OUR DEMOCRACY’S CHALLENGES ARE SERIOUS AND LONGSTANDING Part 1

Our democracy is in real trouble – and always has been. The current crisis of ensuring a peaceful transition of power based on election results is very serious. However, there are other serious problems with our elections including voter suppression, gerrymandering, huge sums of money from wealthy interests, and the Electoral College. This post provides an historical overview and then focuses on the Electoral College and how to fix it.

(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.)

Our democracy is in real trouble – and always has been. The current crisis is ensuring a peaceful transition of power based on election results and it’s an immediate, very real, and very serious threat. The possibility of electing an authoritarian, dictatorial government in the next presidential election, one that would ignore the will of the voters in policy making and in future elections, is significant.

However, the problems with our elections go much deeper than simply honoring the will of the voters. Other serious problems include voter suppression (using many strategies), gerrymandered districts, huge sums of money in campaigns from wealthy individuals and corporations, and the Electoral College, which allows someone to win the presidency with far less than a majority of the votes.

Before delving into these issues and solutions for them, a little history and perspective are valuable. Our Founding Fathers had limited confidence in true democracy, despite their truly radical statement that all men are created equal. Even putting aside their limited vision that included only white men and no women, they put serious limits on a government supposedly operating based on the consent of the governed, which is reflected in multiple elements of the government they created. [1]

For example, U.S. Senators were appointed not elected (until a Constitutional Amendment in 1913), the Electoral College not the voters select the President, the Constitution is very difficult to amend, and the checks and balances of the three branches of government have a built in a bias toward the status quo and make major policy changes difficult. Furthermore, elections are winner take all; proportional representation (to ensure that minority voices are included in government) is not included.

In part this was because the Founding Fathers were designing a government for a small, agrarian country and could not envision the demands on government of today’s complex, fast changing society and world. They created a government where major policy changes are difficult unless there is a strong, broad consensus – and it’s painfully obvious how difficult that is to achieve these days.

The national government today is unstable because it often does not respond expeditiously to the will of the voters. This is typical of political systems where a strong president is elected separately from the legislative branch and where the legislative branch has two equally powerful chambers. This structure and the status quo bias of the government’s checks and balances make responsiveness to voters difficult. Voters quickly get frustrated with the inability of the officials they have just elected to respond to their wishes and therefore tend to vote for the other party in the next election.

In the national elections since 2006, party control of at least one chamber of Congress or the presidency has changed hands in every election except in 2012 (when President Obama was re-elected, Democrats maintained control of the Senate, and Republican maintained control of the House). Since 1980, there’s been a politically divided federal government over 70% of the time. In other words, the presidency and both chambers of Congress have been held by the same party less than 30% of the time. Therefore, it’s been rare that either party has been able to definitively advance its policy agenda.

Winner-take-all elections (as opposed to proportional representation in multi-candidate districts) are a major reason the U.S. has two party politics and a fluctuation of control back and forth. Other parties have little chance of electing any of their candidates and, therefore, are seen as spoilers, not serious options, in elections.

When democratic governments have been setup around the world, including in U.S.-led efforts after World War II and the war in Iraq, the U.S. model has not typically been used. Of the 78 relatively stable democracies in the world, only four use the U.S. model of a strong, head-of-government president and a legislature that are elected in separate voting in winner-take-all elections (U.S., Ghana, Liberia, and Sierra Leone).

The more frequent model for democracies is a parliamentary system. In a parliamentary system the head of the government, usually the prime minister, is the leader of the party or coalition that controls the parliament (i.e., the legislative body). (There is typically only one legislative chamber and if there is a second one, it typically has very limited power.) The president is typically a largely ceremonial figurehead (i.e., a head of state rather than a head of government). If the governing party or coalition in parliament cannot pass its policy agenda, an election is usually quickly held to elect a parliament that can advance its policy agenda.

The Electoral College system of selecting the U.S. President is particularly undemocratic and unstable. A state-based, winner-take-all model prevails in awarding Electoral College votes to the presidential candidates. (Only two states, Maine and Nebraska, split their electors between the presidential candidates.) What this means is that the presidential election is decided in a small number of “swing” states (typically four to maybe 12) by the tiny share of the overall electorate in those states who are the “swing” voters (about 400,000 voters or ¼ of one percent of the total votes cast of roughly 160 million). Moreover, because each state’s electoral votes are the sum of its number of U.S. Representative and Senators, the Electoral College votes are far from the democratic one person one vote standard. Most dramatically, each California Elector represents more than 700,000 people while each Wyoming Elector represents fewer than 200,000 people.

The easiest way to fix the Electoral College problem is to get states with a majority of the Electoral College votes to pass a National Popular Vote (NPV) law. This law simply states that the state’s electoral college votes will go to the presidential candidate with the most popular votes nationally. However, the law won’t go into effect in any state until enough states have passed it to make up a majority of the Electoral College votes (i.e., 270 votes). So far, it has been enacted in 17 states and Washington, D.C., which adds up to 209 electoral college votes. (D.C. has 3 votes even though it has no votes in Congress.) So, only 61 more votes from as few as five more states are needed for NPV to go into effect. In eight states with 80 electoral college votes, it has passed either one or both chambers of the state legislature. You can see the status of NPV in your state here.

If your state is one that hasn’t passed NPV, particularly if it’s one of the states where at least one chamber of the legislature has passed it, please contact your state legislators and urge them to pass it. There’s a nice one-page description of NPV and its status that you may find of interest or want to share with your state legislators here.

There will be more on the challenges facing our democracy and ways to strengthen it in future posts.

[1]      Dayen, D., 1/29/24, “America is not a democracy,” The American Prospect (https://prospect.org/politics/2024-01-29-america-is-not-democracy/)

SHORT TAKES ON IMPORTANT STORIES #6: GOOD NEWS!

Here are short takes on five important good news 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: States Newsroom, the country’s largest state-focused non-profit news organization, now has a full-time presence in all 50 state capitals. Its network has 39 freestanding newsrooms and, in the other 11 states, partnerships with state-focused, non-profit news organizations. It has 220 full-time employees and an annual budget of over $22 million. Statehouse policy and politics are the major focuses of its reporting, with full-time reporters covering every state legislature. It does not accept any corporate funding and publicly discloses all contributions of over $1,000. In addition to news, it publishes commentary that is clearly labeled as such, is completely separated from its news reporting, and is pro-transparency and pro-democracy. It does not publish commentary from current office holders or candidates. [1]

STORY #2: A recent study by the Economic Policy Institute updated a previous analysis from 2016 of the performance of the U.S. economy under Democratic and Republican presidents. [2] It confirmed and extended the finding that the economy consistently performs significantly better under Democratic presidents across a wide range of economic indicators. This is true for market-based data that are not affected by government supports or subsidies, dispelling the contention that the superior economic performance is due to Democratic spending on safety net programs. The report acknowledges that these findings cannot claim to prove there’s a cause-and-effect relationship between the party of the President and economic outcomes. It also acknowledges that the President has limited control over the economy and that luck plays a role. In terms of luck, it notes that both Obama and Biden inherited depressed economic conditions where the economy had been damaged by severe shocks, and, nonetheless, the strong economic performance under Democratic presidents persisted.

Examining economic data both from 1949 to the present and from 1981 to the present finds that economic performance under Democratic presidents was noticeably better on:

  • Growth in Gross Domestic Product,
  • Job growth,
  • Wage and income growth,
  • Unemployment,
  • Business investment,
  • Inflation, and
  • Interest rates.

At the growth rate typical under Democratic presidents, per capita living standards would double every 28 years, while with the growth rate typical under Republican presidents, per capita living standards would take 56 years to double. Moreover, income growth is much more equitable under Democratic presidents than Republican ones, with much higher income growth for those with higher incomes under Republican presidents.

STORY #3: In a major antitrust settlement, Visa and Mastercard, the two dominant corporations in the credit card business, have agreed to limit the fees they charge merchants for purchases using their credit cards. It’s estimated that this will save merchants at least $6 billion a year. Some of these savings may be passed on to consumers. Currently, the typical 2% credit card fee costs merchants over $100 billion a year.

Merchants are also now allowed to charge consumers differentiated fees depending on the credit card they use for their purchase. This incentivizes consumers to use lower cost cards.

The antitrust case has been in the courts for almost 20 years and five years ago Visa and Mastercard paid roughly $6 billion to merchants in what was, at the time, the largest settlement ever in a class action lawsuit. [3]

STORY #4: The Biden administration has taken a stand for safety and workers with a new federal regulation requiring most freight trains to have two-person crews. Ever since the February 2023 toxic train derailment and fire in East Palestine, Ohio, train safety and working conditions have been under intense scrutiny. However, little has changed and the railroad safety bill in Congress has stalled. The Biden administration has been working on this new regulation for two years. The process garnered 13,000 public comments with only about 60 in opposition to two-person crews. Nonetheless, the big railroad corporations have lobbied hard against it and have now gone to court to block the new regulation. The typical train these days is about a mile long (5,300 feet) with roughly 100 cars; some are three miles long. Despite the railroad corporations’ stated commitment to safety, particularly since the Ohio derailment, they are strongly opposing two-person crews and there are currently an average of almost three derailments every day. [4]

STORY #5: As an update on a previous post, Please sign this petition to reduce the Medicare Advantage rip off, the Biden administration held the line on the proposed 3.7% increase in Medicare Advantage payments despite intense lobbying by the insurance industry, which sponsors and makes big profits off Medicare Advantage plans. As a result, Medicare’s payments to Medicare Advantage plans are expected to increase by over $16 billion in 2025, to a total of over $500 billion. In the past, the federal government has usually succumbed to industry lobbying and upped the annual Medicare Advantage increase from the initially proposed amount. Although some advocates were disappointed that the Biden administration didn’t reduce the proposed increase or do more to rein in the abuses by Medicare Advantage plans, this shows that advocacy can change past precedent and result in at least a first step in reining in the for-profit rip off of Medicare Advantage plans. [5]

[1]      Joseph, C., 4/5/24, “This nonprofit has newsrooms in all 50 state capitals. Is it the future of state journalism?” Columbia Journalism Review (https://www.cjr.org/the_media_today/states-newsroom-local-politics-policy-model.php)

[2]      Bivens, J., 4/2/24, “Economic performance is stronger when Democrats hold the White House,” Economic Policy Institute (https://www.epi.org/publication/econ-performance-pres-admin/)

[3]      Smith, P., 3/27/24, “Visa, Mastercard reach $30 billion deal with US retailers,” The Boston Globe from Bloomberg News

[4]      Funk, J., 4/3/24, “Freight railroads must keep two-person crews,” The Boston Globe from the Associated Press

[5]      Corbett, J., 4/2/24, “Campaigners beat ‘greedy’ insurance giants exploiting Medicare Advantage,” Common Dreams (https://www.commondreams.org/news/medicare-advantage-plans)

PLEASE SIGN THIS PETITION TO REDUCE THE MEDICARE ADVANTAGE RIP OFF

Please join me in signing this petition (sponsored by Social Security Works) calling on the Biden administration to take steps to stop the undermining of Medicare by the Medicare Advantage plans offered by for-profit insurance corporations. They maximize their generous profits by denying and delaying care for seniors, as well as through fraudulent billing.

(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.)

The Biden administration will be finalizing the annual increase in payments to Medicare Advantage plans in early April. As you probably know, Medicare Advantage plans are the privatized alternative to regular Medicare. They are very profitable for the for-profit insurance corporations that run them. They cost more per enrollee than regular, public Medicare, even though their enrollees are younger and healthier than the population on regular Medicare. Medicare Advantage plans also deliver poor treatment when enrollees get sick. (More on this below.)

The Biden administration is proposing a 3.7% increase, but the insurance corporations and their lobbyists are pushing hard for a bigger increase. Medicare needs to start holding these insurance corporations accountable for their greed and poor performance. If anything, this proposed increase should be decreased, and certainly not increased. [1]

Therefore, I urge you to join me in signing this petition (sponsored by Social Security Works) calling on the Biden administration to reclaim Medicare from the for-profit Medicare Advantage insurance corporations. As a start, it should stop overpaying them and work to recoup past overpayments.

If you have a minute, I urge you to also contact President Biden to ask him to stop the undermining of Medicare by for-profit insurance corporations whose Medicare Advantage plans are overbilling Medicare while underserving their patients. 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.

Here are some of the negative attributes of the for-profit Medicare Advantage (M.A.) plans:

  • 10,000 lives could be saved each year if Medicare eliminated the worst performing 5% of M.A. plans.
  • M.A. patients are 1.5 times more likely to die within a month after complex cancer surgery than regular Medicare patients.
  • M.A. patients cost Medicare roughly 6% more per patient than patients in regular Medicare, despite worse outcomes with younger, healthier patients.
  • M.A. insurance corporations cost Medicare between $88 billion and $140 billion extra every year over what it would cost if their patients were in regular Medicare. [2]
  • Almost every major M.A. plan sponsor has been found guilty of fraudulent billing of Medicare, many of them multiple times. They claim their patients are sicker than they really are and game the payment system in other ways despite repeated attempts to stop this.
  • M.A. plans regularly deny or delay coverage of treatment through complex prior authorization procedures. They want to pay out as little as possible to maximize their profits. (See more on this below.)
  • M.A. plans limit patients to the doctors and health care facilities in their networks (while regular Medicare lets you pick any doctor and medical facility that you want).
  • M.A. plans attract younger, healthier seniors through aggressive (and sometimes misleading) marketing and by offering coverage for services (such as dental and eye care) that they lobby to keep regular Medicare from being able to offer.
  • M.A. plans have high overhead costs for profits, advertising, executive pay, and complex administration, such as prior authorization procedures. They spend 15% – 25% less on medical services than regular Medicare, because their overhead is so much higher.

A very important strategy for maximizing profits is to minimize how much the M.A. plan pays for medical care. Therefore, they impose complex prior authorization procedures, particularly for expensive care. A recent study of prior authorizations estimated that there were 35 million prior authorization requests in 2021 (the most recent data available) and that 2 million were denied. Roughly 220,000 of these denials were appealed and in 82% of those cases the denial was overturned. The researchers estimated that, overall, there are 1.5 million unfounded denials of care by M.A. plans each year. If more patients went through the complex and time-consuming process of appealing denials, up to 75% of denials would be overturned. Surveys in 2023 found that 94% of doctors reported that the prior authorization process had delayed needed medical care, 89% reported that prior authorization requirements had negative effects on patients’ outcomes, and 33% of doctors reported that the need for a prior authorization had led to an avoidable serious medical event, such as hospitalization, a permanent disability, or death. [3]

The privatization of Medicare through Medicare Advantage plans only benefits for-profit insurance corporations, while patients, Medicare, and, ultimately, taxpayers pay the costs. In 2022, the seven large health care corporations that cover 70% of M.A. patients had over $1 trillion in revenue and over $69 billion in profits. They spent more than $26 billion buying back their own stock, which artificially boosts the stock price rewarding big stockholders, including their corporate executives. [4] For example, in 2023, giant M.A. plan sponsor UnitedHealth spent $8 billion buying back its own stock and another $7 billion on dividends to stockholders. Its CEO was paid nearly $21 million in 2022 (the 2023 figure isn’t available yet), it spent almost $11 million lobbying Congress, and paid $10 million for memberships in industry associations that also lobby and engage in political activity to its benefit. However, it claims that if the Biden administration doesn’t give its M.A. plans a bigger increase it will have to reduce patient benefits and make them pay more! [5]

I’ve been writing about the problems with Medicare Advantage and how this privatization undermines Medicare for over four years. See previous posts here, here, here, here, here, and here if you’re interested.

[1]      Rhodes, C., 3/28/24, “Ady Barkan’s legacy: Reclaiming Medicare from for-profit corporations,” Common Dreams (https://www.commondreams.org/opinion/ady-barkan-medicare-advantage)

[2]      Physicians for a National Health Program, 2023, “Our payments their profits,” (https://pnhp.org/system/assets/uploads/2023/09/MAOverpaymentReport_Final.pdf)

[3]      Cunningham-Cook, M., 3/6/24, “Between you and your doctor: How Medicare Advantage care denials affect patients,” The American Prospect (https://prospect.org/health/2024-03-06-how-medicare-advantage-care-denials-affect-patients/)

[4]      Johnson, J., 3/15/24, “Patients, advocates push Biden to ‘reclaim Medicare’ from privatized Medicare Advantage,” (https://www.commondreams.org/news/medicare-advantage-action)

[5]      Cunningham-Cook, M., 3/6/24, see above

SHORT TAKES ON IMPORTANT STORIES #5: CORPORATE POWER AND STOCK BUYBACKS

Corporate greed and power are evident in stock buybacks and international actions by the U.S. government. Here are short takes on four 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: Corporations’ purchases of their own stock, known as stock buybacks, have increased dramatically over the last 40 years. Between 2010 and 2020, U.S. corporations bought back $6.3 trillion of their own stock. Stock buybacks were outlawed or severely restricted as illegal stock price manipulation until they were deregulated in 1982. Buybacks use profits to enrich stockholders and executives rather than investing in the business or in its workers (e.g., through research and development, upgrading equipment, expanding manufacturing capacity, better pay for workers, better working conditions, or improved safety). [1]

Furthermore, corporate executives use their inside, non-public knowledge of when and how these buybacks will happen to buy or sell stock to further and unfairly maximize their personal benefit. (This is one way the rich get richer.) The Securities and Exchange Commission (SEC) drafted a new regulation requiring corporations to disclose when executives had bought or sold their company’s stock shortly before or after the announcement of a buyback in an effort to control this unfair insider trading. However, the courts struck down the regulation before it could be implemented. Rather than rewriting the regulation to overcome the judge’s concerns, the SEC, under pressure from Wall St. and corporate executives, gave up on the new regulation.

Spending profits on buybacks rather than investments in the corporation’s business has serious consequences. For example, over the past ten years, Boeing has spent $39 billion on buybacks (and an additional $20 billion on dividends to shareholders). Over that period, Boeing’s planes have had two major accidents and numerous less serious accidents and safety issues. It has repeatedly failed to follow through effectively on promised safety improvements and insiders have reported numerous situations where safety was shortchanged to reduce costs. Norfolk Southern Railroad spent $18 billion on buybacks and dividends in the five years before the disastrous derailment in East Palestine, OH. Employees reported many cost saving strategies that reduced safety. Abbott Labs spent $5 billion on buybacks while allowing manufacturing conditions to deteriorate until its infant formula became contaminated resulting in infant deaths and a national shortage of formula when its manufacturing had to be shut down due to safety problems. Bed Bath and Beyond actually went into debt to buyback $12 billion of its stock, which caused it to go bankrupt.

STORY #2: Intel, the biggest U.S. computer chip maker, has been using huge amounts of its profits ($152 billion since 1990 or an average of $4.6 billion each year for 33 years) to buy back its own stock. Intel’s CEO’s compensation was $179 million in 2021, most of it linked to the price of the corporation’s stock, which is artificially boosted by the stock buybacks. [2]

What makes Intel’s stock buybacks particularly concerning is that Intel, rather than spending its own profits on expanding manufacturing capacity, is getting an $8 billion grant from the federal government along with $11 billion in loans on favorable terms. The government funding is from the CHIPS and Science Act and its goal is to incentivize corporations to expand chip manufacturing capacity in the U.S. and to create American jobs. However, there is no prohibition on Intel continuing to buy back its own stock or on it laying off workers. Intel has refused to pledge that it won’t buy back its own stock and that it won’t lay off workers while receiving federal money under the CHIPS Act. So, while it may create 10,000 jobs at a new manufacturing facility, it may be laying off workers elsewhere.

STORY #3: For decades, the $47 billion infant formula industry, led by Mead Johnson and Abbott Labs, has gotten the U.S. government to use its muscle around the world to support sales of formula. U.S. agencies have intervened with at least 17 countries. They have opposed those countries’ efforts to limit marketing of formula or require additional safety precautions, despite the well-documented benefits of breast feeding and links to obesity of feeding formula to toddlers. The countries range from those in the European Union, to Canada, Israel, China, and multiple countries in Africa, Southeast Asia, and Central and South America. U.S. agencies have complained about restrictions on formula advertising in bilateral meetings with other countries as well as before the World Trade Organization (WTO). The implicit threat is a formal WTO complaint that can lead to costly litigation. In 2018, officials in the Trump Administration were accused of threatening to withhold military aid to Ecuador over its support for breastfeeding. [3]

Formula obviously costs more than breast milk and requires clean water to prepare, which is not always available. It typically costs more than cow’s milk. However, aggressive marketing by the formula industry, often claiming unfounded benefits for formula, persuades parents to buy it even when they can barely afford it. The U.S. actions in support of the infant formula corporations have even undermined the work of other U.S. foreign aid and health agencies that have promoted breastfeeding for many years.

STORY #4: At the behest of the genetically engineered crop industry, led by Bayer (due to its acquisition of Monsanto), the U.S. government is challenging Mexico’s ban on using genetically modified (GM) corn for human consumption. Mexico’s president announced back in 2020 that he planned to phase out the use of GM corn for human food (as opposed to animal feed) and to ban the use of the glyphosate-based herbicides (very profitable Monsanto products) that are essential to growing GM corn. The U.S. objected and after negotiations failed to reach an agreement, the U.S. has submitted the dispute to the dispute resolution process established by the U.S.-Mexico-Canada Trade Agreement. GM corn was introduced commercially in 1996 and its safety assessments were done by the corporations working to grow and sell it. The heavy and increasing use of pesticides and herbicides to grow GM corn is also a concern, especially given the lack of systematic monitoring of human exposure to them. Bayer has paid billions of dollars to settle lawsuits over the health effects (especially cancer) of exposure to glyphosate-based herbicides sold under Monsanto’s Roundup brand name. [4]

[1]      Reich, R., 3/13/24, “Disclose executive stock buyback manipulations,” Robert Reich blogpost

[2]      Leopold, L., 3/27/24, “Intel brags of $152 billion in stock buybacks over last 35 years. So why does it need an $8 billion subsidy?” Common Dreams (https://www.commondreams.org/opinion/intel-subsidy-chips-act-stock-buyback)

[3]      Vogell, H., 3/21/24, “The U.S. government defended the overseas business interests of baby formula makers. Kids paid the price.” ProPublica (https://www.propublica.org/article/how-america-waged-global-campaign-against-baby-formula-regulation-thailand)

[4]      Corbett, J., 3/26/24, “Experts warn of toxins in GM corn amid US-Mexico trade dispute,” Common Dreams (https://www.commondreams.org/news/genetically-modified-corn)

AUTHORITARIANISM WILL COME TO THE U.S. IF TRUMP IS ELECTED

There’s a detailed, written plan for the Trump administration, if he’s elected in 2024, to turn our democracy into an authoritarian dictatorship. Project 2025 is a detailed presidential transition plan that identifies policies and personnel to accomplish this transformation. It was developed by a Heritage Foundation-led coalition with a $22 million budget.

(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.)

It becomes clearer by the day that the plan for the next Trump presidency is for an authoritarian dictatorship. This is not just Trump making crazy off-the-cuff statements; it’s a written plan that right-wing organizations and people are advancing every day.

Project 2025 is a detailed presidential transition plan that identifies policies and personnel to transform our democracy into an authoritarian Trump presidency in 2025. It was developed by a Heritage Foundation-led coalition of over 65 right-wing organizations with a $22 million budget. The Heritage Foundation, founded in 1973, a formerly conservative and now revolutionary think tank, has played a leading role in shaping Republican policies since 1980. It’s part of the well-funded network of right-wing groups that have transformed the Republican Party and the Supreme Court. [1]

Project 2025 lays out specific plans to transform the presidency, the executive branch of government, and all our democratic institutions into an authoritarian, strongman-led government. (See this previous post for more details.) If Trump is elected, its authors and supporters will aggressively implement the plan. As Kevin Roberts, president of the Heritage Foundation said, “[T]he Trump administration [in 2016], with the best of intentions, simply got a slow start. And Heritage and our allies in Project 2025 believe that must never be repeated.” [2]

I used to regard the Heritage Foundation as a very conservative but thoughtful contributor to policy debates. This is no longer true. The dramatic change came when Kevin Roberts was appointed its president in 2021. It abruptly changed; for example, it shifted from supporting Ukraine against Russia’s invasion to supporting Russia. Some staff members resigned because of this and other changes. It’s now fully embracing authoritarianism, ending our democracy, and “institutionalizing Trumpism.”

You probably know that Hungarian authoritarian Prime Minister Victor Orban recently visited former president Trump at Mar-a-Lago. And you probably know that Orban upended Hungarian democracy, replacing it with authoritarianism, including gutting civil service and filling government positions with his loyalists, taking over businesses to benefit friends and family, and attacking the rights of immigrants, women, and LGBTQ+ people.

What you may not have heard is that Orban also visited Washington, D.C. Despite being Hungary’s Prime Minister, he did not meet with any government officials. Instead, he met privately with right-wing luminaries and politicians at the headquarters of the Heritage Foundation. Its president, Kevin Roberts, is a big fan of Orban’s and the Heritage Foundation has established a formal partnership with the Hungarian Danube Institute, which is basically a government-funded front for Orban’s propaganda. The Danube Institute has given grants to right-wing entities in the U.S. It’s not known if the Heritage Foundation is one of those entities, but it wouldn’t be a surprise if it was.

There’s an in-depth article on the Project 2025 plan for a Trump presidency in The American Prospect magazine. [3] For example, the Justice Department would be used to prosecute Trump’s political and civilian adversaries. The Insurrection Act would be invoked so the military could be used to crush any protests. The plan includes a long list of enemies and how to target them, including everyone from federal civil servants to business and environmental regulators to union leaders to safety net beneficiaries.

Project 2025 includes a key strategy for quickly implementing the plan: immediately install loyal Deputy Directors (who don’t require Senate confirmation) across the federal bureaucracy and fire all the senior managers who require Senate confirmation. Under federal law, the deputies then become acting heads of the agencies.

Project 2025 states that the Department of Defense (DOD) “has emphasized leftist politics over military readiness” and that the DOD needs to “eliminate Marxist indoctrination.” It encourages rigorous review of all senior officers, i.e., generals and admirals, to ensure they “prioritize the core roles and responsibilities of the military over social engineering and non-defense matters.” This sounds like the implementation of an ideological purity test for military leaders.

Project 2025 would increase economic inequality by favoring the wealthy and large corporations. It calls for cutting taxes on unearned income, i.e., capital gains and dividend income. It calls for lowering the corporate tax rate (which has already been reduced by the 2017 Trump / Republican tax cut bill), privatizing every government function possible, and deregulating every industry. It would incentivize corporations to limit employee benefits by capping the amount that could be treated as an expense to $12,000. It would end congressional approval of arms sales to foreign countries. It would basically eliminate scientists and scientific studies from any role in policy making except for studies of “the risks and complications of abortion.” It would put Christian nationalism at the center of all policy-making and government activities.

Project 2025 would gut current environmental and climate change policies. It would repeal the tax credits for clean-energy companies and ensure climate change deniers are appointed to all relevant agencies and bodies, including the EPA’s Science Advisory Board. It would support the fossil fuel industry while cutting funding for improvements to the electric grid that are necessary for using renewable energy sources. [4]

Even if Trump himself is incompetent and mercurial, Project 2025 would put in place bureaucrats and procedures in all executive branch agencies that would be focused on and effective at implementing the authoritarian government it envisions. The complete Project 2025 plan itself is here, but at close to 1,000 pages it’s a lot to wade through.

[1]      Swan, J., Savage, C., & Haberman, M., 7/17/23, “Trump and allies forged plans to increase presidential power in 2025,” The New York Times

[2]      Richardson, H. C., 3/17/24, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/march-17-2024)

[3]      Meyerson, H., 11/27/23, “The blueprint,” The American Prospect (https://prospect.org/politics/2023-11-27-far-right-blueprint-america/)

[4]      Noor, D., 7/27/23, “ ‘Project 2025’: plan to dismantle US climate policy for the next Republican president,” The Guardian (https://www.theguardian.com/environment/2023/jul/27/project-2025-dismantle-us-climate-policy-next-republican-president)

SHORT TAKES ON IMPORTANT STORIES #4: WORKERS AND ECONOMIC WELL-BEING

Here are short takes on five 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: The Consumer Financial Protection Bureau just finalized a regulation that caps at $8 the fee that the big credit card corporations can charge for a late payment. Currently, they typically charge around $30. When the regulation goes into effect in 60 days, it’s projected to save consumers $10 billion a year. The credit card corporations can charge a higher fee if they can show that their actual collection costs are higher. Nonetheless, the credit card corporations have announced they will go to court to block the fee cap. [1]

In a separate report issued in February, a Consumer Financial Protection Bureau analysis found that large credit card issuers charge customers higher interest rates than smaller ones. They estimated that a customer of one of the 25 largest credit card issuers with an average balance of $5,000 could save $400 to $500 a year by shifting to a small credit card issuer. [2]

STORY #2: An update on a short take in my 2/1/24 post: The Republican Governor in one of the 15 states that was refusing to provide federally-funded food to 8 million very low-income children this summer has changed his mind. Nebraska Governor Pillen has agreed to accept $18 million from the U.S. Department of Agriculture to pay for food for about 150,000 children this summer when they won’t be in school and receiving the free or reduced-price meals they get there. Despite Governor Pillen’s previous statement that he didn’t “believe in welfare,” after hearing from students, a bipartisan group of state legislators, pediatricians, and anti-poverty groups, he changed his mind. He said the change was due to “an evolution of information” about how children would be affected by his decision to forego the food assistance of about $40 per month. Nebraska legislators noted that this showed that grassroots “voices make a positive difference” and called it a “HUGE win for Nebraska’s kids, families, … and small businesses.” [3]

STORY #3: State to state comparisons show that unions improve workers’ pay and benefits and do NOT reduce job growth or hurt a state’s economy. Nonetheless, 26 states have so-called “right-to-work” laws that undermine unions. The advocates for these laws claim that they promote job growth, but there is no evidence for this. “Right-to-work” laws prohibit unions from requiring workers to join the union or to pay the union a fee similar to union dues at a unionized job site. Therefore, workers can receive all the benefits the union provides – from increased pay and benefits to improved working conditions and grievance procedures – without having to pay for them. Not surprisingly, this undermines the union’s membership numbers and finances. Nationally, about 10% of workers are in unions, while in states with long-standing “right-to-work” laws (since before 2010) only 5% of workers are in unions. In states without “right-to-work” laws, over 14% of workers are in unions. [4]

Workers in states without “right-to-work” laws are paid 3.2% more (about $1,700 more a year for full-time work) than workers in states with such laws. They are also more likely to have employer-supported health insurance and retirement benefits. Furthermore, unions reduce job-related racial and gender inequities, as well as income inequality in general.

STORY #4: At 18.6%, the immigrant portion of the U.S. workforce was at a record high in 2023. However, immigrants are NOT hurting the job prospects and incomes of U.S.-born workers. Here are three key facts (among others) that support this statement:

  • The 3.6% unemployment rate for U.S.-born workers in 2023 was a record low.
  • The 81.4% employment rate for prime-age workers (i.e., those between 25 and 54) is at its highest level since 2001.
  • The 83.9% labor force participation rate of those prime-age workers (i.e., those working or actively looking for a job) is at its highest level since 2002.

Furthermore, immigrants contribute to economic growth and increase government tax revenue. Without immigration, the U.S. population would decline, which would hurt economic growth due to a lack of needed workers. [5]

STORY #5: The tariffs President Trump imposed on China and other countries were a political success but a policy and economic failure – like many things he did. A nonpartisan study of U.S. employment data by industry found that Trump’s tariffs on China and other countries in 2018 did NOT increase the number of jobs in the industries protected by the tariffs as promised. However, they did lead to other countries imposing tariffs on U.S. exports in retaliation, which had a negative impact on U.S. jobs and our economy, particularly agriculture. The Trump administration was forced to respond by providing $23 billion in subsidies to farmers in 2018 and 2019, which only partially offset the harm caused by Trump’s tariffs. [6]

[1]      Cowley, S., 3/6/24, “Federal rule caps most credit card late fees,” The Boston Globe from the New York Times

[2]      Wilkins, B., 2/16/24, “New CFPB research spotlights ‘predatory’ credit card practices of big banks,” Common Dreams (https://www.commondreams.org/news/cfpb-credit-card-report)

[3]      Conley, J., 2/13/24, “Under pressure from angry students, GOP Gov reverses on federal summer meals funding,” Common Dreams (https://www.commondreams.org/news/nebraska-summer-meals)

[4]      Sherer, J., & Gould, E., 2/13/24, “Data show anti-union ‘right-to-work’ laws damage state economies,” Economic Policy Institute (https://www.epi.org/blog/data-show-anti-union-right-to-work-laws-damage-state-economies-as-michigans-repeal-takes-effect-new-hampshire-should-continue-to-reject-right-to-work-legislation)

[5]      Costa, D., & Shierholz, H., 2/20/24, “Immigrants are not hurting U.S.-born workers,” Economic Policy Institute (https://www.epi.org/blog/immigrants-are-not-hurting-u-s-born-workers-six-facts-to-set-the-record-straight/)

[6]      Swanson, A., 2/3/24, “Trump’s tariffs hurt US jobs but swayed voters, study finds,” The Boston Globe from the New York Times

CORPORATIONS ARE GIVING BIG MONEY TO ELECTION DENIERS

America’s biggest corporations are  giving tens of millions of dollars to the 147 members of Congress who voted to deny the 2020 election results. They are making campaign donations to these election deniers, also known as the Sedition Caucus, both directly and indirectly through political action committees (PACs) and business groups. Despite concerns expressed by some corporate leaders about political and business or economic upheaval if Trump were to be re-elected, if one follows the money, it’s clear that these corporations and their leaders care more about their profits and political influence than they care about democracy.

(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.)

The billions of dollars flooding candidates’ campaigns for the 2024 elections are not just corrupting policy making and the enforcement of our laws (see this previous post for more detail), they are also undermining our democracy.

In January, senior executives of America’s biggest corporations and other wealthy individuals attended the annual World Economic Forum in Davos, Switzerland, where the theme for the year was “Rebuilding Trust.” However, their hypocrisy was hard to miss. Some of them expressed fear of what a Trump re-election might mean in terms of political unrest and potential risks for businesses. However, they are providing substantial campaign funding for Trump and his acolytes in the Republican Party.

Since the January 6, 2021, Capitol Hill insurrection, 228 of the 300 largest American corporations that have political action committees (PACs) have given over $26 million to the 147 members of Congress who voted to deny the 2020 election results. In the immediate aftermath of the insurrection, numerous corporations announced to great fanfare that they would stop making political contributions to members of Congress who were election deniers. However, many of them have quietly resumed making donations to the election deniers, also known as members of the Sedition Caucus.

For example, Boeing suspended contributions but resumed making them four months later and has since given over $650,000 to 85 election deniers. The list of corporations suspending but then resuming contributions to election deniers includes Amazon, FedEx, Home Depot, Johnson & Johnson, McDonald’s, UPS, Verizon, Walmart, and Wells Fargo. In addition to contributing directly to the election deniers, they are also contributing to Republican Party PACs that support the election deniers. Furthermore, the known contributions are only the ones the corporations’ PACs are making openly and directly; many of them are also contributing to election deniers through vehicles that obscure donors’ identities such as business groups (like the Chamber of Commerce and industry-based associations), super PACs, and dark money groups that do not have to disclose their donors. [1]

If you’d like more detail, check out ProPublica’s database of contributions by Fortune 500 corporations to election deniers. It includes how much they’ve given, what percentage of their total giving it represents, who they’ve given to, and how long they kept their promise not to contribute to election deniers.

If business groups, like the Chamber of Commerce, are added into the calculations, these groups and corporate PACs have given over $108 million to election deniers since the January 6 insurrection. Over 1,400 such entities have given over $91 million directly to election deniers and another $17 million to PACs affiliated with them. The top ten contributors to the election deniers in 2023 are: [2]

  • American Bankers Assoc. $430,500
  • National Assoc. of Realtors $370,000
  • Nat’l Rural Electric Coop Assoc. $272,000
  • UPS $269,500
  • Boeing $257,500
  • Nat’l Multifamily Housing Council $255,000
  • Honeywell $251,000
  • AT&T $248,000
  • Lockheed Martin $239,500
  • Nat’l Auto Dealers Assoc. $236,000

The election deniers who received the largest amounts from these business entities in the first three quarters of 2023 are:

  • Jason Smith (R-MO)       $2,007,185      Chair of the Ways & Means Comm.
                                                                        (which oversees the budget & all fiscal matters)
  • Kevin McCarthy (R-CA)  $1,740,000      Former House Speaker
  • Steve Scalise (R-LA)        $1,549,300      House Majority Leader (2nd in command to the Speaker)

The efforts by wealthy individuals and corporations to skew our policies, laws (and enforcement of them), economy, and society to their benefit are nowhere more obvious than in their huge contributions to political candidates. Apparently, they don’t even have qualms about donating to those who voted to block the democratic transfer of power. Needless to say, major reforms of our campaign finance laws are needed, along with the reversal of the 2010 Citizens United U.S. Supreme Court decision (and related ones). Those decisions equated the spending of money in political campaigns with the right to free speech and have given corporations free speech rights like those granted to human beings.

We must reform campaign financing, which is currently dominated by individuals and corporations with great wealth and, therefore, great power. Supreme Court Justice Louis Brandeis tackled those issues roughly a century ago. As a lawyer, often doing pro bono work in the public’s interests, he successfully took on Boston’s street car and light monopolies and got lower rates and better service. He challenged the power of big railroads, life insurance companies, and banks, as well as their wealthy owners.

Brandeis was a fervent supporter of democracy, saying “The end for which we must strive is the attainment of rule by the people.” He believed that democracy had to include economic freedom, not just political and religious freedom. He supported policies and actions that promoted the general welfare and opposed monopolistic power and special privileges or power for the wealthy.

Brandeis summed it all up by saying, “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.” How true these words ring today, almost 100 years later. [3]

[1]      Reich, R., 1/18/24, “Davos duplicity,” Robert Reich’s Daily Blog (https://robertreich.substack.com/p/corporate-enablers-of-dictatorship)

[2]      Massoglia, A., 1/11/24, “Corporate PACs and industry trade groups steered over $108 million to election objectors since Jan. 6,” Open Secrets (https://www.opensecrets.org/news/2024/01/corporate-pacs-and-industry-trade-groups-steered-over-108-million-to-election-objectors-since-jan-6/)

[3]      Dilliard, I., editor, 1941, “Mr. Justice Brandeis: Great American,” with quotes from Lonergan, R., 10/14/41, “A steadfast friend of labor,” Labor (pages 42 – 43) (https://babel.hathitrust.org/cgi/pt?id=mdp.39015009170443&seq=9)

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)

MONEY CONTINUES TO CORRUPT OUR ELECTIONS

It’s likely that over $10 billion will be spent on political campaigns in the 2023 – 2024 election cycle. The bulk of this money comes from wealthy individuals and corporations. This skews our public policies and the enforcement of our laws to favor their special interests because they do expect to get something in return for their investments. Most Republicans and even some Democrats oppose efforts to limit campaign contributions.

(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.)

As we enter the 2024 presidential election year, money is once again, of course, flooding into candidates’ campaigns. It’s no surprise that, with all the money wealthy individuals and corporations are putting into campaigns, public policies and the enforcement of our laws are skewed to their special interests. A key cause of the growing flood of money is the 2010 Citizens United U.S. Supreme Court decision (and related ones) that have equated the spending of money in political campaigns with the right to free speech and have given corporations free speech rights like those granted to human beings by our Bill of Rights.

Although the presidential election year has just begun, huge amounts of money have already flowed into presidential candidates’ campaign coffers. Including each candidate’s campaign committee as well as any super political action committee(s) (PACs) or other “outside” group(s) dedicated to supporting the candidate, the major candidates have already raised the following sums: [1]

  • Biden $147.5 million
  • Trump $139.5 million
  • Haley $105.4 million
  • Kennedy $  0 million

There typically is at least one super PAC or outside group supporting any serious presidential candidate. These groups can raise and spend unlimited amounts of money and some of them work hard to obscure who their donors are (e.g., through “dark money” groups). Legally, PACs and outside groups are supposed to operate independently of the candidate’s committee, but this is true only in theory. They’re often run by former staffers, friends, or even family members. They sometimes share office space or consultants with the candidate’s campaign. Increasingly, these supposedly independent entities are taking on some of the duties traditionally handled by the candidate’s campaign, such as organizing town hall meetings or doing voter outreach. This is happening because currently there’s effectively no enforcement of the requirement for independence as the Federal Election Commission has largely been emasculated by political gridlock.

The political parties are, of course, also raising money. The Democrats and Republicans each have three major committees, a national one, a Senate one, and a House one. The combined fundraising totals for the three committees are: [2]

  • Democrats $315.5 million
  • Republicans $262.8 million

Campaign fundraising will, of course, increase during this election year. It’s likely that each side will spend over $1 billion on the presidential race alone. This is a staggering amount of money and the wealthy individual and corporate donors do expect to get something in return for their investments. Therefore, their money skews the policy topics and alternatives that are on the table for consideration, as well as which ones are enacted and how laws are enforced (or not).

For all federal elections (not just the presidential race), outside spending is greater than it’s ever been. Super PACs and other outside groups have already spent almost $318 million on the presidential and congressional races. This is over six times what had been spent at this point in the last presidential election cycle in 2020. An advertising analyst is predicting that over $10 billion will be spent on political advertising in the 2023 – 2024 election cycle. [3]

Most Republicans and, unfortunately, even some Democrats oppose efforts to limit campaign contributions. Elected officials have successfully used the current system to get elected and the large contributions of wealthy individuals and corporations are typically what got them into office and will keep them there, whether they’re Democrats or Republicans.

Recently, in Virginia, Democrats who control the General Assembly quietly killed a bill that would have limited campaign contributions. Virginia is one of five states with virtually no limits on campaign contributions. Although three-quarters of voters in Virginia – including strong majorities of Democrats (82%) and Republicans (67%) – support contribution limits, bills to do so make no progress in the legislature.

The recent legislation that was killed would have limited individuals’ contributions to Senate and statewide candidates to $20,000 and to $10,000 for House candidates. Typical contribution limits for individuals in other states are between $2,000 and $4,000, and are $3,300 at the federal level. Even these amounts are much more than the average voter can or will contribute. So, the proposed Virginia limits were quite high, but still weren’t acceptable to Democratic legislators there. Overall, campaign contributions for legislative candidates in Virginia have grown from $39 million in 1989 to $191 million in 2023 (after adjusting for inflation). Dominion Energy, the state’s largest publicly-regulated electric utility, was the largest contributor in the 2023 election cycle, giving $11.5 million to candidates and party committees, including almost $700,000 to the Democratic House Speaker. This money is buying access if not outright influence. [4]

Massive campaign spending corrupts our democracy. Many elected officials are beholden to wealthy donors, individuals and corporations. The effects on our government and its policy making are both blatant and subtle, but we certainly do NOT have a democratic government that’s truly of the people, by the people, and for the people.

