40 years, but our laws regulating toxic substances have not changed. The chemical industry, and related industries, has blocked regulation under existing law, as well as improvements to the current law. (See post of 6/10/13 for more detail.) [1]

Thousands of consumer products for children, such as toys, car seats, bedding, and clothes, contain toxic chemicals linked to cancer, hormone disruption, developmental problems, and reproduction and immune system problems. Yet there is no national requirement to regulate, disclose, or label such products. Washington State in 2008 became the first state to require manufacturers to report the presence of toxic chemicals in their products. [2]

Chemicals in a mother’s blood can also be harmful to children. During pregnancy, toxins can cause a preterm birth or even a miscarriage, and do cross the placenta and get into her fetus’s blood, with unknown effects on her yet to be born baby. After birth, breast milk can be harmful as it is the most highly chemical-contaminated of any food. It contains dioxins, pesticides, PCBs, and the range of other chemicals that are found in human blood. (See posts of 5/22/13 and 6/2/13 for more detail.) These are examples of toxic trespass: toxic chemicals in our bodies that got there without our consent or control. [3]

In January, the Environmental Protection Agency (EPA) issued its report America’s Children and the Environment. The good news is that it finds that air quality has improved, children’s blood lead levels have declined, and children’s exposure to second hand tobacco smoke has decreased. However, it states that research is need on the causes of increased asthma rates, the potential impacts of early life exposure to chemicals, and the higher incidences of diseases in children in minority and low income families than in other families. It notes that children may be exposed to relatively higher amounts of chemicals than adults because they eat, drink, and breathe more relative to their size. Furthermore, they may be exposed to chemicals that adults are not because they play on the ground or floor and more frequently put their hands to their mouths. And children in minority and low income families generally have higher body burdens of toxic chemicals. [4]

It is often difficult to determine the impact of chemicals and the cause of adverse health outcomes because of the presence and interaction of multiple factors. For many environmental exposures, there is very little information on the potential health consequences of exposure levels typically experienced by US children. Furthermore, the impact on children of a given exposure can vary widely due to genetics; the length, avenue, and magnitude of exposure; age and developmental stage; concurrent or prior exposure to other contaminants; and the presence of other, non-chemical stressors. The prenatal period is the most sensitive, generally. Respiratory diseases, childhood and adult cancers, neuro-developmental disorders, obesity, and adverse birth outcomes are some of the negative health outcomes for which there is evidence of a link to environmental factors. The effects of harmful exposure may not be evident until years later and may contribute to the onset of chronic diseases in adulthood.

Specific findings of the EPA report, based on the most recent data available, include:

Virtually all children experienced hazardous air pollutant concentrations above the cancer risk benchmark in 2005. 56% experienced one pollutant over the safe level standard for health effects other than cancer, (e.g., asthma).
Despite the reductions in blood lead levels, 15% of children birth to age 5 still lived in homes with a lead hazard in 2005-2006. The median lead blood level of Black children was one-third higher than for other children.
The median concentration of mercury in the blood of women ages 16 to 49 (i.e., child-bearing age) is unchanged over the last 10 years. Hopefully, the recent regulation of mercury emissions for electric power generating plants will improve this in the future. In recent years, while mercury regulation was blocked by the electric power industry, we advised women of child-bearing age to limit their intake of certain fish to avoid excessive mercury, which is a known neurotoxin for fetuses and young children.
The concentrations of phthalates (which have been linked to hormonal changes and birth defects in animals) were 10% to 33% higher in children than in women, with no clear trend up or down. Phthalates were detected in all samples of indoor air and dust at child care centers.
Pesticides were detected in all samples of indoor air and dust at child care centers.

The EPA report also found that chronic illnesses and childhood disabilities have risen dramatically in recent years. Although some of this may be due to improved diagnosis, there clearly has been an increase in incidence. While no clear cause has been established, increased exposure to toxic chemicals is very likely to be at least a contributing cause. For example:

Asthma rates are up to one in 11 children, increasing from 8.7% in 2001 to 9.4% in 2010. The rate (16.0%) for Black children is nearly double that of White children.
Childhood cancer rates have increased over 10%, from 157 cases per million children to 173.5, over the last 15 years.
Attention-deficit / hyperactivity disorder (ADHD) diagnoses have increased by 50%, from 6.3% to 9.5% of children over the last 13 years.
One in 100 children now exhibits autism symptoms, a ten-fold increase over 13 years.
The child obesity rate has risen from 5% to 17% over the last 30 years, but seems to have stabilized. This is due to multiple causes, but chemical exposure is likely to be a factor.
One in eight births occurs prematurely, increasing from 11.0% to 12.8% over the last 15 years.
A sampling of birth defects has shown an increase over the last 8 years.

Puberty is occurring about a year and a half earlier, with one in 10 girls going into puberty before age 8. Early puberty raises the risk of breast cancer. Puberty marks a broad range of changes in one’s body, including brain structure and functioning. No one knows what the impacts of early puberty overall might be. But we do know that the same chemicals that can cause early sexual maturation in animals in the lab are in the bodies of our children. So it seems likely that these chemicals are at least contributing to the early puberty that is being observed in our children. [5]

We know there are very high economic and human costs to these medical problems and chronic illnesses. Despite this, we do not have an effective regulatory system in place to protect us – not even our children.

[1] Steingraber, S., 4/19/13, “Sandra Steingraber’s war on toxic trespassers,” Bill Moyers public TV show, available at BillMoyers.com. Note: Steingraber has written multiple books including “Having faith: An ecologist’s journey to motherhood” and “Raising Elijah: Protecting our children in an age of environmental crisis.”

[2] McCauley, L., 5/1/13, “Report: Toxic chemicals found in thousands of children’s products,” Common Dreams. The report cited is at http://watoxics.org/chemicalsrevealed.

[3] Steingraber, S., 4/19/13, see above

[4] Environmental Protection Agency, Jan. 2013, “America’s Children and the environment,” http://www.epa.gov/ace

[5] Steingraber, S., 4/19/13, see above

BLOCKING REGULATION OF TOXINS

ABSTRACT: Corporations with a financial interest in the use and sale of toxic chemicals are engaged in a major, multi-faceted effort to prevent, weaken, and delay regulation. They work to prevent clear, unbiased, scientific information from being available to our policy makers and the public. They engage in efforts to affect the regulatory process – from the enactment of laws to the implementation of regulations – in the legislative, executive, and judicial branches of government. They work to make the whole process as long and complicated as possible. This gives them many opportunities to block, weaken, and delay the actual regulation of a toxic chemical.

The chemical industry works to limit the effectiveness of any regulations eventually implemented and of the agency enforcing them.

It achieves results by using the standard tactics of 1) Campaign contributions, 2) Lobbying, and 3) The revolving door of personnel moving between the industry and legislative and executive branch staff positions, which result in personal relationships (and potential conflicts of interest) that can benefit the chemical industry.

Given that corporations typically have more resources, a more singular focus, and greater longevity for waging the battle against regulation than those working to regulate a toxic chemical, dragging out the process and making it costly generally works to their advantage.

FULL POST: Corporations with a financial interest in the use and sale of toxic chemicals are engaged in a major, multi-faceted effort to prevent, weaken, and delay regulation, despite threats to public health and safety, as well as to the environment. These corporations work to prevent clear, unbiased, scientific information from being available to our policy makers and the public. They engage in efforts to affect the regulatory process – from the enactment of laws to the implementation of regulations – in the legislative, executive, and judicial branches of government. [1] The regulation of lead [2] (see post of 6/2/13 for more detail) and tobacco are classic examples. (Similar efforts are occurring in other arenas, such as climate change and regulation of the financial industry.)

The efforts of the chemical industry on the legislative front are both proactive and reactive, offensive and defensive, as well as high profile and hidden. Examples, for among many, include:

The fracking^* industry proactively but quietly got legislation passed that exempted fracking from review by the Environmental Protection Agency (EPA) under the Safe Drinking Water Act. This happened in 2005 under President Bush and Vice President Cheney and is widely referred to as the “Halliburton Loophole” because a major beneficiary is Cheney’s previous employer, Halliburton Co.
The genetically modified organism (GMO) industry quietly attached a provision to an emergency budget bill (passed and signed into law by President Obama) that allows corporations (notably Monsanto) to sell GMO seeds for agriculture even when a federal court has ordered them not to. [3]
A provision in the 2013 Farm Bill, currently in the US House of Representatives, would prohibit states from enacting laws requiring the labeling of food with GMO ingredients or otherwise regulating the production of agricultural goods. [4]

The chemical industry achieves legislative results by using the standard tactics of:

Campaign contributions to Congress people (and state legislators) who have oversight roles,
Lobbying, and
The revolving door of personnel moving between the industry and legislative staff positions, which result in personal relationships (and potential conflicts of interest) that can benefit the chemical industry.

Then, once laws are in place, the chemical industry works to make the process of implementation through rules and regulations as long and complicated as possible. This gives it many additional opportunities (beyond those of the legislative process) to block, weaken, and delay the actual regulation of a toxic chemical.

The chemical industry also works to limit the effectiveness of any regulations eventually implemented and of the agency enforcing them. One way is to lobby to make the regulations as complex as possible with loopholes and details that make them difficult to enforce and open to court challenges. This can include putting the burden of proof on the agency as opposed to the corporation and setting a high standard of proof or harm. For example, the Toxic Substances Control Act gives the EPA just 90 days to find “unreasonable risk” if it wants to regulate a new chemical (see post of 6/2/13 for more detail). Another tactic is to require an extensive and often biased cost-benefit analysis of any new regulation.

The tactics of lobbying and the revolving door of personnel, in this case involving the regulatory agency in the executive branch rather than the legislative branch of government, are used to achieve these results.

A regulatory agency can also have its effectiveness hurt by budget cuts or legislative failure to confirm key agency personnel. And challenging regulations or regulatory decisions in court uses the judicial branch of government as another way to delay and drive up the costs of regulation.

Finally, the chemical industry engages in efforts to control the flow and clarity of information. Corporations with a stake in research on a potentially toxic chemical will create a false and parallel science by paying for biased research and will control, as much as possible, the dissemination of scientific information. They will attack scientists, sometimes directly and personally, including threatening them and suing them, when their research finds toxic effects from the corporation’s chemical. [5] An important goal of these efforts is to create false or exaggerated doubt in the minds of policy makers and the public about the harm that a chemical causes.

Trade associations like the American Chemical Council and public relations experts are used in efforts to manipulate public opinion and influence the media. Supposedly independent groups are created and funded specifically to promote the industry’s position. These allow the corporation with a vested interest to remain behind the scenes and apparently independent of public relations efforts to downplay evidence of dangers, exaggerate uncertainty, allege misconduct by scientists who find toxic effects, and plant inaccurate or biased stories in the media. [6][7]

To avoid having to share information with the public, corporations will claim that it represents “trade secrets” or “proprietary information”. For example, the fracking industry makes such claims when asked to reveal the chemicals it is pumping into the ground to release natural gas. This claim is also used to avoid labeling products with their chemical contents. Eastman Chemical Co. has used this claim to suppress information from a court case on the presence and effects of chemicals in its plastics. [8]

[1] Union of Concerned Scientists, Feb. 2012, “Heads they win, tails we lose: How corporations corrupt science at the public’s expense,” http://www.ucsusa.org/scientific_integrity/abuses_of_science/how-corporations-corrupt-science.html

[2] Rosner, D., & Markowitz, G., 5/17/13, “Toxic disinformation,” Bill Moyers’ public TV show, available at billmoyers.com

* Fracking is shorthand for hydraulic fracturing where high pressure water and other fluids, including toxic chemicals, are injected into the ground to release natural gas.

[3] McCauley, L., 5/20/13, “Senator leads call to repeal the ‘Monsanto Protection Act’,” http://www.commondreams.org/headline/2013.05/20-2

[4] Sheets, C.A., 5/17/13, “’Monsanto Protection Act 2.0’ would ban GMO-labeling laws at the state level,” International Business Times

[5] Riley, T., 5/18/13, “Blinding us from science,” http://billmoyers.com/2013/05/18/blinding-us-from-science

[6] Rosner, D., & Markowitz, G., 4/29/13, “You and your family are guinea pigs for the chemical corporations,” TomDispatch.com

[7] Union of Concerned Scientists, Feb. 2012, see above

[8] Dubose, L., 6/1/13, “Silencing science: What you may never know about plastic baby bottles,” The Washington Spectator

THE REAL SCANDAL BEHIND THE IRS “SCANDAL”

ABSTRACT: Overwhelmed IRS employees, trying to sort through hundreds of applications for tax exempt status to identify ones that should be rejected because they were political rather than true social welfare organizations, used search terms that may have been tilted toward identifying conservative groups, although there were terms used that are neutral or tilted toward liberal or progressive politics. (Perhaps there was such a tilt because the number and spending of such groups on the conservative side has far outweighed those on the liberal or progressive side.)

As Republicans in Congress try to blow this up into a major scandal, it should be noted that the IRS Commissioner when this activity occurred was Douglas Shulman, who was appointed by President Bush in 2008 and served until November 2012.

Three factors have led to the growth of 501(c)(4) social welfare organizations that engage in political activity: 1) They do not have to disclose their donors; 2) Political committees have had to disclose their donors since 2001; and 3) The Supreme Court’s 2010 Citizens United decision allowed unlimited spending on political activity by wealthy individuals, corporations, and other organizations. Corporations and wealthy individuals who would like to keep their political activities secret have flocked to using these social welfare organizations.

The real scandals hiding behind the front page news are that the IRS: 1) Has not clarified the limits on political activity by tax exempt social welfare groups; 2) Has not taken enforcement actions against any politically active social welfare group; and 3) Has had the capacity of its staff to engage in appropriate oversight and enforcement activities cut.

The current “scandal” at the IRS should be the springboard for reform. Unfortunately, the Republicans in Congress seem far more intent on using the situation to score political points and to undermine the important work of the IRS.

FULL POST: If you were an overwhelmed IRS employee trying to sort through hundreds of applications for tax exempt status to identify ones that should be rejected because they were political rather than true social welfare organizations, how would you do it? Searching for political terms would make a lot of sense. The terms used should be balanced, so they look for any group with a political focus, not just ones with a certain perspective.

It appears that the search terms that were used may have been tilted toward identifying conservative groups, although there were terms used that are neutral or tilted toward liberal or progressive politics. (Perhaps there was such a tilt because the number and spending of such groups on the conservative side has far outweighed those on the liberal or progressive side.) And there were liberal or progressive organizations that were scrutinized and had their applications delayed, as some conservative ones did. Although the search terms used may have been efficient and rational, they may not have been appropriate from a political or public perception stand point. [1]

The Cincinnati office, where this work was concentrated, had fewer than 200 people working to process 70,000 applications for tax exempt status each year. Moreover, despite the complex legalities of these determinations, this group had few lawyers and only vague guidelines. The unit has been reorganized and its procedures revised multiple times over the past three years.

The issue of non-profit groups and their political activity has burst into the spotlight in recent years. Traditional non-profit groups are organized under section 501(c)(3) of the IRS code and are prohibited from engaging in political activity. Organizations under IRS section 501(c)(4), although originally exclusively for the promotion of social welfare, in 1960 were allowed to engage in political activity as long as their primary purpose was social welfare. The IRS has not established what “primary” or “political activity” means. Three factors have led to the growth of 501(c)(4) social welfare organizations that engage in political activity:

They do not have to disclose their donors.
Political committees have had to disclose their donors since 2001.
The Supreme Court’s 2010 Citizens United decision allowed unlimited spending on political activity by wealthy individuals, corporations, and other organizations. [2]

As a result, corporations and wealthy individuals who would like to keep their political activities secret have flocked to using these social welfare organizations. Crossroads GPS (the conservative group Karl Rove helped found in 2010) spent $88 million in the last two national election cycles, massively outspending all other 501(c)(4)s’ political expenditures. It has a tiny staff and no discernible social welfare purpose, and its application for tax exempt status is still pending. [3] (501(c)(4)s are allowed to operate as non-profits without IRS approval.) For the 2012 elections, based on reports to the Federal Election Commission, of the more than $256 million spent by social welfare non-profits on ads, at least 80% came from conservative groups. [4]

The real scandals hiding behind the front page news are that the IRS:

Has not clarified the limits on political activity by tax exempt social welfare groups (i.e., 501(c)(4)s) or even defined what is considered political activity.
Has not taken enforcement actions against any politically active social welfare group, despite their spending, combined, at least $500 million on political advertising during the last four years. [5] This includes groups that told the IRS in their tax exemption applications that they were not going to engage in political activity and then did so. [6]
Has had the capacity of its staff to engage in appropriate oversight and enforcement activities cut. (Its budget has been cut the last three years, including by the sequester, and staff levels are down from 117,000 in 1992 to 90,000 today while dollars collected have more than doubled.) This has led to overwhelmed workers as occurred in the tax exempt review group in Cincinnati.

The current “scandal” at the IRS should be the springboard for reform – for clarifying and enforcing rules on political activity by tax exempt organization, as well as for assessing and meeting the needs at the IRS for staffing and professionalization of personnel and procedures. Unfortunately, the Republicans in Congress seem far more intent on using the situation to score political points and to undermine the important work of the IRS.

[1] Confessore, N., Kocieniewski, D., & Luo, M., 5/18/13, “Confusion and staff troubles rife at I.R.S. office in Ohio,” The New York Times

[2] Norris, F., 5/16/13, “A fine line between social and political,” The New York Times

[3] Maguire, R., 5/16/13, “Conservative groups granted exemption vastly outspent liberal ones,” Open Secrets

[4] Barker, K. & Elliott, J., 5/22/13, “Six facts lost in the IRS scandal,” ProPublica

[5] Confessore, N., et al., 5/18/13, see above

[6] Barker, K. & Elliott, J., 5/22/13, see above

HOW AND WHY TOXINS ARE IN YOUR BLOOD

ABSTRACT: The dozens of toxic chemicals we all have in our blood are there because they are in the clothes we wear; the toys, furniture, fabrics, paint, and construction materials in our homes; the cleaning and personal care products we use; and the containers for our food and beverages. They are in all these places because our government regulators are failing us and the corporations that produce and use these chemicals engage in extensive efforts to block regulation.

The Toxic Substances Control Act (TSCA) of 1976 is the US law that regulates chemicals. Almost all of the 60,000 chemicals in use in 1976 when the law was passed were deemed safe without testing or review. Only a handful of chemicals have had their use restricted. For a new chemical, the EPA must act in just 90 days (!) and find an “unreasonable risk” or the chemical is deemed safe. In addition, the burden of proof lies on the EPA to show “unreasonable risk” rather than on the corporation to show that a chemical is safe.

There are numerous examples, historically and currently, of the difficulty of implementing regulations on chemicals, including lead, asbestos, pesticides, PCBs, formaldehyde, flame retardants, and BPA. Chemical exposure has been associated with a very wide range of health and developmental problems, including learning disabilities, asthma, birth defects, developmental problems in children, cancer, obesity, and problems with the immune and reproductive systems, as well as with the brain and nervous system. The effects of long-term exposure to multiple chemicals and the impacts on fetuses and young children are unknown.

Our bodies are toxic dumps and we are the guinea pigs – without our consent and often without even our knowledge – in the largest, uncontrolled experiment that has ever occurred.

FULL POST: The dozens of toxic chemicals we all have in our blood are there because they are in the air we breathe, the food we eat, and the water we drink. (See 5/22/13 post for more detail.) They get there from the clothes we wear; the toys, furniture, fabrics, paint, and construction materials in our homes; the cleaning and personal care products we use; and the containers for our food and beverages. They are in all these places because our government regulators are failing us and the corporations that produce and use these chemicals engage in extensive efforts to block regulation. Many of these chemicals are new, but some have been around for 100 years. [1]

The Toxic Substances Control Act (TSCA) of 1976 is the US law that regulates the introduction of new chemicals and the chemicals existing when it was enacted. Almost all of the 60,000 chemicals in use in 1976 when the law was passed were deemed safe without testing or review. The TSCA is administered by the Environmental Protection Agency (EPA). The EPA has tested only 200 of the more than 75,000 synthetic chemicals in use in the US. In the 37 year history of the TSCA, only a handful of chemicals have had their use restricted. This is partly because the Pre-Manufacturing Notice a corporation submits for a new chemical it wants to use has only limited information (e.g., no safety information is required). Then, the EPA must act in just 90 days (!) and find an “unreasonable risk to human health or the environment” or the chemical is deemed safe for use. Even the EPA’s own Office of the Inspector General has criticized the TSCA as weak and ineffective, noting that corporations’ assertions of trade secrets prevent effective testing and that the EPA process is predisposed to protecting industry information rather than providing the public with health and safety information. [2] The Natural Resources Defense Council says that under the TSCA “it is almost impossible for the EPA to take regulatory action against dangerous chemicals, even those that are known to cause cancer or other serious health effects.” One reason is that the burden of proof lies on the EPA to show “unreasonable risk” rather than on the corporation to show that a chemical is safe, as a drug company is required to do. [3]

Lead is a classic example of the difficulty of implementing regulation. The dangers of lead have been known for 100 years. Yet the lead industry engaged in a 60 year campaign to cover-up the effects of lead and to promote its use – in a campaign similar to that waged by the tobacco industry more recently. In wasn’t until 1971 that Congress passed a law to limit the use of lead paint in public housing and 1978 when the Consumer Product Safety Commission banned lead paint for consumer use. During the 1980’s, the EPA issued rules that eventually eliminated the use of lead in gasoline in 1995 (although it is still used in aviation fuel).

Even today, the Centers for Disease Control (CDC) estimates that children in 4 million US households are exposed to dangerous amounts of lead and that 500,000 children from birth to 5 have elevated levels of lead in their blood. No level of lead is considered safe and child exposure to lead is linked to attention and cognitive deficits, behavior problems, and learning disabilities – all of which risk putting a child on a trajectory for problems in school and later life. [4]

A similar pattern occurred with efforts to regulate asbestos. Chlorinated hydrocarbons, including pesticides such as DDT, were widely used until their detrimental effects became clear. Then they were successfully banned decades ago. However, these chemicals persist in the environment and have accumulated in our bodies. The same is true for polychlorinated biphenyls (PCBs). The non-stick coating for cookware, Teflon, is widely present in our blood and is linked to cancer.

Bisphenol A (BPA), which is used in plastics including baby bottles and water bottles, as well as the linings of food cans, has been found widely in our blood. At even very low doses, it has been shown to interact with our endocrine system and its hormones, with links to obesity, neurobehavioral problems, reproductive abnormalities, and breast and prostate cancers. Nonetheless, its regulation is being fought in the courts and elsewhere at this moment.

Currently, formaldehyde is used as a fungicide, germicide, and disinfectant in plywood and many materials used in building homes and furniture. However, as it ages it evaporates and the vapors we inhale accumulate in our bodies; it is known to cause cancer. Similarly, flame retardants are found in almost everyone’s blood and have been linked to thyroid, memory, learning, cognitive, and developmental problems, as well as early onset of puberty.

These are prominent examples of our widespread exposure to a large number of toxic chemicals. This exposure has been associated with a very wide range of health and developmental problems, including learning disabilities, asthma, birth defects, developmental problems in children, cancer, obesity, and problems with the immune and reproductive systems, as well as the brain and nervous system. The effects of long-term exposure to multiple chemicals are unknown.

When the TSCA passed in 1976, the scientific understanding of biochemistry was not nearly as sophisticated as it is today. The ways chemicals affect our health, their potential to accumulate in and have subtle, long-term effects on our bodies and how they function, were unknown. Even today, the effects chemicals have on fetuses and young children are largely unstudied and unknown. [5] In 1976, it was generally believed that the placenta filtered a mother’s blood and prevented dangerous chemicals from reaching the fetus. We now know that this isn’t true.

