TO COMMENT CLICK HERE
sep 2024
CAPITALISM REPRESENTED ITSELF AS FREEING SERFS, SLAVES, ETC. FREEDOM BECAME CAPITALISM'S SELF-CELEBRATION WHICH IT LARGELY REMAINS. YET THE REALITY OF CAPITALISM IS DIFFERENT FROM ITS CELEBRATORY SELF-IMAGE. THE MASS OF EMPLOYEES ARE NOT FREE INSIDE CAPITALIST ENTERPRISES TO PARTICIPATE IN THE DECISIONS THAT AFFECT THEIR LIVES (E.G., WHAT THE ENTERPRISE WILL PRODUCE, WHAT TECHNOLOGY IT WILL USE, WHERE PRODUCTION WILL OCCUR, AND WHAT WILL BE DONE WITH THE PROFIT WORKERS' EFFORTS HELP TO PRODUCE). IN THEIR EXCLUSION FROM SUCH DECISIONS, MODERN CAPITALISM'S EMPLOYEES RESEMBLE SLAVES AND SERFS. YES, PARLIAMENTS, UNIVERSAL SUFFRAGE, ETC. HAVE ACCOMPANIED CAPITALISM - AN ADVANCE OVER SERFDOM AND SLAVERY. YET EVEN THAT ADVANCE HAS BEEN LARGELY UNDERMINED BY THE INFLUENCE OF THE HIGHLY UNEQUALLY DISTRIBUTED WEALTH AND INCOME THAT CAPITALISM HAS EVERYWHERE GENERATED.
RICHARD D. WOLFF
---------------------------------------------------------
The rapacity of contemporary capitalism is enabled by the weakness,
dishonesty, and cowardice of the flaccid and collaborationist left.
Luciana Bohne
--------------------------------------------------------
Socialism for the Rich, Capitalism for the Poor
Noam Chomsky: Consider this: Every time there is a crisis, the taxpayer is called on to bail out the banks and the major financial institutions. If you had a real capitalist economy in place, that would not be happening. Capitalists who made risky investments and failed would be wiped out. But the rich and powerful do not want a capitalist system. They want to be able to run the nanny state so when they are in trouble the taxpayer will bail them out. The conventional phrase is "too big to fail."
The IMF did an interesting study a few years ago on profits of the big US banks. It attributed most of them to the many advantages that come from the implicit government insurance policy -- not just the featured bailouts, but access to cheap credit and much else -- including things the IMF researchers didn't consider, like the incentive to undertake risky transactions, hence highly profitable in the short term, and if anything goes wrong, there's always the taxpayer. Bloomberg Businessweek estimated the implicit taxpayer subsidy at over $80 billion per year.
-----------------------------------------------
“As soon as you're born they make you feel small
By giving you no time instead of it all
'Til the pain is so big you feel nothing at all…
Keep you doped with religion, and sex, and T.V.
And you think you're so clever and classless and free
But you're still fucking peasants as far as I can see…”
— John Lennon, “Working Class Hero
The reason we have poverty is that we have no imagination. There are a great many people accumulating what they think is vast wealth, but it's only money... they don't know how to enjoy it, because they have no imagination.
alan watts
articles
*Inside the “very, very guarded” agreements that dictate what’s sold in grocery stores — and the cost(ARTICLE BELOW)
*During antitrust trial, exec admits Kroger jacked up milk and egg prices above inflation(ARTICLE BELOW)
*REPORT: CEOS ARE DRIVING “GREEDFLATION,” RAISING PRICES TO PAY THEMSELVES MORE
(ARTICLE BELOW)
*CORPORATE PROFITS SOARED TO HIGHEST LEVELS IN 7 DECADES LAST YEAR
(ARTICLE BELOW)
*BABY FORMULA INDUSTRY SUCCESSFULLY LOBBIED TO WEAKEN BACTERIA SAFETY TESTING STANDARDS(ARTICLE BELOW)
*FIRST QUARTER OF 2022 SEES RECORD $1 BILLION SPENT ON LOBBYING
(ARTICLE BELOW)
*CORPORATE PROFITEERS BLAMED PRICE INCREASES ON LABOR COSTS — THEN GAVE BIG RAISES TO CEOS(ARTICLE BELOW)
*AVERAGE US TAXPAYER GAVE $900 TO MILITARY CONTRACTORS LAST YEAR
(ARTICLE BELOW)
*CORPORATIONS ARE SUPPRESSING WAGES. THERE’S AN EASY FIX FOR THAT.
(ARTICLE BELOW)
*AMAZON DODGED $5.2 BILLION IN TAXES LAST YEAR, REPORT FINDS
(ARTICLE BELOW)
*US’S RICHEST FAMILIES SET TO DODGE $8.4 TRILLION IN TAXES OVER NEXT DECADES
(ARTICLE BELOW)
*WYOMING REVEALED AS ONE OF WORLD'S TOP TAX HAVENS WITH 'COWBOY COCKTAIL' SCHEME TO HIDE MONEY(ARTICLE BELOW)
*MERCK SELLS FEDERALLY FINANCED COVID PILL TO U.S. FOR 40 TIMES WHAT IT COSTS TO MAKE
(ARTICLE BELOW)
*TRASHING THE PLANET AND HIDING THE MONEY ISN’T A PERVERSION OF CAPITALISM. IT IS CAPITALISM(ARTICLE BELOW)
*MORE THAN HALF OF AMERICA’S 100 RICHEST PEOPLE EXPLOIT SPECIAL TRUSTS TO AVOID ESTATE TAXES(ARTICLE BELOW)
*PANDEMIC PROFITS: TOP US HEALTH INSURERS MAKE BILLIONS IN SECOND QUARTER
(ARTICLE BELOW)
*REPORT: REAL ESTATE GROUPS PAID GOP LAWMAKERS HUGE SUMS TO REINSTATE EVICTIONS
(ARTICLE BELOW)
*DCREPORT UNCOVERS A HUGE SECRET TAX FAVOR FOR SUPER WEALTHY
(ARTICLE BELOW)
*MICROSOFT IRISH SUBSIDIARY PAID ZERO CORPORATE TAX ON £220BN PROFIT LAST YEAR
(ARTICLE BELOW)
*The Business Class Has Been Fearmongering About Worker Shortages for Centuries
(ARTICLE BELOW)
*HERE'S HOW MUCH BIG COMPANIES LIKE MCDONALD'S AND WALMART WOULD PAY UNDER SANDERS' AND WARREN'S TAX ON CEO PAY(ARTICLE BELOW)
*OWNERS OF HOSPITAL CONGLOMERATE MADE BILLIONS AS HEALTH CARE WORKERS LACKED PPE
(ARTICLE BELOW)
*THE DAMNING TRUTH ABOUT CEO PAY HAS BEEN REVEALED BY THIS RESEARCH
(ARTICLE BELOW)
*RICH AMERICANS WHO FEAR HIGHER TAXES HURRY TO MOVE MONEY NOW
(ARTICLE BELOW)
*NEW REPORT SHOWS TOP BILLIONAIRES’ WEALTH SKYROCKETING DURING PANDEMIC
(ARTICLE BELOW)
*THE TRUMP ADMINISTRATION ALLOWED AVIATION COMPANIES TO TAKE BAILOUT FUNDS AND LAY OFF WORKERS, SAYS HOUSE REPORT(ARTICLE BELOW)
*Capitalism Made Women of Color More Vulnerable to the COVID Recession
(ARTICLE BELOW)
*Economist Richard Wolff: Capitalism is the reason COVID-19 is ravaging America
(ARTICLE BELOW)
*How the U.S. Chamber of Commerce wrecked the economy — and made the pandemic worse(ARTICLE BELOW)
*As 45 million lost their jobs over the last three months, US billionaires grew $584 billion richer(ARTICLE BELOW)
*FORGET “LOOTING.” CAPITALISM IS THE REAL ROBBERY
(ARTICLE BELOW)
*THE NUMBERS ARE IN—THE TRUMP-RADICAL REPUBLICAN RESPONSE HAS BEEN GREAT FOR CORPORATIONS AND THE ONE-PERCENTERS, NOT SO GOOD FOR YOU(ARTICLE BELOW)
*The Bailout Is Working — For the Rich
(ARTICLE BELOW)
*TOP US COMPANIES LAY OFF THOUSANDS OF WORKERS WHILE REWARDING SHAREHOLDERS AMID CORONAVIRUS PANDEMIC(ARTICLE BELOW)
*Robert Reich breaks down the sham of corporate social responsibility
(ARTICLE BELOW)
*BIG COMPANIES THAT GAVE EXECUTIVES HUGE BONUSES, PAID MASSIVE FINES, CASH IN ON SMALL BUSINESS AID(ARTICLE BELOW)
*Bezos, Musk among billionaires gaining net worth in pandemic: report
(ARTICLE BELOW)
*CASH-STRAPPED HOSPITALS LAY OFF THOUSANDS OF HEALTH WORKERS DESPITE COVID-19 STAFF SHORTAGES(ARTICLE BELOW)
*HOW THE FEDERAL RESERVE IS BAILING OUT BIG CORPORATIONS AND WALL STREET BANKS
(ARTICLE BELOW)
*‘WHO CARES? LET ’EM GET WIPED OUT’: STUNNING CNBC ANCHOR, VENTURE CAPITALIST SAYS LET HEDGE FUNDS FAIL AND SAVE MAIN STREET(ARTICLE BELOW)
*Medical Staffing Companies Owned by Rich Investors Cut Doctor Pay and Now Want Bailout Money(ARTICLE BELOW)
*How Private-Equity Firms Squeeze Hospital Patients for Profits
(EXCERPT BELOW)
*U.S. companies criticized for cutting jobs rather than investor payouts
(ARTICLE BELOW)
*ONE REASON CAREGIVERS ARE WEARING TRASH BAGS: A U.S. FIRM HAD TO RECALL 9 MILLION SURGICAL GOWNS(ARTICLE BELOW)
*A PRIVATE EQUITY BARON SITTING ON AN EMPTY PHILADELPHIA HOSPITAL IS IN LINE FOR HUGE TAX GIFT IN THE COVID-19 STIMULUS(ARTICLE BELOW)
*AT LAST: TIME TO KILL "USELESS EATERS"
(EXCERPT BELOW)
*The Virus of Capitalism Has Infected the COVID-19 Fight
(ARTICLE BELOW)
*Late-stage capitalism primed us for this pandemic
(ARTICLE BELOW)
*FILINGS SHOW TOP HEALTHCARE CEOS RAKED IN COMBINED $300 MILLION IN 2019
(ARTICLE BELOW)
*AT&T To Lay Off More Workers And Cut Costs By Tens Of Billions—Those Tax Breaks Are Working!(ARTICLE BELOW)
*The real global threat to 21st century freedom is authoritarian capitalism — not democratic socialism(ARTICLE BELOW)
*OPINION: THE DISASTER OF UTOPIAN ENGINEERING
(ARTICLE BELOW)
*The monopolization of milk
(ARTICLE BELOW)
*The plutocrats’ most effective secret weapon is the U.S. tax code
(ARTICLE BELOW)
*U.S. company directors compensated more than ever, but now risk backlash
(ARTICLE BELOW)
*Neither Democrats Nor Republicans Will Admit the Problem Is Capitalism Itself
(ARTICLE BELOW)
*Here’s why Capitalism vs Socialism is a false choice
(ARTICLE BELOW)
*Here’s the big problem with American capitalism
(ARTICLE BELOW)
*Capitalism Is Not the “Market System”
(ARTICLE BELOW)
*The Normalization of Corruption
(ARTICLE BELOW)
*'Corporations Are People' Is Built on an Incredible 19th-Century Lie
(ARTICLE BELOW)
*5 BIG MYTHS SOLD BY THE DEFENDERS OF CAPITALISM(excerpt below)
*CAPITALISM: THE NIGHTMARE(excerpt below)
*funnies and charts(below)
*THIS INFOGRAPHIC SHOWS HOW ONLY 10 COMPANIES CONTROL ALL THE WORLD’S BRANDS(ARTICLE BELOW)
The reality of capitalism
George Monbiot sums up well some of the more toxic elements of neoliberalism, which remained largely hidden since it was in the mainstream press less as an ideology than as an economic policy. He writes:
Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning. Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimized, public services should be privatized. The organization of labor and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve.
fundamentals of american capitalism
*american capitalists hate socialism until their incompetence and greed exposes their failure.
*a system created by slavery utilized on cotton plantations and have now become corporations.
*keep republicans in power to aide in ripping off american consumers
*always promote patriotism and american exceptionalism so the stupid public will think you are on their side
*nothing is more important than maximizing profits
*Never pass on opportunities to defraud CUSTOMERS
*when you get caught cheating on your taxes, make sure you have bribed enough government officials to minimize damage.
*maintain lobbyists, front groups, think tanks, etc. to lie and cover-up your corporate corruption.
*develop schemes to steal employee wages
*Maximize tax avoidance strategies
*hire part-time workers and deny them benefits
*always look to outsource labor to corrupt 3rd world countries to reduce labor costs
*sell mediocre products that never perform as advertised
*once your company is caught in scandal, mount an ad campaign portraying yourself as a wholesome organiZation
*never acknowledge guilt once your company is fined or sued
*hire lobbyist to bribe local politicians
*always scheme to avoid as many government regulations as possible
*make sure to defeat union organizing
*make sure that employees bare most of the cost of benefit packages
*underfund employees' pension plans
*make sure you can steal pension fund money through bankruptcy
*re-market and re-package old products as new and raise the price
Inside the “very, very guarded” agreements that dictate what’s sold in grocery stores — and the cost
With food prices up 25% over the last four years, it may be worth asking – what determines the cost of food?
By Cara Michelle Smith - SALON
Published September 23, 2024 1:17PM (EDT)
With food prices up 25% over the last four years, it may be worth asking – what determines the cost of food?
It’s a complicated question, involving supply costs, crop yields, public policy, the availability of raw materials, supply chain issues and animal and plant disease, to name a few factors.
But in our grocery stores, supermarkets and food manufacturers often determine the final label price consumers pay. Many consumers are unaware of the clandestine cooperative marketing agreements between supermarkets and food conglomerates that influence how food is stocked, how aisles are arranged, what products are highly promoted and, ultimately, what foods consumers get to choose from, and how much we pay.
“Manufacturers are able to really control and dictate the retail environment, to the detriment of consumers and consumers’ health,” Sara John, deputy director at the Center for Science in the Public Interest, told Salon.
Those systems are particularly harmful to small food brands; a best-case success scenario for those brands often ends in acquisition. And those structures stand to potentially blossom under a proposed $24.6 billion megamerger between Kroger and Albertsons, America’s two largest supermarket brands, that the Federal Trade Commission is suing to block over concerns the deal would create a monopoly.
“Absent antitrust enforcement and fair competition enforcement, it's really hard to imagine how these companies at the top ever get knocked off, or how three companies controlling 80% of the mayonnaise ever actually changes,” Claire Kelloway, program manager for fair food and farming systems at the Open Markets Institute, told Salon.
Lawyers from both Kroger and the FTC gave closing arguments in the FTC’s antitrust case last week; the judge overseeing the case is expected to issue their ruling as early as October. Kroger did not return a request for comment.
‘A really big source of profits' for grocery stores
Supermarkets’ cooperative marketing agreements are often “very, very tightly guarded documents,” John said. Outside of a handful of public data points, little is known about them.
One example of such an agreement is slotting fees, which have existed for decades but are shrouded in secrecy – a reality put on full display in 1999, when two small-business owners testified in a Senate hearing on slotting fees “in black hoods,” their voices electronically disguised for fear of retaliation.
“Because it's so guarded, I do think it is such an important part of the retail business model,” John said of the agreements.
Grocery stores charge slotting fees to brands for favorable shelf space, as well as for things like end-of-aisle placements and special displays. Often, these fees can amount to millions of dollars in extra payments and “effectively elbows out smaller brands,” according to a 2021 report from Food & Water Watch. In 2016, the owner of a small condiments brand said he was charged between $5,000 and $20,000 per item in slotting fees, according to a CSPI investigation into the practice.
Bemoaning the power imbalance between conglomerates and their competitors, the owner of a small canned tomatoes brand said the biggest canned vegetable companies can pay those fees “just to keep us off the shelf,” per a Federal Trade Commission report on grocery industry marketing practices, published in 2001. (Despite its long shelf life, the report remains one of the more comprehensive sources on the subject.)
The FTC report found that, at the time, slotting fees typically ranged between $75 and $300 per item, per store, and could be “likely to increase the wholesale price of a product, because the manufacturer must raise its price to cover the expense.” Bedrock Analytics, a consumer goods data company, offered an updated estimate in 2019, describing slotting fees in a report as “typically ranging from $250 to $1,000 per item per store.”
“There are all these different ways that brands are paying grocers for promotions, for slotting, for a display in the middle of the store,” Kelloway said. “That has become a really big source of profits and revenue for grocers dealing more in promotions and deals and coupons.”
Slotting fees helped Kroger reduce its annual costs by roughly $6 billion between 2010 and 2012, according to a Food & Water Watch report. Kroger did not return a request for comment.
‘A very clever strategy’
Another common pricing arrangement between supermarkets and food brands? Category captain arrangements, in which the top-selling food manufacturers dictate where their products – and their competitors’ – are placed on the shelves.
In grocery stores, category captain arrangements are “widespread, and likely the dominant mode for many European and U.S. based retailers,” according to a 2020 report in Industrial Marketing Management. Under these agreements, the top manufacturer in a given product – using, prevailing wisdom says, their competitive marketing insights – will create visual layouts dictating how to arrange all the products in that given category.
“A captain that is able to control decisions about product placement and promotions could hinder the entry or expansion of rivals, leading to less variety and possibly higher prices,” states a 2018 report on grocery captain agreements from the American Antitrust Institute.
In the 2016 CSPI investigation, an owner of a small ice cream brand said he feared his products being relegated out of customers’ sight by category captains, “behind a hinge . . . so you can barely see it.”
Nestlé, he said, was the category captain in frozen desserts in 22 of the country’s largest 25 supermarkets. Nestlé did not return a request for comment.
Smaller brands ‘just hoping to get acquired’
Such arrangements – slotting fees, category captains and perhaps other structures publicly unknown – creates a food ecosystem in which the best business move for a smaller brand is getting gobbled up by a larger one, experts say, further shrinking the number of companies controlling the food on our grocery shelves in an already consolidated system.
“Most new food businesses, they really are just hoping to get acquired, because that's how you're going to get your product the best shelf placement,” Kelloway said.
It’s a two-way street, experts say – a growth strategy the biggest food manufacturers employ to add brands “already vetted by the market,” Carolyn Dimitri, an applied economist at New York University, told Salon. Recent small brand acquisitions include General Mills’ $204 million acquisition of Annie’s in 2014 and Danone buying Silk’s parent company for $10 billion in 2016.
In 2020, Mars acquired the maker of KIND Bars for $5 billion.
“It's actually a very clever strategy,” Dimitri said, adding that consumers often assume they’re supporting smaller brands not owned by a major food conglomerate.
“If you let small entrepreneurs develop these new products, they're taking all the risk,” she said. “Then, when they have a successful product, Frito Lay or Pepsi will come and buy you out. And then, they keep the same branding.”
It’s a complicated question, involving supply costs, crop yields, public policy, the availability of raw materials, supply chain issues and animal and plant disease, to name a few factors.
But in our grocery stores, supermarkets and food manufacturers often determine the final label price consumers pay. Many consumers are unaware of the clandestine cooperative marketing agreements between supermarkets and food conglomerates that influence how food is stocked, how aisles are arranged, what products are highly promoted and, ultimately, what foods consumers get to choose from, and how much we pay.
“Manufacturers are able to really control and dictate the retail environment, to the detriment of consumers and consumers’ health,” Sara John, deputy director at the Center for Science in the Public Interest, told Salon.
Those systems are particularly harmful to small food brands; a best-case success scenario for those brands often ends in acquisition. And those structures stand to potentially blossom under a proposed $24.6 billion megamerger between Kroger and Albertsons, America’s two largest supermarket brands, that the Federal Trade Commission is suing to block over concerns the deal would create a monopoly.
“Absent antitrust enforcement and fair competition enforcement, it's really hard to imagine how these companies at the top ever get knocked off, or how three companies controlling 80% of the mayonnaise ever actually changes,” Claire Kelloway, program manager for fair food and farming systems at the Open Markets Institute, told Salon.
Lawyers from both Kroger and the FTC gave closing arguments in the FTC’s antitrust case last week; the judge overseeing the case is expected to issue their ruling as early as October. Kroger did not return a request for comment.
‘A really big source of profits' for grocery stores
Supermarkets’ cooperative marketing agreements are often “very, very tightly guarded documents,” John said. Outside of a handful of public data points, little is known about them.
One example of such an agreement is slotting fees, which have existed for decades but are shrouded in secrecy – a reality put on full display in 1999, when two small-business owners testified in a Senate hearing on slotting fees “in black hoods,” their voices electronically disguised for fear of retaliation.
“Because it's so guarded, I do think it is such an important part of the retail business model,” John said of the agreements.
Grocery stores charge slotting fees to brands for favorable shelf space, as well as for things like end-of-aisle placements and special displays. Often, these fees can amount to millions of dollars in extra payments and “effectively elbows out smaller brands,” according to a 2021 report from Food & Water Watch. In 2016, the owner of a small condiments brand said he was charged between $5,000 and $20,000 per item in slotting fees, according to a CSPI investigation into the practice.
Bemoaning the power imbalance between conglomerates and their competitors, the owner of a small canned tomatoes brand said the biggest canned vegetable companies can pay those fees “just to keep us off the shelf,” per a Federal Trade Commission report on grocery industry marketing practices, published in 2001. (Despite its long shelf life, the report remains one of the more comprehensive sources on the subject.)
The FTC report found that, at the time, slotting fees typically ranged between $75 and $300 per item, per store, and could be “likely to increase the wholesale price of a product, because the manufacturer must raise its price to cover the expense.” Bedrock Analytics, a consumer goods data company, offered an updated estimate in 2019, describing slotting fees in a report as “typically ranging from $250 to $1,000 per item per store.”
“There are all these different ways that brands are paying grocers for promotions, for slotting, for a display in the middle of the store,” Kelloway said. “That has become a really big source of profits and revenue for grocers dealing more in promotions and deals and coupons.”
Slotting fees helped Kroger reduce its annual costs by roughly $6 billion between 2010 and 2012, according to a Food & Water Watch report. Kroger did not return a request for comment.
‘A very clever strategy’
Another common pricing arrangement between supermarkets and food brands? Category captain arrangements, in which the top-selling food manufacturers dictate where their products – and their competitors’ – are placed on the shelves.
In grocery stores, category captain arrangements are “widespread, and likely the dominant mode for many European and U.S. based retailers,” according to a 2020 report in Industrial Marketing Management. Under these agreements, the top manufacturer in a given product – using, prevailing wisdom says, their competitive marketing insights – will create visual layouts dictating how to arrange all the products in that given category.
“A captain that is able to control decisions about product placement and promotions could hinder the entry or expansion of rivals, leading to less variety and possibly higher prices,” states a 2018 report on grocery captain agreements from the American Antitrust Institute.
In the 2016 CSPI investigation, an owner of a small ice cream brand said he feared his products being relegated out of customers’ sight by category captains, “behind a hinge . . . so you can barely see it.”
Nestlé, he said, was the category captain in frozen desserts in 22 of the country’s largest 25 supermarkets. Nestlé did not return a request for comment.
Smaller brands ‘just hoping to get acquired’
Such arrangements – slotting fees, category captains and perhaps other structures publicly unknown – creates a food ecosystem in which the best business move for a smaller brand is getting gobbled up by a larger one, experts say, further shrinking the number of companies controlling the food on our grocery shelves in an already consolidated system.
“Most new food businesses, they really are just hoping to get acquired, because that's how you're going to get your product the best shelf placement,” Kelloway said.
It’s a two-way street, experts say – a growth strategy the biggest food manufacturers employ to add brands “already vetted by the market,” Carolyn Dimitri, an applied economist at New York University, told Salon. Recent small brand acquisitions include General Mills’ $204 million acquisition of Annie’s in 2014 and Danone buying Silk’s parent company for $10 billion in 2016.
In 2020, Mars acquired the maker of KIND Bars for $5 billion.
“It's actually a very clever strategy,” Dimitri said, adding that consumers often assume they’re supporting smaller brands not owned by a major food conglomerate.
“If you let small entrepreneurs develop these new products, they're taking all the risk,” she said. “Then, when they have a successful product, Frito Lay or Pepsi will come and buy you out. And then, they keep the same branding.”
During antitrust trial, exec admits Kroger jacked up milk and egg prices above inflation
Jake Johnson, Common Dreams
August 28, 2024 11:37AM ET
A top Kroger executive admitted under questioning from a Federal Trade Commission attorney on Tuesday that the grocery chain raised its egg and milk prices above the rate of inflation, a concession that came as no surprise to economists who have been highlighting corporate price gouging across the U.S. economy in recent years.
Andy Groff, Kroger's senior director for pricing, said during a court hearing on the FTC's legal challenge to the company's proposed acquisition of Albertsons—its primary competitor—that Kroger's objective is to "pass through our inflation to consumers."
Groff's comment came in response to questioning about an internal email he sent to other Kroger executives in March. In that note, Groff observed that "on milk and eggs, retail inflation has been significantly higher than cost inflation."
A Kroger spokesperson told Bloomberg in a statement that the email was "cherry-picked" and "does not reflect Kroger's decadeslong business model to lower prices for customers by reducing its margins."
But Rakeen Mabud, chief economist at the Groundwork Collaborative, noted Wednesday that "execs all over the economy were saying this stuff on their earning calls back in 2021."
"This was not a secret," Mabud added.
Bloomberg reported Tuesday that "in Illinois, where Kroger operates the Mariano's chain, company executives create a weekly report on egg prices, comparing prices from Walmart, Meijer Inc., and Albertsons' Jewel-Osco, said Matthew Marx, president of the Kroger division overseeing Mariano's."
"The FTC walked Marx through several of the weekly egg reports from 2022 and 2023," the outlet added. "In May 2022, for example, both Walmart and Meijer dropped egg prices by 14 cents a dozen, but Mariano's opted to keep its pricing the same to match the higher price at Jewel-Osco, Marx said. A year later, in April 2023, as egg prices again soared, Mariano's opted to keep its pricing near Jewel-Osco's even as Walmart was lowering its own."
The U.S. grocery sector—dominated by Kroger, Walmart, and a handful of other major companies—profited hugely during the Covid-19 pandemic as corporate giants exploited supply chain disruptions to aggressively jack up prices.
"The grocery industry, as represented by four of its largest players, became more profitable in the pandemic, and it has stayed that way for a couple of years at least," The Financial Timesnoted Monday. "It is a good guess that price increases in excess of cost increases have played a role in this."
In its legal challenge against Kroger's proposed merger with Albertsons, the FTC argues that the deal would further drive up costs for consumers by eliminating "fierce competition" between the two grocers.
Laurel Kilgour, research manager at the American Economic Liberties Project, said after opening arguments in the case earlier this week that the FTC "previewed concrete evidence that a Kroger-Albertsons merger would lead to higher prices for millions of Americans and worse working conditions for hundreds of thousands of workers."
"By contrast, lawyers for Kroger and Albertsons touted fake promises of utopian outcomes that are not legally enforceable. Indeed, Albertsons has a track record of profiting from similar fake promises that turned out disastrously for competition and for communities, and this time is no different," Kilgour continued. "At a time when working families are especially concerned with costs and access to food, we need more—not less—competition between grocery stores on prices, wages, the freshness of produce, and service quality."
Andy Groff, Kroger's senior director for pricing, said during a court hearing on the FTC's legal challenge to the company's proposed acquisition of Albertsons—its primary competitor—that Kroger's objective is to "pass through our inflation to consumers."
Groff's comment came in response to questioning about an internal email he sent to other Kroger executives in March. In that note, Groff observed that "on milk and eggs, retail inflation has been significantly higher than cost inflation."
A Kroger spokesperson told Bloomberg in a statement that the email was "cherry-picked" and "does not reflect Kroger's decadeslong business model to lower prices for customers by reducing its margins."
But Rakeen Mabud, chief economist at the Groundwork Collaborative, noted Wednesday that "execs all over the economy were saying this stuff on their earning calls back in 2021."
"This was not a secret," Mabud added.
Bloomberg reported Tuesday that "in Illinois, where Kroger operates the Mariano's chain, company executives create a weekly report on egg prices, comparing prices from Walmart, Meijer Inc., and Albertsons' Jewel-Osco, said Matthew Marx, president of the Kroger division overseeing Mariano's."
"The FTC walked Marx through several of the weekly egg reports from 2022 and 2023," the outlet added. "In May 2022, for example, both Walmart and Meijer dropped egg prices by 14 cents a dozen, but Mariano's opted to keep its pricing the same to match the higher price at Jewel-Osco, Marx said. A year later, in April 2023, as egg prices again soared, Mariano's opted to keep its pricing near Jewel-Osco's even as Walmart was lowering its own."
The U.S. grocery sector—dominated by Kroger, Walmart, and a handful of other major companies—profited hugely during the Covid-19 pandemic as corporate giants exploited supply chain disruptions to aggressively jack up prices.
"The grocery industry, as represented by four of its largest players, became more profitable in the pandemic, and it has stayed that way for a couple of years at least," The Financial Timesnoted Monday. "It is a good guess that price increases in excess of cost increases have played a role in this."
In its legal challenge against Kroger's proposed merger with Albertsons, the FTC argues that the deal would further drive up costs for consumers by eliminating "fierce competition" between the two grocers.
Laurel Kilgour, research manager at the American Economic Liberties Project, said after opening arguments in the case earlier this week that the FTC "previewed concrete evidence that a Kroger-Albertsons merger would lead to higher prices for millions of Americans and worse working conditions for hundreds of thousands of workers."
"By contrast, lawyers for Kroger and Albertsons touted fake promises of utopian outcomes that are not legally enforceable. Indeed, Albertsons has a track record of profiting from similar fake promises that turned out disastrously for competition and for communities, and this time is no different," Kilgour continued. "At a time when working families are especially concerned with costs and access to food, we need more—not less—competition between grocery stores on prices, wages, the freshness of produce, and service quality."
GREED, IT ALL ABOUT GREED!!!
Report: CEOs Are Driving “Greedflation,” Raising Prices to Pay Themselves More
BY Jake Johnson, Common Dreams - TRUTHOUT
PUBLISHED July 19, 2022
The AFL-CIO’s latest annual analysis of top executive pay was published Monday with the following conclusion: “CEOs, not working people, are causing inflation.”
In recent months, corporate bosses and top Federal Reserve officials have pointed to workers’ wages as a factor in surging prices, which have pushed overall inflation in the United States to a four-decade high.
But the AFL-CIO’s new report attempts to reframe the national inflation discussion, emphasizing that while wage increases won by ordinary workers are drawing outsized attention from policymakers and executives, CEO pay hikes significantly outpaced the wage increases of rank-and-file employees last year.
Titled “Greedflation,” the report shows that “in 2021, CEOs of S&P 500 companies received, on average, $18.3 million in total compensation.”
“CEO pay rose 18.2%, faster than the U.S. inflation rate of 7.1%,” the analysis finds. “In contrast, U.S. workers’ wages fell behind inflation, with worker wages rising only 4.7% in 2021. The average S&P 500 company’s CEO-to-worker pay ratio was 324-to-1.”
The highest-paid executive among S&P 500 companies last year was Expedia’s Peter Kern, who brought in an eye-popping $296 million in total compensation.
Other executives at the top of the 2021 list were Amazon CEO Andy Jassy ($213 million), Intel CEO Pat Gelsinger ($179 million), Apple CEO Tim Cook ($99 million), and JPMorgan Chase CEO Jamie Dimon ($84 million).
“Runaway CEO pay is a symptom of greedflation — when companies increase prices to boost corporate profits and create windfall payouts for corporate CEOs,” the new analysis states.
During a conference call outlining the report’s findings, AFL-CIO Secretary-Treasurer Fred Redmond said that “when you look at those numbers and at CEOs trying to blame workers for inflation, it just doesn’t add up.”
In his remarks during an earnings call earlier this year, for instance, Amazon’s chief financial officer attributed inflationary pressures felt within the company during the final quarter of 2021 to “wage increases and incentives in our operations.”
But Redmond pointed out that “last year, Amazon delivered the highest CEO-to-worker pay ratio in the S&P 500 Index with a pay ratio of 6,474 to 1.”
“Amazon’s new CEO Andy Jassy received $212.7 million in total compensation,” he noted. “What did Amazon’s median worker earn last year? Just $32,855… Corporate profits and runaway CEO pay are responsible for causing inflation, not workers’ wages.”
In a blog post on Monday, economist Dean Baker similarly argued that soaring executive pay is contributing to inflation, which has eroded modest wage gains that many ordinary workers have seen since late 2020.
“We… transfer tens of billions of dollars upward to CEOs and other top corporate executives through the corrupt corporate governance structure that we have instituted,” writes Baker, a senior economist at the Center for Economic and Policy Research. “In this context, it is not surprising that even mediocre CEOs can get paychecks in the tens of millions of dollars annually. And, it is not just the CEO. If the CEO gets $20 million, the chief financial officer might get $10 to $12 million, and even third-tier executives may get $2 to $3 million.”
“This is all inflationary,” he added.
The AFL-CIO’s analysis was released as the Federal Reserve gears up to hike interest rates by another 75 basis points at its upcoming policy meeting, a move that economists fear could push the U.S. economy closer to recession.
The second consecutive 0.75 percentage point rate hike is expected despite evidence that key divers of inflation — such as gas prices — are cooling. Wage growth has also slowed substantially in recent months, prompting experts to warn that additional rate increases could slash wages by driving up the unemployment rate — a potential disaster for millions.
“Higher unemployment lowers wage growth much more reliably and by larger amounts than it lowers inflation,” notes Josh Bivens, director of research at the Economic Policy Institute, noted last week. “Currently, wage growth is decelerating. This means there is no genuine need for a recession to pull wage growth down to sustainable levels.”
The AFL-CIO’s Redmond echoed that sentiment Monday, declaring that “we need to raise wages to help working people cope with rising prices, not make working people poorer by causing a recession.”
In recent months, corporate bosses and top Federal Reserve officials have pointed to workers’ wages as a factor in surging prices, which have pushed overall inflation in the United States to a four-decade high.
But the AFL-CIO’s new report attempts to reframe the national inflation discussion, emphasizing that while wage increases won by ordinary workers are drawing outsized attention from policymakers and executives, CEO pay hikes significantly outpaced the wage increases of rank-and-file employees last year.
Titled “Greedflation,” the report shows that “in 2021, CEOs of S&P 500 companies received, on average, $18.3 million in total compensation.”
“CEO pay rose 18.2%, faster than the U.S. inflation rate of 7.1%,” the analysis finds. “In contrast, U.S. workers’ wages fell behind inflation, with worker wages rising only 4.7% in 2021. The average S&P 500 company’s CEO-to-worker pay ratio was 324-to-1.”
The highest-paid executive among S&P 500 companies last year was Expedia’s Peter Kern, who brought in an eye-popping $296 million in total compensation.
Other executives at the top of the 2021 list were Amazon CEO Andy Jassy ($213 million), Intel CEO Pat Gelsinger ($179 million), Apple CEO Tim Cook ($99 million), and JPMorgan Chase CEO Jamie Dimon ($84 million).
“Runaway CEO pay is a symptom of greedflation — when companies increase prices to boost corporate profits and create windfall payouts for corporate CEOs,” the new analysis states.
During a conference call outlining the report’s findings, AFL-CIO Secretary-Treasurer Fred Redmond said that “when you look at those numbers and at CEOs trying to blame workers for inflation, it just doesn’t add up.”
In his remarks during an earnings call earlier this year, for instance, Amazon’s chief financial officer attributed inflationary pressures felt within the company during the final quarter of 2021 to “wage increases and incentives in our operations.”
But Redmond pointed out that “last year, Amazon delivered the highest CEO-to-worker pay ratio in the S&P 500 Index with a pay ratio of 6,474 to 1.”
“Amazon’s new CEO Andy Jassy received $212.7 million in total compensation,” he noted. “What did Amazon’s median worker earn last year? Just $32,855… Corporate profits and runaway CEO pay are responsible for causing inflation, not workers’ wages.”
In a blog post on Monday, economist Dean Baker similarly argued that soaring executive pay is contributing to inflation, which has eroded modest wage gains that many ordinary workers have seen since late 2020.
“We… transfer tens of billions of dollars upward to CEOs and other top corporate executives through the corrupt corporate governance structure that we have instituted,” writes Baker, a senior economist at the Center for Economic and Policy Research. “In this context, it is not surprising that even mediocre CEOs can get paychecks in the tens of millions of dollars annually. And, it is not just the CEO. If the CEO gets $20 million, the chief financial officer might get $10 to $12 million, and even third-tier executives may get $2 to $3 million.”
“This is all inflationary,” he added.
The AFL-CIO’s analysis was released as the Federal Reserve gears up to hike interest rates by another 75 basis points at its upcoming policy meeting, a move that economists fear could push the U.S. economy closer to recession.
The second consecutive 0.75 percentage point rate hike is expected despite evidence that key divers of inflation — such as gas prices — are cooling. Wage growth has also slowed substantially in recent months, prompting experts to warn that additional rate increases could slash wages by driving up the unemployment rate — a potential disaster for millions.
“Higher unemployment lowers wage growth much more reliably and by larger amounts than it lowers inflation,” notes Josh Bivens, director of research at the Economic Policy Institute, noted last week. “Currently, wage growth is decelerating. This means there is no genuine need for a recession to pull wage growth down to sustainable levels.”
The AFL-CIO’s Redmond echoed that sentiment Monday, declaring that “we need to raise wages to help working people cope with rising prices, not make working people poorer by causing a recession.”
Corporate Profits Soared to Highest Levels in 7 Decades Last Year
BY Jake Johnson, Common Dreams - truthout
PUBLISHED June 21, 2022
A new paper published Tuesday shows that U.S. corporate price markups and profits surged to their highest levels since the 1950s last year, bolstering arguments for an excess profits tax as a way to rein in sky-high inflation.