[1]      Open Secrets, retrieved 2/18/24, “2024 Presidential Race,” (https://www.opensecrets.org/2024-presidential-race)

[2]      Bryner, S., & Glavin, B., 2/1/24, “Three takeaways from 2024 presidential candidate filings,” Open Secrets (https://www.opensecrets.org/news/2024/02/three-takeaways-from-2024-presidential-candidate-campaign-finance-filings)

[3]      Massoglia, A., & Cloutier, J., 1/16/24, “Outside spending on 2024 elections tops $138 million,” Open Secrets (https://www.opensecrets.org/news/2024/01/outside-spending-on-2024-elections-tops-318-million/)

[4]      Cloutier, J., 2/16/24, “Virginia state lawmakers quietly killed a bill to limit campaign donations,” Open Secrets (https://www.opensecrets.org/news/2024/02/virginia-legislature-killed-a-bill-to-limit-campaign-donations)

SHORT TAKES ON IMPORTANT STORIES #2

Here are short takes on four 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: As the political divide in the U.S. widens, it’s been particularly evident in state level policies. States now vary widely in their health care coverage for low-income households under Medicaid and other public health programs. There’s also great variation in the generosity of other public benefits and safety net programs. Minimum wage and gun safety laws vary greatly as do rates of unionization. These and many other state policies affect the well-being and ultimately the longevity of a state’s residents.

Examining life expectancy provides a valuable perspective on the effects of policies on the residents of states and countries. Globally, life expectancy has been increasing in high-income countries for decades. While the U.S.’s life expectancy was increasing, when compared to these other countries it began to fall behind in the 1990s and by 2006 it ranked last. After 2014, life expectancy in the U.S. actually began to decline. By 2021, life expectancy in the U.S. was 76.4 years, compared to 80 to 83 years in European countries and 84.5 years in Japan. Even in China it was 78.2 years.  [1]

The trend in life expectancy varies considerably among U.S. states. Several recent studies provide convincing evidence that the divergence of state-level policies between Democratic and Republican dominated states has contributed significantly to the changes in life expectancy, especially for low-income people. The differences are highlighted by comparing Connecticut and Oklahoma where the policy ideology has shifted the most over the last 60 years. In CT, policies have trended toward Democratic, progressive, or liberal policies and in OK toward Republican or conservative policies. In both states, life expectancy was 71.1 years in 1959. By 2017, life expectancy in CT had increased to 80.7 years, while in OK it had increased to only 75.8 years. [2]

STORY #2: Not content to control just state policies (and harm residents statewide), Republican-controlled states are more and more frequently blocking local governments from enacting policies that benefit their local residents (but that state-level lawmakers don’t like). This trend began in 2016 when North Carolina’s Republican state officials nullified Charlotte’s ordinance protecting LGBTQ rights. Also in 2016, the Republican Alabama state legislature and governor banned local minimum wage laws after Birmingham had enacted one. (Note: Alabama is one of five states (all in the south) that has never enacted a state minimum wage law.) Mississippi’s Republican state lawmakers stripped Jackson of its criminal courts, having the state take over. Nashville’s civilian police review board was prohibited by Tennessee’s Republican state officials.

Texas, which had previously banned municipalities from enacting tenant protections and regulating fracking within their boundaries, for example, has now passed a blanket prohibition on any local law that does more than state law in a wide range of policy arenas, including agriculture, finance, insurance, labor, natural resources, and property rights, as well as in business, commerce, and employment law. Among many other things, this state law negated laws in Austin and Dallas that required water breaks for construction workers, despite scorching hot summer days. Florida is now trying to outdo even Texas’s blanket preemption of local government policy making. [3]

According to the Local Solutions Support Center (which helps municipalities fight state preemption laws), these preemption laws began as special interest legislation pushed by businesses for economic reasons but have now expanded to social issues and the culture war. Over 700 preemption bills have been filed in state legislatures in 2023 and, by October, 90 had been passed, even though they are typically unpopular with the public. They are, however, popular with wealthy business owners who provide campaign money to Republicans. Thirty-one of the largest 35 cities in the U.S. are run by Democrats and most of them have large minority populations, including Black majorities in some southern cities. Pre-emption by Republican state lawmakers prevents Democrats and, in some cases, Blacks from governing in their own communities.

STORY #3: A classic case of pre-emption by state and federal lawmakers has been protecting gun manufacturers and dealers from liability for gun crimes involving violence and deaths using illegally sold guns. In the late 1990s, dozens of cities filed lawsuits against gun manufacturers and dealers. Only one, brought by Gary, Indiana, has survived lawmakers’ protections and legal challenges. Last fall, the judge for the case ordered the gun manufacturers and retailers who are defendants to turn over internal records relevant to the case. It is widely believed that these documents would reveal damaging evidence about the gunmakers’ and sellers’ knowledge of illegal gun sales. Republicans, who hold large majorities in the Indiana state legislature and the governorship, are pushing legislation that would ban cities from suing gun manufacturers or dealers; reserving that power to the state. Not coincidentally, the legislation is retroactive to August 27, 1999, three days before the Gary lawsuit was filed. [4]

STORY #4: With the end of the pandemic’s ban on dropping children and adults from Medicaid health insurance, millions of children are losing health care coverage. States are now allowed to review the current eligibility of children covered by their Medicaid programs. At least 2 million children have already lost coverage and federal researchers estimate that more than 5 million children will eventually lose the health insurance they’ve been getting through Medicaid or the Children’s Health Insurance Program (CHIP). Under the pandemic’s emergency rules, Medicaid enrollment grew and researchers estimate that by 2022 more than half of the children in the U.S. were covered by Medicaid or CHIP. Overall, over 90 million people, more than one-fourth of the population, were enrolled in these health insurance programs. Over 15 million people have now lost their Medicaid coverage based on these eligibility reviews. Because Medicaid and CHIP are joint federal-state programs, the states have significant power to decide who they will cover and who they won’t and what happens to people who lose their coverage. [5] In Massachusetts, for example, 400,000 people have lost their Medicaid coverage, but the state is actively working to help them obtain other health insurance. Over 50,000 of them have signed up for subsidized health insurance under the state’s Health Connector program. [6]

[1]      OECD, 2024, “Life expectancy at birth,” (https://data.oecd.org/healthstat/life-expectancy-at-birth.htm)

[2]      Starr, P., 12/8/23, “The life-or-death cost of conservative power,” The American Prospect (https://prospect.org/health/2023-12-08-life-death-cost-conservative-power/)

[3]      Meyerson, H., 2/6/24, “Pre-preemption,” The American Prospect (https://prospect.org/politics/2024-02-06-pre-preemption/)

[4]      Cook, T., & Coleman, V., 1/30/24, “Indiana lawmakers trying to kill historic suit seeking gun industry accountability,” ProPublica and IndyStar (https://www.propublica.org/article/indiana-guns-gary-lawsuit-gunmakers-hb1235)

[5]      Weiland, N., 11/10/23, “2 million kids lost health coverage,” The Boston Globe  from the New York Times

[6]      Borkhetaria, B., 1/29/24, “MassHealth takes steps to preserve coverage for eligible members,” CommonWealth Beacon (https://commonwealthbeacon.org/the-download/the-download-masshealth-takes-steps-to-preserve-coverage-for-eligible-members/)

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

RESULTS OF FOR-PROFIT HEALTH CARE

Here are some current examples of the results of for-profit health care. First, serious medical errors and complications increase in hospitals after they’ve been bought by private equity firms. Second, acquisitions, consolidations, and vertical integration are rampant throughout the U.S. health care system leading to monopolistic power and behaviors.

This is the tenth post in a series on how the U.S. health care system is a profit-driven system. The first post presented an overview of the system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described large-scale vertical integration and the related problems and illegal behavior. The sixth post describes egregious illegal and unethical behavior that is all too common among nursing home operators. The seventh post highlighted how doctors are pushing back. The eighth and ninth posts described anti-competitive and often illegal practices by drug companies that are jacking up drug prices in the U.S. and what can be done about it.

(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.)

The rate of serious medical errors and complications increased by 25% or more in some hospitals after they were bought by private equity (PE) firms. A recent study of 51 hospitals between 2009 and 2019 found that in the three years after a hospital was bought by a private equity firm, infections, bed sores, and falls all increased by 25% or more. Reduced staffing is likely to be a major contributor to this increase in adverse outcomes. [1] [2]

Over the last 20 years, private equity firms have been major buyers of hospitals and other pieces of our health care system. For example, two PE-owned companies now dominate the motorized wheelchair business. To reduce costs and maximize profits, they a) use lower quality parts, which lead to more breakdowns and malfunctions; and b) have reduced the number of repair technicians so there are long waits for repairs. [3] [4]

The private equity model is to buy a business, saddle it with high levels of debt and/or rent (after profiting from selling its real estate), take (often excessive) fees and dividends, maximize short-term profits, and then sell what’s left of the business or file for bankruptcy. The PE model has led to monopolistic consolidations, staffing cuts (often compromising quality and safety), financial manipulation, disruptive bankruptcies, and reduced quality, access, and affordability of health care for many Americans. (See previous posts here and here for more details.)

In addition to private equity firms’ activities, acquisitions and consolidations are rampant throughout the U.S. health care system. Although large health care providers and vertical integration can, in theory, lead to efficiencies and lower costs, the extreme-concentration and vertical integration that’s occurring is leading to higher costs, along with reduced quality and access. (See previous posts here and here for more details on vertical integration in the health care system.)

A recent example of an acquisition creating increased consolidation and vertical integration is CVS’s purchase of Oak Street Health and its 169 clinics for $22 billion. Oak Street serves patients over 65 who are on Medicare and “its lucrative privatized cousin, Medicare Advantage.” So, another health system giant gets bigger by adding to the 11% of Medicare Advantage patients already covered by its Aetna subsidiary. [5] This increases CVS’s opportunities for profit growth through monopolistic power and vertical integration.

In another recent example, UnitedHealth, already the largest health care conglomerate, purchased Amedisys, a provider of home health and hospice care, in June 2023 for $3.3 billion. This gives UnitedHealth the ability to direct more of its Medicare patients (it runs the country’s largest Medicare Advantage plan) to itself, keeping the money and profits in-house. Home health and hospice care have some of the largest Medicare profit margins, 22% and 17% respectively, based on the latest data from the Medicare Payment Advisory Commission. [6]

As another example, local drug stores and pharmacies have been replaced by giant chains like CVS and Walgreens. Having gained large degrees of local market domination, they are now closing hundreds of stores to maximize profits, leaving some customers with long and inconvenient trips to get their medications. In a 1933 U.S. Supreme Court decision that stopped states from charging higher fees to chain store retailers in an effort to protect local businesses, Justice Louis Brandeis wrote a famous and prescient dissent. He wrote that opposition to the growth of chain stores was occurring because “furthering the concentration of wealth and of power and … promoting absentee ownership, is thwarting American ideals; that it is making impossible equality of opportunity; that it is converting independent tradesmen into clerks; and that it is sapping the resources, the vigor and the hope of the smaller cities and towns.” France, in contrast to U.S. policies, requires that a pharmacy must be owned by a licensed pharmacist, who is limited to having only one store! [7]

In addition to the large multi-state, billion-dollar acquisitions, many local and regional acquisitions occurred in 2023. Local or regional hospitals, physicians’ practices, and other health care providers are consolidating to boost their market share, which increases their negotiating leverage with insurers, allowing them to charge higher prices. These regional consolidations that provide monopolistic power to providers are occurring all over the country from Florida to Colorado and from Massachusetts to California.

[1]      Abelson, R., & Sanger-Katz, M., 12/27/23, “JAMA study notes rise in medical errors: Increase seen in hospitals bought by private equity,” The Boston Globe from the New York Times

[2]      Kannan S., Bruch, J. D., & Song, Z., 12/26/23, “Changes in hospital adverse events and patient outcomes associated with private equity acquisition,” Journal of the American Medical Association (https://jamanetwork.com/journals/jama/article-abstract/2813379)

[3]      Editorial Board, 1/17/24, “Scrutinize private equity’s involvement in health care,” The Boston Globe

[4]      Roberts, P., May-June 2022, “Two behemoths dominate the motorized wheelchair industry. Disabled customers pay the price,” Mother Jones (https://www.motherjones.com/politics/2022/05/motorized-wheelchairs-numotion-national-seating-mobility/)

[5]      Herman, B., & Bannow, T., 12/30/23, “2023 saw several health care deals that changed the landscape,” The Boston Globe

[6]      Herman, B., & Bannow, T., 12/30/23, see above

[7]      Kuttner R., 1/19/24, “Saving local retail,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2024-01-19-saving-local-retail/)

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”)

TRUMP’S FOREIGN CONFLICTS OF INTEREST

Former president Trump’s criminal and civil court cases have been getting a lot of attention lately. Lost in all of this activity – and to-date unprosecuted – are his substantial conflicts of interest while president based on his foreign businesses and his interactions with foreign government officials and business people. Given the strong evidence that his decisions and actions as President were influenced by these relationships, these conflicts of interest are likely violations of the Constitution, as well as ethics and bribery laws.

(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. Click on the Subscribe Today button to receive notification of new posts.)

The Foreign Emoluments Clause in Article 1 of the Constitution states that “[N]o Person holding any Office of … [the United States], shall … accept … any present, Emolument [i.e., benefit], … of any kind whatever, from any … foreign State.” President Trump probably violated this provision of the Constitution in three different ways. First, he failed to disclose gifts worth more than $250,000 that he received from foreign governments or officials. (U.S. House Committee on Oversight and Accountability, 3/17/23, “Oversight Democrats release evidence showing Trump first family failed to disclose and account for more than $250,000 worth of foreign government gifts”)

Second, four of his U.S. businesses received at least $7.8 million from foreign entities in 20 countries in his first two years in office. This total is from only four of Trump’s over 500 businesses and is in a report from a congressional investigation based on records from the Trump organization’s accounting firm. The investigation was ended by Republicans when they took control of the House in 2022 and they told the accounting firm it did not need to provide documents it had been ordered to provide by a court. The bulk of this money, $5.6 million, came from China and most of it from a Chinese bank that leased space in the Trump Tower in New York. The other countries topping the list are Saudi Arabia ($615,000), Qatar ($466,000), Kuwait, ($303,000), India ($283,000), and Malaysia ($249,000). (Konig, J., Semyon, C., & Diamante, R., 1/4/24, “Trump collected millions from China, other foreign governments as president, House Democratic report says,” Spectrum News; Beitsch, R., 1/4/24, “Trump businesses took in nearly $8 million from foreign governments: House Democrats,” The Hill)

These countries, and indeed all countries, have significant interests in U.S. foreign policy decisions. Therefore, this revenue to the Trump Organization created conflicts of interest for President Trump. For example, Trump was making decisions that significantly affected trade with China, including the imposition of tariffs. The Trump administration was also deciding on a $100 billion arms deal with Saudi Arabia, as well as deciding how to respond to the murder of American journalist Jamal Khashoggi by the Saudi government.

Third, data from the first two years of Trump’s presidency show that he was making substantial sums of money from his foreign properties and interests, while also continuing to pursue new ventures despite a promise not to do so. Trump had properties and licensing arrangements in at least 30 countries including China, Qatar, Russia, Saudia Arabia, Turkey, and the United Arab Emirates. His foreign assets were worth at least $130 million. In many cases, it appears foreign business and political leaders were making efforts to gain influence with Trump.(Massoglia, A., & Evers-Hillstrom, K., 6/4/19, “World of influence: A guide to Trump’s foreign business interests,” Open Secrets)

Based on an analysis of Trump’s tax returns, he made as much as $160 million from foreign business activities while president. Although it is probably impossible to know with certainty, there’s plenty of evidence to suggest that Trump’s actions as president were influenced by his financial interests. For example, his decision to abruptly end U.S. support for the Kurdish people on the Turkey-Syria border was highly appreciated by Turkey’s political leaders. Trump’s actions supporting the Chinese company ZTE after it had been sanctioned for allowing its products to be used to spy on Americans was shocking to many, including Republicans and the intelligence services. Meanwhile, Trump’s tax returns showed more than $7.5 million in income from China. In Argentina, Trump delayed enacting tariffs until after trademarks for his company had been approved. Trump pushed the British government to hold the British Open golf tournament at one of his Scottish golf courses. And the list of foreign conflicts of interest goes on and on. (Jacobs, R., & Maguire, R., 4/13/23, “Trump made up to $160 million from foreign countries as president,” Citizens for Responsibility and Ethics in Washington)

Trump will probably never be prosecuted for these conflicts of interest (although several groups have filed related lawsuits) but their effects on U.S. domestic and foreign policies, as well as actions taken and not taken by the federal government, were very significant and should not be forgotten. With this context, the hypocrisy of congressional Republicans’ “investigation” of Hunter Biden’s business activities is mind boggling. This hypocrisy is underscored by the lack of investigation of Trump’s son-in-law, Jared Kushner, and the $2 billion investment his new asset management firm received from the Saudis shortly after he left his White House role overseeing Mideast policy.

U.S. DRUG PRICES ARE A RIP-OFF Part 2

U.S. drug prices are 1 ½ to 3 times higher than they are in other well-off countries. Here are five steps our federal government should take to stop the ubiquitous anti-competitive strategies used by the pharmaceutical industry to jack up drug prices and profits. Inflated drug prices have dramatic, negative effects on people’s health and financial well-being.

This is the ninth post in a series on how the U.S. health care system is a profit-driven system. The first post presented an overview of the system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described large-scale vertical integration and the related problems and illegal behavior. The sixth post describes egregious illegal and unethical behavior that is all too common among nursing home operators. The seventh post highlighted how doctors are pushing back against health care for profits rather than for patients.  The eighth post presented an overview of how anti-competitive and often illegal practices by drug companies are jacking up drug prices in the U.S.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog is here. Click on the Subscribe Today button to receive notification of new posts.)

My previous post presented an overview of the anti-competitive and often illegal practices used by drug companies that result in U.S. drug prices being 1 ½ to 3 times higher than they are in other well-off countries. Importation of drugs from Canada could save consumers and governments hundreds of millions of dollars every year. Here are some specific examples of drug company rip-offs and some policies that could address the problem of exorbitant drug prices.

A classic example of the abuses of patents and monopolistic power is the EpiPen. The EpiPen injects a pre-loaded dose of epinephrine (which counteracts a potentially fatal allergic reaction) with the push of a button. Both this auto-injector technology and the drug are over 50 years old. However, Viatris Inc. (formerly Mylan) has maintained a patent-driven monopoly on the EpiPen and typically charges over $600 for one, although the cost to produce it is just a few dollars. It regularly files for new patents based on minor changes that allow it to block generics from the market. [1]

In 2022, Viatris paid $264 million to settle an antitrust lawsuit for illegally blocking generic competition for the EpiPen – a small penalty given Viatris’s $2 billion in profits in 2022. (I’ve previously written about high drug prices, including the EpiPen, in 2022 and 2016.)

Another abuse of the patent system is the filing of multiple patents on a particular drug. An investigation by the Initiative for Medicines, Access, and Knowledge (I-MAK) found that for the ten most frequently sold drugs in the U.S. companies had obtained an average of 74 patents on each of them! [2] Furthermore, there were an average 140 patent applications on each of these ten drugs and two-thirds of them were submitted after the drug was approved for sale by the FDA. One study found that 78% of drug patents are NOT for new drugs. [3]

Numerous patents on a drug are referred to as a “patent thicket” and its goal is to put a huge roadblock in front of any potential competitor even after the original patent expires. Cutting through this patent thicket to establish the legal right to market a generic version of the drug is likely to take years and to cost millions of dollars in legal fees.

Humira, an arthritis drug made by AbbVie Inc., is an example. AbbVie filed for 312 patents on the drug; 293 of them after it had gotten FDA approval! Of those, 166 were granted and extended the patent-based monopoly on the drug for seven years, from 2016 to 2023. About two-thirds of the money AbbVie got for selling Humira, or about $100 billion, came in the seven-year extension period. For sake of comparison, AbbVie got 6.4 times as many patents on Humira in the U.S. as it did in the European Union, where its 26 patents expired in 2018.

A report from the American Economic Liberties Project and the Initiative for Medicines, Access, and Knowledge (I-MAK) identified ten illegal, anti-competitive strategies used by the pharmaceutical industry to inflate drug prices (see this previous post for details) and also identified policy fixes, including: [4]

  1. Prohibiting payments to potential competitors to NOT produce generic alternatives.
  2. Tightening the U.S. patent office’s procedures and standards in order to eliminate fraud and abuse. Patents shouldn’t be issued for new products that are minor tweaks of existing products, as they are used simply to extend the life of the original patent and prevent generic alternatives from entering the market. Filings that simply delay the approval of generics should be prohibited or ignored. The patent office also needs more staff, resources, and medical expertise to deal with the barrage of patent applications from the pharmaceutical industry.
  3. Streamlining the FDA’s approval of generics, including ignoring attempts by makers of patented drugs to slow or block approvals.
  4. Strengthening antitrust enforcement, in part by increasing funding and personnel. For sake of comparison, the FDA has 14,000 employees to review and approve drugs, while antitrust enforcement has only a few dozen working on pharmaceutical industry cases.
  5. Increasing penalties on violators. Clearly, current penalties have been insufficient to deter persistent and repetitive illegal behavior. Both companies and corporate executives need to be more harshly punished. Delaying generic competition and other illegal behaviors are very profitable, therefore significant penalties need to be levied to discourage them.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to take strong action to stop anti-competitive practices in the pharmaceutical industry and to rein in drug prices. 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., 8/7/23, “Eminent domain for overpriced drugs,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-08-07-eminent-domain-overpriced-drugs/)

[2]      Initiative for Medicines, Access, and Knowledge, Sept. 2023, “Overpatented, overpriced,” (https://www.i-mak.org/wp-content/uploads/2022/09/Overpatented-Overpriced-2022-FINAL.pdf) 

[3]      Cooper, R., 6/6/23, “How Big Pharma rigged the patent system,” The American Prospect (https://prospect.org/health/2023-06-06-how-big-pharma-rigged-patent-system/)

[4]      American Economic Liberties Project and the Initiative for Medicines, Access, and Knowledge, May 2023, “The costs of pharma cheating,” (https://www.economicliberties.us/wp-content/uploads/2023/05/AELP_052023_PharmaCheats_Report_FINAL.pdf)

U.S. DRUG PRICES ARE A RIP-OFF

U.S. drug prices have long been a classic example of the corporate, profit maximization mentality that puts profits before people. The lack of regulation and antitrust enforcement in the face of ubiquitous anti-competitive strategies by the pharmaceutical industry have allowed this rip-off to go on for far too long with horrible effects on people’s health and financial well-being.

This is the eighth post in a series on how the U.S. health care system is a profit-driven system. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described large-scale vertical integration and the problems and illegal behavior that have occurred with it. The sixth post describes an example of the egregious illegal and unethical behavior that is all too common among nursing home operators. The seventh post highlighted how doctors are pushing back against health care for profits rather than for patients.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog is here. Click on the Subscribe Today button to receive notification of new posts.)

Drug prices are far higher in the U.S. than in other well-off countries. Per person drug spending in the U.S. is over three times what it is in the Netherlands, Norway, and Sweden; it’s one and a half times what it is in Switzerland, the next highest among the nine high-income countries in this study. [1] This is largely due to higher prices and not other factors.

A recent and rather dramatic example of how high drug prices are in the U.S. is that the U.S. Food and Drug Administration (FDA) just allowed Florida to buy drugs in bulk from Canada for its public health programs including Medicaid and incarcerated people’s health care. It is estimated that this will save Florida $150 million a year! Eight other states have laws allowing state drug importation and have asked, or plan to ask, the FDA for approval for similar bulk purchasing plans. There is broad (80% in some polls) and bipartisan support for drug importation from Canada to reduce drug costs. [2]

Congress passed a law allowing drug importation 20 years ago but the federal government has delayed its implementation, supposedly because of safety concerns. However, in many cases, the drugs are from the same manufacturer, just sold through a Canadian distributor.

The pharmaceutical industry, through its lobbying organization, the Pharmaceutical Research and Manufacturers of America (PhRMA), has fiercely opposed drug importation and has sued multiple times to block bulk drug importation plans. It is expected to file a lawsuit to block, or at least delay, Florida’s program.

Some drug manufacturers have agreements with Canadian distributors that prevent the distributors from exporting their drugs to the U.S. The Canadian government has taken steps to block the exportation of drugs that are in short supply, as the U.S. market is, of course, much bigger than the Canadian market.

It is estimated that the pharmaceutical industry’s aggressive and sometimes illegal efforts to keep drug prices high and block competition cost U.S. consumers, insurers, and government health programs (i.e., taxpayers) at least $40 billion every year. [3] As a result, one of out every four Americans can’t afford their prescribed medications. [4]

A study by the American Economic Liberties Project and the Initiative for Medicines, Access, and Knowledge (I-MAK) identified ten illegal, anti-competitive strategies used by the pharmaceutical industry to inflate drug prices. Its examination of the 100 most-used drugs in Medicare and Medicaid in 2019 estimated that the programs’ costs for them were inflated by $15 billion (14%) and $3 billion (9%), respectively. These two public programs are responsible for 45% of drug expenditures in the U.S. Other drug purchasers paid $22 billion more for these drugs due to the illegal, anti-competitive practices of the pharmaceutical industry. For example, it was estimated that Medicare and Medicaid would have paid 50% less for insulin in the absence of illegal practices by the four major insulin manufacturers. [5]

The anti-competitive practices of the pharmaceutical industry include:

  • Paying potential competitors not to sell generic alternatives to drugs,
  • Patent fraud and abuse including false statements to the patent office and sham patent lawsuits,
  • Fraudulent tactics to delay approval of a competing drug, often a generic alternative,
  • Collusion among competitors to increase prices,
  • Mergers, acquisitions, and monopolistic behavior, and
  • Rebates to drug insurance plans to steer consumers to brand name drugs and away from cheaper generic drugs. (These rebates are indistinguishable from bribes or kickbacks.)

My next post will highlight some specific examples of these anti-competitive practices and will present some policy changes that would reduce these abuses.

[1]      Sarnak, D. O., Squires, D., Kuzmak, G., & Bishop, S., Oct. 2017, “Paying for prescription drugs around the world: Why is the U.S. and outlier?” The Commonwealth Fund (https://www.commonwealthfund.org/sites/default/files/documents/___media_files_publications_issue_brief_2017_oct_sarnak_paying_for_rx_ib_v2.pdf)

[2]      Jewett, C., & Stolberg, S. G., 1/6/24, “FDA issues first approval for mass drug imports to states from Canada,” The Boston Globe from The New York Times

[3]      Johnson, J., 5/16/23, “Big Pharma’s ‘rampant corporate lawlessness’ cost Americans $40 billion in 2019: Report,” Common Dreams (https://www.commondreams.org/news/big-pharma-corporate-lawlessness)

[4]      American Economic Liberties Project and the Initiative for Medicines, Access, and Knowledge, May 2023, “The costs of pharma cheating,” (https://www.economicliberties.us/wp-content/uploads/2023/05/AELP_052023_PharmaCheats_Report_FINAL.pdf)

[5]      American Economic Liberties Project and the Initiative for Medicines, Access, and Knowledge, May 2023, see above

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

DOCTORS ARE FIGHTING FOR-PROFIT HEALTH CARE BY UNIONIZING

The U.S. health care system has been taken over by a corporate, big business mentality where profits rather than patients are the priority. The result is a system with very high costs, poor outcomes, and widespread fraud. It’s a system that doctors increasingly find unrewarding to work in and in violation of their ability and ethical desire to deliver quality care.

This is the seventh post in a series on how the U.S. health care system has become a profit-driven system. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described the large-scale vertical integration of UnitedHealth Group and the problems and illegal behavior that have occurred with it. The sixth post focused on a particularly egregious example of illegal and unethical behavior by a nursing home operator with a small degree of vertical integration.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: The new, more user-friendly website for my blog is here. Click on the Subscribe Today button to receive notification of new posts.)

With the takeover of the U.S. health care system by large, corporate, for-profit providers, doctors are increasingly becoming employees, rather than small business practitioners. In 2012, only 5.6% of doctors were direct hospital employees and 60% were in physician-owned practices. By 2022, 52.1% of doctors were direct hospital employees and another 21.8% were employed by other corporate entities, [1] a complete reversal of the employment pattern in just ten years.

Furthermore, health care providers’ monopolistic concentration has left doctors with only a few employment options in many geographic areas. In 2016, 90% of all metropolitan areas had highly concentrated hospital markets. For example, in Pittsburgh, 71% of hospital beds are owned by a single company. In a quarter of metropolitan areas, more than 30% of doctors are employed by a single private equity firm. In 2021, private equity firms bought 484 physician practices. It’s estimated that private equity firms control between 25% and 40% of the staffing in emergency rooms nationwide.

As my previous posts have highlighted, monopolistic consolidation and private equity ownership in the health care system have led to higher costs, reduced access, worse health outcomes, and significant illegal behavior. In this profit-driven health care system, doctors are frequently not allowed to spend the time with patients they need to to deliver quality care. It’s not unusual for a primary care doctor to have 2,500 to 3,000 patients. With this many patients, personalized care is practically impossible and the primary care doctor’s job has largely been reduced to five-minute time slots to make a diagnosis and a referral to a specialist. Insurance typically pays only $30 to $60 for a primary care visit and the doctor typically gets just half of that. [2]

Doctors are pushing back by unionizing. Currently only 5.9% of doctors are unionized. However, the Committee of Interns and Residents (CIR), an affiliate of the Service Employees International Union (SEIU), has grown from 19,000 to 30,000 members in the last two years. It has won union recognition elections by large margins in hospitals from Boston to California. A poll in November 2022 found that 51% of clinicians would be willing to join a union. Doctors are resorting to unionization as the only way to have a voice in the for-profit health care system and to push for more patient-centered, humane health care.

Health care employers have responded just like other corporate employers: they’ve hired big name, expensive law firms that specialize in blocking unions. In addition to opposing union organizing up-front, including unionization elections, these law firms are perhaps most effective after a successful election when they challenge the vote and delay the bargaining that establishes the initial contract.

Another way doctors are pushing back is by leaving the system and starting what are called direct primary care (DPC) practices. In DPC, doctors don’t accept any insurance, including Medicare and Medicaid. Patients pay an up-front cash subscription fee of $75 to $100 per month. The doctor typically has around 600 patients and they have direct access to the doctor and hour-long appointments. The doctors often serve as their own pharmacists and link patients to needed services at low, wholesale prices (with only a small processing fee added on) to allow patients to access services with less frustration and lower costs than dealing with the mainstream health care system on their own.

The doctors with DPC practices find it a more rewarding way to practice medicine both in terms of their patients’ health outcomes and experiences, as well as their own personal, professional lives. DPC is great for patients who can afford the out-of-pocket costs.

The fact that doctors are finding that they must unionize or leave the system to have some control over their ability to deliver quality health care says a lot about how bad the for-profit health care system is. More and more doctors are supporting a public, single-payer system as the viable and better alternative to the current for-profit health care system.

A single-payer system is the only way to both ensure quality and control costs, as Don Berwick, M.D., has stated. (Berwick is the former head of the Centers for Medicare and Medicaid Services, the federal agency that oversees those public health insurance programs.)

[1]      Meyerson, H., 8/4/23,  “When M.D.s go union,” The American Prospect (https://prospect.org/health/2023-08-04-when-mds-go-union/)

[2]      Arnold, S., M.D., & Tkacik, M., 7/31/23, “My life in corporate medicine,” The American Prospect (https://prospect.org/health/2023-07-31-my-life-in-corporate-medicine/)

VERTICAL INTEGRATION AND ILLEGAL BEHAVIOR IN HEALTH CARE

Vertical integration in our health care system creates significant conflicts of interest and opportunities for illegal behavior – even when it’s at a relatively small scale (at least when compared to UnitedHealth Group as described in my previous posts here and here). It facilitates greed and putting profits before patients.

This is the fifth post in a series on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth and fifth posts described the large-scale vertical integration of UnitedHealth Group and the problems and illegal behavior that have occurred there.

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

Nursing homes became a growth industry in the late 1960s as people lived longer and the federal government began paying billions of dollars for nursing home care through Medicare and Medicaid. With lax oversight, nursing homes became a golden opportunity for greedy entrepreneurs willing to cut corners on patient care and engaged in other questionable business practices.

For example, beginning in the late 1960s, Morris Esformes founded and built a chain of nursing homes. By the 1990s, he was among the most successful (i.e., wealthy) nursing home operators in Chicago, and also owned nursing homes in Missouri and Florida. His son, Philip, joined the family business and eventually took it over. They added skilled nursing and assisted living facilities, as well as home health providers and a small hospital to their limited set of vertically integrated health care services. [1]

Morris always seemed to be pushing boundaries – cutting corners on patient care, allegedly bribing a state official, and billing for fictitious services. Until 2016, he and Philip always managed to avoid any significant consequences.

Keeping beds occupied, and therefore generating revenue, is key to making money from the facilities they owned. To this end, Esformes’ facilities accepted a growing number of patients with mental illnesses. They also accepted homeless people and those with drug addiction, including significant numbers of ex-convicts. Eventually, the Esformeses were paying kickbacks to doctors and others who would send patients to their facilities, sometimes on fictitious grounds.

Their facilities were under-staffed and under-equipped, especially for serving the especially challenged populations they courted to keep their beds occupied and generating revenue. They also fraudulently billed Medicare and Medicaid, and set up dozens of shell companies to launder money so it appeared their facilities were barely profitable. Meanwhile, they spent lavishly on building connections to politicians and others who helped them, hosting expensive parties that sometimes included prostitutes.

Their small-scale vertical integration nonetheless allowed them to cycle patients among their various facilities. For example, a 72-hour hospital stay made patients eligible for their skilled nursing facilities, which were a particularly profitable part of their businesses. Medicare would pay for up to 100 days at a skilled nursing facility. Then, the patient could be transferred to one of their assisted living facilities and after 60 days there, the patient would be eligible for another 100 days at their skilled nursing facility. In 2004, the Esformeses settled a civil fraud case with the Justice Department for $15 million and no admission of guilt over their practice of shuttling patients between their hospital and skilled nursing facilities.

Between 2013 and 2018, the Esformes’ facilities were the subjects of more than two dozen wrongful death complaints. Most were settled without any admission of guilt. Some of their nursing homes were among the lowest on the federal quality rating system, but no meaningful sanctions were imposed. In 2009, Philip Esformes was an unindicted co-conspirator in a federal bribery and kickback conspiracy case in which another Chicago facility owner was convicted.

In 2016, Philip Esformes was arrested and charged with health care fraud, giving and getting illegal kickbacks, money laundering, obstruction of justice, and other offenses. He was convicted after an eight-week trial in 2019 and sentenced to 20 years in prison. Prosecutors described him as the central figure in the “largest single criminal health care fraud case ever brought against individuals by the Department of Justice,” citing over $1 billion in false reimbursement claims.

However, this was not the end of the story. During Philip’s prosecution, his father, Morris, from whom Philip had inherited the businesses, made a $65,000 contribution to the Aleph Institute, one of Jared Kusher’s favorite charities. In 2020, after President Trump had been voted out of office, Kushner (Trump’s son-in-law) was actively involved in the clemency decisions Trump was making. In December 2020, Trump commuted Philip’s sentence and ordered him released from prison, in a very unorthodox clemency grant. Philip’s conviction remains on his record as does an order for $44 million in restitution and penalties. (Court records listed his net assets at $78 million.)

Justice Department officials, in an unprecedented move of their own, are planning to charge and try Philip again. Although the jury convicted him on over two dozen charges, they were unable to reach a verdict on others, including the very significant charge of conspiracy to commit health care and wire fraud. The prohibition on double jeopardy, i.e., on retrying a defendant on charges they were found innocent of, does not apply to charges on which no verdict was rendered. Apparently, these charges were also not included in the grant of clemency.

This is one example, albeit a very egregious one, of illegal behavior by a nursing home and skilled nursing facility operator. A simple on-line search will find multiple examples of such illegal behavior and lawsuits. It will also find multiple sources with information about how to avoid and report this illegal behavior.

[1]      Pomorski, C., Nov. / Dec. 2023, “The untouchables: Donald Trump freed a convicted Medicare fraudster. The Justice Department wants him back,” Mother Jones (https://www.motherjones.com/politics/2023/11/philip-esformes-trial-morris-medicare-fraud-prosecution-donald-trump-clemency/)

VERTICAL INTEGRATION EXACERBATES PROFITEERING IN HEALTH CARE Part 2

UnitedHealth Group is a huge corporation that owns companies in every piece of the health care system. This vertical integration creates major conflicts of interest and opportunities for monopolistic behavior. It exacerbates the incentive to put profits before patients and tends to lead to illegal behavior. However, United’s vertical integration has created what amounts to a single-payer health care system.

This is the fifth post in a series on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms. The fourth post described how vertical integration creates opportunities for monopolistic behavior and exacerbates the incentive to put profits before patients.

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

UnitedHealth Group (United) is a huge, vertically-integrated, health care corporation. My previous post described how this vertical integration creates opportunities for monopolistic behavior and exacerbates the incentive to put profits before patients. Vertical integration also tends to lead to illegal behavior.

In 2002, 700,000 physicians filed a class action lawsuit against United and nine other managed care insurance companies for fraud and racketeering. They claimed that these insurers systematically denied and delayed payment to physicians and profited by doing so. The lawsuit went on for years. Most insurers settled out of court, but United fought on and eventually, in 2006, got a judge to dismiss the charges. The judge ruled that the free market should be allowed to operate unless Congress stepped in to regulate the health care system. [1]

A 2011 lawsuit against United detailed how it was profiteering by gaming Medicare’s per patient payment rates. United reported that its Medicare Advantage insurees were sicker than they actually were, thereby qualifying it for higher payments. The lawsuit was based on information from a whistleblower – United’s former finance director.

Medicare also tried to control insurers’ profiteering by requiring insurers to spend 80% to 85% of premiums on patient care. However, United’s vertical integration allowed it meet this criterion by shifting money internally, increasing payments for patient care to its own health services subsidiary, Optum.

Since 2010, United’s Optum subsidiary has made 28 purchases of physicians’ group practices, including one that had 15,000 doctor’s offices. Typically, it bought small physicians’ groups one at a time to avoid requirements to report purchases to regulators. Optum’s revenue grew from $29 billion in 2011 to $183 billion in 2022.

United also bought companies that provided unbiased benchmarks on industry-wide health care billing rates, which determine how much it (and other insurers) must pay for health care services. After it acquired essentially every company that provided such billing data, it wasn’t long before the New York State Attorney General sued United for manipulating the published benchmark rates so that it (and other insurers) had to pay less than a fair rate for health services. United settled the case for $50 million and a commitment to set up a non-profit entity to provide billing data.

United’s vertical integration creates numerous conflicts of interest. For example, one lawsuit claimed that United nursing homes denied services, such as hospitalization, to patients on its Medicare Advantage insurance plan. This kept the patient and the associated revenue flowing to its nursing home, while saving its Medicare Advantage plan from having to pay for hospital care. During the lawsuit, it was revealed that its nursing home facilities and nurses received bonuses for low hospitalization rates. Nurses were also required to encourage patients to sign “do not resuscitate” agreements. A patient’s death, of course, eliminated the need for United’s Medicare Advantage insurance to pay for additional services. Clearly, profits are being put before patients’ needs and vertical integration increases the incentives for doing so.

Not only was United aggressive in the market place, its CEO was aggressive in putting money in his own pocket. In 2006, an outside review of employee stock options found that United executives were regularly and illegally backdating stock option transactions to maximize their benefits. CEO William McGuire was the chief beneficiary, having backdated most or all of his 44 million stock options over the previous decade. He also received $5 million in cash bonuses due to errors in calculating stock-based compensation. McGuire resigned in October 2006, was fined $7 million, returned $600 million of illegal gains to United, and was barred from being a director or officer of a public corporation for 10 years, but walked away with $800 million.

Nonetheless, the backdating of stock options appears to have continued at United. A shareholder lawsuit in 2008 alleged that the new CEO offered backdated options to new employees. Although United denied the allegations, it settled this subsequent case for $895 million.

United’s vertical integration has created what amounts to a single-payer health care system. Others in the health care business are emulating United’s vertical integration strategy. With strong, public utility-like regulation, these huge health care companies could become the country’s single-payer system. It might be far easier to get to a single-payer system by regulating these private entities than trying to create a Medicare for All single-payer system, especially given the significant privatization of Medicare through Medicare Advantage.

[1]      Brown, K., & Sirota, S., 8/2/23, “Health care’s intertwined colossus,” The American Prospect (https://prospect.org/health/2023-08-02-health-cares-intertwined-colossus/) This post is, for the most part, a summary of this article.

VERTICAL INTEGRATION UNDERMINES QUALITY HEALTH CARE Part 1

UnitedHealth Group is a huge corporation that owns businesses in every part of the health care system. This is called vertical integration and creates major conflicts of interest along with opportunities for monopolistic behavior. It furthers the ability and incentives to put profits before patients.

This is the fourth post in a series on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes. The first post presented an overview of the for-profit U.S. health care system. The second and third ones focused on the role of the extreme capitalism of private equity firms in the health care system.

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

UnitedHealth Group (United) is a huge corporation that owns an insurance company, primary care and mental health clinics, surgical and urgent care centers, pharmacies and a pharmacy benefit manager, home health and hospice agencies, a bank, and much more. It is the fifth largest publicly-traded corporation in the U.S., as well as the country’s largest and most powerful health care company. Its health services division, Optum, has 103 million patients (almost a third of the U.S. population), revenue of $186 billion a year, and profits of over $28 billion. It’s the country’s largest employer of doctors – 70,000 of them – across 2,200 locations. Its health insurance business covers 50 million people. [1]

This is called vertical integration – when a company owns multiple parts of a supply chain, i.e., when a company owns companies that supply goods or services to it. United owns so many companies (i.e., subsidiaries) that one quarter of its revenue comes from its subsidiaries.

Vertical integration creates opportunities for monopolistic behavior, although the more common horizontal integration (i.e., domination of the market for a particular good or service) is what’s typically monopolistic. United’s vertical integration is designed to maximize profits via monopolistic behavior, i.e., by exerting control over patients, providers, and payers, including the government. It also creates conflicts of interest.

United began in 1974 as Charter Med. Health Maintenance Organizations (HMOs) were being created in an effort to control rapidly rising health care cost. However, they were required to be non-profit organizations run by doctors. Charter Med, a for-profit, non-doctor run company, created a loophole by contracting with non-profit HMOs to provide management services. These HMO contracts were the beginning of managed care, where the power to control health care spending is in the hands of insurance companies rather than health care providers.

In 1982, United introduced the use of a list of approved prescription drugs with tiered co-payments that its insurance would pay for. This list, called a drug formulary, was a strategy for reducing spending on drugs. Two years later it introduced a new business model where the drugs on its formulary were linked to “rebates” (aka kickbacks) from drug manufacturers. This spawned a whole new industry – and opportunity to make profits – the creation of pharmacy benefit managers (PBMs). United marketed its PBM services to HMOs.

