SHORT TAKES ON IMPORTANT STORIES #3: CORPORATE GREED

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RESULTS OF FOR-PROFIT HEALTH CARE Part 2

Here are some current examples of the results of for-profit health care: lack of availability and use of generic drugs, huge bills for ambulance services, doctors unionizing, and illegal and unethical health care for prison inmates from a private equity-owned provider.

This is the eleventh post in a series on how the U.S. health care system is a high-cost, low-quality, profit-driven system. The tenth post provides some other examples of the results of for-profit health care and links to the previous posts. Those posts cover the negative effects of vertical integration and private equity-owned health care providers. They also describe illegal and unethical behavior by nursing home operators as well as anti-competitive and often illegal practices by drug companies. And one post highlights how doctors are pushing back against for-profit health care.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog is here.)

Generic drugs that are just as effective as and cheaper than brand name drugs are sometimes unavailable in the U.S. or are underused because they don’t produce enough profit. For example, there’s a generic cold medicine, ambroxol, that’s been available in Europe since 1978. It’s cheap (a few euros), available over the counter, and Americans who have used it describe it as miraculous. However, no drugmaker has ever sought Food and Drug Administration (FDA) approval to sell it in the U.S. FDA approval is costly and time-consuming and the profits of a generic drug aren’t sufficient to warrant the expense, so it’s not available in the U.S. [1]

The Biden Administration should direct the FDA to establish a new, expedited approval process for drugs approved for sale in Europe. The European Medicines Agency, Europe’s equivalent of the FDA, has a proven track record as an effective drug regulator and the FDA could simply review its records on a drug and quickly approve the drug for use in the U.S.

Another example is anastrozole, a generic drug that works to prevent breast cancer in post-menopausal women with risk factors for breast cancer. Many women and even some doctors are unaware of this because, as a generic drug, it would not produce enough profit to warrant a marketing campaign by a drugmaker. A one-year supply costs only about $100. Anastrozole is FDA approved for treating breast cancer but not for preventing breast cancer. A definitive clinical trial showing its benefit in preventing breast cancer was completed in 2014 in the United Kingdom (UK). Because the UK has a single-payer health care system that is motivated to decrease costs as well as promote health, it promotes the use of anastrozole for preventing breast cancer, while no one is promoting that here in the U.S. [2]

On a different front, exorbitant bills for ambulance transportation are still widespread, despite the federal No Surprises Act passed in 2022. It eliminated surprise billing for most medical services but excluded ambulance services because of the complexities involved. An advisory committee charged with studying this issue recently recommended capping patients’ out-of-pocket costs at $100. At least ten states have banned surprise billing (aka balance billing) to patients of the difference between what a service provider charges and what the patient’s insurance will pay. In the absence of such a state law, patients are receiving ambulance bills that often are $1,000 and sometimes as high as $3,300. People who need an ambulance shouldn’t have second thoughts about calling one due to fear of an unaffordable bill. [3]

Doctors are pushing back against for-profit health care by unionizing (which was the topic of this previous post). The 145 doctors at Salem Hospital in Massachusetts have announced they are unionizing in order to improve patient care. Citing budget cuts, lack of sufficient beds, and decision-making without their input, they are joining Council 93 of the American Federation of State, County, and Municipal Employees (AFSCME), which represents roughly 3,000 doctors nationwide. Salem Hospital is part of the Mass General Brigham, Boston-based conglomerate, which employs about 7,500 doctors. Some of its nurses, medical residents and fellows, and other staff are already unionized. [4]

Another example of problems with private equity (PE) owned health care providers is Wellpath (owned by H.I.G. Capital). (See previous posts here and here for other examples.) Wellpath provides prison health care in 34 states for 300,000 patients, generating an estimated $2 billion in revenue. It is a defendant in over 1,000 lawsuits filed by prisoners, their families, and civil rights advocates. A survey of inmates it serves found that 80% reported delayed health care and 79% reported a medical condition that had been ignored. In its six years servicing 6,000 inmates in Massachusetts’s Department of Correction, it has been accused of chronic understaffing, denials of care, and failures to follow doctors’ treatment plans, as well as inappropriate treatment of inmates with mental health issues, including the inappropriate use of solitary confinement and chemical and physical restraints. In November 2020, an investigation by the Massachusetts U.S. Attorney and the U.S. Department of Justice’s Civil Rights Division found numerous problems and accused Wellpath of exposing inmates having a mental health crisis “to conditions that harm them or place them at serious risk of harm.” [5] [6]

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to:

Implement an expedited FDA approval process for drugs approved in Europe,
Fund the FDA to promote generic drug use, and
Ban private equity firms from our healthcare system. Furthermore, ask them to regulate the private equity business generally to eliminate its harmful and unproductive extreme capitalism practices throughout our economy.