Our bodies are toxic dumps and we are the guinea pigs – without our consent and often without even our knowledge – in the largest, uncontrolled experiment that has ever occurred. The large corporations that produce and use these chemicals are using every tactic at their disposal and their huge treasuries to fight regulation and stop laws that would require testing of chemicals. My next post on this topic will focus on this battle.

[1] Rosner, D., & Markowitz, G., 4/29/13, “You and your family are guinea pigs for the chemical corporations,” TomDispatch.com

[2] Wikipedia, retrieved 6/1/13, “Toxic Substances Control Act of 1976,” en.wikipedia.org/wiki/Toxic_Substances_Control_Act_of_1976

[3] Natural Resources Defense Council, retrieved 6/1/12, “More than 80,000 chemicals permitted in the US have never been fully assessed for toxic impacts on human health and the environment,” http://www.nrdc.org/health/toxics.asp?gclid=CPjZ66CLw7cCFYii4Aod6GwAWA

[4] Rosner & Markowitz, 4/19/13, see above

[5] Steingraber, S., 4/19/13, “Sandra Steingraber’s war on toxic trespassers,” Bill Moyers public TV show, available at BillMoyers.com

GOVERNMENT AUSTERITY DEBUNKED

ABSTRACT: The argument for government austerity was largely built on two economic theories, both of which have been debunked recently by academia and reality. First was the theory that if government debt exceeded 90% of economic activity, then economic growth would be sharply lower. The second was that cutting spending in a depressed economy would create jobs.

The study the first was based on was dramatically discredited when an error was discovered in the Excel spreadsheet used to calculate its findings. Furthermore, the link highlighted between government debt and slow economic growth does not indicate that government debt causes slow growth; it could just as likely be the reverse.

The second theory was based on another academic study that was refuted by a 2010 study by the International Monetary Fund, which used better data. And finally, real life experiences in the US and Europe have not borne out what the austerity advocates predicted or promised.

Despite this debunking of the rationales for austerity, there hasn’t been any change in policies or political rhetoric in the US. The US austerity movement appears to be driven by small government ideologues who are using the economic crisis as an opportunity to push for cuts in social programs they’ve always opposed. There also appears to be an issue of class hiding behind austerity advocacy. While the years since the Great Depression and of austerity policies in Washington have been hard on the middle and lower classes, for the well off they’ve been pretty good. So, perhaps it shouldn’t be a surprise that the wealthy and political elites keep pushing austerity policies despite the lack of support from theory or reality.

FULL POST: The argument for government austerity – reducing the deficit by cutting spending and perhaps raising taxes – was largely built on two economic theories, both of which have been debunked recently by academia and reality. First was the theory that if government debt exceeded 90% of economic activity (measured by gross domestic product [GDP]), then economic growth would be sharply lower. The second was that cutting spending in a depressed economy would create jobs.

The first, on the danger of government debt, was based on a 2010 study by two Harvard economists, Reinhart and Rogoff, “Growth in a Time of Debt.” Despite significant controversy about it, its finding of a tipping point for reduced economic growth when government debt hit 90% of GDP was presented as fact by politicians and media arguing for the need for austerity. [1]

This study was dramatically discredited when an error was discovered by Thomas Herndon, a Ph.D. student at the University of Massachusetts, Amherst, in the Excel spreadsheet Reinhart and Rogoff used to calculate their findings. An error in one of their formulas had excluded data from Canada, New Zealand, and Australia, all of which had experienced strong economic growth in periods of high government debt. [2] (Reinhart and Rogoff have acknowledged the error.) This explained why other researchers, using similar data, hadn’t been able to replicate their findings. As Reinhart and Rogoff’s work was scrutinized, it was also criticized for omitting data and using questionable statistical procedures.

Furthermore, the link they highlighted between government debt and slow economic growth does not indicate that government debt causes slow growth; it could just as likely be the reverse, that slow growth leads to higher government debt. Indeed, the latter is clearly what happened in Japan in the early 1990s when government debt grew after the economy collapsed. [3]

The second theory, that cutting spending in a depressed economy would create jobs, was based on another academic study. It was refuted by a 2010 study by the International Monetary Fund (IMF), which used better data. The IMF study found that austerity reduced job growth instead of accelerating it as the original study and austerity promoters claimed. [4]

Finally, real life experiences in the US and Europe have not borne out what the austerity advocates predicted or promised. In the US, government debt and a bit of stimulus did not produce high interest rates and a shrinking economy. Most recently, the austerity measures adopted in March – namely the sequester’s budget cuts – are clearly causing jobs to be cut, with no signs of resultant job creation. Meanwhile, most of Europe is in recession despite consistent application of the austerity medicine for the last four years.

Despite this debunking of the rationales for austerity, there hasn’t been any change in policies or political rhetoric in the US, and little in Europe. This suggests that the austerity movement is not based on research and reality, but on ideology.

The US austerity movement appears to be driven by small government ideologues, given that the push for budget cuts continues unabated. These ideologues are using the economic crisis as an opportunity to push for cuts in social programs they’ve always opposed. They’ve seized on the austerity theories from academia as justification for their actions, and aren’t letting go of them even when they have been soundly discredited. [5]

There also appears to be an issue of class hiding behind austerity advocacy. The wealthy in the US regard the deficit as the most important problem we face and favor solving it by cutting spending on health care and Social Security. The middle and lower classes, although they see the deficit as a problem, view unemployment as a more important problem and want to see spending on health care and Social Security increase. [6] Given the political power of the wealthy elites, it’s not surprising to see policy bending to their preferences. While the years since the Great Depression and of austerity policies in Washington have been hard on the middle and lower classes (high unemployment, incomes that aren’t keeping up with inflation, home values that haven’t recovered to 2008 levels), for the well off they’ve been pretty good (incomes growing faster than inflation, corporate profits and stock prices surging). So, perhaps it shouldn’t be a surprise that the wealthy and political elites keep pushing austerity policies despite the lack of support from theory or reality.

[1] Krugman, P., 4/18/13, “The Excel depression,” The New York Times

[2] Roose, K., 4/18/13, “Meet the 28-year-old grad student who just shook the global austerity movement,” Daily Intelligencer

[3] Krugman, P., 4/18/12, see above

[4] Krugman, P., 5/3/13, “Playing whack-a-mole with expansionary austerity,” The New York Times

[5] Editorial, 5/5/13, “Blame ideologues, not economists for failed ‘austerity’ policies,” The Boston Globe

[6] Krugman, P., 4/15/13, “The 1 percent’s solution,” The New York Times

TOXINS IN YOUR BLOOD

ABSTRACT: Did you know that there are most probably dozens of toxic chemicals in your blood? These are likely to include polychlorinated biphenyls (PCBs), dioxins, and pesticides, including DDT, all of which are toxic to humans. We are all test subjects – largely unknowingly – in a huge chemical exposure experiment.

There are roughly 75,000 chemicals in use in the US and only about 500 of them have been tested for health risks. Many of the chemicals found in our blood are long-lasting in the environment and in our bodies. The impacts of the combinations of these chemicals that we all have in our blood have never been looked at.

None of us were asked if it was OK to expose us to these chemicals. Therefore, some people refer to this as “toxic trespass.” These toxins are trespassing in our bodies without our permission. From a common sense perspective, and certainly from a public health perspective, it doesn’t make sense to expose people to toxic chemicals and then engage in a debate about what level of them is safe.

Future posts will address related topics such as how we got to this point, what the possible impacts are, and what we can do about this.

FULL POST: Did you know that there are most probably dozens of toxic chemicals in your blood? These include chemicals from consumer products, plastics, pesticides, flame retardants, and non-stick coatings on cookware, as well as industrial chemicals. We are all test subjects – largely unknowingly –in a huge chemical exposure experiment. Scientists call the total amalgamation of chemicals in your body your “body burden.” [1]

Bill Moyers, as part of his documentary Trade Secrets, had his blood analyzed back in 2001. He was tested for 150 chemicals and 84 were found, including 31 polychlorinated biphenyls (PCBs), 13 dioxins, and at least two pesticides, including DDT, all of which are toxic to humans. His results are typical of what any US residents could expect to find in his or her blood. The only one of the 84 that would have been found in a person’s blood, or even anywhere in the environment, 100 years ago was lead. [2]

There are roughly 75,000 chemicals in use in the US and only about 500 of them have been tested for health risks. On average, twenty new chemicals are introduced each week, generally without testing. Many of the chemicals found in our blood are long-lasting in the environment, i.e., they don’t breakdown readily and aren’t biodegradable. Many are also long-lasting in our bodies, i.e., our bodies don’t have a mechanism for breaking them down or removing them. For example, DDT was banned in the US in 1972 and PCBs in 1979, but they were still in Bill Moyers’ blood in 2001 – and are likely to be in your blood today.

The impacts of the combinations of these chemicals that we all have in our blood have never been looked at. And only a very few of these chemicals have been investigated for their impacts children or babies in utero.

None of us were asked if it was OK to expose us to these chemical. For most of them we have no choice about introducing them to our bodies, because they are in the air we breathe, the water we drink, the food we eat, and the consumer products we use. And although we have some control over the latter two categories, we often don’t know about the chemicals that are present or that we absorb into our bodies, let alone about any potential negative effects. We know that many of these chemicals can be toxic, but we don’t know at what levels or what the risks are of the current levels of them in our bodies.

Therefore, some people refer to this as “toxic trespass.” These toxins are trespassing in our bodies without our permission. [3]

From a common sense perspective, and certainly from a public health perspective, it doesn’t make sense to expose people to toxic chemicals, some of which are known carcinogens, and then engage in a debate about what level of them is safe. We should remove them from our environment to the greatest extent possible, as we did with DDT and PCBs.

Future posts will address related topics, including:

How this plethora of chemicals, including toxins, got into our environment and our blood
How regulation is failing to protect us
The chemical industry’s and others’ efforts to limit regulation of these chemicals
The role of Genetically Modified Organisms in agriculture and food in putting toxins into our bodies
The body burden of chemicals in babies’ and pregnant women’s blood
Possible impacts of our body burden and toxic trespass, especially on children
What’s being done about this and what you can do

[1] Barnett, S., 10/6/11, “What’s your body’s chemical burden, “ The Huffington Post

[2] Moyers, B., retrieved 5/20/13, “Moyers moment (2001): Toxins in our blood,” http://billmoyers.com/2013/05/17/moyers-moment-2001-toxins-in-our-blood

[3] Steingraber, S., 4/19/13, “Sandra Steingraber’s war on toxic trespassers,” Bill Moyers public TV show, available at BillMoyers.com

REDUCING INTEREST ON STUDENT LOANS

ABSTRACT: The interest rate on new federal student loans is scheduled to increase from 3.4% to 6.8% in July. Senator Elizabeth Warren (MA) has introduced legislation to give students the same interest rate that the big bank corporations get when they borrow from the Federal Reserve: 0.75%. Warren’s bill highlights the enormous advantages and preferences the federal government gives to large corporations and the contrast with what the government does (or doesn’t do) for students, their families, and 99% of taxpayers in general.

Student debt exceeds $1 trillion and is a substantial drag on the economy. Some financial experts have warned that the student debt problem has parallels to the housing mortgage loan crisis.

You can become a citizen co-sponsor of Warren’s Bank on Students Loan Fairness Act at http://my.elizabethwarren.com/page/s/studentloans?source=20130516em.

FULL POST: The interest rate on new federal student loans is scheduled to increase from 3.4% to 6.8% in July. Senator Elizabeth Warren (MA) has introduced legislation to give students the same interest rate that the big bank corporations get when they borrow from the Federal Reserve: 0.75%.

Senator Warren’s bill in the Senate (her first) and Representative Tierney’s companion bill in the House would have the Federal Reserve make funds available to the Department of Education for student loans at this low rate for one year, to give Congress time to find a long-term solution to the student debt problem. As she writes, “If the government can float huge sums of money to large financial institutions at low interest rates to grow the economy, surely it can float the money necessary to fund our students, keep us competitive, and grow our middle class.” [1]

In addition to providing some relief to students, Warren’s bill highlights the enormous advantages and preferences the federal government gives to large corporations, in this case the large banks (who crashed our economy). It starkly draws a contrast with what the government does (or doesn’t do) for students, their families, and 99% of taxpayers in general, including homeowners who got little help while the large financial corporations involved with the housing collapse got bailed out.

At a time when the federal government can borrow money at 0.25% for 2 years, under 1% for 5 years, at 2% for 10 years, and roughly 3% for 30 years, [2] it hardly seems fair to be charging students even 3.4%, let alone 6.8%.

Student debt exceeds $1 trillion, which is more than all credit card debt. It is a substantial drag on the economy. (See post of 6/6/12 for more detail.) It depresses spending by students and their families. Because consumer spending is roughly two-thirds of our economic activity, depressed consumer spending slows our economic recovery. And if the default rate on student loans grows, which seems likely given that many students are having a very hard time finding jobs, let alone ones with good pay, the impact on our economy, government, and financial institutions could be significant. That’s why some financial experts have warned that the student debt problem has parallels to the housing mortgage loan crisis. [3]

You can become a citizen co-sponsor of Warren’s Bank on Students Loan Fairness Act at http://my.elizabethwarren.com/page/s/studentloans?source=20130516em.

[1] Warren, E., 5/16/13, “If it’s good enough for the banks, it’s good enough for students,” Elizabeth Warren for Senate Newsletter

[2] Bloomberg, 5/17/13, “United States Government Bonds, US Treasury yields,” retrieved from the Internet at http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/

[3] Zumbrun, J., & Torres, C., 5/7/13, “Bankers warn Fed of farm, student loan bubbles echoing subprime,” Bloomberg

REDUCING GUN VIOLENCE

ABSTRACT: There’s good news and bad news after the recent obstruction by filibustering in the US Senate of a law to reduce gun violence. Information on the votes in the Senate and how to contact your Senators (and Representatives) is below.

Efforts to reduce gun violence are getting unprecedented attention. Four states have recently passed laws targeting gun violence. However, there is a continuing lack of good data and research on gun violence, largely because the gun industry and its supporters have aggressively worked to block government data collection and research, as well as to intimidate private researchers. This inhibits the solving and prevention of crimes, as well as the identification and prosecution of gun dealers who irresponsibly, if not illegally, sell guns, including guns that are used in crimes.

I urge you to contact your Senators and let them know how you feel about this issue, whether you agree with their vote or not. Good legislation, good data and research, and strong enforcement could significantly reduce the 18,000 suicides and 12,000 murders that happen with guns each year in this country. Communication to elected officials by voters – their constituents – is critical to taking advantage of this window of opportunity and achieving change that will reduce the tragedy of gun violence.

FULL POST:There’s good news and bad news after the recent obstruction by filibustering in the US Senate of a law to reduce gun violence. (See post of 4/20/13 for more details.) One piece of good news is that some Senators are saying they will continue the effort. Information on the votes in the Senate and how to contact your Senators (and Representatives) is below.

Other good news:

Efforts to reduce gun violence are getting unprecedented attention, including coverage in mainstream media
The issue is a much higher priority in voters’ minds than it was
Elected officials are being asked where they stand on the issue regularly
Elected officials who support steps to reduce gun violence are much more comfortable saying so in public
Four states have recently passed laws targeting gun violence: Colorado, Connecticut, Maryland, and New York. Others are considering doing so. You may want to check and see if there is such an effort in your state.

Nationally, the broad support for reducing gun violence is clear and its potential political impact has being discussed. For example, in 21 states both US Senators supported the gun background check provision that was defeated by filibuster. Those 21 states have 261 Electoral College votes, out of the 270 needed to elect a President. The 17 states where both Senators opposed the law only have 146 electoral votes. [1]

The National Academy of Sciences published a major report back in 2004, “Firearms and Violence: A Critical Review,” that found that there is a lack of good data and research on this topic. It recommended that the federal government support “a systematic program of data collection and research” (page 3). The report noted that “violence is positively associated with firearms ownership” (page 5) but that the data do not allow a conclusion about whether there is a cause and effect relationship. It stated that in comparisons among countries, “there is a substantial association between gun ownership and homicide” and that “the U.S. homicide rate is much higher than in all other developed countries.” (page 6) [2] Australia has achieved a dramatic reduction in gun violence over the last 6 years. (See post of 4/20/13 for more details.)

Despite this, there is a continuing lack of good data and research on gun violence, largely because the gun industry and its supporters, notably the National Rifle Association (NRA), have aggressively worked to block government data collection and research, as well as to intimidate private researchers. The US Centers for Disease Control and the US Department of Health and Human Services are effectively blocked from spending any money on gun violence research. In contrast, despite the fact that roughly the same number of people die each year in gun violence as in car accidents, the National Highway Traffic Safety Administration spends roughly $125 million per year to study and improve highway safety. As with highway safety, gun safety is a public health issue and should be address as such.

The blocking of the collection and use of gun data inhibits the solving and prevention of crimes, as well as the formulation of effective policies to reduce gun violence. It also inhibits the identification and prosecution of gun dealers who irresponsibly, if not illegally, sell guns, including guns that are used in crimes. [3][4]

Getting back to the gun violence prevention efforts in the US Senate, the vote on the background check provision was 54 in favor (Yeas) and 46 opposed (Nays), but because of the filibuster, 60 votes in favor were needed to move the legislation forward. It was largely a party line vote, with Republicans opposed and Democrats in favor, with the following exceptions: [5]

4 Republicans in favor: Collins (ME), Kirk (IL), McCain (AZ), and Toomey (PA).
4 Democrats opposed: Baucus (Montana), Begich (Alaska), Heitkamp (ND), and Pryor (Arkansas). (Reid [NV] voted “No”, but as a procedural move to allow him to call for reconsideration.)

I urge you to contact your Senators and let them know how you feel about this issue, whether you agree with their vote or not. If you support them they need to hear that, because there is pressure on them from both sides. If you’d like them to change their vote, they should hear that as well. You can find your US Senators’ names and contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm

It wouldn’t hurt to contact your US Representative while you’re at it, although there is no impending action in the House. You can find their names and contact information at: http://www.house.gov/representatives/find/

Good legislation, good data and research, and strong enforcement could significantly reduce the 18,000 suicides and 12,000 murders that happen with guns each year in this country. The attention this issue is finally getting is an important step forward. Communication to elected officials by voters – their constituents – is critical to taking advantage of this window of opportunity and achieving change that will reduce the tragedy of gun violence.

[1] Green, J., 5/1/13, “A matter of time? Congress failed to act, but the gun control tides are shifting,” The Boston Globe

[2] Wellford, C.F., et al., 2004, “Firearms and Violence: A Critical Review,” Committee on Law and Justice, National Research Council, National Academy of Sciences

[3] Bender, M.C., 2/12/13, “Gun lobby blocks data collection by crimefighters,” Bloomberg

[4] Thacker, P.D., 12/19/12, “Congress and the NRA suppressed research on gun violence,” Slate Magazine

[5] The official Senate Roll Call vote record is at: http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=113&session=1&vote=00097

FIXING THE SEQUESTER’S BUDGET CUTS

ABSTRACT: The impacts of the $85 billion, 5% across the board budget cuts that went into effect on March 1^st (known as the Sequester) are being felt. The cuts to air traffic controllers caused flight delays, so Congress acted with rarely seen speed to provide funding for them.

However, other impacts of the sequester, which are having far more significant effects on people’s lives than having a flight delayed, are being ignored by Congress. It is estimated that almost 60,000 young children will lose or receive reduced Head Start and Early Head Start services. Grants for child care subsidies have been cut, which will undermine the ability of parents to work and the school readiness of an estimated 28,000 children. The estimated impacts of other cuts include: lost nutrition benefits for 600,000 mothers and their young children, reduced K-12 education supports for 1.2 million disadvantaged children, fewer meals for tens of thousands of seniors, and 4,000 fewer AmeriCorps and VISTA volunteers. Unemployment benefits, vouchers for rental housing assistance, and health care funding have also been cut.

I urge you to email, write, or call your representatives in Congress and the President to say that it’s nice to fix the sequester’s impact on flight delays, but it’s much more important to fix the significant, negative impacts the sequester is having on people’s daily lives, on our children and their education from birth onward, on seniors’ ability to live independently, and on the ability of low income families and the unemployed to make ends meet.

FULL POST: The impacts of the $85 billion, 5% across the board budget cuts that went into effect on March 1^st (known as the Sequester) are being felt. As you’ve probably heard, the cuts to air traffic controllers caused flight delays. So Congress acted with rarely seen speed and in just two days passed a bill that shifts money from airport improvement projects to provide funding for the controllers. The meat industry, the Pentagon, and the Homeland Security and Justice Departments also got some relief from the sequester’s cuts in the bill. [1]

However, other impacts of the sequester, which are having far more significant effects on people’s lives than having a flight delayed, are being ignored by Congress. Here are some examples: [2][3]

Early childhood care and education:
- Head Start and Early Head Start, which provide families in poverty with school readiness enrichment for children under 5 and other support, are cutting services. Some are closing early and some are shutting down for 2 – 3 weeks. Others are laying off staff and serving fewer children, with some conducting lotteries to determine which children will be asked to leave. This is potentially harmful to children’s brain development, which is likely to negatively affect their success in school and their ability to be productive workers in the future. Nationally, it is estimated that almost 60,000 young children will lose or receive reduced services.
- Grants to the states for child care subsidies have been cut. Therefore, states will offer less help to low income families to pay for child care. This will undermine the ability of parents to work and the school readiness of an estimated 28,000 children.
Nutrition for mothers and their young children: It is estimated that 600,000 low income mothers and their young children will lose nutrition benefits. This could do long-term harm to the health and school readiness of these children.
K-12 Education: School teachers, aides, and literacy and remedial specialists are being laid off. In particular, the Title I program that provides funding to schools serving high numbers of low income families has been cut by $726 million, which is estimated to affect 1.2 million disadvantaged students and 10,000 school staff members.
Unemployment benefits: The federal government advised states to cut their unemployment benefits to the long-term unemployed by 10.7% in the first week of April or make larger percentage cuts later. In California, for example, where unemployment is 9.6%, 400,000 long-term unemployed workers, whose average weekly check is $297, will receive a cut of $52 a week.
Housing: Vouchers for rental assistance are being cut. Some recently issued vouchers are being rescinded and some subsidized tenants are being asked to pay more toward their rent. Waiting lists and times (measured in years in many places) for housing assistance are growing. Tens of thousands of families will be affected.
Services for seniors: Transportation services for seniors are being cut and some senior centers are being closed. Meals on Wheels will deliver hundreds of thousands fewer meals for tens of thousands of seniors.
Health care: Local clinics, the most convenient and cost-effective places to get health care, are cutting services, forcing patients to travel longer distance to access more expensive services at hospitals. Hospitals and health care organizations will lose $11 billion this year. Non-profit hospitals that serve large Medicare populations will be disproportionately affected.
Community service: 4,000 of 80,000 AmeriCorps and VISTA volunteers will be cut.

The impacts of the sequester’s cuts to social and human service programs are difficult to quantify and describe because they are in numerous programs and grants, and are happening differently in each state, in each city, and in each agency and program as these entities struggle to implement the cuts with the least harm possible.

Meanwhile, Congress, including prominent deficit hawks, is insisting that the military spend almost half a billion dollars on tanks that the Pentagon doesn’t want to save 700 jobs at a General Dynamics plant in Ohio. General Dynamics, by the way, spent $11 million on lobbying last year. [4]

I urge you to email, write, or call your representatives in Congress and the President to say that it’s nice to fix the sequester’s impact on flight delays, but it’s much more important to fix the significant, negative impacts the sequester is having on people’s daily lives, on our children and their education from birth onward, on seniors’ ability to live independently, and on the ability of low income families and the unemployed to make ends meet.