United grew rapidly from revenue of $13 million in 1984 to $606 million in 1990. Its growth was aided by states relaxing the requirement that HMOs be non-profits, which allowed United to buy several HMOs. United also bought a large, traditional, fee-for-service insurer.

In 1990, the federal government created an exemption to anti-kickback laws to allow pharmacy benefit managers to legally get “rebates” from drug manufacturers. Higher drug prices produce bigger rebates and bigger profits for PBMs. Therefore, this business model results in higher costs for patients because PBMs get more revenue and profit from the use of expensive brand-name drugs than from cheaper generic drugs. It also tends to put private pharmacies out of business by favoring the big chain drug stores’ pharmacies. By 2022, United’s PBM, Optum Rx, had almost $100 billion in revenue.

As early as the mid-1990s, United’s size and vertical integration gave it “critical mass,” as it wrote in an SEC filing. This meant it had monopolistic power to demand lower prices from doctors and hospitals, to undercut rival insurers, and to drive out competition. United’s implementation of aggressive managed care practices and their detrimental effects on patient care led to a powerful backlash. In the late 1990s, over 400 bills regulating managed care practices were introduced in state legislatures based on evidence that United and other health plans were denying treatment for patients and incentivizing doctors to limit services.

Nonetheless, United continued its expansion through acquisitions and contracts to manage government paid health care provided under Medicare and Medicaid. By 2002, it was overseeing the care of over 1 million Medicaid enrollees and 6 million Medicare beneficiaries in its Medicare Advantage plan.

By 2020, United had the largest Medicare Advantage plan in the country with 26% of the market and roughly $80 billion in revenue. I’ve written extensively about how Medicare Advantage plans undermine Medicare and how corrupt the Medicare Advantage plan providers are. (See previous posts here, here, and here.) United and other Medicare Advantage plan providers engaged in a multi-million dollar lobbying campaign to stop the federal government from reducing excessive payments to Medicare Advantage plans, as was required by the Affordable Care Act (aka Obama Care). They succeeded, and actually got the government to increase payments to Medicare Advantage plans.

The next post in my series on the U.S. health care system will further describe the problems created by vertical integration in health care and the corruption it engendered at United. It will also suggest that these huge, vertically integrated health care system companies could be used to move the U.S. to a single-payer health care system.

[1]      Brown, K., & Sirota, S., 8/2/23, “Health care’s intertwined colossus,” The American Prospect (https://prospect.org/health/2023-08-02-health-cares-intertwined-colossus/) This post is, for the most part, a summary of this article.

GIVING THANKS FOR PRESIDENT BIDEN

We should all be giving thanks for President Biden. He and his administration have taken historic steps to protect America’s democracy politically and economically. He is leading the charge to restore fairness and competitiveness in the U.S. economy. He is finding creative ways to support local governments in states where right-wing Republican Governors and legislatures are blocking progressive local policies. Biden has nominated, and the Democrats in the Senate have confirmed, over 150 very diverse judges. He is tackling economic inequality by enforcing our tax laws so the rich pay what they owe.

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

I hope you are finding many things to give thanks for this Thanksgiving, despite the troubled state of the world and our democracy. We should all be giving thanks for the accomplishments of President Biden and his administration.

President Biden and his administration have taken historic steps, with remarkable success, in the fight to protect America’s democracy politically and economically, including standing up for workers and consumers. His administration has resurrected the idea that government can promote economic growth by regulating businesses, investing in ordinary Americans, and protecting workers and consumers. This was the American social contract that was in place from 1933 to 1980. Since 1980, Republicans have torn up that social contract and instead deregulated business, including ignoring antitrust laws that had blocked the growth of huge, monopolistic companies. The result has been that trillions of dollars have been taken from lower- and middle-class workers and consumers and given to the richest 1% of Americans. [1]

President Biden has been leading the charge to restore fairness and competitiveness in the U.S. economy. The economy is displaying remarkably strong growth and a dramatic increase in jobs (13.2 million) (both are stronger than under President Trump). With Biden’s support, workers have made dramatic gains. For example, the United Auto Workers have reached an agreement with the auto makers that includes a 25% wage increase over the next 4.5 years, along with cost-of-living adjustments that will bring the increases up to an estimated 33%. [2]

In 2021, Biden signed an Executive Order requiring agencies throughout the executive branch to promote competition in the economy. His administration is reinvigorating the enforcement of antitrust laws that had been mostly ignored for the past 40 years. It has focused on opposing large monopolistic corporations’ proposed mergers and acquisitions that would make them even larger and more powerful. The filing of antitrust litigation or the threat to do so has stopped the merger of big publishers Simon & Schuster and Penguin Random House, the anti-competitive partnership of Jet Blue and American Airlines, as well as several proposed mergers in the health care, energy, and technology sectors of the economy. Antitrust investigations of Apple, Ticketmaster, and Visa are underway. In 2023, the value of completed mergers is down 40% from the average of the past five years largely because of the administration’s focus on enforcement of antitrust laws. [3]

Biden and his administration have also focused broadly on reducing anti-worker and anti-consumer business practices. It is working to reduce junk fees, eliminate non-compete clauses in most employment contracts, and end mandatory arbitration clauses in many consumer contracts. His administration has broken up the hearing aid cartel making hearing aids cheaper and more readily accessible. It has issued new regulations on broadband service providers and railroad corporations. It has revived the prohibition on directors serving simultaneously on the boards of competitors, which can lead to anti-competitive behavior in the market place and insider trading in the stock market. It won an $85 million settlement from agricultural giant Cargill and others for collusion to suppress workers’ wages.

The Biden administration is finding creative ways to support local governments in states where right-wing Republican Governors and legislatures are blocking progressive local policies. For example, in 2011, Wisconsin Republicans blocked local governments from requiring employers to offer paid sick leave, as Milwaukee had done. Fifteen states have passed similar laws including Texas, which has also blocked local governments from expanding voting options, taking some Covid response measures, and regulating local oil and gas drilling. In Florida, the state is controlling what local schools can teach and what books they can have. In Georgia, the state criminalized the provision of food and water to people waiting to vote at local polling places. And the list goes on and on. [4]

Perhaps the most dramatic step Biden has taken to support local governments is making federal funding available directly to them instead of having it flow through state governments, as has traditionally been the case. For example, the 2021 American Rescue Plan Act sent $130 billion directly to municipalities along with $220 billion to state governments. The 2021 Bipartisan Infrastructure Law includes $196 billion for surface transportation grants that municipalities can apply for directly. The 2022 Inflation Reduction Act includes a novel mechanism that allows municipalities to take advantage of tax credits for renewable energy projects.

Biden has nominated, and the Democrats in the Senate have confirmed, over 150 judges who may well be called on to protect our democracy (particularly around the 2024 elections) and our rights in the face of the right-wing and authoritarian onslaught from Republicans and former President Trump. In addition to the quality of these judges (in stark contrast to some who were nominated and approved under Trump and President George W. Bush), they are much more diverse than those nominated and confirmed under those Republican Presidents. Of Biden’s first 150 judges, 100 are women and 98 are people of color. [5]

President Biden is tackling economic inequality by enforcing our tax laws so the rich pay what they owe. The 2022 Inflation Reduction Act provided new funding for the IRS to enhance enforcement. In just a few months, it has recovered $38 million in delinquent taxes from 175 high-income taxpayers. It is estimated that for each dollar the IRS spends auditing the top 1% of taxpayers it will recover $3.18; from the top 0.1%, it will recover $6.29 for each $1 spent. A study in 2021 estimated that the 1% of people with the highest incomes failed to report more than 20% of their earnings to the IRS. [6]

These are just some examples of the many steps President Biden and his administration have taken to promote fairness and competition in our economy, as well as to re-establish our democracy’s promise of equal opportunity for all. These actions are guided by his principles and values for our economy, our society, and our democracy. A subsequent post will put his actions in this larger context.

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

[2]      Richardson, H. C., 10/26/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/october-26-2023)

[3]      Norris, W., 10/29/23, “Winning the anti-monopoly game,” Washington Monthly (https://washingtonmonthly.com/2023/10/29/winning-the-anti-monopoly-game/)

[4]      Norris, W., 4/4/23, “How Biden is using federal power to liberate localities,” Washington Monthly (https://washingtonmonthly.com/2023/04/04/how-biden-is-using-federal-power-to-liberate-localities/)

[5]      Puzzanghera, J., 11/19/23, “For Biden, a full court press to fill US bench,” The Boston Globe

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

HOW PRIVATE EQUITY VULTURES HAVE CORRUPTED U.S. HEALTH CARE Part 2

This is the third in a series of posts on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes because there’s a fundamental conflict between caring for patients and maximizing return for investors. The first post in this series presented an overview of the for-profit U.S. health care system. The second one and this one focus on the role of the extreme capitalism of private equity firms.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog! Special Note: My new, more user-friendly website presents the Latest Posts chronologically here: https://www.policyforthepeople.org/blog. Please click on the Subscribe Today button to continue receiving notification of my posts.)

In addition to buying hospitals (see this previous post), private equity (PE) firms have also been heavily involved in providing outsourced, contracted staffing for hospitals and emergency room services. Not surprisingly (given the PE business model), two large PE-owned medical staffing providers have filed for bankruptcy this year, creating health care chaos. In May, Envision Healthcare filed for bankruptcy with $7.7 billion in debt. In September, American Physician Partners (APP) filed for bankruptcy. It had 160 contracts providing emergency room, hospital, and/or intensive care staff and services to healthcare providers. Those contracts involved over 2,500 physicians plus other staff at over 100 sites in 29 states. In less than three months, it shut down those 160 contracts and let go or transitioned those thousands of health care staff. [1] The bankruptcy revealed, among other things, that between 2018 and 2023 APP had underpaid eight physicians by a total of $14 million. [2]

As part of the chaos of these two bankruptcies, many of the firms’ hospital and emergency room physicians either lost up to two months of pay for work they had performed or received it a month or two late. Lapses in essential employer-paid malpractice insurance coverage were also a major issue for physicians. For clinicians who were not U.S. citizens, which were a third of staff at some locations, their work visas are valid only with a specific employer. When their employer changed because of the bankruptcy, their visas became invalid and had to be transferred to a new employer, a process that takes more time than the notice some of the staff were given. One doctor noted that her emergency room practice had experienced four ownership transitions in her 13 years at the trauma center of a major hospital in Illinois.

One notable patient impact of private equity firms’ ownership of medical staffing companies is the occurrence of surprise billing. This occurs when a patient with insurance gets a surprise (often quite large) bill because they unknowingly got treatment from a medical professional who was not part of their covered network of providers. The classic case of this is a patient who goes to the emergency room in a hospital in the network covered by their health insurer. While there, the patient gets treated by a physician who is an employee of a third-party medical staffing company owned by a PE firm. This physician is outside the patient’s approved network, so he or she gets billed by the PE firm for whatever it wants to charge for the physician’s services.

PE firms and their fake grassroots advocacy groups like Doctor Patient Unity have spent millions of dollars on campaign contributions, lobbying, and advertising campaigns to block regulation of their health care practices and billing. For example, until 2019, they were successful in blocking regulation of surprise out-of-network billing of patients for PE firms’ employees. Their success was in part due to their campaign contributions of at least $32,700 and $63,600 respectively to two key members of the U.S. House, Richard Neal (D-MA) and Kevin Brady (R-TX), who were the leaders of the powerful Ways & Means Committee. When a ban on most surprise billing was finally enacted, it exempted ground ambulances and public payers.

To avoid regulation, some PE firms have focused on segments of the health care system that lack clinical standards and strong government oversight, such as nursing homes and eating disorder and autism treatment facilities. PE firms bought nursing homes early in the 2000s and then largely abandoned them after extracting all the profits they could. They typically left behind financially struggling facilities, which were, not coincidentally, where more than one-fifth of all Covid deaths occurred, affecting both patients and staff. [3]

In conclusion, private equity firms buy health care providers because they can generate big short-term profits. PE firms drastically cut costs, push to maximize revenue (sometimes illegally), and manipulate real estate and other assets to maximize their return. Patient outcomes are not a concern.

For-profit health care dangerously incentivizes denials of care and other practices not in patients’ best interests. There is a fundamental conflict between caring for patients and maximizing return for investors. [4] The private equity business model should have been regulated out of business years ago. In particular, PE firms should never have been allowed to buy pieces of the health care system.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to ban private equity firms from our healthcare system. Furthermore, ask them to regulate the PE business generally to eliminate its harmful and unproductive extreme capitalism practices.

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]      Muoio, D., 9/20/23, “Hospital, ED staffer American Physician Partners files for Chapter 11 bankruptcy,” Fierce Healthcare (https://www.fiercehealthcare.com/providers/hospital-ed-staffer-american-physician-partners-files-chapter-11-bankruptcy)

[2]      Tkacik, M., 7/29/23, “Shock treatment in the emergency room,” The American Prospect (https://prospect.org/health/2023-07-29-shock-treatment-emergency-room/)

[3]      Goozner, M., Nov./Dec. 2023, “How America bungled the pandemic,” Washington Monthly (https://washingtonmonthly.com/2023/10/29/how-america-bungled-the-pandemic/)

[4]      Tkacik, M., & Dayen, D., 7/31/23, “A sick system,” The American Prospect (https://prospect.org/health/2023-07-31-sick-system-business-health-care/)

HOW PRIVATE EQUITY VULTURES HAVE CORRUPTED U.S. HEALTH CARE Part 1

This is the second in a series of posts on how the U.S. health care system has been privatized and financialized so that profits rather than patients have become the perverse and pervasive priority. The result is a system that has very high costs and poor outcomes because there is a fundamental conflict between caring for patients and delivering value to investors. The first post in this series presented an overview of the for-profit U.S. health care system. This one focuses on the role of the extreme capitalism of private equity firms.

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

An important piece of the for-profit privatization of the U.S. health care system is the role of private equity (PE) “investors.” “Investors” is in quotes because these financial manipulators aren’t investing in anything except their own short-term profits. They are not investing in the companies they buy; they are looking to maximize their short-term profits and have no qualms about the companies going bankrupt – in some cases that is their plan.

The private equity model involves using mostly borrowed money to buy a company. The debt and interest of the borrowed money are then made the responsibility of (and often an overwhelming burden for) the purchased company. This forces the purchased company to engage in (often severe) cost-cutting to be able to make the payments on the debt. This cost-cutting typically involves major cuts to the number of and compensation for employees, as well as reductions in the quality of the company’s products or services. In addition, the company’s assets, such as real estate, are often sold off to raise money to pay for the debt or provide payments to the private equity buyer. The success or failure of the company is largely irrelevant as long as the PE firm can extract a high return. PE firms regularly use bankruptcy to get rid of costs and liabilities while, nonetheless, holding onto their questionably acquired gains.

U.S. laws and policies aid and abet this process by granting tax benefits to having debt, including the very high levels of debt that private equity buyouts create. PE firms are also much more loosely regulated than publicly owned companies or mutual funds that sell shares to the public. Given their private ownership, PE firms have basically no requirements for public disclosures or transparency. And PE firms have learned how to expertly manipulate the bankruptcy laws to shortchange workers and customers (in the examples here doctors, nurses, and patients) while preserving benefits for themselves.

For the last 20 years, private equity firms have been buying health care companies. The PE model of maximizing profits with no regard for the purchased company or its customers or employees, means that this has undermined the quality, access, timeliness, and affordability of health care for many Americans. PE firms’ health care system purchases include hospitals, home care and hospice providers, diagnostic and imaging labs, pharmaceutical and medical device companies, dialysis and fertility clinics, physicians’ practices, and urgent and specialty care centers. In 2018, there were 800 PE health deals representing over $100 billion in value. The subsequent cost-cutting has led to the loss of 1.3 million jobs since 2009.  [1] Many communities have lost their local hospital or other medical services providers creating health care deserts that require people to travel tens or hundreds of miles to get medical care, including emergency room services.

For example, in 2006, a consortium of three private equity firms bought Hospital Corporation of America (HCA). To maximize profits for its PE owners, HCA manipulated billing to garner unwarranted revenue and refused to serve patients who didn’t pay in advance. Physicians in other PE-owned hospitals or clinics have been pressured to maximize patient volume by, among other things, restricting the time they spend with each patient. They have also been pressured to push products and treatments, some of which were unnecessary, while being required to be parsimonious with medical and other supplies. This is all typical of the revenue maximization and cost cutting that occurs under PE firm ownership, maximizing profits at any cost. Emergency room (ER) physicians also report being pushed to inappropriately admit patients when hospital beds were open and being asked to meet quotas for the number of admissions.

Here’s how a not atypical acquisition, in June 2019, of a community hospital played out in Watsonville, California. A PE firm, Halsen Healthcare, bought the community hospital for around $40 million. The hospital’s real estate was immediately sold to an Alabama real estate investment trust called Medical Properties Trust for $55 million. The hospital then had to pay $5 million a year to rent back the property. Under PE ownership, the hospital immediately stopped paying vendors and quickly ran out of essential supplies from printer paper to hospital gowns to surgical supplies. Within six months, doctors at the hospital were not getting paid; some quit. Halsen also stopped paying nurses’ health insurance premiums and froze employee’s retirement savings accounts. Sometime in the spring of 2020 it stopped paying rent. Somehow, the hospital managed to limp along until it filed for bankruptcy in late 2021, when, among other things, it owed $40 million on unpaid rent and loans. [2]

Similarly, Steward Health Care and its private equity owner, Cerberus Capital Management, did several hospital real estate transactions with Medical Properties Trust using real estate investment trusts (REITs). REITs are specialized investment vehicles that receive tremendous tax advantages under U.S. tax laws. Their use by PE firms for hospitals’ real estate allows the PE firms to extract hundreds of millions of dollars from each hospital purchase, but typically leaves the hospitals financially crippled. Between 2015 and 2021, Medical Properties Trust did hospital REIT transactions with at least seven PE firms for over a dozen hospitals or hospital chains. Investigations have revealed schemes and scams, as well as outright criminality, that have enriched PE firms and friendly CEOs of the hospitals they own. The CEO of Medical Properties Trust itself is still making about $16 million a year even though the price of the company’s stock has declined nearly 75% since January 2022. Meanwhile, countless hospitals whose real estate is owned by Medical Properties Trust and its REITs have gone bankrupt or slashed services and employee pay to make rent payments.

My next post will describe some other parts of the health care system that PE firms have bought and the effects this has had on patients, doctors, nurses, and other health care workers.

[1]      Feng, R., 6/3/22, “The pain profiteers,” The American Prospect (https://prospect.org/culture/books/pain-profiteers-mariner-olson-reviews/)

[2]      Tkacik, M., 5/23/23, “Quackonomics: Medical Properties Trust spent billions buying community hospitals in bewildering deals that made private equity rich and working-class towns reel,” The American Prospect (https://prospect.org/health/2023-05-23-quackonomics-medical-properties-trust/)

HOW TO BECOME A BILLIONAIRE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE U.S. HEALTH CARE SYSTEM IS MORE THAN BROKEN, IT’S TOTALLY CORRUPTED

This is the first in a series of posts on how the U.S. health care system has been totally corrupted by private, for-profit companies. The system has very high costs and poor outcomes. Profits rather than patients have become the perverse and pervasive priority because there is a fundamental conflict between caring for patients and delivering value to investors.

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

The U.S. health care system is more than broken; it’s truly dysfunctional. It’s been totally corrupted by private, for-profit companies. If you ever want to prove that private, for-profit businesses aren’t necessarily effective and efficient, the U.S. health care system should be exhibit 1.

The U.S. health care system has the highest costs by far of any comparable country, but also has by far the worst outcomes. [1]

  • The U.S. spent 17.8% of its Gross Domestic Product (GDP, the value of all goods and services the economy produces) on health care. This is almost twice as much of as the average of the other 38 comparable countries in the Organisation for Economic Co-operation and Development (OECD), which range from Germany at 12.8% to South Korea at 8.8%.
  • The U.S. spends $11,912 per person on health care versus $7,382 in Germany (the next highest) and, in the three lowest countries, $4,666 in Japan, $4,393 in New Zealand, and $3,914 in South Korea.
  • U.S. life expectancy is 77.0 years, the lowest of the OECD countries, which range from the United Kingdom at 80.4 to Japan at 84.7. Furthermore, for Black Americans life expectancy is only 74.8 years and 71.8 years for American Indians and Alaska Natives.
  • The U.S. rate of preventable or treatable deaths per 100,000 people is 336, far higher than the other OECD countries, which range from Germany at 195 to Switzerland at 130.
  • The U.S. rate of infant deaths per 1,000 live births is 5.4, far higher than the other OECD countries, which range from Canada at 4.5 to Norway at 1.6.
  • The U.S. rate of maternal deaths per 100,000 live births is 23.8, far higher than the other OECD countries, which range from New Zealand at 13.6 to the Netherlands at 1.2. These are deaths due to complications of pregnancy and childbirth.
  • The U.S. rate of death from physical assault per 100,000 people is 74, far higher than the other OECD countries, which range from New Zealand at 1.3 to Japan at 0.2.
  • The U.S. supply of physicians per 1,000 people is 2.6, lower than the OECD countries’ average of 3.7, which range from Germany at 4.5 to Korea at 2.5.

The U.S. health care system has been privatized and financialized so that profits rather than patients have become the perverse and pervasive priority. Mergers and acquisitions have created behemoth health care corporations that have an insatiable drive to increase profits. Through local monopolies and vertical integration (where one company owns and profits from everything from primary care doctors and nurses to end-of-life hospice care), they maximize profits rather than patient outcomes. Pharmaceutical companies manipulate patents and buy off generic drug makers to maximize profits. Private equity firms profit by buying health care providers and monopolizing niche markets, slashing costs, and manipulating real estate and other assets.

The portion of U.S. health care dollars that go to administrative overhead, waste, and fraud has grown to 30%, while the portion going to pay doctors and nurses has fallen. For example, the CEOs of the top seven health insurers got an average of $48 million last year. Experts estimate that one-tenth (10%) of what the federal government spends on health care is fraud.

Meanwhile, the supposedly efficient private sector health care system has shortages of doctors and nurses; shortages of frequently used drugs (e.g., antibiotics and common cancer treatments) and of commonly used and essential intravenous solutions; and medical deserts where emergency and acute services can’t be found, typically due to the closing of small, often rural hospitals and other service providers for the sake of profit maximization. [2]

In the 1980s, due to deregulation and supposed innovation, the U.S. health care system began a dramatic shift from a small business and not-for-profit model to a large corporate, for-profit model. The cost of health care in the U.S. began to skyrocket. And outcomes did not improve. (See above for some data on costs and outcomes.)

The government pays for a growing portion of health care in the U.S.; it’s about half today, having grown from less than a third in the 1990s. Much of this care has been privatized. Over 80% of Medicaid’s low-income families and individuals are enrolled in some type of privatized care. Over half of Medicare’s seniors are in privatized plans known by the misnomer Medicare Advantage plans. Medicare Advantage plans are such large and reliable generators of profits that every insurer, many private equity capitalists, and even retailers like Amazon, Walgreens, and Dollar General are anxious to tap into the it. The health care industry and Congresspeople whose campaigns it has funded are also working hard to privatize the Veterans Affairs health care system.

One example of a huge health care corporation built through mergers and acquisitions is HCA Healthcare, which has $60 billion in annual revenue. It owns roughly 180 hospitals and 2,300 ambulatory care sites, including surgery centers, freestanding ERs, urgent care centers, and physician clinics, in 20 states and the United Kingdom. It is effectively a monopoly in some areas.

HCA has engaged in fraud, billing Medicare and Medicaid for unnecessary and wasteful services and supplies, including repeat lab tests and redundant scans. Critics describe it as the epitome of the profits over patients mindset. More than two dozen doctors from 16 HCA hospitals have corroborated its use of a “vulnerability index” algorithm to identify patients most likely to die. HCA then pushes staff to persuade the patients’ caregivers to abandon less profitable life support and move the patient to more profitable hospice care. Since acquiring a hospice provider two years ago, HCA’s hospital to hospice discharge rate has jumped to twice the national average. Insurance reimbursement practices mean that profits can be maximized by moving these patients to hospice and freeing up hospital beds for other patients who use more billable services. Moreover, this gets a death off the hospital’s records, improving its mortality statistics, which are part of HCA’s calculation of executives’ bonuses.

For-profit health care dangerously incentivizes denials of care and actions not in patients’ best interests because there is a fundamental conflict between caring for patients and delivering profits for investors. Vertical integration of health care services (where one company owns and profits from everything from primary care doctors and nurses to end-of-life hospice care) exacerbates conflicts of interest between maximizing profits and patient well-being.

[1]      The Commonwealth Fund, 1/31/23, “U.S. health care from a global perspective, 2022: Accelerating spending, worsening outcomes,” Issue Brief (https://www.commonwealthfund.org/publications/issue-briefs/2023/jan/us-health-care-global-perspective-2022)

[2]      Tkacik, M., & Dayen, D., 7/31/23, “A sick system,” The American Prospect (https://prospect.org/health/2023-07-31-sick-system-business-health-care/)

THANK GOODNESS JOE BIDEN IS PRESIDENT!

President Biden is providing outstanding leadership in a series of very challenging situations. President Biden’s speech to the nation on 10/19 will impress and move you. The mainstream media focus on drama, conflict, and negativity. Calm, steady, effective leadership doesn’t get the coverage it deserves. Below are three examples of non-mainstream media that have done a much better job of telling the story of Biden’s leadership than the mainstream media. Stop and think for a minute what would be happening if Donald Trump were President.

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

In turbulent situations, it’s invaluable to have an experienced, thoughtful, steady, and rational leader. President Biden is providing outstanding leadership in a series of very challenging situations:

  1. The Covid pandemic and its aftermath, including serious damage to the economy;
  2. Putin’s attack on Ukraine;
  3. The dysfunction of the Republicans in the U.S. House of Representatives and, in particular, their threat to default on the U.S. debt; and
  4. Hamas’s attack on Israel and all the volatility it could unleash in the Middle East.

I don’t think any other President in my lifetime has faced such a set of serious challenges. Stop and think for a minute what would be happening if Donald Trump had been re-elected in 2020.

The mainstream media is now driven by on-line clicks, and therefore focuses on drama, conflict, and negativity. Calm, steady, effective leadership doesn’t generate as many clicks, so it doesn’t get the coverage it deserves.

Non-mainstream media have done a much better job of telling the story of President Biden’s leadership. For example, Robert Reich (who served as President Clinton’s Secretary of Labor and in a number of other federal government jobs before that), in his blog on 10/19/23, titled The last adult in the room, describes President Biden as “shrewd, careful, and calibrated” in the face of major challenges, despite the child-like behavior of many other supposed leaders. Reich highlights Biden’s significant actions and successes on the home and global stages from the Middle East to dealing with Congress to delivering benefits for the American workforce.

Robert Hubbell, in his blog on 10/20/23, titled We cannot give up on peace, reviews President Biden’s speech to the nation on the evening of 10/19. I encourage you to listen to Biden’s 15-minute speech. You will be impressed and moved by it. (It begins 2 hours and 5 minutes into the YouTube recording of the news broadcast.) Hubbell calls it a truly great speech in which Biden forcefully and convincingly addresses the complicated situations in the Middle East, Ukraine, and here in America. He links all of them back to the need to defend democracy from the threats of dictators, terrorists, and hate. Biden is thoughtful, compassionate, and comprehensive; he does not shrink from taking on difficult topics including racism, Islamophobia, and antisemitism.

In the speech, Biden underscores the importance of the United States of America and its leadership on the global stage. He calls America the “essential” and “indispensable nation,” noting that America “is a beacon to the world” … “the idea of America, the promise of America.” He states that we must “reject all forms of hate. It’s what great nations do.”

Heather Cox Richardson, in her blog, Letters from an American on 10/18/23, reviews Biden’s visit to Israel and the speeches he gave there, where he adroitly walked the tight rope of condemning terrorism, supporting Israel, stating that the vast majority of Palestinians are not Hamas terrorists, and negotiating humanitarian aid to the Palestinians in Gaza. He called unequivocally for the protection of civilians on all sides and adherence to the rules of war. He stated that democracies must live by the rule of law, not the rules of terrorism. Richardson takes note of “Biden’s steady hand, experience, and courage” in visiting Israel and taking on the tricky issues the Hamas-Israel conflict presents.

We are lucky, and should be thankful, that President Biden is bringing such capable leadership to our country and the world at this very challenging time both globally and domestically.

SENATOR WARREN’S EFFORTS TO REDUCE FEDERAL OFFICIALS’ CONFLICTS OF INTEREST

Senator Warren (D-MA) has worked relentlessly to expose and reduce federal officials’ conflicts of interest, thereby reducing corporate influence on government decision making. Here are three examples of her work involving the oversight of Medicare, the Internal Revenue Service (IRS), and the Defense Department.

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

Senator Warren (Democrat of Massachusetts) has worked relentlessly to expose and reduce the conflicts of interest of federal officials. She regularly advocates for stronger ethical standards for federal employees and for closing or at least slowing the revolving door between public and private employment where conflicts of interest arise. One of her goals is to prevent or at least reduce corporate influence over government decision making. Here are three examples of her work on this issue.

First example: President Biden has nominated Demetrios Kouzoukas for a spot on the Board of Trustees for the Medicare and Social Security Programs. His specific role would be as a Public Trustee, charged with overseeing the finances of Medicare and Social Security to ensure they are able to provide promised benefits to seniors in perpetuity.

Senator Warren raised concerns at Kouzoukas’s confirmation hearing about a potential conflict of interest due to his membership on the Board of Directors of Clover Health, a for-profit health insurance company. Clover Health receives a substantial portion of its revenue from Medicare Advantage plans, which provide privatized Medicare services to seniors. Kouzoukas receives over $100,000 a year from Clover Health for his position on its Board. He also owns 25,000 shares of Clover Health stock. [1]

As you may know (and as I have written about previously here, here, and here), there are multiple problems with Medicare Advantage plans’ privatization of Medicare. These plans cream the crop so they only serve healthier seniors. Nonetheless, they have successfully lobbied to get paid more per patient than Medicare spends on other patients. They often deny coverage for needed services and have high overhead for advertising, administration, and executive pay. Most damningly, every major provider of Medicare Advantage plans has fraudulently over-billed Medicare. Many health care experts worry that the current growth of Medicare Advantage plans will, ultimately, bankrupt Medicare.

The Board of Trustees that Kouzoukas has been nominated for will, among other things, oversee the efforts of Medicare to stop fraud by Medicare Advantage providers, which is estimated to be $75 billion a year. That role presents a direct conflict of interest for Kouzoukas given his position on Clover Health’s Board, from which he has refused to resign. [2] (Note: This footnoted press release from Senator Warren lists nine examples since July 2021 of her successful efforts to get federal appointees to commit to higher than required ethical standards that reduce conflicts of interest.)

Second example: In February 2022, Senator Warren requested that the Department of the Treasury Inspector General for Tax Administration (TIGTA) investigate potential conflicts of interest resulting from the revolving door of personnel between the Internal Revenue Service (IRS) and the big accounting, tax, and audit companies. The New York Times had reported that tax lawyers from these companies were taking senior jobs at the IRS, writing policies that frequently were favorable to their former employers, and then often returning to their former employers where they received promotions and pay raises. [3]

TIGTA’s recent report revealed that 496 federal employees had received income from those big accounting, tax, and audit companies before taking government jobs. An undisclosed number went back to those firms after working for the government. At least eighteen IRS employees had worked on official tax administration rulings for clients represented by the company they had worked for either before or after their IRS job. For 232 IRS employees, TIGTA could not determine if they had conflicts of interest with previous private sector work because their previous employers would not cooperate with the investigation. Furthermore, an undetermined number of IRS executives did not properly disclose, as is required, private sector job searches while they were working for the IRS.

The IRS has agreed to implement two recommendations from the TIGTA report: 1) improving training for employees on ethics and impartiality, and 2) collecting better data to identify potential conflicts of interest. Senator Warren is pushing the IRS and its officials to do more. She has communicated with Marjorie Rollinson, who has been nominated to be the IRS’s top internal lawyer, and has asked her to hold herself to a higher ethical standard than is currently required by law. Rollinson has committed to do so by extending the two-year requirement to four years for recusing herself from matters concerning previous clients and employers. In addition, for four years after she leaves the IRS, she has promised not to lobby the IRS or to seek any employment or compensation from companies she interacted with while at the IRS.

High ethical standards at the IRS are particularly important right now because the IRS is receiving additional funding and implementing several important policies contained in the 2022 Inflation Reduction Act. These include the Corporate Minimum Tax (that Warren has championed) and new tax credits. In addition, the IRS is implementing a new, free, income tax filing system that would allow most Americans to easily file their income tax returns (and avoid paying for tax preparers or software to do so). Having these policies implemented by staff that don’t have conflicts of interest is critical to their success and effectiveness.

Third example: Senator Warren is investigating conflicts of interest involving the Defense Department’s Office of Strategic Capital (OSC). The OSC was created in 2022 by Defense Secretary Austin to identify and finance technologies critical to US national security. It provides loans, financing guarantees, and other financial supports to companies involved with such technologies.

Warren has expressed concern that at least two advisers at OSC have senior positions at private consulting and venture capital firms that might present conflicts of interest. Both advisers were hired as “special government employees,” which exempts them from many of the ethics standards that apply to regular federal employees. For example, they are not barred from lobbying federal agencies or receiving outside income. However, their access to non-public information might benefit them in making investment decisions or assisting clients in getting defense contracts, for example.

Warren has proposed a bill in Congress, the Anti-Corruption and Public Integrity Act, that would subject “special government employees” to the same ethical standards as other federal employees and would require them to recuse themselves from any matters that would provide a financial benefit to them or to an employer or client of theirs from the preceding four years. [4]

[1]      Johnson, J., 9/29/23, “Warren grills Biden Medicare Trustee pick over ‘shocking’ ties to Medicare Advantage firm,” Common Dreams (https://www.commondreams.org/news/warren-grills-biden-medicare-trustee-pick-over-shocking-ties-to-medicare-advantage-firm)

[2]      Warren, E., 9/28/23, “At hearing, Senator Warren slams Medicare and Social Security Public Trustee nominee over ‘shocking and deeply unethical’ financial conflicts of interest,” Press release (https://www.warren.senate.gov/newsroom/press-releases/at-hearing-senator-warren-slams-medicare-and-social-security-public-trustee-nominee-over-shocking-and-deeply-unethical-financial-conflicts-of-interest)

[3]      Facundo, J., 9/28/23, “Warren and Jayapal raise revolving-door concerns at the IRS,” The American Prospect (https://prospect.org/power/2023-09-28-warren-jayapal-revolving-door-concerns-irs/)

[4]      Conley, J., 7/10/23, “Warren demands answers from Pentagon on ‘cozy’ relationship with Wall Street,” Common Dreams (https://www.commondreams.org/news/warren-pentagon-office)

HOW POLICY AFFECTS FREEDOM

There are two philosophical types of freedom: “positive freedom” and “negative freedom,” also referred to as “freedom to” and “freedom from,” respectively. Government policies and programs have a big impact on the freedom we experience. “Freedom to” better aligns with democracy and equal opportunity. However, for 40 years, “freedom from” has dominated U.S. politics and policy making. President Biden and Democrats in Congress are working to change that and promote “freedom to.”

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

My previous post began an exploration of what freedom means in a democratic society. It provided an overview of the two philosophical types of freedom: “positive freedom” and “negative freedom.” Negative freedom is often referred to as “freedom from” and positive freedom as “freedom to.” “Freedom from” means freedom from constraints of external forces, while “freedom to” means the opportunity to make choices, take advantage of possibilities, pursue happiness, and be safe and secure. “Freedom to” is facilitated by governments’ policies and programs that protect rights, promote equal opportunity, provide a safety net, and invest in public infrastructure, including investments in knowledge and innovation through research. (Note: The terms “freedom” and “liberty” are generally used interchangeably by political and social philosophers.)

Beginning in the 1970s and continuing to today, the “freedom from” philosophy has been ascendant in American policy and politics. As a result, there has been a push to reduce the role of government in our society. Efforts to reduce the size of government have been part of this, including through policies that cut taxes so government has less revenue to fund its activities and programs. Cuts in the safety net of economic supports and assistance have followed, including everything from the minimum wage and overtime pay to unemployment benefits to housing and food assistance. As a result, the economic security and “freedom to” of many middle and low-income people has been undermined.

The push for freedom from government constraints has been applied not only to individuals, but also to businesses. This has led to deregulation of business, which has predominantly benefited large, wealthy corporations and their executives and investors (as has the tax cutting noted above). One piece of this deregulation had been the suspension of enforcement of anti-trust laws. As a result, huge companies have been formed and now almost every sector of the American economy is dominated by a few large companies. These companies have monopolistic power over markets resulting in reduced consumer choice, fewer employment options, and often lower quality in goods and services. They also have the power to manipulate prices, squash market place competition, and exert significant influence over our economic and political systems.

Reduced government regulation of the private sector has resulted in a loss of “freedom to” in many ways. Private companies have reduced the economic security of workers, which reduces their freedom to pursue opportunities and happiness. For example, employers have been allowed to make cuts in employer-provided health and retirement benefits. Companies have also imposed external constraints on workers and consumers. For example, many employers require workers to sign non-compete clauses prohibiting them from going to work for a competitor – a significant loss of job opportunities. Consumers are required to sign mandatory arbitration agreements in many contracts for products or services, which ban consumers from suing companies, including through class action lawsuits. This is just one item in the lengthy contracts consumers are required to sign for many services, particularly in the software and Internet markets.

Reduced regulation of companies as employers, and therefore of the labor market, has led to a dramatic decline in union membership. This has reduced workers’ ability to bargain collectively for economic security through job stability and good pay and benefits. As a result, “freedom to” has been dramatically reduced for many workers. In addition, the exploitation of labor has gone so far as to lead to a push to repeal child labor laws. These protect children from working in unsafe and unhealthy environments and from working long and late hours, which inhibit their ability to learn in school and therefore gain knowledge and skills that will provide them opportunities (i.e., “freedom to”) in the future. [1] [2]

On top of policies that have allowed these huge companies to be formed, U.S. policies have allowed financial speculation, manipulation, and exploitation through private equity firms and vulture capitalism. This, coupled with reduced taxes, has led to extremely wealthy businesspeople and investors who have outsized influence in public (or what should be public) functions and decision making. These very wealthy businesspeople, usually men, have great power not just in the economic system, but also in politics and information dissemination through ownership of social media and of many media outlets (e.g., Fox TV, many other TV and radio stations, and many local and national newspapers). They even can have dramatic effects on international populations and events. The Gates Foundation exerts tremendous influence over education in the U.S. and global health initiatives. Elon Musk, through his ownership of the Starlink satellite Internet service, often controls communication in disaster or war zones. US policies have allowed him to launch over 4,500 satellites (over 50% of all active satellites) and to maintain control over their use. At least twice, he has cut off Ukraine’s use of Starlink communications when they were critical to their efforts to fight Russia. [3]

Basic economics describes capitalism as a system that advances “freedom to” for consumers and workers – freedom to make rational decisions and choices among good alternatives. Free market capitalism is supposed to provide perfect competition among multiple providers of goods and services, while consumers and workers have the full information they need to make good choices that are in their best interests.

However, this is not the economy we have, because without government regulation (i.e., with “freedom from”) the private sector has shown itself to be greedy and manipulative, even rapacious. Perhaps the greatest obstacle to economic freedom today is businesses’ monopolistic power over consumers, workers, and even government policies. We need to restore competition to promote innovation, protect workers, keep prices down, provide good choices, and preserve democracy. In other words, competition is needed to provide “freedom to.” Recent estimates have put the cost of the lack of competition at as much as $5,000 a year for a typical U.S. household.

To address the 40-year trajectory of declining economic competition and “freedom to,” President Biden has established a White House Competition Council. It is directing government-wide efforts to promote competition in the private sector. For example, the Federal Trade Commission is reinvigorating enforcement of antitrust laws As Biden recently stated, “Fair competition is why capitalism has been the world’s greatest force for prosperity and growth. … But what we’ve seen over the past few decades is less competition and more concentration that holds our economy back.” [4]

[1]      Stancil, K., 7/19/23, “GOP assault on child labor laws under fresh scrutiny after 16-year-old dies at poultry plant,” Common Dreams (https://www.commondreams.org/news/mississippi-poultry-plant-teen-dies)

[2]      The Conversation, 6/26/23, “States are weakening their child labor restrictions nearly 8 decades after the US government took kids out of the workforce,” (https://theconversation.com/states-are-weakening-their-child-labor-restrictions-nearly-8-decades-after-the-us-government-took-kids-out-of-the-workforce-205175)

[3]      Richardson, H.C., 9/9/23, “Letters from an American blog,” https://heathercoxrichardson.substack.com/p/september-9-2023

[4]      Richardson, H.C., 9/26/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/september-26-2023)

WHAT KIND OF FREEDOM DO YOU WANT?

There are two philosophical types of freedom: “positive freedom” and “negative freedom.” Conflicts occur when one person’s freedom impinges on another person’s freedom. Laws, societal standards, and government attempt to strike a balance in such situations. If a society wants to increase freedom broadly, it must establish policies and institutions that ensure people have positive freedom, which means realistic options in making choices about important opportunities.

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

My last four posts have been a reflection on the state of our democracy, as well as what we need to do to restore American democracy and belief in it. They are a review of the book by George Packer, Last best hope: America in crisis and renewal.

Just beneath the surface of the discussion of American democracy is the question: What does freedom mean in a democratic society? Packer writes that the greatest obstacle to economic freedom today is businesses’ monopolistic power over consumers, workers, and government. This is one piece of freedom.

There are two philosophical types of freedom: “positive freedom” and “negative freedom.” Negative freedom is characterized by the absence of imposed, explicit external constraints on personal decision making and behavior. Libertarians and Packer’s Free Americans are proponents of this type of freedom. (Note: The terms “freedom” and “liberty” are generally used interchangeably by political and social philosophers.)

Positive freedom is characterized by conditions where individuals are enabled and empowered to realistically pursue any opportunity that interests them. Positive freedom requires the absence of implicit external constraints such as discrimination, a lack of access to or unaffordability of desired goods, services, or opportunities (e.g., jobs, education, and where one would like to live).

In shorthand, negative freedom is referred to as “freedom from” and positive freedom is referred to as “freedom to.” In other words, freedom from constraints of external forces versus freedom to make choices and take advantage of opportunities, to pursue happiness, and to be safe and secure.

Conflicts occur when one person’s freedom impinges on another person’s freedom. These situations are where laws, societal standards, and government attempt to strike a balance between one person’s freedom and another’s.