Authored by Mike Konczal and Niko Lusiani of the Roosevelt Institute, the analysis finds that markups—the difference between the actual cost of a good or service and the selling price—”were both the highest level on record and the largest one-year increase” in 2021.
“Markups this high mean there is room for reversing them with little economic harm and likely societal benefit,” Konczal said in a statement. “To tackle inflation, we need an all-of-the-above administrative and legislative approach that includes demand, supply, and market power interventions.”
In their new brief, Konczal and Lusiani note that higher markups don’t always mean larger profits.
“But they did in 2021,” the researchers write, showing that the net profit margins of U.S. firms jumped from an annual average of 5.5% between 1960 and 1980 to 9.5% in 2021 as companies pushed up prices, citing inflationary pressures across the global economy as their justification.
“How high companies can increase their sales up and above their costs… matters for the economy more generally because these markups distribute economic gains from workers and consumers to firms and shareholders,” said Lusiani. “This is especially the case when almost 100% of these firms’ earnings derived from markups are distributed upward to shareholders rather than retained and reinvested.”
“Making corporations once again price-takers rather than price-makers,” Lusiani added, “will help bring down prices, and in time lead to a more equitable, innovative economy.”
The new research comes as the White House struggles to formulate a coherent and effective response to an inflation surge that has become a serious economic and political problem, particularly as the pivotal 2022 midterms approach.
Survey data shows that U.S. voters, including those in key battleground states, overwhelmingly want the Biden administration to challenge corporate power and support a windfall profits tax to counter soaring prices at grocery stores, gas stations, and elsewhere across the economy.
Konczal and Lusiani’s brief makes the case for a new tax to combat excess profits that they say have become “widespread.” Such a tax, the researchers argue, would help redistribute “runaway economic gains while simultaneously eroding company incentives to increase their markups.”
Additionally, they write, “increasing competition and reducing market power” through antitrust action “would bring down inflation to some degree, no matter its cause.”
But influential U.S. economists — former Treasury Secretary Larry Summers chief among them — have argued that solving high inflation would require pushing down wages and throwing millions of people out of work.
“We need five years of unemployment above 5% to contain inflation — in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment,” Summers, who spoke with President Joe Biden by phone Monday morning, said in an address in London later that same day.
Federal Reserve Chair Jerome Powell, who is leading an effort to tamp down inflation by aggressively hiking interest rates, has also cited modest wage increases over the past two years as a factor behind rising inflation, expressing his desire to “get wages down” despite evidence that wage growth has slowed in recent months.
Konczal and Lusiani contend in their paper that “while the idea that we are facing the threat of a wage-price spiral is becoming conventional wisdom, this brief and other research finds that changes to labor and worker compensation are not driving factors in recent markups.”
“If margins are unusually high, then there’s the possibility that profits and markups can decrease as either supply opens up or demand cools, removing pricing pressure,” they write. “Such a high profit margin also means that there’s room for wages to increase without necessarily raising prices — an important dynamic in a hot labor market.”
RELATED: Don’t Let Corporations Profit From Our Inflation PainCorporations are blaming rising prices on elected officials and worker organizing even as they rake in record profits.
by Brooke Adams, Truthout
Authored by Mike Konczal and Niko Lusiani of the Roosevelt Institute, the analysis finds that markups—the difference between the actual cost of a good or service and the selling price—”were both the highest level on record and the largest one-year increase” in 2021.
“Markups this high mean there is room for reversing them with little economic harm and likely societal benefit,” Konczal said in a statement. “To tackle inflation, we need an all-of-the-above administrative and legislative approach that includes demand, supply, and market power interventions.”
In their new brief, Konczal and Lusiani note that higher markups don’t always mean larger profits.
“But they did in 2021,” the researchers write, showing that the net profit margins of U.S. firms jumped from an annual average of 5.5% between 1960 and 1980 to 9.5% in 2021 as companies pushed up prices, citing inflationary pressures across the global economy as their justification.
“How high companies can increase their sales up and above their costs… matters for the economy more generally because these markups distribute economic gains from workers and consumers to firms and shareholders,” said Lusiani. “This is especially the case when almost 100% of these firms’ earnings derived from markups are distributed upward to shareholders rather than retained and reinvested.”
“Making corporations once again price-takers rather than price-makers,” Lusiani added, “will help bring down prices, and in time lead to a more equitable, innovative economy.”
The new research comes as the White House struggles to formulate a coherent and effective response to an inflation surge that has become a serious economic and political problem, particularly as the pivotal 2022 midterms approach.
Survey data shows that U.S. voters, including those in key battleground states, overwhelmingly want the Biden administration to challenge corporate power and support a windfall profits tax to counter soaring prices at grocery stores, gas stations, and elsewhere across the economy.
Konczal and Lusiani’s brief makes the case for a new tax to combat excess profits that they say have become “widespread.” Such a tax, the researchers argue, would help redistribute “runaway economic gains while simultaneously eroding company incentives to increase their markups.”
Additionally, they write, “increasing competition and reducing market power” through antitrust action “would bring down inflation to some degree, no matter its cause.”
But influential U.S. economists — former Treasury Secretary Larry Summers chief among them — have argued that solving high inflation would require pushing down wages and throwing millions of people out of work.
“We need five years of unemployment above 5% to contain inflation — in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment,” Summers, who spoke with President Joe Biden by phone Monday morning, said in an address in London later that same day.
Federal Reserve Chair Jerome Powell, who is leading an effort to tamp down inflation by aggressively hiking interest rates, has also cited modest wage increases over the past two years as a factor behind rising inflation, expressing his desire to “get wages down” despite evidence that wage growth has slowed in recent months.
Konczal and Lusiani contend in their paper that “while the idea that we are facing the threat of a wage-price spiral is becoming conventional wisdom, this brief and other research finds that changes to labor and worker compensation are not driving factors in recent markups.”
“If margins are unusually high, then there’s the possibility that profits and markups can decrease as either supply opens up or demand cools, removing pricing pressure,” they write. “Such a high profit margin also means that there’s room for wages to increase without necessarily raising prices — an important dynamic in a hot labor market.”
RELATED: Don’t Let Corporations Profit From Our Inflation PainCorporations are blaming rising prices on elected officials and worker organizing even as they rake in record profits.
by Brooke Adams, Truthout
profit over people!!!
BABY FORMULA INDUSTRY SUCCESSFULLY LOBBIED TO WEAKEN BACTERIA SAFETY TESTING STANDARDS
The current formula shortage is traced in part to a contamination-induced shutdown at a key manufacturing plant.
Lee Fang - the intercept
May 13 2022
THE ABBOTT NUTRITION facility in Sturgis, Michigan, which produces much of the U.S. supply of baby formula, shut down in February, bringing production lines to a grinding halt. Following a voluntary recall and investigation by the Food and Drug Administration and the Centers for Disease Control and Prevention, the stoppage stemmed from a bacterial outbreak whose effects would be felt months later. Starting last September, five babies who had consumed the plant’s formula contracted bacterial infections. Two of them died.
The production pause is now contributing to a national shortage of formula, a crisis that experts believe will continue for months. Abbott, however, disputes that there is any link between its formula and the infant illnesses.
Questions are now swirling about alleged problems at the Abbott-owned factory, which produces popular brands such as Similac, Alimentum, and EleCare. A recently disclosed whistleblower document claims that managers at the Sturgis plant falsified reports, released untested infant formula, and concealed crucial safety information from federal inspectors.
But eight years earlier, the formula industry rejected an opportunity to take a more proactive approach — not only for increasing supply capacity, but also for preventing a potential outbreak. Records show that the industry successfully mobilized against a 2014 proposal from the FDA to increase regular safety inspections of plants used to manufacture baby formula.
At the time, the FDA had proposed rules to prevent the adulteration of baby formula in any step of the process in order to prevent contamination from salmonella and Cronobacter sakazakii, which led to this year’s Sturgis plant shutdown.
The largest infant formula manufacturers quickly stepped up to delay the safety proposals. The International Formula Council, now known as the Infant Nutrition Council of America, is the lobby group that represents Abbott Nutrition (owned by Abbott Laboratories), Gerber (owned by Nestlé), Perrigo Co., and Reckitt Benckiser Group, the companies that control 89 percent of the baby formula market in the U.S.
In March 2014, the group wrote to FDA officials to request additional time to respond to the proposed rules. The agency, the industry claimed, had used a cost-benefit analysis that “overestimates the expected annual incidence of Cronobacter infection” using “outdated data.” The formula representatives asked for an additional 30 to 45 days.
“We feel the agency and the industry would benefit from this additional time,” wrote Mardi Mountford, an official with the International Formula Council.
That June, after months of deliberation, the FDA released a new interim final proposal that incorporated some of the industry concerns. The rules reduced the frequency of stability testing for new infant formulas from every three months to every four months. The FDA also provided a number of exemptions for manufacturers, allowing them to shirk testing requirements if the “new infant formula will likely not differ from the stability of formulas with similar composition, processing, and packaging for which there are extensive stability data.”
Later that year, the lobby group petitioned the FDA to revisit the safety manufacturing rule with even lower standards, including fewer inspections. In a letter to regulators, Mountford wrote that compliance costs would reach slightly over $20 million a year, including increased personnel and lab fees. “The IFC believes that the additional requirements for end of shelf-life testing under the Final Rule are unnecessary and burdensome and do not provide any additional public health benefit,” Mountford wrote in the September 2014 request. “Based on the frequency of manufacture and store inventories,” the letter noted, “virtually all infant formula is consumed early in its shelf-life (consumers typically purchase and use infant formula between 3 and 9 months after manufacture and do not stockpile infant formula at home).”
The Infant Nutrition Council of America did not respond to a request for comment from The Intercept.
As critics have noted, the formula industry had wide latitude to expand production and increase spending on safety standards. Abbott last year announced that it had spent $5 billion purchasing its own stock.
Abbott Nutrition has declined to inform other outlets whether additional cases of Cronobacter have been identified.
Following publication of this story, a spokesperson for Abbott provided a statement disputing the whistleblower allegations.
“This former employee was dismissed due to serious violations of Abbott’s food safety policies. After dismissal, the former employee, through their attorney, has made evolving, new and escalating allegations to multiple authorities. Abbott is reviewing this new document and will thoroughly investigate any new allegations,” said the Abbott spokesperson.
The spokesperson also provided a statement regarding the Abbott’s trade group lobbying efforts. The International Formula Council’s efforts, said the spokesperson, do “not align with Abbott’s actual past or current practices with regards to testing for Cronobacter sp. Abbott has been conducting finished product testing for Cronobacter sp. in our powdered manufacturing facilities long before the Infant Formula Good Manufacturing Practice (GMP) rule requiring this testing was finalized. Additionally, Abbott has always tested for Cronobacter sp. at more than twice the sample size (volume) that FDA requires in 21 CFR Part 106.”
The company on its website claims that there is “is no evidence to link our formulas” to the recent wave of infant illnesses.”
The House Committee on Energy and Commerce is scheduled to hold a hearing on May 25 to investigate.
The Abbott whistleblower allegation was sent to the FDA and Rep. Rosa DeLauro, D-Conn., in October 2021 and made public last month. DeLauro has demanded that regulators move swiftly in obtaining answers from the company. Despite the whistleblower tip, the FDA did not inspect the Sturgis plant until January 31 of this year, and the recall was not issued until February 17, according to a report from Food Safety News.
Approximately 40 percent of baby formula products were sold out during the week that started on April 24, according to a recent survey. Desperate parents have reportedly turned to eBay, where canisters cost more than six times the retail price. Viral images of empty shelves have alarmed parents, and the Biden administration has said it will take urgent action to address the shortage.
The shortage has other contributing factors. The U.S. maintains strict limits on imports of European brands of infant formula, despite studies showing that products under European Union regulations have high safety and nutrition standards. Competing brands in the U.S. have attempted to ramp up production to make up for the loss of Abbott Nutrition’s Sturgis factory but have encountered supply chain problems.
The production pause is now contributing to a national shortage of formula, a crisis that experts believe will continue for months. Abbott, however, disputes that there is any link between its formula and the infant illnesses.
Questions are now swirling about alleged problems at the Abbott-owned factory, which produces popular brands such as Similac, Alimentum, and EleCare. A recently disclosed whistleblower document claims that managers at the Sturgis plant falsified reports, released untested infant formula, and concealed crucial safety information from federal inspectors.
But eight years earlier, the formula industry rejected an opportunity to take a more proactive approach — not only for increasing supply capacity, but also for preventing a potential outbreak. Records show that the industry successfully mobilized against a 2014 proposal from the FDA to increase regular safety inspections of plants used to manufacture baby formula.
At the time, the FDA had proposed rules to prevent the adulteration of baby formula in any step of the process in order to prevent contamination from salmonella and Cronobacter sakazakii, which led to this year’s Sturgis plant shutdown.
The largest infant formula manufacturers quickly stepped up to delay the safety proposals. The International Formula Council, now known as the Infant Nutrition Council of America, is the lobby group that represents Abbott Nutrition (owned by Abbott Laboratories), Gerber (owned by Nestlé), Perrigo Co., and Reckitt Benckiser Group, the companies that control 89 percent of the baby formula market in the U.S.
In March 2014, the group wrote to FDA officials to request additional time to respond to the proposed rules. The agency, the industry claimed, had used a cost-benefit analysis that “overestimates the expected annual incidence of Cronobacter infection” using “outdated data.” The formula representatives asked for an additional 30 to 45 days.
“We feel the agency and the industry would benefit from this additional time,” wrote Mardi Mountford, an official with the International Formula Council.
That June, after months of deliberation, the FDA released a new interim final proposal that incorporated some of the industry concerns. The rules reduced the frequency of stability testing for new infant formulas from every three months to every four months. The FDA also provided a number of exemptions for manufacturers, allowing them to shirk testing requirements if the “new infant formula will likely not differ from the stability of formulas with similar composition, processing, and packaging for which there are extensive stability data.”
Later that year, the lobby group petitioned the FDA to revisit the safety manufacturing rule with even lower standards, including fewer inspections. In a letter to regulators, Mountford wrote that compliance costs would reach slightly over $20 million a year, including increased personnel and lab fees. “The IFC believes that the additional requirements for end of shelf-life testing under the Final Rule are unnecessary and burdensome and do not provide any additional public health benefit,” Mountford wrote in the September 2014 request. “Based on the frequency of manufacture and store inventories,” the letter noted, “virtually all infant formula is consumed early in its shelf-life (consumers typically purchase and use infant formula between 3 and 9 months after manufacture and do not stockpile infant formula at home).”
The Infant Nutrition Council of America did not respond to a request for comment from The Intercept.
As critics have noted, the formula industry had wide latitude to expand production and increase spending on safety standards. Abbott last year announced that it had spent $5 billion purchasing its own stock.
Abbott Nutrition has declined to inform other outlets whether additional cases of Cronobacter have been identified.
Following publication of this story, a spokesperson for Abbott provided a statement disputing the whistleblower allegations.
“This former employee was dismissed due to serious violations of Abbott’s food safety policies. After dismissal, the former employee, through their attorney, has made evolving, new and escalating allegations to multiple authorities. Abbott is reviewing this new document and will thoroughly investigate any new allegations,” said the Abbott spokesperson.
The spokesperson also provided a statement regarding the Abbott’s trade group lobbying efforts. The International Formula Council’s efforts, said the spokesperson, do “not align with Abbott’s actual past or current practices with regards to testing for Cronobacter sp. Abbott has been conducting finished product testing for Cronobacter sp. in our powdered manufacturing facilities long before the Infant Formula Good Manufacturing Practice (GMP) rule requiring this testing was finalized. Additionally, Abbott has always tested for Cronobacter sp. at more than twice the sample size (volume) that FDA requires in 21 CFR Part 106.”
The company on its website claims that there is “is no evidence to link our formulas” to the recent wave of infant illnesses.”
The House Committee on Energy and Commerce is scheduled to hold a hearing on May 25 to investigate.
The Abbott whistleblower allegation was sent to the FDA and Rep. Rosa DeLauro, D-Conn., in October 2021 and made public last month. DeLauro has demanded that regulators move swiftly in obtaining answers from the company. Despite the whistleblower tip, the FDA did not inspect the Sturgis plant until January 31 of this year, and the recall was not issued until February 17, according to a report from Food Safety News.
Approximately 40 percent of baby formula products were sold out during the week that started on April 24, according to a recent survey. Desperate parents have reportedly turned to eBay, where canisters cost more than six times the retail price. Viral images of empty shelves have alarmed parents, and the Biden administration has said it will take urgent action to address the shortage.
The shortage has other contributing factors. The U.S. maintains strict limits on imports of European brands of infant formula, despite studies showing that products under European Union regulations have high safety and nutrition standards. Competing brands in the U.S. have attempted to ramp up production to make up for the loss of Abbott Nutrition’s Sturgis factory but have encountered supply chain problems.
the best government money can buy!!!
First Quarter of 2022 Sees Record $1 Billion Spent on Lobbying
BY Katherine Huggins, OpenSecrets
PUBLISHED May 8, 2022
This year is on track for record lobbying spending after lobbyists collectively clocked the biggest first quarter haul in history — with more than $1 billion disclosed during the first quarter of 2022 alone.
At this point in 2021, 10,503 lobbyists had brought in less than $929 million across all industries.
The federal budget was the most lobbied issue from January through March, with 3,394 clients paying for lobbying on the issue. Health issues were also heavily lobbied, with 2,068 clients.
Lobbying related to health continues to dominate spending as recovery from the coronavirus pandemic continues.
The health sector accounted for about $187 million in this year’s first quarter and $689 million over the course of 2021. Of the 3,130 lobbyists working for the health sector last year, nearly half — 47.8% — had taken a swing in the revolving door as former government employees.
Within the sector, the pharmaceuticals and health products industry continues to be a top lobbying spender as various companies fight drug pricing regulations, grapple with supply chain issues and seek approval for vaccinations.
Pharmaceutical Research & Manufacturers of America ranked third overall in the first quarter of 2022 with nearly $8.3 million in spending during that period. The pharmaceuticals industry trade group was the third largest lobbying spender of 2021 at over $30 million for that full year.
Blue Cross/Blue Shield is the fourth highest lobbying spender overall with about $7.6 million in the first quarter of 2022. The health insurance company spent over $25 million on lobbying last year, making it the fifth biggest lobbying spender overall in 2021.
The American Hospital Association and the American Medical Association are also major lobbying spenders with about $6.6 million in spending from each during the first quarter of 2022. The associations were also neck and neck in 2021 with their national associations spending about $20 million each on lobbying over the year, putting them among the top spenders. Along with its state affiliates, the American Hospital Association’s federal lobbying spending topped $25 million in 2021.
America’s Health Insurance Plans spent another $4.7 million on lobbying in the first quarter of this year, more than any prior quarter in the health insurance industry trade group’s history.
Biotechnology Innovation Organization spent nearly $3.2 million on lobbying in the first quarter of this year, falling lower among the ranks of lobbying spending but remaining a powerful influencer for the biotechnology industry.
Lobbying Stalwarts Continue to Top Spending Charts
While the health industry dominates overall, the top spender of this year’s first quarter was the U.S. Chamber of Commerce with about $19 million in lobbying spending.
A longtime top lobbying spender with more than $1.7 billion spent since 1998, the Chamber spent over $66 million on lobbying in 2021 alone. The business lobbying group’s heavy spending made it the top lobbying spender of 2021 despite fallout among Republicans after the Chamber’s endorsement of 30 Democrats seeking House seats in 2020, which led to several key officials parting ways with the group and criticism from GOP lawmakers.
The Chamber is also a big spender on elections, spending millions on ads targeting politicians it may later lobby. During the 2020 election cycle, the Chamber’s spending on electioneering communications – which can boost and attack candidates without explicitly advocating for their election or defeat – topped $5.7 million.
The National Association of Realtors was the second highest lobbying spender with over $12 million in the first quarter of this year.
The Realtors association was also the second highest spender in 2021 as it faced further scrutiny from the Justice Department related to antitrust issues, pouring about $40 million into lobbying spending over the course of last year. The association’s 2020 lobbying spending topped $84 million, the largest amount the association has spent on lobbying in any single year, and more than any other organization spent on lobbying that year.
While the association’s lobbying spending dipped in 2021, it has a history of dropping in non-election years. The association’s $12 million in first quarter spending is over $4 million more than it spent on lobbying during the same period last year but still about $1.5 million less than it spent during the first quarter in 2020.
Like the Chamber, the National Association of Realtors also spends to influence U.S. elections directly, along with its affiliated political groups, pouring more than $20 million into 2020 spending.
Technology companies were also among the top 10 lobbying spenders of 2022’s first quarter.
Facebook’s parent company, Meta, spent nearly $5.4 million on lobbying while online retail giant Amazon spent over $5.3 million.
At this point in 2021, 10,503 lobbyists had brought in less than $929 million across all industries.
The federal budget was the most lobbied issue from January through March, with 3,394 clients paying for lobbying on the issue. Health issues were also heavily lobbied, with 2,068 clients.
Lobbying related to health continues to dominate spending as recovery from the coronavirus pandemic continues.
The health sector accounted for about $187 million in this year’s first quarter and $689 million over the course of 2021. Of the 3,130 lobbyists working for the health sector last year, nearly half — 47.8% — had taken a swing in the revolving door as former government employees.
Within the sector, the pharmaceuticals and health products industry continues to be a top lobbying spender as various companies fight drug pricing regulations, grapple with supply chain issues and seek approval for vaccinations.
Pharmaceutical Research & Manufacturers of America ranked third overall in the first quarter of 2022 with nearly $8.3 million in spending during that period. The pharmaceuticals industry trade group was the third largest lobbying spender of 2021 at over $30 million for that full year.
Blue Cross/Blue Shield is the fourth highest lobbying spender overall with about $7.6 million in the first quarter of 2022. The health insurance company spent over $25 million on lobbying last year, making it the fifth biggest lobbying spender overall in 2021.
The American Hospital Association and the American Medical Association are also major lobbying spenders with about $6.6 million in spending from each during the first quarter of 2022. The associations were also neck and neck in 2021 with their national associations spending about $20 million each on lobbying over the year, putting them among the top spenders. Along with its state affiliates, the American Hospital Association’s federal lobbying spending topped $25 million in 2021.
America’s Health Insurance Plans spent another $4.7 million on lobbying in the first quarter of this year, more than any prior quarter in the health insurance industry trade group’s history.
Biotechnology Innovation Organization spent nearly $3.2 million on lobbying in the first quarter of this year, falling lower among the ranks of lobbying spending but remaining a powerful influencer for the biotechnology industry.
Lobbying Stalwarts Continue to Top Spending Charts
While the health industry dominates overall, the top spender of this year’s first quarter was the U.S. Chamber of Commerce with about $19 million in lobbying spending.
A longtime top lobbying spender with more than $1.7 billion spent since 1998, the Chamber spent over $66 million on lobbying in 2021 alone. The business lobbying group’s heavy spending made it the top lobbying spender of 2021 despite fallout among Republicans after the Chamber’s endorsement of 30 Democrats seeking House seats in 2020, which led to several key officials parting ways with the group and criticism from GOP lawmakers.
The Chamber is also a big spender on elections, spending millions on ads targeting politicians it may later lobby. During the 2020 election cycle, the Chamber’s spending on electioneering communications – which can boost and attack candidates without explicitly advocating for their election or defeat – topped $5.7 million.
The National Association of Realtors was the second highest lobbying spender with over $12 million in the first quarter of this year.
The Realtors association was also the second highest spender in 2021 as it faced further scrutiny from the Justice Department related to antitrust issues, pouring about $40 million into lobbying spending over the course of last year. The association’s 2020 lobbying spending topped $84 million, the largest amount the association has spent on lobbying in any single year, and more than any other organization spent on lobbying that year.
While the association’s lobbying spending dipped in 2021, it has a history of dropping in non-election years. The association’s $12 million in first quarter spending is over $4 million more than it spent on lobbying during the same period last year but still about $1.5 million less than it spent during the first quarter in 2020.
Like the Chamber, the National Association of Realtors also spends to influence U.S. elections directly, along with its affiliated political groups, pouring more than $20 million into 2020 spending.
Technology companies were also among the top 10 lobbying spenders of 2022’s first quarter.
Facebook’s parent company, Meta, spent nearly $5.4 million on lobbying while online retail giant Amazon spent over $5.3 million.
Corporate profiteers blamed price increases on labor costs — then gave big raises to CEOs
Some companies raised prices, blaming rising wages — but actually cut workers' pay, according to new report
By IGOR DERYSH - salon
PUBLISHED APRIL 25, 2022 6:00AM (EDT)
More than a dozen major companies that blamed price increases on rising labor costs gave their top executives big raises — and some of them even slashed workers' pay, according to a new report.
Corporations like Amazon, Apple, McDonald's, Coca-Cola, Verizon and Starbucks cited growing labor costs when they hiked prices on consumers while behind the scenes their CEO-to-worker pay gap grew larger, according to an analysis from the left-leaning watchdog group Accountable.US.
Amazon, which cited "wage increases" while hiking prices on Prime memberships, gave new CEO Andy Jassy about a 600% increase in compensation while founder Jeff Bezos saw his net worth climb over 77% to $201 billion. After the pay hike, the company's CEO pay gap increased by more than 11,000%, meaning that Jassy earns as much as about 6,474 average Amazon employees.
Apple, which cited growing labor costs as one of the reasons it raised prices on new models of the iPhone, increased CEO Tim Cook's pay by 568%, to $98.7 million, and increased its CEO pay gap by 464%, to a ratio of 1,447 to 1. Verizon complained to investors about "labor rates" while looking to hike prices and "pass-through" costs while its CEO pay gap increased by 48%, to 166-to-1, and its median worker pay fell by more than 28% to $48,000.
The 15 companies listed in the report only scratch the surface. The median pay of S&P 500 CEOs rose by 19% to a record of $14.2 million in 2021 while the 4.7% increase in average hourly wages for workers was completely wiped out by rising costs, effectively resulting in a 2.4% decline in wages, according to Labor Department data. CEOs at roughly half the companies in the S&P 500 earned at least 186 times more than the median worker in 2021, according to a recent Wall Street Journal analysis, as median employee pay declined in one-third of the companies.
Despite low unemployment numbers and strong economic growth, working families have been squeezed amid the highest price increases in four decades. At the same time, corporate profits jumped by a record 25% in 2021.
"These higher prices were largely due to corporate profiteering, with S&P 500 companies enjoying near-record operating margins because they had the power to hike prices," the Accountable.US report argued.
"Considering corporate profits are at their highest levels in nearly 50 years, it's safe to say executives have had breathing room in their business decisions," Accountable.US president Kyle Herrig said in a statement to Salon. "Unfortunately, we're seeing a trend of highly profitable companies choosing to enrich a small group of investors and their executives at the expense of their customers and workers."
McDonald's last year blamed price increases in its restaurants in part on "labor inflation" and executives have said they are likely to raise prices again in 2022 despite acknowledging that rising costs "aren't likely to wipe out McDonald's recent gains in profitability," as The Wall Street Journal has reported. The company's net income rose by 59% to $7.55 billion in 2021 and it reported that more than $4.7 billion of that was spent on stock buybacks and shareholder dividends. CEO Chris Kempczinski's compensation last year was more than $20 million, bringing in 2,251 times more than the median employee. The median company salary dropped from $9,124 in 2020 to $8,897 in 2021.
Billionaire investor Carl Icahn, a McDonald's shareholder, called out the company for this "injustice" in a letter to shareholders last Thursday.
"I find the Company's executive compensation, especially relative to the average employee, to be unconscionable," Icahn wrote. "For 2021, total Chief Executive Officer compensation was $20,028,132, an astounding 2,251x the average employee's total compensation of $8,897. The Board is clearly condoning multiple forms of injustice and I believe the majority of the public would agree."
Even as major corporations repeatedly express concerns over inflation and supply chain issues, billionaire CEOs have made out like bandits during the pandemic and economic recovery.
Billionaire Warren Buffett's Berkshire Hathaway conglomerate saw many of its subsidiaries raise prices to offset a "sharp rise" in labor and material costs, Insider reported last month. At the same time, the company's net earnings increased by 110% to over $90 billion — more than $27 billion of which was spent on stock buybacks. Buffett's net worth increased by 42% to $96 billion in 2021, and another 32% to $127 billion by April 2022, according to Forbes.
Coca-Cola, which was among several big companies that raised costs this year due to "labor problems," reported a 9% increase in revenue that was "driven by a 10% increase in prices," The Wall Street Journal reported earlier this year. The company, which owns a number of beverage brands, saw its net income grow 26% to $9.8 billion last year, $7.3 billion of which it paid in shareholder dividends. CEO James Quincey got a $6.5 million bump in compensation in 2021, earning 1,791 times more than the median company employee.
Starbucks, one of the companies facing a growing nationwide unionization push, raised prices last year and earlier this year while predicting they would rise even more in the future. At the same time, Starbucks' profits increased by 352% after taking a hit during the pandemic and the company committed to $20 billion in stock buybacks and shareholder dividends over the next three years. CEO Kevin Johnson got a 39% pay hike to $20.4 million last year, earning 1,579 times more than the median employee.
HanesBrands executives in February told investors that the company hiked prices in response to "wage pressure" and other cost increases even as they bragged that the company's financial situation was "far stronger" now than before the pandemic. CEO Stephen Bratspies' compensation increased by more than 50% to $11 million, 1,564 times more than the median employee.
Under Armour executives, on a call with investors, said the company faced "rising wages" and other costs but previously reported that it improved its margins "primarily due to pricing benefits." In September, CEO Patrik Frisk said that high demand and supply chain issues presented an "opportunity for us to raise prices." Frisk in February touted record revenue and earnings, and his own compensation increased 111% to more than $15.5 million, or 1,485 times more than the median employee salary.
PepsiCo executives said on an earnings call that it expected "labor cost inflation to persist" but intended to "mitigate the impact of these pressures with its revenue management." The company hiked prices on its products last year and predicted additional price increases in 2022. At the same time, its net income climbed by nearly $500 million to more than $7.6 billion and it spent $5.9 billion of that on stock buybacks and shareholder dividends. The company projected it would spend even more on shareholder handouts in 2022. CEO Ramon Laguarta saw his compensation increase by more than $4 million to $25.5 million, or 488 times more than its median employee earns.
Domino's CEO Ritch Allison last year complained about labor shortages as he teased price hikes for consumers to offset wage increases. But the company's median worker pay actually fell, from $22,076 in 2020 to $17,782 in 2021. At the same time, Allison's compensation increased from $6.3 million to $7.1 million, a pay ratio of 401-to-1.
Kraft Heinz executives cited "labor constraints" and "production constraints" to investors even as it hiked prices and saw bigger profit margins than prior to the pandemic. CEO Miguel Patricio got a 40% pay increase to $8.6 million, making 190 times more than the median employee. The company's net income grew by 183% to more than $1 billion in 2021 and it spent nearly $2 billion on shareholder dividends.
Goodyear, the tire giant, raised prices four times last year, which the company said was in response to growing labor costs and other pressures. CEO Richard Kramer told investors in February that the company "achieved our highest fourth-quarter revenue in nearly 10 years" due to the higher prices. Meanwhile, median worker salary fell from $48,659 to $43,746 while Kramer's compensation increased from $16 million to $21.4 million, 490 times the average employer wage.
The Biden administration has made fighting inflation a top priority amid staggering price increases but has also sought to make clear that corporate profiteering is a major contributor to rising prices. Biden earlier this year called out meatpackers for price gouging, arguing that they had raised prices beyond the increases to their own costs.
"In too many industries, a handful of giant companies dominate the market," Biden said in January, arguing that many big companies are "making our economy less dynamic, giving themselves free rein to raise prices, reduce options for consumers or exploit workers.
Biden last year issued an executive order with 72 initiatives targeting a wide range of industries, including provisions to crack down on "anti-competitive pricing" and enhance consumer protections. He has since pushed the Federal Trade Commission to investigate price gouging by oil companies and prodded the Agriculture Department to investigate poultry and pork companies. The push also includes the Federal Maritime Commission, which Biden pressed to investigate large shipping companies in the supply chain.
Accountable.US backed Biden's efforts to target corporate profiteering in response to rising inflation.
"Can a company that posted huge new profits over the last year while rewarding shareholders and executives by millions honestly say it needed to raise prices so high, or pay their workers so little?" Herrig questioned. "Reining in runaway corporate greed is key to bringing down costs for everyday families."
Corporations like Amazon, Apple, McDonald's, Coca-Cola, Verizon and Starbucks cited growing labor costs when they hiked prices on consumers while behind the scenes their CEO-to-worker pay gap grew larger, according to an analysis from the left-leaning watchdog group Accountable.US.
Amazon, which cited "wage increases" while hiking prices on Prime memberships, gave new CEO Andy Jassy about a 600% increase in compensation while founder Jeff Bezos saw his net worth climb over 77% to $201 billion. After the pay hike, the company's CEO pay gap increased by more than 11,000%, meaning that Jassy earns as much as about 6,474 average Amazon employees.
Apple, which cited growing labor costs as one of the reasons it raised prices on new models of the iPhone, increased CEO Tim Cook's pay by 568%, to $98.7 million, and increased its CEO pay gap by 464%, to a ratio of 1,447 to 1. Verizon complained to investors about "labor rates" while looking to hike prices and "pass-through" costs while its CEO pay gap increased by 48%, to 166-to-1, and its median worker pay fell by more than 28% to $48,000.
The 15 companies listed in the report only scratch the surface. The median pay of S&P 500 CEOs rose by 19% to a record of $14.2 million in 2021 while the 4.7% increase in average hourly wages for workers was completely wiped out by rising costs, effectively resulting in a 2.4% decline in wages, according to Labor Department data. CEOs at roughly half the companies in the S&P 500 earned at least 186 times more than the median worker in 2021, according to a recent Wall Street Journal analysis, as median employee pay declined in one-third of the companies.
Despite low unemployment numbers and strong economic growth, working families have been squeezed amid the highest price increases in four decades. At the same time, corporate profits jumped by a record 25% in 2021.
"These higher prices were largely due to corporate profiteering, with S&P 500 companies enjoying near-record operating margins because they had the power to hike prices," the Accountable.US report argued.
"Considering corporate profits are at their highest levels in nearly 50 years, it's safe to say executives have had breathing room in their business decisions," Accountable.US president Kyle Herrig said in a statement to Salon. "Unfortunately, we're seeing a trend of highly profitable companies choosing to enrich a small group of investors and their executives at the expense of their customers and workers."
McDonald's last year blamed price increases in its restaurants in part on "labor inflation" and executives have said they are likely to raise prices again in 2022 despite acknowledging that rising costs "aren't likely to wipe out McDonald's recent gains in profitability," as The Wall Street Journal has reported. The company's net income rose by 59% to $7.55 billion in 2021 and it reported that more than $4.7 billion of that was spent on stock buybacks and shareholder dividends. CEO Chris Kempczinski's compensation last year was more than $20 million, bringing in 2,251 times more than the median employee. The median company salary dropped from $9,124 in 2020 to $8,897 in 2021.
Billionaire investor Carl Icahn, a McDonald's shareholder, called out the company for this "injustice" in a letter to shareholders last Thursday.
"I find the Company's executive compensation, especially relative to the average employee, to be unconscionable," Icahn wrote. "For 2021, total Chief Executive Officer compensation was $20,028,132, an astounding 2,251x the average employee's total compensation of $8,897. The Board is clearly condoning multiple forms of injustice and I believe the majority of the public would agree."
Even as major corporations repeatedly express concerns over inflation and supply chain issues, billionaire CEOs have made out like bandits during the pandemic and economic recovery.
Billionaire Warren Buffett's Berkshire Hathaway conglomerate saw many of its subsidiaries raise prices to offset a "sharp rise" in labor and material costs, Insider reported last month. At the same time, the company's net earnings increased by 110% to over $90 billion — more than $27 billion of which was spent on stock buybacks. Buffett's net worth increased by 42% to $96 billion in 2021, and another 32% to $127 billion by April 2022, according to Forbes.
Coca-Cola, which was among several big companies that raised costs this year due to "labor problems," reported a 9% increase in revenue that was "driven by a 10% increase in prices," The Wall Street Journal reported earlier this year. The company, which owns a number of beverage brands, saw its net income grow 26% to $9.8 billion last year, $7.3 billion of which it paid in shareholder dividends. CEO James Quincey got a $6.5 million bump in compensation in 2021, earning 1,791 times more than the median company employee.
Starbucks, one of the companies facing a growing nationwide unionization push, raised prices last year and earlier this year while predicting they would rise even more in the future. At the same time, Starbucks' profits increased by 352% after taking a hit during the pandemic and the company committed to $20 billion in stock buybacks and shareholder dividends over the next three years. CEO Kevin Johnson got a 39% pay hike to $20.4 million last year, earning 1,579 times more than the median employee.
HanesBrands executives in February told investors that the company hiked prices in response to "wage pressure" and other cost increases even as they bragged that the company's financial situation was "far stronger" now than before the pandemic. CEO Stephen Bratspies' compensation increased by more than 50% to $11 million, 1,564 times more than the median employee.
Under Armour executives, on a call with investors, said the company faced "rising wages" and other costs but previously reported that it improved its margins "primarily due to pricing benefits." In September, CEO Patrik Frisk said that high demand and supply chain issues presented an "opportunity for us to raise prices." Frisk in February touted record revenue and earnings, and his own compensation increased 111% to more than $15.5 million, or 1,485 times more than the median employee salary.
PepsiCo executives said on an earnings call that it expected "labor cost inflation to persist" but intended to "mitigate the impact of these pressures with its revenue management." The company hiked prices on its products last year and predicted additional price increases in 2022. At the same time, its net income climbed by nearly $500 million to more than $7.6 billion and it spent $5.9 billion of that on stock buybacks and shareholder dividends. The company projected it would spend even more on shareholder handouts in 2022. CEO Ramon Laguarta saw his compensation increase by more than $4 million to $25.5 million, or 488 times more than its median employee earns.
Domino's CEO Ritch Allison last year complained about labor shortages as he teased price hikes for consumers to offset wage increases. But the company's median worker pay actually fell, from $22,076 in 2020 to $17,782 in 2021. At the same time, Allison's compensation increased from $6.3 million to $7.1 million, a pay ratio of 401-to-1.