[1] Grant, D., 4/16/13, “Before members rush for airports, Congress ends sequester flight delays,” The Christian Science Monitor

[2] Zero to Three, 4/26/13 and 4/8/13, “The sequester’s pain: Air travelers get relief, little kids not so much,” and “When babies share the burden – How the sequester is affecting young children,” Baby Policy Blog of Zero to Three

[3] Coalition on Human Needs, April, 2013, “Sequester impact factsheets,” http://www.chn.org/background/save-state-fact-sheets/

[4] Lardner, R., 4/29/13, “Army says no to tanks, but Congress insists,” Associated Press in Daily Times Chronicle

MOVING FORWARD ON CAMPAIGN FINANCE

ABSTRACT: A serious effort for campaign finance reform is moving forward in New York State. The citizen / public campaign financing system that is in place in New York City is a great model for the state’s efforts and others.

We need campaign finance reform because, for example, in the 2012 federal election campaigns over $7 billion was spent with the bulk of the money coming from wealthy individuals and corporations. One third of the roughly $1 billion spent by groups other than the candidates’ campaigns themselves was secret funds anonymously funneled through front groups created to launder the money and hide its source. The voices of average citizens – the 99% of us – are drowned out in the campaigns and in policy making by the megaphones and mega-dollars of the wealthy. Money in campaigns does matter. In 2012, more than 80 percent of US House candidates and two-thirds of Senate candidates who outspent their general election opponents won. As Justice Brandeis stated, “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”

New York City has a system of citizen funding for campaigns for city offices. It provides matching public funds that give candidates the opportunity to run for public office without dependence on large contributions from wealthy donors. Participants in these city races are getting the majority of their funding from a broad spectrum of small contributors, while candidates for the state legislature from the same area, without the citizen funding system, get the majority of their funding from large contributors.

At least 10 states and 7 cities have citizen / public campaign financing for at least some elections. You can find information on campaign financing and whether there is a reform effort in your state at the Public Campaign website (http://www.publicampaign.org/).

Citizen / public campaign financing is an essential step in making our elected officials accountable and responsive to the 99% of us, as opposed to wealthy campaign contributors.

FULL POST: A serious effort for campaign finance reform is moving forward in New York State. The citizen / public campaign financing system that is in place in New York City is a great model for the state’s efforts and others. [1]

We need campaign finance reform because, for example, in the 2012 federal election campaigns over $7 billion was spent. We have the best democracy money can buy and the bulk of the money came from wealthy individuals and corporations. Of course this means it isn’t a democracy at all, for the golden rule of US politics is that he who provides the gold, rules.

Each of the presidential candidates raised and spent over $1 billion. President Obama broke all records by attending a fundraiser on average every two and a half days throughout the long campaign. Is this really how we want our President – and our other elected officials – spending their time? The 435 races for the House of Representatives cost over $1 billion, or an average of $2.3 million per seat. The races for the 33 Senate seats up for election cost over $700 million, or an average of $21 million each.

One third of the roughly $1 billion spent by groups other than the candidates’ campaigns themselves was secret funds anonymously funneled through front groups created to launder the money and hide its source. For the Super Political Action Committees (PACs), which could raise and spend unlimited sums because of the Supreme Court’s Citizens United decision, the top 32 donors gave an average of $10 million each and just 159 people donated 60% of their funds.

The great bulk of the $7 billion spent on the federal races in 2012 came in large amounts from wealthy individuals and corporations. The voices of average citizens – the 99% of us – are drowned out in the campaigns and in policy making by the megaphones and mega-dollars of the wealthy.

So there is no question that we need comprehensive campaign finance reform if we want government of, by, and for the people. As Justice Brandeis stated, “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”

New York City has a system of citizen funding for campaigns for city offices. It provides matching public funds that give candidates the opportunity to run for public office without dependence on large contributions from wealthy donors. Someone running for citywide office or for city council who wants to participate in the voluntary citizen financing system has to raise a qualifying amount in small contributions. A mayoral candidate has to raise $250,000 from at least 1,000 city residents. A City Council candidate has to raise $5,000 in small donations from at least 75 in-district residents.

Once a candidate has achieved the qualifying threshold, any contribution up to $175 is matched six to one by public funds. So a $25 contribution is worth $175, a $100 contribution is worth $700, and a $175 contribution is worth $1,225. Only contributions by residents of the City or district are matched, and any amount over $175 is not matched. In addition to the qualifying thresholds and matching funds, there are per election spending limits ($161,000 for City Council and a little over $6 million for Mayor) and disclosure requirements. [2]

Participants in these city races are getting the majority of their funding from a broad spectrum of small contributors, while candidates for the state legislature from the same area, without the citizen funding system, get the majority of their funding from large contributors. This citizen funding allows candidates to focus their attention on ordinary citizens, not those with deep pockets, and still raise an amount of money that’s sufficient to run a credible, competitive campaign. And it engages citizens, because somebody who contributes $10 to a campaign, is more likely to volunteer, is more likely to show up and vote, and is more likely to follow and engage with what happens in government after the campaign than someone who doesn’t contribute – because they don’t believe their small contribution matters.

This blunts the influence of the big money in multiple ways. Beyond the base amount needed to run a credible campaign, additional money has a diminishing marginal return (to use a term from economics). In other words, after a point, additional campaign spending just doesn’t have that much impact. That’s one of the reasons all the Super PAC money wasn’t as effective as many thought it would be in the 2012 elections – people just got tired of hearing the same message over and over.

But money does matter. In 2012, more than 80 percent of House candidates and two-thirds of Senate candidates who outspent their general election opponents won. And although money doesn’t often literally buy elected officials’ votes, it does corrupt some of them and it certainly gets their ears and may well get them to lean toward the interests of their contributors.

At least 10 states and 7 cities have citizen / public campaign financing for at least some elections. A serious effort to implement broad citizen / public financing of elections is underway in New York for state elections. You can find information on campaign financing and whether there is a reform effort in your state at the Public Campaign website (http://www.publicampaign.org/).

Citizen / public campaign financing is an essential step in making our elected officials accountable and responsive to the 99% of us, as opposed to wealthy campaign contributors. It was important before the Supreme Court’s Citizens United decision, which allows unlimited spending by wealthy interests, and it’s even more important now.

[1] The majority of the content for this blog post is a summary of Bill Moyers’ show of 2/15/13, “The fight to keep democracy alive.” You can watch it at http://billmoyers.com/episode/full-show-the-fight-to-keep-democracy-alive/. A podcast is also available. As I probably don’t need to tell you, Bill’s shows are fantastic and I urge you to watch or listen to them regularly if possible, or whenever you can find the time.

[2] Migally, A., & Liss, S., 2010, “Small donor matching funds: The NYC election experience,” Brennan Center for Justice, http://www.brennancenter.org/issues/public-financing

SHAMEFUL FAILURE TO ADDRESS GUN VIOLENCE

ABSTRACT: A filibuster in the US Senate just blocked passage of a law to require background checks on most gun buyers, despite the fact that 90% of Americans support these background checks; even 74% of National Rifle Association (NRA) members support them!

This reflects the power of money in politics – the money of the gun and ammunition makers and sellers. Their well-funded front organization, the NRA, only has about 2 million members, but wields outsized influence.

The facts make this failure to address gun violence shameful. In the four months since the Newtown massacre of 20 young children and 6 adults, over 3,500 people have died from gun violence. Roughly 30,000 people die each year from gun violence in the US. This is ten times as many as died on September 11^th, but we spend far more time and money to prevent violence by terrorists than we do to prevent gun violence.

Contrary to the NRA’s rhetoric, guns do NOT make you safer: 1) For every use of a gun in self-defense at home, there are 11 suicide attempts, 7 assaults or murders, and 4 gun accidents; 2) Gun death rates are over three times higher in states with high gun ownership; and 3) Despite the claim that more armed civilians would stop mass shootings, this hasn’t happened once in the last 30 years.

In 1996, Australia banned automatic and semi-automatic weapons, required strict permitting and tracking of gun purchases, and purchased and destroyed about 700,000 firearms. The results are:

59% decrease in firearm murders (without an increase in non-firearm murders)
65% decrease in firearm suicides (without an increase in non-firearm suicides)
No gun massacres in the 16 years since enactment of the law compared with 13 massacres (in which 4 or more people died) in the 18 years before enactment
The murder rate has dropped to 1 per 1 million people. (The US rate is 33 times higher.)

The votes in the US Senate are profiles in cowardice. There is no reason for anyone other than law enforcement and the military to have automatic and semi-automatic weapons with magazines that hold over 10 bullets. I urge you to call, email, and / or write your federal and state elected officials and demand reasonable gun laws that will prevent future gun massacres.

FULL POST: A filibuster in the US Senate just blocked passage of a law to require background checks on most gun buyers. Although there was a majority of 54 votes in favor, the Republicans, abetted by four Democrats, obstructed progress. This occurred despite the fact that 90% of Americans support these background checks; even 74% of National Rifle Association (NRA) members support them! The Senate also failed to pass a provision banning the sales of assault weapons; there were only 40 votes in favor, even though 45% of gun owners support a ban on these weapons. [1]

This reflects the power of money in politics – the money of the gun and ammunition makers and sellers. While their lobbyists operate behind the scenes, their well-funded front organization, the NRA, operates in public. Although it only has about 2 million members (out of 300 million people in the US), which is only 5% of gun owners, and 30% of gun owners have an unfavorable opinion of the NRA, it wields outsized influence. Together, the money, the private lobbying, and the public publicity have banned federal research and data sharing on gun violence and perpetrated myths about guns and gun violence.

The facts make this failure to address gun violence shameful. In the four months since the Newtown massacre of 20 young children and 6 adults, over 3,500 people have died from gun violence. Roughly, 30,000 people die each year of gun violence in the US, 12,000 murders and 18,000 suicides. This is ten times as many as died on September 11^th, but we spend far more time and money to prevent violence by terrorists than we do to prevent gun violence. There is also far more focus, effort, and resources spent to keep illegal immigrants out of this country than there is to keep guns out of the hands of illegal gun purchasers.

Contrary to the NRA’s rhetoric, guns do NOT make you safer:

For every use of a gun for self-defense at home, there are 11 suicide attempts, 7 assaults or murders, and 4 accidents with a gun. Six times more women were shot by husbands, boyfriends, and ex-partners than were murdered by strangers. A women’s chance of being killed by her abuser is 7 times higher if he has access to a gun.
Gun death rates are over three times higher in states with high gun ownership. The state with the highest gun ownership (Wyoming, over 60% of households) also has the highest rate of gun deaths (over 15 per 100,000 people). The state with the lowest gun ownership (Hawaii, less than 10% of households) also has the lowest rate of gun deaths (less than 5 per 100,000 people). The other states clearly demonstrate this relationship that more guns means more gun deaths.
Despite the claim that more armed civilians would stop mass shootings, this hasn’t happened once in the last 30 years.
Civilians in the US own roughly 310 million guns while law enforcement and the military have 4 million guns. Roughly a third of Americans own a gun, down from about half in 1973. The average gun owner has 8 guns. [2]

In terms of evidence to support the effectiveness of legislation to prevent gun violence, there is a very relevant example from Australia. In 1996, 35 people were killed in Australia by a gunman in a massacre reminiscent of those we have experienced recently here in the US. In response, Australia, under Conservative Prime Minister John Howard, banned automatic and semi-automatic weapons, required strict permitting and tracking of gun purchases, and purchased and destroyed about 700,000 firearms in a gun buyback program. [3]

The results are: [4][5]

59% decrease in firearm murders (without an increase in non-firearm murders)
65% decrease in firearm suicides (without an increase in non-firearm suicides)
No gun massacres in the 16 years since enactment of the law compared with 13 massacres (in which 4 or more people died) in the 18 years before enactment
The murder rate has dropped to 1 per 1 million people, a fortieth of what it was. (The US rate is 33 times higher.)

The votes in the US Senate are profiles in cowardice. Colorado, New York, and Connecticut have recently passed meaningful gun violence prevention laws. There is no reason for anyone other than law enforcement and the military to have automatic and semi-automatic weapons with magazines that hold over 10 bullets. Sensible gun laws, as evidenced by the Australian experience, would make a difference. (See my post of 12/16/12 for more detail.)

I urge you to call, email, and / or write your federal and state elected officials and demand reasonable gun laws that will prevent future gun massacres. I also encourage you to participate in on-line or local actions to express your support for common sense gun violence prevention laws.

It’s past time to take serious steps to reduce gun deaths and violence, as well as hopefully, eventually, to eliminate the occurrence of gun massacres – as Australia did. We must insist that our elected officials pass sensible gun violence prevention laws.

[1] Jan, T., & Viser, M., 4/18/13, “Wider checks on guns rejected,” The Boston Globe

[2] Gilson, D., March/April 2013 issue, “Hits and myths: Ten pro-gun claims that don’t stand up to fact-checking,” Mother Jones

[3] An equivalent buyback program in the US would need to purchase and destroy 40 million guns.

[4] Matthews, D., 8/2/12, “Did gun control work in Australia?” The Washington Post

[5] Editorial Board, 12/18/12, “Australian gun control holds lessons for U.S.,” USA Today

SOCIAL SECURITY AND CHAINED CPI

ABSTRACT: In his federal government budget, President Obama has proposed cutting future Social Security benefits. He has done so in a way that is probably meant to obscure this fact. The Social Security Administration estimates that the result would be a 5% cut in benefits over every 12 year period.

It would not reduce the annual deficit, because SS has its own, dedicated funding stream. Social Security (SS) does not have a major funding problem; its shortfall 20 years from now is easily remedied.

Therefore, it seems that the only reason President Obama is proposing this cut in SS benefits is to offer a political olive branch to Republicans who want to cut SS because they are ideologically opposed to it.

An average 77 year old is receiving $23,832 per year from SS. If chained CPI had been used over the last 12 years, this person would be receiving $22,560 instead. Despite the very modest level of income that SS provides, one-third of seniors rely on SS for at least 90% of their income and another third for over 50% of their income.

The use of chained CPI as the government’s new, official measure of inflation will also, over time, reduce low income families’ eligibility for benefits and push low and middle income taxpayers into higher income tax rate brackets. Thus, it will disproportionately hit low and moderate income families. This would be morally and ethically questionable in the best of times, but with low and middle income families still suffering from the effects of the Great Recession, and income and wealth inequality at levels unseen for at least 80 years, this is unconscionable.

I urge you to contact the President, your Senators, and your Congressperson in the House of Representatives and ask them to oppose this change – or to explain why they support it.

FULL POST: In his federal government budget, President Obama has proposed cutting future Social Security benefits. He has done so in a way that is probably meant to obscure this fact or at least muddy the waters so his proposal isn’t describe as a benefit reduction.

Obama has proposed that the annual inflation adjustment for Social Security (SS) benefits be calculated differently. Instead of using the current Consumer Price Index (CPI), he proposes using a figure called the “chained CPI.” [1] It gives a lower estimate of inflation than CPI, so benefits would increase more slowly. The Social Security Administration estimates that the result would be a 5% reduction in benefits over every 12 year period.

This would cut total SS payments by $10 – $20 billion per year over the next 10 years. However, it would not reduce the annual deficit (which is roughly $800 billion), because SS has its own, dedicated funding stream and is not part of the regular federal budget. Furthermore, SS does not have a major funding problem; its shortfall 20 years from now is easily remedied by other steps that don’t reduce future payments to retirees. (See posts of 1/7/13 and 12/4/11 for more details.)

An average 77 year old is receiving $23,832 per year from SS. If chained CPI had been used over the last 12 years, this person would be receiving $22,560 instead, $1,272 less or a little over a 5% reduction. [2]

Despite the very modest level of income that SS provides, one-third of seniors rely on SS for at least 90% of their income and another third for over 50% of their income. Chained CPI won’t keep up with the inflation that seniors actually experience, given the high portions of their incomes that go for the necessities of food and health care. [3]

And if that isn’t bad enough, remember that SS was meant to be one leg of a three legged stool of retirement security that included employer pension plans and personal savings. Employer pensions have disappeared for most workers and have, at best, been turned into personal savings plans, such as 401ks, where workers have all the risk, just like other personal savings. Given this, now is not the time to be cutting SS, the only guaranteed retirement benefit left in what is now a much less stable and riskier two legged stool.

The use of chained CPI as the government’s new, official measure of inflation will also, over time, reduce low income families’ eligibility for benefits and push low and middle income taxpayers into higher income tax rate brackets. For example, the federal poverty rate is adjusted annually for inflation. Using chained CPI, it will rise more slowly and, in the future, fewer families will fall below the poverty line, which is used to determine eligibility for programs from Head Start to health care, food, and heating assistance. The federal income tax brackets are also adjusted annually for inflation. With the cut off amounts for higher income tax rate brackets rising more slowly, more taxpayers will fall into higher brackets, increasing their income tax. This doesn’t affect the wealthy, of course, because they are already in the top bracket. [4]

The bottom line is that this change in the measure of inflation that is used to calculate Social Security benefits, eligibility for many anti-poverty programs, and income tax rate brackets will disproportionately hit low and moderate income families. This would be morally and ethically questionable in the best of times, but with low and middle income families still suffering from the effects of the Great Recession, and income and wealth inequality at levels unseen for at least 80 years, this is unconscionable.

In reality, this is a backdoor way to cut benefits for SS recipients and low income families, and to have low and middle income taxpayers pay more in income taxes – without having to say that’s what you’re doing. Obfuscation is the name of this game.

I urge you to contact the President, your Senators, and your Congressperson in the House of Representatives and ask them to oppose this change – or to explain why they support it.

[1] Chained CPI assumes that as the prices of goods and services rise, consumers substitute less costly alternatives. For example, if gas prices rise, consumers use their cars less or buy (usually smaller) cars that get better gas mileage. Or if the price of beef goes up, they buy less beef and more chicken or less meat overall. Or if the price of heating oil goes up, consumers turn down the heat and use electric space heaters to heat only the rooms in which they spend time. First, this sounds, in many cases, like a decline in one’s standard of living or quality of life. Second, in some cases buying a cheaper substitute isn’t really an option. When the cost of health insurance and health care goes up, there often isn’t a way to buy a less costly alternative. And for seniors, this is a big part of their budget.

[2] Matthews, D., 12/11/12, “Everything you need to know about Chained CPI in one post,” The Washington Post

[3] Warren, E., 4/10/13, Newsletter from Senator Elizabeth Warren

[4] Ohlemacher, S., 4/8/13, “Obama plan hits seniors, low-income taxpayers,” Associated Press (in the Reading Daily Times Chronicle)

THE SHRINKING DEFICIT

ABSTRACT: The federal government’s annual budget deficit is falling, and falling faster than at any time since WWII. Overall government spending has been falling since 2007. Roughly 750,000 government jobs have been cut since the recovery began in 2009, cancelling out much of the benefit of increased private sector employment, and leaving unemployment higher than it would be otherwise.

Many economists believe that an austerity strategy of a rapidly declining deficit and spending cuts such as the “sequester” could hurt the economy and its recovery. Europe is experiencing a second recession and very high unemployment (12%) due to its austerity strategy. The current, irrational obsession with the deficit is precluding investments that have a high return and would improve the fiscal picture over the long-term.

Ultimately, jobs and a strong economy are the answer to taming the deficit, which is already shrinking rapidly.

FULL POST: The federal government’s annual budget deficit is falling. And it’s falling faster than at any time since the end of World War II. And that’s even before the March 1 spending cuts (the “sequester”) are factored in. [1] The deficit for this year is projected by the Congressional Budget Office to be $845 billion, down from $1,100 billion last year and $1,413 billion in 2009. It grew in 2008 and 2009 because the Great Recession led to 1) a dramatic loss of tax revenue due to decreased economic activity and jobs; [2] 2) increased expenditures for unemployment, food assistance, and other government benefits that softened the impact of the recession on families; and 3) tax cuts that were used to stimulate the economy, reducing the depth of the recession. [3]

Overall government spending, including the federal, state, and local levels, has been falling since 2007. Although the decline in federal spending in the fourth quarter of 2012 is seen as the culprit in causing the economy to shrink (i.e., negative growth) in that quarter, spending reductions and job losses have been most pronounced at the state and local levels. Federal spending has declined from 25.2% of our total economy or Gross Domestic Product (GDP) in 2009 to 22.8% in 2012, and is projected to fall to 21.5% by 2017 without any dramatic changes in budget policy. (The 40 year average has been 21.0%.)

Roughly 750,000 government jobs have been cut since the recovery began in 2009. This has been a “massive drag on the economy,” cancelling out much of the benefit of increased private sector employment. [4] Although the US unemployment rate has fallen to 7.7%, it would have fallen significantly further if these government jobs, including those of many teachers, had not been lost.

Many economists believe that an austerity strategy of a rapidly declining deficit and spending cuts such as the “sequester” could hurt the economy and its recovery. Historically, rapidly falling government deficits and spending have tended to lead to recessions. [5] If you want evidence of this, you need look no further than Europe at this moment. Europe is experiencing a second recession and very high unemployment (12%) due to its austerity strategy. Mark Cliffe, chief economist at IMG, describes its austerity strategy as “a bit of a vicious circle. Europe is pursuing a policy that is self-evidently failing.” [6]

The current, irrational obsession with the deficit (rather than a focus on creating jobs and strengthening the economy), is precluding investments in infrastructure and other activities that have a high return on investment and would improve the fiscal picture over the long-term. Especially given the federal government’s ability to borrow money at near zero interest rates, now is an ideal time to make investments in the future strength and growth of our economy, which is the best long-term strategy for reducing the deficit. [7]

There isn’t a good answer to the question of why the deficit – which is already rapidly falling – is more important now than creating jobs and strengthening the economy. [8] And if we look at Europe, we can see clear evidence that an austerity strategy does not lead to a falling deficit or a stronger economy with more jobs. The only answer is ideology – a belief that a smaller public sector is more important than putting struggling Americans back to work and back on their feet.

Ultimately, jobs and a strong economy are the answer to taming the deficit and the overall accumulated debt. Furthermore, a focus on creating jobs would resonate with the American public, many of whom are still struggling with the impacts of the Great Recession. It’s a matter of delivering a clear message about the need to create jobs and stimulate the economy, and that this will solve the issue of the deficit, which is already shrinking rapidly.

[1] Klein, E., 2/12/13, “The deficit chart that should embarrass deficit hawks,” The Washington Post

[2] Raum, T., 2/22/13, see above

[3] Konczal, M., 1/22/13, “The most important graph on the deficit, “ The Roosevelt Institute

[4] Raum, T., 2/22/13, “Government downsizes amid GOP demands for more cuts,” Associated Press (in the Reading Daily Times Chronicle)

[5] Klein, E., 2/12/13, see above

[6] The Balance Sheet, 4/3/13, “Europe’s austerity addiction,” The American Prospect

[7] Summers, L., 1/21/13, “America’s deficits: The problem is more than fiscal,” The Washington Post

[8] Wolf, M., 1/22/13, “America’s fiscal policy is not in crisis,” Financial Times

NO FISCAL CLIFF FOR CORPORATE TAX LOOPHOLES

ABSTRACT: So you thought our Washington politicians were serious about reducing the deficit? Guess again. The actual bill that averted the “fiscal cliff” in January included 43 corporate tax breaks worth $67 billion in 2013, which is more than the revenue that was raised! This means that the “fiscal cliff” legislation did NOT decrease the deficit, but rather increased it. The tax breaks include: 1) $11 billion for corporations such as GE, Citicorp, and Ford on overseas earnings, 2) $430 million for Hollywood producers for filming in the US, 3) $331 million for railroads for track maintenance, 4) $500 million for pharmaceutical giant Amgen, and 5) $120 million for Whirlpool Corporation. The support for corporate tax loopholes is often bipartisan as they provide leverage for campaign contributions.