Traffic laws and their enforcement are examples of where the balancing of freedom from versus freedom to play out. If traffic laws are lax and/or laxly enforced, freedom from constraints is the priority. However, the safety and enjoyment of other drivers and road users (e.g., pedestrians and bicyclists) is compromised. If freedom to is the emphasis, there are strict traffic laws and enforcement. For example, in Finland, speed limits tend to be lower than in the U.S. (at least in heavily populated areas), speed cameras for enforcement are ubiquitous, and tickets are assessed, not as a fixed fine, but as a percentage of one’s income. As a result, drivers’ behavior is more civilized and roads are safer for drivers, pedestrians, and cyclists. The road death rate is one-third of what it is in the U.S. (Interestingly, late at night in Finland, most traffic lights are turned off!) [1]

Another Finnish example of a focus on freedom to is the way that income and opportunity are spread across the lifespan through taxes and benefit programs. Although taxes are high on income during one’s peak earning years, they are used to support young families and seniors. This effectively evens out income over one’s lifespan and enhances positive freedom in the early years of raising a family and in retirement (i.e., the ability to make choices and take advantage of opportunities, to pursue happiness).

In Finland, the costs of child-raising are significantly subsidized (e.g., through paid parental leave and subsidized child care) when parents are young and their earnings may be low as they’re early in their careers or furthering their education. This allows parents to make relatively unconstrained decisions about when and how many children to have.

In the U.S., the tremendous expense of child raising is the most common reason given by women for seeking an abortion and is a reason many parents have fewer children than they would like. Reproductive freedom isn’t just about birth control, it’s about the ability to choose (and afford) when and how many children to have.

To help with the high costs of child raising, the U.S. enacted an enhanced child tax credit as part of Covid pandemic relief in 2021. It reduced child poverty by 46% (from 9.7% to 5.2%), lifting 3.7 million children and 5.3 million people out of poverty. (Child poverty is basically non-existent in Finland.) It reduced hunger, homelessness, and low birth weight babies, while improving maternal and mental health. It improved the well-being of children and families of color even more dramatically than for white children and families. [2] (For more detail on the benefits of the enhanced child tax credit see this previous post.)

However, when the initial program expired in December 2021, congressional Republicans and a few Democrats refused to extend the program. Apparently, a majority of congressional lawmakers don’t believe in positive freedom, even for families with children. As a result, in January 2022, child poverty increased by 41% and hunger rose 25%. The arguments against continuing the enhanced child tax credit were that families would misuse the money, that they would reduce their workforce participation, and that they didn’t really need the money. However, research showed that families had spent the money on food, housing, and other things that benefited children, like education; and that it didn’t reduce the amount they worked.

Having guaranteed health insurance also contributes to positive freedom. Everyone in Finland has guaranteed health insurance but not in the U.S. This means that in Finland people’s choices aren’t constrained by concern about losing health insurance, such as when quitting jobs, starting a business, or losing a job. Moreover, they don’t have to worry about having to change doctors when they switch jobs, go back to school, or their employer switches insurance plans.

All human societies are complex and people are interdependent in innumerable and often unapparent ways. Negative freedom (freedom from) and individualism only get you so far – to the end of your driveway or to when you have a serious health issue.

If a society wants to increase freedom broadly, it must establish policies and institutions that ensure positive freedom (freedom to) so people have realistic options in making choices about important opportunities throughout their lives. Freedom is NOT maximized when some people are allowed to indulge their every whim, no matter the consequences to others or our planet.

[1]      Cooper, R., 9/14/23, “The Nordic way of freedom,” The American Prospect (https://prospect.org/world/2023-09-14-nordic-way-of-freedom/)

[2]      Covert, B., & Konczal, M., 9/1/23, “We have the solution to child poverty. Republicans are blocking it.” The Nation (https://www.thenation.com/article/economy/child-tax-credit-poverty/)

CRISIS AND HOPE FOR AMERICAN DEMOCRACY Part 4

George Packer’s book, Last best hope: America in crisis and renewal, offers an analysis of American democracy’s current crisis. He points out that our democracy has gone through similar crises in the past. He identifies key elements of a functioning democracy and four cultural narratives, moral identities, or “tribes” that have emerged in the U.S. They have fractured American politics and society. This post, the last in a 4-part series, discusses his specific recommendations on how we put America back together again.

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

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

All four “tribes” emerged due to America’s failure to maintain a middle-class-focused democracy and an economy that lived up to its founding principle of equal opportunity for all. Although this ideal has never been reached and has often been violated, without a commitment to work toward it, American democracy cannot function.

American democracy has had near-death experiences before; perhaps, most relevant is the Civil War. Americans have used the same tools of citizenship to recover democracy that we have today: journalism, government, and activism. (See this previous post for an overview of this history and the overall path to recovery.)

We will require a period of detoxification according to Packer’s analysis. It will also be essential to show the American people that government can make, and is making, their lives better. The economy must be governed so that everyone has a chance, not just to survive, but to participate in society with dignity and with a real chance to enjoy life, liberty, and happiness.

Packer states that the first needed step is to repair the safety net for workers and families by building on FDR’s New Deal of the 1930s, including policies such as universal health care and child care, paid family and medical leave, a living wage, solid unemployment insurance, and stronger workplace safety protections. He advocates for improved education for poor and middle-class children, including by moving funding responsibility away from local communities with more state and federal support for local public schools

Second, workers and citizens in the middle and lower-income brackets need to have more economic and political power. A key strategy is to make it easier for workers to organize and form unions, including instituting collective bargaining across whole sectors of the economy, not just with individual employers (e.g., for fast food workers and hospitality workers in hotels). In addition to direct benefits for workers and their families, unions build shared experience, responsibility, and empowerment among diverse groups of workers. Packer also suggests worker representation on corporate boards as is done in Europe.

Third, a new type of activism is needed that builds cohesion and solves real problems. It goes beyond just protesting and embraces working together. The local level, including local government, presents promising opportunities for this. This new activism is emerging and empowers Americans, makes their voices heard, and allows them to act as self-governing citizens.

Fourth, American democracy needs a revitalization that ensures that every citizen’s voice is heard. This means encouraging voter participation and stopping the erection of barriers to voting. Racial and partisan gerrymandering need to be ended. Campaign financing needs to be reformed, including through the use of public funds to make small contributions more impactful.

Packer advocates for significant government investments in key economic sectors, such as clean energy, manufacturing, education, and caregiving to create jobs, stimulate innovation, and raise pay and benefits for workers. A fairer tax system is also necessary to put the brakes on growing inequality. This would require taxing wealth, including an increase in taxes on large estates.

Packer writes that the greatest obstacle to economic freedom today is businesses’ monopolistic power over consumers, workers, and government. He also cites the need for reform of the media which are under financial, technological, and political pressures. The result is an information (and disinformation) stream that is faster, simpler, louder, more partisan, and more divisive. The demise of small news outlets (in large part due to our winner take all economic system) has led to the nationalization of news and politics, polarization of “facts,” and partisanship in everything that is reported. Objectivity is routinely questioned and struggled with in today’s journalism. Fear of hyper-partisan responses and social media firestorms has bred a self-censorship in the media that is more dangerous and less visible than government censorship. All of this leads to less thoughtful journalism and readership. And all of this is exacerbated by the rise of the big tech monopolies in social media.

I encourage you to engage in constructive activism in whatever way works for you. Working on local issues and/or in local government is a great way to work productively with others to address concrete issues that affect people’s everyday lives. Writing letters to the editor of local news outlets is an important way to share information and opinions.

In addition to voting, being informed about and engaging in campaigns for elected offices is, of course, essential to a functioning democracy. Engagement can involve volunteering for campaign work locally or remotely (e.g., through writing postcards to encourage voter registration and turnout). Making contributions to candidates you support of whatever amount you’re comfortable with is also an important way to participate.

I encourage you to contact your elected officials and, if possible, establish a personal relationship with them (and/or members of their staff). This ensures that your voice is heard – even when you don’t get the result you would like. Volunteering for or contributing to candidates’ campaigns helps in getting their attention and building a relationship with them.

Democracy is NOT a spectator sport. If all of us are engaged and act as responsible citizens, in whatever ways we can, large or small, we can revitalize our democracy and its work toward its founding and exemplary principle of equal opportunity for all. This probably won’t happen as quickly or easily as we’d like, and it will happen with fits and starts, but we can make it happen if we all pitch in.

CRISIS AND HOPE FOR AMERICAN DEMOCRACY Part 3

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CRISIS AND HOPE FOR AMERICAN DEMOCRACY Part 2

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

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

In Packer’s analysis, America fractured in the 1970s from two relatively stable cultural narratives or moral identities aligned with the Democratic and Republican parties into four rival narratives. Democrats traditionally stood for workers, social solidarity, and ensuring fairness for all. Republicans stood for business, individual enterprise, and getting ahead. In the late 1960s, both parties were undemocratic, corrupt, and often bigoted. Some of the organized constituencies that had traditionally been aligned with each party began to question their affiliation. The post-World War II, middle-class-focused, bipartisan America was being transformed.

Packer names and describes four new, rival cultural narratives, moral identities, or “tribes” that emerged from this transformation. My previous post briefly summarized the Free America and Smart America tribes. This post provides a summary of the other two: Real America and Just America.

Real America: The members of the Real America tribe typically live in small towns and are hardworking, patriotic, generally Christian, predominantly white, members of the working class. They are suspicious of both a shiftless underclass and a parasitic upper class. They blame multinational corporations and big government for their declining socioeconomic status. Internationally, they are isolationists.

Real Americans typically support the Republican Party, which has cultivated their loyalty with its culture war politics of racist, xenophobic, anti-abortion, and anti-LGBTQ positions. They turn a blind eye to the Republicans’ support of big business and the wealthy, despite its undermining of their economic security. As their economic security and opportunities have declined, they have rightly felt that neither party was listening to them and that they had no voice and no way of participating meaningfully in American democracy.

Therefore, despair and anger have grown in Real America. Donald Trump’s rhetoric gave voice to their despair and anger. They turned a blind eye to his (and the Republican Party’s) support for big business and the wealthy (again). His apparent empathy with their feelings and raw emotions about blacks, immigrants, cultural changes, and their decline in social status were all they needed to hear to become ardent supporters. His identity politics was classic demagoguery, connecting with their sense of grievance and unfairness, their fear of the “other” (e.g., blacks, immigrants, non-heterosexuals, and non-evangelical Christians), and their desire for power to push back against their perceived enemies, including economic and political elites.

Just America: Members of the Just America tribe tend to be young (born in the late 1990s or after) and to have a jaundiced view of the progress of America towards its aspirational principle of equal opportunity for all. They are skeptical of capitalism and democracy, as well as of business and political elites. They see an accumulation of failures by these elites including on civil rights, criminal justice, economic inequality, and climate change.

Many of them entered the workforce with crushing college debt only to find employment opportunities limited by the Great Recession, a skewed economy, and then the pandemic. With the election of Donald Trump, police killings of unarmed blacks, rampant gun violence, active undermining of democracy by Republicans, unaddressed climate change, and re-emergent racism and anti-LGBTQ+ rhetoric and policies, Just Americans see little of value in America’s historical path and traditions.

They espouse a new, more differentiated identity politics, a politics focused on identity groups and not individuals. They expand identity politics from a focus on just race, ethnicity, religion, and gender, to a more differentiated version based on sexuality (i.e., LGBTQ+), on differentiated types of disabilities, and on the intersections among the old identity categories as well as the new ones.

Events that have paralleled the rise of Just America include the multiple and continuing killings of often unarmed blacks, particularly young males, by white police officers and others. These are now often caught on video by cellphone cameras, such as that of Michael Brown in Ferguson, Missouri in the summer of 2014 and of George Floyd in Minnesota in 2020.

The publication of The 1619 Project: A new origin story in the summer of 2019, with its re-examination of the history of slavery, furthered Just Americans’ call for action to address the persistent effects of slavery and racial discrimination. Their perception is that America has a persistent, caste-like, racial hierarchy. But Just Americans aren’t only focused on race, they also support economic justice, addressing gender issues, justice for the LGBTQ+ community, and tackling climate change and environmental concerns.

New language based on Just America’s principles has become pervasive in our society, including, for example, systemic racism, white privilege, marginalized communities, toxic masculinity, intersectionality, nonbinary, and BIPOC (black, indigenous, and people of color). Just America has changed the way Americans think, talk, and act, but has not yet significantly changed most people’s lived experiences.

Just American’s strong commitment to social justice has, at times, made them hostile to open debate and compromise.

My next post will discuss the interactions among Packer’s four American tribes and his analysis of where we go from here, including how we put America back together and back on track.

CRISIS AND HOPE FOR AMERICAN DEMOCRACY Part 1

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

(Vacation Note: Sorry for not posting the last two weeks. I was on vacation with grandkids in LA and friends from Salt Lake City.)

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

George Packer’s book, Last best hope: America in crisis and renewal, offers an analysis of how American democracy got to its current crisis and how it will, hopefully, renew itself and survive. He points out that American democracy has gone through similar crises in the past and has successfully renewed itself and resumed its journey toward the visionary principles expressed in the Declaration of Independence.

He posits that a functioning democracy requires three elements:

  1. The people view each other as fellow citizens of goodwill,
  2. The people believe that their government hears and responds to them, and
  3. The people believe that their government leaders will abide by democratic rules, including that votes will be accurately cast, counted, and respected.

Right now, the American people – or at least some of them – are questioning each of these. Destructive tribalism has shattered these foundations of democracy and the shared reality that is essential for self-government. The high and growing levels of inequality that our current economic system produces makes national solidarity impossible – especially in a country founded on the principle of equal opportunity. Concentrated economic and political power in the hands of a small number of wealthy capitalists and their political allies has denied many Americans control of their lives and futures, and has taken away their economic security.

In Packer’s analysis, America fractured in the 1970s from two relatively stable cultural narratives or moral identities aligned with the Democratic and Republican parties into four rival narratives. Democrats stood for workers, social solidarity, and ensuring fairness for all. Republicans stood for business, individual enterprise, and getting ahead. In the late 1960s, both parties were undemocratic, corrupt, and often bigoted. Some of the organized constituencies that had traditionally been aligned with each party began to question their affiliation. The post-World War II, middle-class-focused, bipartisan America was being transformed.

Packer names and describes four new, rival cultural narratives, moral identities, or “tribes” that emerged from this transformation. Here’s a brief summary of two of them. (The other two and more on Packer’s analysis will be presented in subsequent posts.)

Free America: Driven by consumer capitalism and libertarian ideas, members of the Free America tribe are focused on individual freedom unconstrained by government, society, or other people. They are skeptical of democracy and view the role of government as simply to secure individual rights. They embrace the mythical self-made man, pioneer, and cowboy. Their individualism and resultant self-isolation tend to breed distrust. They support deregulation without foreseeing the resultant emergence of concentrated wealth and economic power in the hands of a small number of huge corporations and wealthy capitalists. They are strongly nationalistic, believing in American exceptionalism, ideals, and military might. They tend to be radical rather than conservative. They break down institutions and oppose rules and traditions. The quality of the leadership of this tribe has steadily deteriorated from Ronald Reagan to Newt Gingrich to Donald Trump. Ultimately, the Free America that this tribe’s members advocate for has, for many of them, eroded their economic security, their ability to enjoy their freedom, and their identity as solid members of the middle class.

Smart America: Smart America is an embodiment of the new knowledge economy. Its members believe in expertise and credentials (e.g., college degrees). They embrace capitalism and meritocracy. They support government and private programs to ensure equal opportunity, such as affirmative action, diversity hiring, and perhaps reparations to promote racial justice. They support economic and educational justice too. They are, however, individualists. The American society they have built, based on education and merit, has created a new, often hereditary, professional, white collar social class. Politically, they align with and have shaped the new Democratic Party, with Bill and Hillary Clinton as quintessential members and leaders. They and this new Democratic Party have moved away from supporting unions and blue-collar workers. Instead, they support free trade, deregulation, and the resultant concentration of economic power in huge, international corporations. The winners in Smart America are on Wall Street and in Silicon Valley. Its families strive feverishly to get their children into elite universities. The country’s education system (from kindergarten through higher education), envisioned as the vehicle for equal opportunity, has now become the enforcer of ostensibly merit-based inequality. As the professionals of Smart America have succeeded, blue collar workers have seen their economic security and opportunities diminish. The loyalty of Smart Americans is to their families and less so to America. Their identity is less American and more that of global citizen.

My next post will summarize Packer’s other two rival cultural narratives, moral identities, or “tribes”: Real America and Just America. A subsequent post will discuss the interactions among the four American tribes and Packer’s analysis of where we go from here, including how we put America back together and back on track.

FINANCIAL CORPORATIONS USE ANTI-LGBTQ+ CAMPAIGN TO FIGHT COMPETITION ON CREDIT CARD FEES

Corporations and their executives will do anything to protect their profits, wealth, and power. Visa, Mastercard, and their big bank partners are working with right-wing groups using an anti-LGBTQ+, anti-wokeness campaign in a fight to protect their monopolistic price-gouging on credit card transaction (“swipe”) fees.

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

Corporate executives are totally focused on the bottom line – on profits. When profits are on the line, no holds are barred. Visa, Mastercard, and their big bank partners are using an anti-LGBTQ+ campaign to fight competition that would reduce transaction fees (swipe fees) on credit card transactions. Despite websites and social media communications claiming sensitivity and a commitment to the LGBTQ+ individuals, and some token actions supporting the LGBTQ+ community, these big financial corporations are resorting to an anti-LGBTQ+, anti-wokeness campaign to fight legislation in Congress that would require competition in the processing of credit card transactions. [1] (Note: Many corporations that claim to support the LGBTQ+ community are, nonetheless, making significant political contributions to politicians promoting anti-LGBTQ+ legislation. See this previous post for details.)

To reduce monopolistic swipe fees by introducing competition, a bipartisan group in Congress is working to reduce the dominance of the credit card market by Mastercard and Visa (and their big bank partners). Mastercard and Visa currently control over 80% of the credit card market. Therefore, they effectively set the fees that retailers (and ultimately consumers) must pay them to process credit card transactions. Since 2020, these fees have increased by 40%, even though the cost of processing transactions has gone down as technology has improved and gotten cheaper.

Swipe fees on credit and debit card transactions cost retailers and consumers $161 billion in 2022. Credit card swipe fees are, on average, 2% of each transaction’s value, but can be more for on-line transactions and up to 4% on some cards. Total swipe fees in 2022 are about eight times as much as they were in 2001, when they were about $20 billion.

For most retailers, credit card swipe fees are their second biggest cost; second only to the cost of paying their workers. For small, low-margin businesses like mom-and-pop convenience stores and gas stations, swipe fees are a higher portion of their costs than they are for bigger businesses. [2]

Therefore, a bipartisan group in Congress is looking to reduce this burden on small businesses (and their customers) with the Credit Card Competition Act (CCCA). The bill would require Visa and Mastercard, and the big banks they work with, to allow competitors to process credit card transactions, introducing competition on swipe fees. If passed, it is estimated that this competition would save retailers and their customers $15 billion per year.

A similar law regulating debit cards was passed by Congress in 2010 It, and regulations from the Federal Reserve, cap debit card swipe fees at $0.21 per transaction and 0.05% of a transaction’s value. It also requires large banks’ debit cards to allow processing by two unaffiliated computer networks, eliminating monopolistic control by Visa, Mastercard, and their big bank partners. It is estimated that these regulations save retailers and their customers over $9 billion per year.

New regulations that took effect July 1, 2023, have confirmed that the fee cap and network processing rules apply to on-line and contactless debit card transactions, as well as to in-store transactions. Visa, Mastercard, and their partner banks had not been living up to these rules on transactions done in these alternative modes.

Visa, Mastercard, and their big bank partners are spending millions of dollars to fight the CCCA. For example, the Credit Union National Association spent $2 million in the last six months lobbying against swipe fee reform, Mastercard spent $200,000, and the American Bankers Association spent almost $5 million over the last year on issues including swipe fee reform.

Even though the support for the CCCA is being led by the National Association of Convenience Stores and the Merchants Payment Coalition (which spearheaded the effort to regulate debit cards through the 2010 law), the big financial corporations are claiming that the CCCA is a liberal effort to reward “woke” retailers. Their ads, mailings, and lobbying claim that the CCCA is meant to reward big “woke” retailers like Target. As you may remember, Target unveiled a Gay Pride product line for Gay Pride month in June this year with prominent displays in stores and on its website. In the face of right-wing extremists’ attacks, it pulled back on the displays in some stores and on products featured on its website.

The financial corporations are working with right-wing dark money groups (whose contributors are hidden from public disclosure) to send mailings and run advertisements claiming the CCCA is a liberal handout to “woke” retailers. They are focusing on the districts of Republican supporters of the CCCA, hoping to split the bipartisan coalition for the CCCA and to defeat it by making it a target in the Republican anti-LGBTQ+ culture war.

This tactic by the big financial corporations clashes with their efforts over the past several years to portray themselves as leaders in promoting diversity, equity, and inclusion. They routinely pledge to support LGBTQ+ inclusivity in hiring. Some held their own Pride Month celebrations this past June.

This current use of an anti-LGBTQ+ tactic underscores their hypocrisy and their willingness to use any tactic possible to protect their financial interests and profits. There’s no real commitment by corporations or their executives to moral or ethical principles. Their behaviors and rhetoric only reflect an interest in maximizing their profits, wealth, and power.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support the Credit Card Competition Act. The monopolistic control of swipe fees by Visa, Mastercard, and their big bank partners needs to end. Doing so will save small businesses and consumers billions of dollars every year. 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]      Goldstein, L., 8/4/23, “Wall Street stokes culture war to fight swipe fee reform,” The American Prospect (https://prospect.org/power/2023-08-04-wall-street-culture-war-swipe-fee-reform/)

[2]      National Retail Federation, retrieved from the Internet 8/11/23, “Swipe fees,” (https://nrf.com/advocacy/policy-issues/swipe-fees)

CORPORATIONS’ GOOD DEEDS ARE OFTEN JUST PR

Corporate good deeds and words are often just for public relations (PR) and do not represent any real commitment to good causes. Many corporations, despite statements and some token actions supporting the LGBTQ+ community, are making significant political contributions to politicians promoting anti-LGBTQ+ legislation. Combining state and federal level political giving, since Jan. 2022, 25 of these corporations have given $13.5 million to anti-LGBTQ+ politicians or their committees. Over 50 corporations that have actually signed the Human Rights Campaign’s LGBTQ+ pledge have, since Jan. 2020, contributed over $2.4 million to state legislators promoting bills deemed anti-LGBTQ+.

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

Corporate executives are totally focused on the bottom line – profits. Good deeds and words from them and their corporations are often just for public relations (PR). Actions speak louder than words and in terms of money, token spending on bits of PR is outweighed by significant money going elsewhere, such as to political contributions.

Recent examples relate to the LGBTQ+ community. Corporations, their executives, and their websites and social media communications claim sensitivity and a commitment to the LGBTQ+ community. Despite statements and some token actions supporting the LGBTQ+ community, many corporations, nonetheless, are making significant political contributions to politicians promoting anti-LGBTQ+ legislation. Here are two studies that document this.

First, a study by Popular Information of 25 corporations that had excellent ratings on the Human Rights Campaign’s (HRC) annual Corporate Equality Index (which rates over 1,200 companies on their treatment of LGBTQ+ employees and customers) found that, since Jan. 2022, they or their political action committees (PACs) have given $13.5 million to anti-LGBTQ+ politicians and their committees at the state and federal levels. HRC’s methodology for calculating its Corporate Equality Index has NOT to-date taken political donations into account. The top ten corporate contributors to state and federal anti-LGBTQ+ politicians are: [1]

  • AT&T $1,396,650
  • Charter Communications $1,167,000
  • UnitedHealth $1,139,050
  • Comcast/NBC Universal $1,046,000
  • Home Depot $   784,200
  • General Motors $   767,350
  • Deloitte $   669,800
  • Walmart $   650,250
  • Amazon $   488,000
  • CVS Caremark $   479,500

Other corporations in the top 25 are: UPS, Wells Fargo, Delta, Aflac, Verizon, Fed Ex, Cigna, Google, Toyota, T-Mobile, Microsoft, Visa, Anheuser Busch, American Airlines, and Capital One. Each of these gave $200,000 or more to anti-LGBTQ+ politicians.

Second, a study of state-level campaign finance reports by Open Secrets found that over 50 corporations that have signed the HRC LGBTQ+ pledge (or their political action committees) have, since Jan. 2020, contributed over $2.4 million to state lawmakers promoting bills deemed anti-LGBTQ+ by the American Civil Liberties Union. [2] As-of June 1, 2023, 323 corporations have signed the HRC pledge “stating their clear opposition to harmful legislation aimed at restricting … LGBTQ people in society.”

In the first six months of 2023, these state lawmakers have played key roles in passing 62 anti-LGBTQ+ bills in 18 states. There are at least another 270 anti-LGBTQ+ bills under consideration in 33 states.

Nine corporations accounted for 83% of the $2.4 million in contributions to anti-LGBTQ+ state politicians:

  • AT&T $517,550
  • Altria (tobacco) $362,260
  • Amazon $273,993
  • Union Pacific $188,750
  • Disney $166,991
  • Pfizer $163,525
  • CVS Caremark $137,550
  • Merck $105,800
  • General Motors $100,750

The state lawmakers receiving these contributions have passed bills that include bans or criminalization of gender-affirming medical care, requirements to use bathrooms and pronouns based on biological sex at birth, restrictions on transgender youth participating in sports, and banning events where people are dressed in drag.

Corporations that appear to have a real commitment to the LGBTQ+ community have often capitulated when faced with pushback from right-wing extremists. Target, for example, unveiled a Gay Pride product line for Gay Pride month in June this year with prominent displays in stores and on its website. It had signed the HRC pledge two years ago and had not contributed to any of the anti-LGBTQ+ state lawmakers. Nonetheless, in the face of right-wing extremists’ attacks, it pulled back on displays in some stores and on products featured on its website.

My next post will describe how financial corporations are using an anti-wokeness campaign to fight efforts to reduce credit card fees, despite their past pledges to support LGBTQ+ inclusion and diversity.

[1]      Legum, J., Zekeria, T., & Crosby, R., 6/5/23, “These 25 rainbow flag-waving corporations donated $13.5 million to anti-gay politicians since 2022,” Popular Information (https://popular.info/p/these-25-major-corporations-donated)

[2]      Ratanpal, H., & Giorno, T., 6/9/23, “Companies that publicly condemned legislation targeting the LGBTQ+ community send political contributions to state lawmakers who advanced anti-LGBTQ+ bills,” Open Secrets (https://www.opensecrets.org/news/2023/06/companies-that-publicly-condemned-legislation-targeting-lgbtq-community-send-political-contributions-to-state-lawmakers-who-advanced-anti-lgbtq-bills/)

IT’S OFFICIAL: TRUMP AND ALLIES WANT AUTHORITARIAN GOVERNMENT

Donald Trump and his allies want to abandon democracy and create an authoritarian government in the U.S. This is now the official and explicit plan of the right-wing of the Republican Party. Their “Project 2025” is the culmination of efforts by right-wing, wealthy elitists to control the government’s administrative capacity and its regulation of the private sector. Its plan would give wealthy individuals and corporations unfettered control of the American economy, government, and society. To achieve these goals, they are willing to give the President dictatorial powers.

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

Donald Trump and his allies want to create an authoritarian government in the U.S. Although Trump has rhetorically and through some actions given indications of this in the past, what is new and shocking is that it is now the official and explicit plan of the right-wing of the Republican Party. This has the support (at least tacitly) of the Republican establishment. What has happened is that “businessmen who hated regulation joined with racists who hated federal protection of civil rights and traditionalists who opposed women’s rights” to advocate for upending our democratic government and returning the country to the pre-Franklin Roosevelt, pre-New Deal days of the 1920s. [1]

Their plan would abandon democracy, eliminate the checks and balances of the three branches of government, and create a presidency with dictatorial powers. It would increase presidential authority over every part of the executive branch of government, particularly over employees or agencies that currently have some measure of independence from political control from the White House.

Created by Project 2025, this presidential transition plan is identifying policies and personnel for a transition to a Trump (or other Republican) presidency in 2025. The scale and revolutionary nature of the plan are unprecedented. Project 2025 is being run by a Heritage Foundation-led coalition of over 65 right-wing organizations with a $22 million budget. The Heritage Foundation, founded in 1973, a formerly conservative and now revolutionary think tank, has played a leading role in shaping Republican policies and funneling personnel to Republican administrations since the Reagan Administration. It is part of the well-funded network of right-wing, radical, revolutionary groups that have transformed the Republican Party and the Supreme Court. [2] They now want to transform the presidency and all our democratic practices and institutions.

Project 2025’s plan is echoed by information on the Trump campaign website that was primarily written by Trump advisors Vince Haley and Ross Worthington, [3] with input from others, including Trump’s virulent, anti-immigrant advisor, Stephen Miller. The plan has been publicly promoted by Russell Vought, Trump’s head of the Office of Management and Budget, and by John McEntee, head of Trump’s Presidential Personnel Office. McEntee, as part of President Trump’s effort to control the government bureaucracy, was working to install Trump loyalists throughout the Executive Branch, even over the objections of Trump’s Cabinet Secretaries. The culmination of these efforts was clear in the leadup to the January 6, 2021, insurrection when Trump tried to get these loyalists to assert control at the DOJ, DOD, and other government agencies. [4]

Project 2025’s plan would:

  • Bring independent agencies under direct presidential control such as the Department of Justice (DOJ), the Internal Revenue Services (IRS), the Consumer Financial Protection Bureau, the Federal Trade Commission (which is the business regulation and antitrust agency), the Postal Regulatory Commission, and probably the Federal Reserve;
  • Allow the President to refuse to spend (“impound”) funds appropriated by Congress that were for programs or policies he didn’t like and, in general, to emasculate the legislative branch of government and any checks and balances it might exercise over the President;
  • Strip Civil Service protections from tens of thousands of career federal government employees, including at the intelligence agencies, the State Department, and the Department of Defense (DOD), so that they would be political appointees serving at the pleasure of the President and acting at his behest regardless of national security or the best interests of the country; and
  • Eliminate administrative procedures requiring public hearings and public comment periods for changes in regulations, as well as requirements for information sharing such as open meeting laws.

Project 2025 is the culmination of efforts by right-wing, wealthy elitists to have unfettered control of the American economy, government, and society via a President and Republican Party that they control with their money. To achieve these goals, they are willing to abandon democracy and create an authoritarian presidency with dictatorial powers. [5]

Many of the elements of the plan would be challenged in court if they are implemented. Many of these cases would eventually get to the Supreme Court. Although historically (in 1935 and 1988) the Court has upheld the independence of executive branch agencies and personnel from presidential political meddling, the current Court has already begun to erode those precedents. The Supreme Court’s recent track record would certainly seem to indicate that it would allow much of the concentration of power in the presidency that is being proposed by Project 2025’s plan.

If implemented, Project 2025 would likely end equality before the law, protection of civil rights, investments in programs that allow working people to prosper, and policies that build an economy that reduces economic inequalities. It would allow the President, for example, to:

  • Have the IRS target political opponents for tax audits and enforcement, while ignoring tax fraud or evasion by political supporters;
  • Have the DOJ prosecute political opponents, including on trumped up charges (no pun intended), while ignoring crimes by political supporters;
  • Target business regulations and antitrust actions at companies of political opponents, while letting those of political supporters operate uninhibitedly;
  • Order the Federal Reserve to cut interest rates before an election;
  • Target federal spending to states and municipalities led by political supporters while penalizing those of political opponents; and
  • Harm national security by directing loyalists in intelligence, diplomacy, and defense activities to act on his whims (e.g., friendships with Putin and Kim Jong Un) rather than on expertise and the country’s best interests.

[1]      Richardson, H. C., 7/17/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/july-17-2023)

[2]      Swan, J., Savage, C., & Haberman, M., 7/17/23, “Trump and allies forged plans to increase presidential power in 2025,” The New York Times

[3]      Vince Haley and Ross Worthington were Trump Advisors for Policy, Strategy and Speechwriting and developed Trump’s policies for undermining ethics standards among other things. Both had previously worked for former U.S. House Speaker Newt Gingrich for many years.

[4]      Cooper, R., 7/18/23, “Donald Trump is plotting to make himself dictator,” The American Prospect (https://prospect.org/politics/2023-07-18-donald-trump-plotting-make-himself-dictator/)

[5]      Cooper, R., 7/18/23, see above

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE UNCONSTRAINED RADICAL REACTIONARY SUPREME COURT

The six radical reactionary Supreme Court justices have clearly demonstrated that they believe there are no constraints on their decision making. To them, the end justifies the means. Through their invented “major questions” doctrine, they have crowned themselves the rulers over all government policies. Through their rulings, they are returning our society to one where some people are better and have more rights than others. Through their acceptance of contrived cases without true plaintiffs (see this previous post for details), they rule over what is acceptable or not in our society.

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

Recent decisions by the Supreme Court clearly show that its radical reactionary six-justice majority (Roberts, Alito, Barrett, Gorsuch, Kavanaugh, and Thomas) recognizes no constraints on its decision making. They are making up law, precedents, procedures, and conclusions that fit their white supremacist, evangelical Christian, plutocratic ideology. This is not hyperbole or political bias speaking, it is fact. What worries me the most is their decision-making process, not the substance of their decisions, as horrific as that is. Their perversion of the law, their disregard for facts, their rejection of procedural standards and precedents, and their contorted “logic” clearly have no constraints.

Heather Cox Richardson, an historian, in her June 30th post on her Letters from an American daily blog, writes that in the student loan forgiveness case, Biden v. Nebraska, the six radical reactionary justices based their decision that loan forgiveness was unconstitutional on their “major questions” doctrine. She notes that they invented this new doctrine in 2022 in the West Virginia v. Environmental Protection Agency (EPA) case. In that case, they stripped the EPA of the authority to regulate some kinds of air pollution based on their assertion that Congress cannot delegate “major questions” to executive branch agencies.

This “major questions” doctrine has no basis in law or the Constitution. The Court itself determines whether an issue is a “major question.” Therefore, the Court has basically taken over the legislative branch’s power and authority to delegate implementation of policy to the executive branch. By deeming an issue a “major question,” the Court can and is blocking any policy it doesn’t like, whether it’s regulation of air pollution or forgiving student loans. As Justice Kagan wrote in her dissent to the Biden v. Nebraska decision, “the Court, by deciding this case, exercises authority it does not have. It violates the Constitution.”

Robert Hubbell, a retired lawyer, in his Today’s Edition Newsletter on July 5, 2023, “The walls of liberty,” writes that the “major questions” doctrine is a “judge-made doctrine [that] arrogates to the Court the right to overturn any decision by a federal agency with which the reactionary majority disagrees. The pseudo-rationale for the doctrine is that if Congress intends to delegate discretion to federal agencies on “major questions,” it should use a level of specificity that is to the liking of the Supreme Court. … The doctrine was invented from whole cloth to justify judicial activism in service of an anti-government agenda.”

Richardson also writes that recent Supreme Court decisions, particularly the decision in 303 Creative LLC v. Elenis on the ability of a business to refuse to serve LGBTQ people, “continue to push the United States back to the era before the New Deal” and, indeed, back to the mid-1800s’ and the Civil War’s issues of slavery and Black citizenship and voting. The issues of discrimination and segregation from the Civil Rights Movement of the 1960s are also rekindled by this decision.

She writes that the 303 Creative decision means that the federal government cannot prevent discrimination against LGBTQ people by individuals and their businesses based on the proprietor’s religious beliefs and, moreover, the Court won’t let the states do so either. Richardson writes that this takes the country back to the 1800s when it was acceptable to exclude people from voting based on literacy tests, poll taxes, a criminal conviction, etc. White men were protected from these requirements because they were allowed to vote if their grandfathers had been eligible to vote, so the effect, of course, was to discriminate against Black men.

Richardson writes in her July 3rd post, “as in the 1850s, we are now, once again, facing a rebellion against our founding principle, as a few people seek to reshape America into a nation in which certain people are better than others.” That founding principle of the United States, which is what made it exceptional, was that all people are created equal – although they really only meant all white men – but that was revolutionary at the time.

As Justice Sotomayor wrote in her dissent on the 303 Creative case, for “the first time in history” the Court has given “a business open to the public a constitutional right to refuse to serve members of a protected class.” This is reminiscent, of course, of the Woolworth lunch counter’s exclusion of Blacks, which was a seminal moment in the 1960s Civil Rights Movement. Segregation was and is defended as based on deeply held religious beliefs just as is the discrimination against LGBTQ people allowed by the 303 Creative case decision.

The six radical reactionary Supreme Court justices have clearly demonstrated that they are unconstrained by precedents of any kind. They are not in any way conservative. Democracy, the separation of powers, the rule of law, and the Constitution apparently mean nothing to them. To them the end justifies the means. Their decisions are truly radical.

They are reactionary in that they are reversing the trajectory of U.S. history which has continually extended rights and equality to broader groups of people, e.g., Black men, women, and LGBTQ individuals. This trajectory has moved the United States toward its founding principle that all people are created equal. For the first time in the country’s history, the Supreme Court and its six reactionary justices are taking away people’s rights and equality, rather than expanding them. To these six justices, discrimination and inequality are not issues that the government should do anything about.

They apparently will let nothing stand in their way of creating a society based on evangelical Christian religious tenets, where wealthy white men control the government and society.

P.S. There are two new scandals involving Justice Thomas. First, in 2019, an aide to Justice Thomas received cash, apparently for Thomas’s Christmas Party, from at least seven lawyers who have had cases before Thomas and the Supreme Court. The names of seven lawyers are known although the amounts of money are not. [1] Second, shortly after Thomas’s confirmation to the Supreme Court in 1991, he was accepted into the Horatio Alger Association of Distinguished Americans, a group made up primarily of extraordinarily wealthy, conservative, male, businessmen. Thomas is an honorary Board Member of the non-profit organization with a roughly $20 million annual budget, $300 million in assets, and a 21-person staff. He provides it unusual access to the Supreme Court’s actual courtroom, where he hosts its annual awards ceremony. Leaders of the organization are major donors to conservative causes with broad interests in Supreme Court decisions, even if they are not actual parties in specific cases. Thomas has received personal hospitality and other undisclosed benefits from some of them. [2]

[1]      Stancil, K., 7/12/23, “‘Corruption’: Thomas aide accepted money from lawyers who have had cases before the Supreme Court,” Common Dreams (https://www.commondreams.org/news/clarence-thomas-aid-venmo)

[2]      Johnson, J., 7/10/23, “‘Clarence Thomas needs to resign’: Report shines more light on Justice’s gifts from the rich,” Common Dreams (https://www.commondreams.org/news/clarence-thomas-gifts)

THE OUT-OF-CONTROL RADICAL REACTIONARY SUPREME COURT

The six radical reactionary Supreme Court justices have clearly demonstrated that they are unconstrained by precedents of any kind, i.e., they are truly out-of-control. To them the end justifies the means. Through their invented “major questions” doctrine they have crowned themselves the rulers over all government policies. Through their acceptance of contrived cases without true plaintiffs (i.e., ones with standing to bring a case to court) they rule over what is acceptable or not in all elements of our society. Through their rulings they are returning our society to one where some people are better and have more rights than others.

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

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

Recent decisions by the Supreme Court clearly show that its radical reactionary six-justice majority (Roberts, Alito, Barrett, Gorsuch, Kavanaugh, and Thomas) is out-of-control. They are making up law, precedents, procedures, and conclusions that fit their white supremacist, evangelical Christian, plutocratic ideology. This is not hyperbole or political bias speaking, it is fact.

What worries me the most is not the substance of their decisions, as horrific as that is, it’s their process, their perversion of the law, their contorted “logic,” their disregard for facts, and their rejection of procedural standards and precedents. As Norman Ornstein, a respected political scientist and a senior fellow emeritus at the right-wing American Enterprise Institute (where he has been for over 40 years) wrote, “It is not just the rulings the Roberts Court is making. They created out of whole cloth a bogus, major questions doctrine. They made a mockery of standing. They rewrite laws to fit their radical ideological preferences. They have unilaterally blown up the legitimacy of the Court.”

Five recent blog posts or articles from my three favorite sources of intelligent, progressive policy analysis and commentary provide detail that documents the veracity of Ornstein’s statements. They document the radical reactionary nature of recent Supreme Court decisions – not just in terms of the specific outcomes and substance, but in terms of process and perversion of law and history.

David Dayen’s article, “Supreme Court decides fake plaintiffs are good plaintiffs,” on The American Prospect website, focuses on the issue of standing. Normally, for a plaintiff to file a suit in court, the individual(s) or organization(s) bringing the suit must have “standing” to sue, meaning they must have suffered actual harm – physical, financial, or an inability to do something, such as to vote. In both the student loan forgiveness case (Biden v. Nebraska) and the LGBTQ wedding website case (303 Creative LLC v. Elenis) the plaintiffs did NOT have standing to even bring the cases based on traditional definitions of standing or any normal interpretation of law, legal practice, or precedent.

The only rationale for the Supreme Court’s acceptance of these two cases and their granting of standing to the plaintiffs is that the six radical reactionary justices knew the ruling they wanted to make and were eager to accept any case that would allow them to do so. Dayen writes that beyond the ethical and financial corruption of Supreme Court justices that has recently come to light, “there is a subtler corruption, whereby the Court picks up whatever facts, whether true or untrue, [including on standing to sue] and wields them to decide cases that fit their prior beliefs.”

Robert Hubbell, a retired lawyer, in his Today’s Edition Newsletter blog on July 1, 2023, “Brute force in the service of religious nationalism,” also focuses on the Supreme Court’s willingness to accept and rule on cases where the plaintiff lacks standing to bring a lawsuit. Moreover, the “conflicts” underlying Biden v. Nebraska and 303 Creative LLC v. Elenis were contrived by right-wing advocates in a conscious and concerted effort to create a case so the Court could make a ruling. The Court was happy to take on these cases and make the ruling the advocates wanted and that fit with their radical, reactionary ideology.

My next post will review the six justices’ invented but powerful “major questions” doctrine and their efforts to turn back the pages of our history, allowing discrimination and asserting that all people are NOT equal, but that some are better, or at least more important before the law, than others.

THE SUPREME COURT PROBABLY DELIVERED THE HOUSE TO THE REPUBLICANS IN 2022

The Supreme Court has been issuing its end of session decisions recently and one of them, Allen v. Mulligan, upheld a key provision of the Voting Rights Act that prohibits election district maps that are drawn to dilute minority voting power. The Court, prior to the 2022 elections, blocked the redrawing of districts despite lower courts’ rulings that the districts were unconstitutional. This left districts in place for the election in seven or more states that have now been deemed unconstitutional. This probably delivered at least seven seats to the Republicans that otherwise would have likely gone to Democrats. The shift of five seats from Republicans to Democrats would have changed the control of the House.

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

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

The Supreme Court has been issuing its end of session decisions recently and they’ve been garnering a lot of attention in the media because some of them have far reaching effects. One of the decisions, Allen v. Mulligan, upheld a key provision of the Voting Rights Act and was heralded as a bit of a surprise because other relatively recent Supreme Court decisions had gutted most of the Voting Rights Act. This decision upheld the section of the Act that prohibits election district maps that are drawn to dilute minority voting power.