Kraft Heinz executives cited "labor constraints" and "production constraints" to investors even as it hiked prices and saw bigger profit margins than prior to the pandemic. CEO Miguel Patricio got a 40% pay increase to $8.6 million, making 190 times more than the median employee. The company's net income grew by 183% to more than $1 billion in 2021 and it spent nearly $2 billion on shareholder dividends.
Goodyear, the tire giant, raised prices four times last year, which the company said was in response to growing labor costs and other pressures. CEO Richard Kramer told investors in February that the company "achieved our highest fourth-quarter revenue in nearly 10 years" due to the higher prices. Meanwhile, median worker salary fell from $48,659 to $43,746 while Kramer's compensation increased from $16 million to $21.4 million, 490 times the average employer wage.
The Biden administration has made fighting inflation a top priority amid staggering price increases but has also sought to make clear that corporate profiteering is a major contributor to rising prices. Biden earlier this year called out meatpackers for price gouging, arguing that they had raised prices beyond the increases to their own costs.
"In too many industries, a handful of giant companies dominate the market," Biden said in January, arguing that many big companies are "making our economy less dynamic, giving themselves free rein to raise prices, reduce options for consumers or exploit workers.
Biden last year issued an executive order with 72 initiatives targeting a wide range of industries, including provisions to crack down on "anti-competitive pricing" and enhance consumer protections. He has since pushed the Federal Trade Commission to investigate price gouging by oil companies and prodded the Agriculture Department to investigate poultry and pork companies. The push also includes the Federal Maritime Commission, which Biden pressed to investigate large shipping companies in the supply chain.
Accountable.US backed Biden's efforts to target corporate profiteering in response to rising inflation.
"Can a company that posted huge new profits over the last year while rewarding shareholders and executives by millions honestly say it needed to raise prices so high, or pay their workers so little?" Herrig questioned. "Reining in runaway corporate greed is key to bringing down costs for everyday families."
Average US Taxpayer Gave $900 to Military Contractors Last Year
BY Lindsay Koshgarian, OtherWords
PUBLISHED April 17, 2022
Most of us want our tax dollars to be wisely used — especially around tax time.
You’ve probably heard a lot about corporations not paying taxes. Last year, individuals like you contributed six times more in income tax than corporations did.
But have you heard about how many of your tax dollars then end up in corporate pockets? It’s a lot — especially for corporations that contract with the Pentagon. They collect nearly half of all military spending.
The average taxpayer contributed about $2,000 to the military last year, according to a breakdown my colleagues and I prepared for the Institute for Policy Studies. More than $900 of that went to corporate military contractors.
In 2020, the largest Pentagon contractor, Lockheed Martin, took in $75 billion from taxpayers — and paid its CEO more than $23 million.
Unfortunately, this spending isn’t buying us a more secure world.
Last year, Congress added $25 billion the Pentagon didn’t ask for to its already gargantuan budget. Lawmakers even refused to let military leaders retire weapons systems they couldn’t use anymore. The extra money favored top military contractors that gave campaign money to a group of lawmakers, who refused to comment on it.
Then there’s simple price-gouging.
There’s the infamous case of TransDigm, a Pentagon contractor that charged the government $4,361 for a metal pin that should’ve cost $46 — and then refused to share cost data. Congress recently asked TransDigm to repay some of its misbegotten profits, but the Pentagon hasn’t cut off its business.
Somewhere between price-gouging and incompetence lies the F-35 jet fighter, an embarrassment the late Senator John McCain, a Pentagon booster, called “a scandal and a tragedy.”
Among the most expensive weapons systems ever, the F-35 has numerous failings. It’s spontaneously caught fire at least three times — hardly the outcome you’d expect for the top Pentagon contractor’s flagship program. The Pentagon has reduced its request for new F-35s this year by about a third, but Congress may reject that too.
Most serious of all, there’s the problem of U.S. weapons feeding conflicts in ways the Pentagon didn’t foresee, but probably should have.
When U.S. ground troops left Afghanistan, they left behind a huge array of military equipment, from armored vehicles to aircraft, that could now be in Taliban hands. The U.S. also left weapons in Iraq that fell into the hands of ISIS, including guns and an anti-tank missile.
Even weapons we sold to so-called allies like Saudi Arabia have ended up going to people affiliated with groups like al Qaeda.
Military weapons also end up on city streets at home. Over the years, civilian law agencies have received guns, armored vehicles, and even grenade launchers from the military, turning local police into near-military organizations.
Records also show that the Pentagon has lost hundreds of weapons which may have been stolen, including grenade launchers and rocket launchers. Some of these weapons have been used in crimes.
Taxpayers shouldn’t be spending $900 apiece for these outcomes. My team at the Institute for Policy Studies and others have demonstrated ways to cut up to $350 billion per year from the Pentagon budget, including what we spend on weapons contractors, without compromising our safety.
Even better, we could then put some of that money elsewhere.
Compared to the $900 for Pentagon contractors, the average taxpayer contributed only about $27 to the Centers for Disease Control and Prevention, $171 to K-12 education, and barely $5 to renewable energy.
How much more could we get if we invested even a fraction of what we spend on military contractors for these dire needs?
Most Americans support shifting Pentagon funds to pay for domestic needs. Instead of making Americans fork over another $900 to corporate military contractors this year, Congress should put our dollars to better use.
You’ve probably heard a lot about corporations not paying taxes. Last year, individuals like you contributed six times more in income tax than corporations did.
But have you heard about how many of your tax dollars then end up in corporate pockets? It’s a lot — especially for corporations that contract with the Pentagon. They collect nearly half of all military spending.
The average taxpayer contributed about $2,000 to the military last year, according to a breakdown my colleagues and I prepared for the Institute for Policy Studies. More than $900 of that went to corporate military contractors.
In 2020, the largest Pentagon contractor, Lockheed Martin, took in $75 billion from taxpayers — and paid its CEO more than $23 million.
Unfortunately, this spending isn’t buying us a more secure world.
Last year, Congress added $25 billion the Pentagon didn’t ask for to its already gargantuan budget. Lawmakers even refused to let military leaders retire weapons systems they couldn’t use anymore. The extra money favored top military contractors that gave campaign money to a group of lawmakers, who refused to comment on it.
Then there’s simple price-gouging.
There’s the infamous case of TransDigm, a Pentagon contractor that charged the government $4,361 for a metal pin that should’ve cost $46 — and then refused to share cost data. Congress recently asked TransDigm to repay some of its misbegotten profits, but the Pentagon hasn’t cut off its business.
Somewhere between price-gouging and incompetence lies the F-35 jet fighter, an embarrassment the late Senator John McCain, a Pentagon booster, called “a scandal and a tragedy.”
Among the most expensive weapons systems ever, the F-35 has numerous failings. It’s spontaneously caught fire at least three times — hardly the outcome you’d expect for the top Pentagon contractor’s flagship program. The Pentagon has reduced its request for new F-35s this year by about a third, but Congress may reject that too.
Most serious of all, there’s the problem of U.S. weapons feeding conflicts in ways the Pentagon didn’t foresee, but probably should have.
When U.S. ground troops left Afghanistan, they left behind a huge array of military equipment, from armored vehicles to aircraft, that could now be in Taliban hands. The U.S. also left weapons in Iraq that fell into the hands of ISIS, including guns and an anti-tank missile.
Even weapons we sold to so-called allies like Saudi Arabia have ended up going to people affiliated with groups like al Qaeda.
Military weapons also end up on city streets at home. Over the years, civilian law agencies have received guns, armored vehicles, and even grenade launchers from the military, turning local police into near-military organizations.
Records also show that the Pentagon has lost hundreds of weapons which may have been stolen, including grenade launchers and rocket launchers. Some of these weapons have been used in crimes.
Taxpayers shouldn’t be spending $900 apiece for these outcomes. My team at the Institute for Policy Studies and others have demonstrated ways to cut up to $350 billion per year from the Pentagon budget, including what we spend on weapons contractors, without compromising our safety.
Even better, we could then put some of that money elsewhere.
Compared to the $900 for Pentagon contractors, the average taxpayer contributed only about $27 to the Centers for Disease Control and Prevention, $171 to K-12 education, and barely $5 to renewable energy.
How much more could we get if we invested even a fraction of what we spend on military contractors for these dire needs?
Most Americans support shifting Pentagon funds to pay for domestic needs. Instead of making Americans fork over another $900 to corporate military contractors this year, Congress should put our dollars to better use.
Corporations Are Suppressing Wages. There’s an Easy Fix for That.
by Sonali Kolhatkar | the smirking chimp
March 28, 2022
Amid all the good news about successful labor organizing and job growth in the United States is the stark reality that wages continue to remain inexcusably low even as inflation rises. A new government report by numerous agencies including the U.S. Treasury Department came to the stark conclusion that corporate power is suppressing wages.
Two weeks later, the international aid organization Oxfam America released a report consistent with this finding, that millions of American workers continue to earn less than $15 an hour. People of color and particularly women of color are disproportionately impacted—as is always the case.
But, pro-corporate coverage paints a rosy picture about the U.S. economy—one that requires no intervention because things are apparently humming along just fine on their own.
The government report, barely noted in the media, was the result of a collaboration between the Treasury Department, the Department of Justice, the Department of Labor, and the Federal Trade Commission. It concluded that wages in the U.S. are 20 percent lower than they should be and that this state of affairs is the direct result of corporations wielding their power over the labor market.
Yet, conservative think tanks like the Competitive Enterprise Institute (CEI) continue to insist that wages are “naturally rising far beyond… [the federal minimum wage] due to basic supply and demand,” and therefore government intervention to raise the floor would be a bad idea. CEI cites how Target is already paying workers between $15 and $24 an hour. It offers no solution for how underpaid workers can afford to live if inflation continues to rise. Indeed, the only problem that the organization seems to care about is how rising wages could contribute to inflation.
But the Treasury Department’s report points out that corporate power is unnaturally suppressing wages in myriad ways including the offshoring of labor to nations where wages are even lower, the imposition of so-called “non-compete” contracts that undermine workers’ ability to switch jobs within their field, and the misclassification of workers that prevents them from exercising labor rights such as joining a union.
There is nothing “natural” about that.
---
According to Oxfam America’s new report, “The Crisis of Low Wages in the US,” “more than 31.9 percent of the US labor force, or 51.9 million workers, currently make less than $15 per hour, and many are stuck at the federal minimum wage.”
Dr. Kaitlyn Henderson, a senior research adviser with Oxfam America’s U.S. Domestic Policy Program, who authored the report, told me in an interview that “it is shocking, especially considering that this is the highest [that] inflation has been in four decades.”
Even those making $15 an hour earn barely enough to get by. The supposedly high upper limit “breaks down to $31,200 a year—before taxes,” explained Henderson. This means they “have a harder time keeping a roof over their head and food on the table. This is not enough for an individual to live [on], much less a working family.”
If this crisis is not apparent to the public, we can thank institutions like CEI that spread nonsense about wages “naturally” rising, and the corporate media’s near-exclusive focus on the number of jobs over the quality of jobs and pay. Media outlets routinely obscure the catastrophe of low wages each month when the Labor Department’s jobs report generates stories that focus on employment numbers and little else.
For example, the New York Times on March 4 covered the February 2022 report signaling “a flood of new jobs and new workers last month,” which to the paper meant that “the pandemic’s vise grip on the economy may be loosening.” The story featured quotes from pro-corporate economists such as Morgan Stanley’s Robert Rosener who said, “We’ve continually been surprised by the resilience of the U.S. labor market.”
This upbeat tone continued throughout the story, even when discussing wages: “The labor force grew, unemployment fell, and average hourly earnings were virtually unchanged from January, although they are up significantly over the past year, particularly for workers in low-wage industries.”
Anyone reading the New York Times or CEI’s reports would come away feeling optimistic about the state of the economy and adopt a hands-off approach. But Oxfam America’s report, which covers wages through December 2021, arrives at a very different conclusion where nearly a third of workers are scraping by on meager wages. “In the United States, the value we attribute to shareholders is somehow greater than the value we attribute to the workers who make our society function,” writes Henderson in the report.
Another major blind spot in pro-corporate economic coverage is how income inequality is delineated along racial lines. According to Henderson, “low-wage workers are disproportionately women, people of color, and women of color especially.” Henderson referred to the “occupational segregation” that Black and Latino workers are subjected to.
“When you’re thinking about it through an intersectional lens, where you’re considering race and gender, the pay gap increases substantially,” Henderson told me. So, women of color, who are overrepresented in industries like child care, are among the hardest hit. It should not surprise us then that, as per Henderson, “Child care is one of the lowest-paid professions in the United States,” and this “reflects the value system we have in this country.”
The Center on Budget and Policy Priorities (CBPP) suggested that while elite figures and institutions were celebrating Women’s History Month in March, one way to put their money where their mouths are is to support the women who work in child care and home health care. CBPP’s Diana Azevedo-McCaffrey wrote that the women of color who dominate these industries and are grossly underpaid to do so are “performing the labor that underpins the nation’s economy and maintains families’ health and well-being.”
CBPP backs myriad basic federal policies to fix this problem, including paid leave and federal funding for child care and home health care. Similarly, Oxfam America backs straightforward solutions such as federal funding boosts as well as the passage of the Raise the Wage Act, which would gradually raise the federal minimum wage from $7.25 an hour to $15 an hour—hardly a big ask 10 years after the Fight for Fifteen movement, and already inadequate to meet working people’s needs.
The problem of low wages in the U.S. ought to shock us, in spite of the pro-corporate optimism about the economy and the media’s refusal to amplify the problem. The solutions are obvious, easy, and hardly radical.
Two weeks later, the international aid organization Oxfam America released a report consistent with this finding, that millions of American workers continue to earn less than $15 an hour. People of color and particularly women of color are disproportionately impacted—as is always the case.
But, pro-corporate coverage paints a rosy picture about the U.S. economy—one that requires no intervention because things are apparently humming along just fine on their own.
The government report, barely noted in the media, was the result of a collaboration between the Treasury Department, the Department of Justice, the Department of Labor, and the Federal Trade Commission. It concluded that wages in the U.S. are 20 percent lower than they should be and that this state of affairs is the direct result of corporations wielding their power over the labor market.
Yet, conservative think tanks like the Competitive Enterprise Institute (CEI) continue to insist that wages are “naturally rising far beyond… [the federal minimum wage] due to basic supply and demand,” and therefore government intervention to raise the floor would be a bad idea. CEI cites how Target is already paying workers between $15 and $24 an hour. It offers no solution for how underpaid workers can afford to live if inflation continues to rise. Indeed, the only problem that the organization seems to care about is how rising wages could contribute to inflation.
But the Treasury Department’s report points out that corporate power is unnaturally suppressing wages in myriad ways including the offshoring of labor to nations where wages are even lower, the imposition of so-called “non-compete” contracts that undermine workers’ ability to switch jobs within their field, and the misclassification of workers that prevents them from exercising labor rights such as joining a union.
There is nothing “natural” about that.
---
According to Oxfam America’s new report, “The Crisis of Low Wages in the US,” “more than 31.9 percent of the US labor force, or 51.9 million workers, currently make less than $15 per hour, and many are stuck at the federal minimum wage.”
Dr. Kaitlyn Henderson, a senior research adviser with Oxfam America’s U.S. Domestic Policy Program, who authored the report, told me in an interview that “it is shocking, especially considering that this is the highest [that] inflation has been in four decades.”
Even those making $15 an hour earn barely enough to get by. The supposedly high upper limit “breaks down to $31,200 a year—before taxes,” explained Henderson. This means they “have a harder time keeping a roof over their head and food on the table. This is not enough for an individual to live [on], much less a working family.”
If this crisis is not apparent to the public, we can thank institutions like CEI that spread nonsense about wages “naturally” rising, and the corporate media’s near-exclusive focus on the number of jobs over the quality of jobs and pay. Media outlets routinely obscure the catastrophe of low wages each month when the Labor Department’s jobs report generates stories that focus on employment numbers and little else.
For example, the New York Times on March 4 covered the February 2022 report signaling “a flood of new jobs and new workers last month,” which to the paper meant that “the pandemic’s vise grip on the economy may be loosening.” The story featured quotes from pro-corporate economists such as Morgan Stanley’s Robert Rosener who said, “We’ve continually been surprised by the resilience of the U.S. labor market.”
This upbeat tone continued throughout the story, even when discussing wages: “The labor force grew, unemployment fell, and average hourly earnings were virtually unchanged from January, although they are up significantly over the past year, particularly for workers in low-wage industries.”
Anyone reading the New York Times or CEI’s reports would come away feeling optimistic about the state of the economy and adopt a hands-off approach. But Oxfam America’s report, which covers wages through December 2021, arrives at a very different conclusion where nearly a third of workers are scraping by on meager wages. “In the United States, the value we attribute to shareholders is somehow greater than the value we attribute to the workers who make our society function,” writes Henderson in the report.
Another major blind spot in pro-corporate economic coverage is how income inequality is delineated along racial lines. According to Henderson, “low-wage workers are disproportionately women, people of color, and women of color especially.” Henderson referred to the “occupational segregation” that Black and Latino workers are subjected to.
“When you’re thinking about it through an intersectional lens, where you’re considering race and gender, the pay gap increases substantially,” Henderson told me. So, women of color, who are overrepresented in industries like child care, are among the hardest hit. It should not surprise us then that, as per Henderson, “Child care is one of the lowest-paid professions in the United States,” and this “reflects the value system we have in this country.”
The Center on Budget and Policy Priorities (CBPP) suggested that while elite figures and institutions were celebrating Women’s History Month in March, one way to put their money where their mouths are is to support the women who work in child care and home health care. CBPP’s Diana Azevedo-McCaffrey wrote that the women of color who dominate these industries and are grossly underpaid to do so are “performing the labor that underpins the nation’s economy and maintains families’ health and well-being.”
CBPP backs myriad basic federal policies to fix this problem, including paid leave and federal funding for child care and home health care. Similarly, Oxfam America backs straightforward solutions such as federal funding boosts as well as the passage of the Raise the Wage Act, which would gradually raise the federal minimum wage from $7.25 an hour to $15 an hour—hardly a big ask 10 years after the Fight for Fifteen movement, and already inadequate to meet working people’s needs.
The problem of low wages in the U.S. ought to shock us, in spite of the pro-corporate optimism about the economy and the media’s refusal to amplify the problem. The solutions are obvious, easy, and hardly radical.
Amazon Dodged $5.2 Billion in Taxes Last Year, Report Finds
BY Sharon Zhang, Truthout
PUBLISHED February 8, 2022
Thanks to a tax code that favors corporations and the wealthy, Amazon was able to dodge billions of dollars of federal income taxes in 2021, a new report has found.
According to the Institute on Taxation and Economic Policy (ITEP), the tech behemoth reported record profits last year, raking in $35 billion – 75 percent more than they made in 2020, which was also a record year for the company.
Despite these record profits, the company paid a federal income tax rate of 6.1 percent, or $2.1 billion, in 2021. If the company hadn’t benefited from tax breaks and had paid the already low statutory corporate tax rate of 21 percent, it would have paid $7.3 billion in federal tax. This means that the company successfully dodged $5.2 billion in corporate taxes last year.
Since 2018, the company has only paid an average effective tax rate of 5.1 percent. In 2018 and 2019, Amazon’s tax dodging was especially egregious; in 2019, the company paid 1.2 percent in federal income taxes. The year before, the company paid a negative 1.2 percent tax rate, meaning that it received more money from the government than it paid in taxes.
“It has been well documented for decades that Amazon’s strategy for retail dominance rests on two tactics: avoiding taxes and using the savings to finance a slow strangulation of its retail competition,” the authors of the ITEP report wrote. “First at the state and local level, then federally and internationally, Amazon has bullied lawmakers into bending tax laws to its advantage and made that the source of its competitive advantage over small businesses in the retail space.”
In their calculations, the report’s authors took into account tax credits, excess stock option deductions, and other tax breaks. Congress has the power to end these tax breaks as long as lawmakers can summon the political will, they pointed out.
Corporate tax dodging runs rampant among large corporations. Last week, ITEP reported that Netflix also dodged a huge amount of federal income taxes last year. Though it made record profits in 2021 – nearly doubling its profits over 2020 – the company paid only $58 million in taxes, or a 1.1 percent rate. This means that the company dodged over $1 billion in taxes last year.
In response to the report, Sen. Bernie Sanders (I-Vermont) reiterated the progressive call to tax the rich. “Corporate greed is Netflix making a record-breaking $5.1 billion profit, giving its CEO $43 million in total compensation, avoiding over $1 billion in taxes and paying a 1.1 percent effective federal income tax rate – a lower tax rate than a nurse, teacher or truck driver,” he said.
As the authors of the ITEP report noted, Congress can implement simple reforms like the extremely popular corporate minimum tax rate to make it much harder for large corporations to dodge taxes to this degree in the future. The corporate minimum tax would create a minimum tax rate of 15 percent for profits over $1 billion. It would also levy the tax on book profits – the profits that the company reports to shareholders – rather than the deflated profits that the company reports to the government.
Although Democrats were considering including the corporate minimum tax in the Build Back Better Act, the corporate-backed Sen. Joe Manchin (D-West Virginia) has declared that the bill is now dead.
Without tax reforms for corporations, the government will continue to miss out on billions of dollars of revenue each year due to tax dodging. Last year, ITEP found that 20 corporations had paid $0 in federal taxes in 2020, with many companies paying a negative effective tax rate due to tax breaks. Tax dodgers included companies like Nike and FedEx and energy companies like American Electric Power and Duke Energy.
According to the Institute on Taxation and Economic Policy (ITEP), the tech behemoth reported record profits last year, raking in $35 billion – 75 percent more than they made in 2020, which was also a record year for the company.
Despite these record profits, the company paid a federal income tax rate of 6.1 percent, or $2.1 billion, in 2021. If the company hadn’t benefited from tax breaks and had paid the already low statutory corporate tax rate of 21 percent, it would have paid $7.3 billion in federal tax. This means that the company successfully dodged $5.2 billion in corporate taxes last year.
Since 2018, the company has only paid an average effective tax rate of 5.1 percent. In 2018 and 2019, Amazon’s tax dodging was especially egregious; in 2019, the company paid 1.2 percent in federal income taxes. The year before, the company paid a negative 1.2 percent tax rate, meaning that it received more money from the government than it paid in taxes.
“It has been well documented for decades that Amazon’s strategy for retail dominance rests on two tactics: avoiding taxes and using the savings to finance a slow strangulation of its retail competition,” the authors of the ITEP report wrote. “First at the state and local level, then federally and internationally, Amazon has bullied lawmakers into bending tax laws to its advantage and made that the source of its competitive advantage over small businesses in the retail space.”
In their calculations, the report’s authors took into account tax credits, excess stock option deductions, and other tax breaks. Congress has the power to end these tax breaks as long as lawmakers can summon the political will, they pointed out.
Corporate tax dodging runs rampant among large corporations. Last week, ITEP reported that Netflix also dodged a huge amount of federal income taxes last year. Though it made record profits in 2021 – nearly doubling its profits over 2020 – the company paid only $58 million in taxes, or a 1.1 percent rate. This means that the company dodged over $1 billion in taxes last year.
In response to the report, Sen. Bernie Sanders (I-Vermont) reiterated the progressive call to tax the rich. “Corporate greed is Netflix making a record-breaking $5.1 billion profit, giving its CEO $43 million in total compensation, avoiding over $1 billion in taxes and paying a 1.1 percent effective federal income tax rate – a lower tax rate than a nurse, teacher or truck driver,” he said.
As the authors of the ITEP report noted, Congress can implement simple reforms like the extremely popular corporate minimum tax rate to make it much harder for large corporations to dodge taxes to this degree in the future. The corporate minimum tax would create a minimum tax rate of 15 percent for profits over $1 billion. It would also levy the tax on book profits – the profits that the company reports to shareholders – rather than the deflated profits that the company reports to the government.
Although Democrats were considering including the corporate minimum tax in the Build Back Better Act, the corporate-backed Sen. Joe Manchin (D-West Virginia) has declared that the bill is now dead.
Without tax reforms for corporations, the government will continue to miss out on billions of dollars of revenue each year due to tax dodging. Last year, ITEP found that 20 corporations had paid $0 in federal taxes in 2020, with many companies paying a negative effective tax rate due to tax breaks. Tax dodgers included companies like Nike and FedEx and energy companies like American Electric Power and Duke Energy.
THE WONDERS OF SLAVE-CAPITALISM!!!
US’s Richest Families Set to Dodge $8.4 Trillion in Taxes Over Next Decades
BY Sharon Zhang, Truthout
PUBLISHED February 3, 2022
The richest families in the U.S. are set to dodge trillions of dollars’ worth of taxes in the coming decades thanks to tax loopholes, according to a new report.
If lawmakers keep the current maximum estate tax rate of 40 percent, the richest families will dodge roughly $8.4 trillion in taxes over the next 24 years, Americans for Tax Fairness found in its report. Meanwhile, between now and 2045, the top 0.5 percent of wealthy families will pass on an estimated $21 trillion to their heirs.
As the report notes, capturing $8.4 trillion in dynastic wealth would allow the government to implement the Build Back Better Act for the next four decades, as the House-passed version of the bill was slated to cost $1.75 trillion over a decade.
Tax loopholes allow families to avoid the estate tax, gift taxes and wealth transfer taxes. Although Donald Trump and congressional Republicans doubled the estate tax exemption during the first year of Trump’s presidency, Democratic lawmakers didn’t address estate and generational tax loopholes in the tax reform section of the Build Back Better Act.
Under the Trump-implemented rule, which is pegged to inflation, estate values of up to $12 million for individuals and up to $24 million for married couples can be passed on tax-free. This is such a high amount that only 0.1 percent of estates owe the estate tax.
According to the report, wealth-transfer tax avoidance “has played an outsized role in our return to Gilded Age levels of wealth concentration.” Failing to impose estate taxes, gift taxes and generation-skipping tax exemptions is threatening not only the U.S. economy, but also the “stability of American democracy,” the report says.
“No justification exists for the failure of policy makers to end this scandal,” it continues. “There is no constituency supporting these enormous tax loopholes except the ultrarich and the wealth-protection industry they employ. They serve no societal purpose.”
The report’s authors go on to suggest levying a tax on undistributed trust income in order to disincentivize the accumulation of wealth within the trust. They also suggest implementing a 2 percent wealth tax on trust holdings that exceed $50 million and a 3 percent tax on holdings over $1 billion – the same wealth tax proposed by Sen. Elizabeth Warren (D-Massachusetts).
Part of the reason why lawmakers have yet to address issues of accumulating dynastic wealth is the outsized power that the wealthy have on politics, the report’s authors point out.
Despite campaigning on estate and gift tax reforms, President Joe Biden didn’t include any such measures in his Build Back Better proposal, even though he did include other taxes on the rich.
“His proposal to eliminate stepped-up basis – an income-tax policy that allows the wealthy, including billionaires, to entirely escape income tax on a lifetime of investment gains – was abandoned after wealthy opponents went on the attack, using phony claims that the proposal threatened America’s family farms and small businesses,” the report says.
In response to the report, lawmakers have reignited calls to tax the rich. “We can afford Build Back Better – four times over, as a matter of fact,” wrote Rep. Bonnie Watson (D-New Jersey). “For the lawmakers who opposed the bill, affordability was never *really* the issue. For them, protecting special interests was worth the cost of hurting working families. The rich must pay their fair share.”
If lawmakers keep the current maximum estate tax rate of 40 percent, the richest families will dodge roughly $8.4 trillion in taxes over the next 24 years, Americans for Tax Fairness found in its report. Meanwhile, between now and 2045, the top 0.5 percent of wealthy families will pass on an estimated $21 trillion to their heirs.
As the report notes, capturing $8.4 trillion in dynastic wealth would allow the government to implement the Build Back Better Act for the next four decades, as the House-passed version of the bill was slated to cost $1.75 trillion over a decade.
Tax loopholes allow families to avoid the estate tax, gift taxes and wealth transfer taxes. Although Donald Trump and congressional Republicans doubled the estate tax exemption during the first year of Trump’s presidency, Democratic lawmakers didn’t address estate and generational tax loopholes in the tax reform section of the Build Back Better Act.
Under the Trump-implemented rule, which is pegged to inflation, estate values of up to $12 million for individuals and up to $24 million for married couples can be passed on tax-free. This is such a high amount that only 0.1 percent of estates owe the estate tax.
According to the report, wealth-transfer tax avoidance “has played an outsized role in our return to Gilded Age levels of wealth concentration.” Failing to impose estate taxes, gift taxes and generation-skipping tax exemptions is threatening not only the U.S. economy, but also the “stability of American democracy,” the report says.
“No justification exists for the failure of policy makers to end this scandal,” it continues. “There is no constituency supporting these enormous tax loopholes except the ultrarich and the wealth-protection industry they employ. They serve no societal purpose.”
The report’s authors go on to suggest levying a tax on undistributed trust income in order to disincentivize the accumulation of wealth within the trust. They also suggest implementing a 2 percent wealth tax on trust holdings that exceed $50 million and a 3 percent tax on holdings over $1 billion – the same wealth tax proposed by Sen. Elizabeth Warren (D-Massachusetts).
Part of the reason why lawmakers have yet to address issues of accumulating dynastic wealth is the outsized power that the wealthy have on politics, the report’s authors point out.
Despite campaigning on estate and gift tax reforms, President Joe Biden didn’t include any such measures in his Build Back Better proposal, even though he did include other taxes on the rich.
“His proposal to eliminate stepped-up basis – an income-tax policy that allows the wealthy, including billionaires, to entirely escape income tax on a lifetime of investment gains – was abandoned after wealthy opponents went on the attack, using phony claims that the proposal threatened America’s family farms and small businesses,” the report says.
In response to the report, lawmakers have reignited calls to tax the rich. “We can afford Build Back Better – four times over, as a matter of fact,” wrote Rep. Bonnie Watson (D-New Jersey). “For the lawmakers who opposed the bill, affordability was never *really* the issue. For them, protecting special interests was worth the cost of hurting working families. The rich must pay their fair share.”
Wyoming revealed as one of world's top tax havens with 'Cowboy Cocktail' scheme to hide money
Bob Brigham - RAW STORY
December 20, 2021
Wyoming has become a worldwide tax haven, according to information revealed in the Pandora Papers trove of documents on the ultra rich.
A new story in The Washington Post highlight's Wyoming's "Cowboy Cocktail system of hiding wealth.
"The cocktail and variations of it — consisting of a Wyoming trust and layers of private companies with concealed ownership — allow the world’s wealthy to move and spend money in extraordinary secrecy, protected by some of the strongest privacy laws in the country and, in some cases, without even the cursory oversight performed by regulators in other states," the newspaper reported. "A dozen international clients who created Wyoming trusts were identified in the Pandora Papers, a trove of more than 11.9 million records obtained by the International Consortium of Investigative Journalists (ICIJ) and shared with The Washington Post that expose the movement of wealth around the world. The documents offer a rare look at Wyoming’s discreet financial sector and the people who rely on its services."
The newspaper noted Moscow billionaire Igor Makarov, the matriarch of Argentina’s Baggio family, and Kalil Haché Malkún of the Dominican Republic.
"For years, anti-money-laundering experts and law enforcement have warned federal and state lawmakers that suspect money was flowing into U.S. tax havens, eluding taxing authorities, creditors and criminal investigators. In Wyoming, with the support of state lawmakers, the industry charged ahead, promoting a suite of financial arrangements to potential customers around the world," the newspaper reported. "At the heart of those arrangements are trusts, legal agreements that allow people to stash away money and other assets so they are protected from creditors and incur few or no tax obligations for themselves or their heirs."
Wyoming does not have a personal income tax or corporate income tax.
"In a competitive global market, Wyoming’s financial incentives have stood out. One trust company 8,700 miles away in Singapore recommended Wyoming on its website as a go-to tax haven that would 'completely shield' clients’ names and assets. 'Offshore Wyoming, USA,' noted another firm, this one in Ukraine’s bustling capital, Kyiv," the newspaper reported.
In his 2020 book Billionaire Wildness, Justin Farrell noted that Jackson's Teton County has become the richest county in America — and the county with the worst income inequality.
"For better or worse, specific government policies have contributed to the local changes we have seen. It is not the cause of random market forces, but deliberate choices for one tax policy over another. And even if these choices result in staggering wealth inequality, or cost the state dearly in much needed tax revenue, policies remain unchanged because of Wyoming's longstanding anti-federalist streak that has created an all-out aversion to new taxes, even if it means cutting off your nose to spite your face," Farrell explained.
A new story in The Washington Post highlight's Wyoming's "Cowboy Cocktail system of hiding wealth.
"The cocktail and variations of it — consisting of a Wyoming trust and layers of private companies with concealed ownership — allow the world’s wealthy to move and spend money in extraordinary secrecy, protected by some of the strongest privacy laws in the country and, in some cases, without even the cursory oversight performed by regulators in other states," the newspaper reported. "A dozen international clients who created Wyoming trusts were identified in the Pandora Papers, a trove of more than 11.9 million records obtained by the International Consortium of Investigative Journalists (ICIJ) and shared with The Washington Post that expose the movement of wealth around the world. The documents offer a rare look at Wyoming’s discreet financial sector and the people who rely on its services."
The newspaper noted Moscow billionaire Igor Makarov, the matriarch of Argentina’s Baggio family, and Kalil Haché Malkún of the Dominican Republic.
"For years, anti-money-laundering experts and law enforcement have warned federal and state lawmakers that suspect money was flowing into U.S. tax havens, eluding taxing authorities, creditors and criminal investigators. In Wyoming, with the support of state lawmakers, the industry charged ahead, promoting a suite of financial arrangements to potential customers around the world," the newspaper reported. "At the heart of those arrangements are trusts, legal agreements that allow people to stash away money and other assets so they are protected from creditors and incur few or no tax obligations for themselves or their heirs."
Wyoming does not have a personal income tax or corporate income tax.
"In a competitive global market, Wyoming’s financial incentives have stood out. One trust company 8,700 miles away in Singapore recommended Wyoming on its website as a go-to tax haven that would 'completely shield' clients’ names and assets. 'Offshore Wyoming, USA,' noted another firm, this one in Ukraine’s bustling capital, Kyiv," the newspaper reported.
In his 2020 book Billionaire Wildness, Justin Farrell noted that Jackson's Teton County has become the richest county in America — and the county with the worst income inequality.
"For better or worse, specific government policies have contributed to the local changes we have seen. It is not the cause of random market forces, but deliberate choices for one tax policy over another. And even if these choices result in staggering wealth inequality, or cost the state dearly in much needed tax revenue, policies remain unchanged because of Wyoming's longstanding anti-federalist streak that has created an all-out aversion to new taxes, even if it means cutting off your nose to spite your face," Farrell explained.
MERCK SELLS FEDERALLY FINANCED COVID PILL TO U.S. FOR 40 TIMES WHAT IT COSTS TO MAKE
The Covid-19 treatment molnupiravir was developed using funding from the National Institutes of Health and the Department of Defense.
Sharon Lerner - THE INTERCEPT
October 5 2021, 1:22 p.m.
A FIVE-DAY COURSE of molnupiravir, the new medicine being hailed as a “huge advance” in the treatment of Covid-19, costs $17.74 to produce, according to a report issued last week by drug pricing experts at the Harvard School of Public Health and King’s College Hospital in London. Merck is charging the U.S. government $712 for the same amount of medicine, or 40 times the price.
Last Friday’s announcement that the new medicine cut the risk of hospitalization among clinical trial participants with moderate or mild illness in half could have huge implications for the course of the coronavirus pandemic. Because it’s a pill — as opposed to monoclonal antibodies, a comparable antiviral treatment that is administered intravenously — molnupiravir is expected to be more widely used and, hopefully, will cut the death rate. In the first 29 days of the trial, no deaths were reported among the 385 patients who received the drug, while eight of the people who received a placebo died, according to the statement put out by Merck and Ridgeback Biotherapeutics, the two companies that are jointly launching it.
In addition to having huge implications for health, the pill could bring staggering profits to both Merck and Ridgeback Biotherapeutics. A small Miami-based company, Ridgeback licensed the medicine from Emory University in 2020 and two months later sold the worldwide rights to the drug to Merck for an undisclosed sum. Although Ridgeback remains involved in the development of the drug, some have described the deal as “flipping.”
Like the vast majority of medicines on the market, molnupiravir — which was originally investigated as a possible treatment for Venezuelan equine encephalitis — was developed using government funds. The Defense Threat Reduction Agency, a division of the Department of Defense, provided more than $10 million of funding in 2013 and 2015 to Emory University, as research done by the nonprofit Knowledge Ecology International has revealed. The National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, also provided Emory with more than $19 million in additional grants.
Yet only Merck and Ridgeback will reap the profits from the new antiviral, which according to Quartz could bring in as much as $7 billion by the end of this year. After the announcement of the encouraging clinical trial results on Friday, Merck’s stock price climbed, while stock prices of some vaccine makers sagged. Despite its initial investment, the U.S. government seems to be facing a steep markup in prices. In June, the government signed a $1.2 billion contract with Merck to supply 1.7 million courses of the medication at the $712 price. The transaction is due to take place as soon as molnupiravir receives emergency use authorization from the Food and Drug Administration.
Reasonable Terms
Good government advocates are pointing out that because federal agencies spent at least $29 million on the drug’s development, the government has the obligation to ensure that the medicine is affordable. “The public funded this drug, and therefore the public has some rights, including the rights you have it available under reasonable terms,” said Luis Gil Abinader, senior researcher at Knowledge Ecology International.
In an interview on CNBC, Ridgeback co-founder Wendy Holman noted that the company asked for but “never got government funding” to help manufacture molnupiravir. A whistleblower complaint filed by Rick Bright, the former director of the Biomedical Advanced Research and Development Authority, or BARDA, in May 2020, described Ridgeback’s unsuccessful efforts “to secure approximately $100 million” from BARDA to develop the drug as a Covid-19 treatment. The company’s press release about the study results also noted that “since licensed by Ridgeback, all funds used for the development of molnupiravir have been provided by Merck and by Wayne and Wendy Holman of Ridgeback.”
Abinader was critical of Ridgeback’s failure to acknowledge the government’s initial investment in the drug before the company acquired it. “What they want to do, apparently, is to shape the narrative about who paid for the development of this drug in order to avoid demands from the public to make it available at reasonable prices,” he said.