So, take with a big grain of salt all the talk about deficit reduction. Corporate welfare continues unabated while deficit reduction is used as an axe to cut government programs, many focused on helping low and middle income families. And take with a big grain of salt the talk about the need to cut Medicare and Medicaid spending when big giveaways to Amgen and other pharmaceutical corporations are costing these programs billions of dollars every year.

Note: I’m back to blogging after a three month hiatus. And no, unfortunately, this post is NOT an April Fool’s joke.

FULL POST: So you thought our Washington politicians were serious about reducing the deficit given the last minute “fiscal cliff” deal in January and the automatic spending cuts (“the sequester”) that went into effect on March 1? Guess again. Corporate tax loophole giveaways that were actually part of the “fiscal cliff” bill cost more than the revenue that was raised!

As background, the manufactured austerity crisis, known as the “fiscal cliff,” was a package of spending cuts and tax increases set to go into effect automatically on December 31, 2012, if a substitute agreement on deficit reduction wasn’t reached. (See post of 12/12/12 for more details.)

Early on New Year’s Day legislation was passed that supposedly tackled the deficit by increasing revenue. It also postponed the spending cuts until March 1. Most of the scheduled tax increases were scaled back, so only $30 – $60 billion per year in new revenue was generated. Income tax rates on individuals with incomes over $400,000 were increased, with some reductions in deductions starting at $250,000 in income. The estate tax was increased a bit and workers’ Social Security taxes were increased by 2% of wages on earnings up to $110,000. (This restored a temporary cut in the Social Security tax that was targeted at boosting the economy and middle and low income workers during the Great Recession.) (See post of 1/7/13 for more details.)

The postponed spending cuts ended up going into effect on March 1 because our politicians could not come to an agreement on other deficit reduction measures. These spending cuts are likely to hurt the economy, slowing the recovery and increasing unemployment. In addition, these cuts are hurting low and middle income families. Head Start’s high quality school readiness programs are serving fewer children – fewer 3 and 4 year olds from families in poverty. School systems are laying off teachers and staff. College students are losing government support. Housing authorities are laying off staff and cutting housing assistance to poor families. And there will be cuts in health care that will disproportionately affect low income individuals. [1]

Despite all of this, quietly, and with very little coverage by the mainstream (corporate) media, the actual bill that averted the “fiscal cliff” in January included 43 corporate tax breaks worth $67 billion in 2013, which is more than the revenue that was raised by the highly publicized tax increases. [2] This means that the “fiscal cliff” legislation did NOT decrease the deficit, but rather increased it by giving more in tax breaks to corporations than it raised in tax revenue from individuals!

For example, Whirlpool Corporation got a tax benefit worth an estimated $120 million in 2012 and 2013 after spending $1.8 million on lobbying over the last two years; a 6,700 percent return on investment. Whirlpool’s total income taxes paid to federal, local, and foreign governments for 2009 -2011 were a REFUND of $561 million! And it is carrying forward federal tax credits it can use to decrease its US taxes in future years. Meanwhile, Whirlpool closed a factory in Arkansas and laid off 800 workers, moving the manufacturing of its refrigerators to Mexico. This was part of an overall reduction of its workforce in North America and Europe of 5,000 jobs, which it announced in 2011. [3]

Another example was a provision in the “fiscal cliff” legislation that gave two years of relief from Medicare cost controls for certain drugs. Although not mentioned by name, the clear beneficiary is the pharmaceutical giant, Amgen. It is estimated that this loophole will cost taxpayers about $500 million over two years – to the benefit of Amgen. The company’s CEO quickly informed investment analysts of this good news. Two factors make this particularly egregious:

Amgen had already received a two year delay on these cost controls and another one is hard to justify
Two weeks earlier, Amgen had pleaded guilty in a major federal fraud case to illegal drug marketing and had agreed to pay $762 million in criminal and civil penalties

This particular case is tied to close relations Amgen has with three Senators: Max Baucus (D – Montana), Mitch McConnell (R – Kentucky), and Orrin Hatch (R – Utah). [4][5] As in this case, the support for corporate tax loopholes is often bipartisan. Many of them have to be renewed every two years. This gives members of Congress leverage for an on-going source of campaign contributions from these corporations and their lobbyists. The supposedly temporary nature of these corporate tax loopholes also avoids the accounting analysis, and resultant publicity, the federal budget process requires of permanent or longer-term tax expenditures. Overall, corporate welfare will cost the federal government at least $154 billion in 2013 through 135 individual provisions in the tax code. [6]

Other corporate tax breaks in the “fiscal cliff” legislation include:

$11 billion for corporations such as GE, Citicorp, and Ford on overseas earnings
$430 million for Hollywood producers for filming in the US
$331 million for railroads for track maintenance

[1] Coalition on Human Needs, 3/22/13, “Sequester Impact,” http://www.chn.org/wp-content/uploads/2013/03/sequester-impact-mar-13-21.pdf

[2] Rowland, C., 3/17/13, “Tax lobbyists help businesses reap windfalls,” The Boston Globe

[3] Rowland, C., 3/17/13, see above

[4] Moyers, B., & Winship, M., 1/25/13, “Foul play in the Senate,” Common Dreams

[5] Lipton, E., & Sack, K., 1/20/13, “Fiscal cliff bill benefits Amgen,” The New York Times

[6] Rowland, C., 3/17/13, see above

A HIATUS IN BLOGGING

I apologize for the hiatus in my blogging. My professional life has been very busy; I’m teaching two college courses right now. And nothing has slowed down in my personal life, so I haven’t found the time to keep blogging.

As I’m sure you know, it isn’t for the lack of material. With the automatic budget cuts (the sequester) quickly approaching and partisan politics unabated in Washington, there’s plenty I’d like to be blogging about.

Hopefully, in March I’ll be able to return to at least a weekly blog post. I’m looking forward to it; I hope you are as well.

CUTTING SPENDING TO REDUCE THE DEFICIT Part 2

ABSTRACT: Medicare and Medicaid do present significant funding challenges. This is because they reflect the costs of our health care system, which spends 2 ½ times what other advanced economies spend on average – and our health outcomes are worse. Obamacare takes initial steps to make our whole health care system more cost effective. One proposal to save money in Medicare is to raise the age at which one is eligible for coverage from 65 to say 67. This would save only $13 billion per year over 10 years and would only shift the cost for health insurance somewhere else.

Cuts to Medicaid mean that fewer low income individuals, primarily low income children and seniors, would have health insurance.

It is unfair and unnecessary to cut services and benefits for low income families and seniors when other options for reducing the deficit are available.

FULL POST: Medicare and Medicaid do present significant funding challenges. This is because they reflect the costs of our health care system, which spends over $7,500 per person per year. This is 2 ½ times what other advanced economies spend on average – and our health outcomes are worse. (See post of 12/9/11 for more details.)

The real issue is the need to make our whole health care system more cost effective. Obamacare takes initial steps to do just that. It includes cuts in payments to Medicare health insurers and health care providers of $700 billion, requiring them to be more efficient, but not cutting any benefits to seniors. Nonetheless, during the 2012 campaigns, Republicans attacked this as a cut to Medicare, despite the fact that their Vice Presidential candidate, Paul Ryan, the chairman of the House Budget Committee, had included these cuts in his budget the previous two years. Ironically, Republicans have also taken steps to eliminate the cost control board created by Obamacare that is charged with limiting the growth of Medicare spending. [1]

President Obama has continued his efforts to reduce Medicare costs by proposing giving Medicare the right to negotiate with drug makers for lower prices. [2] The Veterans Administration and large health insurers already do this and save significant amounts of money, but President Bush’s Medicare drug benefit prohibited Medicare from doing so, providing a windfall to the pharmaceutical corporations.

Another proposal to save money in Medicare is to raise the age at which one is eligible for coverage from 65 to say 67 and increase premiums for high income recipients. The Congressional Budget Office reviewed these proposals and concluded that they would save only $13 billion per year over 10 years. Moreover, increasing the eligibility age would only shift the cost for health insurance somewhere else and would leave some people without health insurance.

Cuts to Medicaid mean that fewer low income individuals would have health insurance or that their benefits would be cut. Medicaid beneficiaries are primarily low income children and seniors, with Medicaid paying for many seniors’ nursing home care. An expansion of Medicaid is an essential part of reducing the number of Americans without health insurance under Obamacare.

It is unfair and unnecessary to cut services and benefits for low income families and seniors when other options for reducing the deficit are available. Despite our riches, the US is less generous in its benefits for seniors and low income families than other countries with advanced economies. Surely, we can find the will and a way to maintain, if not improve, our benefits for these members of our society.

[1] New York Times editorial, 11/18/12, “A bad idea resurfaces,” The New York Times

[2] Krugman, P., 12/3/12,“The GOP’s big budget mumble,” The New York Times

CUTTING SPENDING TO REDUCE THE DEFICIT

ABSTRACT: A deal was reached to address the year-end “fiscal cliff” or austerity crisis. Spending cuts were postponed for two months and most of the tax increases were eliminated, while some tax and revenue increases were enacted. The deficit reduction focus will now largely shift to spending cuts. We should be focusing on job creation and strengthening the economy, but somehow the deficit is the hot topic.

The discussion of spending cuts will probably focus on the military and on entitlement programs, specifically Social Security and the health care programs, Medicare and Medicaid. Much of the discussion of cutting military spending will be on avoiding cuts. However, military spending can be reduced up to $200 billion per year – without jeopardizing national security.

Turning to calls for cuts in Social Security and our public sector health programs, keep in mind that every other advanced economy has health care for all and a retirement support system. Social Security has its own funding stream and does not contribute to the deficit, so rationally it shouldn’t be part of this discussion. Ideologues are using the deficit issue to target Social Security because of their doctrinaire opposition to it. Minor changes to its funding would cover benefits for the next 75 years.

My next post will review proposed cuts to Medicare and Medicaid.

FULL POST: As you probably know, a deal was reached to address the year-end “fiscal cliff” or austerity crisis. Spending cuts were postponed for two months and most of the tax increases were eliminated, while some tax and revenue increases were enacted. The cap on the US government’s debt was not addressed and will be hit in about two months. Here’s a quick summary of what was enacted: [1]

Income tax rates on incomes over $400,000 will increase from 35% to 39.6% and some reductions in deductions will start at $250,000 in income, but there is no “Buffett Rule” requiring 30% be paid on incomes over $1 million. The net result is that new revenue from income taxes will be only about $60 billion per year as opposed to up to $450 billion with the rates increased on incomes over $250,000 and the “Buffet Rule”.
The Social Security payroll tax reduction was NOT extended, so all workers will have an additional 2% taken out of their paychecks on earnings up to $110,000.
Tax benefits for low income households were extended: a child credit and the Earned Income Tax Credit, which supplements income from low paying jobs. The tuition credit was extended as was the corporate research and development credit. The Alternative Minimum Tax, which originally was to function like the “Buffett Rule”, was adjusted so it won’t affect middle income taxpayers.
Unemployment benefits for the long-term unemployed were extended for a year.
The estate tax was increased slightly but not nearly as much as some had proposed and only on individual estates of over $5 million or joint estates of over $10 million.

The deficit reduction focus will now largely shift to spending cuts. We should be focusing on job creation and strengthening the economy, given high unemployment and slow economic growth, but somehow the deficit is the hot topic. As the current experience in Europe is clearly showing, cutting government spending weakens the economy and job growth and can put countries back into a recession.

Having said that, the discussion of spending cuts will probably focus on the military and on entitlement programs, specifically Social Security and the health care programs, Medicare (for seniors) and Medicaid (for low income people including low income seniors).

Unfortunately, much of the discussion of cutting military spending will be on avoiding cuts, including the $50 billion per year cut that is now scheduled for March 1. Military spending can be reduced this much and more – up to $200 billion per year – without jeopardizing national security. (See blog posts of 9/29/12 and 11/17/11 for more information.) For example, Lawrence Korb, an assistant defense secretary under President Reagan, has itemized $150 billion in annual cuts to the military budget. [2]

In the recently enacted $633 billion Defense Department spending bill, there was widespread criticism of inclusion of unnecessary spending. The dollar amount was more than the Department or President requested. The Pentagon complained that it is required to keep weapons, as well as bases and units, that are not needed or efficient. Defense Secretary Panetta decried meddling by Congress that required “excess force structure and infrastructure.” [3][4]

Turning to calls for cuts in Social Security and our public sector health programs, keep in mind that every other advanced economy has health care for all and a retirement support system. So the issue is not whether it is possible to have these programs, it is are we willing to pay for them and are we willing to control health care costs.

Social Security has its own funding stream and does not contribute to the deficit, so rationally it shouldn’t be part of this discussion. Ideologues are using the deficit issue to target Social Security because of their doctrinaire opposition to it. Furthermore, its current funding will cover its benefits for roughly the next 20 years and after that minor changes to its funding would cover benefits for the next 75 years without any cuts in benefits. (See post of 12/4/11 for more details.)

The most prominent proposal for cutting Social Security spending is to reduce the annual increase in benefits that adjusts for inflation. This would save less than $20 billion per year over 10 years. [5] Ask any senior you know if the inflation adjustment is sufficient to keep up with their cost of living and I bet they’ll say, “No.” So cutting this will only hurt our seniors and reduce Social Security’s ability to keep seniors out of poverty. Furthermore, Social Security has become an increasingly important part of retirement income as private sector pensions have largely disappeared; cutting its rather modest benefits seems inappropriate in this environment.

My next post will review proposed cuts to Medicare and Medicaid.

[1] New York Times, 1/1/13, “Highlights of the agreement,” The Boston Globe

[2] Dubose, L., 11/15/12, Book review of Ralph Nader’s “The seventeen solutions: Bold ideas for our American future,” The Washington Spectator

[3] Bender, B., 1/5/13, “A reprieve for local military bases: New Congressional funding flouts Pentagon’s plan for cutbacks,” The Boston Globe

[4] Boston Globe Political Notebook, 12/21/12, “House approves defense bill despite Pentagon objections,” The Boston Globe

[5] Krugman, P., 12/3/12, “The GOP’s big budget mumble,” The New York Times

REBUTTING ARGUMENTS AGAINST INCREASING INCOME TAXES ON THE WEALTHY

ABSTRACT: The Bush tax cuts, and the even larger cuts in the income tax rates for high incomes over the last 30 years, have contributed to creating the federal government’s deficit (see post of 12/22/12) and to dramatically widening income and wealth inequality in the U.S. There has been a dramatic shift of the tax burden from the well-off and corporations to middle and lower income households. This shift in the tax burden has contributed to stagnant incomes for middle and lower income earners while incomes at the top have skyrocketed.

Despite the Republican rhetoric that high income individuals are “job creators,” the fact is that increased income for them is far less effective in stimulating job growth than increased incomes for low and middle income individuals. There is strong evidence, from multiple perspectives, that increasing taxes on the wealthy and redirecting the funds to productive investments or to lower income individuals, for example through unemployment benefits, will benefit the economy and job creation. It would also reduce inequality and address a root cause of the deficit.

FULL POST: The Bush tax cuts, and the even larger cuts in the income tax rates for high incomes over the last 30 years, have contributed to creating the federal government’s deficit (see post of 12/22/12) and to dramatically widening income and wealth inequality in the U.S., which are at their highest levels since the 1930s.

The 400 richest individuals in the US, as identified by Forbes magazine, have pocketed $1.3 trillion because of the Bush tax cuts. The best estimates are that these individuals actually pay only about 18% of their income in taxes, while their predecessors in 1960 paid more than 70%. Not only have their tax rates fallen dramatically (from 91% in 1960 and 70% in 1980 to 35% today [see 11/27/11 post for more detail]), but their increased use of offshore tax havens and other tax reduction strategies has further reduced the taxes they actually pay. For example, the tax return Mitt Romney released shows that he, and presumably his partners at Bain Capital, reported their management fees as capital gains rather than earned income. Assuming they all did, they saved an estimated $200 million on income taxes and another $20 million on the Medicare payroll tax. [1] Also since the 1960s, corporate taxes have fallen from over 27% of federal government revenue to about 10% today. [2]

These reductions in government revenue from high income individuals and corporations have dramatically shifted the tax burden from them to middle and lower income households at the federal, state, and local levels. This shift to regressive revenue sources [3] includes flat rate payroll taxes (i.e., Social Security and Medicare), and in the case of Social Security a cap so that no tax is paid on earnings over $110,000. It also includes most state and local revenue sources, such as sales and excise (e.g., cigarette, alcohol, and car) taxes; flat rate state income taxes; and state revenue from gambling (i.e., lotteries and casinos), all of which are quite regressive. [4] This shift in the tax burden has contributed to stagnant incomes for middle and lower income earners while incomes at the top have skyrocketed. [5] (See my post of 11/13/11 for more detail.) Both fairness and reversing causes of the deficit would argue for increased income tax rates on high incomes.

Despite the Republican rhetoric that high income individuals are “job creators,” the fact is that increased income for them is far less effective in stimulating job growth than increased incomes for middle and low income individuals. The US economy is driven by consumer spending; it’s 70% of our Gross Domestic Product (GDP), a measure of overall economic activity. The lower an individual’s income, the more likely he or she is to spend any additional income to buy goods and services in the local economy. On the other hand, the wealthy are more likely to save additional income or to spend or invest it outside of the US. Furthermore, they are much more likely than the less well-off to use the money for speculative rather than productive investments. Speculative investments do not help the economy or create jobs; they actually harm the economy by increasing prices for consumer goods (e.g., food and gasoline [see my post of 3/5/12]) and by contributing to speculative bubbles (e.g., Internet stocks and mortgage investments) that eventually burst and harm the economy.

Republicans have opposed an increase in the tax rate on high incomes, claiming it will hurt small businesses. But only about 2 – 3% of “small businesses” would be affected and many of these aren’t really small or aren’t businesses at all. Republicans also claim that such a tax increase would hurt the economy and job creation, but “yearly gains in employment, GDP growth, and small business job growth were all greater after the Clinton tax hikes of 1993 than after the Bush tax cuts of 2001.” [6]

In summary, there is strong evidence, from multiple perspectives, that increasing taxes on the wealthy and redirecting the funds to productive investments (such as infrastructure building) or to lower income individuals (who will spend it in their local economies), for example through unemployment benefits, will benefit the economy and job creation. [7] It would also reduce inequality and address a root cause of the deficit.

In my next posts, I’ll take a look at cutting the deficit through spending cuts, the spending cuts in the austerity package, and alternatives to them.

[1] Peters, C. Nov./Dec. issue, “The Bain of my existence,” Washington Monthly

[2] Van Gelder, S., 12/8/12, “4 ways to leap the ‘fiscal cliff’ to a better USA,” YES! Magazine

[3] Regressive revenue sources place a greater burden, relative to one’s ability to forego the income, on middle and lower income households than on higher income individuals.

[4] Jacoby, J., 12/9/12, “Biggest lottery winner? That’d be the Treasury,” The Boston Globe

[5] Appelbaum, B., & Gebeloff, R., 11/29/12, “Tax burden is lower for most Americans than in the 1980s,” The New York Times

[6] Lehigh, S., 12/14/12, “Points of clarity through the fiscal cliff fog,” The Boston Globe

[7] Judis, J.B., 12/12/12, “Rein in the rich: How higher taxes could lift the economy,” The New Republic

INCREASING REVENUE TO CUT THE DEFICIT

ABSTRACT: Increased revenue needs to be part of the effort to reduce the federal government’s budget deficit. Two revenue sources that are not included in the austerity package are closing corporate tax loopholes and enacting a financial transactions tax. They could eliminate over half the deficit with little negative impact on the economy.

The highest profile revenue issue in the austerity package is the personal income tax. Given that the 2001 – 2003 tax cuts on earned and unearned income were significant contributors to creating the deficit, reversing them for high income individuals would seem appropriate. Maintaining the Bush tax cuts on high incomes would cost up to $160 billion per year in lost revenue. Alternatively, using these funds on high impact spending will reduce the deficit over the long-term while strengthening the economy and creating jobs in the short-term.

FULL POST: Increased revenue needs to be part of the effort to reduce the federal government’s budget deficit. However, the increased or new taxes that produce the revenue should not be so large or so quickly implemented that they put the economy back into recession. Here’s a look at the revenue increases that are part of the current austerity package (aka the “fiscal cliff”), some of the negotiations that have occurred on them, and some alternatives that are not included in the package.

First, two revenue sources that are not included in the austerity package are closing corporate tax loopholes and enacting a financial transactions tax (as 10 European countries are doing). These could provide $250 billion and $350 – $500 billion annually, respectively, in new revenue, and eliminate over half the deficit with little negative impact on the economy. (See my post of 9/29/12 for more detail.) An alternative minimum tax for highly profitable corporations that would ensure that they pay a minimum tax rate – similar to the Buffet Tax proposal for high income individuals – would seem quite reasonable. Roughly a quarter of our large and profitable corporations pay NO federal income tax despite multi-billion dollar annual profits. (See my post of 11/5/11 for more detail.) Google, for example, avoided paying $2 billion in taxes in 2011 by funneling profits to overseas shell companies. [1]

The highest profile revenue issue in the austerity package is the personal income tax. The tax cuts enacted by President Bush in 2001 and 2003 are scheduled to expire. President Obama originally proposed letting the cuts expire on income over $250,000 per year, but keeping the cuts on income under that amount. The Republicans proposed a $1 million cut off and Obama has countered with a $400,000 cut off. As the cut off gets higher, the amount of revenue (and deficit reduction) is reduced. The difference between a $250,000 and a $400,000 cut off is estimated to be $40 billion per year in revenue (i.e., $160 billion versus $120 billion in increased revenue).

Expiration means the tax rate on upper incomes would increase from the current 35% to 39.6%, the rate that was in place in the late 1990s. (Note that for an individual with $20 million in taxable income, the Bush tax cuts of 2001 – 2003 have put roughly $1 million in their pockets each year for the last 10 years.) In addition, increasing the tax rate on unearned income – capital gains, dividends, and interest – back to 1990s rates is another hot topic. Given that the 2001 – 2003 tax cuts on earned and unearned income were significant contributors to creating the deficit, reversing them for high income individuals would seem appropriate.

The bottom line is that maintaining the Bush tax cuts on high incomes would cost up to $160 billion per year in lost revenue. Alternatively, using these funds on high impact spending, such as infrastructure investments or unemployment benefits, would generate an estimated net gain of 1.2 million to 1.5 million jobs and add 1.0% to 1.5% to economic growth. The growth in jobs and the economy will, in and of itself, reduce the deficit because taxes and revenue grow when the economy grows. Therefore, this approach will reduce the deficit over the long-term while strengthening the economy and creating jobs in the short-term. The only revenue increase in the austerity package that has a greater positive effect on jobs and the economy than letting the tax cuts on high incomes expire is terminating the cuts in the estate and gift taxes. [2]

In my next post, I’ll review the arguments against raising tax rates on high income individuals. In subsequent posts, I’ll take a look at cutting the deficit through spending cuts, the spending cuts in the austerity package, and alternatives to them.