Although Allen v. Mulligan has been reported as a very important decision with far reaching implications, the monumental effect of the original ruling in the case, before the 2022 elections, has not been widely reported. [1]

First, a little background on this case and the underlying issue of racial gerrymandering of congressional districts. The Allen v. Mulligan decision reinstates a lower court ruling that will require Alabama to redraw its congressional districts due to the racial gerrymandering of the current districts. A less noticed decision in a case known as Ardoin v. Robinson will similarly require Louisiana to redraw its congressional districts. [2] These two cases set a precedent that will affect racially gerrymandered congressional district maps in Florida, Georgia, Ohio, Texas, and South Carolina, and perhaps elsewhere.

In Alabama, there are seven congressional districts. Twenty-seven percent of the population is Black (and four percent is in other non-white categories), but by packing as many Black voters into one district as possible and splitting up the other Black voters among the other districts, there is only one Black-majority district in the state. In Louisiana, there are six congressional districts. A third of the population is Black, but, again, by packing as many Black voters into one district as possible and splitting up the other Black voters among the other districts, there is only one Black-majority district in the state.

Prior to the 2022 elections, the Supreme Court, through “shadow docket” rulings in cases from Alabama (Allen v. Mulligan) and Louisiana (Ardoin v. Robinson), temporarily blocked the redrawing of districts based on lower courts’ rulings that the state’s congressional districts were unconstitutionally racially gerrymandered. This meant that the 2022 congressional elections used congressional districts in seven or more states that were unconstitutionally gerrymandered. (The “shadow docket” refers to rulings the Supreme Court makes without hearing arguments or soliciting input. The Court issues its “shadow docket” rulings without presenting any rationale for its decision. So, in these “shadow docket” cases, the Court provided “emergency relief” to Louisiana and Alabama to use congressional district maps in the 2022 elections that a lower court had ruled were illegal. See previous posts here and here on the Supreme Court’s use of the “shadow docket.)

Each of the seven (or more) states that had unconstitutionally racially gerrymandered districts would have most likely had at least one more Democratic leaning congressional district if the lower court rulings had not been blocked by the Supreme Court. Therefore, it’s highly likely that without the Supreme Court’s interference the Democratic Party would have had control of the U.S. House of Representatives rather than Republicans. After the election, there were 222 Republicans and 213 Democrats in the House. A shift of five seats would have given the Democrats a 218 to 217 majority. A shift in control of the House to Democrats would have had a monumental effect on policy making and the whole tenor of politics in the federal government.

Whether knowingly or not, the Supreme Court’s actions put a heavy thumb on the scales of the 2022 congressional elections. Most probably, the Court’s actions had the dramatic effect of determining who had the majority in the House of Representatives. Ultimately, the Court took away the constitutional right of voters in these states to a fair 2022 election. Furthermore, it did so without hearing arguments or soliciting briefs on the merits of the case and without even explaining its reasoning. [3]

P.S. The latest Supreme Court ethics scandals involve Justice Alito. He took an expensive fishing trip to Alaska, including a flight on a private jet, that was funded by a Republican billionaire and major campaign donor whose hedge fund has had multiple cases before the Court. Alito did not disclose these gifts as required and did not recuse himself on the cases. In addition, Alito’s wife had a business interest in a firm that was affected by a case before the Court from which Alito did not recuse himself. [4] (See previous posts here, here, and here about ethical scandals of Supreme Court justices.)

[1]      Thompson, M. W., 6/13/23, “Voting maps throughout the deep South may be redrawn after surprise Supreme Court ruling,” ProPublica (https://www.propublica.org/article/scotus-voting-rights-act-alabama-redistricting-allen-milligan)

[2]      Wilkins, B., 6/26/23. “‘Big win for democracy’ as SCOTUS OKs redrawing of rigged Louisiana congressional map,” Common Dreams (https://www.commondreams.org/news/louisiana-gerrymandering)

[3]      Editorial, 6/13/23, “The shadow docket does clear harm in voting rights case,” The Boston Globe

[4]      Wilkins, B., 6/26/23, “Wife’s oil and gas leasing deal raises new ethics concerns about Justice Alito,” Common Dreams (https://www.commondreams.org/news/alito)

CORPORATE GREED DRIVES BAD FAITH UNION NEGOTIATIONS

Corporate greed drives a range of bad behaviors including bad faith negotiations with workers’ unions. The quite profitable New York Times dragged out negotiations with its newsroom union for over two years before giving them modest raises that hardly keep up with inflation. Companies are frequently uncooperative in contract negotiations after workers have voted to form a new union. Typically, it takes over a year for a first contract to be signed and, in some cases, no contract is ever signed.

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

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

You’ve probably heard about recent successful votes by workers to establish unions, including at an Amazon warehouse and hundreds of Starbucks stores. There was a 53% increase in the number of unionization votes in 2022 over 2021, and this trend is continuing. All told, 200,000 workers voted to unionize in 2022.

The successful votes to unionize are the good news for the workers. The bad news is that it typically takes more than a year after the successful vote to sign the first contract, and, in some cases, no contract is ever signed. In a study of 391 first-time union contracts signed in 2005 – 2022, the average time from the successful vote to unionize to the signing of the first contract was 465 days; in the last three years of this period, it was over 500 days. A separate study of 226 successful unionization votes in 2018 found that 63% had no contract one year later and that 43% had no contract two years later. In 2009, a study of over 1,000 successful unionization votes found that 52% had no contract one year later, 37% had no contract two years later, and 30% had no contract three years later. [1]

These delays in signing a contract indicate bad faith in employers’ negotiating and are troublesome for multiple reasons. First, if a contract isn’t signed within a year, the employer can challenge the validity of the union. Second, a delay in signing a contract tends to harm workers’ morale and their commitment to the union. The energy from the successful drive to vote for a union tends to dissipate and employee turnover tends to dilute the pool of workers committed to the union.

Labor laws are tilted in the favor of employers to begin with, but employers often also use illegal tactics to delay contract negotiations. Although both parties are required by law to bargain in good faith, there is no enforcement mechanism. Furthermore, there is no requirement to engage in mediation or binding arbitration if negotiations have not produced a contract.

Employers also drag their feet in negotiating new union contracts when one expires. A recent example is the New York Times (NYT), which dragged out contract negotiations for over two years after its newsroom union’s contract expired on March 30, 2021. The NYT engaged a high-powered law firm, Proskauer Rose, to guide its negotiations. It took seven months to respond to the union’s initial wage proposal and then five months to respond to the union’s counterproposal. In the meantime, the union employees worked for two years without a contract and without any increase in pay while inflation cut deeply into the value of their incomes. [2]

After 21 months of negotiation, the NYT and the union were roughly $15 million apart in their positions on aggregate annual wage costs. However, the NYT was not budging, so the workers held a one-day strike in December 2022. To put this in some perspective, the NYT had an average operating profit of $215 million in each year from 2020 to 2022. In 2022, it announced it would buy back $150 million of its own stock during the year. It has also increased the dividends it pays to shareholders by 83% from $0.82 per share in 2020 to a projected $1.50 in 2023. In 2021, compensation for the CEO was $5.75 million (a 32% increase) and $3.6 million for the publisher (a 49% increase). Clearly, the NYT is not a corporation that can’t afford to pay a few million dollars more to its employees, who are recognized around the world as top-notch.

Ultimately, after over two years of negotiating and workers going without any pay increase, the union and the NYT reached a five-year deal on May 23, 2023. The workers got a 7% bonus based on their 2020 wages instead of any retroactive wage increase for the two years they worked without a contract. They got an immediate increase of between 10.6% and 12.5% on their 2020 wages, their only raise over a three-year period, as well as future raises of 3.25% in 2024 and 3.0% in 2025. This was a long, hard-fought battle with a very profitable corporation where negotiations finally produced a contract in which the workers’ pay may not even be keeping up with inflation. [3]

The Protecting the Right to Organize (PRO) Act in Congress would address the problem of employers delaying contract negotiations. It would require an employer to start good faith negotiations within 10 days of a vote for a union or the end of a contract. If a contract is not agreed to within 90 days, either side could request federal mediation. If mediation fails to produce a contract in 30 days, binding arbitration would take place and put a two-year contract in place. [4]

I urge you to contact your U.S. Representative and Senators to ask them to support the PRO Act to ensure that union contracts are negotiated in a reasonable timeframe. 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]      McNicholas, C., Poydock, M., & Schmitt, J., 5/1/23, “Workers are winning union elections, but it can take years to get their first contract,” Economic Policy Institute (https://www.epi.org/publication/union-first-contract-fact-sheet/)

[2]     Greenhouse, S., 12/15/22, “What’s wrong at the Times,” The American Prospect (https://prospect.org/labor/new-york-times-union-contract-strike/)

[3]      Robertson, K., 5/23/23, “The Times reaches a contract deal with newsroom union,” The New York Times

[4]      McNicholas, C., Poydock, M., & Schmitt, J., 5/1/23, see above

CORPORATE BAD BEHAVIOR IS COMMONPLACE

Corporate greed drives a range of bad behaviors including the cheating of customers. Here are two examples: Wells Fargo and Citizens Banks have both recently paid settlements related to schemes that cheated customers. In addition, they, particularly Wells Fargo, have a history of illegal behaviors. Corporate bad behavior is frequent, varied, and often repetitive, i.e., commonplace, making it clear that corporations view paying penalties for bad behavior as simply an acceptable cost of doing business. If we want to stop corporate bad behavior, there must be more enforcement with greater penalties

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

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

Wells Fargo Bank has a long-running record of bad behavior. Most recently, it agreed to pay $1 billion to settle a class-action lawsuit. The suit was brought by shareholders who accused Wells Fargo of making false statements about its progress in implementing reforms in response to its 2016 fraudulent accounts scandal. As a result, when the truth about the failures of its reforms became public, the value of its stock took a dive. [1]

As you may remember, in 2016, Wells Fargo acknowledged opening millions of unauthorized accounts for customers. It fired over 5,000 employees who had opened the fraudulent accounts in order to keep their jobs or earn bonuses. Based on the fraudulent accounts, some customers were charged overdraft fees and some had their credit scores damaged. Wells Fargo’s CEO ultimately lost his job and another senior executive is being prosecuted. The Federal Reserve imposed a series of consent orders on Wells Fargo in 2018 requiring it to remedy its corporate governance and penalizing the company in multiple ways.

Between 2018 and 2020, Wells Fargo touted its progress on complying with the remedial consent orders in public statements and regulatory reports. In reality, it was failing to implement meaningful reforms, failing to develop adequate remediation plans, and failing to meet remediation deadlines.

Overall, since 2000, Wells Fargo has paid penalties of almost $26 billion for 236 offenses of a variety of kinds. [2]

Citizens Bank recently agreed to pay a $9 million penalty in response to a Consumer Financial Protection Bureau lawsuit over violations of consumer protection laws covering credit card customers. Over a five-year period, Citizens Bank made roughly 25,000 of its credit card customers who filed disputes or fraud claims jump through onerous and illegal hoops. In many cases, it failed to return the full amount due to customers and failed to communicate with customers in a timely fashion. It required some customers to file notarized fraud affidavits and some to agree to appear as a witness in court in order to pursue their complaints. Their complaints were automatically dismissed if they could not or refused to comply. Under the terms of the settlement, Citizens Bank, which had discontinued use of the fraud affidavits, agreed not reinstitute their use. [3]

Overall, since 2000, Citizens Bank has paid penalties of almost $150 million for 17 offenses of a variety of kinds. [4]

These, of course, are just examples of corporate bad behavior, which is frequent, varied, and often repetitive, i.e., commonplace. If you need any convincing of this, I encourage you to explore the Violation Tracker database compiled by Good Jobs First. Just put in the name of any corporation and see how many offenses they’ve had since 2000 and how much they’ve paid in penalties. This makes it clear that corporations view paying penalties for bad behavior as simply an acceptable cost of doing business.

Therefore, if we want to stop corporate bad behavior, there must be more enforcement with greater penalties. More on this in a future post.

[1]      Gregg, A., 5/17/23, “Wells Fargo agrees to $1b shareholder settlement,” The Boston Globe from the Washington Post

[2]      https://violationtracker.goodjobsfirst.org/parent/wells-fargo

[3]      Murphy, S. P., 5/24/23, “Citizens Bank agrees to pay $9 million after suit on behalf of some customers,” The Boston Globe

[4]      https://violationtracker.goodjobsfirst.org/parent/citizens-financial-group

STOCK BUYBACKS ARE HARMFUL AND SHOULD BE ILLEGAL AGAIN

The billions of dollars that corporate executives are spending to buy back their own companies’ stocks reduces safety for workers, consumers, and the public. Until 1982, stock buybacks were illegal. Making them legal has led to a dramatic change in corporate executives’ behavior. They now aggressively maximize profits and returns to stockholders, including themselves, while responsibilities to other stakeholders are left behind.

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

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

My previous post discussed, in the aggregate, the aggressive profit maximization behavior by corporate executives and their use of stock buybacks and high dividends to maximize the returns to shareholders, including themselves. It documented the occurrence of such behavior, the reasons it’s occurring, and what it reflects in terms of the goals and ideology of corporate executives, i.e., that maximizing returns for shareholders (including themselves) is all that matters. This post will focus on the impacts at individual corporations and on-the-ground. These impacts include reduced safety and economic security for workers, as well as reduced safety for consumers and the public.

One part of aggressively maximizing profits is aggressively reducing costs, which can mean that corners get cut on quality and safety. For example, in 2012, Boeing rolled out what appeared to be the very successful and profitable 737 Max passenger jet. However, at the time, Boeing was engaged in a major drive to increase profits and returns to shareholders through big stock buybacks (tens of billions of dollars) and generous dividends. In 2018 and 2019, two of the 737 Max jets crashed, killing 346 people. It turned out that the crashes were due to the same malfunction in the autopilot system. The investigations of the 737 Max crashes strongly suggest that Boeing executives’ drive to increase profits and returns to shareholders led to management decisions that cut corners on safety and were a major – if not the major – contributor to the crashes. [1]

Norfolk Southern Railroad, whose train derailed and crashed in East Palestine, OH, with disastrous results, and whose trains have derailed elsewhere as well, has used cash from profits to buy back stock instead of investing in employees and infrastructure that would have made their trains safer. (See previous posts here and here for more detail on Norfolk Southern and the railroad industry’s profit maximization.) Nike bought back stock while cutting the poverty-level wages of Asian workers. Pharmaceutical corporations buy back stock instead of investing in research and development. Nonetheless, they claim high drug prices are needed to fund the development of new drugs. [2]

The U.S. response to the Covid pandemic was hampered by corporations whose executives had engaged in profit maximization strategies that undermined the availability of ventilators and high-quality masks, among other things needed to combat the corona virus. [3]

As became painfully clear during the pandemic, corporate executives, in order to cut payroll costs and aggressively maximize profits, had created fragile supply lines dependent on other countries and international shipping. They had also reduced inventories and production capacity to absolute minimums to reduce costs, leaving their companies without the capacity to respond to disruptions in supply chains or spikes in demand and need for their products. So, for example, baby formula manufacturers did not have the inventory or capacity to fill the gap when one of them (that had cut corners on quality controls) had to pull its tainted products off the market.

Although stock buybacks are only one piece of these problems, they are a blatant and significant one that can be relatively easily addressed by dramatically reducing or banning them.

The Biden administration has been taking steps to discourage stock buybacks. The 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act signed by President Trump prohibited corporations from using federal financial aid to buy back stock, but because cash is fungible, it had little effect. The Biden administration, as part of the 2022 Inflation Reduction Act, implemented a 1% tax on buybacks. However, corporations are treating this as a cost of doing business and are continuing to buy back shares. [4] Biden called for raising the tax to 4% in his State of the Union speech, but even this or a higher tax is likely to have little effect because of the huge size of the economic benefits to big shareholders, including executives.

The only thing that will really stop stock buybacks and the harms they cause is to ban them again. Recently, three House Democrats (Representatives Garcia [IL], Khanna [CA], and Van Hoyle [OR]) filed a bill, the Reward Work Act, that would ban stock buybacks. A version of this bill was filed in the Senate back in 2018 by Senators Baldwin (WI), Warren (MA), Schatz (HI), Gillibrand (NY), and Sanders (VT). [5]

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to ban stock buybacks and to take other steps to incentivize corporate executives to be more responsive to stakeholders other than shareholders. 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]      Lazonick, W., & Sakinc, M. E., 5/31/19, “Make passengers safer? Boeing just made shareholders richer,” The American Prospect (https://prospect.org/environment/make-passengers-safer-boeing-just-made-shareholders-richer./)

[2]      Lazonick, W., 6/25/18, “The curse of stock buybacks,” The American Prospect (https://prospect.org/power/curse-stock-buybacks/)

[3]      Lazonick, W., & Hopkins, M., 7/27/20, “The $5.3 trillion question behind America’s COVID-19 failure,” The American Prospect (https://prospect.org/coronavirus/americas-covid-19-failure-corporate-stock-buybacks/)

[4]      Kuttner, R., 5/17/23, “How Wall Street feeds itself,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-05-17-how-wall-street-feeds-itself/)

[5]      Meyerson, H., 5/25/23, “The bill that would stop buybacks,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-05-25-bill-that-would-stop-buybacks/

STOCK BUYBACKS ARE UNPRODUCTIVE, SELF-ENRICHING, MARKET MANIPULATION

The billions of dollars that corporate executives are spending to buy back their own companies’ stocks have significant effects on the economy, on stock prices and stock markets, and on economic inequality. Stock buybacks, which benefit large stockholders, including corporate executives, set a new record in 2022. Until 1982, stock buybacks were illegal. Making them legal has led to a dramatic change in corporate executives’ behavior. Instead of retaining and reinvesting profits in their corporations, they are distributing them to shareholders, including themselves. They are also aggressively cutting (aka “downsizing”) costs to maximize profits.

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

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

The billions of dollars that corporate executives are spending to buy back their own companies’ stocks have significant effects on the economy, on stock prices and stock markets, and on economic inequality. These buybacks use up corporate cash that therefore CANNOT be used to pay employees, to expand production or service delivery, to invest in research and development, nor to improve productivity and efficiency.

Stock buybacks set a new record in 2022. The world’s 1,200 largest corporations spent a total of $1.3 trillion (an average over $1 billion each) buying back their own stock. Buybacks reduce the number of the corporation’s shares that are available on the stock market, thus increasing the value and price of the shares that remain on the market.

The stock price increases generated by stock buybacks benefit large shareholders, who include corporate executives. One half of stocks are owned by the wealthiest 1% of Americans and the wealthiest 10% own 90% of stocks. Corporate executives are large shareholders because they receive large portions of their compensation as shares or stock options. In addition, a significant portion of their compensation is often determined by the performance of the stock’s price. Therefore, these executives are doubly rewarded if the price of their corporation’s stock goes up. Clearly, the decision to buy back stock presents a huge conflict of interest for corporate executives because it’s a use of corporate funds that results in substantial self-enrichment. [1]

Almost 80% of U.S. corporations have conducted stock buybacks, while only 45% of corporations headquartered elsewhere have. Corporations often borrow money to buy back stock – a kind of speculation that adds no value to the economy but enriches large shareholders.

Until 1982, stock buybacks were illegal; they were banned because they were considered market manipulation. President Reagan’s Securities and Exchange Commission (SEC) changed market regulations to allow them. It took a while, but before long corporate executives realized that this was a gold mine for self-enrichment, given the large amounts of company stock they owned. By the ten years from 2003 to 2012, they were spending 54% of profits ($2.4 trillion) on stock buybacks and another 37% of profits on dividends to shareholders.

All told, from 2003 to 2012, corporate executives used 91% of profits to enrich shareholders, including themselves. This behavior continues to today. This distribution of profits leaves little for employees, research and development, and other investments in their corporations. (These data are for the 449 corporations of the S&P 500 index whose shares were publicly traded on a stock market over that 10-year period.) [2]

This spending on buybacks and dividends represented a dramatic change in corporate executives’ use of cash from profits. Prior to 1982, much of profits was retained and reinvested in innovation, infrastructure, and employees. Since 1982, profits have been increasingly distributed to shareholders while the number of employees and their compensation, as well as other costs, have been aggressively reduced or downsized.

The focus of corporate executives has shifted from value creation to value extraction. [3] The 2017 cut in the corporate tax rate from 35% to 21% was supposed to give corporations more cash to use to create jobs, but instead they’ve used it for stock buybacks and dividends.

The retention and reinvestment of profits of the 1940s through the early 1980s was essential to the success of the U.S. economy, the growth of the middle class, the reduction of economic inequality, and America’s leadership in the global economy. These positive trends have been reversed by the “distribute-and-downsize” ideology that is now prevalent among corporate executives, having increasingly taken hold since 1982. [4]

This ideology is focused on extracting value from corporations for shareholders through profit distribution and through profit maximization by aggressive cost cutting, including downsizing the workforce. It reflects the ascendance of the economic and corporate ideology that maximizing returns for shareholders is the only goal for corporate executives; that it’s literally all that matters. This is a self-serving ideology for wealthy economic elites, including corporate executives.

This ideology overturned the previous (and perhaps resurgent) ideology that corporate decision-making should include responsibilities to serve a broad set of stakeholders including employees, customers, communities in which the corporation operates, and ultimately the overall society in which the corporation exists. These stakeholders have contributed knowledge, skills, and education; infrastructure such as roads, utilities, and public safety services; and a stable legal and societal environment in which to sell goods and services.

My next post will highlight some specific examples of the effects of prioritizing returns for shareholders over all other stakeholders. It will also identify efforts to reduce stock buybacks and move corporate decision-making back toward an ideology of value creation through the retention and reinvestment of a bigger share of profits, as well as of responsibilities to stakeholders other than shareholders.

[1]      Kuttner, R., 5/17/23, “How Wall Street feeds itself,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-05-17-how-wall-street-feeds-itself/)

[2]      Meyerson, H., 5/25/23, “The bill that would stop buybacks,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-05-25-bill-that-would-stop-buybacks/

[3]      Lazonick, W., & Sakinc, M. E., 5/31/19, “Make passengers safer? Boeing just made shareholders richer,” The American Prospect (https://prospect.org/environment/make-passengers-safer-boeing-just-made-shareholders-richer./)

[4]      Lazonick, W., 6/25/18, “The curse of stock buybacks,” The American Prospect (https://prospect.org/power/curse-stock-buybacks/)

REPUBLICANS’ HYPOCRISY AND HARM OVER THE DEBT CEILING

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

THE OTHER CRISIS WITH THE SUPREME COURT: ITS RADICAL, POLITICAL RULINGS

The other crisis with the Supreme Court is the political nature of the rulings of the six radical, right-wing justices who upend precedents, the rule of law, and democratic norms to achieve what certainly appear to be predetermined outcomes. Twice before in U.S. history the Supreme Court has attempted to grab reactionary dictatorial power. Ultimately, the voters will decide if this is the course they want America to pursue.

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

SPECIAL NOTE: I’ve created a new website for my blog that’s more user-friendly. The Latest Posts are presented chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org/. If you like the new format, please click on the Subscribe Today button and subscribe. Any comments on the new site or the content of the posts are most welcome. The Word Press site will continue to be available.

The other crisis with the Supreme Court, in addition to the financial and conflict of interest scandals of individual justices, is the political nature of the rulings of the six radical, right-wing justices. (See this previous post for an overview of the ethical scandals of the Supreme Court justices and some possible fixes.) They have upended well-established legal precedents, long-standing procedural practices, and vital democratic norms. They have created a crisis by aligning themselves with the reactionary, white, evangelical Christian, nationalist, right-wing of the Republican Party. By taking on cases designed to provide a venue for achieving their political and ideological goals, and by making rulings consistent with these goals rather than with the rule of law, they are grabbing dictatorial power and attempting to govern the country from the Court. [1]

Recent Supreme Court rulings threaten generations of progress toward real democracy and the achievement of the principles set forth by our founding fathers and documents. The six right-wing justices are not constitutional originalists or textualists, or conservatives; they are radical reactionaries undermining the Constitution and democracy with almost every ruling. (See this previous post for an explanation of why radical and reactionary are the appropriate descriptors for these six justices.)

Twice before in the 233-year history of the Supreme Court similar crises have occurred. In both cases, as today, the thrust was reactionary – an attempt to return America to a past idealized by a subset of the population.

The first crisis was in the 1850s when the Court, dominated by slaveholders, tried to entrench white supremacy and slavery in America. The key event was the Dredd Scott decision, which ruled that a person of African descent was not a citizen, could not sue in federal court, and basically could never achieve freedom. The decision is widely viewed as a significant contributing factor to the occurrence of the Civil War.

The second crisis was in the 1930s when the Court, in the face of the Great Depression, tried to block President Roosevelt’s efforts to restructure the economy with a more level playing field through workers’ rights and protections, as well as a commitment to economic justice and equal opportunity. The Court’s rulings protected the wealth and privilege of the economic elites and barred any government establishment of a right to human dignity or equality for others.

From an issue-based perspective, the current court has ignored long-standing precedents in ending abortion rights, dramatically expanding gun rights, and limiting the executive branch’s power to promulgate regulations, including to address the climate crisis. From a process perspective, the Court has expanded its power and upended established procedures through the frequent use of emergency orders and what’s referred to as the “shadow docket.” With these orders, the Court can step into cases in lower courts and make rulings without allowing trials, briefings, oral arguments, or friend-of-the-court filings. It typically issues these rulings with no explanation and almost always presents victories to politically favored litigants or causes. These shadow docket rulings have been used aggressively and have been a significant contributor to the achievement of the political goals of the six right-wing justices.

The overarching result is that nothing can be viewed as settled law and that the rule of law has been replaced by the rule of the white, evangelical Christian, nationalist, reactionary ideology of the six right-wing justices. The presence of these six justices on the Court is the result of a decades-long effort, spearheaded by the Federalist Society, by right-wing Republicans and their billionaire backers. The current revelations of financial and other connections between the six justices and right-wing billionaires and Republicans are just the tip of the iceberg of concerted efforts to have right-wing interests favored by the Court.

The crisis of the Supreme Court’s political decision-making is likely to be evident in a number of major cases in the 2023 term. The court recently agreed to hear a case that could gut the government’s ability to regulate business. In this case, the Court will reconsider the 1984 Chevron v. Natural Resources Defense Council decision, which affirmed that judges should defer to executive branch agencies’ reasonable interpretation of a law if the wording of the law is unclear or unspecific. The six right-wing justices seem likely to reject this precedent, which would allow judges to second guess regulations according to their own interpretations of laws. [2]

The Court will also consider and rule on a case based on the independent legislature theory, which asserts that only state legislatures (and not state or federal courts) may regulate, supervise, and ultimately decide elections. This would apply to federal elections for president and Congress, not just state office elections. It would, at least in theory, allow a state legislature to decide the outcome of an election regardless of the will of the voters. In particular, it would allow a state legislature to send a different set of electors to the Electoral College in a presidential election than those chosen by voters.

In 2023, the Court will also take up a case that would allow it to end affirmative action in college admissions and another one that would allow it to dramatically cut back the few remaining voter protections of the Voting Rights Act. Also of note, a group of landlords is preparing to ask the Court to overturn rent control in New York City, a change in law supported by Crow Holdings. This case would again put Justice Thomas and his relationship with Harlan Crow in the spotlight. If the case does come before the Court, it will be interesting to see if Thomas recuses himself. He hasn’t in similar situations in the past.

In conclusion, the politicization of the Supreme Court and the alignment of a six-justice majority with the radical, reactionary, white, evangelical Christian, right-wing of the Republican Party have not only undermined the Court’s legitimacy, but also the rule of law, a foundational principle of American democracy and exceptionalism. Numerous other institutions and processes of democracy are being undermined as well.

Ultimately, the voters will determine the future of the Court. They can vote to protect their rights and lives from the Court’s radical, reactionary rulings by shifting power in Congress and the White House away from the Republican Party. This would allow legislative and appointment powers, over time, to repair the Court and the damage that’s been done.

[1]      Epps, G., 10/30/22, “The Court’s third great crisis,” Washington Monthly (https://washingtonmonthly.com/2022/10/30/the-courts-third-great-crisis/)

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

MORE ON THE ETHICAL SCANDALS OF THE SUPREME COURT AND SOME FIXES

New revelations about questionable financial relationships and possible conflicts of interest of Supreme Court justices seem to be uncovered almost every day. The failure of Chief Justice Roberts to address these scandals further undermines the credibility of the Court. The failures of justices to recuse themselves from Supreme Court cases where conflicts of interest seem apparent call into question many of the Court’s decisions where the outcomes would have been different if recusals had occurred. The political nature of the rulings of the six radical, right-wing justices becomes clearer and clearer as they upend precedents and democratic norms to achieve what seem to be predetermined outcomes. Legislation has been proposed to force the Court to institute a code of ethics. (See this previous post for an overview of ethical issues with Supreme Court justices and this post for a summary of Justice Thomas’s ethical scandals.)

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

SPECIAL NOTE: I’ve created a new website for my blog that’s more user-friendly. The Latest Posts are presented chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org/. If you like the new format, please click on the Subscribe Today button and subscribe. Any comments on the new site or the content of the posts are most welcome. The old site will continue to be available.

New revelations about the questionable financial relationships of Supreme Court justices seem to be uncovered almost every day. One new tidbit is about Justice Gorsuch’s sale of property. As previously reported, the almost $2 million sale was to an individual not identified on Gorsuch’s financial disclosure, but who turned out to be the CEO of a major law firm that has had 22 cases before the Court since the purchase. The new tidbit is that the property had been on the market for two years before the sale, which occurred just nine days after Gorsuch was confirmed to the Supreme Court. [1]

Possible conflicts of interest are present in the George Mason University Justice Scalia Law School’s relationships with three of the radical, right-wing Supreme Court justices, Gorsuch, Kavanaugh, and Thomas, who have been hired as faculty members. For Gorsuch and Kavanaugh this has included handsomely paid (almost $30,000) two-week teaching gigs in Europe that seem more like subsidized vacations than work. All three of them have used Supreme Court staff to support their activities at the school despite a judicial advisory opinion that states that staff members should not support justices “in performing activities for which extra compensation is to be received.” These justices (and others) have also been recruited to be lecturers and special guests at school events. They have also attended fundraisers for the school even though Supreme Court Justices are not supposed to be involved in any fundraising activity. [2]

The dean of the law school, Henry Butler, has bragged to donors about his close ties to Supreme Court justices and he invited Justice Gorsuch on a junket to Montana to meet with a property rights group (where Butler is on the Board of Directors). The invitation was made a month after the Supreme Court decided to hear a property rights case of interest to the group. Faculty at the law school frequently submit friend-of-the-court briefs on cases before the Supreme Court that these justices rule on because they don’t recuse themselves. [3]

The law school was named after deceased Justice Antonin Scalia after right-wing power broker Leonard Leo engineered $30 million in gifts to the school in support of the renaming. The Charles Koch Foundation (of the Koch brothers, billionaire funders of many right-wing political activities) gave $10 million with the other $20 million coming from an anonymous donor. This donor is widely believed to be Barre Seid, who later gave $1.6 billion to a right-wing political group controlled by Leo.

On April 25, 2023, Chief Justice Roberts refused the Senate Judiciary Committee’s request that he testify before it about the scandals with Supreme Court justices. Roberts noted in his response that the justices subscribe to a statement of ethics principles and practices, which he attached. The Democrats on the Judiciary Committee responded with a letter saying: “It is noteworthy that no Justice will speak to the American people after numerous revelations have called the Court’s ethical standards into question, even though sitting Justices have testified before Senate or House Committees on at least 92 occasions since 1960.” They asked when the justices had agreed to the statement of ethics. Roberts stated that the justices had agreed to the ethics statement on April 25, 2023. [4]

None of the Republicans on the Judiciary Committee signed on to the request to Roberts. This may be due in part, as was recently revealed, to the fact that since 2001 the nine of them have each received campaign contributions from Harlan Crow that total at least $457,000 for the group. Crow, of course, is the same right-wing billionaire who has given millions in gifts to Justice Thomas that Thomas didn’t report. The Committee has sent a letter to Crow requesting that he provide full details of his financial ties and gifts to Thomas and other Supreme Court Justices. [5]

The Judicial Conference of the United States, a body of federal judges led by Chief Justice Roberts, is legally mandated to oversee administrative and policy issues of the federal court system. It is reportedly considering the matter of Justice Thomas’s conduct. It would certainly appear that it has plenty of information to warrant a referral of Thomas to the Attorney General for an investigation of violations of federal ethics and disclosure laws. [6]

The intertwined relationships between the six radical, right-wing justices and the wealthy individuals funding the right-wing of the Republican Party (as well as a network of powerful political organizations) have produced a definite appearance of conflicts of interest, if not actual quid pro quo corruption. This is underscored by the consistency of their rulings favoring right-wing causes and the business and political interests of these wealthy, right-wing “friends” of the Court. The frequency with which long-standing legal precedents and judicial processes are thrown out to the benefit of these interests gives clear credence to charges that these six justices are driven by politics and not the law. These rulings have dramatically undermined the rule of law and our democracy. It is important to note that any number of the justices’ votes in key decisions, many of them by 5 – 4 tallies, were ethically compromised by apparent conflicts of interest and their failures to recuse themselves. The outcomes of many of these cases would have been different if they had recused themselves.

On April 26, Senators Angus King (I-ME) and Lisa Murkowski (R-AK) introduced the Supreme Court Code of Conduct Act. The bill would require a Supreme Court code of ethics and avoid any separation of powers concerns by requiring the court to write its own code of conduct and appoint an official to review possible conflicts of interest and public complaints. It’s a straightforward bill to address the ethical scandals at the Court and at least begin to restore the public’s confidence in the Court. [7] Even before these scandals erupted, proposals had been put forward to counter the radical behavior of the six right-wing justices by expanding the size of the Court with new justices and / or by instituting term limits to ensure regular turnover on the Court so that it couldn’t be politically manipulated.

Ultimately, the voters will determine the future of the Court. Their reactions to the Court’s rulings and behavior will affect their voting. Some of the justices, seeing this, may moderate their rulings as occurred in the 1930s when Franklin Roosevelt was President and his policies were being blocked by the Court. Or the voters may shift the power in Congress and the White House away from the Republican Party with which the six justices are in cahoots, thereby allowing legislative and appointment power to repair the Court over time.

My next post will take a step back and look at the Supreme Court from the broader perspective of its alignment with the radical, reactionary, right-wing of the Republican Party. This politicization and the Court’s related actions have not only undermined the Court’s legitimacy, but also the rule of law, a foundational principle of American democracy and exceptionalism, and other institutions of democracy as well.

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

[2]      Eder, S. & Becker, J., 4/30/23, “How Scalia Law School became a key friend of the Court,” The New York Times

[3]      Levy, P., 5/2/23, “The Dobbs leak didn’t wreck the Supreme Court – the justices’ scandals did,” Mother Jones (https://www.motherjones.com/politics/2023/05/supreme-court-scandals/)

[4]      Cox Richardson, H., 5/1/23, see above

[5]      Stancil, K., 5/9/23, “Billionaire Harlan Crow also bankrolled GOP lawmakers blocking SCOTUS ethics reform,” Common Dreams (https://www.commondreams.org/news/harlan-crow-senate-judiciary-committee-republicans-supreme-court-reforms)

[6]      Levy, P., 5/2/23, see above

[7]      Cox Richardson, H., 5/1/23, see above

THE ETHICAL SCANDALS OF SUPREME COURT JUSTICE THOMAS

The relationship between Supreme Court Justice Thomas and right-wing billionaire Harlan Crow is a major ethical scandal. Justice Thomas’s wife’s activities also present significant conflicts of interest. The fact that Justice Thomas has failed to report relevant and required information about these potential conflicts not only deepens the scandal but in some cases is also a clear violation of federal law. The failure of Thomas to recuse himself from Supreme Court cases where these issues are relevant makes this a truly unbelievable breach of judicial ethics and calls into question many of the 5 – 4 Court decisions whose outcome would have been different if Thomas had recused himself. All of this has severely damaged the credibility of the Supreme Court. (See this previous post for an overview of ethical issues with Supreme Court justices and the damage that’s been done to the Court.)

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

SPECIAL NOTE: I’ve created a new website for my blog that’s more user-friendly. The Latest Posts are presented chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org/. If you like the new format, please click on the Subscribe Today button and subscribe. Any comments on the new site or the content of the posts are most welcome. The old site will continue to be available.

There are numerous scandalous elements to the relationship between right-wing billionaire Harlan Crow and Justice Thomas, which they claim are only reflections of their friendship. It’s relevant to note that they only became “friends” in 1996 AFTER Thomas joined the Supreme Court in 1991. This certainly makes one wonder if Crow’s interest in this friendship was about more than friendship. The relationship has included: [1] [2]

  • Free vacations in Indonesia, the Caribbean, and the Baltics and Russia for Thomas and his family, each of which is estimated to be worth at least $500,000. This is well in excess of the requirement to report gifts of over $415. The vacations don’t qualify for the exemption from reporting for personal hospitality because they weren’t at Crow’s personal home and, therefore, federal rules require them to be disclosed.
  • Numerous trips on Crow’s private jet over the last 25 years are clearly required to be reported on Thomas’s mandatory annual financial disclosure form but have not been.
  • Regular summer vacations at Crow’s Adirondack Mountains resort, which is owned by a corporation not personally by Crow. Therefore, they don’t qualify for the exemption of personal hospitality from required reporting.
  • Crow’s purchases of multiple real estate properties from Thomas and his family for over $100,000, including the home where Thomas’s mother lived rent-free and where renovations were done at Crow’s expense. Thomas did not disclose the purchases, despite federal law requiring officials, including Supreme Court justices, to disclose real estate transactions over $1,000. [3]
  • Crow’s payment of tuition at private high schools for the grandnephew of Justice Thomas who lived with Thomas and his wife for 13 years and for whom Thomas was the legal guardian. The tuition was $25,000 to $30,000 a year, except for one year at a special school where it was $70,000. Crow paid at least $100,000 of this tuition. Thomas did not report the tuition from Crow on his annual financial disclosures, although he did report as a gift $5,000 from another friend that was for the boy’s education.
  • Crow’s gift of $500,000 to a Tea Party organization called Liberty Central founded and run by Thomas’s wife, which paid her a $120,000 salary.
  • Crow’s expenditure of more than $2 million to fund a museum at the site of a cannery where Thomas’s mother worked.
  • Crow’s $150,000 of financing for a Clarence Thomas wing at the Savannah library.
  • Crow’s donation of $105,000 to the Yale Law School for the Justice Thomas Portrait Fund.
  • Crow’s gifts to Thomas of a $19,000 bible owned by Frederick Douglass and of a $15,000 bust of Abraham Lincoln.

Justice Thomas has said, and most reporting on the scandal has echoed, that there’s no ethical issue with Crow’s gifts because he didn’t personally have a case come before the Court. While that’s technically true, his business and political interests certainly have had cases before the Court. Crow inherited a large family real estate business. In 2005, an appeal in a $25 million suit against a Crow company came before the Court. (The Court declined to hear the appeal.) [4] A real estate trade association, the National Multifamily Housing Council (NMHC), which has close links to Crow and his businesses, has filed multiple briefs in Supreme Court cases. NMHC is chaired by the CEO of Crow Holdings, Ken Valach, who took over that position from Crow in 2015. NMHC advocates for over 1,000 large residential rental property owners. Three of Crow’s companies are dues paying members and multiple Crow executives serve on its Board of Directors. It has filed briefs with the Court on cases that would impact Crow’s businesses, such as cases involving rent control, racial discrimination in housing, and the Clean Water Act. [5]

In terms of political interests, Crow is an active member of a network that provides substantial funding to right-wing political candidates, institutions, and legal cases. He has spent millions on efforts to transform the law and the federal judiciary, including the Supreme Court, to reflect his right-wing ideology. The right-wing think tank, the American Enterprise Institute, where Crow is on the Board, has filed three briefs with the Supreme Court. (Furthermore, Thomas’s wife, Ginni, has been a paid employee of the Institute.) In 2003, the Club for Growth, a right-wing, free market advocacy group where Crow serves on the Founders’ Committee, filed a brief with the Court in a campaign finance case.

Thomas’s hobnobbing with Crow has brought him into contact with numerous right-wing activists including Leonard Leo, the leader of the Federalist Society. Leo and the Federalist Society are generally regarded as the architects of the successful effort to turn the Supreme Court into a right-wing juggernaut. [6] Leo uses a network of opaque non-profits to support advocacy for a wide range of right-wing causes, including spending millions to influence Supreme Court cases. For example, at least six groups funded by Leo’s network have filed briefs with the Court on a same-sex marriage discrimination lawsuit. Groups in the network are active in opposing affirmative action, LGBTQ rights, and federal oversight of elections. [7]

Leo has also directed tens of thousands of dollars to Thomas’s wife, Ginni. He instructed a Republican pollster, Kellyanne Conway (who would later be in Trump’s White House), and her company, the Polling Company, to pay Ginni Thomas’s recently formed Liberty Consulting company $100,000 in 2011 and 2012. Specifically, in January 2012, Leo told Conway to bill the Judicial Education Project (JEP), a non-profit organization that Leo advised, “another $25,000” to give to Ginni Thomas. He emphasized that the paperwork should have “No mention of Ginni, of course.” Shortly thereafter, the JEP filed a brief with the Supreme Court for a case on the Voting Rights Act. In a 5 – 4 decision, with Justice Thomas voting with the narrow majority, the Court struck down provisions of the Act that protected minority voters, in accordance with the position of the JEP brief. The JEP has since submitted about ten friend-of-the-court briefs to the Supreme Court and Thomas hasn’t recused himself in any of those cases. [8]

Justice Thomas’s wife, Ginni, is deeply involved in right-wing Republican politics, but this has not led Justice Thomas to recuse himself from cases where this would seem to present a conflict of interest. For example, she was deeply involved in efforts to keep President Trump in office and overturn the results of the 2020 election, including being in touch with people at the White House. Nonetheless, Justice Thomas did not recuse himself from the Supreme Court case deciding whether the House committee investigating the January 6th insurrection could obtain White House records, even though his wife’s communications could have been among those records. By the way, he was the only justice voting that the committee shouldn’t get the records. [9]

By concealing gifts from Crow and potential conflicts of interest from his wife’s activities, Justice Thomas prevented the issue of whether he should recuse himself from being raised as cases were being heard by the Court. He clearly violated judicial ethics by not recusing himself in some of these cases and he clearly violated federal law by not reporting gifts from Crow.

Justice Thomas’s vote was obviously essential in many of the very significant 5 – 4 decisions by the Court. If he should have recused himself in some of these cases, that would have changed their outcomes. One example is the 5 – 4 decision in Shelby County v. Holder, the Voting Rights Act case mentioned earlier. Another example is the 5 – 4 decision in the 2010 Citizens United v. Federal Election Commission case. This decision opened the floodgates for unlimited spending in political campaigns. One result of this decision was that Harlan Crow and his family could now spend much more on campaigns and have much more political influence. Specifically, from 1977 to 2009 the Crow family spent $5 million in total on campaigns or about $160,000 a year. After the Citizens United decision, from 2010 to 2022, the Crows spent over $20 million on campaigns or about $1.6 million a year, roughly ten times as much as they had spent previously. [10]

My next post will share updates on, effects of, and remedies for the ethical scandals of the Supreme Court justices. I apologize for the length of this post (I think it’s the longest one I’ve ever done) but I couldn’t make even an overview of Justice Thomas’s ethical scandals any shorter.