In an emailed response to questions submitted to Ridgeback Biotherapeutics for this article, Davidson Goldin wrote, “Ridgeback has never received any government funding for molnupiravir and self-funded the development of this medicine for treating SARS-CoV-2 when the government did not provide financial support.” Merck did not respond to inquiries about this article.
No Strings Attached
Merck has promised to make molnupiravir accessible around the world and has already entered into licensing agreements with five Indian companies that manufacture generic drugs. “Merck has committed to providing timely access to molnupiravir globally, if it is authorized or approved, and plans to implement a tiered pricing approach based on World Bank country income criteria to reflect countries’ relative ability to finance their health response to the pandemic,” the company said in its announcement of the trial results on Friday. Indian companies are planning to price the drug at less than $12 for a five-day course, according to recent reports.
In the U.S., and likely in many upper-middle-income and all high-income countries, the price will be determined by the market. Noting that the treatment may be offered to people who are not yet severely sick with Covid-19, health advocates fear that will mean some in these countries will not be able to afford the new drug. “Offering someone a $700 treatment when they don’t yet feel that ill is going to mean that a lot of people are not going to take it,” said Dzintars Gotham, a physician at King’s College Hospital in London and a co-author of the report on the pricing of molnupiravir. According to the report, pricing molnupiravir at $19.99 would allow a company a 10 percent profit margin.
Melissa Barber, a doctoral candidate at the Harvard School of Public Health and co-author of the report on molnupiravir, said that, while its pricing is not as extreme as that of some other drugs, it will likely still place the antiviral out of reach of some who could benefit from it. “If you can’t afford medicine because it’s 1,000 times more than you can afford, or because it’s 100 times more than you can afford, it doesn’t matter,” said Barber. “Those are both bad.”
Barber and Gotham acknowledge that the $17.74 cost of producing a five-day course of the antiviral pills is an estimate but said that the algorithm they used, and have employed to estimate the production costs for hundreds of drugs, tends to result in overestimates in the long run.
Meanwhile, the prices that private companies charge for drugs tend to go up rather than down. “For all these deals that have happened for therapeutics or vaccines, the price has only increased as uncertainty has decreased,” she said. “One price is given and then, for the next sale, the price goes up. The price went up for other drugs and vaccines, so I would be very surprised if this price didn’t go up, too.”
The pricing differential should be grounds to demand a better price under the Bayh-Dole Act, according to Knowledge Ecology International’s Abinader. Bayh-Dole, passed in 1980, regulates the transfer of federally funded inventions into commercial property and allows the government to “march in” and suspend the use of patents that were developed with government funding if it determines that the products are excessively priced.
“The pressure for march-in rights around this drug is going to be huge,” predicted Abinader, who suggested that the government could use the law to lower the price of molnupiravir. “When the Biden administration negotiates another supply agreement with Merck, they should probably leverage those rights in order to get a better price,” he said.
According to Gotham, who is based in London, the short story of molnupiravir already sums up the best and the worst of the U.S. pharmaceutical system. “It’s a great coup that the American government funded some scientists to develop antivirals,” he said. “The great tragedy is that, after their great success, they just gave it away to private industry with apparently no strings attached.”
Last Friday’s announcement that the new medicine cut the risk of hospitalization among clinical trial participants with moderate or mild illness in half could have huge implications for the course of the coronavirus pandemic. Because it’s a pill — as opposed to monoclonal antibodies, a comparable antiviral treatment that is administered intravenously — molnupiravir is expected to be more widely used and, hopefully, will cut the death rate. In the first 29 days of the trial, no deaths were reported among the 385 patients who received the drug, while eight of the people who received a placebo died, according to the statement put out by Merck and Ridgeback Biotherapeutics, the two companies that are jointly launching it.
In addition to having huge implications for health, the pill could bring staggering profits to both Merck and Ridgeback Biotherapeutics. A small Miami-based company, Ridgeback licensed the medicine from Emory University in 2020 and two months later sold the worldwide rights to the drug to Merck for an undisclosed sum. Although Ridgeback remains involved in the development of the drug, some have described the deal as “flipping.”
Like the vast majority of medicines on the market, molnupiravir — which was originally investigated as a possible treatment for Venezuelan equine encephalitis — was developed using government funds. The Defense Threat Reduction Agency, a division of the Department of Defense, provided more than $10 million of funding in 2013 and 2015 to Emory University, as research done by the nonprofit Knowledge Ecology International has revealed. The National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, also provided Emory with more than $19 million in additional grants.
Yet only Merck and Ridgeback will reap the profits from the new antiviral, which according to Quartz could bring in as much as $7 billion by the end of this year. After the announcement of the encouraging clinical trial results on Friday, Merck’s stock price climbed, while stock prices of some vaccine makers sagged. Despite its initial investment, the U.S. government seems to be facing a steep markup in prices. In June, the government signed a $1.2 billion contract with Merck to supply 1.7 million courses of the medication at the $712 price. The transaction is due to take place as soon as molnupiravir receives emergency use authorization from the Food and Drug Administration.
Reasonable Terms
Good government advocates are pointing out that because federal agencies spent at least $29 million on the drug’s development, the government has the obligation to ensure that the medicine is affordable. “The public funded this drug, and therefore the public has some rights, including the rights you have it available under reasonable terms,” said Luis Gil Abinader, senior researcher at Knowledge Ecology International.
In an interview on CNBC, Ridgeback co-founder Wendy Holman noted that the company asked for but “never got government funding” to help manufacture molnupiravir. A whistleblower complaint filed by Rick Bright, the former director of the Biomedical Advanced Research and Development Authority, or BARDA, in May 2020, described Ridgeback’s unsuccessful efforts “to secure approximately $100 million” from BARDA to develop the drug as a Covid-19 treatment. The company’s press release about the study results also noted that “since licensed by Ridgeback, all funds used for the development of molnupiravir have been provided by Merck and by Wayne and Wendy Holman of Ridgeback.”
Abinader was critical of Ridgeback’s failure to acknowledge the government’s initial investment in the drug before the company acquired it. “What they want to do, apparently, is to shape the narrative about who paid for the development of this drug in order to avoid demands from the public to make it available at reasonable prices,” he said.
In an emailed response to questions submitted to Ridgeback Biotherapeutics for this article, Davidson Goldin wrote, “Ridgeback has never received any government funding for molnupiravir and self-funded the development of this medicine for treating SARS-CoV-2 when the government did not provide financial support.” Merck did not respond to inquiries about this article.
No Strings Attached
Merck has promised to make molnupiravir accessible around the world and has already entered into licensing agreements with five Indian companies that manufacture generic drugs. “Merck has committed to providing timely access to molnupiravir globally, if it is authorized or approved, and plans to implement a tiered pricing approach based on World Bank country income criteria to reflect countries’ relative ability to finance their health response to the pandemic,” the company said in its announcement of the trial results on Friday. Indian companies are planning to price the drug at less than $12 for a five-day course, according to recent reports.
In the U.S., and likely in many upper-middle-income and all high-income countries, the price will be determined by the market. Noting that the treatment may be offered to people who are not yet severely sick with Covid-19, health advocates fear that will mean some in these countries will not be able to afford the new drug. “Offering someone a $700 treatment when they don’t yet feel that ill is going to mean that a lot of people are not going to take it,” said Dzintars Gotham, a physician at King’s College Hospital in London and a co-author of the report on the pricing of molnupiravir. According to the report, pricing molnupiravir at $19.99 would allow a company a 10 percent profit margin.
Melissa Barber, a doctoral candidate at the Harvard School of Public Health and co-author of the report on molnupiravir, said that, while its pricing is not as extreme as that of some other drugs, it will likely still place the antiviral out of reach of some who could benefit from it. “If you can’t afford medicine because it’s 1,000 times more than you can afford, or because it’s 100 times more than you can afford, it doesn’t matter,” said Barber. “Those are both bad.”
Barber and Gotham acknowledge that the $17.74 cost of producing a five-day course of the antiviral pills is an estimate but said that the algorithm they used, and have employed to estimate the production costs for hundreds of drugs, tends to result in overestimates in the long run.
Meanwhile, the prices that private companies charge for drugs tend to go up rather than down. “For all these deals that have happened for therapeutics or vaccines, the price has only increased as uncertainty has decreased,” she said. “One price is given and then, for the next sale, the price goes up. The price went up for other drugs and vaccines, so I would be very surprised if this price didn’t go up, too.”
The pricing differential should be grounds to demand a better price under the Bayh-Dole Act, according to Knowledge Ecology International’s Abinader. Bayh-Dole, passed in 1980, regulates the transfer of federally funded inventions into commercial property and allows the government to “march in” and suspend the use of patents that were developed with government funding if it determines that the products are excessively priced.
“The pressure for march-in rights around this drug is going to be huge,” predicted Abinader, who suggested that the government could use the law to lower the price of molnupiravir. “When the Biden administration negotiates another supply agreement with Merck, they should probably leverage those rights in order to get a better price,” he said.
According to Gotham, who is based in London, the short story of molnupiravir already sums up the best and the worst of the U.S. pharmaceutical system. “It’s a great coup that the American government funded some scientists to develop antivirals,” he said. “The great tragedy is that, after their great success, they just gave it away to private industry with apparently no strings attached.”
Trashing the planet and hiding the money isn’t a perversion of capitalism. It is capitalism
Exploiting people, exploiting land, and keeping its ugly side secret. Its historical effects are all too recognisable in the Pandora papers now
George Monbiot - THE GUARDIAN
10/6/2021
Whenever there’s a leak of documents from the remote islands and obscure jurisdictions where rich people hide their money, such as this week’s release of the Pandora papers, we ask ourselves how such things could happen. How did we end up with a global system that enables great wealth to be transferred offshore, untaxed and hidden from public view? Politicians condemn it as “the unacceptable face of capitalism”. But it’s not. It is the face of capitalism.
Capitalism was arguably born on a remote island. A few decades after the Portuguese colonised Madeira in 1420, they developed a system that differed in some respects from anything that had gone before. By felling the forests after which they named the island (madeira is Portuguese for wood), they created, in this uninhabited sphere, a blank slate – a terra nullius – in which a new economy could be built. Financed by bankers in Genoa and Flanders, they transported enslaved people from Africa to plant and process sugar. They developed an economy in which land, labour and money lost their previous social meaning and became tradable commodities.
As the geographer Jason Moore points out in the journal Review, a small amount of capital could be used, in these circumstances, to grab a vast amount of natural wealth. On Madeira’s rich soil, using the abundant wood as fuel, slave labour achieved a previously unimaginable productivity. In the 1470s, this tiny island became the world’s biggest producer of sugar.
Madeira’s economy also had another characteristic that distinguished it from what had gone before: the astonishing speed at which it worked through the island’s natural wealth. Sugar production peaked in 1506. By 1525 it had fallen by almost 80%. The major reason, Moore believes, was the exhaustion of accessible supplies of wood: Madeira ran out of madeira.
It took 60kg of wood to refine 1kg of sugar. As wood had to be cut from ever steeper and more remote parts of the island, more slave labour was needed to produce the same amount of sugar. In other words, the productivity of labour collapsed, falling roughly fourfold in 20 years. At about the same time, the forest clearing drove several endemic species to extinction.
In what was to become the classic boom-bust-quit cycle of capitalism, the Portuguese shifted their capital to new frontiers, establishing sugar plantations first on São Tomé, then in Brazil, then in the Caribbean, in each case depleting resources before moving on. As Moore says, the seizure, exhaustion and partial abandonment of new geographical frontiers is central to the model of accumulation that we call capitalism. Ecological and productivity crises like Madeira’s are not perverse outcomes of the system. They are the system.
Madeira soon moved on to other commodities, principally wine. It should come as no surprise that the island is now accused of functioning as a tax haven, and was mentioned in this week’s reporting of the Pandora papers. What else is an ecologically exhausted island, whose economy depended on looting, to do?
In Jane Eyre, published in 1847, Charlotte Brontë attempts to decontaminate Jane’s unexpected fortune. She inherited the money from her uncle, “Mr Eyre of Madeira”; but, St John Rivers informs her, it is now vested in “English funds”. This also has the effect of distancing her capital from Edward Rochester’s, tainted by its association with another depleted sugar island, Jamaica.
But what were, and are, English funds? England, in 1847, was at the centre of an empire whose capitalist endeavours had long eclipsed those of the Portuguese. For three centuries, it had systematically looted other nations: seizing people from Africa and forcing them to work in the Caribbean and North America, draining astonishing wealth from India, and extracting the materials it needed to power its Industrial Revolution through an indentured labour system often scarcely distinguishable from outright slavery. When Jane Eyre was published, Britain had recently concluded its first opium war against China.
Financing this system of world theft required new banking networks. These laid the foundations for the offshore financial system whose gruesome realities were again exposed this week. “English funds” were simply a destination for money made by the world-consuming colonial economy called capitalism.
In the onshoring of Jane’s money, we see the gulf between the reality of the system and the way it presents itself. Almost from the beginning of capitalism, attempts were made to sanitise it. Madeira’s early colonists created an origin myth, which claimed that the island was consumed by a wild fire, lasting for seven years, that cleared much of the forest. But there was no such natural disaster. The fires were set by people. The fire front we call capitalism burned across Madeira before the sparks jumped and set light to other parts of the world.
Capitalism’s fake history was formalised in 1689 by John Locke, in his Second Treatise of Government. “In the beginning all the world was America,” he tells us, a blank slate without people whose wealth was just sitting there, ready to be taken. But unlike Madeira, America was inhabited, and the indigenous people had to be killed or enslaved to create his terra nullius. The right to the world, he claimed, was established through hard work: when a man has “mixed his labour” with natural wealth, he “thereby makes it his property”. But those who laid claim to large amounts of natural wealth did not mix their own labour with it, but that of their slaves. The justifying fairytale capitalism tells about itself – you become rich through hard work and enterprise, adding value to natural wealth – is the greatest propaganda coup in human history.
As Laleh Khalili explains in the London Review of Books, the extractive colonial economy never ended. It continues through commodity traders working with kleptocrats and oligarchs, grabbing poor nations’ resources without payment with the help of clever instruments such as “transfer pricing”. It persists through the use of offshore tax havens and secrecy regimes by corrupt elites, who drain their nation’s wealth then channel it into “English funds”, whose true ownership is hidden by shell companies.
The fire front still rages across the world, burning through people and ecologies. Though the money that ignites it may be hidden, you can see it incinerating every territory that still possesses unexploited natural wealth: the Amazon, west Africa, West Papua. As capital runs out of planet to burn, it turns its attention to the deep ocean floor and starts speculating about shifting into space.
The local ecological disasters that began in Madeira are coalescing into a global one. We are recruited as both consumers and consumed, burning through our life support systems on behalf of oligarchs who keep their money and morality offshore.
When we see the same things happening in places thousands of miles apart, we should stop treating them as isolated phenomena, and recognise the pattern. All the talk of “taming” capitalism and “reforming” capitalism hinges on a mistaken idea of what it is. Capitalism is what we see in the Pandora papers.
RELATED: WE CAN SHUT DOWN THE CRIMES EXPOSED BY THE PANDORA PAPERS — IF WE WANTJon SchwarzCrushing the tax haven racket is a big political challenge, but the steps needed are straightforward and simple.
Capitalism was arguably born on a remote island. A few decades after the Portuguese colonised Madeira in 1420, they developed a system that differed in some respects from anything that had gone before. By felling the forests after which they named the island (madeira is Portuguese for wood), they created, in this uninhabited sphere, a blank slate – a terra nullius – in which a new economy could be built. Financed by bankers in Genoa and Flanders, they transported enslaved people from Africa to plant and process sugar. They developed an economy in which land, labour and money lost their previous social meaning and became tradable commodities.
As the geographer Jason Moore points out in the journal Review, a small amount of capital could be used, in these circumstances, to grab a vast amount of natural wealth. On Madeira’s rich soil, using the abundant wood as fuel, slave labour achieved a previously unimaginable productivity. In the 1470s, this tiny island became the world’s biggest producer of sugar.
Madeira’s economy also had another characteristic that distinguished it from what had gone before: the astonishing speed at which it worked through the island’s natural wealth. Sugar production peaked in 1506. By 1525 it had fallen by almost 80%. The major reason, Moore believes, was the exhaustion of accessible supplies of wood: Madeira ran out of madeira.
It took 60kg of wood to refine 1kg of sugar. As wood had to be cut from ever steeper and more remote parts of the island, more slave labour was needed to produce the same amount of sugar. In other words, the productivity of labour collapsed, falling roughly fourfold in 20 years. At about the same time, the forest clearing drove several endemic species to extinction.
In what was to become the classic boom-bust-quit cycle of capitalism, the Portuguese shifted their capital to new frontiers, establishing sugar plantations first on São Tomé, then in Brazil, then in the Caribbean, in each case depleting resources before moving on. As Moore says, the seizure, exhaustion and partial abandonment of new geographical frontiers is central to the model of accumulation that we call capitalism. Ecological and productivity crises like Madeira’s are not perverse outcomes of the system. They are the system.
Madeira soon moved on to other commodities, principally wine. It should come as no surprise that the island is now accused of functioning as a tax haven, and was mentioned in this week’s reporting of the Pandora papers. What else is an ecologically exhausted island, whose economy depended on looting, to do?
In Jane Eyre, published in 1847, Charlotte Brontë attempts to decontaminate Jane’s unexpected fortune. She inherited the money from her uncle, “Mr Eyre of Madeira”; but, St John Rivers informs her, it is now vested in “English funds”. This also has the effect of distancing her capital from Edward Rochester’s, tainted by its association with another depleted sugar island, Jamaica.
But what were, and are, English funds? England, in 1847, was at the centre of an empire whose capitalist endeavours had long eclipsed those of the Portuguese. For three centuries, it had systematically looted other nations: seizing people from Africa and forcing them to work in the Caribbean and North America, draining astonishing wealth from India, and extracting the materials it needed to power its Industrial Revolution through an indentured labour system often scarcely distinguishable from outright slavery. When Jane Eyre was published, Britain had recently concluded its first opium war against China.
Financing this system of world theft required new banking networks. These laid the foundations for the offshore financial system whose gruesome realities were again exposed this week. “English funds” were simply a destination for money made by the world-consuming colonial economy called capitalism.
In the onshoring of Jane’s money, we see the gulf between the reality of the system and the way it presents itself. Almost from the beginning of capitalism, attempts were made to sanitise it. Madeira’s early colonists created an origin myth, which claimed that the island was consumed by a wild fire, lasting for seven years, that cleared much of the forest. But there was no such natural disaster. The fires were set by people. The fire front we call capitalism burned across Madeira before the sparks jumped and set light to other parts of the world.
Capitalism’s fake history was formalised in 1689 by John Locke, in his Second Treatise of Government. “In the beginning all the world was America,” he tells us, a blank slate without people whose wealth was just sitting there, ready to be taken. But unlike Madeira, America was inhabited, and the indigenous people had to be killed or enslaved to create his terra nullius. The right to the world, he claimed, was established through hard work: when a man has “mixed his labour” with natural wealth, he “thereby makes it his property”. But those who laid claim to large amounts of natural wealth did not mix their own labour with it, but that of their slaves. The justifying fairytale capitalism tells about itself – you become rich through hard work and enterprise, adding value to natural wealth – is the greatest propaganda coup in human history.
As Laleh Khalili explains in the London Review of Books, the extractive colonial economy never ended. It continues through commodity traders working with kleptocrats and oligarchs, grabbing poor nations’ resources without payment with the help of clever instruments such as “transfer pricing”. It persists through the use of offshore tax havens and secrecy regimes by corrupt elites, who drain their nation’s wealth then channel it into “English funds”, whose true ownership is hidden by shell companies.
The fire front still rages across the world, burning through people and ecologies. Though the money that ignites it may be hidden, you can see it incinerating every territory that still possesses unexploited natural wealth: the Amazon, west Africa, West Papua. As capital runs out of planet to burn, it turns its attention to the deep ocean floor and starts speculating about shifting into space.
The local ecological disasters that began in Madeira are coalescing into a global one. We are recruited as both consumers and consumed, burning through our life support systems on behalf of oligarchs who keep their money and morality offshore.
When we see the same things happening in places thousands of miles apart, we should stop treating them as isolated phenomena, and recognise the pattern. All the talk of “taming” capitalism and “reforming” capitalism hinges on a mistaken idea of what it is. Capitalism is what we see in the Pandora papers.
RELATED: WE CAN SHUT DOWN THE CRIMES EXPOSED BY THE PANDORA PAPERS — IF WE WANTJon SchwarzCrushing the tax haven racket is a big political challenge, but the steps needed are straightforward and simple.
More Than Half of America’s 100 Richest People Exploit Special Trusts to Avoid Estate Taxes
Secret IRS records show billionaires use trusts that let them pass fortunes to their heirs without paying estate tax. Will Congress end a tax shelter that has cost the Treasury untold billions?
by Jeff Ernsthausen, James Bandler, Justin Elliott and Patricia Callahan - PROPUBLICA
Sept. 28, 10:45 a.m. EDT
It’s well known, at least among tax lawyers and accountants for the ultrawealthy: The estate tax can be easily avoided by exploiting a loophole unwittingly created by Congress three decades ago. By using special trusts, a rarefied group of Americans has taken advantage of this loophole, reducing government revenues and fueling inequality.
There is no way for the public to know who uses these special trusts aside from when they’ve been disclosed in lawsuits or securities filings. There’s also been no way to quantify just how much in estate tax has been lost to them, though, in 2013, the lawyer who pioneered the use of the most common one — known as the grantor retained annuity trust, or GRAT — estimated they may have cost the U.S. Treasury about $100 billion over the prior 13 years.
As Congress considers cracking down on GRATs and other trusts to help fund President Joe Biden’s domestic agenda, a new analysis by ProPublica based on a trove of tax information about thousands of the wealthiest Americans sheds light on just how widespread the use of special trusts to dodge the estate tax has become.
More than half of the nation’s 100 richest individuals have used GRATs and other trusts to avoid estate tax, the analysis shows. Among them: former Democratic presidential candidate Michael Bloomberg; Leonard Lauder, the son of cosmetics magnate Estée Lauder; Stephen Schwarzman, a founder of the private equity firm Blackstone; Charles Koch and his late brother, David, the industrialists who have underwritten libertarian causes and funded lobbying efforts to roll back the estate tax; and Laurene Powell Jobs, the widow of Apple founder Steve Jobs. (Powell Jobs’ Emerson Collective is among ProPublica’s largest donors.)
More than a century ago amid soaring inequality and the rise of stratospherically wealthy families such as the Mellons and Rockefellers, Congress created the estate tax as a way to raise money and clip the fortunes of the rich at death. Lawmakers later added a gift tax as a means of stopping wealthy people from passing their fortunes on to their children and grandchildren before death. Nowadays, 99.9% of Americans never have to worry about these taxes. They only hit individuals passing more than $11.7 million, or couples giving more than $23.4 million, to their heirs. The federal government imposes a roughly 40% levy on amounts above those figures before that wealth is passed on to heirs.
For her part, Powell Jobs has decried as “dangerous for a society” the early 20th century fortunes of the Mellons, Rockefellers and others. “I’m not interested in legacy wealth buildings, and my children know that,” she told The New York Times last year. “Steve wasn’t interested in that. If I live long enough, it ends with me.”
Nonetheless, after the death of her husband in 2011, Powell Jobs used a series of GRATs to pass on around a half a billion dollars, estate-tax-free, to her children, friends and other family, according to the tax records and interviews with her longtime attorney. By using the GRATs, she avoided at least $200 million in estate and gift taxes.
Her attorney, Larry Sonsini, said Powell Jobs did this so that her children would have cash to pay estate taxes when she dies and they inherit “nostalgic and hard assets,” such as real estate, art and a yacht. (At 260 feet, Venus is among the larger pleasure ships in the world.) Without the $500 million or so passed through the trusts, he said, Powell Jobs’ heirs would have to sell stock that she intends to give to charity to pay her estate tax bill.
Sonsini said Powell Jobs, whose fortune is pegged at $21 billion by Forbes, has already given billions away to charity and paid $2.5 billion in state and federal taxes between 2012 and 2020. “When you look at an estate that may be worth multiple billions, and all the rest is going to charity, and you put it in perspective, what is the problem we’re worried about here?” Sonsini asked. “This is not about creating dynasty wealth for these kids.”
In a written statement, Powell Jobs said she supports “reforms that make the tax code more fair. Through my work at Emerson Collective and philanthropic commitments, I have dedicated my life and assets to the pursuit of a more just and equitable society.”
Others whose special trusts ProPublica identified, including Bloomberg and the Kochs, declined to comment on why they’d set up the trusts or their estate-tax implications. Representatives for Lauder didn’t respond to requests to accept questions on his behalf. Schwarzman’s spokesperson wrote that he is “one of the largest individual taxpayers in the country and fully complies with all tax rules.”
A typical GRAT entails putting assets, like stocks, in a trust that ultimately benefits a person’s heirs. The trust pays back an amount equal to what the trust’s creator put in plus a modest amount of interest. But any gains on the investments above that amount flow to the heirs free of gift or estate taxes. So if a person puts $100 million worth of stock in a GRAT and the stock rises in value to $130 million, their heirs would receive about $30 million tax-free.
In 1990, Congress accidentally created GRATs when it closed another estate tax loophole that was popular at the time. The IRS challenged the maneuver but lost in court.
“I don’t blame the taxpayers who are doing it,” said Daniel Hemel, a professor at the University of Chicago Law School. “Congress has virtually invited them to do it. I blame Congress for creating the monster and then failing to stop the monster once it became clear how much of the tax base the GRAT monster would eat up.”
Users of the trusts extend well beyond the top of the Forbes rankings, ProPublica’s analysis of the confidential IRS files show. Erik Prince, founder of the military contractor Blackwater and himself heir to an auto parts fortune, used the shelter. Fashion designer Calvin Klein has used them, as have “Saturday Night Live” creator Lorne Michaels and media mogul Oprah Winfrey.
“We have paid all taxes due,” a spokesperson for Winfrey said. A representative of Klein did not accept questions from ProPublica or respond to messages. A spokesman for Michaels declined to comment.
Prince also did not answer questions. “Hey if you publish private information about me I’ll be sure to return the favor,” he wrote. “Go ahead and fuck off.”
The GRAT has become so ubiquitous in recent decades that high-end tax lawyers consider it a plain vanilla strategy. “This is an off-the-shelf solution,” said Michael Kosnitzky, co-leader of the private wealth practice at law firm Pillsbury Winthrop Shaw Pittman. “Almost every wealthy person should have one.”
---
Senate Budget Committee Chairman Bernie Sanders, I-Vt., has proposed going further in undercutting estate tax avoidance tools. But the prospect of any reform is uncertain, as Democrats on Capitol Hill struggle to find the votes to pass the package of spending and tax changes.
GRATs are commonly described by tax lawyers as a “heads I win, tails we tie” proposition. If the investment placed in the GRAT soars in value, that increase passes to an heir without being subject to future estate tax. If the investment doesn’t go up, the wealthy person can simply try again and again until they succeed, leading many users to have multiple GRATs going at a time.
---
ProPublica described the transactions (but not the name of the person engaging in them) to Lord, the trusts and estates attorney. The GRAT is “the perfect loophole to avoid estate and gift tax in this situation,” said Lord, who is also tax counsel for Americans for Tax Fairness and an advocate for estate tax reform.
When Bloomberg ran for president in 2020, he vowed to shore up the estate tax. “Owners of the biggest estates are expert at gaming the system to reduce what they owe,” a campaign fact sheet for his tax plan said. Bloomberg vowed to “lower the estate-tax threshold, so that more estates are taxed,” and to “shut down multiple estate-tax avoidance schemes.” His fact sheet offered few details as to how he would do that, and it didn’t mention GRATs.
The legislation Congress is now considering to curtail GRATs would leave open other options for estate tax avoidance, including a cousin to the GRAT known as a charitable lead annuity trust, or CLAT, which contributes to charity while passing gains from stocks and other assets on to heirs. And the legislation would grandfather in existing trusts, meaning that those who have already established trusts would be able to continue to use them to avoid paying estate taxes.[...]
RELATED: Erik Prince threatens ProPublica reporters after they reveal special trusts he and others exploited to avoid estate taxes
There is no way for the public to know who uses these special trusts aside from when they’ve been disclosed in lawsuits or securities filings. There’s also been no way to quantify just how much in estate tax has been lost to them, though, in 2013, the lawyer who pioneered the use of the most common one — known as the grantor retained annuity trust, or GRAT — estimated they may have cost the U.S. Treasury about $100 billion over the prior 13 years.
As Congress considers cracking down on GRATs and other trusts to help fund President Joe Biden’s domestic agenda, a new analysis by ProPublica based on a trove of tax information about thousands of the wealthiest Americans sheds light on just how widespread the use of special trusts to dodge the estate tax has become.
More than half of the nation’s 100 richest individuals have used GRATs and other trusts to avoid estate tax, the analysis shows. Among them: former Democratic presidential candidate Michael Bloomberg; Leonard Lauder, the son of cosmetics magnate Estée Lauder; Stephen Schwarzman, a founder of the private equity firm Blackstone; Charles Koch and his late brother, David, the industrialists who have underwritten libertarian causes and funded lobbying efforts to roll back the estate tax; and Laurene Powell Jobs, the widow of Apple founder Steve Jobs. (Powell Jobs’ Emerson Collective is among ProPublica’s largest donors.)
More than a century ago amid soaring inequality and the rise of stratospherically wealthy families such as the Mellons and Rockefellers, Congress created the estate tax as a way to raise money and clip the fortunes of the rich at death. Lawmakers later added a gift tax as a means of stopping wealthy people from passing their fortunes on to their children and grandchildren before death. Nowadays, 99.9% of Americans never have to worry about these taxes. They only hit individuals passing more than $11.7 million, or couples giving more than $23.4 million, to their heirs. The federal government imposes a roughly 40% levy on amounts above those figures before that wealth is passed on to heirs.
For her part, Powell Jobs has decried as “dangerous for a society” the early 20th century fortunes of the Mellons, Rockefellers and others. “I’m not interested in legacy wealth buildings, and my children know that,” she told The New York Times last year. “Steve wasn’t interested in that. If I live long enough, it ends with me.”
Nonetheless, after the death of her husband in 2011, Powell Jobs used a series of GRATs to pass on around a half a billion dollars, estate-tax-free, to her children, friends and other family, according to the tax records and interviews with her longtime attorney. By using the GRATs, she avoided at least $200 million in estate and gift taxes.
Her attorney, Larry Sonsini, said Powell Jobs did this so that her children would have cash to pay estate taxes when she dies and they inherit “nostalgic and hard assets,” such as real estate, art and a yacht. (At 260 feet, Venus is among the larger pleasure ships in the world.) Without the $500 million or so passed through the trusts, he said, Powell Jobs’ heirs would have to sell stock that she intends to give to charity to pay her estate tax bill.
Sonsini said Powell Jobs, whose fortune is pegged at $21 billion by Forbes, has already given billions away to charity and paid $2.5 billion in state and federal taxes between 2012 and 2020. “When you look at an estate that may be worth multiple billions, and all the rest is going to charity, and you put it in perspective, what is the problem we’re worried about here?” Sonsini asked. “This is not about creating dynasty wealth for these kids.”
In a written statement, Powell Jobs said she supports “reforms that make the tax code more fair. Through my work at Emerson Collective and philanthropic commitments, I have dedicated my life and assets to the pursuit of a more just and equitable society.”
Others whose special trusts ProPublica identified, including Bloomberg and the Kochs, declined to comment on why they’d set up the trusts or their estate-tax implications. Representatives for Lauder didn’t respond to requests to accept questions on his behalf. Schwarzman’s spokesperson wrote that he is “one of the largest individual taxpayers in the country and fully complies with all tax rules.”
A typical GRAT entails putting assets, like stocks, in a trust that ultimately benefits a person’s heirs. The trust pays back an amount equal to what the trust’s creator put in plus a modest amount of interest. But any gains on the investments above that amount flow to the heirs free of gift or estate taxes. So if a person puts $100 million worth of stock in a GRAT and the stock rises in value to $130 million, their heirs would receive about $30 million tax-free.
In 1990, Congress accidentally created GRATs when it closed another estate tax loophole that was popular at the time. The IRS challenged the maneuver but lost in court.
“I don’t blame the taxpayers who are doing it,” said Daniel Hemel, a professor at the University of Chicago Law School. “Congress has virtually invited them to do it. I blame Congress for creating the monster and then failing to stop the monster once it became clear how much of the tax base the GRAT monster would eat up.”
Users of the trusts extend well beyond the top of the Forbes rankings, ProPublica’s analysis of the confidential IRS files show. Erik Prince, founder of the military contractor Blackwater and himself heir to an auto parts fortune, used the shelter. Fashion designer Calvin Klein has used them, as have “Saturday Night Live” creator Lorne Michaels and media mogul Oprah Winfrey.
“We have paid all taxes due,” a spokesperson for Winfrey said. A representative of Klein did not accept questions from ProPublica or respond to messages. A spokesman for Michaels declined to comment.
Prince also did not answer questions. “Hey if you publish private information about me I’ll be sure to return the favor,” he wrote. “Go ahead and fuck off.”
The GRAT has become so ubiquitous in recent decades that high-end tax lawyers consider it a plain vanilla strategy. “This is an off-the-shelf solution,” said Michael Kosnitzky, co-leader of the private wealth practice at law firm Pillsbury Winthrop Shaw Pittman. “Almost every wealthy person should have one.”
---
Senate Budget Committee Chairman Bernie Sanders, I-Vt., has proposed going further in undercutting estate tax avoidance tools. But the prospect of any reform is uncertain, as Democrats on Capitol Hill struggle to find the votes to pass the package of spending and tax changes.
GRATs are commonly described by tax lawyers as a “heads I win, tails we tie” proposition. If the investment placed in the GRAT soars in value, that increase passes to an heir without being subject to future estate tax. If the investment doesn’t go up, the wealthy person can simply try again and again until they succeed, leading many users to have multiple GRATs going at a time.
---
ProPublica described the transactions (but not the name of the person engaging in them) to Lord, the trusts and estates attorney. The GRAT is “the perfect loophole to avoid estate and gift tax in this situation,” said Lord, who is also tax counsel for Americans for Tax Fairness and an advocate for estate tax reform.
When Bloomberg ran for president in 2020, he vowed to shore up the estate tax. “Owners of the biggest estates are expert at gaming the system to reduce what they owe,” a campaign fact sheet for his tax plan said. Bloomberg vowed to “lower the estate-tax threshold, so that more estates are taxed,” and to “shut down multiple estate-tax avoidance schemes.” His fact sheet offered few details as to how he would do that, and it didn’t mention GRATs.
The legislation Congress is now considering to curtail GRATs would leave open other options for estate tax avoidance, including a cousin to the GRAT known as a charitable lead annuity trust, or CLAT, which contributes to charity while passing gains from stocks and other assets on to heirs. And the legislation would grandfather in existing trusts, meaning that those who have already established trusts would be able to continue to use them to avoid paying estate taxes.[...]
RELATED: Erik Prince threatens ProPublica reporters after they reveal special trusts he and others exploited to avoid estate taxes
Pandemic profits: top US health insurers make billions in second quarter
Health companies see decline from record profits of last year – but where is the scrutiny of such vast sums?
Amanda Holpuch in New York
the guardian
Fri 6 Aug 2021 06.00 EDT
Five of America’s largest health insurers reported more than $11bn in profits in the second quarter – a decline from the same period last year when the Covid-19 pandemic helped drive sky-high profits.
The rise in profits last year was a result of people in the US seeking less medical care because of fears about Covid-19 while still paying for health insurance. Companies warned pent-up demand could have an effect on their bottom line, but medical use still has not returned to normal rates.
The scrutiny insurers faced last year after reporting such high profits – in some cases doubling the amount they made the year before – has largely faded away.
The House Energy and Committee launched an investigation into insurers last August, but the results of that have not been made public.
In a November article for the Journal of the American Medical Association (JAMA), Dr Joshua Sharfstein at Johns Hopkins Bloomberg School of Public Health and others called for part of the windfall to be allocated to other parts of the health system, such as beleaguered public health departments which couldn’t afford to contact trace.
“A lot of public health departments are really still struggling to find funds for contact tracing, testing even when the local insurer was sitting on huge profits,” Sharfstein said. “I think part of the dysfunction of the US response was the fact that money was accumulating in one part of the healthcare universe while it was desperately needed in another part.”
The American Rescue Plan and other government funding initiatives have helped fill some of the gaps in public health funding, but Sharfstein, the public health school’s vice-dean for public health practice and community engagement, said it would have been better recoup some of the insurer profits to prop up these systems instead of using taxpayer money.
The article also advised regulators to seek greater transparency on how the money was used, but other than the congressional investigation there has been little action on that front.
At the same time, Americans have borne the brunt of the financial crush from the pandemic and resulting recession.
In a survey conducted between March and June, 36% of adults with health insurance said they had a medical bill problem or medical debt, according to a Commonwealth Fund study published last month. People who had Covid-19, lost income or lost their employer-sponsored health insurance had higher rates of medical bill and debt problems than those not affected by those issues.
Consumers will see some of the profits from last year. Under the Affordable Care Act, there are limits on how much insurers can spend on profits and administration. Money in excess of that limit is paid to customers in rebates. The Kaiser Family Foundation (KFF) estimated in April that insurers would be issuing about $2.1bn in rebates this year.
There is still uncertainty for health insurers about what could come this year, especially with the Delta variant driving a rise in cases across the US. But in the second quarter earnings reports, they showed little evidence of it affecting their bottom line.
UnitedHealth Group reported $4.37bn in profit and increased its earnings outlook after beating expectations for profit and revenue. Anthem reported $1.8bn in profit and said Covid-19 variants and slowing vaccination rates added uncertainty to the second half of the year, but still raised its earnings forecast.
Humana, which provides coverage to a large share of seniors, had the most dramatic drop in earnings compared to the same period the year before – with a 68.7% drop to $588m. Executives acknowledged uncertainties with the pandemic, but said they expect 2022 to be a more normal year.