[1] Brown, C., 12/13/12, “Google on ‘immoral’ tax evasion: ‘It’s capitalism’,” Common Dreams

[2] Bivens, J., & Fieldhouse, A., 9/18/12, “A fiscal obstacle course, not a cliff,” Economic Policy Institute

STOP THE GUN MASSACRES

ABSTRACT: Gun massacres must stop. We must enact sensible gun laws. Automatic weapons with magazines that hold over a dozen bullets turn tragic murder into horrifying massacre. Sensible gun laws would make a difference; they lead to much lower gun violence in other countries, and the federal assault weapon ban made a difference in the 10 years it was in effect.

The profits of gun and ammunition makers are at stake. The right to bear arms the framers of our Constitution had in mind was not unfettered access to weapons that fire a dozen bullets per second.

We must seize this moment to loudly and collectively demand that our elected leaders enact strong, sensible gun laws (detail below). To take action, start by going to the White House petitions site (https://petitions.whitehouse.gov/petitions). Find a petition calling for action on gun laws and sign it.

FULL POST: Gun massacres must stop. We must enact sensible gun laws. Yes, guns don’t kill people, people kill people. But automatic weapons with magazines that hold over a dozen bullets turn tragic murder into horrifying massacre. There is no reason anyone other than law enforcement or military personnel should have automatic weapons with high capacity magazines. The federal bans on assault weapons and high capacity magazines that were in place from 1994 to 2004 need to be reinstated.

Why is getting a driver’s license so much more rigorous than getting a gun, including an automatic? With over 4 times as many civilians murdered each year with guns (over 12,000) as died in the September 11 attacks, why do we do so much to prevent terrorism and so little to prevent gun violence? Why do we allow gun homicides in the US at almost 20 times the rate in similar countries with similar overall crime and violence rates? [1]

Sensible gun laws would make a difference; they lead to much lower gun violence in other countries and the federal assault weapon ban made a difference in the 10 years it was in effect. In the struggle for sensible gun laws, remember that the profits of gun and ammunition makers are at stake. They support loose gun laws and the National Rifle Association so they can maximize their profits.

The right to bear arms (as part of a well regulated militia) that is in the second amendment to the Constitution was written when guns were muzzle loaders and the time per bullet – to reload and fire again – was measured in minutes. Today we measure the number of bullets fired per second. The right to bear arms the framers of our Constitution had in mind was not unfettered access to weapons that fire a dozen bullets per second.

We must seize this moment to loudly and collectively demand that our elected leaders – our President and Members of Congress, our Governors and State Legislators – enact strong, sensible gun laws including 1) a ban on assault weapons and high capacity magazines, 2) limits on the number of guns and amount of ammunition an individual can buy, 3) reasonable requirements for obtaining a gun license, and 4) strong background check requirements for all gun purchases. In addition, the penalties for violating gun laws should be tough; any gun or ammunition seller who violates the law and allows an individual to obtain guns or ammunition illegally should be treated as an accomplice to murder, under criminal and civil law.

To take action, start by going to the White House petitions site (https://petitions.whitehouse.gov/petitions). Find a petition calling for action on gun laws and sign it. (If you don’t already have an account you will need to go through the quick process of obtaining one.) There are multiple petitions on the firearms issue, which you can scroll down to find or select the “Filter by issue” button and select “Firearms”. I urge you to sign at least one and as many as you support if you have the time. This will send a strong signal of support for this issue. The two I’d suggest starting with are:

“Immediately address the issue of gun control through the introduction of legislation in Congress” (http://wh.gov/RN6U). It already has over 100,000 signers; please add your voice.
“Today IS the day: Sponsor strict gun control laws in the wake of the CT school massacre” (http://wh.gov/RRkn). It has over 19,000 signers and you can add your support.

Also, call, email, and / or write your federal and state elected officials and demand gun laws that will end the massacres now. Participate in local or on-line actions to express your support for sensible gun laws.

It’s past time to take serious steps to reduce and hopefully eventually eliminate the occurrence of gun massacres. We must insist that our elected officials pass sensible gun laws.

[1] Brady Center to Prevent Gun Violence, retrieved 12/15/12, “Facts: Gun violence,” www.bradycampaign.org/facts/gunviolence

A MANUFACTURED AUSTERITY CRISIS, NOT A FISCAL CLIFF

ABSTRACT: The so-called fiscal cliff you’ve been hearing so much about is actually a manufactured austerity crisis. There is widespread agreement that if nothing is changed by or relatively soon after December 31 that our economy is extremely likely to fall into a recession and unemployment is likely to increase to over 9%, an increase of between 1% and 1.5%.

The austerity package bundles together a variety of measures that are largely unrelated. Addressing these complex issues individually and with time for thoughtful consideration would make more sense than doing so in a bundle under severe time constraints. The austerity package’s cuts to social programs would be 8.4% across the board, with a few programs exempted. These cuts would have very significant negative effects on low income families and on education.

FULL POST: The so-called fiscal cliff you’ve been hearing so much about is actually a manufactured austerity crisis. [1] Congress and the President agreed on this package of spending cuts and tax increases (which take effect on December 31) because the Republicans demanded it in exchange for their votes to increase the federal government’s debt cap back in August 2011. As you may remember, they pushed the government to the brink of default – which hurt its credit rating and the economy – in order to extract these austerity measures. (By the way, I believe this brinksmanship and the harm it caused is incredibly UNpatriotic; but that’s a separate discussion.) A Congressional “Super-committee” was created to find alternative ways to reduce the deficit but was unable to come to a consensus recommendation, so we are left with this “fiscal cliff.” However, the effects of the austerity package would occur over time, so it is actually more of a “slope” than a “cliff.” [2]

There is widespread agreement that if nothing is changed by or relatively soon after December 31 that our economy is extremely likely to fall into a recession and unemployment is likely to increase to over 9%, an increase of between 1% and 1.5%. The roughly $100 billion per year in spending cuts and $350 billion in annual tax increases would reduce the deficit from about $1 trillion per year to about $600 billion. But taking this $400 billion out of the country’s economic activity would almost certainly turn slow economic growth into a recession. (See my post, The “Fiscal Cliff” and the Economy of 9/19/12 for more details.) As we’ve seen in Europe, austerity measures have pushed Greece, Spain, and Britain into a recession and the whole Eurozone is teetering on the edge of recession.

The federal government’s deficit does need to be addressed, but doing so precipitously and in the wrong ways will hurt the economic recovery. The immediate problems are not the government deficit, but the lack of jobs, particularly middle class jobs, and the lack of consumer spending, which represents two-thirds of our economic activity. [3] In addressing the deficit, we should use strategies that minimize negative effects on jobs and the economy. (See my post, Addressing the Deficit on 9/29/12 for four specific policy changes that would eliminate the roughly $1 trillion per year deficit with minimal impact on jobs and the economy.) Furthermore, spending cuts and increased tax revenue should be phased in over time to reduce their impact on our weak economy. [4]

The austerity package bundles together a variety of measures that are largely unrelated other than they have some impact on the federal government’s revenue or spending; although some actually have no impact on the deficit. Therefore, some view this “fiscal cliff’ as more of a “fiscal obstacle course.” [5] Major changes to both the personal and corporate tax codes are included, as well as significant changes to spending on a wide range of government programs from defense to social programs. Addressing these complex issues individually and with time for thoughtful consideration would make more sense than doing so in a bundle under severe time constraints.

In addition to the expiration of the Bush tax cuts, which expire for all income levels in the austerity package, other benefits for middle and low income households are scheduled to expire as well. These include:

Unemployment benefit extensions beyond the traditional 26 weeks (2 million individuals would lose benefits in December and another 1 million in April)
The reduction in the Social Security and Medicare payroll tax (by 2% of pay, which puts about $1,000 a year in the average worker’s pocket)
An enhancement to the Child Care Tax Credit
The expansion of the Earned Income Tax Credit, which augments incomes of low income workers
An exemption from income tax on mortgage debt that is forgiven

The austerity package’s spending cuts come 50% from the military and 50% from social programs. Many members of Congress oppose the cuts to the military. However, there are strong arguments for cutting military spending: 1) it has more than doubled (to $733 billion per year) since 2001, 2) we are winding down the wars in Iraq and Afghanistan, 3) we have far and away the largest military budget in the world, and 4) it’s widely acknowledged that there is significant waste in the military budget. Furthermore, military spending is not an efficient way to create jobs and at 58% of the federal government’s discretionary spending, it would be difficult and unfair to significantly reduce spending without cutting the military budget. (See posts of 9/29/12 and 11/17/11 for more details.)

The austerity package’s cuts to social programs would be 8.4% across the board, with a few programs exempted, such as Medicaid and the Children’s Health Insurance Program. These cuts would have very significant negative effects on low income families and on education. It is estimated that: [6]

75,000 3 and 4 year old, disadvantaged children would lose the enriched preschool services of Head Start;
25,000 young children would lose subsidies for early care and education (aka child care);
16,000 teachers and other school staff would lose their jobs;
460,000 students would lose special education services and 12,500 special education staff would lose their jobs;
20,000 youth would lose job training;
734,000 households would lose heating (or cooling) assistance;
Community health centers would lose $55 million; and
1.3 million college students would lose tuition support.

If cuts to military spending are reduced, but overall spending reductions are maintained, cuts to social programs would be even more severe.

In my next two posts, I’ll discuss reducing the deficit through alternatives to the current austerity package, including reviewing various alternative proposals that have been put forth. I’ll focus first on options for increasing revenue and second on options for cutting spending.

[1] Klein, E., 11/28/12, “It’s not a fiscal cliff, it’s an austerity crisis,” Bloomberg

[2] Stone, C., 9/24/12, “Misguided ‘fiscal cliff’ fears pose challenges to productive budget negotiations. Failure to extend tax cuts before January will not plunge economy into immediate recession,” Center on Budget and Policy Priorities

[3] Krugman, P., 11/12/12, “On deficit hawks and hypocrites,” The New York Times

[4] Woolhouse, M., 11/19/12, “Phase in deficit cuts, economists say,” The Boston Globe

[5] Bivens, J., & Fieldhouse, A., 9/18/12, “A fiscal obstacle course, not a cliff,” Economic Policy Institute

[6] Every Child Matters Education Fund, 11/16/12, “The pending threat of Congressional actions to children’s safety net programs,” Every Child Matters, http://everychildmatters.org

IRRATIONAL EXTREMISM BLOCKS PROGRESS

ABSTRACT: The irrational extremism associated with the Tea Party faction of the Republican Party has just blocked progress for disabled people around the world by defeating ratification of a treaty. Radical Republicans used scare tactics and lies to defeat it. They ignored the support of 61 Senators including John McCain, of former President G. W. Bush, of every veterans group in America, and of former Senator Dole, who came to the Senate chamber to support the treaty in a wheelchair as an 89 year old, disabled veteran, and former Republican Presidential nominee. They ignored the fact that it would improve opportunities for 4.5 million children worldwide who don’t attend school because they are blind.

This is an example of how a small number of extremists in Congress is blocking progress for millions of people in the U.S. – and around the world.

FULL POST: The irrational extremism associated with the Tea Party faction of the Republican Party has just blocked progress for disabled people around the world by defeating ratification of a treaty. The treaty, the United Nations Convention on the Rights of Persons with Disabilities, is:

Based on the Americans with Disabilities Act (ADA) passed 22 years ago.
Supported by 61 Senators including John McCain as well as former President G. W. Bush and former Senator Bob Dole.
Ratified by 126 other countries.

Despite 61 votesin favor of ratification, radical Republicans used scare tactics and lies to defeat it. (Treaty ratification requires a 2/3s majority or 66 votes.) [1]

Because it is based on the ADA, the U.S. is already basically in compliance. But because it conflicts with Tea Party ideology that views cooperation with the United Nations and other countries as surrendering U.S. sovereignty, arguments were fabricated to defeat it. Tea Party types argued that it would threaten parents and home schooling because it says that disabled children have a right to education, and that it would promote abortion because it says that disabled people have a right to health care including reproductive health. They argued both that the treaty was toothless in forcing other countries to provide access for disabled persons and that it would tie the hands of the U.S. and force unwanted changes here despite the fact that the ADA is already in place. [2]

They ignored the support of every veterans group in America, who viewed it as supporting disabled veterans, and of former Senator Dole, who came to the Senate chamber to support the treaty in a wheelchair as an 89 year old, disabled veteran, and former Republican Presidential nominee. Among other potential treaty benefits, they ignored the fact that it would improve opportunities for 4.5 million children worldwide who don’t attend school because they are blind.

This is an example of how a small number of extremists in Congress is blocking progress for millions of people in the U.S. – and around the world.

[1] Calvan, B.C., 12/5/12, “Treaty for disabled rights falls short in Senate,” The Boston Globe

[2] Boston Globe Editorial, 12/6/12, “Tea Party scare tactics doom disabled treaty in the Senate,” The Boston Globe

CAMPAIGN SPENDING: THE FUTURE

ABSTRACT: The huge sums of money in our political system are corrupting it, in subtle and not so subtle ways, and are undermining the promise of democracy of, by, and for the people. We the people need to work to blunt the impact and eventually stop the flow of these huge amounts of money. Steps that could and should be taken include: 1) Legislation at the federal and state levels should be enacted promptly that requires disclosure on a timely basis of all political spending and the sources of the funds; 2) Lobbyists’ contributions to candidates must be severely restricted and perhaps prohibited; 3) Tougher rules and enforcement are needed of the ban on coordination between Super PACs or other groups and candidates’ campaigns; and 4) Ultimately, a Constitutional Amendment is needed to overturn the Supreme Court’s Citizens United decision.

I urge you to communicate to your elected representatives at the federal and state levels your concern about the corrupting influence of huge amounts of money in our political system. Ask them what remedies they support and encourage them to support the steps listed above.

FULL POST: The huge sums of money in our political system are corrupting it, in subtle and not so subtle ways, and are undermining the promise of democracy of, by, and for the people. Despite the fact that all the outside money and all the advertising it bought were less effective in the 2012 election than was anticipated and than was hoped for by those paying for it, the big spenders learned some valuable lessons. They won’t give up on their efforts to influence and control government and its policy making. They will find more effective ways to use their money and will have substantial impacts in the future. [1] Therefore, we the people need to work to blunt the impact and eventually stop the flow of these huge amounts of money.

First, some of the lessons the big spenders learned:

Advertising, and particularly negative advertising, has diminishing returns as the amount of it and repetition of it increases.
Grassroots efforts to identify and turn out supporters can have a big impact.
Grassroots, person-to-person communications can be more effective than advertising.
Untested candidates or ones with extreme positions are more likely to lose.
Money can have a bigger impact in less visible, lower cost races.

The less visible, lower cost races include primary, US House of Representatives, and state office races (as opposed to the final Presidential election and final US Senate races). In the Republican Presidential primary, the big money from Super PACs clearly had an effect. Money from the Super PAC supporting Romney deluged state primary elections with negative advertising against whichever competitor was threatening Romney at that point. This clearly allowed Romney to win state primaries he wouldn’t have won otherwise. Huge Super PAC expenditures by extremely rich individuals single-handedly kept Gingrich and Santorum in the primary race longer than they would have been otherwise. [2]

In lower cost races, a given amount of money (e.g., $100,000) is more significant, may overwhelm other campaign spending, and can have a disproportionate impact, especially if spent late in the election period and as a surprise. State office races such as those for Governor, state legislative seats, and elected judges can be dramatically affected by relatively small amounts of money. State ballot initiatives can also be significantly altered by relatively small sums of money.

Given the corrosive effects of huge amounts of money in our political system, a New York Times Editorial stated, “A backlash against the damaging power of big money cannot come too soon.” [3] Steps that could and should be taken include:

Legislation at the federal and state levels should be enacted promptly that requires disclosure on a timely basis of all political spending and the sources of the funds. The DISCLOSE Act that has been introduced in Congress is one example. (It was filibustered by Senate Republicans multiple times.) Disclosure must cover all entities engaged in political spending, including non-profit, “social welfare” groups, known as 501(c)(4)s to the IRS.
Lobbyists’ contributions to candidates must be severely restricted and perhaps prohibited, especially for an elected official sitting on the legislative committee that oversees the special interest the lobbyist represents. The definition of a lobbyist must be expanded to cover all individuals and entities that work to influence government policies, rules, and regulations. The ability of lobbyists and others to deliver aggregated contributions from multiple individuals or groups, often referred to as “bundling,” and which can occur through fundraising events organized by a lobbyist, should be banned or at least fully disclosed.
Tougher rules and enforcement are needed of the ban on coordination between Super PACs or other groups and candidates’ campaigns. The overlap and connections between candidates’ current and former campaign staff and the staff of the supposedly independent groups, and the use of the same consultants, provide clear evidence that these groups are not, in fact, independent. [4]
Ultimately, a Constitutional Amendment is needed to overturn the Supreme Court’s Citizens United decision, to make it clear that corporations are not persons with Constitutional rights, that money is not the same as speech, and that corporations and political spending can be regulated.

[1] New York Times Editorial, 11/10/12, “A landslide loss for big money,” The New York Times

[2] Boston Globe Editorial, 11/8/12, “Billionaires: Now, mind your own business(es),” The Boston Globe

[3] New York Times Editorial, 11/10/12, “A landslide loss for big money,” The New York Times

[4] Boston Globe Editorial, 9/29/12, “As super PACs link arms, mega-donors’ clout increases,” The Boston Globe

WHY LIMITED SUCCESS FOR CAMPAIGN SPENDING

ABSTRACT: So why were all the outside money and all the advertising it bought less effective than was anticipated in the recent election? First, the great bulk of the outside money was spent on advertising, largely negative advertising. Voters were overwhelmed and simply tuned them out. The advertising lost effectiveness and experienced diminishing returns. Second, the huge amounts of money and advertising drew lots of attention. So fact checkers were very active and the mainstream media became active in covering the money, the advertising, and the fact checking. This gave voters information that may have led them to question or resist the messages of the ads.

Third, the big money and advertising appears to have been less effective than good old fashioned grassroots organizing. Finally, Democratic candidates and messages appear to have resonated better with voters than Republican candidates and messages. Despite the outside money’s lack of success in electing desired candidates, I doubt that it will go away. My next post will examine likely future effects and what can be done to better monitor and control potential negative impacts.

FULL POST: So why were all the outside money and all the advertising it bought less effective than was anticipated – and than hoped for by those paying for it – in electing specific candidates in the recent election? I think there are four major reasons.

First, the great bulk of the outside money was spent on advertising, largely negative advertising. And it bought lots of ads. But voters know that ads are marketing and hype, and that their goal is often to deceive and obfuscate (especially negative ads) rather than to inform. [1] Also, voters were overwhelmed by the din and repetition of all the ads and simply tuned them out. [2] Advertising markets where the Presidential race or other races were competitive were literally saturated; all the available air time was purchased for political ads. In short, because there was so much advertising, it lost its effectiveness and experienced diminishing returns. [3]

Second, the huge amounts of money and advertising drew lots of attention. So fact checkers were very active in analyzing the accuracy of the ads. And the mainstream media became active in covering the money, the advertising, and the fact checking. This included reporting on who had funded the ads or that the actual funders were veiled in secrecy. This coverage of the ads, their accuracy and their funding, gave voters information that may have led them to question or resist the messages of the ads. Although negative advertising has historically depressed voter turnout, that did not happen in this election. Perhaps there was an actual voter backlash against the negative advertising.

Third, the big money and advertising appears to have been less effective than good old fashioned grassroots organizing – voter outreach, identification, and get out the vote efforts. The ground game appears to have been more effective at producing votes than the airwaves. [4] In addition, efforts to make it harder to vote or to suppress voting appear to have generated a backlash in some places that resulted in high voter turnout that blunted the impact of negative advertising.

Finally, Democratic candidates and messages appear to have resonated better with voters than Republican candidates and messages. The extreme positions and statements of some Republicans, particularly Tea Party types, generally did not sit well with voters, both within their states or districts and beyond. And the advertising blitz could not overcome these differences between the parties.

Despite the outside money’s lack of success in electing desired candidates, it did have significant impacts. (See 11/14/12 post.) I doubt that it will go away, and there are good reasons to be concerned about big money in political campaigns. My next post will examine likely future effects and what can be done to better monitor and control potential negative impacts.

[1] Carroll, J., 10/29/12, “America’s kidnapped politics,” The Boston Globe

[2] New York Times Editorial, 11/10/12, “A landslide loss for big money,” The New York Times

[3] New York Times Editorial, 10/7/12, “The cacophony of money,” The New York Times

[4] New York Times Editorial, 11/10/12, see above

THE IMPACT OF ALL THE CAMPAIGN SPENDING

ABSTRACT: Roughly $6 billion was spent on the 2012 elections for federal offices. Although complete data isn’t yet available, an unprecedented $1.3 billion plus of this amount was “outside” money. Roughly a quarter of this outside money was “dark” money – money where the actual source of the money cannot be identified. About 80% of the outside money was spent opposing a candidate, typically through negative advertising. And over 70% of the outside money was spent trying to elect Republicans. The big outside money donors are large corporations and very wealthy individuals who have very specific, special interests in government actions that provide them substantial benefits.

Although the deluge of outside money achieved only limited election results, it had other significant, if somewhat more subtle, impacts. First, the great majority of the outside spending was on negative advertising, which changed the tone of the campaigns and demeaned the whole electoral process – candidates, voting, and the role of government. Second, the unlimited contribution amounts increase the influence these contributors have with elected officials; it creates a sense of obligation. Third, candidates had to spend even more of their time than before raising money. Finally, certain issues were not even discussed during the campaign for fear of alienating large donors.

FULL POST: Roughly $6 billion was spent on the 2012 elections for federal offices according to the best estimates; a truly staggering sum. Although complete data isn’t yet available, an unprecedented $1.3 billion plus of this amount was “outside” money, namely spending by entities other than the candidates’ campaigns themselves. And roughly a quarter of this outside money was “dark” money – money where the actual source of the money cannot be identified. [1]

About 80% of the outside money was spent opposing a candidate, typically through negative advertising. And over 70% of the outside money was spent trying to elect Republicans. This Republican advantage in outside money was offset in part by Obama’s and other Democratic candidates’ ability to out raise Republicans in direct contributions to their campaigns (i.e., in “inside” money). [2]

Beyond the general concern about the influence of large amounts of campaign money on candidates and elected officials, these unprecedented levels of outside money raise particular concerns. The outside money comes almost exclusively from large donors (i.e., $100,000, $1,000,000, and multi-million dollar contributions). The outside money donors are large corporations and very wealthy individuals who have very specific, special interests in government actions that provide them substantial benefits.

The good news is that all this outside money didn’t buy successful election results to the extent I and many others thought it would. Clearly, outside money significantly affected the Republican Presidential primary.[3] It also had a notable impact on some Congressional primary races. And presumably the large sums that flowed into competitive Congressional races, particularly in the last few days before the election, did affect the outcome of some of those races. [4] [5]

Although the deluge of outside money achieved only limited election results, it had other significant, if somewhat more subtle, impacts.

First, the great majority of the outside spending was on negative advertising, which changed the tone of the campaigns, particularly in competitive races. This negativity demeaned the whole electoral process – the candidates, voting, and the role of government. The ads were often misleading and sometimes clearly false. This occurred because candidates cannot be held accountable for the ads, given that the outside money is independent and outside of the candidates’ control (at least in theory). [6] The negative advertising forces candidates to spend time and money defending themselves rather than discussing issues. Note that in the Massachusetts Senate race there was very little of the negative advertising that was common elsewhere because the candidates had an enforceable agreement to ban outside spending on advertising.