[1]      Blumenthal, P., 4/26/23, “Clarence Thomas said his billionaire friend didn’t come before the Court – but his business interests did,” The Huffington Post (https://www.huffpost.com/entry/clarence-thomas-harlan-crow-business-interests_n_64494a12e4b0d840388c2935)

[2]      Kaplan, J., Elliott, J., & Mierjeski, A., 5/4/23, “Clarence Thomas had a child in private school. Harlan Crow paid the tuition,” ProPublica (https://www.propublica.org/article/clarence-thomas-harlan-crow-private-school-tuition-scotus)

[3]      Conley, J., 4/13/23, “‘He must be impeached’: Clarence Thomas made undisclosed property deal with billionaire megadonor,” Common Dreams (https://www.commondreams.org/news/clarence-thomas-real-estate)

[4]      Tillman, Z., 4/24/23, “Clarence Thomas’s billionaire friend did have business before the Supreme Court,” Bloomberg (https://www.bloomberg.com/news/articles/2023-04-24/clarence-thomas-friend-harlan-crow-had-business-before-the-supreme-court)

[5]      Blumenthal, P., 4/26/23, see above

[6]      Kaplan, J., Elliott, J., & Mierjeski, A., 4/6/23, “Clarence Thomas and the billionaire,” ProPublica (https://www.propublica.org/article/clarence-thomas-scotus-undisclosed-luxury-travel-gifts-crow)

[7]      Kroll, A., Perez, A., & Ramaswami, A., 12/14/23, “Conservative activist poured millions into groups seeking to influence Supreme Court on elections and discrimination,” ProPublica (https://www.propublica.org/article/leonard-leo-scotus-elections-nonprofits-discrimination)

[8]      Brown, E., Boburg, S., & O’Connell, J., 5/4/23, “Judicial activist directed fees to Clarence Thomas’s wife, urged no mention of ‘Ginni’,” The Washington Post

[9]      Levy, P., 5/2/23, “The Dobbs leak didn’t wreck the Supreme Court – the justices’ scandals did,” Mother Jones (https://www.motherjones.com/politics/2023/05/supreme-court-scandals/)

[10]     Stancil, K., 5/2/23, “Thomas’ Citizens United vote enabled billionaire benefactor to boost political power,” Common Dreams (https://www.commondreams.org/news/clarence-thomas-citizens-united-harlan-crow-political-spending)

THE DESTRUCTION OF THE SUPREME COURT AS A REVERED INSTITUTION OF AMERICAN DEMOCRACY

The takeaways from this post are that:

  • The U.S. Supreme Court’s status as a revered institution of American democracy has been destroyed by the actions of the six radical, reactionary, right-wing justices.
  • There are strong reasons to question the impartiality of three of these justices, Thomas, Gorsuch, and Chief Justice Roberts, on cases that have come before the Court but where they have not recused themselves.
  • Chief Justice Roberts has done nothing to respond to ethical issues or to address the overarching issue of the lack of ethical standards for the Supreme Court.
  • Justice Abe Fortas resigned in 1969 due to an ethical issue far less serious than those in which Justices Roberts, Thomas, and Gorsuch have been involved.

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

SPECIAL NOTE: I’ve created a new website for my blog that’s more user-friendly. The Latest Posts are presented chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org/. If you like the new format, please click on the Subscribe Today button and subscribe. Any comments on the new site, or the posts themselves of course, are most welcome. The old site will continue to be available.

The U.S. Supreme Court’s status as a revered institution of American democracy has been destroyed by the actions of the six radical, reactionary, right-wing justices. This is not hyperbole but a statement of fact. They are right-wing, politically-driven, radical, and reactionary individuals engaged in an unprecedented undermining of the legitimacy and credibility of the Supreme Court. They have shown time and again that they have no respect for the Supreme Court as an institution or for its processes and precedents. Another way to put this is that they have no respect for the rule of law. They are not conservative, originalists, contextualists, or any of the other things they and their supporters like to call them. Calling them radical reactionaries is appropriate and accurate as this previous post and the three prior posts it has links to explain.

The most recent scandal, of course, is Justice Thomas’s unethical (to say the least, corrupt would probably be more accurate) relationship with the right-wing, politically active, businessman Harlan Crow. Thomas has claimed – and much of the media has echoed – that there isn’t any ethical issue or reason to question Thomas’s impartiality because Crow hasn’t had business before the Supreme Court. That’s only true in the narrowest of meanings in that Crow hasn’t personally had a case before the Court. Some detail on Justice Thomas’s extensive interactions with and financial benefits from Crow, as well as the conflicts of interest that have been present, will be covered in my next post.

This is not Justice Thomas’s first serious ethical violation to come to light. In 2011, he amended 20 years of annual financial disclosure forms to include the sources of his wife’s income, including right-wing political organizations that had been involved in cases before the Court. [1] Thomas didn’t recuse himself from those Court cases nor from cases involving efforts to overturn the 2020 presidential election even though his wife was involved in those efforts.

The media recently reported that Justice Gorsuch, another of the radical reactionaries, sold a piece of property nine days after being confirmed to the Supreme Court. He shared ownership of the home and land, which sold for $1.825 million, and received between $250,000 and $500,000 from the sale. He did report the transaction, but surprisingly did not disclose the buyer, who was the CEO of the law firm Greenberg Traurig that has been involved in at least 22 Supreme Court cases since then. Gorsuch’s failure to disclose the buyer is surprising both because it’s clearly required and because he did report the names of those who gave him a fishing rod, a painting, and a pair of cowboy boots. [2]

A scandal hiding behind the Thomas and Gorsuch scandals, that in some ways is even more serious, is that Chief Justice Roberts has done nothing to respond to these scandals or to address the overarching issue of the lack of ethical standards for the Court. He has stonewalled requests from Congress to provide information and to establish binding ethical standards for the Court. He has failed to take any public action or to make any public statements to address the scandals. His previous apparent concern for maintaining the legitimacy of the Court appears to have lapsed or to have been overwhelmed by his inability to control the three extreme justices appointed by President Trump. His lack of leadership will presumably go down in history as being a major contributor to the destruction of the Supreme Court’s credibility, legitimacy, and revered status. (See this previous post for more detail on Chief Justice Roberts failure to address ethical problems at the Supreme Court and in the federal judiciary more broadly.)

By the way, Chief Justice Roberts has his own ethical problem in that his wife is a legal personnel recruiter for law firms that appear before the Court. It was recently revealed that between 2007 and 2014 (Roberts has been on the Court since 2005) she received over $10 million in commissions with at least hundreds of thousands of dollars of that coming from firms appearing regularly before the Court. [3]

Judicial rules that apply to the Supreme Court require justices to recuse themselves “in any proceeding in which [their] impartiality might be questioned.” Clearly Thomas, Roberts, and Gorsuch have failed to abide by this rule.

Although there aren’t rules that require resignation and the only standard in the Constitution for justices is that they exhibit “good behaviour,” there is a precedent for resigning based on an ethics issue. In 1969, Justice Abe Fortas resigned because he had accepted $20,000 for advising the family foundation of Louis Wolfson, a financier who subsequently went to prison for stock fraud. Fortas insisted that there was no wrongdoing – and there was no evidence of anything corrupt – but that he was resigning to protect the reputation of the Court and to spare the Court from controversy. Fortas had terminated his relationship with the foundation in June 1966, less than a year after it had begun, when he decided he didn’t have time to work for the foundation given the workload at the Court. He had returned the $20,000 in December 1966 after Wolfson was indicted in September and October 1966. The relationship with the foundation and the original payment were disclosed in May 1969 and Fortas resigned 11 days later. [4] (Note: $20,000 in 1966 would be around $185,000 today, adjusted for inflation.)

Clearly, Fortas resigned for an ethical issue far, far less serious than the ethical issues Justice Thomas is involved in, and also less serious than the ethical issues in which Justices Roberts and Gorsuch are involved. Nonetheless, there were bipartisan calls for Fortas’s resignation and talk of possible impeachment from members of Congress, despite the fact that his resignation allowed President Nixon to tilt the balance of the Court in a more conservative direction. If Thomas doesn’t resign, impeachment would be appropriate, however the political partisanship in Congress means this won’t happen.

[1]      Kaplan, J., Elliott, J., & Mierjeski, A., 4/7/23, “Clarence Thomas defends undisclosed “family trips” with GOP megadonor. Here are the facts.” ProPublica (https://www.propublica.org/article/clarence-thomas-response-trips-legal-experts-harlan-crow)

[2]      Wilkins, B., 4/25/23, “‘So blatant’: Gorsuch failed to disclose he sold home to CEO of major law firm,” Common Dreams (https://www.commondreams.org/news/neil-gorsuch-colorado-home)

[3]      Schwartz, M, 4/28/23, “Jane Roberts, who is married to the Chief Justice John Roberts, made $10.3 million in commissions from elite law firms, whistleblower documents show,” Business Insider (https://www.businessinsider.com/jane-roberts-chief-justice-wife-10-million-commissions-2023-4)

[4]      MacKenzie, J. P., 4/17/23, “The Supreme Court justice who resigned in disgrace over his finances,” The Washington Post

CORRUPT CORPORATE BEHAVIOR IS EXTENSIVE

A new investigative report finds that large U.S. corporations frequently engage in illegal price fixing and other anti-competitive practices that violate antitrust laws. Since 2000, large corporations have paid almost $100 billion in fines and settlements for more than 2,000 cases of illegal price-fixing. Examining a wider range of illegal corporate activity, 557,000 civil and criminal cases have been prosecuted by over 400 government agencies with total penalties of $917 billion. Despite the billions of dollars paid in penalties, new corporate violations of the law are identified on a regular basis and many large corporations are repeat offenders. This strongly suggests that big corporations see these fines and settlements as a cost of doing business and are happy to break the law time after time and simply pay the penalties.

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

SPECIAL NOTE: I’ve created a new website for my blog that’s more user-friendly. The Latest Posts are presented chronologically here: https://www.policyforthepeople.org/blog. The new home page, where posts are presented by topics, is here: https://www.policyforthepeople.org/. If you like the new format, please click on the Subscribe Today button and subscribe. Any comments on the new site, or the posts themselves of course, are most welcome. The old site will continue to be available.

An investigative report, Conspiring against competition: Illegal corporate price-fixing in the U.S. economy,” from the Corporate Research Project of Good Jobs First, finds that since 2000, large corporations have paid over $96 billion in fines and settlements on 2,033 cases of illegal price-fixing. Price-fixing steals money from consumers and artificially increases inflation. [1]

Of the 2,033 documented cases, 357 were initiated by the U.S. Department of Justice or other federal agencies, 269 were initiated by state attorneys general, and 1,407 were class action lawsuits initiated by individuals. Cases that were settled out of court are not included in these numbers or the report as public records of them are hard if not impossible to find. (NOTE: Corporations have been working for years to significantly limit the number of class action lawsuits by requiring employees and customers to sign mandatory arbitration agreements in employment contracts and user agreements. These agreements require the use of arbitration to settle a dispute, prohibiting the filing of a lawsuit. The Biden administration is working to limit the use of mandatory arbitration agreements and to restore employees’ and customers’ rights to file lawsuits.)

Capitalism is supposedly an economic system where vigorous competition, coupled with the supply of and demand for goods and services, determines fair prices. This report documents that large corporations frequently avoid competition by colluding with one another to fix prices and control markets to unfairly increase prices and their profits.

The high degree of market concentration in the U.S. (i.e., where one or a few large corporations dominate a market) make it much easier for collusion and price fixing to occur. In the financial services and pharmaceutical sectors of the economy just about every major corporation (or a subsidiary) has been a defendant in one or more price-fixing cases. Nine of the top ten corporations in terms of financial penalties are banks, credit card companies, or other financial firms. Since 2000, the financial sector as a whole has paid $33 billion in fines and settlements, much of this for schemes to rig interest rates that determine the rates paid by consumers on loans and credit card balances. The pharmaceutical industry was the second most penalized sector at $11 billion, primarily for efforts by brand name drug manufacturers to illegally prevent the introductions of lower-priced, generic versions of their drugs. However, price-fixing collusion has occurred in a wide range of sectors from food retailing to auto parts to chemicals to electronic components.

Over the last 22 years, nineteen corporations (or their subsidiaries) have paid over $1 billion each in penalties for price-fixing and other violations of fair competition laws. At the top of the list are Visa ($6.2 billion), Deutsche Bank ($3.8 billion), Barclays Bank ($3.2 billion), MasterCard ($3.2 billion), and Citigroup bank and financial services ($2.7 billion). Price-fixing scandals continue to emerge on a regular basis, so this appears to be fairly common corporate behavior in the U.S.

Good Jobs First maintains a Violation Tracker website that tracks each corporations’ violations of the law, including laws on banking, finance, consumer protection, false claims, the environment, worker protection, discrimination, price-fixing, fair competition, and government contracting. It aggregates for each corporation the number of cases and the dollars in penalties imposed by federal agencies, state attorneys general, selected state and local regulatory agencies, and selected types of class action lawsuits brought by individuals. In all, the website has recorded 557,000 civil and criminal cases prosecuted by more than 400 agencies with total penalties of $917 billion.

Including all of the types of violations that are in the Violation Tracker database, most corporations had multiple violations including, for example, Walmart (497 cases, $5.5 billion in penalties), Home Depot (290 cases, $220 million), Wells Fargo Bank (236 cases, $25.9 billion), Verizon (219 cases, $2.3 billion), and Citigroup (170 cases, $26.7 billion). I urge you to visit the Violation Tracker website and select a corporation or a few from the pull-down list to see the shocking extent of corporate law-breaking.

Despite the billions of dollars corporations have paid in penalties, new corporate violations of the law are identified on a regular basis and many large corporations are repeat or frequent offenders, sometimes repeating the same offense multiple times. This strongly suggests that big corporations see these fines and settlements as a cost of doing business and are happy to break the law time after time and simply pay the penalties.

Larger penalties would probably reduce recidivism somewhat. To really change big corporations’ behavior on price fixing and other illegal anti-competitive behaviors, aggressive steps to reduce market concentration and power will be required. Vigorous enforcement of antitrust laws is needed and, where monopolistic market power exists, breaking up big corporations will probably be necessary to achieve a lasting, long-term remedy. Reducing market concentration, monopolistic power, and simply the size and power of huge multi-national corporations will not only create the real competition that capitalism promises, it will also reduce corporations’ threats to democracy and the growth of economic inequality.

The ultimate and definitely effective penalty would be to revoke a corporation’s charter to do business, putting it out of business. This has rarely been done and, to my knowledge, has never been done for a corporation of any significant size.

[1]      Stancil, K., 4/19/23, “‘Illegal corporate price-fixing’ is rampant in the US economy: Report,” Common Dreams (https://www.commondreams.org/news/corporate-price-fixing-us-economy)

GOOD NEWS ON THE ECONOMY, BUT A FEW CONCERNS

Inflation is subsiding, unemployment is low, and wage growth is modest. Problems in the banking industry provide some concern. The biggest concern for the economy is that the Federal Reserve (the Fed) will continue to push interest rates higher, hurting banks, increasing unemployment, and possibly pushing the economy into a recession.

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

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Annual inflation in March was 5.0% (i.e., consumer prices were 5% higher than a year earlier). This continued the steady decline in annual inflation since its peak of 9.0% last June. Consumer prices increased just 0.1% from February to March, which would be an annualized inflation rate of just 1.2%. Consumer prices for housing (a component of the overall inflation rate) increased 0.6% from February to March, but that is expected to decline. Note that housing costs have risen in part because of the Federal Reserves’ increases in interest rates, which increase the cost of mortgages, depress the production of new housing, and reduce the purchases of homes. The latter two increase the number of people needing rental housing, which pushes up rents. [1]

Wholesale prices fell in March, down 0.5% from February. For the whole year, they were up only 2.7%. Wholesale price inflation is generally considered an indicator of future consumer price inflation, so this suggests that consumer inflation will continue to fall. [2] In addition, wage increases have been modest, around 4% on an annual basis. This is lower than the annual price increase, so wage growth is not driving inflation. [3]

Given that inflation appears to be under control and with the uncertainty in banking industry in mind (due to the collapse of three banks in March in part due to high interest rates), the Fed and Chairman Powell should at least pause interest rate hikes.

Powell’s recent interest rate hikes have caused the value of banks’ investments in bonds to fall an estimated $620 billion as-of the end of 2022. The Fed has announced a bailout for banks with bond losses; a safety net for financiers for a systemic crisis created by the Feds’ dramatic interest rate increases. In addition, the Fed has announced what is in effect a bailout for foreign central banks (i.e., other countries’ equivalent of the Fed), so that their dollar-based holdings don’t rapidly flow out to be invested in the high interest rates available in the U.S. [4]

Corporate profits have played a central role in creating and sustaining the inflation experienced since 2021. Profit markups (the percentage that profits are of all production costs) in the non-financial corporate sector of the economy jumped from about 12.5% in 2017 through early 2020 to an average of 15% from the 2nd quarter of 2020 through 2023. Putting this in terms of inflation, from 2017 through early 2020, profits represented 13% of inflation, with labor costs being almost 60% and non-labor costs about 30%. From the 2nd quarter of 2020 through the end of 2022, profits represented over one-third of inflation (about 34%), while labor costs and non-labor costs each accounted for roughly one-third of inflation (about 33%). The noteworthy change is that the contribution of profits to inflation jumped from 12.5% to 34%.

Given that the Feds’ increases in interest rates have no effect on corporate profit markups and no effect on the supply chain issues (which have been a major contributor to inflation but are easing), further interest rate increases are likely to be ineffective in reducing inflation. Moreover, they may push the economy into a recession, which won’t be good for anyone. [5]

Unemployment has fallen to 3.5%, the lowest level since 1969, while Black unemployment is at an all-time low of 5.0%. The percentage of prime age workers (those 25 to 54 years old) who are in the labor force is the highest it’s been since 2001. This is all good news for workers.

Much of the credit for this good jobs news goes to President Biden and the Democrats in Congress for passing the American Rescue Plan in the spring of 2021. Much of the mainstream media chooses to ignore the health of the job market and fails to give Biden and the Democrats credit for this accomplishment. By way of contrast, it took nearly 13 years for the job market to recover to this extent after the Great Recession of 2008. A major reason for this difference is that the 2009 stimulus package was much smaller and, in hindsight, clearly inadequate (as many progressives said at the time). Biden was Vice President then and may have learned a lesson from that experience that informed his decision to go big in 2021. In addition, President Biden’s economic advisors are ones who are more focused on Main St. and workers than on Wall St. and financiers. In contrast, in 2009, President Obama’s economic advisors were Wall St.-types – Bob Rubin, Tim Geithner, and Larry Summers. [6]

[1]      Kuttner, R., 4/12/23, “Will the Fed wreck an improving economy?” The American Prospect Blog (https://prospect.org/blogs-and-newsletters/tap/2023-04-12-will-fed-wreck-improving-economy/)

[2]      Wiseman, P., 4/14/23, “Wholesale inflation pressure eases,” The Boston Globe from the Associated Press

[3]      Kuttner, R., 4/12/23, see above

[4]      Galbraith, J. K., April 17/24, 2023, “The Fed, the banks, and the dollar,” The Nation (https://www.thenation.com/article/economy/svb-collapse-fed-causes-bailout/)

[5]      Bivens, J., 3/30/23, “Even with today’s slowdown, profit growth remains a big driver of inflation in recent years,” Economic Policy Institute (https://www.epi.org/blog/even-with-todays-slowdown-profit-growth-remains-a-big-driver-of-inflation-in-recent-years-corporate-profits-have-contributed-to-more-than-a-third-of-price-growth/)

[6]      Meyerson, H., 4/13/23, “Are good jobs good news?” The American Prospect Blog (https://prospect.org/blogs-and-newsletters/tap/2023-04-13-good-jobs-good-news/)

EFFECTIVE GOVERNMENT IS NEEDED TO PROTECT OUR RIGHTS AND WELL-BEING

Governments are established to ensure people’s rights and well-being, along with a fair, well-functioning society. Government agencies need to have appropriate levels of human and financial resources to effectively carry out this mission. Since the 1980s, Republicans have led on-going efforts to shrink government and reduce agency resources (except for Defense). The result is that government agencies are unable to effectively fulfill their missions and serve the public. This undermines the public’s faith in government and in democracy.

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

According to the Declaration of Independence, governments are established to secure people’s rights to life, liberty, and the pursuit of happiness. To ensure these rights, governments must have the resources and policies to function effectively. Well-functioning government agencies are necessary to have a fair and smoothly operating society. (See previous posts here and here for more details.)

Since 1980, it has been the ideology of the Republican Party to shrink government so that it does not have the capacity to ensure these rights for residents – although Republicans rarely say the second part of this out loud. In the 1980s, President Reagan and other Republicans (abetted by some Democrats) began cutting taxes (primarily for the wealthy) and the budgets of many government agencies, while claiming that they could do this without cutting government services.

Their claim to be able to cut taxes and budgets without cutting services is essentially promising people a free lunch. It was a lie, as has been proven over time, and as I believe many of them knew at the time. In many cases, this claim was a smoke screen for two Republican ideological initiatives:

  • Defunding of services and supports for poor people, which has racist implications, and
  • Privatization of public services to allow the private sector to make profits delivering them.

Forty years of work defunding and shrinking the federal government have taken a toll. Public services and regulation of the private sector that people want and that protect their rights as stated in the Declaration of Independence have been weakened or eliminated. One measure of this is the decline in the number of federal employees, despite growth in the economy and the population. Furthermore, the scope and complexity of what society needs and wants public employees to do has escalated. For example, the Covid pandemic and the growing number and severity of disasters (from hurricanes to forest fires) have placed new burdens and challenges on the federal government and agency employees.

Declining financial and human resources coupled with a growing workload mean that the government can’t effectively serve the public. This undermines faith in government and democracy, which may have been a goal of some of the right-wing architects of the efforts to shrink government. Underfunding not only starves agencies of the employees needed to fulfill their mandates, but also of other necessary infrastructure such as effective, up-to-date computer systems. [1]

In 2011, the Republicans in Congress used negotiations on lifting the debt ceiling cap to force dramatic cuts in federal civilian employment. (They are trying to do this again right now.) After these cuts were implemented, largely between 2013 and 2017, President Trump took office in 2017 and implemented further cuts in executive branch employees especially at the Departments of Interior, Labor, Justice, State, Agriculture, and Health and Human Services. The number of employees at independent agencies like the Environmental Protection Agency (EPA) and the Social Security Administration have also dropped significantly.

From 2010 to 2022, the number of employees at most federal agencies (other than Defense and Veterans’ Affairs) declined, some dramatically. For example: [2]

  • Interior: down 23%, i.e., 18,500 employees (manages national parks and wildlife refuges; responsible for environmental initiatives and protecting endangered species)
  • Agriculture: down 21%, i.e., 22,500 employees (oversees food safety, nutrition programs, agriculture, natural resources, and rural development)
  • Environmental Protection Agency: down 20% (protects the environment and public health)
  • Housing and Urban Development: down 18% (provides housing and community development assistance; works to ensure fair housing)
  • Treasury: down 10%, i.e., 10,900 employees (manages federal finances, collects taxes, oversees banks, enforces finance and tax laws)
  • Labor: down 10% (oversees workers’ rights to fair, safe, and healthy working conditions; minimum wage and overtime pay; unemployment insurance)

On top of the reduced number of employees, there has been a significant loss in experience, expertise, and institutional knowledge due to the departure of employees with longevity. There has also been a serious loss of diversity. The Biden administration is beginning to rebuild federal agencies, but, even if Congress were cooperative, it would take significant time to rebuild the numbers, and even longer to rebuild the expertise and therefore the full effectiveness of the federal government.

From a longer-term perspective, the number of federal civilian employees is about 2 million, roughly the same as in 1966, despite a population that has grown by 68% and a federal budget that is five times what it was then.

These cuts mean, for example, that the EPA is taking the fewest civil enforcement actions against polluters in 20 years. Food inspections are down and our railroads aren’t as safe as they should be. At the Internal Revenue Service, audit and enforcement actions on taxpayers earning $1 million a year or more has dropped from 7.2% of returns filed in 2011 to just 0.7% in 2019. [3]

Providing federal government agencies with appropriate financial and human resources is essential to their ability to fulfill their missions, serve the public effectively, ensure people’s rights, and oversee a fair, well-functioning society and democracy.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support appropriate funding for federal government agencies so they can fulfill their missions and effectively serve and protect the public. 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]      Panditharatne, M., 4/5/23, “Rebuilding federal agencies hollowed out by Trump and Congress,” Brennan Center for Justice (https://www.brennancenter.org/our-work/analysis-opinion/rebuilding-federal-agencies-hollowed-out-trump-and-congress)

[2]      Panditharatne, M., 4/5/23, see above

[3]      Cox Richardson, H., 4/7/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/april-7-2023)

HOLDING EXECUTIVES OF FAILED BANKS ACCOUNTABLE

A history of greed, mismanagement, deregulation, and weak oversight has resulted in a litany of banking and financial system crises over the last 40 years. Future crises could be prevented by:

  • Strengthening regulation,
  • Increasing deposit insurance, and
  • Holding bank executives personally liable and culpable.

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

Greed and mismanagement by bank executives led to the collapse of three banks in early March. Deregulation of “mid-size” banks in 2018 and 2019, along with failures of banking oversight by the Federal Reserve (the Fed), were also major factors in the banks’ collapses. The Chair of the Federal Reserve, Jerome Powell, bears significant responsibility for the conditions that led to these bank failures. (See this previous post for more details.) The first two strategies above for preventing future banking crises – strengthening regulation and increasing deposit insurance – were discussed in this previous post.

To hold bank executives personally liable and culpable when their banks fail, banking regulators and the Justice Department should:

  • Demand the return of executives’ compensation (i.e., “claw back” compensation), especially when it was linked to the stock price or other metrics that were inflated by inappropriate risks taken by the executives. For example, CEO Becker of the failed Silicon Valley Bank (SVB) received $9.9 million in compensation last year, including a $1.5 million bonus for increasing profitability. He made $3.6 million from selling SVB stock in late February, just weeks before his bank collapsed. In the previous four years, he collected $58 million from the sale of stock received as part of his compensation. Similarly, several top executives at First Republic Bank, which was also bailed out, sold almost $12 million in stock in the two months before their bank went under. Senator Warren (D-MA) is asking for the details of ten years of compensation for the executives at the bailed-out banks, including what criteria were used to determine their bonuses. Senator Warren is calling on bank regulators to demand repayment of executives’ pay and bonuses when they are linked to engagement in high-risk activities.
  • Investigate bank executives for possible illegal insider trading. Senator Warren is also calling for an investigation into whether these executives engaged in illegal sales of their banks’ stock based on inside information and into other possible illegal activities.
  • Charge executives of bailed-out banks with criminal offenses. Prior to 2003, criminal prosecutions were the norm. In the 1980s savings and loan scandal, more than 1,000 bank executives were prosecuted and many went to jail. Then, under President G. W. Bush, the prosecutions of bank executives stopped and were replaced by Deferred Prosecution Agreements (DPAs). These DPAs typically impose corporate fines and include promises of remedial action, but criminal prosecution is deferred and almost never invoked, even when repeat offenses occur. [1]
  • Ban senior executives of failed banks from future employment in the financial industry.

One exception to the new norm of using DPAs instead of criminal prosecutions is occurring now and may indicate a shift in the norm under the Biden administration. Wells Fargo bank created roughly 3.5 million unauthorized customer accounts and issued about 500,000 unauthorized credit cards, costing customers billions of dollars. The corporation and the Trump Justice Department settled with a DPA that required Wells Fargo to pay $6.7 billion in fines and restitution, while five senior executives personally paid civil fines of tens of millions of dollars. The CEO lost his job and the executive under him who presided over the creation of the fraudulent accounts was prosecuted and just pled guilty to a reduced charge of interfering with a bank examination. She might actually do some jail time, although sentencing hasn’t occurred yet. [2]

In conclusion, it’s well past time to stop bank executives from pocketing private profits while socializing risk (i.e., dumping losses on the government and taxpayers). Repeated bailouts and the failure to prosecute individuals reinforces and incentivizes inappropriate risk-taking by bank executives. And, as history has proven, they will take inappropriate risks in order to enrich themselves. Accountability and deterrence are sorely needed; they are essential to preventing the next banking crisis. The steps listed above would serve as strong deterrents to future bad behavior by bank executives.

In the aftermath of this (hopefully mini-) banking crisis, President Biden has called for more accountability and punishment for executives of the failed banks, including clawing back compensation, imposing fines, and banning them from working in the banking industry. [3] He has also called for stricter regulation by executive branch agencies, noting that the Trump administration weakened key regulations. Treasury Secretary Yellen has echoed Biden’s statements and has noted that “the costs of proper regulation pale in comparison to the tragic costs of financial crises.” [4]

Senator Warren and Representative Porter (D-CA) have filed legislation that would strengthen banking regulations, including reversing the provisions in the 2018 EGRRCP law that dramatically weakened regulation of mid-size banks, like the three that just collapsed.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support the strengthening of banking regulations and the holding of bank executives accountable with financial, criminal, and other consequences. Urge them to call on Fed Chair Powell to resign due to his complicity in these bank failures.

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. 3/20/23, “Former Wells Fargo exec could do prison time,” The American Prospect https://prospect.org/justice/2023-03-20-wells-fargo-exec-justice/

[2]      Kuttner, R., 3/20/23, see above

[3]      Gardner, A. 3/18/23, “Biden calls for tougher penalties on bank execs,” The Boston Globe from Bloomberg

[4]      Hussein, F., & Boak, J., 3/31/23, “Biden calls to revive bank regulations,” The Boston Globe from the Associated Press

PREVENTING BANK FAILURES

A history of greed, mismanagement, deregulation, and weak regulatory oversight has created a litany of banking and financial system crises over the last 40 years. Future crises can be prevented by:

  • Reversing the deregulation of a 2018 law,
  • Strengthening regulation,
  • Increasing deposit insurance, and
  • Making bank executives personally liable and culpable.

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

Greed and mismanagement by bank executives led to the collapse of three banks in early March. Deregulation of “mid-size” banks in 2018 and 2019, along with failures of banking oversight by the Federal Reserve (the Fed), were also major factors in the banks’ collapses. The Chair of the Federal Reserve, Jerome Powell, bears significant responsibility for the conditions that led to these bank failures. (See this previous post for more details.)

The ultimate trigger for the collapse of Silicon Valley Bank (SVB), the first of the three to collapse, is an interesting story of conflicts of interest and hypocrisy. On Wednesday afternoon, March 8, SVB announced it needed to raise capital, presumably because the value of its long-term bond holdings had fallen, meaning its assets weren’t sufficient to meet its required level of capital. Hearing this, the venture capitalists who had invested in many of the companies with deposits at SVB, warned their companies (who further spread the word) that SVB was in trouble and they should withdraw their deposits. This was especially important for those with deposits above the $250,000 federal insurance cap, which was 90% of SVB’s depositors and 97% of its deposits. For example, Roku, the media streaming company, had $500 million on deposit at SVB. As a result, depositors withdrew $42 billion from SVB in the next 24-hours, causing the bank to collapse because it could not come up with sufficient cash to cover the withdrawals. [1]

The venture capitalists and the start-up companies, along with the failed banks’ executives, then insisted that the federal government should cover the uninsured deposits (roughly $175 billion) and make cash available to depositors immediately (both of which it did), even though they were the ones who had triggered the run on the bank that led to its collapse. Furthermore, the venture capitalists (who I believe deserve the moniker “vulture capitalists”) threatened to withdraw money from other banks and cause them to collapse if the government didn’t fully cover the deposits at the three failed banks. The resultant bailout is, in effect, a gift to a few very wealthy people who are happy to walk away with the profits of their risky behavior while dumping the costs of its failures on the government and taxpayers. Furthermore, until they need a bailout, they demand that government should stay out of their business.

This is a blatant display of hypocrisy, as many of these venture capitalists and bankers had pushed (and will push again, undoubtedly) for the deregulation that was a major contributing factor to the banks’ collapses. Notably, SVB CEO Greg Becker had vigorously lobbied for the 2018 law that dramatically reduced regulation of his bank.

The history of bank and financial deregulation is one of repeated bank and financial system crises. Most notably, there were the savings and loan crisis in the late 1980s and 1990s, and the financial collapse of 2008. In addition, there were the junk bond scandal of 1990, the Prudential Insurance scandal in 1994, the dot-com bubble bust of 2000 – 2002, and the Enron scandal of 2001. There have also been small numbers of banks failing from time to time as has just happened.  [2]

This history makes it clear that strong regulation of banks and the financial industry is necessary. Banking by institutions with federally (i.e., taxpayer) insured deposits should be safe and boring. Financial activities with high risk and potentially higher returns should be separated from insured bank deposits. This is what the Glass-Steagall Act did until it was repealed in 1999.

To prevent future banking and financial system crises, the following steps should be taken:

  • Reverse the deregulation of the 2018 law,
  • Strengthen regulation,
  • Increase deposit insurance, and
  • Make bank executives personally liable and culpable.

REVERSE THE DEREGULATION: Key provisions of the 2018 deregulation law, the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP), should be reversed. Most notably, the provision that exempted “mid-size” banks (i.e., those with assets of $50 billion to $250 billion) from most regulation should be repealed. The argument was that these banks weren’t systemically important and therefore didn’t warrant strong regulation. Recent events have proved this wrong as the Federal Reserve formally declared the failure of these three “mid-size” banks as a systemic crisis. A multi-trillion-dollar bailout program was required to stabilize the banking industry.

STRENGTHEN REGULATION: The further weakening of regulations for “mid-size” banks (in addition to those in the 2018 law) that the Fed put in place in 2019 should be reversed. Regulations required or allowed by the 2010 Dodd-Frank law that have still not been implemented, such as regulation of bank executives’ compensation, should be implemented quickly and strongly. Dodd-Frank prohibits compensation that incentivizes inappropriate risk-taking, such as compensation heavily based on a bank’s stock price. Because of the Feds’ failure to implement this prohibition, between 2019 and 2022, SVB CEO Becker made $58 million from stock-based compensation as the SVB stock price went from $100 to $700 over six years due to his inappropriate risk-taking. [3]

The use of Deferred Prosecution Agreements (DPAs) must stop. These are settlements with regulators where banks pay fines and agree to stop bad behavior, but there’s no prosecution of executives. DPAs have become the norm since 2003. Bank executives used to be prosecuted, as in the savings and loan crisis of the 1980s and 1990s when more than 1,000 bank executives were prosecuted and many went to jail.

SVB ignored six formal warnings from the Fed over the course in 2021 and 2022, apparently assuming (correctly) that there would be no consequences. The Fed did little to follow-up on or enforce its warnings. This must change. Furthermore, SVB had no chief risk officer for almost a year. [4] [5]

INCREASE DEPOSIT INSURANCE: Deposit insurance by the Federal Deposit Insurance Corporation (FDIC) should be increased, along with appropriate fees to pay for it. The current $250,000 limit should be increased substantially, perhaps to $10 million, as even a relatively small business today needs more than $250,000 on hand to meet payroll and other routine expenses. [6]

My next post will describe how bank executives should be held personally liable and culpable for the failures of their banks. It will also present some specific steps that can be taken to prevent future banking and financial system crises.

[1]      Dayen, D., 3/13/23, “The Silicon Valley Bank bailout didn’t need to happen,” The American Prospect (https://prospect.org/economy/2023-03-13-silicon-valley-bank-bailout-deregulation/)

[2]      Miller, K., 3/21/23, “Seeking the roots of banking turmoil,” The Boston Globe

[3]      Anderson, S., 3/21/23, “Curbing bad behavior of bank CEOs isn’t as hard as they make it seem,” Common Dreams (https://www.commondreams.org/opinion/curbing-big-bank-ceo-greed)

[4]      Dayen, D., 3/21/23, “The Fed’s Silicon Valley Bank coverup won’t work,” The American Prospect (https://prospect.org/economy/2023-03-21-fed-supervision-silicon-valley-bank)

[5]      Smialek, J., 3/20/23, “Failed bank ignored Fed’s warnings,” The Boston Globe

[6]      Smialek, J., 3/20/23, see above

BANK DEREGULATION FAILS AGAIN

Deregulation of “mid-sized” banks in 2018 and 2019, along with failures of banking oversight by the Federal Reserve, led to the collapse of three banks in the last ten days. The Chair of the Federal Reserve, Jerome Powell, bears significant responsibility for the conditions that allowed these bank failures to occur.

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

The collapse of three banks in the last weeks has been widely reported. What hasn’t been nearly as widely reported are the factors that led to these failures. Greed and mismanagement by the banks’ executives caused their collapses, of course. However, this wouldn’t have happened without deregulation and failures of oversight by bank regulators (primarily the Federal Reserve). Deregulation in banking and other industries over the last 40 years has not lived up to its promises of greater efficiencies and better products and prices for consumers. Moreover, in many cases, it has harmed employees, customers, and taxpayers. (See this previous post for more details on the failures of deregulation.)

This banking system crisis is a somewhat surprising repeat (on a smaller scale) of the banking crisis in 2008, although it was predictable in some experts’ eyes. Again, as in 2008, fifteen short years ago, the banks and wealthy depositors are being bailed out by the federal government.

After the 2008 debacle, the Dodd-Frank Act was passed in 2010 to enhance bank regulation and (hopefully) prevent a recurrence. However, Dodd-Frank wasn’t as strong as many experts would have liked and efforts to weaken it further began immediately. These efforts were led by the banks and Wall St. financial corporations, with support from most Republicans and some Democrats – and some of the federal banking regulators. The efforts included a focus on weakening and delaying the implementation of the regulations required by Dodd-Frank.

In 2018, the Trump administration and the Republicans in control of Congress (with some Democratic support), passed a law significantly reducing banking regulation, primarily for “mid-sized” banks (i.e., ones with assets between $50 billion and $250 billion). The three banks that collapsed recently are in this group.

The Chair of the Federal Reserve (the Fed), Jerome Powell, lobbied for the 2018 deregulation law, despite the fact that the Fed is the primary regulator of these banks. He is a former investment banker and was nominated to the post by President Trump. Many supporters of strong banking regulation were dismayed when President Biden renominated him in 2021.

The collapse of these three banks is due in part to the failure of the Fed’s oversight (what’s referred to in the business as “supervision”). Banking experts, investors, rating agencies, and even some in the media had identified risks at Silicon Valley Bank (SVB) that the Fed seems to have missed or ignored. SVB was the first of the three banks to collapse and is the 2nd biggest bank failure in U.S. history. (There would have been other bigger ones in 2008 if the government hadn’t stepped in to rescue them.) SVB had grown rapidly, had deposits largely from one industry and from companies that were inter-related, had significant individual deposits over the insurance limit of $250,000, and had invested lots of its cash in long-term investments that heightened risk if interest rates went up or depositors wanted money back on short notice. All of these factors are flags that should have drawn the attention of the Fed long before SVB’s collapse. Senator Warren (D-MA) and other banking watchdogs have called the collapse of these three banks a glaring failure of oversight by the Fed.

The federal government released a statement on Sunday, March 12, to reassure the public about safety and security of the country’s banking system and their bank deposits. Fed Chair Powell delayed the release of the statement with his insistence that the statement not mention the failures of the Fed in overseeing SVB and other banks. [1]

On March 15, Senator Warren sent a scathing 10-page letter to Fed Chair Powell detailing his and the Fed’s role in aiding and abetting the collapse of these banks. She wrote to Powell that these banks collapsed “under faulty supervision and in a weakened regulatory environment that you helped create.” She noted that Powell had “led and vigorously supported efforts to weaken the regulations” for these banks. In 2018, Powell, as Fed Chair, supported the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP), which rolled back some provisions of the Dodd-Frank law, dramatically weakening regulation of banks, particularly those with $50 billion to $250 billion in assets. At that time, a Wall Street Journal editorial warned that the bill would make the financial system more vulnerable and a Bloomberg editorial warned that the bill chipped away at the bedrock of financial resilience. Powell supported it anyway.

Furthermore, in 2019, Powell took additional deregulatory steps that weakened or eliminated guardrails that would have applied to SVB. As he was doing so, a federal Reserve Board member warned that safeguards at the core of the system were being weakened. A Federal Deposit Insurance Corporation (FDIC) Board member objected to Powell’s deregulatory steps, warning at the time that they significantly underestimated the risks of banks SVB’s size, noting that banks of this size experienced significant stress in the 2008 debacle and would have collapsed without government bailouts.

Just three days before the SVB collapse, when asked by Senate Republicans if he would continue to weaken banking regulation, Powell replied, “Yes, I can easily commit to that.” Ironically, Powell’s strong and persistent push to raise interest rates causes the value of long-term bonds to fall. SVB and other banks holding long-term bonds therefore would see the value of their investments fall which would threaten their ability to sell them to deliver cash to depositors. This was a key factor in the collapse of SVB and, although Powell’s actions at the Fed precipitated it, he and the Fed apparently did not anticipate their negative effects on banks.

Senator Warren’s letter concludes by noting that Powell contributed to the bank failures in three ways:

  • Powell actively supported legislation that weakened the Dodd-Frank law,
  • Powell implemented regulations that further weakened bank regulation, and
  • Powell failed to ensure that the oversight of the Fed was effective in preventing the banks’ collapses.

Warren’s letter states that Powell should recuse himself from the internal review the Fed has announced into the oversight and regulation of SVB, given his direct involvement in and responsibility for the chain of events that led to the bank’s collapse.

As-of March 17, a week after SVB’s collapse, it and other banks that have collapsed or are at-risk have borrowed a total of $165 billion from the Fed to bail them out. The U.S. Treasury and the FDIC have committed to protect all depositors at the failed banks, bailing out the start-up companies and their venture capital funders, particularly the ones that had over $250,000 on deposit at a bank that collapsed.

My next post will provide a few more details about the collapse of these three banks and will discuss efforts to prevent this from happening again.

[1]      Johnson, J., 3/17/23, “‘An abomination’: Powell cut mention of regulatory failures from bank bailout statement,” Common Dreams (https://www.commondreams.org/news/powell-cut-regulatory-failures-mention)

GOOD AND BAD NEWS ON MEDICARE

The takeaways from this post are:

  • President Biden has proposed Medicare changes as part of his proposed budget that would keep it funded for 25 years, however, Republicans in Congress are not likely to pass them.
  • Partial privatization of Medicare through the Medicare Advantage and ACO REACH programs undermines quality and increases costs.

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

There are three pieces of good news on the Medicare front. First, President Biden’s budget for the next fiscal year (starting 10/1/23) includes increased funding and decreased costs for Medicare that would mean it is fully funded for the next 25 years. The increased funding comes from raising the Medicare tax on people with incomes over $400,000, based on both earned and unearned income (such as capital gains). The decreased costs come from significantly expanding Medicare’s ability to negotiate what it pays pharmaceutical companies for drugs. [1] The bad news is that Republicans in the House are not likely to pass this. The other bad news is that Biden didn’t propose strengthening Medicare by adding coverage for vision, hearing, and/or dental services.