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

[1] Kuttner, R., 9/15/23, “How do you spell relief?” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/2023-09-15-how-do-you-spell-relief/)

[2] Kleiman, L., 12/27/23, “Cheap, effective treatments for cancer already exist, so why don’t we know about them?” The Boston Globe

[3] Editorial Board, 11/20/23, “Ban expensive surprise bills for ambulance rides,” The Boston Globe

[4] Johnston, K., 1/10/24, “Hospital doctors forming a union,” The Boston Globe

[5] Piore, A., 1/3/24, “Company seeking new contract faces more scrutiny over prisoner treatment,” The Boston Globe

[6] Editorial Board, 12/27/23, “Warren, Markey shine a much-needed light on prison health care,” The Boston Globe

SHORT TAKES ON IMPORTANT STORIES 2/1/24

These short takes highlight important stories that have gotten little attention in the mainstream media. They provide a quick summary of the story, a hint as to why it’s important, and a link to more information.

The U.S. economy is performing better than any other major economy in the world. Workers’ wages have grown 2.8% over the last four years after adjusting for inflation. The overall economy is 7% larger than before the pandemic and unemployment has been at record lows. Inflation is down to a benign 2% and consumer spending, which drives the U.S. economy, is growing. This isn’t just happenstance; it’s been fueled by pandemic relief measures and economy-stimulating legislation passed by Democrats in Congress and the Biden Administration. The success of these policies suggests that in future economic downturns, stimulative spending (i.e., fiscal policy) may well be more effective in reviving the economy than the Federal Reserve’s adjustment of interest rates (i.e., monetary policy). (Lynch, D. J., 1/28/24, “You don’t have to look far for the world’s best economic recovery because it’s happening here. What is going on in the US?” The Boston Globe from The Washington Post)

In February 2023, a train derailed in East Palestine, OH, and created a toxic nightmare. The railroads promised to operate more safely and Congress promised to pass legislation to prevent future accidents. However, derailments have increased and no legislation has been passed. Congressional legislation, the Railway Safety Act, has been opposed by lobbyists for the railroads. (Eavis, P., 1/28/24, “Since Ohio train derailment, accidents have gone up,” The Boston Globe from the New York Times)

The Consumer Financial Protection Bureau (CFPB) has proposed limiting the overdraft fees big banks can charge. The proposal, which will probably take a year or two to finalize and go into effect, would reduce the $35 overdraft fee that’s the current standard to between $3 and $14 or just enough to cover banks’ costs. The proposal would only apply to the 175 largest banks (out of about 9,000), but those banks collect about 2/3 of all overdraft fees. In 2022, consumers paid $7.7 billion in overdraft fees; the CFPB’s proposal would save bank customers about $3.5 billion a year. CFPB will be accepting public comments until April 1. (Crowley, S., 1/17/24, “Consumer bureau proposes overdraft fee limits for large banks,” The Boston Globe from the New York Times; The CFPB website: CFPB Proposes Rule to Close Bank Overdraft Loophole that Costs Americans Billions Each Year in Junk Fees)

Republicans in 15 states are refusing to provide federally-funded food to 8 million very low-income children this summer when they don’t get free meals at school. In 2022, roughly one out of every six households with children did not have enough food (17.3%). This was up almost 50% from 2021 due to the end of emergency food assistance, which was a response to the pandemic. The states refusing the federal funding are: Alabama, Alaska, Florida, Georgia, Idaho, Iowa, Louisiana, Mississippi, Nebraska, Oklahoma, South Carolina, South Dakota, Texas, Vermont, and Wyoming. (Gowen, A., 1/10/24, “Republican governors in 15 states reject summer food money for kids,” The Boston Globe from the Washington Post)

A record 20 million people have enrolled in health insurance under the Affordable Care Act (aka Obama Care) this year. This is up 25% over last year’s record of 16 million and is at least in part due to increased subsidies for health insurance’s costs. The need for and popularity of federally subsidized health insurance grows, despite Republican attempts to reduce the subsidies and statements denigrating the Affordable Care Act. (Weiland, N., 1/22/24, “20m signed up for Obamacare for the new year,” The Boston Globe from the New York Times; Weiland, N., 12/21/23, “Americans are signing up for Obamacare in record numbers,” The Boston Globe from the New York Times)

Intuit Inc., the maker of the Turbo Tax software for doing income tax returns, has lobbied aggressively against the IRS creating an easy, free, on-line system for Americans to file their income tax returns. It has claimed such a system would be too expensive and not a good use of taxpayers’ money. The IRS has estimated that it would cost between $64 and $249 million annually for it to offer a free E-filing system. Intuit got a federal research tax credit of $94 million in 2022, which would roughly pay for the cost of the free IRS filing system. (Business Talking Points, 1/4/24, “Lawmakers say break for Intuit could have financed free government tax filing program,” The Boston Globe from Bloomberg News; Senator E. Warren, 1/3/24, “Warren, Blumenthal, Sanders, Porter probe massive tax breaks received by Intuit while company fights free tax filing for millions of Americans”)