Second, the unlimited contribution amounts, newly unleashed by the Supreme Court’s Citizens United decision, increase the influence these contributors have with elected officials when they are in office. The big contributions by large corporations (which have far deeper pockets than any of the other players) and very wealthy individuals, create a sense of obligation. [7] For example, Sheldon Adelson and his wife have given over $36 million to Super PACs and unknown tens of millions to non-profit groups that don’t have to report donors. He has a clear policy agenda and makes it known that he views giving to these groups, who then support specific candidates, the same as giving to the candidates directly. [8]

Third, candidates had to spend even more of their time than before raising money. This diverts their time and attention from interacting with voters and discussing issues. [9] The huge amounts of money in general, turn campaigns into an arms race. The unlimited outside spending exacerbates this, requiring candidates to build up huge war chests to be able to counter last minute outside expenditures. [10]

Finally, certain issues and issue options were not even discussed during the campaign for fear of alienating large donors. For example, the issues of global warming and meaningful regulation of the financial industry effectively disappeared from the presidential and many other campaigns. It’s hard to believe that the deep pockets and big campaign spending of companies and executives in the oil, gas, and coal corporations and of those from Wall Street didn’t contribute to the lack of discussion of these issues.

So why were all the spending and all the advertising less effective than was anticipated – and than hoped for by those paying for it – in electing specific candidates? That will be the topic of my next post.

[1] Schere, M., Elliott, J., & Barker, K., 11/2/12, “Dark money rises,” ProPublica

[2] Sunlight Foundation, retrieved 11/13/12, “Outside spenders’ return on investment,” http://reporting.sunlightfoundation.com/2012/return_on_investment

[3] Boston Globe Editorial, 11/8/12, “Billionaires: Now, mind your own business(es),” The Boston Globe

[4] Calvan, B.C., 11/5/12, “Spending on congressional races soars,” The Boston Globe

[5] McGinty, J.C., 10/29/12, “Donors make last-minute investments in House races,” The New York Times

[6] Eggen, D., & Farnam, T.W., 11/8/12, “Spending by independent groups had little election impact, analysis finds,” The Washington Post

[7] New York Times Editorial, 11/10/12, “A landslide loss for big money,” The New York Times

[8] Boston Globe Editorial, 9/29/12, “As super PACs link arms, mega-donors’ clout increases,” The Boston Globe

[9] Eggen, D., & Farnam, T.W., 11/8/12, “Independent groups’ big money had little impact on vote results,” The Boston Globe

[10] Eggen, D., & Farnam, T.W., 11/8/12, “Spending by independent groups had little election impact, analysis finds,” The Washington Post

THE DEBT, THE ECONOMY, AND THE POLITICAL PARTIES

ABSTRACT: Since 1945, Democratic presidents have on average reduced the federal government’s debt as a percentage of GDP by about 3% while Republican presidents have on average increased it by about 3%. PresidentObama has increased the debt percentage more than any president in this period. However, this is largely due to his inheriting a large deficit and the worst recession since the Great Depression. Other than this, the six largest increases in the debt percentage have occurred in recent Republican presidents’ terms.

Multiple measures of economic performance are better under Democratic presidents than Republican ones. Since 1949, overall economic growth measured by median annual increase in GDP has been 4.2% under Democratic presidents and 2.6% under Republican presidents. Stock market performance since 1913 as measured by the median increase in Standard and Poor’s index of 500 stocks has increased 12.1% under Democratic presidents and 5.1% under Republican presidents. The annual increase in corporate earnings since 1936 has been 10.5% under Democrats and 8.9% under Republicans.

This data certainly shows that Republicans aren’t more fiscally responsible than Democrats; if anything it strongly suggests the opposite. The data also show that Republicans aren’t the party of economic prosperity more so than Democrats.

FULL POST: The historical record of the federal debt and the performance of the economy under Republican and Democratic presidents is interesting to examine.

First, the federal government’s total debt (the total of all the previous annual deficits and surpluses) as a percentage of the overall economy (i.e., the Gross Domestic Product or GDP) is probably the most meaningful statistic about the debt. Since 1945, Democratic presidents have on average reduced the debt’s percentage of GDP by about 3% while Republican presidents have on average increased it by about 3%.

President Obama has increased the debt percentage more than any president in this period. However, this is largely, if not totally, due to his inheriting a large deficit and the worst recession since the Great Depression. Other than this, the six largest increases in the debt percentage have occurred in recent Republican presidents’ terms: George W. Bush’s two terms (with 2005 – 2009 being the worst other than Obama), George H.W. Bush’s term, Ronald Reagan’s two terms, and Gerald Ford’s partial term. The only two terms under Democratic presidents where the debt percentage increased were Harry Truman’s and Bill Clinton’s first terms. Both of them reduced the debt percentage in their second terms significantly more than the increase in their first terms, so overall they both reduced the debt percentage. [1]

Stock market performance since 1913 as measured by the median increase in Standard and Poor’s index of 500 stocks has increased 12.1% under Democratic presidents and 5.1% under Republican presidents. The annual increase in corporate earnings since 1936 has been 10.5% under Democrats and 8.9% under Republicans. [2]

While a president’s actions have only indirect influences on these measures and a president inherits policies and the state of the economy from his predecessors, this data certainly shows that Republicans aren’t more fiscally responsible than Democrats; if anything it strongly suggests the opposite. The data also show that Republicans aren’t the party of economic prosperity more so than Democrats.

[1] The Economist, 11/1/12, “The change in America’s debt by presidential term,” www.economist.com/blogs/graphicdetail/2012/11/daily-chart

[2] Healy, B., 11/2/12, “Taking stock of past races,” The Boston Globe

CANDIDATES’ BUDGET PROPOSALS AND THE DEFICIT

ABSTRACT: Both Presidential candidates, Obama and Romney, have put forward tax and budget proposals that they say will reduce the deficit. Obama’s tax and spending proposals would reduce the deficit by about one quarter. Romney’s proposals cannot be reasonably expected to reduce the deficit. Furthermore, they are likely to increase the deficit and the already high levels of inequality in income and wealth.

FULL POST: Both Presidential candidates, Obama and Romney, have put forward tax and budget proposals that they say will reduce the deficit. Obama has specified tax increases and a cut to military spending that would begin to reduce the deficit. Romney says his tax proposals would be revenue neutral, although he fails to specify how he would offset his tax cuts, and he promises to increase military spending. He asserts that his proposals would produce economic growth that would increase tax revenue and reduce the deficit; however, there is no credible evidence for that assertion. (Note: President G. W. Bush’s tax cuts, increases in military spending, and promises of economic growth that would pay for them are what began the process of turning a federal government surplus into deficits.)

Obama would let the Bush tax cuts on income over $250,000 expire and would also restore or increase taxes on unearned income (i.e., capital gains, dividends, and interest). He has also proposed limiting deductions and exclusions from income, as well as implementing the “Buffett Rule,” so that households with incomes over $1 million would at least pay taxes at the rate that middle class families do. These measures would generate roughly $200 billion per year in additional revenue, reducing the deficit by one-fifth. [1]

Obama has also proposed reducing the $700 billion military budget by about $50 billion per year as the wars in Afghanistan and Iraq wind down. Together, these tax and spending proposals would reduce the deficit by about one quarter.

Romney proposes keeping the Bush tax cuts and further reducing tax rates on earned income by one-fifth. He would maintain even lower tax rates on unearned income than earned income. Overall, these proposals would reduce income tax revenue by about $400 billion per year. Romney says he will make up for the lost revenue by reducing tax deductions and credits, and that the well-off will continue to pay at least the same amount in taxes. He says would do this by limiting total deductions and credits on a tax return to a fixed dollar amount and has mentioned amounts ranging from $17,000 to $50,000. [2]

While it is theoretically possible to achieve the same amount of revenue (i.e., revenue neutrality) under Romney’s proposals, it would be challenging and would require significantly cutting very popular deductions. [3] Four deductions account for 80% of all deductions and credits; in order of size they are the deductions for 1) home mortgage interest, 2) state and local taxes paid, 3) real estate taxes paid, and 4) charitable contributions. If an across the board cut to deductions were used to offset the loss in revenue, Romney would have to cut all these deductions by about one-third. Clearly, this would be unpopular and would also hit the middle class as well as high income families.

Romney has also proposed eliminating the estate tax, while Obama proposes maintaining an estate tax on estates over $3.5 million. Romney has also stated that he will increase the military budget. Here again, Obama’s proposal clearly reduces the deficit and these Romney proposals would clearly increase the deficit. The benefits of eliminating the estate tax, of course, go to wealthy families.

With a backdrop of 30 years of decreasing income tax rates that have seen dramatic increases in income and wealth in our best-off households and middle class families struggling to keep their heads above water, further cuts in tax rates do not seem at all likely to reverse this trend or benefit the middle class. Further, to provide some perspective on Romney’s proposal, looking at the cuts in tax rates alone, a family with taxable income of $100,000 or less, whose tax rate is cut from 25% to 20%, would see a benefit of $5,000 or less. A family with taxable income of $1 million, whose rate is cut from 35% to 28%, would see a benefit of $70,000; and if income is $10 million, a benefit of $700,000. This just doesn’t seem fair, especially on top of the huge tax cuts these high income households have seen over the last 30 years.

In addition, Romney’s proposal maintains lower rates on all unearned income (i.e., capital gains, dividends, and interest), while Obama’s has lower rates only on long-term capital gains (i.e., investments held for over one year). Having lower rates on all unearned income also doesn’t seem fair, especially given that the great bulk of unearned income goes to high income, high wealth households. Moreover, one of Romney’s arguments for lower tax rates is that by letting taxpayers keep more of what they earn, they will be rewarded for working. If we want to reward work, then income tax rates on work, namely earned income, should be lower (not higher) than the rates on non-work (unearned) income.

Finally, Romney’s assertion that cuts in tax rates will spur economic growth does not have any credible evidence. [4] This rationale has been used for the tax rate cuts that have occurred over the last 30 years. The strongest economic growth of the past 30 years (and the only elimination of the federal government’s deficit) occurred under President Clinton when he increased tax rates on high incomes. Furthermore, the rationale for tax cuts spurring growth has been that they put more money in consumers’ pockets and, with consumer spending being two-thirds of our economy, their spending will grow the economy. However, Romney has said his tax cuts will be offset by reducing deductions so that there will be no loss in government revenue or increase in the deficit. Therefore, there is no increase in the money in consumers’ pockets and no increased spending to spur economic growth.

If Romney’s tax cuts are indeed offset by reducing deductions so the result is revenue neutral, and if he lives up to his commitment to cap federal government spending at 20% of the overall economy (i.e., of gross domestic product), which would require significant spending cuts, Romney’s plans are likely to lead to job losses and a recession, not economic growth. Overall, Obama’s budget and tax proposals are highly likely to do more to spur near-term growth in jobs and the economy than Romney’s. [5]

In conclusion, Obama’s tax and budget proposals do take steps that can be reasonably expected to reduce the deficit by about one-quarter. Romney’s proposals cannot be reasonably expected to reduce the deficit. Furthermore, they are likely to increase the deficit and the already high levels of inequality in income and wealth.

[1] Tax Policy Center, Oct. 2012, “Major tax proposals by President Obama and Governor Romney”

[2] Wirzbicki, A., & Borchers, C., 10/5/12, “Questions on challenger’s idea to cap tax deductions,” The Boston Globe

[3] Kranish, M., 9/21/12, “Candidates leave much unsaid on tax plans,” The Boston Globe

[4] Rowland, C., 10/15/12, “GOP faith unshaken in supply-side tax policies,” The Boston Globe

[5] Bivens, J., & Fieldhouse, A., 9/26/12, “Who would promote job growth most in the near term?” The Century Foundation

PRIVATIZATION EXAMPLES I

ABSTRACT: Currently, privatization of public sector functions is being looked to to generate badly needed immediate cash. First example: the city of Chicago, desperate for cash to cover a budget shortfall, sold its parking meter revenue for the next 75 years for $1.2 billion. Parking rates in some neighborhoods have quadrupled. The city is prohibited from engaging in any activity that could be competition for the parking meters and has to reimburse the private owners for any lost revenue due to a street closing, a meter being out of commission, and free parking provided to the disabled. Chicago has given up the ability to make decisions about parking for 75 years and appears to have in effect guaranteed substantial profits to the private investors.

Second example: Indiana received $3.8 billion in 2006 from an international consortium in exchange for the right to maintain, operate, and collect tolls for 75 years on 157 miles of Interstate 90. The 400 page lease agreement is indicative of both the thought that went into it and the complexity of such an arrangement.

A danger in these high-value, long-term privatization deals is that sophisticated investors will take advantage of government officials desperate for short-term revenue, who often don’t take the time or have the expertise to perform appropriate, long-term, cost-benefit analyses. Because of their significant impact on the public, any privatization deal should require public hearings, and those with a longer time span than the term of office of the person signing it should require super-majority approval (say 2/3) by the relevant legislative body, while those over 10 years should require a voter referendum with a super-majority (say 2/3) needed for approval.

FULL POST: In my previous post (10/16/12), I provided an overview of privatization of public sector functions and evidence that there’s no guarantee of improved performance. Privatization doesn’t always meet its stated goals of saving taxpayers’ money, improving public services, and/or increasing accountability. It only tends to be successful if there is good oversight and regulation, as well as real competition.

Currently, privatization is being looked to, not for those traditional reasons, but to generate badly needed immediate cash. This is occurring because the public sector is being squeezed by falling revenues (largely due to the recession and in some cases due to tax cuts) and rising costs (generally due to inflation). Here are two examples of privatization to raise immediate cash.

First, in 2009, the city of Chicago, desperate for cash to cover a budget shortfall, sold its parking meter revenue for the next 75 years for $1.2 billion. The private consortium of investors was led by the huge Wall Street financial corporation, Morgan Stanley (one of the companies responsible for the collapse of the financial sector and the recession that contributed to Chicago’s severe budget shortfall).

The deal will allow the private owners to increase parking fees substantially and parking rates in some neighborhoods have quadrupled. [1] It prohibits the city from any activity, such as building a new parking garage, that could be competition for the parking meters. The city has to reimburse the private owners for any lost revenue due to a street closing for repairs or a street festival. If a meter is out of commission for six hours, the city must reimburse the owners for a full day’s worth of revenue. In May 2012, the private owners had billed the city for $50 million for reimbursements for out of service meters and free parking provided to the disabled. [2]

Not only will this deal cost Chicago substantial money for 75 years, it also means it has given up the ability to make decisions about parking and its cost for 75 years. Furthermore, it appears to have in effect guaranteed substantial profits to the private investors, as there is no competition and little risk.

Second, Indiana received $3.8 billion in 2006 from an international consortium in exchange for the right to maintain, operate, and collect tolls for 75 years on 157 miles of Interstate 90 as it crosses Indiana. The 400 page lease agreement has limits on toll increases, requires the state to reimburse the private owners if tolls are waived during an emergency (such as a natural disaster), and covers details such as how quickly the consortium must remove dead animals from the highway. While the length of the agreement is indicative of both the thought that went into it and the complexity of such an arrangement, it is hard to imagine that every issue that could come up in 75 years has been identified.

In the short run, with the economy in recession and traffic down on the highway, it appears that Indiana taxpayers are coming out ahead. Indiana wisely used the funds for investments in infrastructure rather than short-term spending. [3] But it’s only six years into a 75 year lease and lots can happen over that time. For example, if traffic levels don’t increase and the consortium of owners goes into bankruptcy or defaults on their debt, what will happen? Could a bankruptcy court throw out the limits on toll increases?

Experiences with highway privatization in California, Virginia, and San Diego have all had significant problems. These privatization contracts are typically long-term, generally limit competition, and, therefore, result in significant limits on future public decisions and policies. [4]

A danger in these high-value, long-term privatization deals is that sophisticated investors and corporations will take advantage of government officials desperate for short-term revenue, who often don’t take the time or have the expertise to perform appropriate, long-term, cost-benefit analyses. A 75 year commitment clearly goes long beyond the longevity in office of the public officials who make the deal and it’s hard to believe that such a deal can be known to be in the public’s best interest over that time span.

“[P]rivatization can undermine good public policy and democratic decision making. Turning tax dollars and control of public services over to companies whose overriding incentive is to maximize profits can lead to long-term costs and sometimes devastating consequences.” (p. 4) [5]

Because of their significant impact on the public – on public services, on public policy and flexibility, on accountability, and on transparency – I would suggest that any privatization deal should require public hearings before (and after) the fact. Furthermore, those with a longer time span than the term of office of the person signing it should require super-majority approval (say 2/3) by the relevant legislative body. Privatization contracts of over 10 years should require a voter referendum with a super-majority (say 2/3) needed for approval.

[1] Rusnak, K., retrieved 10/21/12, “Privatization plans lack long-term focus,” economyincrisis.org/content//privatization-plans-lack-long-term-focus

[2] People for the American Way, retrieved 7/31/12, “Predatory privatization: Exploiting financial hardship, enriching the 1 percent, undermining democracy,” http://www.pfaw.org

[3] Daniels, M., 5/10/12, “Indiana didn’t ‘sell’ its toll road,” The Washington Post

[4] Dannin, E., 3/15/11, “The toll road to serfdom,” American Constitution Society (www.acslaw.org/acsblog/node/18553)

[5] People for the American Way, retrieved 7/31/12,, see above

AN OVERVIEW OF PRIVATIZATION

ABSTRACT: Privatization of public services or “outsourcing” has been promoted for decades as a way to save taxpayers money, improve public services, and increase public sector accountability. A resurgence is occurring as the public sector is being squeezed by falling revenues and rising costs. In this environment, privatization is often looked to to generate badly needed cash immediately. As a result, privatization is big business these days.

As background for a detailed look at current privatization activity, municipal level privatization has been used significantly and studied quite extensively, especially for water and sewer systems and for solid waste collection and disposal. From 1997 – 2002, more services were brought back in house or deprivatized than were outsourced. Services were deprivatized because of unsatisfactory results. Most studies of water, sewer, and solid waste privatization (21 of 35) found no cost or efficiency difference between public or private delivery. The other 14 studies were split.

Competition and careful monitoring are required to obtain benefits from privatization and to ensure that profit maximization doesn’t result in a loss of quality. A review of privatization by The Century Foundation [1] states that “public monopoly or government regulation is a more effective approach to ensuring efficient service delivery than privatization or deregulation.”

The delivery of public services must incorporate the fact that citizens are more than consumers. They frequently want to be engaged and have a voice. Public services are not just part of a market but part of a community.

FULL POST: Privatization of public services or “outsourcing” has been promoted for decades as a way to save taxpayers money, improve public services, and increase public sector accountability. A resurgence is occurring as the public sector is being squeezed by falling revenues and rising costs, much of which are due to inflation. In this environment, privatization is often looked to not for the traditional reasons of saving money or improving services and accountability, but to generate badly needed cash immediately. In this environment, privatization of public assets (e.g., buildings, parking facilities, roads, and land), which has been used in the past to cover short-term cash problems, has taken on new importance.

The privatization resurgence is bolstered by rhetoric from the right, which favors smaller government, and by lobbying from corporations, which are always looking for new ways to make profits.

As a result, privatization is big business these days. Wall Street firms and the big management consulting companies have public sector or public private partnership business divisions to pursue privatization deals. Financial corporations are setting up “Infrastructure Funds” that create pools of money to buy privatization deals as investments. Over $100 billion is available to Infrastructure Funds run by large financial corporations such as Goldman Sachs and JPMorgan Chase.

As background for a detailed look at current privatization activity, municipal level privatization has been used significantly since the 1960s and surged in the 1990s. It has been studied quite extensively, especially for water and sewer systems and for solid waste collection and disposal. These studies have tracked privatization, the contracting out of services, and deprivatization, the bringing of services back in house into the public sector. An overall review of privatization of 67 basic local services with a focus on water, sewer, and waste services was conducted by The Century Foundation. [2]

Up until 1997, privatization of water, sewer, and waste services was growing, but from 1997 – 2002 more services were brought back in house or deprivatized than were outsourced. The reasons for deprivatization were tracked. In 2002, among 245 cases of deprivatization the following reasons were given, including multiple reasons in many cases:

Service quality not satisfactory 73% of cases
Cost savings insufficient 51%
In house efficiency improved 36%
Problems with contract monitoring or specifications 35%

In summary, services were deprivatized because of unsatisfactory results. Furthermore, despite the fact the privatization is promoted as reducing costs and saving taxpayers money, most studies of water, sewer, and solid waste privatization (21 of 35) found no cost or efficiency difference between public or private delivery. The other 14 studies were split with 9 of the 35 finding private delivery cheaper or more efficient and 5 finding public delivery cheaper or more efficient.

The Century Foundation report notes that competition and careful monitoring are required to obtain benefits from privatization and to ensure that profit maximization doesn’t result in a loss of quality. However, it noted that in many cases, such as water and sewer services, there was no competition and privatization merely substituted a private monopoly for a public one. The report states that “public monopoly or government regulation is a more effective approach to ensuring efficient service delivery than privatization or deregulation.” (page 12)

The delivery of public services, even when privatized, must incorporate the fact that citizens are more than consumers. They frequently want to be engaged and have a voice in what, how, and the quality with which services are delivered. From a citizen’s perspective, more than just efficiency is involved; safety, reliability, transparency, and other values; local control; public accountability; and community identity can all be important. Public services are not just part of a market but part of a community.

Future posts will build on this overview and review specific examples of current and proposed privatization of public services and assets.

[1] The Century Foundation describes itself as a progressive, non-partisan think tank, founded in 1919. It convenes and promotes the best thinkers and thinking across a range of public policy questions and produces timely and critical analyses of major economic, political, and social institutions and issues.

[2] Warner, M., 2009, “Local government infrastructure and the false promise of privatization,” The Century Foundation, http://government.cce.cornell.edu/doc/pdf/Warner_2009_TCF.pdf

THE FINANCIAL TRANSACTION TAX

ABSTRACT: A financial transaction tax (FTT) could generate $350 to $500 billion of revenue per year by applying a very low tax rate to financial transactions. The US had a financial transaction tax from 1914 to 1966 and 40 other countries have such a tax. It would not only generate needed revenue, it would also provide a disincentive for high volume, short-term, speculative trading. It has been dubbed “The Robin Hood Tax” (see www.robinhoodtax.org).

Multiple bills to create a FTT have been introduced in Congress, one of which, HR 6411, would rebate the tax to households with incomes under $75,000. It is also aligned with a broad, international campaign for the FTT.

FULL POST: As presented in my previous post (9/29/12), a financial transaction tax (FTT) could generate $350 to $500 billion of revenue per year by applying a very low tax rate to financial transactions. This would in effect be a sales tax on Wall St. transactions.

The US had a financial transaction tax from 1914 to 1966 and 40 other countries have such a tax. The US tax on purchases and sales of stock was 0.04% (40 cents on a $1,000 transaction). Currently, the US has a very small 0.0034% tax (3.4 cents per $1,000) that is levied on stock transactions to support the operating costs of the Securities and Exchange Commission (SEC), which regulates financial markets. However, much of the revenue is being diverted to other purposes. [1]

A financial transaction tax would not only generate needed revenue, it would also provide a disincentive for high volume, short-term, speculative trading. Such trading produces profits for speculators, but no benefit for the overall economy. It actually harms the economy by contributing to increased market volatility and increased prices for commodities such as food and gasoline (see blog post 3/5/12).