These results echoed a broad review of health insurer filings by KFF, which found that most insurers expect health use to return to the levels it was at before the pandemic and aren’t factoring additional costs into next year’s premiums, or the cost consumers pay each month for healthcare. Georgetown University’s Center on Health Insurance Reform (CHIR), also analyzed early filings and found that most insurers consider the pandemic to be “a one-time event, with limited, if any, impact on their 2022 claims costs.”
United, Anthem and Humana posted their results in July, but the insurers who shared their earnings this week, when there was more public concern about the Delta variant, saw their stock prices fall after sharing their results.
This is in part because one of the companies, CVS Health, also announced it would raise wages for employees at its 9,900 retail locations. The health giant reported $2.78bn in profits on Tuesday and said starting next summer it would raise wages to $15 an hour – at a cost of $600m over three years.
Cigna also beat expectations, with $1.47bn in profit, but its stocks fell after the company reported costs for providing medical services were starting to recover.
The rise in profits last year was a result of people in the US seeking less medical care because of fears about Covid-19 while still paying for health insurance. Companies warned pent-up demand could have an effect on their bottom line, but medical use still has not returned to normal rates.
The scrutiny insurers faced last year after reporting such high profits – in some cases doubling the amount they made the year before – has largely faded away.
The House Energy and Committee launched an investigation into insurers last August, but the results of that have not been made public.
In a November article for the Journal of the American Medical Association (JAMA), Dr Joshua Sharfstein at Johns Hopkins Bloomberg School of Public Health and others called for part of the windfall to be allocated to other parts of the health system, such as beleaguered public health departments which couldn’t afford to contact trace.
“A lot of public health departments are really still struggling to find funds for contact tracing, testing even when the local insurer was sitting on huge profits,” Sharfstein said. “I think part of the dysfunction of the US response was the fact that money was accumulating in one part of the healthcare universe while it was desperately needed in another part.”
The American Rescue Plan and other government funding initiatives have helped fill some of the gaps in public health funding, but Sharfstein, the public health school’s vice-dean for public health practice and community engagement, said it would have been better recoup some of the insurer profits to prop up these systems instead of using taxpayer money.
The article also advised regulators to seek greater transparency on how the money was used, but other than the congressional investigation there has been little action on that front.
At the same time, Americans have borne the brunt of the financial crush from the pandemic and resulting recession.
In a survey conducted between March and June, 36% of adults with health insurance said they had a medical bill problem or medical debt, according to a Commonwealth Fund study published last month. People who had Covid-19, lost income or lost their employer-sponsored health insurance had higher rates of medical bill and debt problems than those not affected by those issues.
Consumers will see some of the profits from last year. Under the Affordable Care Act, there are limits on how much insurers can spend on profits and administration. Money in excess of that limit is paid to customers in rebates. The Kaiser Family Foundation (KFF) estimated in April that insurers would be issuing about $2.1bn in rebates this year.
There is still uncertainty for health insurers about what could come this year, especially with the Delta variant driving a rise in cases across the US. But in the second quarter earnings reports, they showed little evidence of it affecting their bottom line.
UnitedHealth Group reported $4.37bn in profit and increased its earnings outlook after beating expectations for profit and revenue. Anthem reported $1.8bn in profit and said Covid-19 variants and slowing vaccination rates added uncertainty to the second half of the year, but still raised its earnings forecast.
Humana, which provides coverage to a large share of seniors, had the most dramatic drop in earnings compared to the same period the year before – with a 68.7% drop to $588m. Executives acknowledged uncertainties with the pandemic, but said they expect 2022 to be a more normal year.
These results echoed a broad review of health insurer filings by KFF, which found that most insurers expect health use to return to the levels it was at before the pandemic and aren’t factoring additional costs into next year’s premiums, or the cost consumers pay each month for healthcare. Georgetown University’s Center on Health Insurance Reform (CHIR), also analyzed early filings and found that most insurers consider the pandemic to be “a one-time event, with limited, if any, impact on their 2022 claims costs.”
United, Anthem and Humana posted their results in July, but the insurers who shared their earnings this week, when there was more public concern about the Delta variant, saw their stock prices fall after sharing their results.
This is in part because one of the companies, CVS Health, also announced it would raise wages for employees at its 9,900 retail locations. The health giant reported $2.78bn in profits on Tuesday and said starting next summer it would raise wages to $15 an hour – at a cost of $600m over three years.
Cigna also beat expectations, with $1.47bn in profit, but its stocks fell after the company reported costs for providing medical services were starting to recover.
Report: Real Estate Groups Paid GOP Lawmakers Huge Sums to Reinstate Evictions
BY Sharon Zhang, Truthout
PUBLISHED July 27, 2021
As the national eviction moratorium, originally created for the pandemic, is set to end on July 31, a new report finds that the real estate industry has been lobbying for federal regulators to end the policy for months.
The report by Accountable.US, which calls itself a government corruption watchdog group, finds that Senators Mike Crapo (R-Idaho) and Pat Toomey (R-Pennsylvania), who both raised objections to the eviction moratorium as early as December of last year, have pocketed hundreds of thousands of dollars each from real estate groups. Crapo has taken nearly $281,000 and Toomey $183,000.
Real estate groups have filed lawsuits in courts across the country, including the Supreme Court, trying to get the eviction moratorium struck down. Meanwhile, the influential National Association of Realtors has lobbied across Washington to get the Centers for Disease Control and Prevention’s (CDC) moratorium ended.
This aggressive lobbying comes despite the fact that top corporate rental companies have reported stable or good performance in the first quarter of 2021, the report finds, with many of them reporting “solid” finances. The finding suggests that, despite the heavy lobbying, the ability to evict tenants isn’t necessary for these companies to profit.
“Even during a pandemic and severe economic downturn, the real estate industry still managed to post strong profits as families in every corner of the country battled homelessness,” said Kyle Herrig, president of Accountable.US, in a statement.
“To make matters worse, while many landlords continued to thrive, they fought tooth and nail to prematurely end the CDC’s eviction moratorium and kick millions of Americans out of their homes amid a once-in-a-lifetime pandemic,” Herrig continued, saying that it’s crucial for lawmakers to pass housing aid.
President Joe Biden had extended the eviction moratorium last month but pledged that it would be the last month that the moratorium would be in place. Advocates praised the temporary extension, but have warned that it won’t be enough to stymie an eviction wave as the country still battles the COVID pandemic.
Democrats had sent a letter to Biden asking him to extend the moratorium before the announcement, saying, “By extending the moratorium and incorporating these critical improvements to protect vulnerable renters, we can work to curtail the eviction crisis disproportionately impacting our communities of color.”
The Biden administration has estimated that the eviction moratorium has prevented 1.55 million evictions, though that figure could be higher as over 8 million people have reported falling behind on rent during the pandemic, according to the Census Bureau.
In a hearing held by the House Select Committee on the Coronavirus Crisis on landlord abuses and evictions, Jim Baker, the director of the Private Equity Stakeholder Project, pointed out that many landlords have been filing to evict their tenants despite the ban. “Since last September, some of the world’s largest asset managers that manage trillions of dollars have filed to evict residents,” Baker said.
“While many renters have faced dramatic hardships during the pandemic, many corporate landlords have done extremely well and are growing and buying more houses,” said Baker. Despite that, many corporate landlords bankrolled by large finance firms have filed thousands of eviction actions, he said.
Indeed, the eviction moratorium was put in place to shield the country as millions lost their jobs and were at threat of experiencing homelessness and becoming even more susceptible to the virus if the moratorium wasn’t in place. A recent report by Pew found that the pandemic caused twice as many renters to fall behind on rent payments than usual.
Advocates say that now is a terrible time to lift the moratorium as states are rushing to distribute millions in rental assistance that has yet to go out to renters. The pandemic is still ongoing, and many of the people most at risk of being evicted are also most susceptible to dying due to the virus.
The report by Accountable.US, which calls itself a government corruption watchdog group, finds that Senators Mike Crapo (R-Idaho) and Pat Toomey (R-Pennsylvania), who both raised objections to the eviction moratorium as early as December of last year, have pocketed hundreds of thousands of dollars each from real estate groups. Crapo has taken nearly $281,000 and Toomey $183,000.
Real estate groups have filed lawsuits in courts across the country, including the Supreme Court, trying to get the eviction moratorium struck down. Meanwhile, the influential National Association of Realtors has lobbied across Washington to get the Centers for Disease Control and Prevention’s (CDC) moratorium ended.
This aggressive lobbying comes despite the fact that top corporate rental companies have reported stable or good performance in the first quarter of 2021, the report finds, with many of them reporting “solid” finances. The finding suggests that, despite the heavy lobbying, the ability to evict tenants isn’t necessary for these companies to profit.
“Even during a pandemic and severe economic downturn, the real estate industry still managed to post strong profits as families in every corner of the country battled homelessness,” said Kyle Herrig, president of Accountable.US, in a statement.
“To make matters worse, while many landlords continued to thrive, they fought tooth and nail to prematurely end the CDC’s eviction moratorium and kick millions of Americans out of their homes amid a once-in-a-lifetime pandemic,” Herrig continued, saying that it’s crucial for lawmakers to pass housing aid.
President Joe Biden had extended the eviction moratorium last month but pledged that it would be the last month that the moratorium would be in place. Advocates praised the temporary extension, but have warned that it won’t be enough to stymie an eviction wave as the country still battles the COVID pandemic.
Democrats had sent a letter to Biden asking him to extend the moratorium before the announcement, saying, “By extending the moratorium and incorporating these critical improvements to protect vulnerable renters, we can work to curtail the eviction crisis disproportionately impacting our communities of color.”
The Biden administration has estimated that the eviction moratorium has prevented 1.55 million evictions, though that figure could be higher as over 8 million people have reported falling behind on rent during the pandemic, according to the Census Bureau.
In a hearing held by the House Select Committee on the Coronavirus Crisis on landlord abuses and evictions, Jim Baker, the director of the Private Equity Stakeholder Project, pointed out that many landlords have been filing to evict their tenants despite the ban. “Since last September, some of the world’s largest asset managers that manage trillions of dollars have filed to evict residents,” Baker said.
“While many renters have faced dramatic hardships during the pandemic, many corporate landlords have done extremely well and are growing and buying more houses,” said Baker. Despite that, many corporate landlords bankrolled by large finance firms have filed thousands of eviction actions, he said.
Indeed, the eviction moratorium was put in place to shield the country as millions lost their jobs and were at threat of experiencing homelessness and becoming even more susceptible to the virus if the moratorium wasn’t in place. A recent report by Pew found that the pandemic caused twice as many renters to fall behind on rent payments than usual.
Advocates say that now is a terrible time to lift the moratorium as states are rushing to distribute millions in rental assistance that has yet to go out to renters. The pandemic is still ongoing, and many of the people most at risk of being evicted are also most susceptible to dying due to the virus.
DCReport Uncovers A Huge Secret Tax Favor for Super Wealthy
Biden Can Stop Sinister Trump Plan with One Phone Call -- Will He?
DAVID CAY JOHNSTON - DC REPORT
June 29, 2021
DCReport has uncovered a secret IRS tax favor for the super-rich—authorized when Donald Trump was president—that will take effect on Thursday, July 1. President Joe Biden can stop it with one phone call. Will he?
The Biden White House was unaware of this Trump tax favor—disguised as a crackdown on wealthy tax cheaters—when DCReport asked about it on Friday.
That’s not surprising because the IRS remains under the control of Charles Rettig, a holdover from the Trump era. Before Trump named him IRS commissioner, Rettig was a Beverly Hills tax lawyer who helped the super-wealthy escape taxes and—if they got caught cheating—negotiated secret settlements that avoided public humiliation while minimizing taxes and penalties.
If Biden lets this Trump policy take effect it would be a huge benefit to clients of Rettig’s old law firm and others like it. And it would make an already unfair tax system even more heavily tilted in favor of billionaires all through a clever excuse for hiring less capable auditors.
IRS Minimizes
Internally the IRS characterized the new favor for the rich as nothing more than a subtle change to comply with arcane civil service policy. But at least one high-level IRS manager saw through this façade and fought the plan, an email obtained by DCReport shows.
What makes this Trumpian scheme diabolical is that on the surface, it appears to be a 50% increase in enforcement of gift and estate tax law, areas where cheating is rampant. Actually, it’s the opposite.
Starting Thursday, July 1, the IRS will hire 71 new people to examine estate and gift tax returns.
The 137 IRS tax lawyers who do this work now are, in effect, highly trained colonels on the tax police force. They need sophisticated detective skills to understand the mind-numbingly complex trusts and other devices that lawyers like Rettig designed to hide money from the IRS.
Skills Downgrade
The new hires, however, won’t be lawyers, only lightly trained tax specialists. They will be equivalent of mere corporals on the tax police force, lacking the legal education required to see through the fog of confusion that tax lawyers get paid fat fees create so their clients can pay little to nothing in taxes.
Despite the severe downgrading in required skills, the new hires will get the same pay and benefits as the lawyers doing the work now. The new hires will also be eligible for promotion and to move on to other jobs in the civil service, unlike the existing auditors.
It makes no sense to pay the same wages and benefits for reduced skills. On second thought, that does make sense when the purpose is to create the appearance of increased tax law enforcement while doing the opposite.
This stealth plot to help the super-rich comes just days after DCReport revealed a nearly total collapse of audits of super high-income Americans, those making on average $30 million each.
The IRS audited just 38 of the 26,517 households in this rarified income stratum in 2018. Recommended additional taxes after audit fell 99.1% from 2010, my analysis of new IRS data tables found.
Our new expose comes after ProPublica and The New York Times published separate reports showing how many of the wealthiest Americans pay little to no taxes. DCReport revealed how this forces everyone else to subsidize their lifestyles. All these reports dealt in part with weak enforcement of the tax laws regarding the highest income and wealthiest Americans.
Billions Become Pennies
Tax lawyers, like Rettig before Trump put him in charge of the IRS, help clients reduce or eliminate gift and estate taxes through a host of complicated legal devices. They include intentionally defective grantor trusts, split-interest arrangements, life insurance trusts and several dozen other techniques that distort the time-value-of-money to shield dynastic wealth from taxes. Tax lawyers like Rettig reduce billions of dollars to pennies.
These devices enable dynastic wealth but at the price of inhibiting future economic growth and make it harder for new generations of wealth creators to arise, as Warren Buffett told me in 2001. Economic oppression from trying up wealth in trusts was a driving force in the bloody French Revolution of 1789.
The gift and estate tax laws are crucial backups to the income tax system, which Congress was told as far back as 1924 by Representative William R. Green, an Iowa Republican and longtime chairman of the House Ways and Means Committee.
Detecting these tax avoidance tricks and then figuring out how much tax is due requires sophisticated skills, especially in understanding legal doctrines and court decisions. The new hires are required to have only minimal training, none of it in contract law.
So, while it appears the IRS is beefing up its auditing power, it is simultaneously moving to assign the work to employees less likely to detect cheating and much easier to dupe. Imagine your local police department announcing it would no longer hire homicide detectives but instead assign future murder cases to patrol cops.
IRS Executive Fought Plan
The existing auditors are classified as “905” employees. The new hires will be classified as “901” employees.
Karen L. Sumler, the IRS executive who oversees the examination of gift and estate taxes, fought against the downgrade.
“I pushed back hard,” she wrote in a June 16 email to her subordinates. “I provided documents from the decision back in 1967” to use attorneys to examine gift and estate tax returns to try and stop the plan. She said the IRS chief counsel “was unmoved.”
After she lost that battle Sumler fell in line, writing about “a big change” as “a new opportunity.”
Because of civil service rules, hiring lawyers as gift and estate tax examiners requires approval from the Treasury Department general counsel.
Treasury refused such permission when Trump was president. Biden or Treasury Secretary Janet Yellen can order that policy rescinded, which would allow the IRS to hire 71 lawyers instead of ill-trained tax specialists at the same pay.
If Biden lets this policy proceed, he is tacitly declaring that he supports Trump-era policy to help the wealthiest Americans pay less tax. That would be a betrayal of his campaign and White House promises to reduce unfairness in the tax system and require those making more than $400,000 per year to pay more to support the government which made their wealth and income possible.
Just stopping the plan from taking effect would give the Biden administration time to understand this scheme. The question is whether Biden will do what he promised or reveal himself to just be another politician who tells voters what he thinks they want to hear and then doesn’t act.
The Biden White House was unaware of this Trump tax favor—disguised as a crackdown on wealthy tax cheaters—when DCReport asked about it on Friday.
That’s not surprising because the IRS remains under the control of Charles Rettig, a holdover from the Trump era. Before Trump named him IRS commissioner, Rettig was a Beverly Hills tax lawyer who helped the super-wealthy escape taxes and—if they got caught cheating—negotiated secret settlements that avoided public humiliation while minimizing taxes and penalties.
If Biden lets this Trump policy take effect it would be a huge benefit to clients of Rettig’s old law firm and others like it. And it would make an already unfair tax system even more heavily tilted in favor of billionaires all through a clever excuse for hiring less capable auditors.
IRS Minimizes
Internally the IRS characterized the new favor for the rich as nothing more than a subtle change to comply with arcane civil service policy. But at least one high-level IRS manager saw through this façade and fought the plan, an email obtained by DCReport shows.
What makes this Trumpian scheme diabolical is that on the surface, it appears to be a 50% increase in enforcement of gift and estate tax law, areas where cheating is rampant. Actually, it’s the opposite.
Starting Thursday, July 1, the IRS will hire 71 new people to examine estate and gift tax returns.
The 137 IRS tax lawyers who do this work now are, in effect, highly trained colonels on the tax police force. They need sophisticated detective skills to understand the mind-numbingly complex trusts and other devices that lawyers like Rettig designed to hide money from the IRS.
Skills Downgrade
The new hires, however, won’t be lawyers, only lightly trained tax specialists. They will be equivalent of mere corporals on the tax police force, lacking the legal education required to see through the fog of confusion that tax lawyers get paid fat fees create so their clients can pay little to nothing in taxes.
Despite the severe downgrading in required skills, the new hires will get the same pay and benefits as the lawyers doing the work now. The new hires will also be eligible for promotion and to move on to other jobs in the civil service, unlike the existing auditors.
It makes no sense to pay the same wages and benefits for reduced skills. On second thought, that does make sense when the purpose is to create the appearance of increased tax law enforcement while doing the opposite.
This stealth plot to help the super-rich comes just days after DCReport revealed a nearly total collapse of audits of super high-income Americans, those making on average $30 million each.
The IRS audited just 38 of the 26,517 households in this rarified income stratum in 2018. Recommended additional taxes after audit fell 99.1% from 2010, my analysis of new IRS data tables found.
Our new expose comes after ProPublica and The New York Times published separate reports showing how many of the wealthiest Americans pay little to no taxes. DCReport revealed how this forces everyone else to subsidize their lifestyles. All these reports dealt in part with weak enforcement of the tax laws regarding the highest income and wealthiest Americans.
Billions Become Pennies
Tax lawyers, like Rettig before Trump put him in charge of the IRS, help clients reduce or eliminate gift and estate taxes through a host of complicated legal devices. They include intentionally defective grantor trusts, split-interest arrangements, life insurance trusts and several dozen other techniques that distort the time-value-of-money to shield dynastic wealth from taxes. Tax lawyers like Rettig reduce billions of dollars to pennies.
These devices enable dynastic wealth but at the price of inhibiting future economic growth and make it harder for new generations of wealth creators to arise, as Warren Buffett told me in 2001. Economic oppression from trying up wealth in trusts was a driving force in the bloody French Revolution of 1789.
The gift and estate tax laws are crucial backups to the income tax system, which Congress was told as far back as 1924 by Representative William R. Green, an Iowa Republican and longtime chairman of the House Ways and Means Committee.
Detecting these tax avoidance tricks and then figuring out how much tax is due requires sophisticated skills, especially in understanding legal doctrines and court decisions. The new hires are required to have only minimal training, none of it in contract law.
So, while it appears the IRS is beefing up its auditing power, it is simultaneously moving to assign the work to employees less likely to detect cheating and much easier to dupe. Imagine your local police department announcing it would no longer hire homicide detectives but instead assign future murder cases to patrol cops.
IRS Executive Fought Plan
The existing auditors are classified as “905” employees. The new hires will be classified as “901” employees.
Karen L. Sumler, the IRS executive who oversees the examination of gift and estate taxes, fought against the downgrade.
“I pushed back hard,” she wrote in a June 16 email to her subordinates. “I provided documents from the decision back in 1967” to use attorneys to examine gift and estate tax returns to try and stop the plan. She said the IRS chief counsel “was unmoved.”
After she lost that battle Sumler fell in line, writing about “a big change” as “a new opportunity.”
Because of civil service rules, hiring lawyers as gift and estate tax examiners requires approval from the Treasury Department general counsel.
Treasury refused such permission when Trump was president. Biden or Treasury Secretary Janet Yellen can order that policy rescinded, which would allow the IRS to hire 71 lawyers instead of ill-trained tax specialists at the same pay.
If Biden lets this policy proceed, he is tacitly declaring that he supports Trump-era policy to help the wealthiest Americans pay less tax. That would be a betrayal of his campaign and White House promises to reduce unfairness in the tax system and require those making more than $400,000 per year to pay more to support the government which made their wealth and income possible.
Just stopping the plan from taking effect would give the Biden administration time to understand this scheme. The question is whether Biden will do what he promised or reveal himself to just be another politician who tells voters what he thinks they want to hear and then doesn’t act.
Tax havens
Microsoft Irish subsidiary paid zero corporate tax on £220bn profit last year
Microsoft Round Island One is ‘tax resident’ in Bermuda with no employees except directors
Rupert Neate Wealth correspondent
THE GUARDIAN
Thu 3 Jun 2021 06.30 EDT
An Irish subsidiary of Microsoft made a profit of $315bn (£222bn) last year but paid no corporation tax, as it is “resident” for tax purposes in Bermuda.
The company, Microsoft Round Island One, posted profits last year equal to nearly three-quarters of Ireland’s entire gross domestic product (GDP) – despite having zero employees.
The subsidiary, which collects licence fees for use of copyrighted Microsoft software around the world, recorded an annual profit of $314.7bn in the year to the end of June 2020, according to accounts filed at the Irish Companies Registration Office. Its profits jumped from just under $10bn the previous year and compare with Ireland’s 2020 GDP of €357bn ($437bn).
The revelation of how much money Microsoft has saved by routing via Ireland comes as world leaders hammer out an agreement to tackle multinational tax avoidance before the G7 meeting in Cornwall later this month.
Microsoft Round Island One, whose registered address is at an office of the law firm Matheson, on the River Liffey in central Dublin, states in its accounts that it has “no employees other than the directors”. In its tax statement it says: “As the company is tax resident in Bermuda, no tax is chargeable on income.”
Bermuda does not levy corporation tax.
The company paid a $24.5bn dividend to Microsoft Corporation during the financial year, followed by a further special dividend of $30.5bn.
Tax transparency campaigners described the “tax aggression displayed by Microsoft, and facilitated by Ireland” as “beyond belief”.
The US Senate has previously investigated Microsoft and Ireland over the use of Microsoft Round Island One and other Irish subsidiaries in order to reduce taxes that might otherwise be due in the US or elsewhere.
A former senator, Carl Levin, who was chairman of the permanent subcommittee on investigations, said in 2012 that Microsoft and other tech companies were “probably the number one user of these offshore entities to transfer intellectual property”. The committee said Microsoft began in the 1990s to establish a “complex web of interrelated foreign entities to facilitate international sales and reduce” tax.
A spokesperson for the company said: “Microsoft has been operating and investing in Ireland for over 35 years and is a longtime taxpayer, employer and contributor to the economy. Our organisational and tax structure reflects our complex global business. We are fully compliant with all local laws and regulations in the countries where we operate.”
Paul Monaghan, chief executive of the tax transparency campaign group the Fair Tax Foundation, said: “The tax aggression being displayed by Microsoft, and facilitated by Ireland, is beyond belief.
“We have here a holding company that has posted $314.7bn in profits, which is a number not far short of Ireland’s entire national gross domestic product. Despite shareholder dividends of $55bn being paid out, not one cent in tax has been paid.
“This race to the bottom on tax competitiveness is truly distasteful, not least at a time when countries across the globe are trying to rebuild their public services post-Covid. It is no longer tenable for a decent and responsible nation state to stand up and proclaim its democratic right to produce CFCs or lead additives, and beggar the impact on the rest of the world. The same goes for the enablement of tax avoidance and evasion, which are toxic pollutants of the world’s financial systems.”
The giant US tech firms known as the Silicon Six – Microsoft, Amazon, Facebook, Google’s owner, Alphabet, Netflix and Apple – have been accused of paying $96bn less in tax over the past decade than the notional taxation figures they cite in their annual financial reports.
The Guardian reported this week that the companies paid $219bn in income tax over the past decade, which works out at 3.6% of their total revenue of more than $6tn. Income tax is paid on profits, but the researchers said the Silicon Six companies deliberately shift income to low-tax jurisdictions to pay less tax.
The company, Microsoft Round Island One, posted profits last year equal to nearly three-quarters of Ireland’s entire gross domestic product (GDP) – despite having zero employees.
The subsidiary, which collects licence fees for use of copyrighted Microsoft software around the world, recorded an annual profit of $314.7bn in the year to the end of June 2020, according to accounts filed at the Irish Companies Registration Office. Its profits jumped from just under $10bn the previous year and compare with Ireland’s 2020 GDP of €357bn ($437bn).
The revelation of how much money Microsoft has saved by routing via Ireland comes as world leaders hammer out an agreement to tackle multinational tax avoidance before the G7 meeting in Cornwall later this month.
Microsoft Round Island One, whose registered address is at an office of the law firm Matheson, on the River Liffey in central Dublin, states in its accounts that it has “no employees other than the directors”. In its tax statement it says: “As the company is tax resident in Bermuda, no tax is chargeable on income.”
Bermuda does not levy corporation tax.
The company paid a $24.5bn dividend to Microsoft Corporation during the financial year, followed by a further special dividend of $30.5bn.
Tax transparency campaigners described the “tax aggression displayed by Microsoft, and facilitated by Ireland” as “beyond belief”.
The US Senate has previously investigated Microsoft and Ireland over the use of Microsoft Round Island One and other Irish subsidiaries in order to reduce taxes that might otherwise be due in the US or elsewhere.
A former senator, Carl Levin, who was chairman of the permanent subcommittee on investigations, said in 2012 that Microsoft and other tech companies were “probably the number one user of these offshore entities to transfer intellectual property”. The committee said Microsoft began in the 1990s to establish a “complex web of interrelated foreign entities to facilitate international sales and reduce” tax.
A spokesperson for the company said: “Microsoft has been operating and investing in Ireland for over 35 years and is a longtime taxpayer, employer and contributor to the economy. Our organisational and tax structure reflects our complex global business. We are fully compliant with all local laws and regulations in the countries where we operate.”
Paul Monaghan, chief executive of the tax transparency campaign group the Fair Tax Foundation, said: “The tax aggression being displayed by Microsoft, and facilitated by Ireland, is beyond belief.
“We have here a holding company that has posted $314.7bn in profits, which is a number not far short of Ireland’s entire national gross domestic product. Despite shareholder dividends of $55bn being paid out, not one cent in tax has been paid.
“This race to the bottom on tax competitiveness is truly distasteful, not least at a time when countries across the globe are trying to rebuild their public services post-Covid. It is no longer tenable for a decent and responsible nation state to stand up and proclaim its democratic right to produce CFCs or lead additives, and beggar the impact on the rest of the world. The same goes for the enablement of tax avoidance and evasion, which are toxic pollutants of the world’s financial systems.”
The giant US tech firms known as the Silicon Six – Microsoft, Amazon, Facebook, Google’s owner, Alphabet, Netflix and Apple – have been accused of paying $96bn less in tax over the past decade than the notional taxation figures they cite in their annual financial reports.
The Guardian reported this week that the companies paid $219bn in income tax over the past decade, which works out at 3.6% of their total revenue of more than $6tn. Income tax is paid on profits, but the researchers said the Silicon Six companies deliberately shift income to low-tax jurisdictions to pay less tax.
The Business Class Has Been Fearmongering About Worker Shortages for Centuries
Our so-called staffing crisis hearkens back to the colonial era.
Jon Schwarz - the intercept
May 7 2021, 10:55 a.m.
Recently “freed” workers on a sugar plantation in the West Indies in 1849. Their progress is watched by a white supervisor with a whip. Image: Hulton Archive/Getty Images
THE CURRENT BLIZZARD of stories about a “worker shortage” across the U.S. may seem as though it’s about this peculiar moment, as the pandemic fades. Restaurants in Washington, D.C., contend that they’re suffering from a staffing “crisis.” The hospitality industry in Massachusetts says it’s experiencing the same disaster. The governor of Montana plans to cancel coronavirus-related additional unemployment benefits funded by the federal government, and the cries of business owners are being heard in the White House.
In reality, though, this should be understood as the latest iteration of a question that’s plagued the owning class for centuries: How can they get everyone to do awful jobs for them for awful pay?
Employers’ anxiety about this can be measured by the fact that these stories have erupted when there currently is no shortage of workers. An actual shortage would result in wages rising at the bottom of the income distribution to such a degree that there was notable inflation. That’s not happening, at least not now. Instead, business owners seem to mean that they can’t find people who’ll work for what the owners want to pay them. This is a “shortage” in the same sense that there is a shortage of new Lamborghinis available for $1,000.
To understand what’s truly going on, it’s necessary to look back at how this question has been settled in different ways through the history of capitalism.
As Europe colonized the Western Hemisphere, the initial solution was simple: slavery. It began with the enslavement of Indigenous people from Canada to Cape Horn. This happened on a larger scale than is generally understood today, with one estimate finding that between 2 and 5.5 million Indigenous people were subject to slavery throughout the Americas.
Enslaving Indigenous populations did not go as well as Europeans hoped, however. If they were forced into bondage near where they’d previously lived, Indigenous people understood the land and could easily escape back to their tribe. (This problem was sometimes addressed by shipping them far away, often to the West Indies to work on extraordinarily brutal sugar plantations.) Britain and France, battling for supremacy in North America, were loath to alienate Indigenous people who might then ally with their rival. And Europeans and their diseases killed so many Indigenous people that often there simply weren’t enough around left to enslave.
This was the first worker shortage. It contributed to the expansion of the African slave trade, which, over 350 years, caused the kidnapping of approximately 12.5 million people, with perhaps 2 million dying on the way to the so-called New World.
But what were employers going to do when it was no longer possible to directly force people to labor? This was the subject of startlingly frank planning in British colonies after the passage of the Slavery Abolition Act of 1833.
In 1836, Lord Glenelg, the British secretary of state for war and the colonies, sent a dispatch to all the governors of the West Indies. Formerly enslaved people were about to be fully emancipated after serving a required period of “apprenticeship” for their former masters. This, Glenelg wrote, was going to cause problems for plantations:
During slavery, labour could be compelled to go wherever it promised most profit to the employer. Under the new system it will go wherever it promises most profit to the labourer. If, therefore, we are to keep up the cultivation of the staple productions, we must make it in the immediate and apparent interest of the negro population to employ their labour in raising them. … Where there is land enough to yield an abundant subsistence to the whole population in return for slight labour, they will probably have no sufficient inducement to prefer the more toilsome existence of a regular labourer.
Obviously the answer couldn’t be paying laborers more. Instead, Glenelg explained, it would be necessary to prevent the former slaves from obtaining any land they could work themselves by fixing “such a price upon Crown lands as may place them out of reach of persons without capital.”
In a then-famous speech, a member of Parliament named William Molesworth said it as straightforwardly as possible: “The danger is, that the whole of the labouring population of the West Indies should, as soon as they become entirely free, refuse to work for wages … and that thus capitalists should be left without labourers.”
Several years later, the Scottish polemicist Thomas Carlyle jumped into the fray, in an article with the viciously racist title you might assume. With a few changes, the substance of its argument could appear in National Review today:
The West Indies, it appears, are short of labour. … Where a Black man, by working about half-an-hour a-day … can supply himself, aid of sun and soil, with as much pumpkin as will suffice, he is likely to be a little stiff to raise into hard work! … Sunk to the ears in pumpkin, imbibing saccharine juices, and much at ease in his creation, he can listen to the less fortunate white man’s “demand,” and take his own time in supplying it. Higher wages, massa; higher, for your cane crop cannot wait; — still higher, til no conceivable opulence of cane crop will cover such wages.
Glenelg’s recommendations were largely enacted. This, together with the importation of indentured servants from India, saved plantation owners from experiencing the feared worker shortage.
The same dynamics played out in various permutations as the Industrial Revolution developed. In the U.S., slavery formally ended but was mostly restituted as sharecropping for almost 100 years. At home, the British government passed a series of enclosure laws, which privatized “common” lands on which landless peasants had farmed. Now unable to survive in the countryside, these tenants moved to cities, where their desperation prevented new factories from experiencing a worker shortage.
Many European countries instituted unemployment insurance programs in the early 20th century over the ferocious objections of the business world, which opposed them for obvious reasons: They allowed workers to eke out a bare-minimum survival without jobs. This changed the power equation between employers and employees, forcing businesses to raise wages and improve working conditions.
Despite large-scale working-class agitation in America, the U.S. federal government, even more dominated by business than the governments of Europe, did not institute unemployment insurance for decades. In 1922, the National Association of Manufacturers made a straightforward pronouncement: “Unemployment insurance” — of any kind — “is economically unsound.” Later, an NAM representative informed Congress that its plan for unemployment insurance was unconstitutional and also wouldn’t work. The media of the time was as solicitous then as it is now of the perspective of employers. One supporter of unemployment insurance testified in congressional hearings during the Great Depression that the idea was enormously popular but lamented that even “with all this mass support, it is extremely difficult to get any mention of this in the public press.”
Unemployment insurance finally was created as part of the Social Security Act of 1935. With that battle lost, business turned to a two-fold strategy: first, lobbying to keep unemployment benefits at the lowest level possible, and second, preventing the unemployment rate from ever getting too low. It may seem counterintuitive that businesses would not want the economy operating at full capacity. But low unemployment alters the balance of power between owners and workers just as unemployment insurance does — and when workers can easily quit and get another job across the street, the dreaded worker shortage simply appears again in a different guise.
The battle against low unemployment was eventually cloaked in scientific jargon. In 1975, two economists announced the existence of the non-accelerating inflation rate of unemployment, or NAIRU. If unemployment fell below NAIRU, inflation would start rising uncontrollably as businesses were forced to pay workers more and more. At the time, NAIRU was purportedly 5.5 percent, while later estimates placed it somewhat higher. This meant that whenever unemployment was getting too low, the Federal Reserve had to step in and strangle the economy until lots of people were thrown out of work.
The problem with NAIRU was that, while there is presumably some level of unemployment so low that it will lead to inflation, the official estimates were clearly far too high. The unemployment rate dropped to 3.8 percent in 2000 and dipped to 3.5 percent at the start of 2020, with no accelerating inflation in sight.
Today, with the additional unemployment benefits from the recent Covid-19 relief bill, business owners are living their greatest nightmare: workers with genuine leverage over their wages and working conditions. The owner of a Florida seafood restaurant recently explained this straightforwardly: “You need to have incentives to get people to work, not to stay home. You’ve got the hard workers who want to have a job, but the others need that motivation.”
In theory, there are many possible such incentives: better pay, better working conditions, even a slice of ownership of the company. But the owning class hasn’t been interested in those incentives at any point in the last few centuries. There’s only one incentive that makes sense to them: You work or you starve.
In reality, though, this should be understood as the latest iteration of a question that’s plagued the owning class for centuries: How can they get everyone to do awful jobs for them for awful pay?
Employers’ anxiety about this can be measured by the fact that these stories have erupted when there currently is no shortage of workers. An actual shortage would result in wages rising at the bottom of the income distribution to such a degree that there was notable inflation. That’s not happening, at least not now. Instead, business owners seem to mean that they can’t find people who’ll work for what the owners want to pay them. This is a “shortage” in the same sense that there is a shortage of new Lamborghinis available for $1,000.
To understand what’s truly going on, it’s necessary to look back at how this question has been settled in different ways through the history of capitalism.
As Europe colonized the Western Hemisphere, the initial solution was simple: slavery. It began with the enslavement of Indigenous people from Canada to Cape Horn. This happened on a larger scale than is generally understood today, with one estimate finding that between 2 and 5.5 million Indigenous people were subject to slavery throughout the Americas.
Enslaving Indigenous populations did not go as well as Europeans hoped, however. If they were forced into bondage near where they’d previously lived, Indigenous people understood the land and could easily escape back to their tribe. (This problem was sometimes addressed by shipping them far away, often to the West Indies to work on extraordinarily brutal sugar plantations.) Britain and France, battling for supremacy in North America, were loath to alienate Indigenous people who might then ally with their rival. And Europeans and their diseases killed so many Indigenous people that often there simply weren’t enough around left to enslave.
This was the first worker shortage. It contributed to the expansion of the African slave trade, which, over 350 years, caused the kidnapping of approximately 12.5 million people, with perhaps 2 million dying on the way to the so-called New World.
But what were employers going to do when it was no longer possible to directly force people to labor? This was the subject of startlingly frank planning in British colonies after the passage of the Slavery Abolition Act of 1833.
In 1836, Lord Glenelg, the British secretary of state for war and the colonies, sent a dispatch to all the governors of the West Indies. Formerly enslaved people were about to be fully emancipated after serving a required period of “apprenticeship” for their former masters. This, Glenelg wrote, was going to cause problems for plantations:
During slavery, labour could be compelled to go wherever it promised most profit to the employer. Under the new system it will go wherever it promises most profit to the labourer. If, therefore, we are to keep up the cultivation of the staple productions, we must make it in the immediate and apparent interest of the negro population to employ their labour in raising them. … Where there is land enough to yield an abundant subsistence to the whole population in return for slight labour, they will probably have no sufficient inducement to prefer the more toilsome existence of a regular labourer.
Obviously the answer couldn’t be paying laborers more. Instead, Glenelg explained, it would be necessary to prevent the former slaves from obtaining any land they could work themselves by fixing “such a price upon Crown lands as may place them out of reach of persons without capital.”