Second, there’s some good news on reining in the privatization of Medicare. The Biden administration is increasing the auditing of the private Medicare Advantage (MA) plans. (As you may well know, Medicare pays a private insurer for seniors’ care when they enroll in a MA plan. Private insurers were allowed to offer these plans because they promised to deliver better care for less money. The result has been the reverse: worse care for more money.) Because of documented and systematic overbilling of Medicare by many of these private MA insurers, Medicare projects that these audits will save $470 million per year. (See this previous post for more details on overbilling by MA insurers.) [2] Nearly every large insurer offering a MA plan has been sued by the Justice Department for overbilling Medicare. [3]

Third, the Biden administration is proposing tougher rules governing Medicare Advantage plans to counter widespread inappropriate denial of coverage for seniors’ health care and deceptive marketing. The new rules would require quick action on authorizations (or denials) of coverage for health care services and require an authorization to cover the full course of treatment, rather than requiring reauthorization for each step or individual treatment.

An inspector general’s investigation found that one out of every seven denials of payment by a Medicare Advantage insurer was inappropriate. It estimated that tens of thousands of MA enrollees have been inappropriately denied medically necessary care. Health care providers report increasingly frequent denials of payment by MA insurers for care routinely covered by traditional, government-run Medicare. In 2022, the number of appeals patients filed contesting Medicare Advantage denials was almost 150,000, up 58% from 2020. On many occasions denials are overturned when appealed; for example, most denials of coverage of skilled nursing care are eventually overturned. However, the denial and appeal process can take over two years. It is not unusual for patients to use their life savings to pay for denied coverage before recovering thousands of dollars months or years later. It is also not unusual for patients to die before their appeals are decided. [4]

Insurers’ marketing of Medicare Advantage plans often confuses consumers (intentionally?) about the fact that MA plans are private, for-profit plans as opposed to traditional government-run Medicare. The new rules would ban the private insurers from using the Medicare logo and name in ads, while requiring them to identify the insurance company operating the MA plan. The rules would also hold the insurers responsible for the actions of third parties doing marketing for them, such as aggressive, unsolicited phone calls. This third-party marketing is often done on a commission basis, so there is great pressure to sell the MA plan.

Medicare Advantage plans are very profitable for the private insurers. They charge Medicare more per enrollee than traditional, government run Medicare costs, despite the fact that their advertising attracts healthier-than-average seniors. They use prior authorization and in-network provider requirements to limit and deny payments for care. Their in-network provider and geographic area limitations mean that enrollees may find that when they’re traveling or on vacation they have no health insurance coverage. [5] Furthermore, in numerous cases, MA networks do not include the best quality care options, such as the best cancer centers and specialists. It is estimated that roughly 10,000 lives per year would be saved if Medicare terminated the 5% of MA plans with the worst rankings. [6]

The bad news on the Medicare privatization front is that a new and more insidious privatization scheme is continuing, albeit with a new name as-of Jan. 1, 2023. The Direct Contracting program initiated by the Trump administration has been renamed ACO REACH by the Biden administration. It allows private companies to manage the care of seniors enrolled in traditional government-run Medicare. Medicare enrollees may be put into these plans without their knowledge or consent based on where they live. The sliver of good news is that new criteria for companies’ participation have eliminated some companies with histories of fraud and abuse with Medicare. However, over a dozen members of Congress have sent a letter to the Centers for Medicare & Medicaid Services (CMS, the agency running Medicare) asking for investigations into nine companies allowed to participate in ACO REACH that have documented cases of defrauding Medicare or other government health programs. [7]

The Physicians for a National Health Program (PNHP) has sent a series of letters to CMS highlighting problems with ACO REACH and calling for its termination. Its latest letter identifies four insurers in ACO REACH that have a history of involvement in health care fraud or other malfeasance (Centene, Sutter Health, Clover Health, and Bright Health). It took only a small investigation by PNHP to identify them. [8]

Overall, the seven largest for-profit health insurers in the U.S. are making a fortune in profits from Medicare and other government health programs, notably Medicaid and the Affordable Care Act which both provide subsidized health insurance for low-income people. For three of the seven, Centene, Humana, and Molina, roughly 90% of their health insurance revenues come from government programs. For all seven (the previous three plus Cigna, CVS/Aetna, Elevance, and UnitedHealth), their 2022 government-program revenues were $577 billion, up from $116 billion in 2012. These seven companies have more than 70% of the Medicare Advantage market, with MA plans generally being their most profitable products. Therefore, they aggressively market their MA plans and have grown them substantially so that now 31 million seniors, almost half of the Medicare-eligible population, have signed up for them. Because the private MA plans’ billings for care are more expensive per enrollee than traditional Medicare, Medicare would realize substantial savings if the MA program was eliminated. [9]

In conclusion, any privatization of Medicare, such as through the Medicare Advantage and ACO REACH programs, (as well as privatization of other government health programs) does NOT save money. It adds costs for private middlemen and their profits, advertising, and administrative costs. Moreover, there are additional costs for government oversight: creating rules and regulations to govern the private entities, monitoring their performance, enforcing the almost certain violations of the rules and regulations, and investigating and stopping efforts to game the system to increase profits. The efficiency and quality of Medicare would be best served by ending privatization, i.e., by eliminating the ACO REACH and MA programs.

I urge you to contact President Biden and your U.S. Representative and Senators and to ask them to stop the privatization of Medicare. Specifically, ask them to eliminate the new ACO REACH program and to rein in Medicare Advantage plans. 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]      Biden, President J., 3/7/23, “My plan to extend Medicare for another generation,” New York Times (https://www.nytimes.com/2023/03/07/opinion/joe-biden-medicare.html)

[2]      Kuttner, R., 2/1/23, “Can Medicare Advantage be contained,” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/2023-02-01-medicare-advantage-privatization/)

[3]      Abelson, R., & Sanger-Katz, M., 12/18/22, “US officials seek curbs on private Medicare Advantage plans,” The Boston Globe

[4]      Ross, C., & Herman, B., 3/14/23, “Denial of care often blamed on insurers’ AI,” The Boston Globe

[5]      Cyrus, R., 2/27/23, “Private health care companies are eating the American economy,” The American Prospect (https://prospect.org/health/2023-02-27-private-health-insurance-medicare/)

[6]      Archer, D., 6/2/22, “Inspector General, AMA and AHA agree: Some Medicare Advantage plans are endangering their enrollees’ lives,” Common Dreams (https://www.commondreams.org/views/2022/06/02/inspector-general-ama-and-aha-agree-some-medicare-advantage-plans-are-endangering)

[7]      Jayapal, Representative P., 1/19/23, “Jayapal applauds exit of bad actors from ACO Reach program, calls for greater accountability,” (https://jayapal.house.gov/2023/01/19/jayapal-applauds-exit-of-bad-actors-from-aco-reach-program-calls-for-greater-accountability/)

[8]      Physicians for a National Health Program, 1/17/23, “Letter to US Department of Health and Human Services Secretary Becerra and CMS Administrator Brooks-LaSure,” (https://pnhp.org/system/assets/uploads/2023/01/REACHLetter_20230117.pdf)

[9]      Johnson, J., 2/28/23, “Report shows big insurance profiting massively from Medicare privatization,” Common Dreams (https://www.commondreams.org/news/report-shows-big-insurance-profiting-massively-from-growing-privatization-of-medicare)

FIGHTING BACK AGAINST MONOPOLISTIC CORPORATIONS AND RECLAIMING DEMOCRACY

The key takeaways from this post are:

  • The Biden administration is taking strong actions to rein in monopolistic corporations and reinvigorate competition in our economy.
  • Some members of Congress are pushing to revitalize antitrust enforcement.
  • Results are already evident and will benefit workers, consumers, the public, and democracy.

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

Corporations and other business interests spend billions of dollars each year on election campaigns and lobbying. (See this previous post for details of their spending.) This spending is an investment in influencing public policies and the enforcement of them that provides benefits that are much, much greater than what the business interests spend. (See this previous post for more details on the benefits they get.)

The good news is that the Biden Administration and some members of Congress are working to turn the tide on monopolistic corporate power. In 2022, Congress passed the first significant update to antitrust laws in 50 years. It includes a new merger fee that will be used to fund the Federal Trade Commission’s (FTC) and the Department of Justice’s (DOJ) antitrust enforcement efforts, as well as to support states’ attorneys general in enforcing antitrust laws at the state level. [1]

Senator Warren (D-MA) is introducing the Prohibiting Anticompetitive Mergers Act in Congress, which would set clearer rules for what makes a merger illegal and create a streamlined process for breaking up monopolistic corporations. There are also three bills with bipartisan support that would rein in some of the monopolistic practices of the Big Tech companies, Amazon, Apple, Google, and Facebook. Bills to further update antitrust laws, make meat processing more competitive, and increase competition in defense contracting are also being introduced in Congress.

On July 9, 2021, President Biden signed a sweeping Executive Order. It included 72 separate actions all focused on reinvigorating competition in the U.S. economy and pushing back against monopolistic corporate behavior. He described it as being “about capitalism working for people” and noted that “Capitalism without competition isn’t capitalism; it’s exploitation.” [2]

Seventeen federal agencies were specifically named in the Executive Order and even ones that weren’t responded with explanations of what they would do to foster competition in the economy. Key Biden appointees leading the revitalization of competition are Lina Kahn, chair of the Federal Trade Commission and Jonathan Kanter, head of the Department of Justice’s Antitrust Division. A new White House competition council was created, led by the National Economic Council, to monitor implementation of the executive order, including complementary legislative and administrative efforts.

Results are already evident. The Federal Trade Commission (FTC) has promulgated new definitions of unfair or deceptive acts and practices. And it’s taking action based on them. It has proposed a ban on non-compete clauses in employment contracts, which depress wages and limit workers’ career advancement. At least one-third of U.S. companies require non-compete clauses, including for fast food workers, dog groomers, and custodians. The FTC has also filed a lawsuit to force Meta (parent of Facebook) to spin off Instagram and WhatsApp. It has sued Meta over its acquisition of the virtual reality company, Within. Last February, Lockheed Martin dropped its proposed merger with Aerojet in the face of an FTC lawsuit. The FTC is working to restore consumers’ right to repair equipment they have purchased, from cell phones to farm tractors. There’s also new scrutiny of bank mergers, pricing practices in the pharmaceutical industry, anti-competitive practices by the giant railroad corporations, price fixing in ocean shipping, abusive use of patents to restrict markets and jack up prices, and junk fees in banking, credit cards, airlines and elsewhere.

For example, according to research by the Center for Responsible Lending, TD Bank charges U.S. customers more than $100 a day for overdrafts by levying a $35 fee three times in a day. These are junk fees that bear no relationship to actual costs; they are opportunistic price gouging. In Canada, where these practices are regulated, TD and other banks may charge overdraft fees only once a day of no more than five Canadian dollars (about $3.50 in USD). This is one reason TD Bank’s proposed merger with Memphis-based First Horizon Bank, a $13.4 billion deal, should be blocked. [3]

The Department of Justice (DOJ) and FTC are rewriting merger guidelines to strengthen antitrust enforcement. The DOJ has already begun a number of antitrust enforcement actions. One would require Google to separate its online advertising business from its search engine business. The DOJ has successfully blocked the merger of publishing houses Simon & Schuster and Penguin Random House. It has filed suit against three giant poultry processors who are alleged to have colluded to deny workers $85 million in pay and benefits.

The DOJ is also investigating the Live Nation – Ticketmaster merger. This is an all-too-frequent example of a merger that was allowed with conditions, but where the merged entity has not complied with the conditions. Live Nation and Ticketmaster promised that after their merger they would not block events from taking place at venues that did business with their competitors. It now appears that Live Nation – Ticketmaster have done just that. In many cases in the past, there has been no enforcement when merger conditions were violated. Hopefully, this is changing. Furthermore, Senator Warren (D-MA) argues that a merger that requires conditions simply shouldn’t be approved. If it’s illegal, then it’s illegal and authorities should just say, “No.” The government shouldn’t be put in the position of having to spend time and money monitoring compliance with merger conditions and then having to go through a typically long and costly process to enforce them when violations occur. [4]

Several federal agencies, not just the FTC and DOJ, have the power to block anticompetitive mergers in their areas of jurisdiction. The Department of Transportation can stop anticompetitive mergers and practices by airlines and other transportation corporations and banking regulators can do so for banks. The Department of Agriculture can regulate mergers and practices of food processors and can protect farmers and ranchers from exploitation by monopolistic agribusinesses. The Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau is investigating monopolistic consolidation among beer makers and also the distributors of alcoholic beverages.

In 2017, Congress passed bipartisan legislation allowing the purchase of hearing aids without a prescription. The requirement for a prescription had allowed a small cartel to control the market and jack up prices by thousands of dollars. As a result, less than one-fifth of the Americans who would have benefitted from a hearing aid got one. The Trump administration failed to implement the law. Biden’s executive order gave the Food and Drug Administration 120 days to implement it. People are now able to buy hearing aids for thousands of dollars less than before.

It’s past time to take on corporate power in America and return power to workers, consumers, and the public, i.e., to rebuild democracy. The Biden administration has made a good start at doing so. Partially as a result of its efforts, merger and acquisition activity in the last half of 2022 slowed sharply. (See this post for more on ways to take on corporate power and rebuild democracy.)

Competition is essential to the vitality of our economy – and of our democracy. A shift seems to be taking place in government and public consciousness about what it means to be a democracy, both politically and economically. Taking back our democracy requires regulating capitalism so it serves multiple stakeholders and the public good, not just wealthy shareholders and executives.

I urge you to contact President Biden and thank him for his efforts to reinvigorate competition in our economy and democracy in our society. 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.

I also urge you to contact your U.S. Representative and Senators to ask them to support efforts to strengthen antitrust laws and rein in monopolistic behavior by big tech, meat processors, defense contractors, and others. 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]      Warren, Senator E., 2/15/23, “Keynote speech at the Renewing the Democratic Republic Conference,” Open Markets Institute (https://www.warren.senate.gov/imo/media/doc/FINAL%20-%20Senator%20Warren%20Speech%20Antitrust%20Open%20Markets%202023.pdf)

[2]      Dayen, D., 1/25/23, “A pitched battle on corporate power,” The American Prospect (https://prospect.org/economy/2023-01-25-pitched-battle-corporate-power/)

[3]      Kuttner, R., 3/3/23, “Excessive bank overdraft charges demand regulation,” The American Prospect blog (https://prospect.org/blogs-and-newsletters/tap/2023-03-03-bank-overdraft-charges-regulation/)

[4]      Warren, Senator E., 2/15/23, see above

WHAT CORPORATIONS GET FOR THEIR CAMPAIGN AND LOBBYING SPENDING

Corporations and other business interests spend billions of dollars each year on election campaigns and lobbying. (See this previous post for details.) This spending is an investment in influencing public policies and the way they are (or are not) enforced. It provides benefits that are much, much greater than what the businesses spend.

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

Here are some examples of what they get in return for their lobbying and campaign spending:

  • Deregulation so they can maximize profits with little regard for the safety of workers and the public or the fair treatment of customers and employees.
  • Lack of enforcement of antitrust laws, so they can become as big and as powerful as possible, while swallowing up or squashing competition.
  • Low tax rates and tax loopholes that allow them to minimize the taxes they pay.
  • Regulations, such as patent laws, that stymie competition.
  • Government bailouts when they’re in trouble.
  • Financial laws and regulations that facilitate acquisitions and mergers, including the vulture capitalism of hedge funds and private equity, such as bankruptcy laws (see this post for more detail) that allow rewarding executives and shareholders while ripping off every other stakeholder.

The safety risks of deregulation are apparent in the derailment of the Norfolk Southern train in Ohio on February 3, 2023, and the toxic nightmare that’s been the result. In 2017, after the railroad industry put over $6 million into Republican campaigns and millions more into lobbying, the Trump Administration repealed a regulation enacted by the Obama Administration that required better braking systems on rail cars carrying hazardous materials. Norfolk Southern and other railroads lobbied for its repeal because they claimed the regulation would be costly and wouldn’t increase safety that much. The railroad industry also lobbied to limit the regulation by defining the “high-hazard flammable trains” (HHFTs) that it would cover to include only trains carrying oil and not ones with industrial chemicals. The train that recently derailed in Ohio was NOT classified as a HHFT! [1] (See this previous post for more details on the railroad industry’s deregulation, consolidation, monopolistic behavior, working conditions, and soaring profits.)

In the aftermath of the train derailment, President Biden pointed out that deregulation has compromised Americans’ safety. He stated that “Rail companies have spent millions of dollars to oppose common-sense safety regulations. And it’s worked. This is more than a train derailment or a toxic waste spill – it’s years of opposition to safety measures coming home to roost.” [2]

Despite their rhetoric about the free market, big corporations do not want to compete for customers or for workers. Because of forty years of failure to enforce antitrust laws, monopolistic corporations dominate the U.S. economy from airlines to food processing to oil and gas to beer, banks, and health care. (See this post for more details.) For example, since 2006, banking regulators have processed 3,500 bank merger applications and haven’t stopped a single one.

To avoid competing for customers, huge monopolistic corporations eliminate competitors via the extreme capitalism they have gotten the government to allow, which includes wiping out small businesses. The dominant corporations buy small business competitors and swallow them, or drive them out of business with their market place power. For example, in the last decade, nearly 20,000 small businesses have been eliminated from the military goods and services market by the five huge defense contractors. Amazon did this in the book selling market and now does this in other markets as well.

Among other things, huge corporations that dominate an industry have monopolistic pricing power. Therefore, during the pandemic, these dominant corporations have been able to engage in price gouging to increase their profits. The best estimates are that between 40% and 53% of the inflation consumers have experienced over the last year is due to corporate price gouging. (See this post for more details.)

Huge, dominant corporations have dramatic negative effects on the economy if they get into trouble, therefore they’re too big to let fail. So, they get government bailouts when they’re in danger. The big banks and financial corporations got trillions of dollars in bailouts in the aftermath of the 2008 financial catastrophe they created. More recently, the airlines – the four huge airlines that are left after consolidation in this industry – got $25 billion in a government bailout during the pandemic. Nonetheless, they laid off thousands of workers, are now raising fares and fees at an exorbitant rate, schedule flights they know they don’t have the workers to fly, and are squeezing workers and customers to increase profits. [3]

Big businesses don’t want to compete for workers, so they have imposed non-compete clauses on many employees in many industries, including the fast-food industry. These non-compete clauses are in employment contracts employees are required to sign and prevent an employee from going to work for a competitor. This means lower wages for workers and less turnover, both of which boost corporate profits. The Federal Trade Commission (FTC) has proposed banning non-compete clauses and big businesses are apoplectic about having to compete for workers. The U.S. Chamber of Commerce, big businesses’ powerful trade association and political megaphone, along with 99 other industry associations, have written a letter to the FTC to complain.

In terms of taxes, the effective tax rate for large, profitable corporations (i.e., what they actually pay) has fallen from 16% in 2014 to 9% in 2018. Furthermore, the portion of large, profitable corporations paying no corporate income tax has increased to 34%. This has occurred in part because of the 2017 Republican tax law that cut the maximum, theoretical corporate tax rate from 35% to 21% and added even more loopholes to a tax code already riddled with them. Corporate taxes are now less than 11% of government revenue; in the 1950s, they were over 30% of revenue. [4]

The ever-increasing wealth of large corporations and rich individuals gives them plenty of money to spend on election campaigns and lobbying. This enhances their political power and allows them to tilt the playing field further and further in their favor, from lax antitrust enforcement to favorable tax and bankruptcy laws to weak regulations to employer-leaning labor laws. This lets them disempower workers (see this post for more details) and destroy communities. It leads to rising prices for housing, food, and medical care; to lower pay and worse working conditions; to the degradation of the quality of the information we get from mass media; and to further concentration of wealth and power.

All of this undermines democracy. It’s past time to take on American corporatocracy and reinvigorate democracy. My next post will discuss current and potential future strategies for fighting back against monopolistic corporations.

[1]      Cox Richardson, H., 2/15/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/february-15-2023)

[2]      Cox Richardson, H., 2/22/23, “Letters from an American blog,” (https://heathercoxrichardson.substack.com/p/february-22-2023)

[3]      Warren, Senator E., 2/15/23, “Keynote speech at the Renewing the Democratic Republic Conference,” Open Markets Institute (https://www.warren.senate.gov/imo/media/doc/FINAL%20-%20Senator%20Warren%20Speech%20Antitrust%20Open%20Markets%202023.pdf)

[4]      U.S. Government Accountability Office, 12/14/22, “Corporate income tax: Effective rates before and after 2017 law change,” (https://www.gao.gov/products/gao-23-105384)

CURRENT U.S. CAMPAIGN FINANCE SYSTEM IS UNDEMOCRATIC

The key takeaways from this post are:

  • Business interests are spending billions of dollars each election cycle on political campaigns.
  • Supreme Court decisions have allowed unlimited campaign spending by wealthy special interests who are increasingly hiding their identities from voters.
  • Business interests are also spending billions of dollars on lobbying each year.
  • This huge spending by business interests is affecting public policy, allowing extreme capitalism where returns to shareholders outweigh all other interests.

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

The 2022 midterm (i.e., non-presidential) federal elections were the most expensive ever by a wide margin. Candidates and political action committees (PACs) spent a total of $9 billion, up from $7 billion in 2018 and $5 billion in 2014 (both figures are adjusted for inflation). Identifiable business interests contributed $3.5 billion to federal campaigns, a record amount. They spent 14 times as much as organized labor. [1]

In the 2022 election cycle, business interests gave $66 million to members of Congress who voted NOT to accept the results of the 2020 presidential election, the so-called Sedition Caucus. Numerous corporations pledged to stop or re-evaluate supporting these members of Congress after the Jan. 6, 2021, insurrection at the Capitol. A significant number of these corporations have resumed making corporate PAC contributions to members of the Sedition Caucus, including contributions from AT&T, Boeing, Cigna, Comcast, General Motors, Home Depot, Lockheed Martin, Marathon Petroleum, Pfizer, Raytheon, UPS, UnitedHealth, Verizon, and Walmart. [2]

A growing number of members of Congress (73) refused corporate PAC money for the 2022 elections; 59 did for the 2020 elections. A much smaller number (7 members of the House and 6 Senators) refused money from all business PACs, including PACs of businesses not organized as corporations (e.g., many law, lobbying, and accounting firms) and of industry associations (e.g., the National Association of Realtors). Note that neither of these categorical refusals excludes the receipt of donations from corporate executives.

Election spending by outside groups has been growing since the 2010 Supreme Court Citizens United decision (as well as other related decisions). The Supreme Court’s decisions allow unlimited outside spending (i.e., spending that is [supposedly] independent of candidates’ campaigns and the political parties). Since 2010, there’s been over $9 billion in outside spending. A growing portion of this money is coming from sources that aren’t required to disclose their donors – so-called “dark money” groups. Most of the dark money comes through non-profit “social welfare” groups, but shell corporations are also used.

Outside spending was about $2 billion in the 2022 federal elections and over $637 million of that was dark money. All but $25 million of this dark money was contributed to PACs (this is essentially money laundering) or was spent on activities that avoid requirements for reporting to the Federal Elections Commission (FEC). (These activities are typically ads promoting or attacking candidates but without explicitly calling for their election or defeat, and that are run before the short period prior to an election when reporting is required.) [3]

In a troubling but not surprising development, the non-profit dark money groups that spent the most on the 2022 elections, $346 million, are closely linked to Republican and Democratic leaders in Congress. The largest spender was One Nation, a dark money non-profit linked to Senate Republican leader Mitch McConnell (R-KY). It spent $145 million, of which $74 million was contributed to PACs, with the vast majority going to McConnell’s Leadership Fund PAC. Note that his PAC shares staff and offices with One Nation. So much for the independence of such spending, despite the requirement for independence in the Supreme Court’s decision! One Nation also spent $71 million on ads, on which it was careful to avoid triggering reporting to the FEC. McConnell’s PAC spent more money on the 2022 elections than any other outside group: $246 million on U.S. Senate races across the country. [4]

Majority Forward, a dark money non-profit linked to the Democratic Senate leadership, spent over $102 million with $27 million going to ads (that avoided FEC reporting) and $76 million in political contributions (with $72 million going to Senate Majority Leader Schumer’s (D-NY) PAC). On the House side, the Republican dark money group spent $77 million, while the Democratic group spent $21 million.

Business interests spend money on lobbying in addition to campaign spending. For example, the National Association of Realtors spent $4 million on federal campaigns in the 2022 election cycle and $126 million on lobbying in the same two-year period.

Overall, $4.1 billion was spent on federal lobbying in 2022, an all-time record in terms of dollars and the highest since 2010 after adjusting for inflation. Over the course of 2022, over 13,000 organizations paid over 12,600 lobbyists. The $1.7 trillion budget bill passed in late 2022 was the subject of lobbying by 1,393 organizations. [5]

The top ten clients hiring lobbyists ranged from the National Association of Realtors, which spent $82 million on lobbying in 2022, to Meta (parent company for Facebook, Instagram, and WhatsApp), which spent $19 million. Amazon, the only individual corporation other than Meta on the list, spent $21 million. The U.S. Chamber of Commerce was second on the list, spending $81 million, followed by the Pharmaceutical Research & Manufacturers of America (PHRMA, $29 million), the American Hospital Association ($27 million), and Blue Cross / Blue Shield ($27 million).

In terms of industries, pharmaceuticals topped the list, spending $372 million on lobbying in 2022, followed by electronics ($220 million), insurance ($158 million), securities and investments ($140 million), and real estate ($135 million). Electric utilities, oil and gas, hospitals and nursing homes, and health services and HMOs each spent roughly $120 million on lobbying.

With billions of dollars being spent by business interests on campaigns and lobbying, it’s clear there’s a lot at stake in federal policy making and implementation. These businesses spend this amount of money because they see a return on their investment. My next post will discuss what they get for their money.

With corporate and business interests spending so much money to buy and exercise influence over government actions, it’s no wonder that we have largely unfettered capitalism in the U.S. The result is extreme capitalism that puts returns to investors and executives ahead of all other stakeholders – workers, consumers, communities, and the public interest. This creates high levels of economic insecurity and inequality in our society.

Everyday citizens have little voice to fight back against the megaphones all this money gives to businesses’ voices. Our only hope is to elect people to office who will stand up for workers, consumers, communities, and the public interest. This is why elections and campaign financing are so important. We must all be involved and informed citizens and voters if we want to stand a chance against the onslaught of corporate and business interests’ spending to influence public policy.

[1]      Giorno, T., 1/27/23, “Business interests spent $3.5 billion on federal political contributions during the 2022 cycle,” Open Secrets (https://www.opensecrets.org/news/2023/01/business-interests-spent-3-5-billion-on-federal-political-contributions-during-the-2022-cycle/)

[2]      Giorno, T., 1/27/23, see above

[3]      Massoglia, A., 1/24/23, “ ‘Dark money’ groups have poured billions into federal elections since the Supreme Court’s 2010 Citizens United decision,” Open Secrets (https://www.opensecrets.org/news/2023/01/dark-money-groups-have-poured-billions-into-federal-elections-since-the-supreme-courts-2010-citizens-united-decision/)

[4]      Massoglia, A., 1/24/23, see above

[5]      Giorno, T., 1/26/23, “Federal lobbying spending reaches $4.1 billion in 2022 – the highest since 2010,” Open Secrets (https://www.opensecrets.org/news/2023/01/federal-lobbying-spending-reaches-4-1-billion-in-2022-the-highest-since-2010/)

HOW TO REFORM CAMPAIGN FINANCING TODAY TO PROMOTE DEMOCRACY

Here are the three takeaways from this post:

  • Our current system of election financing gives wealthy special interests outsized influence.
  • Using public funds to magnify small donations to campaigns can change this.
  • New York State is implementing an innovative campaign financing system for the 2024 elections that significantly magnifies small donations and could dramatically reduce the influence of wealthy special interests.

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

Current campaign financing systems in the U.S. allow a handful of wealthy special interests to dominate election funding and, therefore, gain undue influence in policy making. The 2010 Supreme Court’s Citizens United ruling ended decades of campaign finance laws that maintained a reasonable semblance of democracy. Now, wealthy individuals and corporations, often using Political Action Committees (PACs) and dark money non-profits (501(c)(4) organizations that don’t have to disclose their donors), have become the dominant funders of campaigns.

In the 2022 election cycle, $16.7 billion was spent on national and state elections. The biggest donors (organizations and individuals donating $1,000 or more) have been consistently increasing their share of election spending since the 2010 Citizens United ruling, which (along with other court rulings) allows unlimited spending by wealthy special interests.

The most effective immediate solution, given the Supreme Court’s rulings, is using public funds to magnify small donations. New York City has had such a campaign financing system in place since 1988. It offers a six-to-one match for donations up to $175 by city residents. Therefore, an ordinary resident’s donation of $50 or $100 now has the clout of a much larger contribution – $350 or $700, respectively. As a result, more people are donating, because their small contributions are more impactful and their voices are amplified. This has also led to higher voter turnout. [1] (For more details see this previous post.)

New York State will implement a new, innovate system using public funds to magnify small campaign donations in its 2024 elections for statewide and legislative offices. In its 2022 elections, the 200 biggest individual campaign donors gave $15.9 million, outweighing the 206,000 donors of $250 or less who gave a total of $13.5 million. In addition, millions of dollars were spent by big donors through PACs and dark money organizations, further amplifying their influence.

Candidates in 2024 will have the option of participating in the new campaign financing system. Those running for statewide office who opt-in will receive $6 of public funds for every $1 of small donations (up to $250) from New York residents. Candidates for the legislature who opt-in will receive public funds magnifying small donations from residents in their districts on a sliding scale ranging from $12 for every dollar from donors of $50 or less to $8 for every dollar from donors of $150 to $250. To qualify to receive public funds, a candidate must raise a threshold number of small donations from their constituents and those in lower income districts will require fewer donations to qualify. There is a cap on how much public money a qualified candidate can receive and they must abide by limits on the size of contributions. Fundraising and spending must be publicly reported and will be subject to strict oversight and enforcement. [2]

Modeling of the effects of this new campaign finance law based on the 2022 elections for the NY legislature shows that it has the potential to flip the predominant source of campaign money upside down so more money is coming from small-donor constituents than from wealthy special interests. In New York’s 2022 elections, 11% of campaign donations to candidates for the legislature came from small donors ($250 or less) and 69% came from big donors ($1,000 or more from an individual or organization). If all candidates participate in the new campaign financing system and donations came from the exact same set of donors, 53% of campaign money would come from small donors (up from 11%) and 39% would be from big donors (down from 69%), flipping the source of the majority of campaign funds.

Moreover, a significant increase in the number of small donors is likely and would dramatically increase their impact. New York City’s public financing system produced a significant increase in campaign donors and it now has a rate of donor participation that is about twice that of the rest of the state. If, with the new financing system, the statewide donor rate matched that of NYC, small donors would provide 67% of campaign funding (up from 11%) versus 28% from big donors (down from 69%). This would be a watershed change with the financial weight of small donors being six times what it was in 2022.

For New York’s statewide races (i.e., governor, lt. governor, attorney general, and comptroller), a similar effect would be expected. In 2022, small donors provided just 6% of these candidates’ funds and big donors contributed 90%. With all candidates participating in the new system and the same contributors, small donors would provide 27% of the funds, 4 ½ times what it was. If the number of small donors doubled, their share would increase to 41%, almost seven times what it was. The governor’s race and its high dollar amounts skews this result.  If only the other three offices are considered, the small donor share of funding with a doubling of their numbers would be 73% of candidates’ funds compared to just 27% for big donors.

Election systems with significant public funding have been operating in Arizona, Connecticut, and Maine for a number of years. Roughly a dozen other states and some municipalities also have some public funding for elections.  Bills have been offered in Congress that would create a campaign financing system for congressional elections that is similar to New York City’s.

In New York City, the system of public funds magnifying small donations has changed candidates’ attitudes and approaches to the voting public and to the solicitation of donations. It has muted the importance of large contributors, motivated more citizens to run for office, and made races more competitive. Candidates spend less time fundraising and can, therefore, be more engaged with and responsive to their constituents.

Using public funds to magnify small donations has multiple benefits: [3]

  • Reduces the importance of big donors, thereby reducing the influence of wealthy special interests.
  • Amplifies the voices of average voters and their small donations, and can be used to amplify only those donations coming from constituents, i.e., residents of the area the candidate would represent.
  • Encourages more citizens to make campaign donations and to vote.
  • Incentivizes candidates to seek broad support from many voters in their jurisdiction, as opposed to focusing on support from a few wealthy backers, including out-of-district interests.
  • Enables more people, and more diverse people, to competitively run for election.
  • Supports candidates in being competitive without big donors and even when an opponent has big donors.
  • Allows candidates to spend less time fundraising and more time interacting with voters and talking about issues.

I encourage you to support the use of public funds to magnify small donations to candidates’ campaigns. It will make our elections more democratic. I also encourage you to make contributions of whatever size to candidates who are running to represent you, and to get to know them and your elected officials at the local, state, and federal levels. This is what makes democracy work!

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

[2]      Vandewalker, I., Glavin, B., & Malbin, M., 1/30/23, “Analysis shows amplification of small donors under new NY State public financing program,” The Brennan Center for Justice (https://www.brennancenter.org/our-work/research-reports/analysis-shows-amplification-small-donors-under-new-ny-state-public

[3]      Brennan Center for Justice, retrieved 2/1/23, “Public campaign financing: Why it matters,” (https://www.brennancenter.org/issues/reform-money-politics/public-campaign-financing)

REPUBLICANS, DEMOCRATS, THE DEBT, AND THE ECONOMY

Here are the three takeaways from this post:

  • The U.S. economy is strong, it’s growing and creating jobs, despite the Federal Reserves’ interest rate increases.
  • Over the last 90 years (the period for which data has been captured), the economy has been significantly stronger under Democratic Presidents than Republican ones.
  • Republicans’ current concerns over the federal government’s debt and deficit are hypocritical as they had no such concerns when Trump and other Republicans were president.

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

The U.S. economy finished off 2022 with strong 2.9% growth in the 4th quarter in Gross Domestic Product (GDP, the total of all goods and services sold). GDP growth was 2.1% for the full year. The economic growth was strong despite big interest rate increases by the Federal Reserve (the Fed) designed to slow the economy in an effort to reduce inflation. Employers added 4.5 million jobs in 2022, the second-best year on record; 6.7 million jobs were created in 2021 (available data goes back to 1940). The unemployment rate is 3.5%, a 53-year low. [1]

Inflation is down significantly. Actually, in December, prices were DOWN 0.1% from the previous month. Over the last six months, prices have risen just 1.9%. This is below the Federal Reserve’s target rate of 2%, which would suggest that the Fed should stop increasing interest rates in its fight against inflation. [2]

However, the mainstream media have focused on the fact that prices in December were 6.5% higher than a year earlier, even though this is a significant decrease from June when they were up 9.1%. This focus supports the Fed continuing to increase interest rates, which benefits the banks, investors, and financial elites, but hurts workers and everyday Americans trying to buy homes and pay debts.

Moreover, the current inflation is different than inflation historically; it’s being driven by corporate price gouging, supply chain problems, and the war in the Ukraine. Therefore, interest rate increases are not likely to be as effective in fighting this current inflation as they have been historically. Nonetheless, the Fed’s interest rate increases may well needlessly drive our economy into a recession.

Reviewing economic growth historically, there’s a stark pattern in the U.S. over the last 90 years (the period for which data have been captured): The economy has performed significantly better under Democratic presidents than Republican ones. Although a president has limited control over the overall economy, this pattern is true for all the major measures of the economy: GDP growth, job creation, incomes, productivity, and even stock prices. And the gap is significant in size. [3]

Over the last 90 years, there have been seven Democratic presidents and seven Republicans. (This does not include the current president.) In terms of annual GDP growth, the top four (FDR, Kennedy, Johnson, and Clinton) and number six (Carter) are Democrats. Three of the bottom four are Republicans (Trump [worst], G. W. Bush, and G. H. W. Bush) with Truman (D) as the third from the bottom. Overall, since 1933, the average annual GDP growth has been 4.6% under Democratic presidents, but only 2.4% under Republicans.

Looking at job growth (instead of GDP growth), the top six rates were under Democrats (the five top performers above plus Truman), while the bottom four were under Republicans (the three bottom performers above plus Eisenhower). Trump, by the way, is at the bottom and is the only president in this 90-year period with negative job growth.

Identifying the cause of this pattern is difficult, and, therefore, a bit inconclusive. However, it’s NOT spending and, in particular, it’s NOT deficit spending. In fact, Republican presidents have run up larger deficits than Democrats. (I’ll come back to this below.) Control of Congress is not the answer either.

The answer with the most supporting evidence is that Democratic presidents have been more willing to be pragmatic and follow evidence about which policies have actually strengthened the economy in the past. On the other hand, Republicans have clung to the theory that tax cuts (tilted heavily toward wealthy individuals and corporations) and deregulation will spur economic growth, despite consistent evidence to the contrary based on actual experience. Interestingly, tax increases enacted by President G. H. W. Bush in the late 1980s (to reduce the deficit created by Reagan) and by President Clinton in 1993 were both followed by strong economic growth.

In addition, it may be that Democratic presidents are more aggressive at using the government to respond to crises and that they are more focused on ensuring people have jobs. Democratic presidents may also be more aggressive in having the government invest in job-creating innovation when the private sector doesn’t, such as in medical research and clean energy.

While the causes of the better economic performance under Democratic presidents than Republican ones may not be entirely clear, the pattern is clear, strong, and long-term. (I have written about this pattern before, here.)

In terms of the federal budget deficit and the debt, over the last 40 years, Republican presidents have run up larger deficits and added more to the debt (a bit over $12 trillion) than Democrats (a bit under $7 trillion). (I have written about this pattern before, here.) The last president to balance the federal budget was Clinton (D), who actually reduced the debt over his eight years in office. Previous to that, President Johnson (D) was the most recent one who had a budget surplus.

So, when Republicans oppose raising the debt ceiling, it’s blatant hypocrisy. Under President Trump, they voted to raise the debt ceiling three times as $6.6 trillion was added to the federal debt. The tax cut they passed in 2017 raised the annual deficit by about $200 billion. Moreover, raising the debt ceiling simply allows the government to pay for the spending Republicans and Democrats have already approved in annual budgets.

Republicans’ rhetoric about the debt and deficit is a smokescreen for their efforts to cut spending that supports average Americans, like Social Security; Medicare, Medicaid, and Obama Care that provide health insurance; and the Child Tax Credit that helps low-income families with children. On the other hand, they support spending that benefits wealthy individuals and corporations, often giving them the money through tax breaks. Moreover, Republicans have for years cut the funding for the IRS, preventing it from enforcing our tax laws. As a result, wealthy individuals and corporations are dodging about $100 billion a year in taxes they owe under current tax laws.

Without the Republicans’ 2017 tax cut and with better enforcement of tax laws by the IRS, the federal government wouldn’t be hitting the debt ceiling now. So, Republicans’ opposition to raising the debt ceiling has nothing to do with fiscal responsibility or the debt. Rather, it’s all about holding our government and economy hostage to their demands for cuts in spending that supports everyday Americans. Meanwhile, they protect the wealthy (who provide lots of money for Republicans’ campaigns) from having to pay their fair share in taxes. [4]

[1]      Wiseman, P., 1/27/23, “Slow US economy grew last quarter,” The Boston Globe from the Associated Press

[2]      Kuttner, R., 1/13/23, “The misleading reporting on inflation,” The American Prospect (https://prospect.org/blogs-and-newsletters/tap/2023-01-13-misleading-reporting-on-inflation/)

[3]      Leonhardt, D., 2/2/21, “Why are Republican presidents so bad for the economy?” The New York Times

[4]      Warren, E., 1/24/23, “The Republican con on the debt ceiling,” The Boston Globe

SOUTHWEST AIRLINES: ANOTHER EXAMPLE OF EXTREME CAPITALISM

Southwest Airlines and its debacle of canceled flights around the Christmas holiday is another example of the extreme capitalism that U.S. policies have allowed to flourish. These policies of deregulation, a lack of support for workers and unions, and failure to enforce antitrust laws have allowed profits and returns to shareholders to trump all other goals and responsibilities of businesses.

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

Southwest Airlines canceled over 17,000 flights in the couple of weeks around the Christmas holiday. It canceled far more flights than any other airline; some days it was responsible for 90% of the flights canceled in the U.S. On some days it canceled two-thirds of its flights while other airlines were canceling 2% or fewer of their flights. Although the weather contributed to triggering the cancellations, other airlines coped much, much better with the weather conditions. [1]

The dramatic extent of Southwest’s cancellations was caused, not bad by weather, but by extreme capitalism that has pushed its workforce to the limit and failed to invest in needed infrastructure, while maximizing profits and returns to shareholders. Southwest’s management admitted that the cancellations were primarily due to the failure of internal systems and technology, particularly its personnel scheduling system. Its unions have been highlighting the need for an improved personnel scheduling system for years.

Workers had been complaining about their treatment even before the December meltdown – 16-hour days, mandatory overtime, and a requirement for a doctor’s letter to take a sick day – driven by very thin staffing levels, driven in turn by the push to maximize profits. Things only got worse with December’s problems. Some of Southwest’s unions are talking about going on strike, with much of the focus on working conditions.

Southwest is not a corporation that has been struggling to survive; rather it’s one that’s very profitable. It’s had profits of $5.9 billion and $5.4 billion in 2022 and 2021, respectively, while revenue has grown from $9 billion in 2020 to $15.8 billion in 2021 and $22.7 billion in 2022. It received $7 billion in pandemic relief funds from the federal government, but nonetheless laid off 7,800 workers between March 2020 and July 2021. Its CEO was paid $9 million in 2022 and it spent $2 million on lobbying in 2021 – 2022.

Furthermore, from 2017 through 2019, Southwest spent $5.6 billion of its profits on buying back its own stock and then another $451 million on buybacks in the first quarter of 2020 (as the pandemic was hitting). Using its profits for stock buybacks enriched shareholders and executives, when it could have invested them in workers or needed infrastructure and technology instead. [2] Furthermore, in December 2022, Southwest resumed paying $428 million a year in dividends to shareholders. (Dividends were suspended in the first quarter of 2020 when the pandemic hit). Clearly, Southwest could afford to invest in infrastructure improvements and to treat its employees reasonably.

Despite its horrible performance in December, in January 2023, Southwest announced the promotions of five executives, including the person in charge of network operations. While customers suffered, it seems there’s no accountability for executives. [3]

So far, the federal Department of Transportation has not imposed any penalties for Southwest’s December meltdown. Members of Congress, union representatives, and consumer advocates are all calling for an investigation of what happened, of delayed refunds to customers, and of possible deceptive business practices (such as letting customers book flights when Southwest knew if didn’t have the personnel to operate the flights, which at least three airlines are being investigated for doing).