The financial transaction tax has been dubbed “The Robin Hood Tax” and is being supported by National Nurses United (www.nationalnursesunited.org) and others (see www.robinhoodtax.org). Multiple bills to create a FTT have been introduced in Congress. One is House bill HR 6411, The Inclusive Prosperity Act. It would impose a 0.5% tax on stock trades ($5 per $1,000) and a lesser rate on other financial transactions (e.g., trading of bonds, currencies, and derivatives). The tax would be rebated to households with incomes under $75,000. It would generate an estimated $350 billion per year that could be used for deficit reduction or social and human needs, as recommended in the bill. It is aligned with a broad, international campaign for the FTT, including a very active effort in the European Union. The international campaign includes a specific focus on using revenue generated to address climate change and global health issues. [2]

[1] Wikipedia, retrieved 9/28/12, “Financial transaction tax,” en.wikipedia.org/wiki/Financial_transaction_tax

[2] Vanden Heuvel, K., 9/26/12, “The better bargain: Transaction tax, not austerity,” The Nation

ADDRESSING THE DEFICIT

ABSTRACT: The federal government’s deficit does need to be addressed, but doing so precipitously and in the wrong ways will hurt the economic recovery. Spending cuts and tax increases that have the least negative impact on jobs and the economy should be used. Given these criteria, four items come to the top of the list: 1) A financial transaction tax, 2) Cuts in military spending, 3) Reversing tax cuts and loopholes for high income individuals, and 4) Closing tax loopholes for profitable corporations. These four policy changes would eliminate the roughly $1 trillion per year deficit.

I urge you to determine where candidates for election stand on these measures as alternatives to the “fiscal cliff”. After the election, I urge you to contact your elected representatives to let them know where you stand and to ask them their position on these issues.

FULL POST: The federal government’s deficit does need to be addressed, but doing so precipitously and in the wrong ways will hurt the economic recovery. Specifically, the austerity approach of across the board budget cuts and tax increases, as in the 12/31/12 US deficit reduction “fiscal cliff” (see 9/19/12 blog post) and as currently being implemented in Europe, would hurt job creation and likely push our economy back into a recession, as is happening in Europe.

Selected spending cuts and tax increases that have the least negative impact on jobs and the economy should be used, as opposed to the broad ones of the “fiscal cliff.” Spending cuts in areas that have seen significant recent increases and the reversing of recent tax cuts should be prioritized. Fairness should also be considered.

Given these criteria, four items come to the top of the list:

A financial transaction tax
Cuts in military spending
Reversing tax cuts and loopholes for high income individuals
Closing tax loopholes for profitable corporations

These four policy changes would eliminate the roughly $1 trillion per year deficit. Here’s some detail on each of them.

A financial transaction tax (FTT) could generate $500 billion of revenue per year with a very low tax rate of between 0.1% and 0.5% on financial transactions (i.e., between $1.00 and $5.00 on the purchase or sale of each $1,000 worth of stocks, bonds, currency, commodities, or other financial instruments, including “derivatives”). If such a tax were applied very broadly to all financial transactions (there are over $1 quadrillion of financial transactions each year in the US), a 0.1% tax would actually generate over $1 trillion and eliminate the full deficit by itself. [1] A bill to create a FTT tax has been introduced in Congress. It would generate an estimated $350 billion per year. Most of us pay a sales tax on many of our purchases, so why shouldn’t there be a sales tax on Wall St. transactions? (More on the FTT in my next post.)

Military spending could be reduced without jeopardizing national security because:

We are winding down the wars in Iraq and Afghanistan ($170 billion in 2011),
Military spending has more than doubled since 2001 (increasing almost $400 billion per year and more in percentage terms than any other component of the federal budget),
There is significant waste (easily tens of billions each year) in the military budget (some of it pork barrel spending to favor specific Congressional districts), and
The US alone spends over 40% of all global military expenditures and three times what our European allies spend relative to the size of their economies. (See blog post of 11/17/11.)

Furthermore, military spending produces fewer jobs than just about any other kind of public spending. Overall, phasing in cuts to military spending of $100 – $200 billion per year would be quite reasonable.

Personal income tax rates have been reduced significantly over the last 30 years and most recently in 2001 and 2003. Since 1981, tax rates on high incomes (the cut off has varied between incomes over $200,000 and over $400,000) have been cut in half (from 70% to 35% on regular income). The lowest rate has been cut from 14% or 15% to 10%. Note that if you have taxable income of $1 million, the reduction from 70% to 35% puts $350,000 in your pocket every year. (See blog post of 11/27/11 for more detail.)

Reversing the tax cuts of 2001 – 2003 for those with incomes over $250,000 would generate $200 billion per year. If The Buffet Rule were implemented, eliminating loopholes and special tax benefits so that those with the top 10% of incomes actually paid at least 30% in income tax, revenue of $450 billion would be generated.

The corporate income tax rate today is 35%, down from 46% in the late 1980s. The effective tax rate (what is actually paid) was 18.5% in a recent study of 280 large, profitable corporations; down from 26.5% in the late 1980s. (See blog post of 11/5/11 for more detail.) If corporations actually paid the 35% rate an additional $500 billion in revenue would be generated. If they paid an effective rate of 22.5%, which was the average between 1987 and 2008, revenue would increase by $250 billion.

In summary, four manageable steps that would return us to the status quo of the 1990s and add a financial transactions tax from the 1960s, both periods when the economy was doing very well, would eliminate the $1 trillion deficit:

A financial transaction tax: $350 – $500 billion
Cuts in military spending: $100 – $200 billion
Reversing tax cuts and loopholes for high income individuals: $200 – $450 billion
Closing tax loopholes for profitable corporations: $250 billion
TOTAL: $900 billion – $1.4 trillion

These steps, some phased in over time, would result in federal budget surpluses (as occurred in the 1990s). They would strengthen our economy and reduce inequality. None of them are radical; they simply reinstitute previous policies.

I urge you to determine where candidates for election stand on these measures as alternatives to the “fiscal cliff” that is in place for December 31, 2012. (See 9/19/12 blog post.) And after the election, I urge you to contact your elected representatives to let them know where you stand and to ask them their position on these issues.

[1] Buchheit, P., 8/27/12, “Add it up: Taxes avoided by the rich could pay off the deficit,” http://www.CommonDreams.org/view/2012/08/27

THE “FISCAL CLIFF” AND THE ECONOMY

ABSTRACT: The federal budget’s “fiscal cliff” is looming on December 31, 2012. If Congress and the President let us fall over its edge, it will significantly harm our fragile economy. It cuts annual spending by about $100 billion per year and increases taxes by about $350 billion per year. The result would be a significant reduction in the annual deficit, from about $1 trillion to about $600 billion. However it would also negatively affect the economy: a recession or projected growth of only 0.5% versus growth of between 1.7% and 4.4% if the fiscal cliff were completely eliminated. The negative impact on the economy would make it harder, over the longer-term, to reduce the deficit.

There are many ways to soften the cliff’s impact. One would be to eliminate the tax increase on income under $250,000. Another would be reducing the spending cuts. It’s clear that the US government’s stimulus package helped soften the US recession; it’s equally clear that austerity is not a route to economic recovery. Austerity in Europe has turned a slow recovery into a stalled economy with recession in some countries. We need to call on Congress and the President to soften the fiscal cliff. Right now, the primary focus needs to be on strengthening the economy and creating jobs, which, over the longer-term, will help reduce the deficit.

FULL POST: The federal budget’s “fiscal cliff” is looming on December 31, 2012. If Congress and the President let us fall over its edge, it will significantly harm our fragile economy. Under current law, annual spending cuts of about $100 billion per year would occur and the Bush tax cuts of 2001 through 2003 would expire, which would result in an annual tax increase of about $350 billion.

The result would be a significant reduction in the annual deficit, from about $1 trillion to about $600 billion. However, it would also negatively affect the economy; projections range from a recession (i.e., negative economic growth as economic output shrinks) to growth of only 0.5%. If the fiscal cliff is completely eliminated, in other words if all the tax cuts are extended and the spending cuts are eliminated, projected economic growth would be between 1.7% and 4.4%. [1][2] The negative impact on the economy would make it harder, over the longer-term, to reduce the deficit.

There are, of course, many ways to soften the impact on the economy and on specific groups or agencies. The fiscal cliff’s increased taxes would affect almost everyone and, therefore, hurt consumer spending. Some people are proposing eliminating the tax increase on income under $250,000. This would reduce the tax increase to about $200 billion per year (instead of $350 billion). In addition, it would significantly reduce the impact on our economy (which is 70% consumer spending) because those with incomes over $250,000, who would see their taxes increase, spend only a fraction of their income on goods and services in the local economy. The real job creators in our economy are the vast middle class; their consumer spending is businesses’ revenue and increased business revenue is what leads to job creation. [3]

Reducing the spending cuts would soften their impact. The fiscal cliff’s spending cuts would be split roughly evenly between the military and social programs. Some of the loudest voices arguing for reducing the spending cuts are opposing the $50 billion cut to military spending despite the facts that:

Military spending has more than doubled since 2001,
We’re winding down two wars, and
This represents less than 7% of the over $700 billion per year military budget, which is roughly half of discretionary spending.

One argument that is being put forth is that a cut to military spending would cost jobs. Ironically, this argument is being put forward by many of the same people who have said that government spending doesn’t create jobs and that the way to improve the economy and create jobs is to cut government spending. Yes, cutting military spending will cost jobs in the military-industrial complex. But because military spending creates fewer jobs per dollar than other types of spending, cutting it will cost fewer jobs than cuts in other areas, or, if these cuts will allow spending elsewhere, more jobs will be created than those lost, resulting in a net gain in jobs. [4] (See 11/17/11 post: Defense spending: Can we afford to cut it?)

It’s clear that the US government’s stimulus package helped soften the US recession; it’s equally clear that austerity – cutting government spending and benefits often while raising taxes in an effort to reduce government deficits – is not a route to economic recovery. [5] While deficits do need to be addressed over the longer term, doing so while our economy is weak will only exacerbate the problem. Austerity in Europe has turned the slow recovery of 2009 into, at best, a stalled economy and recession or even depression in some countries. Demands for austerity in exchange for financial aid have occurred five times in Europe, with Greece, Portugal, Ireland, Spain, and Italy. Each time the austerity measures have deepened the economic crisis and weakened the country’s economy. Cutting public spending and benefits, while increasing taxes, decreases employment and incomes. This reduces consumer spending which hurts businesses and kills jobs. As a result, tax revenue falls, increasing (not reducing) government deficits. [6]

We need to call on Congress and the President to soften the fiscal cliff. Right now, the primary focus needs to be on strengthening the economy and creating jobs, which, over the longer-term, will help reduce the deficit. There is ample evidence that austerity will only make the economy and the deficit problem worse.

My next post will examine strategies for reducing the deficit in both the short and the long-term that would be less damaging to the economy than the fiscal cliff.

[1] Businessweek, 8/2/12, “A decade of tax cuts and deficits,” Bloomberg Businessweek

[2] Lipschutz, N., 8/22/12, “Even if ‘fiscal cliff’ gets resolved, outlook is anemic,” The Wall Street Journal

[3] Reich, R., 8/30/12, “Labor Day 2012 and the election of 2012: It’s inequality, stupid,” http://www.RobertReich.org

[4] Pemberton, M., 8/16/12, “Top 10 myths of the jobs argument against military cuts,” Institute for Policy Studies

[5] Loth, R., 9/1/12, “The value of public-sector jobs,” The Boston Globe

[6] Kuttner, R., 9/10/12, “Angela Merkel’s bad medicine,” The American Prospect

OUR SLOW ECONOMIC RECOVERY

ABSTRACT: Our economy is recovering slowly, as would be expected after such a deep recession and the near collapse of the financial system. Most economists agree that the federal government’s stimulus package aided the recovery by increasing employment by about 3 million jobs. Since the recovery began in 2009, the private sector has added 4.5 million jobs. The loss of public sector jobs, however, has been a drag on the recovery; over 600,000 jobs have been lost since 2009, including over 200,000 teachers. Without these job losses, the unemployment rate would be about 0.5% lower, or roughly 7.6%. Regardless of some people’s rhetoric, a public sector job puts money into a family and the economy the same way a private sector job does.

The current rate of economic growth is too slow to generate enough jobs to quickly and significantly reduce the unemployment rate. Federal Reserve Chairman Ben Bernanke recently made a forceful argument that additional steps are needed to stimulate the economy and attack high unemployment. The implied message is that stimulus through spending by the federal government would make sense and that cuts in government spending would not help economic growth or unemployment reduction.

FULL POST: Our economy was the subject of much rhetoric at the recent Republican and Democratic conventions. The reality is that the economy is recovering slowly, as would be expected after such a deep recession and the near collapse of the financial system. Most economists agree that the federal government’s stimulus package aided the recovery by increasing employment by about 3 million jobs and keeping the unemployment rate lower than it would have been (by about 2%).

The recovery began in mid-2009. The private sector has added 4.5 million jobs with net increases in each of the last 29 months. However, this is only half of the 9 million jobs lost in the recession and unemployment is still high at 8.1%. The worst month for job losses was January 2009 when over 800,000 jobs were lost just as President Obama was taking office.

The loss of public sector jobs has been a drag on the recovery; over 600,000 jobs have been lost since 2009, including over 200,000 teachers. The public sector continues to lose roughly 10,000 jobs per month, including teachers, firefighters, police, and other local, state, and federal government workers. Without these job losses, the unemployment rate would be about 0.5% lower, or roughly 7.6%. [1][2] Regardless of some people’s rhetoric, a public sector job is a job and puts money into a family and the economy the same way a private sector job does.

Harvard economist Kenneth Rogoff, who has studied recessions historically and globally, says the pace of the current recovery is consistent with what would be expected after this recession, which continues to reverberate around the globe. Economies damaged by financial crises recover more slowly and the brinkmanship in Congress over increasing the debt ceiling in the summer of 2011 created an additional drag on the recovery. The recovery after the 2001 recession (one of four in the last 30 years) actually experienced even slower job growth than the current recession.

Mark Zandi, chief economist at Moody’s Analytics and advisor to Republican Presidential nominee John McCain, notes that the economy’s problems were brought on by Wall Street’s recklessness and that “government saved our bacon. … the cost [to the economy] would have been measurably … greater had the government not interceded.” [3]

Nonetheless, the rate of economic growth has been too slow to generate enough jobs to quickly and significantly reduce the unemployment rate, let alone the numbers of underemployed workers and those who have given up looking for a job and therefore are not counted in the unemployment figures. Federal Reserve Chairman Ben Bernanke recently made a forceful argument that additional steps are needed to stimulate the economy and attack high unemployment. He noted that the likely benefits outweigh the potential costs. However, monetary policy from the Federal Reserve has limited ability to stimulate the economy at this point because interest rates, the main tool at its disposal, are already extremely low. Therefore, the Federal Reserve may take other, nontraditional steps. [4] The implied message is that stimulus through spending by the federal government would also make sense and that cuts in government spending would not help economic growth or unemployment reduction.

[1] Loth, R., 9/1/12, “The value of public-sector jobs,” The Boston Globe

[2] Woolhouse, M., 9/9/12, “Recovery slow, fits post-crisis pattern,” The Boston Globe

[3] Quoted in Woolhouse, 9/9/12, see above

[4] Appelbaum, B., 9/1/12, “Fed chief makes a detailed case for a stimulus,” The New York Times

CAMPAIGN FUNDRAISING: BIG VS. SMALL CONTRIBUTORS

ABSTRACT: Although every campaign likes to tout the importance and number of its small contributors, it’s large donors who give the bulk of the money. A few big contributors (0.1% of all contributors) give more than the millions of small contributors (90% of all contributors). As of June, 26% of the $469 million raised for the Obama campaign and affiliates (including Super PACs) was from contributions of $200 or less, while 7% of Romney’s $362 million was contributions of $200 or less. 112 so-called “mega-donors” (1 out of every 3 million Americans) have each contributed over $500,000. Super PACs have raised a total of $298 million for the 2012 election cycle; 70% of these contributions come from the 112 mega-donors.

Justice Posner, a Republican and not a judicial liberal, said recently that the Citizens United Supreme Court decision (which allows these huge campaign contributions) has created a political system that is “pervasively corrupt [where] wealthy people essentially bribe legislators.”

Despite all of this, I encourage you to send your small contributions to candidates. I do believe that candidates and office holders listen a bit more closely to contributors. However, it will be essential to stay engaged and active after the election to hold our elected officials accountable for their actions.

FULL POST:

Although every campaign likes to tout the importance and number of its small contributors (typically those contributing $200 or less to a federal office campaign), the truth is that it’s the large donors who give the bulk of the money. As of June, 2.5 million small contributors have given $148 million to the 2012 presidential candidates; this is not a small amount but it accounts for less than 18% of the total raised. On the other hand, 2,100 donors of $50,000 or more have given $200 million to the candidates’ campaigns and affiliated groups, including Super PACs. This means that these few big contributors (0.1% of all contributors) give more than the millions of small contributors (90% of all contributors).

Clearly, from a campaign fundraiser’s perspective, it is more cost effective to schmooze a few hundred rich people than to try to cultivate a few hundred thousand small contributors. Although the overall pattern is similar, there is a noticeable difference between the fundraising of Democrat Obama and Republican Romney: as of June, 26% of the $469 million raised for the Obama campaign and affiliates (including Super PACs) was from contributions of $200 or less, while 7% of Romney’s $362 million was contributions of $200 or less. [1]

Large campaign donors, the 1 out of every 400 Americans who give over $200 to Congressional campaigns, have a disproportionate impact on our elections, both on who gets to run (see 8/6/12 post) and who wins. But there’s an even smaller group that is having a truly outsized impact on the current elections: 112 so-called “mega-donors” (1 out of every 3 million Americans) have each contributed over $500,000. They are led by casino magnate Sheldon Adelson who through June has given $38 million to Super PACs. Super PACs had their biggest fundraising month so far in June when they raised $54 million. This brings the total amount they have raised for the 2012 election cycle to $298 million; 70% of these contributions come from the 112 mega-donors. [2] And this is just the part of the iceberg we know about. (See my 8/10/12 post on non-profit organizations that don’t have to disclose contributors and are outspending the Super PACs.)

Justice Posner of the US 7^th Court of Appeals, a Republican and not a judicial liberal, said recently that the Citizens United Supreme Court decision (which allows these huge campaign contributions) has created a political system that is “pervasively corrupt [where] wealthy people essentially bribe legislators.” [3]

Despite all of this, I encourage you to send your small contributions to candidates. They do make a difference and do identify you to the candidate (and hopefully office holder) as an engaged citizen. I do believe that candidates and office holders listen a bit more closely to contributors than non-contributors. However, given the reality of where the bulk of the campaign money comes from, it is essential to stay engaged and active after the election to hold our elected officials accountable for their actions.

[1] Vogel, K.P., 8/7/12, “Election 2012: The myth of the small donor,” Politico

[2] Blumenthal, P., 7/27/12, “Super PAC mega-donors surpass 100, June best Super PAC month ever,” Huffington Post

[3] Moyers, B., & Winship, M., 7/17/12, “Presto! The DISCLOSE Act disappears,” Moyers & Company

BIG FINANCIAL CORPORATION SCANDALS CONTINUE

ABSTRACT: Things are rotten in the big financial corporations. News of illegal activity continues to surface regularly. The fines that have been imposed haven’t been a sufficient deterrent to stop this bad behavior. Multiple big banks have paid penalties of over $100 million for 1) money-laundering for countries subject to US economic sanctions, 2) selling inappropriately risky investments to conservative investors including municipalities and non-profits, 3) fraudulently foreclosing on mortgages, 4) interest rate manipulation in multiple scenarios, and 5) discriminating against minority borrowers.

Despite this repeated wrong doing, the Securities and Exchange Commission (SEC) and the Justice Department announced recently that they have ended their investigation of Goldman Sachs for fraud related to selling mortgage-backed securities to customers when it knew the securities were likely to be bad investments. This is the latest indication that there will be no significant accountability for the banks that brought on the collapse of the financial sector and our economy.

These huge financial corporations are not just too big to fail, they are simply too big and complex to control by either internal management or outside regulators. Either these huge financial corporations need to be broken up into smaller and less complex entities, or government regulation of them needs to be dramatically changed and strengthened. We cannot allow them to continue to pocket the gains from their risky business practices when we know that we will bear the costs when things go wrong.

FULL POST: Things are rotten in the big financial corporations. News of illegal activity continues to surface regularly across a broad range of banks and financial activities. Here are some of the latest. The fines that have been imposed (which sound like big amounts but are small compared to the size and profitability of these corporations) haven’t been a sufficient deterrent to stop this bad behavior. (In terms of the size of these financial firms, JP Morgan Chase took a $6 billion loss on internal, speculative securities trades and still had a profit for the quarter.)

Standard Chartered, a big British bank, has agreed to a $340 million penalty with New York State to settle charges of money-laundering for countries subject to US economic sanctions. It admitted to concealing transactions with Iran of over $250 billion over nearly 10 years. The bank made hundreds of millions of dollars in fees on the transactions. It agreed to increased monitoring but received no other sanctions on its business. A former US Treasury official noted his disappointment in the small penalty and the lack of criminal charges. A federal investigation is on-going. Since 2005, the US Treasury has imposed fines of over $2 billion on banks for violating US economic sanctions including ING Bank ($617 million), Lloyds Bank ($350 million), UBS ($100 million), Barclays ($176 million), and JP Morgan Chase ($88 million). HSBC bank has been accused of laundering billions of dollars for drug cartels and terrorists and has yet to settle, but has set aside $700 million for potential penalties. [1][2]
Wells Fargo bank is paying $6.5 million to settle charges that it sold inappropriately risky investments to conservative investors including municipalities and non-profits. A Wells Fargo vice president will pay $25,000 and serve a 6 month ban on working in the securities industry. Wells Fargo and its vice president have neither admitted nor denied wrongdoing, as is typical in these cases. Last month, Wells Fargo paid $175 million to settle charges that it discriminated against minority borrowers. [3]

Despite repeated wrongdoing, the Securities and Exchange Commission (SEC) and the Justice Department announced recently that they have ended their investigation of Goldman Sachs for fraud related to selling mortgage-backed securities to customers when it knew the securities were likely to be bad investments. They will not pursue criminal charges against the corporation or its employees. This occurred despite President Obama’s announcement of a special investigative task force in January, despite a formal notice from the SEC in February that it intended to pursue legal action, and despite the $550 million fine Goldman Sachs paid in 2010 for failing to make appropriate disclosures to investors on a similar security. This is the latest indication that there will be no significant accountability for the banks that brought on the collapse of the financial sector and the economy, especially given that the deadline to file cases is fast approaching. [4] [5]

Whatever the reasons are for these huge financial corporations not being held accountable, it is clear that they are not just too big to fail, but simply too big and complex to control. Internal management seems unable to control traders and stop illegal activity (assuming they intend to). Outside regulators have an extremely difficult time detecting and responding to illegal and harmful behavior, not to mention doing so in a timely manner that might prevent the worst of the consequences.

Dramatic changes are needed. Either these huge financial corporations need to be broken up into smaller and less complex entities, or government regulation of them needs to be dramatically changed and strengthened. Otherwise, the risk that they will do serious damage to our economy again is simply too high. We cannot allow them to continue to pocket the gains from their risky business practices when we know that we will bear the costs when things go wrong.

[1] Rooney, B., 8/14/12, “Standard Chartered pays $340 million to settle Iran charges,” CNN Money

[2] Sanati, C., 8/8/12, “Why London bankers are shrugging of Standard Chartered threat,” CNN Money

[3] O’Toole, J., 8/14/12, “Wells Fargo in $6.5 million SEC settlement over risk disclosure,” CNN Money

[4] Protess, B., & Ahmed, A., 8/9/12, “SEC and Justice Dept. end mortgage investigations in Goldman,” DealBook of The New York Times

[5] Mattingly, P., 8/10/12, “US won’t prosecute Goldman Sachs, employees over CDO deals,” Bloomberg Businessweek

GENETICALLY MODIFIED FOODS: WHY NO LABELS?