In a then-famous speech, a member of Parliament named William Molesworth said it as straightforwardly as possible: “The danger is, that the whole of the labouring population of the West Indies should, as soon as they become entirely free, refuse to work for wages … and that thus capitalists should be left without labourers.”
Several years later, the Scottish polemicist Thomas Carlyle jumped into the fray, in an article with the viciously racist title you might assume. With a few changes, the substance of its argument could appear in National Review today:
The West Indies, it appears, are short of labour. … Where a Black man, by working about half-an-hour a-day … can supply himself, aid of sun and soil, with as much pumpkin as will suffice, he is likely to be a little stiff to raise into hard work! … Sunk to the ears in pumpkin, imbibing saccharine juices, and much at ease in his creation, he can listen to the less fortunate white man’s “demand,” and take his own time in supplying it. Higher wages, massa; higher, for your cane crop cannot wait; — still higher, til no conceivable opulence of cane crop will cover such wages.
Glenelg’s recommendations were largely enacted. This, together with the importation of indentured servants from India, saved plantation owners from experiencing the feared worker shortage.
The same dynamics played out in various permutations as the Industrial Revolution developed. In the U.S., slavery formally ended but was mostly restituted as sharecropping for almost 100 years. At home, the British government passed a series of enclosure laws, which privatized “common” lands on which landless peasants had farmed. Now unable to survive in the countryside, these tenants moved to cities, where their desperation prevented new factories from experiencing a worker shortage.
Many European countries instituted unemployment insurance programs in the early 20th century over the ferocious objections of the business world, which opposed them for obvious reasons: They allowed workers to eke out a bare-minimum survival without jobs. This changed the power equation between employers and employees, forcing businesses to raise wages and improve working conditions.
Despite large-scale working-class agitation in America, the U.S. federal government, even more dominated by business than the governments of Europe, did not institute unemployment insurance for decades. In 1922, the National Association of Manufacturers made a straightforward pronouncement: “Unemployment insurance” — of any kind — “is economically unsound.” Later, an NAM representative informed Congress that its plan for unemployment insurance was unconstitutional and also wouldn’t work. The media of the time was as solicitous then as it is now of the perspective of employers. One supporter of unemployment insurance testified in congressional hearings during the Great Depression that the idea was enormously popular but lamented that even “with all this mass support, it is extremely difficult to get any mention of this in the public press.”
Unemployment insurance finally was created as part of the Social Security Act of 1935. With that battle lost, business turned to a two-fold strategy: first, lobbying to keep unemployment benefits at the lowest level possible, and second, preventing the unemployment rate from ever getting too low. It may seem counterintuitive that businesses would not want the economy operating at full capacity. But low unemployment alters the balance of power between owners and workers just as unemployment insurance does — and when workers can easily quit and get another job across the street, the dreaded worker shortage simply appears again in a different guise.
The battle against low unemployment was eventually cloaked in scientific jargon. In 1975, two economists announced the existence of the non-accelerating inflation rate of unemployment, or NAIRU. If unemployment fell below NAIRU, inflation would start rising uncontrollably as businesses were forced to pay workers more and more. At the time, NAIRU was purportedly 5.5 percent, while later estimates placed it somewhat higher. This meant that whenever unemployment was getting too low, the Federal Reserve had to step in and strangle the economy until lots of people were thrown out of work.
The problem with NAIRU was that, while there is presumably some level of unemployment so low that it will lead to inflation, the official estimates were clearly far too high. The unemployment rate dropped to 3.8 percent in 2000 and dipped to 3.5 percent at the start of 2020, with no accelerating inflation in sight.
Today, with the additional unemployment benefits from the recent Covid-19 relief bill, business owners are living their greatest nightmare: workers with genuine leverage over their wages and working conditions. The owner of a Florida seafood restaurant recently explained this straightforwardly: “You need to have incentives to get people to work, not to stay home. You’ve got the hard workers who want to have a job, but the others need that motivation.”
In theory, there are many possible such incentives: better pay, better working conditions, even a slice of ownership of the company. But the owning class hasn’t been interested in those incentives at any point in the last few centuries. There’s only one incentive that makes sense to them: You work or you starve.
Here's how much big companies like McDonald's and Walmart would pay under Sanders' and Warren's tax on CEO pay
Juliana Kaplan and Joseph Zeballos-Roig - business insider
3/20/2021
On Wednesday, Sens. Elizabeth Warren and Bernie Sanders — alongside other Democratic House and Senate members — said they re-introduced the "Tax Excessive CEO Pay Act."
The legislation applies to businesses with more than $100 million in annual revenue and targets larger corporations where CEOs earn at least 50 times more than their median worker. The tax is determined by the size of the pay gap between them, gradually increasing as the disparity worsens.
If the CEO makes between 50 and 100 times more than the median worker, corporate taxes increase by 0.5%. For those CEOS paid between 100 times and up to 200 times more than the median worker, taxes would increase by 1%, with a 1% increase for every order of 100. The highest increase would be 5%, for companies where CEOs earn over 500 times their typical worker.
A 2020 report from the left-leaning Economic Policy Institute (EPI) looked at how CEO compensation has grown in contrast to workers' wages. Focusing on "realized" compensation for CEOs — which "counts stock awards when vested and stock options when cashed in rather than when granted" — EPI found that, in 2019, the ratio between CEO pay and the typical worker's pay was 320-to-1.
And, from 1978 to 2019, CEO pay grew by 1,167%; meanwhile, it grew by 13.7% for the typical worker.
Some big-name companies would owe millions extra under the legislation
Several widely-known companies would find their taxes hiked. In a press release for the bill, several notable ones are highlighted.
If the legislation had been in effect last year, some companies would have paid hundreds of millions more in taxes, according to the press release: Walmart would have owed $854.9 million more; for Home Depot and JPMorganChase, the additional taxes come to $550.8 million and $172.8 million. Nike would have paid an extra $147.7 million.
Meanwhile, McDonald's would have forked over an extra $69.5 million, and American Airlines an extra $22.6 million.
Notably, Nike CEO John Donahoe was promoted to the new position in January 2020, and the company awarded him a much larger compensation package than his predecessor's 2019 pay (shown in the chart below) as part of the move. McDonald's also got a new CEO in 2019, and they calculated their pay ratio using a combination of the pay packages for incoming CEO Chris Kempczinski and departing CEO Steve Easterbrook.
Money CEOs earned compared to median employees at the same company CEO annual total compensation compared to Median employee annual total compensation
Chart: Madison Hoff/Insider Source: Data for all companies from the most recent proxy statements filed with the SEC, except for Nike which is from the proxy statement filed on July 23, 2019. Selected companies and data also from "Sanders and Colleagues Introduce Legislation to Combat Corporate Greed and End Outrageous CEO Pay" press release)
Some conservative economists argue the tax would hit certain sectors harder, such as fast-food and retail because of the low-wages commonly paid in those industries. (BULLSHIT!)
- A new bill would raise taxes on companies where CEOs are paid at least 50 times more than workers.
- The bill would have made some companies pay hundreds of millions more if it were in effect.
- It comes as President Biden mulls tax increases for individuals and corporations.
On Wednesday, Sens. Elizabeth Warren and Bernie Sanders — alongside other Democratic House and Senate members — said they re-introduced the "Tax Excessive CEO Pay Act."
The legislation applies to businesses with more than $100 million in annual revenue and targets larger corporations where CEOs earn at least 50 times more than their median worker. The tax is determined by the size of the pay gap between them, gradually increasing as the disparity worsens.
If the CEO makes between 50 and 100 times more than the median worker, corporate taxes increase by 0.5%. For those CEOS paid between 100 times and up to 200 times more than the median worker, taxes would increase by 1%, with a 1% increase for every order of 100. The highest increase would be 5%, for companies where CEOs earn over 500 times their typical worker.
A 2020 report from the left-leaning Economic Policy Institute (EPI) looked at how CEO compensation has grown in contrast to workers' wages. Focusing on "realized" compensation for CEOs — which "counts stock awards when vested and stock options when cashed in rather than when granted" — EPI found that, in 2019, the ratio between CEO pay and the typical worker's pay was 320-to-1.
And, from 1978 to 2019, CEO pay grew by 1,167%; meanwhile, it grew by 13.7% for the typical worker.
Some big-name companies would owe millions extra under the legislation
Several widely-known companies would find their taxes hiked. In a press release for the bill, several notable ones are highlighted.
If the legislation had been in effect last year, some companies would have paid hundreds of millions more in taxes, according to the press release: Walmart would have owed $854.9 million more; for Home Depot and JPMorganChase, the additional taxes come to $550.8 million and $172.8 million. Nike would have paid an extra $147.7 million.
Meanwhile, McDonald's would have forked over an extra $69.5 million, and American Airlines an extra $22.6 million.
Notably, Nike CEO John Donahoe was promoted to the new position in January 2020, and the company awarded him a much larger compensation package than his predecessor's 2019 pay (shown in the chart below) as part of the move. McDonald's also got a new CEO in 2019, and they calculated their pay ratio using a combination of the pay packages for incoming CEO Chris Kempczinski and departing CEO Steve Easterbrook.
Money CEOs earned compared to median employees at the same company CEO annual total compensation compared to Median employee annual total compensation
- JPMorganChase (393:1)
- $31,619,266
- $80,431
- Walmart (983:1)
- $22,105,350
- $22,484
- McDonald's (1,939:1)
- $18,012,549
- $9,291
- Nike (550:1)
- $13,968,022
- $25,386
- American Airlines (189:1)
- $11,571,714
- $61,143
- Home Depot (481:1)
- $10,889,833
- $22,652
Chart: Madison Hoff/Insider Source: Data for all companies from the most recent proxy statements filed with the SEC, except for Nike which is from the proxy statement filed on July 23, 2019. Selected companies and data also from "Sanders and Colleagues Introduce Legislation to Combat Corporate Greed and End Outrageous CEO Pay" press release)
Some conservative economists argue the tax would hit certain sectors harder, such as fast-food and retail because of the low-wages commonly paid in those industries. (BULLSHIT!)
Owners of Hospital Conglomerate Made Billions as Health Care Workers Lacked PPE
BY Chuck Collins & Omar Ocampo, Inequality.org - truthout
PUBLISHED March 13, 2021
Not everyone is suffering during the pandemic.
The Frist family of Tennessee are the founders and biggest shareholders of Hospital Corporation of America (HCA), the largest for-profit hospital conglomerate in the U.S. Thomas F. Frist Jr. and his family have seen their personal wealth increase from $7.5 billion on March 18, 2020 to $15.6 billion on March 8, 2021, an increase of $8.1 billion or 108 percent, according to an analysis by the Institute for Policy Studies.
Almost half of these gains — $4 billion — have come since September 2020, when Forbes reported the Thomas F. Frist Jr. family wealth at $11.5 billion. The Frists have an estimated 20 percent ownership stake in HCA.
Of the 27 U.S. billionaires whose wealth comes from the health care sector, the Frists have seen the single greatest pandemic wealth gains, even compared to fortunes from big pharma and bio-tech. HCA is the only hospital owner on the list of 27 health care billionaires.
Pandemic Profiteering
The surging wealth gains of the Frist family come as health care workers and their patients face enormous strains.
As Francesca Newton writes in her Tribune piece, “10 Ways Corporations Have Exploited Covid-19,” “While key workers put their lives on the line to keep the country running, and mutual aid groups desperately tried to plug the holes created by decades of cuts to our social fabric, billionaires and big corporate interests have made a killing.”
HCA has reaped enormous profits by squeezing workers and cutting costs, while showering top management with lavish compensation.
Profits
HCA made nearly $4 billion in profits in 2020 during the pandemic, up more than $200 million from 2019. At the same time the company cut supply costs by $112 million, even though workers spoke out for months about inadequate PPE and having to reuse single use equipment like masks and gloves.
CEO Pay
HCA CEO Sam Hazen was paid $27 million in 2019, making him the highest paid CEO in the hospital sector for that year (2020 figures will be released in mid-March). Hazen’s 2019 compensation was higher than the CEO of Humana, $16.7 million. His pay is 478 times the median HCA employee, up from 383 times in 2018. His pay is over 1,038 times the lowest paid worker at HCA, which is $12.50 at its El Paso facility. Hazen is paid roughly $13,000 an hour. According to the Economic Policy Institute, the average ratio of U.S. CEO pay to median worker was 320 to 1 in 2019.
Staffing Levels
In 2019, HCA’s staffing levels were 29 percent below the national average. HCA’s low staffing levels have been linked to poor patient outcomes. For example, low staffing levels at HCA’s Colorado hospitals may have contributed to patient death as well as other preventable harm.
Impact on Frontline Health Care Workers
In addition to inadequate staffing levels and insufficient supplies for PPE, poor wages have been the focus of HCA critics for some time. But the issue worsened during the pandemic as frontline health care workers were forced to take much greater risks. Meanwhile, HCA continued to push back on worker demands. For example, it successfully delayed the vote to unionize 1,800 nurses at its Mission Hospital in Asheville, North Carolina for six months, claiming that delay was necessary during a pandemic.
Frist Family Wealth and U.S. Billionaires
The surge in wealth flowing to Frist family is extraordinary, even for U.S. billionaires who have seen their wealth accelerate during the pandemic. U.S. billionaires have seen their wealth increase $1.3 trillion, or 44 percent, over the 11 months since the beginning of the pandemic lockdowns in March 2020, according to an analysis by Americans for Tax Fairness (ATF) and the Institute for Policy Studies (IPS). The combined wealth of 660 U.S. billionaires now tops $4.2 trillion.
For perspective, the $4.2 trillion in wealth is nearly double the collective $2.4 trillion in wealth held by the entire bottom half of American society, or 165 million people.
The Frist family of Tennessee are the founders and biggest shareholders of Hospital Corporation of America (HCA), the largest for-profit hospital conglomerate in the U.S. Thomas F. Frist Jr. and his family have seen their personal wealth increase from $7.5 billion on March 18, 2020 to $15.6 billion on March 8, 2021, an increase of $8.1 billion or 108 percent, according to an analysis by the Institute for Policy Studies.
Almost half of these gains — $4 billion — have come since September 2020, when Forbes reported the Thomas F. Frist Jr. family wealth at $11.5 billion. The Frists have an estimated 20 percent ownership stake in HCA.
Of the 27 U.S. billionaires whose wealth comes from the health care sector, the Frists have seen the single greatest pandemic wealth gains, even compared to fortunes from big pharma and bio-tech. HCA is the only hospital owner on the list of 27 health care billionaires.
Pandemic Profiteering
The surging wealth gains of the Frist family come as health care workers and their patients face enormous strains.
As Francesca Newton writes in her Tribune piece, “10 Ways Corporations Have Exploited Covid-19,” “While key workers put their lives on the line to keep the country running, and mutual aid groups desperately tried to plug the holes created by decades of cuts to our social fabric, billionaires and big corporate interests have made a killing.”
HCA has reaped enormous profits by squeezing workers and cutting costs, while showering top management with lavish compensation.
Profits
HCA made nearly $4 billion in profits in 2020 during the pandemic, up more than $200 million from 2019. At the same time the company cut supply costs by $112 million, even though workers spoke out for months about inadequate PPE and having to reuse single use equipment like masks and gloves.
CEO Pay
HCA CEO Sam Hazen was paid $27 million in 2019, making him the highest paid CEO in the hospital sector for that year (2020 figures will be released in mid-March). Hazen’s 2019 compensation was higher than the CEO of Humana, $16.7 million. His pay is 478 times the median HCA employee, up from 383 times in 2018. His pay is over 1,038 times the lowest paid worker at HCA, which is $12.50 at its El Paso facility. Hazen is paid roughly $13,000 an hour. According to the Economic Policy Institute, the average ratio of U.S. CEO pay to median worker was 320 to 1 in 2019.
Staffing Levels
In 2019, HCA’s staffing levels were 29 percent below the national average. HCA’s low staffing levels have been linked to poor patient outcomes. For example, low staffing levels at HCA’s Colorado hospitals may have contributed to patient death as well as other preventable harm.
Impact on Frontline Health Care Workers
In addition to inadequate staffing levels and insufficient supplies for PPE, poor wages have been the focus of HCA critics for some time. But the issue worsened during the pandemic as frontline health care workers were forced to take much greater risks. Meanwhile, HCA continued to push back on worker demands. For example, it successfully delayed the vote to unionize 1,800 nurses at its Mission Hospital in Asheville, North Carolina for six months, claiming that delay was necessary during a pandemic.
Frist Family Wealth and U.S. Billionaires
The surge in wealth flowing to Frist family is extraordinary, even for U.S. billionaires who have seen their wealth accelerate during the pandemic. U.S. billionaires have seen their wealth increase $1.3 trillion, or 44 percent, over the 11 months since the beginning of the pandemic lockdowns in March 2020, according to an analysis by Americans for Tax Fairness (ATF) and the Institute for Policy Studies (IPS). The combined wealth of 660 U.S. billionaires now tops $4.2 trillion.
For perspective, the $4.2 trillion in wealth is nearly double the collective $2.4 trillion in wealth held by the entire bottom half of American society, or 165 million people.
The damning truth about CEO pay has been revealed by this research
Dean Baker, DC Report @ Raw Story
March 11, 2021
A friend sent me a new study showing that the top five executives of major corporations pocketed between 15 and 19 cents of every dollar their companies gained from two recent tax cuts. This paper, by Eric Ohrn at Grinnell College, should be a really big deal.
The basic point is one that I, and others, have been making for a long time. CEOs and other top executives rip off the companies they work for. They are not worth the $20 million or more that many of them pocket each year.
Again, this is not a moral judgment about their value to society. It is a simple dollars-and-cents calculation about how much money they produce for shareholders, and this piece suggests that it is nothing close to what they pocket.
The reason why this finding is a big deal is that it is yet another piece of evidence that executives are able to pocket money that they did nothing to earn.
In the case of these tax cuts, company profits increased because of a change in government policy, not because their management had developed new products, increased market share, or reduced production costs. (Some of them presumably paid for lobbyists to push for the tax breaks, so their contribution to higher profits may not have been exactly nothing.)
There is much other work along similar lines. An analysis of the pay of oil company CEOs found that they got large increases in compensation when oil prices rose. Since the CEOs were not responsible for the rise in world oil prices, this meant they were getting compensated for factors that had little to do with their work. A more recent study found the same result. Another study found that CEO pay soared in the 1990s because it seemed that corporate boards did not understand the value of the options they were issuing.
A few years ago, Jessica Schieder and I did a paper showing that the loss of the tax deduction for CEO pay in the health insurance industry, which was part of the Affordable Care Act, had no impact on CEO pay.
The loss of this deduction effectively raised the cost of CEO pay to firms by more than 50%. If CEO pay was closely related to the value they added to the company's bottom line, we should have unambiguously expected to see some decline in CEO pay in the industry relative to other sectors. In a wide variety of specifications, we found no negative effect. (Bebchuk and Fried's book, Pay Without Performance, presents a wide range of evidence on this issue.)
Ripping Off Companies
As can be easily shown the bulk of the upward redistribution from the 1970s was not due to a shift from wages to profits, it was due to an upward redistribution among wage earners. Instead of money going to ordinary workers, it was going to those at the top end of the wage distribution, such as doctors and dentists, STEM [science, technology, engineering and math] workers, and especially to Wall Street trader types and top corporate management. If we want to reverse this upward redistribution then we have to take back the money from those who got it.
If top management actually earned their pay, in the sense of increasing profits for the companies they worked for, then there would be at least some sort of trade-off. Reducing their pay would mean a corresponding loss in profit for these companies. It still might be desirable to see top executives pocket less money, but shareholders would be unhappy in this story since they will have fewer profits as a result.
But if CEOs and other top management are not increasing profits in a way that is commensurate with their pay, their excess pay is a direct drain on the companies that employ them.
Money Thrown in Garbage
From the standpoint of the shareholders, it is no more desirable to pay a CEO $20 million, if someone just as effective can be hired for $2 million than to pay an extra $18 million for rent, utilities, or any other input. It is money thrown in the garbage.
As I have argued in the past, the excess pay for CEOs is not just an issue because of a relatively small number of very highly paid top executives. It matters because of its impact on pay structures throughout the economy. When the CEO gets paid more, it means more money for those next to the CEO in the corporate hierarchy and even the third-tier corporate executives. That leaves less money for everyone else.
The Ohrn study found that 15% to 19% of the benefits of the tax breaks he examined went to the top five executives. If half this amount went to the next twenty or thirty people in the corporate hierarchy, it would imply between 22% and 37% of the money gained from a tax break went to twenty-five or thirty-five highest paid people in the corporate hierarchy.
To throw some numbers around, if the CEO is getting $20 million, then the rest of the top five executives are likely making close to $10 million, with the next echelon making $1 to $2 million.
If we envision pay structures comparable to what we had in the 1960s and 1970s, CEOs would be getting $2 to $3 million. The next four executives likely earning between $1 to $2 million, and the third tier getting paid in the high six figures. With the pay structures from the corporate sector carrying over to other sectors, such as government, universities, and non-profits, we would be looking at a very different economy.[...] READ MORE
The basic point is one that I, and others, have been making for a long time. CEOs and other top executives rip off the companies they work for. They are not worth the $20 million or more that many of them pocket each year.
Again, this is not a moral judgment about their value to society. It is a simple dollars-and-cents calculation about how much money they produce for shareholders, and this piece suggests that it is nothing close to what they pocket.
The reason why this finding is a big deal is that it is yet another piece of evidence that executives are able to pocket money that they did nothing to earn.
In the case of these tax cuts, company profits increased because of a change in government policy, not because their management had developed new products, increased market share, or reduced production costs. (Some of them presumably paid for lobbyists to push for the tax breaks, so their contribution to higher profits may not have been exactly nothing.)
There is much other work along similar lines. An analysis of the pay of oil company CEOs found that they got large increases in compensation when oil prices rose. Since the CEOs were not responsible for the rise in world oil prices, this meant they were getting compensated for factors that had little to do with their work. A more recent study found the same result. Another study found that CEO pay soared in the 1990s because it seemed that corporate boards did not understand the value of the options they were issuing.
A few years ago, Jessica Schieder and I did a paper showing that the loss of the tax deduction for CEO pay in the health insurance industry, which was part of the Affordable Care Act, had no impact on CEO pay.
The loss of this deduction effectively raised the cost of CEO pay to firms by more than 50%. If CEO pay was closely related to the value they added to the company's bottom line, we should have unambiguously expected to see some decline in CEO pay in the industry relative to other sectors. In a wide variety of specifications, we found no negative effect. (Bebchuk and Fried's book, Pay Without Performance, presents a wide range of evidence on this issue.)
Ripping Off Companies
As can be easily shown the bulk of the upward redistribution from the 1970s was not due to a shift from wages to profits, it was due to an upward redistribution among wage earners. Instead of money going to ordinary workers, it was going to those at the top end of the wage distribution, such as doctors and dentists, STEM [science, technology, engineering and math] workers, and especially to Wall Street trader types and top corporate management. If we want to reverse this upward redistribution then we have to take back the money from those who got it.
If top management actually earned their pay, in the sense of increasing profits for the companies they worked for, then there would be at least some sort of trade-off. Reducing their pay would mean a corresponding loss in profit for these companies. It still might be desirable to see top executives pocket less money, but shareholders would be unhappy in this story since they will have fewer profits as a result.
But if CEOs and other top management are not increasing profits in a way that is commensurate with their pay, their excess pay is a direct drain on the companies that employ them.
Money Thrown in Garbage
From the standpoint of the shareholders, it is no more desirable to pay a CEO $20 million, if someone just as effective can be hired for $2 million than to pay an extra $18 million for rent, utilities, or any other input. It is money thrown in the garbage.
As I have argued in the past, the excess pay for CEOs is not just an issue because of a relatively small number of very highly paid top executives. It matters because of its impact on pay structures throughout the economy. When the CEO gets paid more, it means more money for those next to the CEO in the corporate hierarchy and even the third-tier corporate executives. That leaves less money for everyone else.
The Ohrn study found that 15% to 19% of the benefits of the tax breaks he examined went to the top five executives. If half this amount went to the next twenty or thirty people in the corporate hierarchy, it would imply between 22% and 37% of the money gained from a tax break went to twenty-five or thirty-five highest paid people in the corporate hierarchy.
To throw some numbers around, if the CEO is getting $20 million, then the rest of the top five executives are likely making close to $10 million, with the next echelon making $1 to $2 million.
If we envision pay structures comparable to what we had in the 1960s and 1970s, CEOs would be getting $2 to $3 million. The next four executives likely earning between $1 to $2 million, and the third tier getting paid in the high six figures. With the pay structures from the corporate sector carrying over to other sectors, such as government, universities, and non-profits, we would be looking at a very different economy.[...] READ MORE
the plight of the selfish and greedy!!!
Rich Americans Who Fear Higher Taxes Hurry to Move Money Now
By Ben Steverman and Oshrat Carmiel - bloomberg wealth
December 21, 2020, 6:35 AM PST
Rich Americans are rushing to make large transactions before the end of the month, trying to get ahead of any moves next year by President-elect Joe Biden and Democrats in Congress to raise taxes or close loopholes.
Some advisers say they’re busier than ever in the last weeks of 2020, especially with helping clients transfer wealth to the next generation tax-free while they still can. Appraisers, who are crucial for valuing assets used in these estate planning strategies, have been inundated.
Requests for property appraisals have quadrupled at New York firm Miller Samuel Inc., President Jonathan Miller said. By late November, he had to start turning away clients.
“We physically can’t handle all the year-end deadlines at this point,” Miller said. “We started doing this after the Thanksgiving holiday and it’s been extremely frustrating.”
The year-end frenzy is a surprise to many advisers, because Republicans did better than many expected in congressional races. The results suggested Biden may have a difficult time fulfilling campaign promises to raise trillions of dollars in new revenue from the wealthy.
‘Very Difficult’
Two run-off elections in Georgia on Jan. 5 still give Democrats a chance to win 50 seats in the Senate, affording them control of the chamber with Vice President-elect Kamala Harris casting tie-breaking votes.
Even if Democrats win both races in Georgia, “it’s still going to be very difficult for the president-elect to really get significant tax reform done with a split Senate,” said Benjamin Berger, a partner at RSM U.S. and co-leader of the accounting firm’s national family-office practice.
Nonetheless, tax changes are still possible in 2021, and the Biden administration could also try to close the many loopholes that make the U.S. estate and gift tax easy to avoid. “I can see a situation where Treasury issues regulations that make it more difficult to do effective estate planning,” Berger said.
The 2017 Republican tax law signed by President Donald Trump doubled the amount the wealthy could pass to heirs without paying the estate and gift tax, to $11.58 million for individuals and $23.16 million for couples this year. That and other provisions of the law expire in 2026, giving the rich another reason to make moves sooner rather than later.
Gifting Strategies
Before the election, “so many clients had already started looking at gifting strategies,” said Lisa Featherngill, head of legacy and wealth planning at Abbot Downing, a unit of San Francisco-based Wells Fargo & Co. “We’re telling them don’t take your foot off the gas.”
The main reason for rich taxpayers to make moves by Dec. 31 is the threat that tax changes under Biden could be retroactive to the beginning of 2021. Many advisers are now telling clients that seems less likely, with tax hikes occurring in 2022 if they happen at all.
Still, Laura Zwicker, chair of the private client services group at Los Angeles law firm Greenberg Glusker, said she’s busier “than I have ever been” with a surprising number of new clients coming in the weeks after the election looking to finish transactions this year.
“Estate planning is emotional,” Zwicker said. “Clients want to take advantage of the current law, which many have internalized as having been in place forever.”
‘Uncertain Times’
After a crazy 2020 that underscored “we live in uncertain times,” clients are acting out of “an abundance of caution,” said Susan Hartley-Moss, a partner at Cerity Partners, who heads the firm’s trust and estates planning division. “A really smart adviser would advise you, ‘Hey, let’s not take any chances. Let’s use up the remainder of your $11.58 million. You don’t want to risk it.”
Advisers say the pace of work this month is similar to the rush at the end of 2012, when Americans raced to complete transactions before the estate tax exemption was scheduled to drop in 2013. That change was averted by a last-minute deal.
Biden has also called for income tax hikes on the wealthy, including much higher levies on capital gains. Advisers say that has prompted some clients to try to sell businesses or investments in 2020, locking in rates that are unlikely to fall but could rise in the years ahead. Some millionaires could also face higher state and local taxes in 2021, with states like New York facing severe budgetary shortfalls.
Not every adviser agrees it’s necessary to pay extra in 2020 to avoid hypothetical tax hikes in the future, since deferring taxes still has financial advantages. But for some clients, “The devil you know is better than the devil you don’t know,” Berger said.
Charitable Donations
Even if they’re not worried about tax changes in 2021, rich Americans are still pursuing the usual end-of-year planning moves designed to lower their tax bills. The pandemic and Covid-19-related legislation like the CARES Act offer the chance to make these strategies more lucrative.
For example, the charitably inclined have the unprecedented ability to offset 100% of their taxable income with donations in 2020. To take full advantage, donors need to make much of their gifts in cash -- a sticking point for those who prefer the bigger tax breaks provided by gifts of appreciated stock.
Older Americans can also lower their taxable income by not taking required minimum distributions in 2020 from individual retirement accounts. Losses from businesses or this year’s volatile stock market can also offset other income, lowering tax bills or letting clients convert traditional individual retirement accounts to Roth IRAs without paying more than usual.
Still, with 2020 almost over, “There is a race to the finish line,” Hartley-Moss said.
Some advisers say they’re busier than ever in the last weeks of 2020, especially with helping clients transfer wealth to the next generation tax-free while they still can. Appraisers, who are crucial for valuing assets used in these estate planning strategies, have been inundated.
Requests for property appraisals have quadrupled at New York firm Miller Samuel Inc., President Jonathan Miller said. By late November, he had to start turning away clients.
“We physically can’t handle all the year-end deadlines at this point,” Miller said. “We started doing this after the Thanksgiving holiday and it’s been extremely frustrating.”
The year-end frenzy is a surprise to many advisers, because Republicans did better than many expected in congressional races. The results suggested Biden may have a difficult time fulfilling campaign promises to raise trillions of dollars in new revenue from the wealthy.
‘Very Difficult’
Two run-off elections in Georgia on Jan. 5 still give Democrats a chance to win 50 seats in the Senate, affording them control of the chamber with Vice President-elect Kamala Harris casting tie-breaking votes.
Even if Democrats win both races in Georgia, “it’s still going to be very difficult for the president-elect to really get significant tax reform done with a split Senate,” said Benjamin Berger, a partner at RSM U.S. and co-leader of the accounting firm’s national family-office practice.
Nonetheless, tax changes are still possible in 2021, and the Biden administration could also try to close the many loopholes that make the U.S. estate and gift tax easy to avoid. “I can see a situation where Treasury issues regulations that make it more difficult to do effective estate planning,” Berger said.
The 2017 Republican tax law signed by President Donald Trump doubled the amount the wealthy could pass to heirs without paying the estate and gift tax, to $11.58 million for individuals and $23.16 million for couples this year. That and other provisions of the law expire in 2026, giving the rich another reason to make moves sooner rather than later.
Gifting Strategies
Before the election, “so many clients had already started looking at gifting strategies,” said Lisa Featherngill, head of legacy and wealth planning at Abbot Downing, a unit of San Francisco-based Wells Fargo & Co. “We’re telling them don’t take your foot off the gas.”
The main reason for rich taxpayers to make moves by Dec. 31 is the threat that tax changes under Biden could be retroactive to the beginning of 2021. Many advisers are now telling clients that seems less likely, with tax hikes occurring in 2022 if they happen at all.
Still, Laura Zwicker, chair of the private client services group at Los Angeles law firm Greenberg Glusker, said she’s busier “than I have ever been” with a surprising number of new clients coming in the weeks after the election looking to finish transactions this year.
“Estate planning is emotional,” Zwicker said. “Clients want to take advantage of the current law, which many have internalized as having been in place forever.”
‘Uncertain Times’
After a crazy 2020 that underscored “we live in uncertain times,” clients are acting out of “an abundance of caution,” said Susan Hartley-Moss, a partner at Cerity Partners, who heads the firm’s trust and estates planning division. “A really smart adviser would advise you, ‘Hey, let’s not take any chances. Let’s use up the remainder of your $11.58 million. You don’t want to risk it.”
Advisers say the pace of work this month is similar to the rush at the end of 2012, when Americans raced to complete transactions before the estate tax exemption was scheduled to drop in 2013. That change was averted by a last-minute deal.
Biden has also called for income tax hikes on the wealthy, including much higher levies on capital gains. Advisers say that has prompted some clients to try to sell businesses or investments in 2020, locking in rates that are unlikely to fall but could rise in the years ahead. Some millionaires could also face higher state and local taxes in 2021, with states like New York facing severe budgetary shortfalls.
Not every adviser agrees it’s necessary to pay extra in 2020 to avoid hypothetical tax hikes in the future, since deferring taxes still has financial advantages. But for some clients, “The devil you know is better than the devil you don’t know,” Berger said.
Charitable Donations
Even if they’re not worried about tax changes in 2021, rich Americans are still pursuing the usual end-of-year planning moves designed to lower their tax bills. The pandemic and Covid-19-related legislation like the CARES Act offer the chance to make these strategies more lucrative.
For example, the charitably inclined have the unprecedented ability to offset 100% of their taxable income with donations in 2020. To take full advantage, donors need to make much of their gifts in cash -- a sticking point for those who prefer the bigger tax breaks provided by gifts of appreciated stock.
Older Americans can also lower their taxable income by not taking required minimum distributions in 2020 from individual retirement accounts. Losses from businesses or this year’s volatile stock market can also offset other income, lowering tax bills or letting clients convert traditional individual retirement accounts to Roth IRAs without paying more than usual.
Still, with 2020 almost over, “There is a race to the finish line,” Hartley-Moss said.
New Report Shows Top Billionaires’ Wealth Skyrocketing During Pandemic
BY Mike Ludwig, Truthout
PUBLISHED December 11, 2020
The net wealth enjoyed by the richest billionaires in the United States has ballooned since the beginning of the pandemic, according to a new report. Meanwhile, millions of households are struggling to put food on the table and pay rent as COVID-19 deaths and infections surge nationwide, underscoring our nation’s vast inequality.
The collective wealth of the 651 richest billionaires has increased by over $1 trillion since March 18, roughly when states began issuing shutdown orders, according to a new analysis of Forbes financial data by Americans for Tax Fairness and the Institute for Policy Studies. The combined net worth of the richest people in the U.S. totaled $4 trillion this week — more than four times the $908 billion price tag of an economic relief package that has taken center stage in the Senate as Congress struggles to strike a bipartisan deal before the end of year.
A stock market surge combined with more people staying at home has been a boon for tech companies and their CEOs. Familiar names in tech top the report’s list of the richest people getting richer: Jeff Bezos of Amazon, Bill Gates of Microsoft, Mark Zuckerberg of Facebook and Elon Musk of Tesla. The four men have seen stock prices for their companies soar since the pandemic began, making them “centi-billionaires” worth over $100 billion each.
Then there is Dan Gilbert, chairman of Quicken Loans, a company specializing in short and long-term personal loans and home mortgages. As people struggle to pay their bills, Gilbert’s wealth has grown 543 percent from $6.1 billion to $41.8 billion, the second highest increase among billionaires after the net increase enjoyed by Ernest Garcia II, who makes his fortune selling used cars.
The economy looks much different to the rest of us. Millions of people have lost jobs during the pandemic and food and housing insecurity have skyrocketed to crisis levels. Across the country, images of cars lined up for miles to receive food donations have illustrated the severity of the crisis.
More than 1 in 10 adults sometimes or often do not have enough money for food, according estimates based on federal Census data. Last month, more than half of the country worried about affording food as the holidays approached. About 34 percent of the country — roughly 83 million adults — report difficulty paying for basic expenses such as food, medical bills and mortgage payments. An estimated 40 percent of children live in homes that are either behind on rent or facing food hardship, and rates of food insecurity are even higher among families of color.
At least 12 million people are now behind on rent, and housing activists are fighting evictions across the country despite a federal moratorium on evictions set to expire at the end of the month.
---
“Their wealth growth is so great that they alone could provide a $3,000 stimulus payment to every man, woman and child in the country, and still be richer than they were 10 months ago,” Clemente said.
The report on wealth gains among billionaire received favorable review from the fact-checkers at PolitiFact. On the campaign trail, President-elect Joe Biden claimed billionaires “in this country are seeing their wealth increase by $800 billion” during the pandemic, a statement PolitiFact rated “mostly true” based on the report.
Biden campaigned on raising taxes on the wealthy, and Clemente said he must make good on that promise after entering the White House on January 20.
“Joe Biden won a tax-fairness mandate in November,” Clemente said. “We look forward to working with him and Congress to deliver on that mandate by taxing the massive wealth of these billionaires.”
The collective wealth of the 651 richest billionaires has increased by over $1 trillion since March 18, roughly when states began issuing shutdown orders, according to a new analysis of Forbes financial data by Americans for Tax Fairness and the Institute for Policy Studies. The combined net worth of the richest people in the U.S. totaled $4 trillion this week — more than four times the $908 billion price tag of an economic relief package that has taken center stage in the Senate as Congress struggles to strike a bipartisan deal before the end of year.
A stock market surge combined with more people staying at home has been a boon for tech companies and their CEOs. Familiar names in tech top the report’s list of the richest people getting richer: Jeff Bezos of Amazon, Bill Gates of Microsoft, Mark Zuckerberg of Facebook and Elon Musk of Tesla. The four men have seen stock prices for their companies soar since the pandemic began, making them “centi-billionaires” worth over $100 billion each.
Then there is Dan Gilbert, chairman of Quicken Loans, a company specializing in short and long-term personal loans and home mortgages. As people struggle to pay their bills, Gilbert’s wealth has grown 543 percent from $6.1 billion to $41.8 billion, the second highest increase among billionaires after the net increase enjoyed by Ernest Garcia II, who makes his fortune selling used cars.
The economy looks much different to the rest of us. Millions of people have lost jobs during the pandemic and food and housing insecurity have skyrocketed to crisis levels. Across the country, images of cars lined up for miles to receive food donations have illustrated the severity of the crisis.