Better government oversight of the whole airline industry is needed, including stronger rules for consumer protection, as well as better enforcement of existing regulations. Industry-wide problems include slow payments of refunds and compensation to harmed customers. The airlines owe roughly $10 billion in unpaid refunds and other compensation to customers, which have accumulated over the course of the pandemic.

The industry as a whole is so thinly staffed (in pursuit of higher profits) that problems with cancellations and delays are happening fairly regularly when travel peaks around holidays. For example, around July 4, 2022, the problems were bad enough that Attorneys General of 38 states wrote to Congress in August to complain that the federal Department of Transportation (DOT) wasn’t doing enough to respond to customer complaints and problems. Last fall, the DOT imposed fines on airlines (but not Southwest) of $7.25 million in total for delays in providing refunds and compensation to customers. [4]

The airline industry is another example of the poor treatment of workers and customers because U.S. policies allow extreme capitalism and big profits. The big profits are used, of course, to reward shareholders and executives rather than to invest in the business, reward workers, or improve service and prices for customers. I’ve previously written about extreme capitalism in general here and here, as well as about its manifestations specifically in the railroad industry (here and here), in the food industry, and in Medicare privatization.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support stronger regulation of businesses, better protection for consumers, more enforcement of antitrust laws, and enhanced support for workers and their unions. We need to temper the extreme capitalism in the U.S. because it’s hurting workers and consumers, as well as leading to high and growing levels of economic insecurity and inequality. 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]      Stancil, K., 12/28/22, “Southwest under fire for mass flight cancellations, ‘despicable’ treatment of workers,” Common Dreams (https://www.commondreams.org/news/southwest-airlines-corporate-greed)

[2]      Johnson, J., 1/8/23, “Southwest Airlines spent $5.6 billion on shareholder gifts in years ahead of mass cancellation crisis,” Common Dreams (https://www.commondreams.org/news/southwest-airlines-shareholder-gifts)

[3]      Johnson, J., 1/12/23, “‘They are just mocking Pete Buttigieg’: Southwest promotes executives after historic meltdown,” Common Dreams (https://www.commondreams.org/news/southwest-promotes-executives)

[4]      Johnson, J., 1/8/23, “Sanders calls on Buttigieg to hold Southwest CEO accountable for ‘greed and incompetence’,” Common Dreams (https://www.commondreams.org/news/sanders-southwest-greed)

STORIES CENSORED BY CORPORATE MEDIA Part 3

A central purpose of my blog posts is to share information that is under-reported by the mainstream, corporate media. This post and the previous two (here and here) share highlights of the top ten under-reported stories of 2022 from the annual State of the Free Press report from Project Censored. The media – print, TV, on-line, and social media – have undergone a dramatic corporate consolidation over the last 40 years. They are now a handful of huge, for-profit corporations, often owned and run by billionaire oligarchs. Through bias and self-censorship, this has restricted the content and quality of the information reported, skewing the terms and content of public debate and decision making. Project Censored works to hold the corporate news media and their owners accountable. (See this previous post for more detail.)

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

The under-reported stories highlighted by Project Censored’s report mean that the media are failing to provide citizens and voters important information, which threatens our democracy. This also undermines progress toward of a just, fair, and inclusive society. My previous post summarized numbers five through seven of its top ten stories for the year. Here are summaries of the last three. [1]

UNDER-REPORTED STORY #8: CIA’s plans under Pompeo and Trump to kidnap or kill Wikileaks founder, Julian Assange. Such plans were seriously considered in late 2017 according to September 2021 investigative reporting by Yahoo News based on interviews with over 30 former government officials. Pompeo and others wanted vengeance against Assange for Wikileaks online publishing of documents from the CIA’s top secret hacking division. Apparently, resistance from England (where Assange was in refuge in an embassy), from the U.S. National Security Council, and from the U.S. Department of Justice kept these plans from being undertaken. Despite some coverage in non-mainstream media of the Yahoo News reporting, very little, if any, coverage occurred in the mainstream, corporate media.

UNDER-REPORTED STORY #9: Efforts to prevent disclosure of election campaign donors. In the wake of the Supreme Court’s 2010 Citizens United decision (and others) that have reduced regulation of and limits on campaign spending, the role of money whose true donor is unknown (so-called “dark money”) in our elections has exploded. Republican legislators at the national and state levels are promoting legislation that would make it illegal to require non-profit organizations engaged in political spending to disclose their donors.

At the state-level, legislators are using model legislation developed by the American Legislative Exchange Council (ALEC) to ban such disclosure and have passed such laws in nine states. ALEC brings together corporate lobbyists and corporate-friendly legislators to draft and promote legislation favorable to corporations and right-wing interests. ALEC is part of the sprawling political influence network funded by right-wing billionaires, such as the Kochs and Bradleys, both of whom use dark money non-profits to conceal their political spending.

At the federal level, the 2022 fiscal year budget bill included a rider exempting politically-active non-profit organizations that self-identify as promoting the social welfare from having to report their donors. Another rider prevents the Securities and Exchange Commission (SEC) from requiring corporations to disclose political and lobbying spending.

There has been very little coverage in the corporate, mainstream media of these efforts to protect and expand dark money in election campaigns, let alone the role of ALEC and its collaborators in such efforts at the state level.

UNDER-REPORTED STORY #10: Lobbying against online privacy protections is, in part, funded by the mainstream media. “Surveillance advertising,” which collects a user’s data from online activities to tailor advertising to that individual, generally without the user’s knowledge, is ubiquitous and essential to profiting from online advertising. It is extremely profitable for social media apps and platforms, including Facebook, YouTube, Instagram, TikTok, etc. The mainstream media also depend on online advertising revenue, including the New York Times, CNN, MSNBC, Time, the Washington Post, Fox TV, and many others.

The Federal Trade Commission (FTC) is working on regulations for the collection and use of data on online users. However, the Interactive Advertising Bureau (IAB) and its lobbyists are opposing such regulation. The IAB is funded by and represents the interests of online media outlets (including the mainstream media) and data brokers. The personal user information collected online (including from minors) is not only used to target advertising by the app or platform being used, it is typically sold to data brokers. These data brokers create predictive models of users’ online behavior and then sell them to advertisers. These predictive models also allow manipulation of the public’s perceptions of political issues. This occurred during the 2016 presidential campaign: the British firm, Cambridge Analytica, used the personal date of Facebook users, without consent or permission, to craft and target political ads and propaganda.

The importance of revenue from online advertising is huge; it has grown from $32 billion in 2011 to $152 billion in 2020 (almost five times the previous amount). Meanwhile, hardcopy advertising revenue has declined roughly one-quarter from $125 billion in 2011 to $90 billion in 2020. The mainstream corporate media increasingly rely on extensive privacy violations to generate badly needed revenue from online advertising, while the public relies on them to report on this – obviously a huge conflict of interest. While there’s been some reporting of the FTC’s efforts to protect users’ privacy, the corporate media have been largely silent on the push by the FTC and in Congress to ban or severely regulate surveillance advertising. And they have been totally silent on the fact that the industry organization they fund, the IAB, is lobbying against privacy protections for online users as well as against limitations on surveillance advertising.

CONCLUSION: The overarching theme of these under-reported stories is the failure of the mainstream corporate media to educate the American public about the power and influence of wealthy corporations and individuals. The success of these wealthy special interests in influencing government policy and the enforcement of laws is something every voter needs to be well aware of in order to make informed decisions.

This blog can only scratch the surface of the issue of stories under-reported by the mainstream corporate media. For reporting on such stories (and many others), please see the free, reader-supported media that I recommended in this previous post.

[1]      Rosenberg, P., 1/3/23, “Project Censored, Part 2: Billionaire press domination,” The American Prospect, (https://prospect.org/power/project-censored-part-2-billionaire-press-domination/)

STORIES CENSORED BY CORPORATE MEDIA Part 2

A central purpose of my blog posts is to share information that is under-reported by the mainstream, corporate media. This post and the previous one share highlights of the top ten under-reported stories of 2022 identified by the annual State of the Free Press report from Project Censored. The media – print, TV, on-line, and social media – have undergone a dramatic corporate consolidation over the last 40 years so they are now a handful of huge, for-profit corporations, often owned and run by billionaire oligarchs. Through bias and self-censorship, this has restricted the content and quality of the information reported and, therefore, skewed the terms and content of public debate and decision making. Project Censored works to hold the corporate news media and their owners accountable. (See my previous post for more detail.)

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

By failing to provide citizens and voters important information, the under-reporting highlighted by Project Censored’s report undermines democracy, the public interest, and the promotion of a just, fair, and inclusive society. My previous post summarized the first four of its top ten issues for the year. Here are summaries of the next three. [1]

UNDER-REPORTED STORY #5: A network of right-wing “dark money” organizations is undermining democracy in multiple ways. Dark money organizations are politically active groups organized as non-profits so they don’t have to report their donors. A network of them, including the Judicial Crisis Network, The 85 Fund, and the Donors Trust, has been funding election deniers, the January 6 insurrectionists, and campaigns for and against Supreme Court nominees. They have funded support for President Trump’s Supreme Court nominees and opposition to President Biden’s nominee. The billionaire Koch brothers (although one of them has passed away) have their own network of groups that funnel money to political causes, including through the Donors Trust. These dark money groups are also closely link to the Federalist Society of right-wing lawyers and judges and its co-chair Leonard Leo.

This network of dark money groups has been set up to obscure the sources of funding for right-wing political activities. In 2020, these dark money groups provided the Federalist Society and related groups over $52 million, primarily to promote the confirmation of Supreme Court Justice Barrett. In 2020, they provided over $37 million to entities that played a role in the January 6 insurrection. They previously had spent tens of millions of dollars promoting the confirmations of Trump-nominated Justices Gorsuch and Kavanaugh. They gave tens of millions to groups promoting lies about the 2020 election. Members of the Federalist Society played key roles in the various schemes to overturn the results of the 2020 election and to prevent the confirmation of Biden as President. For example, 14 of the 18 Attorneys General who filed suit to throw out election results in key states are Federalist Society members.

Despite the size and scope of this dark money network supporting right-wing political, anti-democracy activities, the corporate media have left the story of the connections and coordination of these funders almost totally unreported. Although the media have covered specific right-wing activities, they have not provided the context of the network of funders of these activities. Therefore, the impact and threat of these dark money funders and the need to address the overarching issue of dark money remain unknown to most of the public and most voters. If nothing else, this minimizes public understanding of the level of the threat to our democracy, to our elections, and to trust in our governments. This undermines democracy by failing to educate voters about the extent of the network of funders and the coordination among the right-wing extremists’ organizations.

UNDER-REPORTED STORY #6: Corporate consolidations and the marketplace power that this creates are key drivers of “inflation.” The mainstream, corporate media have reported extensively on the current surge of inflation. However, they rarely report on the price gouging by huge, monopolistic corporations that has been a key cause of inflationary price increases. When they do report on it, it’s usually to dismiss it as a cause of inflation. Corporate consolidation leading to the marketplace power to engage in price gouging has occurred in many industries in the U.S. and globally, from railroads to pharmaceuticals to ocean shipping. The food industry, which has engaged in price gouging causing high inflation in grocery prices, is a great example. Three corporations own 93% of the carbonated soft drinks sold, three other corporations own 73% of cereals, and four or fewer firms control at least 50% of the market for 79% of groceries. The four big meat suppliers have paid over $225 million to settle suits related to price fixing and other market manipulation.

Because of price increases across the whole economy, U.S. corporations’ profits are at the highest levels in 70 years. Fifty to 60 percent of “inflation” is going to increased profits, which are being used to pay big dividends to investors and to buyback over $20 billion of corporations’ own stocks in 2021 alone. (See previous posts here, here, and he re for more information on corporate consolidation and price gouging that causes “inflation.”)

UNDER-REPORTED STORY #7: Gates Foundation gifts of well over $319 million to the media and related entities. The identified gifts (the true total is undoubtedly far higher) go directly to the media, to the coverage of specific topics, and to journalism training programs and associations. These gifts raise serious questions about journalistic independence and conflicts of interest. U.S. recipients include CNN, NBC, NPR, PBS, and The Atlantic. International recipients include the BBC, Al-Jazeera, The Guardian, The Financial Times, Le Monde, and Der Spiegel. An example of funding for coverage of a specific topic is the Gates Foundation’s $2.3 million grant to the Texas Tribune to increase public awareness and engagement in education reform. Given Gates’ longstanding advocacy for charter schools, which many educators and political leaders see as an effort to privatize public education and undermine teachers’ unions, this grant could be viewed as an effort to generate pro-charter school stories that appear to be objective news reporting.

The Gates Foundation, a tax-exempt charity that frequently trumpets the importance of transparency, is often very secretive about its finances and gifts. Not included in the $319 million figure are gifts to academic journals and research targeted at producing journal articles that often end up getting reported in the mainstream media. For example, at least $13.6 million has been spent on creating content for the prestigious medical journal, The Lancet.

Major corporate media have not covered this story, despite a 2011 Seattle Times article noting that the Gates Foundation’s gifts to media organizations were blurring the line between journalism and advocacy.

My next post will summarize the last three stories that Project Censored had in its top ten list of those censored by the corporate media in 2022.

[1]      Rosenberg, P., 1/3/23, “Project Censored, Part 2: Billionaire press domination,” The American Prospect, (https://prospect.org/power/project-censored-part-2-billionaire-press-domination/)

STORIES CENSORED BY CORPORATE MEDIA Part 1

A central purpose of my blog posts is to share information that is under-reported by the mainstream, corporate media. This post and the next one will share highlights from the State of the Free Press report from Project Censored, which annually identifies its list of the most important issues that were under-reported by the corporate media. The corporate consolidation of the media – print, TV, on-line, and social media – into a handful of huge, for-profit corporations, often owned and run by billionaire oligarchs, has restricted the content and quality of the information reported and, therefore, skewed the terms and content of public debate and decision making. Project Censored works to hold the corporate news media accountable.

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

Over the years, Project Censored’s State of the Free Press report has identified under-reported issues involving climate change, corporate corruption, campaign financing, poverty, racism, and war. In addition, the report’s diverse contributors advocate for press freedom and media literacy as necessary to hold powerful interests accountable and to promote a just, inclusive, and democratic society. The authors note that, “History shows that consolidated media, controlled by a handful of elite owners, seldom serves the public interest.”

The corporate media’s owners filter the news they report through a class-driven frame, which they may be oblivious to. They overlook or ignore conflicts of interest between their ownership, their investors’ and their advertisers’ interests and the interests of the public that they are supposedly serving with objective news coverage. The concentration of corporate wealth and power skews or distorts what they report and, therefore, what the public learns or doesn’t learn about our society, our economy, and our policy making.

The corporate media’s self-censorship of certain stories and topics does not occur through explicit, blanket bans on reporting them, but through omission or under-reporting due to bias based on the personal perspectives of owners, some editors, and some reporters who tend to be white, male, and economically well-off. Although specific incidents of, for example, corporate corruption may be reported, the overall underlying pattern, scope, and scale of stories are often not presented. This reporting is what is referred to as “episodic,” i.e., about a specific episode or example. It lacks the context that would allow the public to truly understand the scope and scale of the issue or topic. The lack of what’s referred to as “thematic” reporting means the consumer of information is not given a complete picture or understanding of what’s happening in society, and what can and perhaps should be done to address problems, such as corporate corruption.

As a result, citizens and voters in our democratic society are under-informed, in particular about the role of government policies in shaping our economy and society. Therefore, they are ill-equipped to be knowledgeable citizens and voters in a democracy and “government based on the consent of the governed is but an illusory dream.” [1]

An overarching element of many of the under-reported stories is corporate power and sometimes outright corporate corruption. A secondary theme is the exercise of corporate power in influencing government policy making and functioning.

UNDER-REPORTED STORY #1: Public subsidy of the fossil fuel industry is over $5 trillion per year worldwide. The subsidy is largely indirect and reflects externalized costs, i.e., costs of using fossil fuels that the industry doesn’t pay. These costs include the health costs of deadly air pollution (42% of the total), damages from extreme, climate-change-driven weather events (29%), and costs of traffic accidents and congestion (15%). Two-thirds of the subsidy occurs in just five countries: the United States, Russia, India, China, and Japan. No national government sets fossil fuels prices at a level that would cover the external costs of fossil fuel use. These were key findings of an International Monetary Fund study of 191 countries published in September 2021 that was ignored by the mainstream, corporate media.

UNDER-REPORTED STORY #2: U.S. employer wage theft from workers is billions of dollars annually and goes largely unpunished. In 2017, the Economic Policy Institute released a study of one form of wage theft: minimum wage violations. It estimated that workers lose $15 billion each year to this type of wage theft, which is rarely reported by the corporate media. For the sake of comparison, street crime is heavily reported by the media, even though its financial impact is less – an estimated $14 billion in 2017 according to the FBI.

Nonetheless, employers are seldom punished for minimum wage violations that steal workers’ pay. A Center for Public Integrity report in 2021 found that over 15 years only one in four employers who were repeat offenders were fined and only 14% of those were required to pay a penalty to the aggrieved worker beyond paying the back wages they owed.

Employer wage theft also includes not paying overtime, requiring workers to work hours “off-the-clock” that they’re not paid for, and withholding tips. Most wage theft is from low-come workers, including, disproportionately, workers of color as well as immigrant and guest workers.

Another form of wage theft is misclassifying workers as independent contractors instead of employees. This has occurred with port-based truck drivers for years and has become an epidemic with the growth of gig workers in recent years. A 2014 study by the National Employment Law Center estimated that California port truckers have $800 million to $1 billion in wages stolen annually through misclassification.

Both federal and state enforcement of wage and labor laws are weak and underfunded. The Wage Theft Prevention and Wage Recovery Act of 2022 is designed to address enforcement issues but is unlikely to pass in Congress.

Given its scale, wage theft is dramatically under-reported by the corporate media. When it is covered, the reporting is episodic, focusing on a specific employer and specific employees. Thematic reporting that includes the scope of the problem, the weak enforcement, and the light punishment of offenders is very rare indeed.

UNDER-REPORTED STORY #3: EPA failed to make reports on dangerous chemicals public. In January 2019, the Environmental Protection Agency (EPA) stopped publicly releasing legally required reports about chemicals presenting a substantial risk of harm to health or the environment. By November of 2021, the EPA had received at least 1,240 reports of substantial risk of harm, but only one was publicly available.

In January 2022, Public Employees for Environmental Responsibility filed a lawsuit to force the EPA to make the reports publicly available. Within a few weeks, the EPA announced it would resume the public release of the reports. There was essentially no reporting of any of this in the corporate media.

UNDER-REPORTED STORY #4: At least 128 Members of Congress have investments in the fossil fuel industry. At least 100 U.S. Representatives and 28 U.S. Senators have investments in the fossil fuel industry. Despite detailed reporting of this in non-corporate media in late 2021, this story has been virtually ignored by the mainstream corporate media. The Senators’ investments add up to roughly $12.5 million with Senator Manchin (D-WV) topping the list with up to $5.5 million in industry investments. (Most reporting is in ranges not specific dollar amounts.) In the House, Representative Taylor (R-TX) topped the list with investments of up to $12.4 million.

Notably, many of the Members of Congress with fossil fuel investments sit on committees that have jurisdiction over energy-related policies. Therefore, they have substantial conflicts of interest as elected legislators supposedly acting in the public’s interest. By the way, the fossil fuel industry spent at least $40 million on congressional campaigns in the 2020 election cycle and spent almost $120 million on lobbying in 2020.

My next post will summarize the six other stories or topics censored by the corporate media that Project Censored had in its top ten list for the year.

[1]      Rosenberg, P., 1/2/23, “Project Censored, Part 1: Billionaire press domination,” The American Prospect, p. 1, (https://prospect.org/power/project-censored-part-1-billionaire-press-domination/)

MILITARY CORPORATIONS DISTORT DEPT. OF DEFENSE SPENDING

Large corporate contractors providing military hardware and services distort Department of Defense (DoD) spending. They inflate U.S. military spending and generate waste, abuse, and sometimes outright fraud.

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

The United States spends more on its military (over $800 billion a year) than the combined total of the next nine biggest military spenders: China, India, Russia, United Kingdom, Saudi Arabia, Germany, France, Japan, and South Korea. The U.S. also spends a larger share of its overall economy on military spending than its key allies, spending roughly twice the percentage of its Gross Domestic Product on the military as do the UK, France, Italy, Canada, Germany, and Japan.

U.S. military spending is roughly half of all federal government discretionary spending (i.e., spending that is authorized each year as opposed to multi-year, mandatory spending such as Social Security and Medicare). Even after adjusting for inflation, Department of Defense spending has been higher in each of the last 20 years than in any previous year since World War II. Over these 20 years, it’s been higher each year than the spike in DoD spending during President Reagan’s military build-up in the 1980s and higher than the spending peaks during the Korean and Vietnam Wars. [1]

In the budget for fiscal year 2023 that was just passed by Congress, military spending is $858 billion and spending for all other federal government programs and functions is $787 billion. There’s also $85 billion in emergency spending; $47 billion for Ukraine and $38 billion for natural disasters that occurred in 2022. These three pieces make up the $1.73 trillion overall cost of the omnibus budget bill. The $858 billion for the military is $45 billion MORE than the Biden administration requested.

This very high level of military spending in the last 20 years is due in good part to the political activities of large corporations that provide military hardware and services. These corporations have spent about $130 million a year on lobbying for the last 25 years. In addition, they have contributed about $15 million a year to candidates and political committees for the last 15 years, with a spike in contributions to $51 million for the two-year 2020 campaign cycle. This political spending targets presidential candidates and members of Congress who sit on the armed services and appropriations committees that have jurisdiction over military spending. [2] One analysis of military spending attributes excessive Department of Defense spending to three causes: corporate lobbying, pork-barrel politics, and strategic overreach.  [3]

In addition to the direct lobbying and campaign contributions of these corporations, they also pay significant amounts to trade associations and other groups lobbying for more defense spending in general, sometimes for their corporate interests explicitly, and sometimes for positions the corporations support but want to keep at arms’ length (so they are not associated with them in their shareholders’ or the public’s eyes). These groups include the U.S. Chamber of Commerce, the Business Roundtable, the National Defense Industrial Association, the Air Force Association, the Navy League, the Submarine Industrial Base Council, and state and local groups lobbying for funding for local jobs. The military contractors also provide in excess of $100 million a year to think tanks that advocate for more military spending.

Roughly half of military spending goes to contractors and about half of that, over $100 billion per year, goes to just five huge military contractors.  These five and their 2020 contract awards in billions are: Lockheed Martin ($75B), Raytheon, ($28B), General Dynamics ($22B), Boeing ($22B), and Northrop Grumman ($20B). From 2001 to 2020, these five corporations received over $2.1 trillion in DoD contracts (adjusted for inflation). These five corporations have been the five biggest recipients of government money every year since 2016 except in 2021 when Pfizer broke in due to spending on the Covid vaccine. [4] Similar to what’s happened in so many industries in the U.S. economy, mergers and acquisitions have reduced what were 51 companies in the 1990s to just these five huge, powerful, politically active corporations.

The Department of Defense’s growing reliance on private contractors raises issues of accountability and transparency, increases risks of waste and fraud, and creates perverse, profit-driven incentives. The five huge military contractors are spending about $40 to $50 million a year on lobbying. Overall, the defense industry hires about 700 lobbyists each year to lobby the executive branch and the 435 members of Congress. The majority of these lobbyists have come through the revolving door from jobs in Congress, the DoD, or other military-related positions in the executive branch of the federal government.

Further evidence of the revolving door is one study’s finding of 645 instances in 2018 alone of the top 20 military contractors hiring former members of Congress or their staffs, ex-military officers, or former executive branch officials. The revolving door turns the other way as well and, for example, four of the past five Secretaries of Defense came from the top five military contractors. [5]

The very high level of U.S. military spending is not necessary to keep the country safe. The DoD (which has never passed an audit) and its contractors are known for significant waste, abuse, and sometimes outright fraud. For example, the F-35 jet fighter may never fly a combat mission because of its hundreds of defects and problems. Nonetheless, the Defense Department has contracted for 2,400 of the planes at a multi-year cost of $200 billion. Lockheed Martin, which builds the plane, spends about $13 million a year on lobbying and $7 million on campaign contributions. This, and its exaggerated claims about the number of jobs the F-35 program creates (which it breaks down by state), have pushed Congress to approve spending for even more planes than the DoD asked for! [6]

One straightforward but valuable step that could be taken to address the issue of corporate influence on DoD spending would be for President Biden to issue an executive order requiring companies with significant government contracts to disclose all their direct and indirect political spending. Such transparency would allow the public and our elected officials to better understand and counteract the military contractors’ self-serving lobbying and campaign activities.

I urge you to contact President Biden and to ask him to require the disclosure of all political spending by government contractors. 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.

[1]      Hartung, W. D., 9/13/21, “Profits of war: Corporate beneficiaries of the post-9/11 Pentagon spending surge,” Watson Institute, Brown University (https://watson.brown.edu/costsofwar/files/cow/imce/papers/2021/Profits%20of%20War_Hartung_Costs%20of%20War_Sept%2013%2C%202021.pdf)

[2]      Open Secrets, Retrieved from the Internet 12/28/22, “Summary of defense industry political spending,” (https://www.opensecrets.org/industries/indus.php?Ind=D)

[3]      Williams, J., & Hartung, W. D., 8/14/22, “Secret spending by the weapons industry is making us less safe,” The Hill (https://thehill.com/opinion/national-security/3588029-secret-spending-by-the-weapons-industry-is-making-us-less-safe/)

[4]      Giorno, T., & Timotija, F., 11/3/22, “Defense sector spent $101 million on lobbying during the first three quarters of 2022.,” Open Secrets (https://www.opensecrets.org/news/2022/11/defense-sector-spent-101-million-lobbying-during-first-three-quarters-of-2022/)

[5]      Hartung, W. D., 9/13/21, see above

[6]      Williams, J., & Hartung, W. D., 8/14/22, see above

CORPORATE POWER AND A BIT OF ACCOUNTABILITY

Large corporations wield enormous power in our economy with little accountability. There’s a little good news on the accountability front and more evidence, both in general and in specific examples, of their power in creating “inflation.”

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

First, the good news. The Consumer Financial Protection Bureau (CFPB) is proposing a registry of finance companies whose violations of consumer protection laws are the subjects of criminal or other legal action. The registry would allow consumers, both individuals and small businesses, to check on the performance of finance companies before engaging in business with them, such as obtaining mortgages or other loans. It would help the CFPB track and oversee corporations that repeatedly break consumer protection laws. The registry would also help CFPB more effectively share information with other regulators and law enforcement agencies. [1]

Then, there’s the bad news. It’s become crystal clear that consumers are suffering from substantial increases in the cost of living because big corporations are increasing prices to increase their profits. Although costs for corporations have increased, they have increased their prices to more than cover their costs. As a result, their profits have soared to their highest levels in 70 years. In 2020 and 2021, increased profits were responsible for over 53% of the increase in prices. [2] Workers’ wages have increased somewhat, but not enough to keep up with the increases in the costs of food, baby formula, cars, gasoline, housing, drugs (including insulin), and other essential needs. [3]

Big corporations have the power to increase prices more than their costs have increased because 40 years of deregulation, consolidation, and lax antitrust enforcement have resulted in mega-corporations with monopolistic economic power. This hyper-capitalism creates great economic inequality and threatens our democracy. (See previous posts here and here about the threat to democracy; here, here, and here about how this has shifted our economy and political system toward oligarchy; and here about the effects of deregulation and consolidation.)

Here’s the really bad news. As corporations’ costs are starting to decline and supply chain delays are easing, they have no intentions of reducing prices – they just plan to increase their profits even more. The Groundwork Collaborative has documented hundreds of examples of corporate CEOs telling investors that they have used Covid-related reasons to jack up prices and profits and, furthermore, that they have no intentions of reducing prices as costs come down. This means they will further increase profits beyond their already record levels! Corporate executives from corporations ranging from the Kroger supermarket super chain, to toy-maker Mattel, to food-makers Hostess, Hormel, J.M. Smucker, and Kraft Heinz, to Proctor and Gamble, to Autozone, to paint and chemical giant company PPG have all boasted to investors about their increased profitability and their plans to increase profits even more – while consumers and workers struggle to survive high “inflation” due to corporations’ price gouging.

Because corporate power and profits are the main drivers of “inflation” (exacerbated and facilitated by pandemic-related supply chain problems and the war in Ukraine), Federal Reserve interest rate increases aren’t likely to be very effective in reducing inflation. They will, however, hurt workers by increasing unemployment, hurt home buyers by increasing mortgage rates, and hurt small businesses and home builders by increasing the interest costs for their loans.

Three strategies that would be more effective in addressing the current brand of “inflation” than increasing interest rates are:

  • A windfall profits tax,
  • Closing loopholes in antitrust laws to prevent corporations from colluding to increase prices (i.e., engaging in price fixing), and
  • Better enforcement of antitrust laws to reduce the monopolistic power of mega-corporations over for the longer-term.

There are bills in Congress that would institute a windfall profits tax. Senator Bernie Sanders (I-VT) has introduced legislation that would put such a tax on a broad range of companies, while other bills have focused on the oil and gas industry. [4] Eighty percent (80%) of U.S. voters support a windfall profits tax. (See this previous post for more details.) [5]

A bill to prohibit price gouging during market disruptions such as the current pandemic, the Price Gouging Prevention Act of 2022, has been introduced by Senators Elizabeth Warren (D-MA) and Tammy Baldwin (D-WI), along with Representative Jan Schakowsky (D-IL). It would empower the Federal Trade Commission (FTC) and state attorneys general to enforce a ban on excessive price increases. It would require public companies to report and explain price increases in their quarterly filings with the Securities and Exchange Commission. (See this previous post for more details.) [6]

The Competitive Prices Act, which would close antitrust loopholes that have allowed blatant price fixing and collusion to go unpunished, has been introduced by Representative Katie Porter (D-CA). For example, the three dominant makers of insulin have for years increased their prices in lock step. [7] Porter’s bill would make this illegal. [8]

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support the CFPB’s proposed corporate criminal registry and to take steps, including a windfall profits tax, to reduce corporate price gouging and price fixing. 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]      Conley, J., 12/13/22, “CFPB applauded for proposing ‘public rap sheet’ for corporate criminals,” Common Dreams (https://www.commondreams.org/news/2022/12/13/cfpb-applauded-proposing-public-rap-sheet-corporate-criminals)

[2]      Bivens, J., 4/21/22, “Corporate profits have contributed disproportionately to inflation. How should policy makers respond?” Economic Policy Institute (https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/)

[3]      Becker, C., 12/19/22, “Understanding corporate power and inflation,” Common Dreams (https://www.commondreams.org/views/2022/12/16/understanding-corporate-power-and-inflation)

[4]      Corbett, J., 7/29/22, “Price gouging at the pump results in 235% profit jump for big oil: Analysis,” Common Dreams (https://www.commondreams.org/news/2022/07/29/price-gouging-pump-results-235-profit-jump-big-oil-analysis)

[5]      Johnson, J., 6/15/22, “With US consumers ‘getting fleeced,’ Democrats demand windfall profits tax on big oil,” Common Dreams (https://www.commondreams.org/news/2022/06/15/us-consumers-getting-fleeced-democrats-demand-windfall-profits-tax-big-oil)j

[6]      Johnson, J., 5/12/22, “New Warren bill would empower feds to crack down on corporate price gouging,” Common Dreams (https://www.commondreams.org/news/2022/05/12/new-warren-bill-would-empower-feds-crack-down-corporate-price-gouging)

[7]      Pflanzer, L. R., 9/16/16, “A 93-year-old drug that can cost more than a mortgage payment tells us everything that’s wrong with America’s healthcare,” Business Insider https://www.businessinsider.com/insulin-prices-increase-2016-9

[8]      Owens, L, 10/30/22, “Who’s really to blame for inflation,” The Boston Globe

THE RAILROAD SETTLEMENT SHORTCHANGES WORKERS

As you’ve probably heard, the threat of a railroad workers’ strike was ended by a new contract imposed by the federal government. The Biden administration brokered a tentative agreement last September after almost three years of unsuccessful bargaining by the workers’ unions and the railroad corporations. However, some of the workers’ unions voted against the proposed settlement, largely because they didn’t feel it adequately addressed some quality-of-life issues; in particular, it lacked paid sick days.

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

Four of the 12 railroad workers’ unions, but those representing a majority of the workers, voted against the proposed contract, which included only one paid sick day. Congress passed a bill that President Biden signed which has imposed the proposed contract on railroad workers because a rail strike would have had serious negative effects on the economy, which is never a good thing but especially not just before the December holidays.

The new contract that was imposed, which covers 115,000 workers, would:

  • Allow workers to take days off for medical care without being penalized, but only one of those days would be paid. (The unions had asked for 15 days of paid sick leave.)
  • Increase pay by 24% over five years, going back to 2020 when the last contract expired, bringing the average workers’ pay to $110,000 in 2024.
  • Provide more worker-friendly work schedules.
  • Keep workers’ health care premiums at current levels.

In addition to the bill imposing the contract, a separate bill was passed by the House but rejected by the Senate (the vote was 52 in favor, including six Republicans, but the filibuster requires 60 votes to pass) that would add seven days of paid sick time to the contract. This paid sick time would cost the railroad corporations an estimated $321 million a year. Given the over $20 billion a year in profits the six big railroad corporations are making, this is less than 2% of their record profits.

President Biden could require the railroads to provide seven paid sick days to the railroad workers through an executive order. An executive order from President Obama required companies with federal contracts to provide seven paid sick days. The railroads, which all have large, long-standing federal contracts, were exempted. President Biden could remove this exemption. Over 70 Democrats in Congress and union supporters are urging him to do so. [1] [2]

I urge you to contact President Biden to ask him to require the railroad corporations to provide their workers seven paid sick days per year. 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.

The background for all of this is that the railroad industry is a textbook example of the extreme capitalism our current laws allow. The railroad corporations are generating very large profits for shareholders (including executives) while workers are getting squeezed very hard. Fortunately, the railroad workers are in a union so they have some power to fight back.

Extreme capitalism has allowed the railroad corporations, through consolidation, deregulation, and aggressive personnel policies, to gain so much power that they have been providing huge returns to shareholders while making life miserable for their employees. Since 1980, through mergers and acquisitions (that our government has failed to stop under antitrust laws), the 40 major railroad corporations have become six (Burlington Northern and Santa Fe [BNSF], Union Pacific, CSX, Canadian National, Norfolk Southern, and Canadian Pacific). Four of them have roughly 85% of the freight business and they operate with monopolistic power in much of their service territories. [3] (See this previous post for more background.)

The profit margin in the industry (the percentage of revenue that is profit) has soared from 15% in 2001 to 40% in 2021. A big part of this increased profitability is that the portion of revenue dedicated to paying employees has dropped from 34% to 20%. [4] In 2019, the freight railroad industry was the most profitable industry in the country with a 51% profit margin. [5]

These record profits are, for the most part, NOT being reinvested in the businesses but are being used to reward shareholders (including executives) through the buying of the corporations’ own stock and paying dividends. For the industry as a whole, these stock buybacks and dividends have totaled over $200 billion since 2010, averaging over $15 billion per year, and they are continuing. [6]

The railroad corporations have cut staff by one-third since 2016 and over 70% since 1980 as total employment in the railroad industry has dropped from 500,000 to under 135,000. This reduced workforce is generating more profits than ever for their employers but hasn’t gotten a wage increase in almost three years as their contract negotiations have dragged on and on.

Many have called the working conditions at the railroads inhumane. Workers’ schedules have been unpredictable as they have been on-call 24/7. The railroads are so thinly staffed that they can’t allow employees any flexibility and need to have them on-call at all times to keep the trains running. Workers had been penalized if they took a day off to go to the doctor or deal with a medical need. The safety of the workers and the communities the trains run through is being compromised.

It’s ironic that railroad executives, who regularly complain about and oppose government regulation, turned to the federal government to impose a contract on their workers. [7]

[1]      Meyerson, H., 12/2/22, “The rail impasse: Your questions answered,” The American Prospect (https://prospect.org/labor/rail-impasse-your-questions-answered/)

[2]      Conley, J., 12/9/22, “70+ lawmakers tell Biden ‘You can and you must’ provide rail workers paid sick leave,” Common Dreams (https://www.commondreams.org/news/2022/12/09/70-lawmakers-tell-biden-you-can-and-you-must-provide-rail-workers-paid-sick-leave)

[3]      Buck, M. J., 2/4/22, “How America’s supply chains got railroaded,” The American Prospect (https://prospect.org/economy/how-americas-supply-chains-got-railroaded/)

[4]      Gardner, E., 9/13/22, “Rail strike by the numbers: Railroad profits are soaring at workers’ expense,” More Perfect Union (https://perfectunion.us/rail-profits-soaring-at-workers-expense/)

[5]      Buck, M. J., 2/4/22, see above

[6]      Stancil, K., 9/19/22, “While fighting workers, railroads made over $10 billion in stock buybacks,” Common Dreams (https://www.commondreams.org/news/2022/09/19/while-fighting-workers-railroads-made-over-10-billion-stock-buybacks)

[7]      Johnson, J., 11/25/22, “One day of Warren Buffett wealth gains could fund 15 days of paid sick leave for rail workers,” Common Dreams (https://www.commondreams.org/news/2022/11/25/one-day-warren-buffett-wealth-gains-could-fund-15-days-paid-sick-leave-rail-workers)

MEMBERS OF CONGRESS INTERFERED WITH FTX INVESTIGATION

Last March, eight members of Congress, dubbed the “Blockchain Eight,” meddled in an investigation of cryptocurrency companies that included the FTX exchange that just went bankrupt. They wrote a letter to the Securities and Exchange Commission (SEC) trying to bully it into easing off on its investigation of cryptocurrency companies. Representative Emmer (R-MN) was the lead author of the letter that was signed by three other Republicans [Reps. Budd (NC), Davidson (OH), and Donalds (FL)] and four Democrats [Reps. Auchincloss (MA), Gottheimer (NJ), Soto (FL), and Torres (NY)]. [1]

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

The Securities and Exchange Commission (SEC) is an independent regulatory and law enforcement agency whose investigations are not supposed to be influenced by politicians. However, the letter the Blockchain Eight sent questioned the SEC’s authority for making information requests to cryptocurrency companies and stated (inaccurately) that the requests might violate federal law. It said that the crypto companies found the requests “overburdensome” and that they were “stifling innovation.” The crypto industry’s complexity and opacity, along with its history of evading sanctions, concealing transactions, and defrauding investors, all make an SEC investigation into it more than appropriate. [2]

The SEC’s investigation of FTX was relevant to its possible mishandling of customer funds, which is what led to its bankruptcy. FTX was improperly transferring customers’ funds to an associated trading company, Alameda Research, which used them to engage in speculative transactions. Ironically, at a congressional hearing back in December 2021, Rep. Emmer told FTX’s CEO Bankman-Fried, “Sounds like you’re doing a lot to make sure there is no fraud or other manipulation.”

U.S. Representative Emmer (R-MN) was clear in a Tweet he sent in March 2022 that the Blockchain Eight’s letter was in response to complaints from crypto companies and that the intent was to stop the SEC’s investigation. He wrote that crypto companies “must not be weighed down by extra-jurisdictional and burdensome reporting requirements. We will ensure our regulators do not kill American innovation.” Simultaneously, Rep. Torres had an op-ed published that called for New York State to loosen its regulation of the crypto industry. However, many experts believe the crypto industry is seriously under-regulated.

It’s unclear whether or not the Blockchain Eight were acting based on a direct request from FTX in their effort to slow or stop the SEC’s investigation. In any case, it’s inappropriate for members of Congress to interfere in an on-going investigation. There are both congressional ethics rules and federal laws that prohibit political interference in investigations.

Five of the eight signers of the letter had received campaign contributions from FTX and/or its employees: Emmer and Gottheimer each got $11,600, Auchincloss got $6,800, and Budd and Torres each received $2,900. Rep. Budd had also received $500,000 from a Super PAC created by FTX co-CEO Ryan Salame. In the 2022 election cycle, with Rep. Emmer as chair of the House Republicans’ campaign committee, its PAC received $5.5 million from FTX-related sources. In 2021, the overall crypto industry contributed $7.3 million to political campaigns and committees.

The House Financial Services Committee has announced hearings into the FTX bankruptcy. Perhaps not surprisingly, six of the Blockchain Eight are on the committee: Emmer, Gottheimer, Auchincloss, Budd, Davidson, and Torres.

The FTX bankruptcy hasn’t stopped Rep. Emmer from supporting the crypto companies. At a recent event of the Blockchain Association, the crypto industry’s trade group, he promoted cryptocurrency and opposed regulation of the industry. Furthermore, Emmer and the other Republican letter signers have tried to blame the SEC and its Chair, Gary Gensler, for the FTX bankruptcy and have peddled conspiracy theories about ties between Gensler, the SEC, and FTX.

Among other things, the SEC has been investigating whether FTX and other crypto companies are creating securities that should be registered with the SEC. The Blockchain Eight’s letter criticized the SEC for “employing … investigative functions to gather information from unregulated cryptocurrency and blockchain industry” companies. However, this is exactly what the SEC should be doing – investigating whether securities that should be registered and regulated are being created by crypto companies.

The revolving door of personnel moving between related government and private sector jobs is very evident in the crypto industry and with its lobbyists. The Blockchain Association’s director of government affairs is the former financial services policy expert for Rep. Davidson. Many of the other lobbyists for the crypto industry are former regulators or other government officials, including three former SEC Chairs, three former Chairs of the Commodities Futures Trading Commission, a former Treasury Secretary, a former White House chief of staff, and three former Senators.

The crypto industry is actively using all three government influencing strategies – campaign spending, lobbying, and the revolving door – in its efforts to avoid regulation. Meanwhile, many customers are losing money in the basically unregulated cryptocurrency financial markets.

The Blockchain Eight’s letter is eerily reminiscent of the Keating Five scandal in 1987 that was part of the Saving and Loan debacle. Back then, five Senators pressured bank regulators into shutting down an investigation into Charles Keating’s Lincoln Savings and Loan bank. Keating had donated $1.3 million to the five Senators’ campaigns over a number of years. Shortly after the shutdown of the investigation, Lincoln went bankrupt, costing the government and taxpayers $3.4 billion. This was a piece of the nationwide Savings and Loan debacle and bailout that cost the federal government and taxpayers $125 billion. Keating was convicted of fraud and served time in jail. The Senate Ethics Committee found that three of the five Senators had improperly interfered with a federal investigation.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to support strong regulation of the crypto industry. Enough people have lost enough money that strong regulation is clearly needed. Also encourage them to ensure that a thorough investigation of the FTX bankruptcy occurs and that appropriate punishments and sanctions are meted out to companies and individuals that were involved.

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]      Sammon, A., 3/21/22, “The eight Congressmen subverting the SEC’s crypto investigation,” The American Prospect (https://prospect.org/power/eight-congressmen-subverting-secs-crypto-investigation/)

[2]      Dayen, D., 11/23/22, “Congressmembers tried to stop the SEC’s inquiry into FTX,” The American Prospect (https://prospect.org/power/congressmembers-tried-to-stop-secs-inquiry-into-ftx/)