ABSTRACT: There aren’t laws in the US requiring labeling of genetically modified (GM) food (as there are in the other developed countries) because the large food and agricultural-biotechnology corporations and their trade associations have spent years working to block labeling. They’ve spent $572 million on lobbying and campaign contributions over the last 10 years. In addition, the revolving door moves people back and forth between their organizations and the relevant government agencies. GM organisms are patented and provide their creators with a monopoly, significant market place power, and potentially substantial profits. Farmers are prohibited from producing their own seed for next year’s crop; they are required to buy it from the corporation.

The costs and benefits of GM foods are, at best, unclear. The large agro-biotech corporations and the related chemical corporations are working hard, through campaign contributions, lobbying, and the revolving door, to have minimal regulation and oversight, and to prevent requirements to label foods as having GM content. This is another example of corporate power riding roughshod over the public interest. Our public officials need to stand up to the corporate interests and serve the public interest and demand of over 90% of the public for GM food labeling and oversight.

FULL POST: There aren’t laws in the US requiring labeling of GM food (as there are in the other developed countries) because the large food and agricultural-biotechnology corporations and their trade associations have spent the years since 1994 (when the first GM tomatoes were marketed) working to block labeling. They’ve spent $572 million on lobbying and campaign contributions over the last 10 years. In addition, the revolving door moves people back and forth between their organizations and the Department of Agriculture and the Food and Drug Administration (FDA) – most recently President Obama appointed Michael Taylor, a former vice president and lobbyist for Monsanto, as a senior advisor to the Commissioner at the FDA – they have successful prevented federal and state efforts to require GM food labeling.

GM organisms serve corporate interests in a way that naturally occurring seeds, plants, and animals don’t. Because they are patented, they provide their creators with a monopoly, significant market place power, and potentially substantial profits. This also allows the corporations to restrict independent, objective research into the efficacy, safety, costs, and benefits of GM organisms. It gives seed corporations great power because in their contracts with farmers, the farmers are prohibited from producing their own seed for next year’s crop; they are required to buy it from the seed corporation. The large seed corporations have, through acquisition and other means, concentrated their scope and power and now four large corporations control 50% of the market. Over 200 independent seed companies have ceased to exist over the last 15 years. One of those large seed corporations, Monsanto, has gone so far as to sue thousands of individual farmers whose crops were contaminated by Monsanto’s GM crops for illegally possessing their GM plants. [1]

The costs and benefits of GM foods are, at best, unclear. The costs, beyond the immediate ones (seed, pesticides, and herbicides), are largely uncalculated, and to some extent are unknown. The benefits have not been as great as the agro-biotech corporations have claimed, for example in increased yields, reduced herbicide and pesticide use, improvement of farmers’ economic conditions, and reduction of world hunger. The large agro-biotech corporations and the chemical corporations that produce the herbicides, pesticides, and fertilizers that GM crops require, have substantial market power and profit potential. They are working hard through campaign contributions, lobbying, and the revolving door of sharing personnel with government, to have minimal regulation and oversight, and to prevent requirements to label foods as having GM content. [2]

This is another example of corporate power in the US, in contrast to other countries, riding roughshod over the public interest. There is a clear public interest, as well as public desire (over 90% in multiple polls), to have foods with GM content labeled. And there is a clear need for more effective oversight of the introduction of GM organisms into the environment and our food, as well as monitoring of long term costs and benefits. Our public officials need to stand up to the corporate interests and serve the public interest on GM food labeling and oversight.

[1] Farm Aid, see above

[2] Moyers, B., with Shiva, V., 7/13/12, “The problem with genetically modified seeds,” Moyers & Company

GENETICALLY MODIFIED FOODS: REASONS AND RISKS

ABSTRACT: Genetically modified (GM) foods have been developed to resist herbicides or pesticides, to resist pests or viruses, and for other reasons. Large portions of common crops in the US are GM, such as sugar beets (95%), soybeans (93%), cotton including for cottonseed oil (93%), canola (93%), and corn and maize (86%). As with any new technology, all the risks associated with genetically modified organisms have almost certainly not yet been identified. Known risks include Allergic reactions, Antibiotic resistance, Toxicity, Decreased biodiversity, Undesired spreading, Resistant weeds and pests, and Poisoning wildlife. In addition, once GM genes are out in the environment, it is impossible to recall them. Furthermore, there is no way to assess, in advance, their full, long term impact and there is no monitoring system in place.

FULL POST: Genetically modified (GM) foods have been developed to resist herbicides or pesticides (so the herbicides can be used to kill weeds or the pesticides to kill pests without harming the desired crop), to resist pests or viruses, and for other reasons. Large portions of common crops in the US are GM, such as sugar beets (95%), soybeans (93%), cotton including for cottonseed oil (93%), canola (93%), and corn and maize (86%). [1]

The known risks of GM foods include those listed below. However, as with any new technology, all the risks associated with genetically modified organisms have almost certainly not yet been identified. Clear risk assessment procedures for known risks are not yet in place, let alone attempts to uncover and analyze currently unknown risks. Some of the risks, such as health issues such as cancer, are long term and possibly cumulative, so risk assessment is challenging. From a scientific perspective, this should put a substantial burden on those who wish to use the new technology to clearly demonstrate its benefits. [2]

Allergic reactions: GM foods routinely contain new proteins, including ones that have never been in any food before. Proteins are the basis of most food allergies. Examples of GM foods where new proteins cause allergic reactions include soybeans with Brazil nut proteins (which trigger Brazil nut allergies) and vegetables with milk proteins (which trigger milk allergies).
Antibiotic resistance: The genetic modification process often brings new genes that produce antibiotic resistance into a GM product. These can reduce the effectiveness of antibiotics in a person eating such a GM product and can also accelerate the development of antibiotic resistant diseases. Because of the widespread presence of antibiotic genes in GM foods, this impact needs to be analyzed cumulatively across the whole food supply.
Toxicity: a) Some GM plants concentrate toxins (such as heavy metals like mercury) from the soil in the non-edible parts of the plant. However, there is a risk that toxins could also be concentrated in the edible part of the plant or that contamination of the edible part of the plant could occur. b) All organisms produce toxic substance to defend themselves against diseases and predators. GM foods could have increased levels of these toxins that could be harmful to humans.
Decreased biodiversity: The push to use GM plants reduces the biodiversity of crops. The resulting monoculture of a single or a few varieties of a crop tends to require increased herbicide, pesticide, and fertilizer use, increasing costs for farmers and likely harm to the environment.
Undesired spreading (specific examples below): GM plants (or animals) can spread in undesired ways. Notably, when insects pollinate GM plants they carry GM genes in the pollen they pick up and do not stay within prescribed boundaries. When they carry the pollen to non-GM plants, they can create seeds for undesired GM plants. This is a particular concern for organic farmers who do not want GM genes in their crops but whose fields are within the range of pollinating insects.
Resistant weeds and pests: The herbicide or pesticide resistant genes in GM organisms or the changed usage patterns of herbicides and pesticides with GM crops may result in weeds, pests, and viruses that are resistant to current herbicides and pesticides. At least 10 species of herbicide resistant weeds have been identified.
Poisoning wildlife: GM organisms may poison wildlife that feeds on them.

Examples of undesired spreading are well documented. Canada’s organic canola industry is basically extinct due to contamination from GM canola. In the US, in 2000, GM corn that represented only 1% of planted acreage contaminated at least 25% of the harvest that year. The GM corn was not approved for human consumption. The result was the recall of over 300 food products, export markets rejecting US corn, and corn prices plummeting for all US corn farmers. A class action suit against the GM corn creator, Aventis, led to a $112 million settlement for corn farmers. Corn farmers and users are concerned that a similar incident could occur with a new GM corn intended for biofuel production. [3]

In addition to the risks identified above, once GM genes are out in the environment, it is impossible to recall them. And because of the complexity of natural ecology, there is no way to assess, in advance, the full, long term impact of these genes. Moreover, there is no monitoring system in place to even look for such effects.

The next post will wrap up this discussion of GM foods by taking a look at what’s behind the lack of GM food labeling in the US.

[1] Wikipedia, retrieved 8/16/12, “Genetically modified food,” en.wikipedia.org/wiki/Genetically_modified_food

[2] Union of Concerned Scientists, retrieved 8/16/12, “Risks of genetic engineering,” http://www.ucsusa.org/food_and_agriculture/science_and_impacts/impacts_genetic_engineering

[3] Farm Aid, retrieved 8/16/12, “New GE crops on the market,” http://www.farmaid.org/site/apps/n1net/content2.aspx

GENETICALLY MODIFIED FOODS AREN’T LABELED

ABSTRACT: Federal regulators are allowing a growing number of genetically modified (GM) agricultural products into our food. What is surprising is that these foods are not labeled. This is the result of a powerful and concerted effort by big corporations in the GM business. Over 90% of the American public in multiple polls supports GM labeling and forty-nine countries, including Russia and even China, require labeling. From a public health perspective, labeling is the only way to track unintended health effects.

FULL POST: Federal regulators are allowing a growing number of genetically modified (GM) agricultural products into our food [1]. What is surprising is that these foods are not labeled as being or containing GM products. In general, foods are required to be labeled with their ingredients so consumers can know what they are eating. The lack of GM labeling is the result of a powerful and concerted effort by big corporations who make significant profits from the raising and selling of GM products.

This lack of labeling flies in the face of the economic theory of free markets, which requires consumers to have full information and make knowledgeable decisions when purchasing goods and services. It also contradicts a basic premise of democracy – that citizens are informed.

Over 90% of the American public in multiple polls supports labeling of food to indicate GM content. Forty-nine countries, including Russia and even China, require the labeling of food that contains GM ingredients. The United Nations (UN) food safety organization supports labeling. Furthermore, the US is the only developed country that does not require safety testing of GM plants, which also is supported by the UN. The lack of testing and labeling creates the risk that other countries will block the importation of US agricultural products.

The US Senate in June 2012 voted 73 – 26 against an amendment to the 2012 Farm Bill that would have allowed states to require GM labeling of food. At least 19 states have introduced legislation on GM labeling of food. A bill in Vermont died this year after Monsanto, a dominant player in the GM field, threatened to sue the state if the bill passed.

From a public health perspective, labeling is the only way to track unintended effects. Neither you as an individual nor public health officials can know that a GM food triggers allergic reactions or other health problems if you don’t know the food that’s being eaten contains GM content. [2] For these reasons, the American Public Health Association and the American Nurses Association, among others, have called for labeling GM foods. [3]

In California, there will be a ballot question this November known as the California Right to Know if Your Food has Been Genetically Engineered Act (Proposition 37). It would require food manufacturers and retailers to label GM foods. Over 1 million people signed the petition to get this measure on the ballot. The opposition includes the big agro-biotech and herbicide / pesticide corporations such as Monsanto, BASF, DuPont, Syngenta, Bayer, and Dow Chemical, as well as big food manufacturers such as PepsiCo, Coca-Cola, and Kellogg, which are some of the biggest users of high-fructose corn syrup, soy lecithin, and sugar beets, commonly used GM ingredients. [4]

The next two posts will also be on GM foods. The next one will examine the reasons for GM organisms and foods along with the risks they present. The subsequent post will look at what’s behind the lack of GM food labeling in the US.

[1] GM foods are also referred to as Genetically Modified Organisms (GMOs), Genetically Engineered (GE) foods, and biotech foods.

[2] Silver, C., 6/26/12, “How Monsanto is sabotaging efforts to label genetically modified food,” Inter Press Service

[3] Sanders, B., 6/19/12, “Label genetically engineered food,” The Huffington Post

[4] Sauve, C., retrieved 8/16/12, “This is the food fight California cannot afford to lose,” San Jose Mercury News

CAMPAIGN FUNDRAISING: THE PERFECT STORM

ABSTRACT: The unprecedented spending and the unprecedented secrecy in the current election campaigns are creating the perfect storm and it’s battering our democracy. They are the result of three factors: 1) great concentration of wealth, 2) unlimited campaign contributions, and 3) secrecy through weakly regulated non-profit organizations. Non-profit organizations don’t have to report contributors and are spending tens of millions of dollars on political activity. These non-profit organizations have accounted for two-thirds of the outside spending to-date – close to $100 million. The Internal Revenue Service has, so far, failed to exercise its oversight responsibilities. Corporations, in particular, like the secrecy.

The DISCLOSE Act in Congress would require disclosure of contributors of over $10,000 by all organizations. Senate Republicans have filibustered it (including a watered down version) multiple times. We need to demand that our elected officials require disclosure of campaign contributors. And we need a Constitutional Amendment that will reverse the Citizens United decision and allow limitations on contributions to political campaigns. Otherwise, the voices of we the people are drowned out by the purchased – not free but purchased – speech of wealthy individuals and corporations.

FULL POST: The unprecedented spending in the current election campaigns and the unprecedented secrecy about who’s contributing to the campaigns are creating the perfect storm and it’s battering our democracy. As Supreme Court Justice Louis Brandeis said, “we can have a democracy or we can have great wealth in the hands of a comparatively few, but we cannot have both.” This perfect storm is the result of three factors:

The greatest concentration of wealth in more than a century,
Unlimited campaign contributions (thanks to the Supreme Court’s Citizens United decision that allows unlimited spending by corporations, unions, and other groups), and
Secrecy for many of the contributors, especially corporations, through weakly regulated non-profit organizations. [1]

In addition to the Super PACs, which have to disclose contributors, there arenon-profit trade associations (such as the US Chamber of Commerce) and non-profit “social welfare” organizations [501(c)(4)s] that don’t have to report contributors. Politics is not supposed to be the primary purpose of these organizations. However, the US Chamber of Commerce is spending tens of millions of dollars on political activity, while refusing to disclose its contributors. Republican strategist Karl Rove’s Crossroads GPS, for example, is a 501(c)(4) that is raising and spending tens of millions of dollars on political activity in close alliance with his Super PAC, while refusing to disclose its contributors. [2]

So far in the 2012 election, these non-profit organizations have accounted for two-thirds of the outside spending – close to $100 million spent primarily on advertising. Back in 2010, they spent $130 million, outspending Super PACs 3-to-2. The Internal Revenue Service has, so far, failed to exercise its oversight responsibilities for these non-profit entities. It has no clear test for what constitutes excessive political activity and these tax-exempt groups are permitted to raise and spend money before being officially reviewed and approved. The tax exempt status of Karl Rove’s Crossroads GPS is still pending more than two years after being created and after having spent tens of millions back in the 2010 elections. [3]

Corporations, in particular, like the secrecy these non-profit groups provide. For example, insurance giant Aetna secretly gave $3 million to a non-profit running ads attacking Obama’s health care plan, while publicly supporting the President. Not a single Fortune 500 company has been reported as contributing to a Super PAC, but they are giving millions to non-profit organizations where their contributions can be kept secret. [4]

At the time of the Citizens United decision, eight of the nine justices made it clear that transparency on contributions for political activity was important and that it was Congress’s responsibility to require appropriate disclosure. The DISCLOSE Act in Congress would require disclosure of contributors of over $10,000 by all organizations, Super PACs, trade associations, unions, and 501(c)(4)s. However, Senate Republicans have filibustered it (including a watered down version) multiple times. Many of the Republicans filibustering the DISCLOSE Act previously supported disclosure, including Senator McCain and Senate Minority Leader McConnell, and 14 Republicans who supported it just a couple of years ago. [5] “[T]he essence of free speech, and democracy, is openness and accountability. … but Republican leaders remain adamantly opposed, and for an obvious reason. Republicans raise far more secret money than the Democrats and have far more to hide.” [6]

We the people are going to have to weather this perfect storm as best we can in this election. And then we will need to demand that our elected officials require disclosure of campaign contributors so we know who is trying to influence our elections. Ultimately, we need a Constitutional Amendment that will reverse the Citizens United decision and allow limitations on contributions to political campaigns. Otherwise, the voices of we the people are drowned out by the purchased – not free but purchased – speech of wealthy individuals and corporations who have amounts of money that far exceed that of everyone else.

[1] Reich, R., 7/13/12, “The selling of American democracy: The perfect Storm,” RobertReich.org

[2] Roberts, C., & Roberts, S.V., 7/18/12, “Shine a light on political donations,” Daily Times Chronicle

[3] McIntire, M., & Confessore, N., 7/7/12, “Corporate money funneled to nonprofits with an agenda,” The New York Times

[4] Moyers, B., & Winship, M., 7/17/12, “Presto! The DISCLOSE Act disappears,” Moyers & Company

[5] Moyers & Winship, 7/17/12, see above

[6] Roberts & Roberts, 7/18/12, see above

CAMPAIGN FUNDRAISING: WHO RUNS FOR OFFICE

ABSTRACT: Because of the way we fund campaigns, we have two elections every cycle, the money election and the voting election. For Congressional races, fewer than 1 in 400 people contribute $200 or more to a campaign. This one-quarter of 1% of the population determines who will show up on the ballot for the voting election. Consequently, these campaign contributors, this 1 out of 400 people, have the power to block candidates from getting on the ballot and, therefore, the power to block – to veto – issues and policies from even getting on the agenda. There are many ways to change the funding of campaigns and broaden who can afford to run.

The current elections will have huge amounts of money spent on negative advertising. Voters will be turned off and disillusioned by the whole process and therefore will not bother to vote. We the voters must stay engaged and elect the best candidates we can find. And then we must hold our elected officials accountable for their actions after they are elected.

FULL POST: Because of the way we fund campaigns, we have two elections every cycle, the money election and the voting election. If you don’t win the first, or at least show that you’re competitive, you don’t even get to the second one. For Congressional races, fewer than 1 in 400 people contribute $200 or more to a campaign. This one-quarter of 1% of the population determines who will show up on the ballot for the voting election, the one everyone thinks is the real election. To succeed as a Congressional candidate, you must gain the support of these large contributors.

Consequently, these campaign contributors, this 1 out of 400 people, have the power to block candidates from getting on the ballot and, therefore, the power to block – to veto – issues and policies from even getting on the agenda. This tilts our democracy toward plutocracy, where the wealthy rule and the rest of us try to hold on for the ride. “[A] nation in which so few have the power to block change is not a nation that can thrive.” [1]

And the proof is in the pudding; it’s not what candidates say on the campaign trail, it’s what they do in office. There’s plenty of winking and nodding that goes on during the campaign, where the one quarter of 1% know that it’s just rhetoric and that they don’t have to worry that action will follow.

There are many ways to change the funding of campaigns and broaden who can afford to run. One that is in place in Arizona, Maine, and a few other places is to match small campaign contributions from individuals with public funds. Presidential elections used to have a mix of private and public funds until the public funding got overwhelmed by huge sums of private money. A newer idea is to give every taxpayer a voucher that can only be used to contribute to campaigns. Another approach would be to reduce the cost of campaigns and the importance of money by requiring broadcasters – who get to use the public airwaves – to provide free air time to candidates so they don’t have to spend small fortunes on advertising.

The current elections will have huge amounts of money spent by supposedly independent groups outside of the candidates’ own campaigns. The bulk of this money will be spent on negative advertising. The small number of wealthy individuals and corporations that are funding these outside groups hope, in part, that voters will be turned off and disillusioned by the whole process and therefore will not bother to vote.

We, the voters, cannot fall into this seductive trap of cynicism and apathy. We must stay engaged and active in the election, and elect the best candidates we can find, even though they are rarely if ever perfect. And then we must hold our elected officials accountable for their actions after they are elected.

[1] Lessig, L., 7/13/12, “Big campaign spending: Government by the 1%,” The Atlantic

WHY WE NEED STRONG REGULATION

ABSTRACT: A fierce battle is occurring over government regulation. Key arguments against regulation are that corporations will regulate themselves and that the discipline of free market capitalism will punish bad corporate behavior and reward good behavior. The series of scandals in our large banks have clearly proven these arguments are wrong. And there are many examples beyond the recent bad behavior in the financial industry.

The market is unable to detect, publicize, and punish bad behavior before very serious damage has been done. Corporations resist efforts to exert control or set standards from outside and our huge corporations have the power to successfully do so. As Robert Sherrill wrote, “thievery is what unregulated capitalism is all about.” “Trust but verify” seems applicable here. We need strong regulators and regulations to verify that large corporations are behaving in a legal and ethical manner. Albert Einstein defined insanity as “doing the same thing over and over and expecting different results.” Deregulation is insanity; we’ve seen the results time and again. Strong regulation of corporations, particularly large corporations, by government is necessary.

FULL POST: A fierce battle is occurring in Congress and the federal government over regulation of the financial industry and over government regulation in general. Key arguments against regulation are that corporations will regulate themselves (with minimal standards from government) and that the discipline of free market capitalism will punish bad corporate behavior and reward good behavior. President George W. Bush asserted that these forces were effective and sufficient as he promoted deregulation.

Over the last couple of years, the series of scandals in our large banks have clearly proven these arguments are wrong. The large banks have not regulated themselves. The mortgage and LIBOR scandals (among others) have shown a pattern of behavior by many banks over many years where they clearly did not regulate themselves, but spun further and further out of control and into illegal and unethical behavior. The recent huge JPMorgan trading loss, currently estimated at $6 billion, shows that they simply cannot control internal behavior despite strong incentives to do so. And there are many examples beyond the recent bad behavior in the financial industry: for example, the Savings and Loan scandal of the late 1980s, Enron and WorldCom’s collapses of 2001 and 2002, and the “dot com” stock bubble of 2000. Our large corporations don’t even seem to be able to exert reasonable control over executive compensation.

The discipline of a competitive market place has also clearly not been effective as a deterrent for bad behavior. The recent scandals have shown as false the assumption that banks would behave honestly to protect their reputations with customers. Moreover, it is clear in all of the examples cited above that the market is unable to detect, publicize, and punish bad behavior before very serious damage has been done. [1]

Finally, corporate capitalism, where the goal is to maximize profits, clearly has strong incentives for promoting self-interest. Conversely, the corporations have strong incentives to resist the public interest, such as worker safety, fair employee compensation, and clean air and water, because they might increase costs and reduce profits. Therefore, corporations resist efforts to exert control or set standards from outside. And our huge corporations have the power to successfully do so, in the market place, in the courts, and in our elections and government.

As Robert Sherrill (the reporter and investigative journalist for The Nation, the Washington Post, and the New York Times Magazine, among others, and the author of numerous books on politics and society [2] ) wrote about the Savings and Loan scandal, “thievery is what unregulated capitalism is all about.” The recent behavior of our large banks seems to have proven this statement again.

“Trust but verify,” a phrase President Reagan popularized when he used it to describe relations with the Soviet Union, seems applicable here. [3] We need strong regulators and regulations to verify that large corporations are behaving in a legal and ethical manner.

Finally, Albert Einstein is quoted as defining insanity as “doing the same thing over and over and expecting different results.” [4] Deregulation of the financial industry in particular, and corporate America in general, is insanity. We’ve seen the results time and again over the last 30 years of deregulation and in the events leading up to the Great Depression. We’re paying a very steep price right now in high unemployment, lost wealth in homes and investments, and over the longer haul in lower wages and reduced benefits for workers.

We need to push back against the large corporations and their special interests in the name of the public interest and the interests of we the people. Strong regulation of corporations, particularly large corporations, by government is necessary.

[1] Surowiecki, J., 7/30/12, “Bankers gone wild,” The New Yorker

[2] Wikipedia, retrieved 7/25/12, “Robert Sherrill,” en.wikipedia.org/wiki/Rovbert_Sherrill

[3] Wikipedia, retrieved 7/26/12, “Trust, but verify,” en.wikipedia.org/wiki/Trust_but_verify

[4] BrainyQuote, retrieved 7/26/12, “Albert Einstein quotes,” http://www.brainyquote.com/quotes/quotes/a/alberteins133991.html