More than 1 in 10 adults sometimes or often do not have enough money for food, according estimates based on federal Census data. Last month, more than half of the country worried about affording food as the holidays approached. About 34 percent of the country — roughly 83 million adults — report difficulty paying for basic expenses such as food, medical bills and mortgage payments. An estimated 40 percent of children live in homes that are either behind on rent or facing food hardship, and rates of food insecurity are even higher among families of color.
At least 12 million people are now behind on rent, and housing activists are fighting evictions across the country despite a federal moratorium on evictions set to expire at the end of the month.
---
“Their wealth growth is so great that they alone could provide a $3,000 stimulus payment to every man, woman and child in the country, and still be richer than they were 10 months ago,” Clemente said.
The report on wealth gains among billionaire received favorable review from the fact-checkers at PolitiFact. On the campaign trail, President-elect Joe Biden claimed billionaires “in this country are seeing their wealth increase by $800 billion” during the pandemic, a statement PolitiFact rated “mostly true” based on the report.
Biden campaigned on raising taxes on the wealthy, and Clemente said he must make good on that promise after entering the White House on January 20.
“Joe Biden won a tax-fairness mandate in November,” Clemente said. “We look forward to working with him and Congress to deliver on that mandate by taxing the massive wealth of these billionaires.”
The Trump Administration Allowed Aviation Companies to Take Bailout Funds and Lay Off Workers, Says House Report
Instead of using bailout money to keep workers, at least two companies restored the full pay of their top management.
by Jeff Ernsthausen and Justin Elliott - PROPUBLICA
Oct. 14, 10:27 a.m. EDT
In the spring, Congress created a program to save aviation worker jobs. Then the Trump administration undermined that program by granting hundreds of millions of dollars in relief to aviation companies for jobs they’d already largely eliminated, according to a House report released Friday.
As a result, thousands of workers at airline caterers and other contractors are out of work while their employers received public funds that were supposed to be passed to workers. What’s more, at least two companies that received hundreds of millions in taxpayer funds restored full pay to management, the report found.
The report follows a monthslong investigation that the House Select Subcommittee on the Coronavirus Crisis launched in July, citing ProPublica reporting on the program.
The $32 billion Payroll Support Program, part of the sweeping CARES Act to rescue the economy from the ravages of the coronavirus crisis, was designed so that money would pass through companies to workers in the hard-hit aviation industry. The federal government gave grants and some loans to airlines and their contractors, who were then meant to keep workers on their payrolls. The amount each company received would be based on six months worth of payroll from last year. In exchange, the companies had to agree not to conduct any layoffs until October, about six months after the CARES Act was passed.
But ProPublica found that the companies laid off workers throughout the spring and then took the money intended to preserve the jobs they had already cut. The Treasury Department, charged with implementing the law, offered no incentive for the companies to rehire their workers.
The select subcommittee’s report reached a similar conclusion.
“Treasury’s implementation of the Payroll Support Program undermined the program’s job preservation purpose,” the subcommittee wrote. “Treasury permitted aviation contractors to lay off tens of thousands of workers through the worst months of the pandemic and still receive full payroll support calculated based on pre-pandemic workforce numbers — the same amount they would have received if they had not laid off a single worker.”
In response to the report, a Treasury spokesperson wrote that “the Payroll Support Program has supported hundreds of thousands of aviation industry jobs, kept workers employed and connected to their healthcare, and played a critical role in preserving the U.S. airline industry. Implementation focused first on the largest employers to help stabilize an industry in crisis and support as many jobs as possible for as long as possible.”
Congressional investigators obtained tens of thousands of pages of documents and interviewed Treasury Department and company officials.
In the case of one contractor, Swissport U.S.A., the subcommittee uncovered correspondence in which a company executive instructed managers to “urgently” verify the employment status of a group of workers prior to finalizing the company’s Payroll Support agreement, and to let them go if they weren’t needed.
“CARES is now imminent, and we need to ensure that we don’t incur unnecessary costs once the ink is on the paper,” the executive wrote, referring to the workers, weeks before the company received $170 million from the program.
Swissport did not respond to a request for comment.
The subcommittee also took to task two airline catering companies that ProPublica wrote about in July, Gate Gourmet and Flying Food Group, for taking advantage of the program.
The report found that the companies drastically reduced their payroll ahead of applying for the relief funds, and continued to do so while their applications were pending. But once the agreements were finalized, neither restored employment to pre-pandemic levels. In fact, the subcommittee found that Flying Food Group, which received $85 million through the program, had not rehired a single worker out of the thousands it laid off or furloughed since the pandemic hit.
Meanwhile, both companies have since restored cuts that had been made to management pay. Both expect the money they received from the Payroll Support Program to subsidize their payroll expenses well into next year, according to the report.
Neither company responded to requests for comment.
Rep. James Clyburn, D-S.C., who chairs the select subcommittee, has called for aviation companies to halt any additional layoffs until they have spent the remainder of the funds they received.
However, since the Sept. 30 deadline for halting layoffs under the CARES Act expired, Flying Food and Gate Gourmet have already initiated hundreds of additional layoffs at airports across the country, according to official layoff notices issued by the companies in recent weeks.
As a result, thousands of workers at airline caterers and other contractors are out of work while their employers received public funds that were supposed to be passed to workers. What’s more, at least two companies that received hundreds of millions in taxpayer funds restored full pay to management, the report found.
The report follows a monthslong investigation that the House Select Subcommittee on the Coronavirus Crisis launched in July, citing ProPublica reporting on the program.
The $32 billion Payroll Support Program, part of the sweeping CARES Act to rescue the economy from the ravages of the coronavirus crisis, was designed so that money would pass through companies to workers in the hard-hit aviation industry. The federal government gave grants and some loans to airlines and their contractors, who were then meant to keep workers on their payrolls. The amount each company received would be based on six months worth of payroll from last year. In exchange, the companies had to agree not to conduct any layoffs until October, about six months after the CARES Act was passed.
But ProPublica found that the companies laid off workers throughout the spring and then took the money intended to preserve the jobs they had already cut. The Treasury Department, charged with implementing the law, offered no incentive for the companies to rehire their workers.
The select subcommittee’s report reached a similar conclusion.
“Treasury’s implementation of the Payroll Support Program undermined the program’s job preservation purpose,” the subcommittee wrote. “Treasury permitted aviation contractors to lay off tens of thousands of workers through the worst months of the pandemic and still receive full payroll support calculated based on pre-pandemic workforce numbers — the same amount they would have received if they had not laid off a single worker.”
In response to the report, a Treasury spokesperson wrote that “the Payroll Support Program has supported hundreds of thousands of aviation industry jobs, kept workers employed and connected to their healthcare, and played a critical role in preserving the U.S. airline industry. Implementation focused first on the largest employers to help stabilize an industry in crisis and support as many jobs as possible for as long as possible.”
Congressional investigators obtained tens of thousands of pages of documents and interviewed Treasury Department and company officials.
In the case of one contractor, Swissport U.S.A., the subcommittee uncovered correspondence in which a company executive instructed managers to “urgently” verify the employment status of a group of workers prior to finalizing the company’s Payroll Support agreement, and to let them go if they weren’t needed.
“CARES is now imminent, and we need to ensure that we don’t incur unnecessary costs once the ink is on the paper,” the executive wrote, referring to the workers, weeks before the company received $170 million from the program.
Swissport did not respond to a request for comment.
The subcommittee also took to task two airline catering companies that ProPublica wrote about in July, Gate Gourmet and Flying Food Group, for taking advantage of the program.
The report found that the companies drastically reduced their payroll ahead of applying for the relief funds, and continued to do so while their applications were pending. But once the agreements were finalized, neither restored employment to pre-pandemic levels. In fact, the subcommittee found that Flying Food Group, which received $85 million through the program, had not rehired a single worker out of the thousands it laid off or furloughed since the pandemic hit.
Meanwhile, both companies have since restored cuts that had been made to management pay. Both expect the money they received from the Payroll Support Program to subsidize their payroll expenses well into next year, according to the report.
Neither company responded to requests for comment.
Rep. James Clyburn, D-S.C., who chairs the select subcommittee, has called for aviation companies to halt any additional layoffs until they have spent the remainder of the funds they received.
However, since the Sept. 30 deadline for halting layoffs under the CARES Act expired, Flying Food and Gate Gourmet have already initiated hundreds of additional layoffs at airports across the country, according to official layoff notices issued by the companies in recent weeks.
OP-ED ECONOMY & LABOR
Capitalism Made Women of Color More Vulnerable to the COVID Recession
BY Tithi Bhattacharya, Truthout
PUBLISHED October 6, 2020
The Bureau of Labor Statistics (BLS) monthly jobs report for September proves with numbers what we have all known anecdotally and experientially: This pandemic-laced recession has been disastrous for women, especially women of color.
Between August and September, 865,000 women dropped out of the workforce, a rate four times higher than that for men. One in 9 Black women, and 1 in 9 Latinas, aged 20 and over, respectively at rates of 11 percent and 11 percent, became unemployed in September. Compare this to white men who have an unemployment rate of 6.5 percent and white women who have a rate of 6.9 percent.
These figures are not very different from the spring, when the Bureau of Labor Statistics report in April told us that women accounted for 55 percent of the 20.5 million job losses. The unemployment rate for adult women then was 15 percent, as compared to the 13 percent unemployment rate for adult men.
From the start of the pandemic, job losses for women have been so much greater than for men that some feminist policy makers have called this a “shecession,” in contrast with 2008. And “she” is most certainly a woman of color.
Sometimes numbers — percentages and charts — can obscure social wounds. We can see the 11 percent job loss figure for Black women, but we don’t necessarily associate that number with the impacts on people like Kyaira Jackson, a seventh grader in my daughter’s class, whose mother, the sole earner for her family, just lost her job at Walmart. Her mother, Jazmine Pinckney, asked me if I could help return some of Kyaira’s school things as the family would be moving soon. As is the case for most Americans, Jazmine’s family’s health care, as well as her ability to pay rent and buy food, were solely and relentlessly dependent on her wage. She would now move back to her childhood home in Atlanta, back to the house she left to make her way in the world, this time with her two young children.
Jazmine’s life, like the lives of so many Black women in this pandemic, is like Ariadne’s thread, leading us through the maze of capitalist social relations. It helps illuminate the monsters behind the inequality that existed long before the virus was even heard of. The first step to understanding the devastation caused by the virus in the lives of women and people of color, is to understand that it was merely the spark; the kindling was there all along.
Let us begin with the wage, since its tyranny shapes not just our working lives but crucially, our lives outside of the workplace.
Well before the pandemic, women in this country earned 82 cents to the dollar that a man earned, while Black women earned 62 cents on the dollar, and Latina women earned 54 cents on the dollar. Often it is difficult to determine cause and effect for gendered wages. It is because women earn less than men that they tend to work part-time and spend their unwaged time doing care work in the home, as both child care and elder care remain exorbitant in the U.S. But it is also true that certain jobs become less prestigious and lower paid when women become the ones primarily performing them. Teaching was treated with much respect and remunerated better in the late nineteenth and early twentieth century when it was mostly men who became teachers; now, K-12 teachers are mostly women, and they are neither as well paid nor well respected.
Waged work remains inextricably braided with unwaged work. Lack of access to quality
child care and elder care forces women to consider quitting waged work before their male partners since their jobs were less paying to begin with. This in turn ensures that women are pushed into, or remain locked into, lower-paid work due to “lack of experience” or for having taken “career breaks.” Just under a third of single mothers were already living below the poverty line; since the pandemic, over a million of them have lost their jobs.
When schools and child care centers closed in the spring, and as they continue to offer partial services through the fall, many women, particularly white women, decided to leave the work force. As Stefania Albanesi put it in The New York Times, “white families tend to have higher wealth and higher average income so they can afford to reduce labor supply, compared to most African-American households, where earnings are quite low.”
If our analysis stops at the doors of the workplace, and only pays attention to the wage gap or unemployment figures, it will fail to see the multiple ways in which waged work orchestrates the unwaged slices of our lives. Ecologists use the term “cascade effect” as a concept to understand how primary extinction of a species can trigger multiple secondary extinctions. The tyranny of the wage has a similar cascade effect on our life-making.
Consider the health of Black women and Latinas during this pandemic. Low wages certainly determine the kind of health care these women have or whether they have it at all. But we should not only be concerned about low wages in the here and now. Historically, Black communities have been forced to live in neighborhoods that have poor air quality and/or contaminated water. They are 75 percent more likely to live near polluting industries that produces hazardous waste.
Schools that predominantly serve Black and Brown communities are chronically underfunded and the first ones to close during a financial crisis. Consistent redlining through the years have ensured that these neighborhoods are also more likely to be what the federal government calls “food deserts” or “areas in which residents are hard-pressed to find affordable, healthy food.”
When a virus with no apparent cure comes into the lives of people in these communities, who, then, shall we blame for the disproportionately high death rates? It is not simply the pandemic or the recession that is driving the disproportionate harm experienced by women of color in this moment. It is an economic system stacked against them.
For all the women who have lost their jobs during this pandemic, for Black women and Latinas who have performed the bulk of the essential work during lockdown and borne the brunt of the recession, for all the Black and Brown elders who have lost their lives during this crisis, it is capitalism that has been their preexisting condition.
Between August and September, 865,000 women dropped out of the workforce, a rate four times higher than that for men. One in 9 Black women, and 1 in 9 Latinas, aged 20 and over, respectively at rates of 11 percent and 11 percent, became unemployed in September. Compare this to white men who have an unemployment rate of 6.5 percent and white women who have a rate of 6.9 percent.
These figures are not very different from the spring, when the Bureau of Labor Statistics report in April told us that women accounted for 55 percent of the 20.5 million job losses. The unemployment rate for adult women then was 15 percent, as compared to the 13 percent unemployment rate for adult men.
From the start of the pandemic, job losses for women have been so much greater than for men that some feminist policy makers have called this a “shecession,” in contrast with 2008. And “she” is most certainly a woman of color.
Sometimes numbers — percentages and charts — can obscure social wounds. We can see the 11 percent job loss figure for Black women, but we don’t necessarily associate that number with the impacts on people like Kyaira Jackson, a seventh grader in my daughter’s class, whose mother, the sole earner for her family, just lost her job at Walmart. Her mother, Jazmine Pinckney, asked me if I could help return some of Kyaira’s school things as the family would be moving soon. As is the case for most Americans, Jazmine’s family’s health care, as well as her ability to pay rent and buy food, were solely and relentlessly dependent on her wage. She would now move back to her childhood home in Atlanta, back to the house she left to make her way in the world, this time with her two young children.
Jazmine’s life, like the lives of so many Black women in this pandemic, is like Ariadne’s thread, leading us through the maze of capitalist social relations. It helps illuminate the monsters behind the inequality that existed long before the virus was even heard of. The first step to understanding the devastation caused by the virus in the lives of women and people of color, is to understand that it was merely the spark; the kindling was there all along.
Let us begin with the wage, since its tyranny shapes not just our working lives but crucially, our lives outside of the workplace.
Well before the pandemic, women in this country earned 82 cents to the dollar that a man earned, while Black women earned 62 cents on the dollar, and Latina women earned 54 cents on the dollar. Often it is difficult to determine cause and effect for gendered wages. It is because women earn less than men that they tend to work part-time and spend their unwaged time doing care work in the home, as both child care and elder care remain exorbitant in the U.S. But it is also true that certain jobs become less prestigious and lower paid when women become the ones primarily performing them. Teaching was treated with much respect and remunerated better in the late nineteenth and early twentieth century when it was mostly men who became teachers; now, K-12 teachers are mostly women, and they are neither as well paid nor well respected.
Waged work remains inextricably braided with unwaged work. Lack of access to quality
child care and elder care forces women to consider quitting waged work before their male partners since their jobs were less paying to begin with. This in turn ensures that women are pushed into, or remain locked into, lower-paid work due to “lack of experience” or for having taken “career breaks.” Just under a third of single mothers were already living below the poverty line; since the pandemic, over a million of them have lost their jobs.
When schools and child care centers closed in the spring, and as they continue to offer partial services through the fall, many women, particularly white women, decided to leave the work force. As Stefania Albanesi put it in The New York Times, “white families tend to have higher wealth and higher average income so they can afford to reduce labor supply, compared to most African-American households, where earnings are quite low.”
If our analysis stops at the doors of the workplace, and only pays attention to the wage gap or unemployment figures, it will fail to see the multiple ways in which waged work orchestrates the unwaged slices of our lives. Ecologists use the term “cascade effect” as a concept to understand how primary extinction of a species can trigger multiple secondary extinctions. The tyranny of the wage has a similar cascade effect on our life-making.
Consider the health of Black women and Latinas during this pandemic. Low wages certainly determine the kind of health care these women have or whether they have it at all. But we should not only be concerned about low wages in the here and now. Historically, Black communities have been forced to live in neighborhoods that have poor air quality and/or contaminated water. They are 75 percent more likely to live near polluting industries that produces hazardous waste.
Schools that predominantly serve Black and Brown communities are chronically underfunded and the first ones to close during a financial crisis. Consistent redlining through the years have ensured that these neighborhoods are also more likely to be what the federal government calls “food deserts” or “areas in which residents are hard-pressed to find affordable, healthy food.”
When a virus with no apparent cure comes into the lives of people in these communities, who, then, shall we blame for the disproportionately high death rates? It is not simply the pandemic or the recession that is driving the disproportionate harm experienced by women of color in this moment. It is an economic system stacked against them.
For all the women who have lost their jobs during this pandemic, for Black women and Latinas who have performed the bulk of the essential work during lockdown and borne the brunt of the recession, for all the Black and Brown elders who have lost their lives during this crisis, it is capitalism that has been their preexisting condition.
Economist Richard Wolff: Capitalism is the reason COVID-19 is ravaging America
Salon interviews Dr. Richard D. Wolff, whose new book "The Sickness is the System" explores capitalism's flaws
MATTHEW ROZSA - salon
OCTOBER 4, 2020 11:30PM (UTC)
As I've written before, the novel coronavirus pandemic has exposed many of the structural weaknesses in capitalism. In order to rationalize the free market ideology that undergirds capitalist systems, capitalists must ignore inconvenient scientific facts (whether about the pandemic or issues like global warming and pollution) and cut corners when trying to help those stricken with misfortune. Even worse, capitalism requires constant consumption in order to maintain prosperity; if a wrench is thrown into the gears of perpetual growth, the entire economy grinds to a halt, as we have seen since the economic shutdowns began in March.
These arguments, and many others like them, are central to Dr. Richard D. Wolff's new book, "The Sickness is the System: When Capitalism Fails to Save Us from Pandemics or Itself." In a series of well-researched essays outlined with impeccable logic, the professor emeritus of economics at the University of Massachusetts Amherst analyzes the events of the last seven months — what one might deem the "COVID-19 era" — and explains how the horrors of 2020 are primarily caused by the social, political and economic status quo. His book tackles a number of issues, including how the economy crashed not because of a virus but because capitalism is incapable of coping with epidemics, how America's healthcare system is corrupt, and how income inequality caused immense suffering long before the pandemic and is propped up by economic myths.
He deconstructs how both the Democratic and Republican parties refuse to accept that capitalism is causing the problems which afflict us today, how the bipartisan stimulus package was woefully inadequate and how surging unemployment could easily be fixed if our policymakers had the will to do so. He explores the connections between capitalism and racism, sexism, the police/prison industrial complex and the dominance of mega corporations like Amazon.
Indeed, his book is so thorough, so comprehensive in its insightful analysis, that it is a practically a one-stop center for anyone who wants to understand why the year 2020 has been such a dumpster fire.
"There is a unique incapacity of the capitalist system — by which I mean, a system of private enterprises owned and operated by shareholders, families, individuals producing for a profit and the ordering about of the majority of people involved in every enterprise or the employees — that system is uniquely incapable of securing public health," Wolff told Salon. "And since public health is a basic demand, a need of human communities, this represents a profound disqualification of capitalism. And to spell it out just briefly: it is not profitable for a private, profit-driven competitive capitalist to produce masks by the millions, or gloves, or ventilators, or hospital beds, or all the rest of them."
As Wolff pointed out, the government failed to step in and fill the void being left by the private sector. This did not happen because it cannot produce what society needs even when doing so is not profitable. The problem is that the government is perfectly capable of implementing such policies — but only does so when it happens to be in the best interest of a given industry which exerts control over the state.
"A government failure cannot be excused on grounds of the government not doing such things or conceiving of such things, because that's not true," Wolff told Salon. "The government does exactly what it failed to do in the maintenance of public health. It does that for the military. It is just as unprofitable for a private capitalist to produce a missile and then store it in some warehouse and monitor it and clean it and replace it and repair it, waiting for God knows however long a time until the next war makes this missile something the government buys."
Wolff noted that companies that are part of the military-industrial complex would not manufacture vehicles, weapons and the like "unless the government comes in and says, 'We will buy it from you right off the assembly line. And then at government expense, we will store it and ship it and monitor it and clean it and all the rest.' The government does this as a matter of course for the military. And it did not do it for the public health."
The reason it failed to do this to thwart the pandemic, Wolff explained, is because sometimes you get groups of industries who join together to create a group monopoly over a service that society needs.
"That's where the health professionals came in," Wolff explained. "There are four industry groups: doctors, number one, hospitals, number two, drug and device makers, number three, and medical insurance companies, number four. Those four together operate a conjoint monopoly. They are the only way to get the health care, one or another dimension of it, that is available. They operate as a monopoly. They help each other, coordinate their political and commercial lobbying advertisements, and they have succeeded dramatically in the United States, particularly since World War II, in boosting the price of medical care far beyond what it would have been had there been genuine competition."
This has not led to better healthcare for Americans. Indeed, as Wolff explained in our interview and his book, Americans pay far more than citizens of other advanced industrial countries for health care and receive mediocre outcomes in return. We struggle with major public health problems like obesity, the opioid epidemic, high blood pressure and diabetes. Yet despite all of this, the health industry monopoly has been able to successfully fight back against all but the most modest reforms (such as the Affordable Care Act, which even now it is pushing to repeal) because it cares less about serving the public than maintaining its industry dominance.
"The medical profession, therefore, never wants the government anywhere near what they're doing, because it would threaten their monopoly," Wolff told Salon. "If the government were making regular purchases, being the intermediary — as governments are virtually everywhere else on this planet — it would draw the attention of a mass public to the problem of government money being used to sustain a profession. And then there would be no excuse anymore for the lunatic arrangement we now have. The monopoly would be attacked and it would be undermined."
Salon also asked Wolff for his thoughts on the 2020 presidential election. In his book he makes it clear that the Democrats and Republicans both subscribe to pro-capitalist ideals that are destructive to both America and the rest of the world. Like many others on the left — including the former supporters of Biden's chief opponent in the primaries, the democratic socialist Sen. Bernie Sanders of Vermont — Wolff is clearly disappointed with Biden's center-left positions. As such, does he feel that electing Biden defeating Trump will help America?
"I don't think it makes a major difference in dealing with the underlying problems, but it does make a significant difference in dealing with a whole set of other less foundational or less fundamental or less deeply rooted problems," Wolff told Salon. "And so it's crystal clear for me that, just for me personally, choosing Mr. Biden over Mr. Trump is a no brainer. And so I have no problem with people who make that choice. I would maintain that what I hear and see from Mr. Biden falls way short of coping with the kinds of issues that I try to raise in that book and in the work that I do generally."
He added, "I regret that. I think it's a mistake on his part even within the framework of his objectives."
These arguments, and many others like them, are central to Dr. Richard D. Wolff's new book, "The Sickness is the System: When Capitalism Fails to Save Us from Pandemics or Itself." In a series of well-researched essays outlined with impeccable logic, the professor emeritus of economics at the University of Massachusetts Amherst analyzes the events of the last seven months — what one might deem the "COVID-19 era" — and explains how the horrors of 2020 are primarily caused by the social, political and economic status quo. His book tackles a number of issues, including how the economy crashed not because of a virus but because capitalism is incapable of coping with epidemics, how America's healthcare system is corrupt, and how income inequality caused immense suffering long before the pandemic and is propped up by economic myths.
He deconstructs how both the Democratic and Republican parties refuse to accept that capitalism is causing the problems which afflict us today, how the bipartisan stimulus package was woefully inadequate and how surging unemployment could easily be fixed if our policymakers had the will to do so. He explores the connections between capitalism and racism, sexism, the police/prison industrial complex and the dominance of mega corporations like Amazon.
Indeed, his book is so thorough, so comprehensive in its insightful analysis, that it is a practically a one-stop center for anyone who wants to understand why the year 2020 has been such a dumpster fire.
"There is a unique incapacity of the capitalist system — by which I mean, a system of private enterprises owned and operated by shareholders, families, individuals producing for a profit and the ordering about of the majority of people involved in every enterprise or the employees — that system is uniquely incapable of securing public health," Wolff told Salon. "And since public health is a basic demand, a need of human communities, this represents a profound disqualification of capitalism. And to spell it out just briefly: it is not profitable for a private, profit-driven competitive capitalist to produce masks by the millions, or gloves, or ventilators, or hospital beds, or all the rest of them."
As Wolff pointed out, the government failed to step in and fill the void being left by the private sector. This did not happen because it cannot produce what society needs even when doing so is not profitable. The problem is that the government is perfectly capable of implementing such policies — but only does so when it happens to be in the best interest of a given industry which exerts control over the state.
"A government failure cannot be excused on grounds of the government not doing such things or conceiving of such things, because that's not true," Wolff told Salon. "The government does exactly what it failed to do in the maintenance of public health. It does that for the military. It is just as unprofitable for a private capitalist to produce a missile and then store it in some warehouse and monitor it and clean it and replace it and repair it, waiting for God knows however long a time until the next war makes this missile something the government buys."
Wolff noted that companies that are part of the military-industrial complex would not manufacture vehicles, weapons and the like "unless the government comes in and says, 'We will buy it from you right off the assembly line. And then at government expense, we will store it and ship it and monitor it and clean it and all the rest.' The government does this as a matter of course for the military. And it did not do it for the public health."
The reason it failed to do this to thwart the pandemic, Wolff explained, is because sometimes you get groups of industries who join together to create a group monopoly over a service that society needs.
"That's where the health professionals came in," Wolff explained. "There are four industry groups: doctors, number one, hospitals, number two, drug and device makers, number three, and medical insurance companies, number four. Those four together operate a conjoint monopoly. They are the only way to get the health care, one or another dimension of it, that is available. They operate as a monopoly. They help each other, coordinate their political and commercial lobbying advertisements, and they have succeeded dramatically in the United States, particularly since World War II, in boosting the price of medical care far beyond what it would have been had there been genuine competition."
This has not led to better healthcare for Americans. Indeed, as Wolff explained in our interview and his book, Americans pay far more than citizens of other advanced industrial countries for health care and receive mediocre outcomes in return. We struggle with major public health problems like obesity, the opioid epidemic, high blood pressure and diabetes. Yet despite all of this, the health industry monopoly has been able to successfully fight back against all but the most modest reforms (such as the Affordable Care Act, which even now it is pushing to repeal) because it cares less about serving the public than maintaining its industry dominance.
"The medical profession, therefore, never wants the government anywhere near what they're doing, because it would threaten their monopoly," Wolff told Salon. "If the government were making regular purchases, being the intermediary — as governments are virtually everywhere else on this planet — it would draw the attention of a mass public to the problem of government money being used to sustain a profession. And then there would be no excuse anymore for the lunatic arrangement we now have. The monopoly would be attacked and it would be undermined."
Salon also asked Wolff for his thoughts on the 2020 presidential election. In his book he makes it clear that the Democrats and Republicans both subscribe to pro-capitalist ideals that are destructive to both America and the rest of the world. Like many others on the left — including the former supporters of Biden's chief opponent in the primaries, the democratic socialist Sen. Bernie Sanders of Vermont — Wolff is clearly disappointed with Biden's center-left positions. As such, does he feel that electing Biden defeating Trump will help America?
"I don't think it makes a major difference in dealing with the underlying problems, but it does make a significant difference in dealing with a whole set of other less foundational or less fundamental or less deeply rooted problems," Wolff told Salon. "And so it's crystal clear for me that, just for me personally, choosing Mr. Biden over Mr. Trump is a no brainer. And so I have no problem with people who make that choice. I would maintain that what I hear and see from Mr. Biden falls way short of coping with the kinds of issues that I try to raise in that book and in the work that I do generally."
He added, "I regret that. I think it's a mistake on his part even within the framework of his objectives."
IT HAS ALWAYS BEEN A LIE!!!
Former GOP insider details why conservative economics is severely flawed
Alex Henderson - ALTERNET
September 21, 2020
Economist Milton Friedman, who was 94 when he died in 2006, was a major influence on Reaganomics, neoliberalism and trickle-down economics — and everyone from the Libertarian Party to Ronald Reagan’s administration has embraced his views on business and the economy. Friedman, however, has been widely criticized by liberals, progressives and proponents of New Deal and Great Society economics, and former GOP insider Bruce Bartlett lays out some reasons why Friedman’s influence on U.S. economic policy has been harmful in an article published in The New Republican this week.
Bartlett himself was a longtime Republican who worked under Presidents Ronald Reagan and George W. Bush — but he broke with the part under the second Bush’s presidency. The GOP has long revered Friedman as a paragon of economic thought, but Bartlett argues this view is a mistake.
Friedman was known for what has been called “shareholder economics” or “the shareholder theory.” In essence, Friedman disagreed that corporations had an obligation to society on the whole — their only obligation, he argued, was to their shareholders.
“Friedman’s ideas about monetary policy have long created negative economic consequences,” Bartlett explains. “And now, more than 40 years after the monetarist recession that former Fed chief Paul Volcker engineered under the influence of Friedman’s theories, Jay Powell’s Federal Reserve is trying to break free from them.”
The worst economic downturn of the last century came when the Great Depression started in 1929. Friedman, Bartlett notes, saw the Depression “as primarily a failure of the Federal Reserve.”
According to Bartlett, “By the time the Depression hit, Friedman contended, the Fed had allowed the money supply to shrink by about a third, which brought on a deflation that caused the price level to drop by about 25%. …. But Friedman’s account glossed over why the money collapsed. When banks failed in those days, their deposits simply disappeared: there was no deposit insurance, and the bulk of the money supply consisted of bank deposits, not cash. The Fed lacked the legal authority to buy banks and keep them solvent, which is the only thing that would have helped.”
Barlett elaborates on why Friedman’s views on the causes of the Great Depression were flawed.
“The only thing the Fed can really do to counteract a downturn is buy Treasury securities on the open market using newly created money,” Bartlett explains. “But if the banking system is basically frozen, as it was in the early 1930s, there is no transmission system to get money circulating. So, in the great tradition of academic economics, Friedman just assumed away this problem, insisting that the Fed could have prevented the Depression simply by aggressively buying Treasury securities and flooding the economy with money.”
Friedman was highly critical of economist John Maynard Keynes, who has often been quoted by liberal economist and New York Times columnist Paul Krugman. Barlett points out that Keynes believed that in a “deflationary depression” like the one President Franklin Delano Roosevelt inherited when he took office in 1933, “government was the only entity capable of increasing aggregate spending.”
Barlett wraps up his article by stressing, in essence, that what the Fed needs today is more Keynes influence and less Friedman influence.
“When the Fed first began its efforts to stimulate the economy by dropping interest rates and increasing the money supply in 2008,” Bartlett writes, “conservatives condemned the move, saying rampant inflation would soon result. Although there has been no sign of inflation in all the years since, they are making the same argument today…. The day may come when the Fed must tighten monetary policy to keep inflation in check. But in the past, its preemptive strikes against it by tightening prematurely have nearly aborted the economic expansion it was seeking to spur.”
Bartlett himself was a longtime Republican who worked under Presidents Ronald Reagan and George W. Bush — but he broke with the part under the second Bush’s presidency. The GOP has long revered Friedman as a paragon of economic thought, but Bartlett argues this view is a mistake.
Friedman was known for what has been called “shareholder economics” or “the shareholder theory.” In essence, Friedman disagreed that corporations had an obligation to society on the whole — their only obligation, he argued, was to their shareholders.
“Friedman’s ideas about monetary policy have long created negative economic consequences,” Bartlett explains. “And now, more than 40 years after the monetarist recession that former Fed chief Paul Volcker engineered under the influence of Friedman’s theories, Jay Powell’s Federal Reserve is trying to break free from them.”
The worst economic downturn of the last century came when the Great Depression started in 1929. Friedman, Bartlett notes, saw the Depression “as primarily a failure of the Federal Reserve.”
According to Bartlett, “By the time the Depression hit, Friedman contended, the Fed had allowed the money supply to shrink by about a third, which brought on a deflation that caused the price level to drop by about 25%. …. But Friedman’s account glossed over why the money collapsed. When banks failed in those days, their deposits simply disappeared: there was no deposit insurance, and the bulk of the money supply consisted of bank deposits, not cash. The Fed lacked the legal authority to buy banks and keep them solvent, which is the only thing that would have helped.”
Barlett elaborates on why Friedman’s views on the causes of the Great Depression were flawed.
“The only thing the Fed can really do to counteract a downturn is buy Treasury securities on the open market using newly created money,” Bartlett explains. “But if the banking system is basically frozen, as it was in the early 1930s, there is no transmission system to get money circulating. So, in the great tradition of academic economics, Friedman just assumed away this problem, insisting that the Fed could have prevented the Depression simply by aggressively buying Treasury securities and flooding the economy with money.”
Friedman was highly critical of economist John Maynard Keynes, who has often been quoted by liberal economist and New York Times columnist Paul Krugman. Barlett points out that Keynes believed that in a “deflationary depression” like the one President Franklin Delano Roosevelt inherited when he took office in 1933, “government was the only entity capable of increasing aggregate spending.”
Barlett wraps up his article by stressing, in essence, that what the Fed needs today is more Keynes influence and less Friedman influence.
“When the Fed first began its efforts to stimulate the economy by dropping interest rates and increasing the money supply in 2008,” Bartlett writes, “conservatives condemned the move, saying rampant inflation would soon result. Although there has been no sign of inflation in all the years since, they are making the same argument today…. The day may come when the Fed must tighten monetary policy to keep inflation in check. But in the past, its preemptive strikes against it by tightening prematurely have nearly aborted the economic expansion it was seeking to spur.”
How the U.S. Chamber of Commerce wrecked the economy — and made the pandemic worse
How the so-called champion of American business fought to protect profiteering — and endangered millions
CARL POPE - salon
JULY 24, 2020 11:00AM (UTC)
As hospital intensive care units overflow again, and delays in COVID-19 testing reports reach record levels in many cities, a conversation I recently with Sen. Ed Markey, a Massachusetts Democrat, reminded me that I had forgotten something utterly critical: Donald Trump's decision to unilaterally disarm America in the face of the coronavirus invasion was urged upon him by an ostensible defender of American business: the U.S. Chamber of Commerce.
When the pandemic reached America, we weren't ready — any more than we were ready when Japan bombed Pearl Harbor. But Trump had the tools to do what the U.S. has often done: make up for lack of preparedness. The crucial gaps to fill in March were supplies for testing to limit the spread of the virus, and medical equipment to treat those who got sick — testing kits, swabs, reagents, masks, gowns and gloves — by the billions. Government health agencies estimated that if the pandemic took hold, the country would need, for example, 3.5 billion N95 medical masks. We had 12 million.
Presidents have available, and have routinely used, the Cold War-era Defense Production Act to overcome such critical supply shortages — not just in wartime, but also to ensure adequate relief supplies after natural disasters. DPA can be used to put emergency purchases at the head of a supply chain, but also to require factories to convert their output to provide needed equipment in adequate volumes. Members of Congress urged Trump to appoint a military official as DPA czar to coordinate production and distribution of essential pandemic-related medical supplies, as was done in the Korean War.
In March, Trump was leaning towards robust use of the DPA, fashioning himself as a wartime president and the battle against the coronavirus as America's "big war." He invoked the DPA to require General Motors to speed up its production of ventilators. But he quickly discovered that he had an enemy within — not the virus as such, but the U.S. Chamber of Commerce.
Within days of Trump's announcement that he would mobilize as if for war and use the DPA, the Chamber of Commerce's lobbying army swung into action. Among the Chamber's arguments: DPA would impose "red tape on companies precisely when they need flexibility to deal with closed borders and shuttered factories." Unstated: if the government took charge of the supply chain for tests, masks and gowns, it could also prevent bidding wars from competing hospitals and states that would, and did, drive prices — and profits — through the roof.
In response, labor unions representing nurses, hospital staff and other frontline workers who were unable to be tested, or to obtain masks or gowns, protested and urged the Chamber to join a national mobilization to defeat the coronavirus. The appeal was not answered. On March 23, Markey and his Massachusetts colleague, Sen. Elizabeth Warren, wrote to the Chamber demanding an explanation. The Chamber's response: Defense Production Act reliance was unnecessary, because "American companies will do whatever it takes to support America's response to the pandemic and shore up the economy."
But what the workers had feared — insufficient production, soaring prices and profits, chaotic delivery mechanisms — took over the health care market during the first wave of virus spikes in the Northeast. Some hospitals were paying 15 times the usual price for masks.
The Chamber continued its strenuous opposition to enabling the government to ensure an adequate supply of tests and PPE. Even Trump conceded that profiteering had taken over the market, and ultimately he did invoke the DPA to prevent it — but when it came to the export market.
Supplies increased, but often at exorbitant prices. Only when the shutdowns of most of the American economy brought the number of hospitalizations down sharply did supply and demand come into temporary balance. Americans believed that if there was a second wave later in the year, at least health care workers on the front lines would have the tools they needed.
Trump, denied by Chamber opposition of an easy pathway to acting like a heroic wartime president, seemingly lost interest. By June his focus had shifted from fighting the virus to reopening the economy and then reigniting the culture wars. Media headlines proclaiming his lack of interest didn't even provoke "fake news" tweets from the East Wing of the White House.
The virus had a longer attention span. With major states like Florida, Texas and Arizona opening rapidly and prematurely, the holes in the jerry-built testing, tracing and quarantine systems each state had fashioned without federal guidance gave the virus its chance.
Cases — although not, initially, fatalities — began to soar. Suddenly, what any nationally coordinated effort would have been tracking and resolving all along — that the nation had stepped up production of tests, masks and gowns to meet the needs of an economy in shutdown, but had nowhere near the level of supplies for a massive second wave — came home to roost. By early July, new cases were flooding the hospital capacity of even some of the nation's major health care centers, such as Houston.
In New Orleans, testing centers had to close eight minutes after they opened. In 100-degree heat in Phoenix, lines at testing centers were eight hours long. San Antonio and Austin were forced to limit testing to those with symptoms, leaving the system utterly unable to detect asymptomatic cases, when research suggests that to 40% of infections take place. Wait times for test results soared with caseloads, so that even those who got tested might not find out they were positive until they were well past the contagious stage.
Nurses were again forced to use one N95 mask for weeks at a time. Prices for what was actually available soared. States reported they could only fulfill 10% of their orders. Even now, in July, the U.S. has nothing like the 3.5 billion N95 masks that we knew in January we would need. Indeed, how could we? No manufacturer could have guessed in March how severe the crisis would be by fall. With no one managing the system, it was clearly foolish for any private company to produce, on speculation, several billion masks. Market signals cannot prepare America for the massive increase in possible scale required by such a pandemic. Nor can individual cities and states trigger the necessary ramp-up of supplies. Only a systematic national plan designed to ensure that we were ready for the worst-case scenario could have protected us.
Inevitably, the "market solutions" favored by the U.S. Chamber of Commerce have failed America not once but twice. In failing, they have taken the nation's economy over the precipice into a deep, long, economic decline. That the loudest voice claiming to represent U.S. business chose to defend profiteering, embrace short-term thinking and risk the collapse of the American health care system and economy is both shameful and shocking.
And that most Americans, including me, had already forgotten this is scary. This is not the first time the Chamber has successfully pursued policies that put us enormously at risk — for years it has been one of the major forces preventing Washington from adopting even the most modest efforts to accelerate a transition off fossil fuels to save lives and protect the climate. But if the Chamber can get away once again with having caused massive economic damage while risking the health of millions, and with its public reputation unscathed, it's unlikely to change its behavior.
When the pandemic reached America, we weren't ready — any more than we were ready when Japan bombed Pearl Harbor. But Trump had the tools to do what the U.S. has often done: make up for lack of preparedness. The crucial gaps to fill in March were supplies for testing to limit the spread of the virus, and medical equipment to treat those who got sick — testing kits, swabs, reagents, masks, gowns and gloves — by the billions. Government health agencies estimated that if the pandemic took hold, the country would need, for example, 3.5 billion N95 medical masks. We had 12 million.
Presidents have available, and have routinely used, the Cold War-era Defense Production Act to overcome such critical supply shortages — not just in wartime, but also to ensure adequate relief supplies after natural disasters. DPA can be used to put emergency purchases at the head of a supply chain, but also to require factories to convert their output to provide needed equipment in adequate volumes. Members of Congress urged Trump to appoint a military official as DPA czar to coordinate production and distribution of essential pandemic-related medical supplies, as was done in the Korean War.
In March, Trump was leaning towards robust use of the DPA, fashioning himself as a wartime president and the battle against the coronavirus as America's "big war." He invoked the DPA to require General Motors to speed up its production of ventilators. But he quickly discovered that he had an enemy within — not the virus as such, but the U.S. Chamber of Commerce.
Within days of Trump's announcement that he would mobilize as if for war and use the DPA, the Chamber of Commerce's lobbying army swung into action. Among the Chamber's arguments: DPA would impose "red tape on companies precisely when they need flexibility to deal with closed borders and shuttered factories." Unstated: if the government took charge of the supply chain for tests, masks and gowns, it could also prevent bidding wars from competing hospitals and states that would, and did, drive prices — and profits — through the roof.
In response, labor unions representing nurses, hospital staff and other frontline workers who were unable to be tested, or to obtain masks or gowns, protested and urged the Chamber to join a national mobilization to defeat the coronavirus. The appeal was not answered. On March 23, Markey and his Massachusetts colleague, Sen. Elizabeth Warren, wrote to the Chamber demanding an explanation. The Chamber's response: Defense Production Act reliance was unnecessary, because "American companies will do whatever it takes to support America's response to the pandemic and shore up the economy."
But what the workers had feared — insufficient production, soaring prices and profits, chaotic delivery mechanisms — took over the health care market during the first wave of virus spikes in the Northeast. Some hospitals were paying 15 times the usual price for masks.
The Chamber continued its strenuous opposition to enabling the government to ensure an adequate supply of tests and PPE. Even Trump conceded that profiteering had taken over the market, and ultimately he did invoke the DPA to prevent it — but when it came to the export market.
Supplies increased, but often at exorbitant prices. Only when the shutdowns of most of the American economy brought the number of hospitalizations down sharply did supply and demand come into temporary balance. Americans believed that if there was a second wave later in the year, at least health care workers on the front lines would have the tools they needed.
Trump, denied by Chamber opposition of an easy pathway to acting like a heroic wartime president, seemingly lost interest. By June his focus had shifted from fighting the virus to reopening the economy and then reigniting the culture wars. Media headlines proclaiming his lack of interest didn't even provoke "fake news" tweets from the East Wing of the White House.
The virus had a longer attention span. With major states like Florida, Texas and Arizona opening rapidly and prematurely, the holes in the jerry-built testing, tracing and quarantine systems each state had fashioned without federal guidance gave the virus its chance.
Cases — although not, initially, fatalities — began to soar. Suddenly, what any nationally coordinated effort would have been tracking and resolving all along — that the nation had stepped up production of tests, masks and gowns to meet the needs of an economy in shutdown, but had nowhere near the level of supplies for a massive second wave — came home to roost. By early July, new cases were flooding the hospital capacity of even some of the nation's major health care centers, such as Houston.
In New Orleans, testing centers had to close eight minutes after they opened. In 100-degree heat in Phoenix, lines at testing centers were eight hours long. San Antonio and Austin were forced to limit testing to those with symptoms, leaving the system utterly unable to detect asymptomatic cases, when research suggests that to 40% of infections take place. Wait times for test results soared with caseloads, so that even those who got tested might not find out they were positive until they were well past the contagious stage.
Nurses were again forced to use one N95 mask for weeks at a time. Prices for what was actually available soared. States reported they could only fulfill 10% of their orders. Even now, in July, the U.S. has nothing like the 3.5 billion N95 masks that we knew in January we would need. Indeed, how could we? No manufacturer could have guessed in March how severe the crisis would be by fall. With no one managing the system, it was clearly foolish for any private company to produce, on speculation, several billion masks. Market signals cannot prepare America for the massive increase in possible scale required by such a pandemic. Nor can individual cities and states trigger the necessary ramp-up of supplies. Only a systematic national plan designed to ensure that we were ready for the worst-case scenario could have protected us.
Inevitably, the "market solutions" favored by the U.S. Chamber of Commerce have failed America not once but twice. In failing, they have taken the nation's economy over the precipice into a deep, long, economic decline. That the loudest voice claiming to represent U.S. business chose to defend profiteering, embrace short-term thinking and risk the collapse of the American health care system and economy is both shameful and shocking.
And that most Americans, including me, had already forgotten this is scary. This is not the first time the Chamber has successfully pursued policies that put us enormously at risk — for years it has been one of the major forces preventing Washington from adopting even the most modest efforts to accelerate a transition off fossil fuels to save lives and protect the climate. But if the Chamber can get away once again with having caused massive economic damage while risking the health of millions, and with its public reputation unscathed, it's unlikely to change its behavior.
As 45 million lost their jobs over the last three months, US billionaires grew $584 billion richer
"If this pandemic reveals anything, it's how unequal our society has become and how drastically it must change"
JAKE JOHNSON - salon
JUNE 18, 2020 4:47PM (UTC)
A devastating trend of soaring inequality in the U.S. continues.
In their weekly analysis of wealth data Thursday, the Institute for Policy Studies (IPS) and Americans for Tax Fairness (ATF) found that billionaires have seen their combined net worth grow by $584 billion in the three months since the COVID-19 pandemic shuttered much of the U.S. economy and threw more than 45 million people out of work.
Jeff Bezos, Bill Gates, Mark Zuckerberg, Warren Buffett, and Larry Ellison—the five wealthiest billionaires in the U.S.—saw their collective riches grow by $101.7 billion between March 18 and June 17, according to the new report. A dozen other American billionaires saw their wealth more than double during that same period.
Frank Clemente, ATF executive director, said in a statement that over the past three months, "about 600 billionaires increased their wealth by far more than the nation's governors say their states need in fiscal assistance to keep delivering services to 330 million residents."
"Their wealth increased twice as much as the federal government paid out in one-time checks to more than 150 million Americans," said Clemente. "This orgy of wealth shows how fundamentally flawed our economic system is."
"If this pandemic reveals anything," Clemente added, "it's how unequal our society has become and how drastically it must change."
IPS, a progressive think-tank, has been publishing annual analyses of billionaire wealth increases since 2015. But in May, IPS began releasing weekly reports documenting the steady surge in billionaire wealth amid the COVID-19 pandemic and resulting economic collapse—a phenomenon the group dubbed "pandemic profiteering."
Since March 18, when social distancing measures and economic shutdowns were in place across the U.S., the combined wealth of America's billionaires has grown from $2.948 trillion to $3.531 trillion, the latest report by IPS and ATF found.
"During the same approximate three-month period, nearly 2.1 million Americans fell ill with the virus and about 118,000 died from it," the report notes. "Among other pandemic victims are 27 million Americans who may lose their employer-provided healthcare coverage. Low-wage workers, people of color, and women have suffered disproportionately in the combined medical and economic crises."
Chuck Collins, executive director of the IPS Program on Inequality, said in a statement that "the last thing U.S. society needs is more economic and racial polarization."
"The surge in billionaire wealth and pandemic profiteering undermines the unity and solidarity that the American people will require to recover and grow together, not pull further apart," said Collins.
In their weekly analysis of wealth data Thursday, the Institute for Policy Studies (IPS) and Americans for Tax Fairness (ATF) found that billionaires have seen their combined net worth grow by $584 billion in the three months since the COVID-19 pandemic shuttered much of the U.S. economy and threw more than 45 million people out of work.
Jeff Bezos, Bill Gates, Mark Zuckerberg, Warren Buffett, and Larry Ellison—the five wealthiest billionaires in the U.S.—saw their collective riches grow by $101.7 billion between March 18 and June 17, according to the new report. A dozen other American billionaires saw their wealth more than double during that same period.
Frank Clemente, ATF executive director, said in a statement that over the past three months, "about 600 billionaires increased their wealth by far more than the nation's governors say their states need in fiscal assistance to keep delivering services to 330 million residents."
"Their wealth increased twice as much as the federal government paid out in one-time checks to more than 150 million Americans," said Clemente. "This orgy of wealth shows how fundamentally flawed our economic system is."
"If this pandemic reveals anything," Clemente added, "it's how unequal our society has become and how drastically it must change."
IPS, a progressive think-tank, has been publishing annual analyses of billionaire wealth increases since 2015. But in May, IPS began releasing weekly reports documenting the steady surge in billionaire wealth amid the COVID-19 pandemic and resulting economic collapse—a phenomenon the group dubbed "pandemic profiteering."
Since March 18, when social distancing measures and economic shutdowns were in place across the U.S., the combined wealth of America's billionaires has grown from $2.948 trillion to $3.531 trillion, the latest report by IPS and ATF found.
"During the same approximate three-month period, nearly 2.1 million Americans fell ill with the virus and about 118,000 died from it," the report notes. "Among other pandemic victims are 27 million Americans who may lose their employer-provided healthcare coverage. Low-wage workers, people of color, and women have suffered disproportionately in the combined medical and economic crises."
Chuck Collins, executive director of the IPS Program on Inequality, said in a statement that "the last thing U.S. society needs is more economic and racial polarization."
"The surge in billionaire wealth and pandemic profiteering undermines the unity and solidarity that the American people will require to recover and grow together, not pull further apart," said Collins.
OP-ED RACIAL JUSTICE
Forget “Looting.” Capitalism Is the Real Robbery.
BY William C. Anderson, Truthout
PUBLISHED May 29, 2020
This morning the president of the United States threatened state-sanctioned murder in response to “looting,” laying bare the way in which white supremacy, capitalism and the state work together to violently repress people who defend Black life.
But Trump’s angry outburst is not the only blatantly racist response we should be interrogating. We also must confront the way in which both conservatives and liberals have responded to the Minneapolis uprisings by condemning “looting.”
Protesters in Minneapolis and around the country are rising up against a lynching and state violence. How should we respond to a lynching? Should our goal simply be to publicize it, in the hope that such publicity will generate condemnation and prevent future lynchings? This logic is flawed, in part, because lynchings thrive off of spectatorship. For white supremacists, the act of killing is also an act of fellowship and opportunity for indoctrination.
Simply spreading images of racist killings and asking the state to stop killing us is not going to stop them. (In fact, while it’s important to publicize the fact that these killings are occurring, sometimes the spread of such images also galvanizes white supremacists.)
And so, for some who oppose racist killings, watching the videos, waiting to vote, and marching in protest feels like enough. But for others, more intervention is needed. The murder of George Floyd by Minneapolis police comes on the heels of the killings of Ahmaud Arbery in Brunswick, Georgia, and Breonna Taylor in Louisville, Kentucky. These killings were committed by current and former law enforcement. Understandably, outrage is growing.
We should expect uprisings. We should expect property to be damaged, as people rise up against the racist systems complicit with racist violence. Many of the people taking part in these revolts have decided that respecting property is not more important than respecting Black life. There is an awareness that if the law doesn’t respect Black life, then the law itself cannot be relied on for protection or given undeserving respect. So, as protesters are being accused of “looting” and “rioting” in Minneapolis or anywhere else, this time demands that we reflect on the systematic robbery of Black America.
Corporations in the United States, again, have walked away with an unprecedented and astronomical amount of money in 2020. With no accountability in sight, there was little to no opposition to their monumental robbery. They were handed trillions. Politicians working in service to the corporate elite — and afraid of appearing opposed to a deal that would largely benefit Wall Street — pushed it through. Of course, the deal left many vulnerable people in the dust. No changes were made after the unresolved debt crisis of 2008 that brutalized people around the world with the starvation we know as austerity. Cuts to social needs have fallen on the public undeterred while the rich continuously grow richer than they’ve ever been.
Now, protests breaking out throughout the nation in response to police brutality foreshadow what’s to come. People are likely to take, break and fight because conditions remain miserable. It should not be surprising. Still, the “looting” by the oppressed will always be condemned more than the structural robbery that’s long taken place under capitalism.
There’s this idea that the perpetrators of crises, rather than their victims, deserve our sympathy when their profits decrease. After at least 100,000 people in the U.S. — disproportionately Black, Native and Latinx people — have died from a merciless pandemic, this absurdity is still being trafficked through the media. The corporations that do not pay people a living wage and who are benefiting from skyrocketing prices amid disaster are not deserving of pity. For those of us whose stability is much more uncertain, one missed paycheck could mean eviction,
imprisonment or hunger. These circumstances are increasingly common as unemployment reaches levels not seen since the Great Depression. At least 40 million people in this country are out of work, and people in need are being effectively robbed by the rich.
As they lose their jobs, people are also being robbed of health care — a vulnerability that will kill people and their family members. People have also been robbed of a safe place to live free from state violence, where they can breathe clean air. People have watched the tax money they paid be given away, time and time again, after being told it would come back to workers, but it never does. For Black America, there are more than enough prison beds, but not nearly enough hospital beds for a population that’s being disproportionately crushed by institutional oppression. So, of course, with little to no real infrastructure to protect people who the government has long neglected and abandoned, there will be uprisings and people will take things. They will take because of what’s been taken from them: safety, security, housing, education, food and even their ability to vote. And, of course, protesters are being robbed of the right to express their anger.
This conversation about “looting” always repeats itself. During virtually every Black uprising that has taken place and shaped this country in the last century, the narrative has remained the same. White supremacist assaults on the Black community were dubbed “race riots,” and Black protesters’ self-defense has been framed as senseless violence. People lament the destruction of property because they’ve bought into the idea that it’s another wrong being committed on top of any given white supremacist violence that caused it all. But stealing because you’re being sucked dry by a system that has rendered you disposable is not the same as the ritualistic racist murders of Black people by white supremacists. Decades of “looting” stores during uprisings can’t measure up to what Wall Street has looted through the financial crises it creates.
They are certainly aware of their crimes. Hedge fund capitalists who amass endless amounts of money through slush funds and financial manipulation have many avenues to escape accountability. As the U.S. military prepares for “civil disturbances” and buys riot gear, it’s clear they know that not all people will accept atrocity. In a nation that has never gotten past the civil war it fought over a wealthy class not giving up slavery profits, defending the wealthy is a tradition. The same people who created and currently benefit from the current crisis are intentionally mismanaging plenty of other parts of our existence.
Those interested in liberation should not condemn protesters’ so-called “rioting” and “looting.” Rather, we should be doing all we can to free the imprisoned protesters in Minnesota and wherever else uprisings occur. The robbery we should concern ourselves with is the theft perpetrated by a system that creates desperation where people in need have to go and take for themselves what should be a guaranteed right. Capitalism encourages thievery from the top down. Writing about the Haitian Revolution, the great writer C.L.R. James once said, “The rich are only defeated when running for their lives.” It has certainly been the case time and time again throughout Black history: People have overcome insurmountable odds to claim victories. How should we answer the question, “What do we do in response to a lynching?” We must make the very system that enables it run for its life.
But Trump’s angry outburst is not the only blatantly racist response we should be interrogating. We also must confront the way in which both conservatives and liberals have responded to the Minneapolis uprisings by condemning “looting.”
Protesters in Minneapolis and around the country are rising up against a lynching and state violence. How should we respond to a lynching? Should our goal simply be to publicize it, in the hope that such publicity will generate condemnation and prevent future lynchings? This logic is flawed, in part, because lynchings thrive off of spectatorship. For white supremacists, the act of killing is also an act of fellowship and opportunity for indoctrination.
Simply spreading images of racist killings and asking the state to stop killing us is not going to stop them. (In fact, while it’s important to publicize the fact that these killings are occurring, sometimes the spread of such images also galvanizes white supremacists.)
And so, for some who oppose racist killings, watching the videos, waiting to vote, and marching in protest feels like enough. But for others, more intervention is needed. The murder of George Floyd by Minneapolis police comes on the heels of the killings of Ahmaud Arbery in Brunswick, Georgia, and Breonna Taylor in Louisville, Kentucky. These killings were committed by current and former law enforcement. Understandably, outrage is growing.
We should expect uprisings. We should expect property to be damaged, as people rise up against the racist systems complicit with racist violence. Many of the people taking part in these revolts have decided that respecting property is not more important than respecting Black life. There is an awareness that if the law doesn’t respect Black life, then the law itself cannot be relied on for protection or given undeserving respect. So, as protesters are being accused of “looting” and “rioting” in Minneapolis or anywhere else, this time demands that we reflect on the systematic robbery of Black America.
Corporations in the United States, again, have walked away with an unprecedented and astronomical amount of money in 2020. With no accountability in sight, there was little to no opposition to their monumental robbery. They were handed trillions. Politicians working in service to the corporate elite — and afraid of appearing opposed to a deal that would largely benefit Wall Street — pushed it through. Of course, the deal left many vulnerable people in the dust. No changes were made after the unresolved debt crisis of 2008 that brutalized people around the world with the starvation we know as austerity. Cuts to social needs have fallen on the public undeterred while the rich continuously grow richer than they’ve ever been.
Now, protests breaking out throughout the nation in response to police brutality foreshadow what’s to come. People are likely to take, break and fight because conditions remain miserable. It should not be surprising. Still, the “looting” by the oppressed will always be condemned more than the structural robbery that’s long taken place under capitalism.
There’s this idea that the perpetrators of crises, rather than their victims, deserve our sympathy when their profits decrease. After at least 100,000 people in the U.S. — disproportionately Black, Native and Latinx people — have died from a merciless pandemic, this absurdity is still being trafficked through the media. The corporations that do not pay people a living wage and who are benefiting from skyrocketing prices amid disaster are not deserving of pity. For those of us whose stability is much more uncertain, one missed paycheck could mean eviction,
imprisonment or hunger. These circumstances are increasingly common as unemployment reaches levels not seen since the Great Depression. At least 40 million people in this country are out of work, and people in need are being effectively robbed by the rich.
As they lose their jobs, people are also being robbed of health care — a vulnerability that will kill people and their family members. People have also been robbed of a safe place to live free from state violence, where they can breathe clean air. People have watched the tax money they paid be given away, time and time again, after being told it would come back to workers, but it never does. For Black America, there are more than enough prison beds, but not nearly enough hospital beds for a population that’s being disproportionately crushed by institutional oppression. So, of course, with little to no real infrastructure to protect people who the government has long neglected and abandoned, there will be uprisings and people will take things. They will take because of what’s been taken from them: safety, security, housing, education, food and even their ability to vote. And, of course, protesters are being robbed of the right to express their anger.
This conversation about “looting” always repeats itself. During virtually every Black uprising that has taken place and shaped this country in the last century, the narrative has remained the same. White supremacist assaults on the Black community were dubbed “race riots,” and Black protesters’ self-defense has been framed as senseless violence. People lament the destruction of property because they’ve bought into the idea that it’s another wrong being committed on top of any given white supremacist violence that caused it all. But stealing because you’re being sucked dry by a system that has rendered you disposable is not the same as the ritualistic racist murders of Black people by white supremacists. Decades of “looting” stores during uprisings can’t measure up to what Wall Street has looted through the financial crises it creates.
They are certainly aware of their crimes. Hedge fund capitalists who amass endless amounts of money through slush funds and financial manipulation have many avenues to escape accountability. As the U.S. military prepares for “civil disturbances” and buys riot gear, it’s clear they know that not all people will accept atrocity. In a nation that has never gotten past the civil war it fought over a wealthy class not giving up slavery profits, defending the wealthy is a tradition. The same people who created and currently benefit from the current crisis are intentionally mismanaging plenty of other parts of our existence.
Those interested in liberation should not condemn protesters’ so-called “rioting” and “looting.” Rather, we should be doing all we can to free the imprisoned protesters in Minnesota and wherever else uprisings occur. The robbery we should concern ourselves with is the theft perpetrated by a system that creates desperation where people in need have to go and take for themselves what should be a guaranteed right. Capitalism encourages thievery from the top down. Writing about the Haitian Revolution, the great writer C.L.R. James once said, “The rich are only defeated when running for their lives.” It has certainly been the case time and time again throughout Black history: People have overcome insurmountable odds to claim victories. How should we answer the question, “What do we do in response to a lynching?” We must make the very system that enables it run for its life.
The Rich Are Making Out Like Bandits In This Pandemic
The Numbers Are In—The Trump-Radical Republican Response Has Been Great for Corporations and the One-Percenters, Not So Good for You
By David Cay Johnston, DCReport Editor-in-Chief
5/21/2020
Cash began pouring into money funds in early March, just as the Trump pandemic was escalating.
Tens of millions of Americans are cashless, many desperate to feed their children. Meanwhile the richest Americans merrily float on a rapidly rising tide of money thanks mainly to Trump & Co.
My analysis of Federal Reserve data shows a record flow of greenbacks let the corporate rich pour trillions of dollars into their accounts as they fired tens of millions.
Now that money just sits, idle.
How can it be that as want ravages cash-starved Americans, money wealth rises for the already rich like the tide rushing into the Bay of Fundy?
Part of the answer is as simple as it is awful. The Trump administration and its Radical Republican Senate allies are taking care of those who need help the least while declaring enough already for the unemployed.
One in five families didn’t have enough food to feed their children in April.
At the same time, 36% of adults who lost their jobs to the COVID-19 pandemic or had their hours cut say they couldn’t pay their bills in April. But the Trump administration and the Republican leaders in the Senate say no more, at least not now. Yet they are rolling out proposals to give more to the richest among us.
Donald Trump promised to champion the Forgotten Man when he ran in 2016. Apparently, he forgot about innocent victims of a long-predicted infectious disaster.
But he hasn’t forgotten about the swamp creatures he brought to Washington and the ones still roaming unchecked beyond the nation’s capital.
But the four pandemic relief laws totaling $3 trillion of spending and tax breaks aren’t the only source of all this cash at the top. Not by a long shot.
Cash Deposits Grow
Since the beginning of March, when the coronavirus started killing a rising number of Americans, idle cash parked in institutional money market funds ballooned. The figure grewfrom less than $2.3 trillion to more than $3.3 trillion.
Try to get your head around the scale of that. In just 13 weeks companies parked $1 trillion in institutional money market funds.
Note that T–one-million million dollars. To park that much cash, companies had to deposit $11 billion each and every day.
Institutional money market funds are one of the places where large corporations and other big enterprises park money they don’t need right away. Parked cash doesn’t help revive our economy. It just sits idle like a box in the garage gathering dust.
Cash also gets deposited at commercial banks. Since the economy began its long rebound early in the Obama administration commercial bank deposits grew at 6% annually. Under Trump that fell to 4.6% until mid-March. But since then the growth in bank deposits leaped to a 15.8% rate.
Trump Policy Worsens Inequality
Consider another measure of cash, known as M1. That’s the total of all dollar bills and coins, money held in checking accounts and traveler’s checks.
By this measure the amount of cash in America grew at a 42% annual rate in the 13 weeks from Feb. 3 to May 4, Federal Reserve reports show.
That’s almost twice the highest rate ever previously—22.5% in 2011. It’s also almost seven times the average 6.3% annual growth in the basic money supply since 1976, Federal Reserve reports show.
As these numbers all show, the Trump pandemic makes inequality in America far worse. That’s not because of any unstoppable natural force or immutable principle of economics. It’s because of Trump administration policies supported by obedient Trumpers in our Congress that favor the political donor class.
The result is an abundance of cash everywhere except where it’s needed most. That’s a choice – to favor the rich. It’s not necessary or required. And it can be changed, although there is no evidence Trump will ever do so.
Triple Whammy
But for the refusal of Speaker Nancy Pelosi and House Democrats to go along with Trump & Co., the cash flow to the top would have been even greater. Pelosi’s team rewrote the coronavirus relief bills to ensure the involuntarily jobless got more, but hardly enough.
The numbers I analyzed reveal that during the pandemic the Trump administration is taking good care of the corporate rich while tossing crumbs to the people least able to withstand the economic shock of losing their paycheck and their health insurance.
And these jobless Americans now must cope with the sharpest spike in food prices since 1974, as even Fox News, aka Trump TV, reported last week.
That triple whammy of no paycheck, no health insurance and higher food prices is the reason you see miles-long lines of cars lined up at food banks. Many of those cars are shiny and new, leased or bought with loans that must be paid monthly or the vehicles will get repossessed.
For those whose pockets have been emptied by the pandemic, getting car loans is much harder than last year. At the end of 2019 not a single bank in America was tightening its requirements for auto loans, Fed data shows. Now 16% are.
Sources of Cash
A lot of the cash sitting idle came from two activities beyond the four relief laws.
One was selling stocks. In eight of the last 10 years investors took out more money out of stock funds than they invested.
All told, a net $444 billion was pulled out of the U.S. equity funds and ETFs over the past decade,” financial journalist Mark Hurlbut noted just as the pandemic was taking hold.
When the stock market started to slide many big investors reduced their holdings of company shares, generating cash that had to be parked somewhere until its spent or reinvested.
Second, many companies loaded up on new debt this year, raising cash to ride out whatever economic storms the coronavirus causes. This is not new. Companies have been taking on debt in record amounts, now more than $10 trillion, more than double compared with the turn of the century. But some companies have taken out loans or issued corporate bonds to buy back their own stock. That puts cash in the hands of investors who sell while simultaneously executives’ stock options more valuable because profits per share rise all else being equal.
But that does nothing to invest in new job-creating activities while creating new corporate tax deductions for interest paid on the debt.
All of this is encouraged by Trump, who likes to call himself “the king of debt.”
More for the Already Rich
Trump, in his disjointed and self-pitying way, says what America needs right now is another corporate tax cut. Trump and Congressional Republicans slashed the corporate profits tax rate by 40% starting in 2018.
Huge new tax breaks were included in the Coronavirus Aid Relief and Economics Security (CARES) Act. People with incomes of more than $1 million per year, roughly one in every 500 taxpayers, will get 80% of the tax savings, as we reported last month.
Larry Kudlow, a key Trump economic adviser, proposed cutting in half the corporate tax for companies who bring overseas jobs home.
The White House is also pushing for a payroll tax cut, which would benefit the highest-paid workers most and does nothing for the unemployed.
Tax cuts are the universal solvent for financial ailments in Trump World and its orbiting Republican dependencies. They are to tax cuts as the wacky father in My Big Fat Greek Wedding was to the Windex he sprayed everywhere as an all-purpose solutions to both cleaning glass and treating physical ailments.
A Pause Instead of Relief
Trump and his allies say the unemployed and small business owners whose doors have been ordered shut to block the Grump Reaper don’t need more help, at least not now.
“We need to hit pause for a while, see what has worked, what hasn’t worked and let’s see how much money—additional money—we need after the economy is opened back up,” Sen. John Kennedy, a Louisiana Republican, says. He is parroting the Trump White House line.
Steve Mnuchin, Trump’s Treasury secretary, bobbed and weaved at a Tuesday Senate hearing when Sen. Elizabeth Warren (D-Mass.) tried to pin him down on making sure that cash sent to the corporate rich will be used properly. She wants strong contracts, their terms enforced and audits. Mnuchin complained the questions from Warren and others were unfair, but he never pledged to make sure taxpayers are treated fairly.
Trump and his allies are feeding the rich and the enterprises they control with torrents of cash because they, in turn, take care of the politicians with campaign donations, jobs for politicians and their family and friends.
What did any of those 32 million everyday Americans who lost their jobs do for the politicians except, maybe, cast a vote?
Then again, the only way to change this is by casting votes.
My analysis of Federal Reserve data shows a record flow of greenbacks let the corporate rich pour trillions of dollars into their accounts as they fired tens of millions.
Now that money just sits, idle.
How can it be that as want ravages cash-starved Americans, money wealth rises for the already rich like the tide rushing into the Bay of Fundy?
Part of the answer is as simple as it is awful. The Trump administration and its Radical Republican Senate allies are taking care of those who need help the least while declaring enough already for the unemployed.
One in five families didn’t have enough food to feed their children in April.
At the same time, 36% of adults who lost their jobs to the COVID-19 pandemic or had their hours cut say they couldn’t pay their bills in April. But the Trump administration and the Republican leaders in the Senate say no more, at least not now. Yet they are rolling out proposals to give more to the richest among us.
Donald Trump promised to champion the Forgotten Man when he ran in 2016. Apparently, he forgot about innocent victims of a long-predicted infectious disaster.
But he hasn’t forgotten about the swamp creatures he brought to Washington and the ones still roaming unchecked beyond the nation’s capital.
But the four pandemic relief laws totaling $3 trillion of spending and tax breaks aren’t the only source of all this cash at the top. Not by a long shot.
Cash Deposits Grow
Since the beginning of March, when the coronavirus started killing a rising number of Americans, idle cash parked in institutional money market funds ballooned. The figure grewfrom less than $2.3 trillion to more than $3.3 trillion.
Try to get your head around the scale of that. In just 13 weeks companies parked $1 trillion in institutional money market funds.
Note that T–one-million million dollars. To park that much cash, companies had to deposit $11 billion each and every day.
Institutional money market funds are one of the places where large corporations and other big enterprises park money they don’t need right away. Parked cash doesn’t help revive our economy. It just sits idle like a box in the garage gathering dust.
Cash also gets deposited at commercial banks. Since the economy began its long rebound early in the Obama administration commercial bank deposits grew at 6% annually. Under Trump that fell to 4.6% until mid-March. But since then the growth in bank deposits leaped to a 15.8% rate.
Trump Policy Worsens Inequality
Consider another measure of cash, known as M1. That’s the total of all dollar bills and coins, money held in checking accounts and traveler’s checks.
By this measure the amount of cash in America grew at a 42% annual rate in the 13 weeks from Feb. 3 to May 4, Federal Reserve reports show.
That’s almost twice the highest rate ever previously—22.5% in 2011. It’s also almost seven times the average 6.3% annual growth in the basic money supply since 1976, Federal Reserve reports show.
As these numbers all show, the Trump pandemic makes inequality in America far worse. That’s not because of any unstoppable natural force or immutable principle of economics. It’s because of Trump administration policies supported by obedient Trumpers in our Congress that favor the political donor class.
The result is an abundance of cash everywhere except where it’s needed most. That’s a choice – to favor the rich. It’s not necessary or required. And it can be changed, although there is no evidence Trump will ever do so.
Triple Whammy
But for the refusal of Speaker Nancy Pelosi and House Democrats to go along with Trump & Co., the cash flow to the top would have been even greater. Pelosi’s team rewrote the coronavirus relief bills to ensure the involuntarily jobless got more, but hardly enough.
The numbers I analyzed reveal that during the pandemic the Trump administration is taking good care of the corporate rich while tossing crumbs to the people least able to withstand the economic shock of losing their paycheck and their health insurance.
And these jobless Americans now must cope with the sharpest spike in food prices since 1974, as even Fox News, aka Trump TV, reported last week.
That triple whammy of no paycheck, no health insurance and higher food prices is the reason you see miles-long lines of cars lined up at food banks. Many of those cars are shiny and new, leased or bought with loans that must be paid monthly or the vehicles will get repossessed.
For those whose pockets have been emptied by the pandemic, getting car loans is much harder than last year. At the end of 2019 not a single bank in America was tightening its requirements for auto loans, Fed data shows. Now 16% are.
Sources of Cash
A lot of the cash sitting idle came from two activities beyond the four relief laws.
One was selling stocks. In eight of the last 10 years investors took out more money out of stock funds than they invested.
All told, a net $444 billion was pulled out of the U.S. equity funds and ETFs over the past decade,” financial journalist Mark Hurlbut noted just as the pandemic was taking hold.
When the stock market started to slide many big investors reduced their holdings of company shares, generating cash that had to be parked somewhere until its spent or reinvested.
Second, many companies loaded up on new debt this year, raising cash to ride out whatever economic storms the coronavirus causes. This is not new. Companies have been taking on debt in record amounts, now more than $10 trillion, more than double compared with the turn of the century. But some companies have taken out loans or issued corporate bonds to buy back their own stock. That puts cash in the hands of investors who sell while simultaneously executives’ stock options more valuable because profits per share rise all else being equal.
But that does nothing to invest in new job-creating activities while creating new corporate tax deductions for interest paid on the debt.
All of this is encouraged by Trump, who likes to call himself “the king of debt.”
More for the Already Rich
Trump, in his disjointed and self-pitying way, says what America needs right now is another corporate tax cut. Trump and Congressional Republicans slashed the corporate profits tax rate by 40% starting in 2018.
Huge new tax breaks were included in the Coronavirus Aid Relief and Economics Security (CARES) Act. People with incomes of more than $1 million per year, roughly one in every 500 taxpayers, will get 80% of the tax savings, as we reported last month.
Larry Kudlow, a key Trump economic adviser, proposed cutting in half the corporate tax for companies who bring overseas jobs home.
The White House is also pushing for a payroll tax cut, which would benefit the highest-paid workers most and does nothing for the unemployed.
Tax cuts are the universal solvent for financial ailments in Trump World and its orbiting Republican dependencies. They are to tax cuts as the wacky father in My Big Fat Greek Wedding was to the Windex he sprayed everywhere as an all-purpose solutions to both cleaning glass and treating physical ailments.
A Pause Instead of Relief
Trump and his allies say the unemployed and small business owners whose doors have been ordered shut to block the Grump Reaper don’t need more help, at least not now.
“We need to hit pause for a while, see what has worked, what hasn’t worked and let’s see how much money—additional money—we need after the economy is opened back up,” Sen. John Kennedy, a Louisiana Republican, says. He is parroting the Trump White House line.
Steve Mnuchin, Trump’s Treasury secretary, bobbed and weaved at a Tuesday Senate hearing when Sen. Elizabeth Warren (D-Mass.) tried to pin him down on making sure that cash sent to the corporate rich will be used properly. She wants strong contracts, their terms enforced and audits. Mnuchin complained the questions from Warren and others were unfair, but he never pledged to make sure taxpayers are treated fairly.
Trump and his allies are feeding the rich and the enterprises they control with torrents of cash because they, in turn, take care of the politicians with campaign donations, jobs for politicians and their family and friends.
What did any of those 32 million everyday Americans who lost their jobs do for the politicians except, maybe, cast a vote?
Then again, the only way to change this is by casting votes.
The Bailout Is Working — For the Rich
The economy is in free fall but Wall Street is thriving, and stocks of big private equity firms are soaring dramatically higher. That tells you who investors think is the real beneficiary of the federal government’s massive rescue efforts.
by Jesse Eisinger - propublica
May 10, 5 a.m. EDT
Ten weeks into the worst crisis in 90 years, the government’s effort to save the economy has been both a spectacular success and a catastrophic failure.
The clearest illustration of that came on Friday, when the government reported that 20.5 million people lost their jobs in April. It marked a period of unfathomable pain across the country not seen since the Great Depression. Also on Friday, the stock market rallied.
The S&P 500 is now up 30% from its lows in mid-March and back to where it was last October, when the outlook for 2020 corporate earnings looked sunshiny. Companies have sold record amounts of debt in recent weeks for investment-grade companies. Junk bonds, historically dodgy during an economic swoon, have roared back.
If you’re looking for investors’ verdict on who has won the bailout, consider these returns: Shares of Apollo Group, the giant private equity firm, have soared 80% from their lows. The stock of Blackstone, another private equity behemoth, has risen 50%.
The reason: Asset holders like Apollo and Blackstone — disproportionately the wealthiest and most influential — have been insured by the world’s most powerful central bank. This largess is boundless and without conditions.
“Even if a second wave of outbreaks were to occur,” JPMorgan economists wrote in a celebratory note on Friday, “the Fed has explicitly indicated that there is no dollar limit and no danger of running out of ammunition.”
Many aspects of the coronavirus bailout that assist individuals or small businesses, meanwhile, are short-term or contingent. Aid to small businesses comes with conditions on what they can do with the money. The sums allocated by the CARES Act for stimulus and expanded unemployment insurance are vast by historical standards. But the relief they provide didn’t prevent tens of millions from losing their jobs. The assistance runs out in weeks, and the jobless live at the mercy of a divided Congress, which will decide whether that help gets extended and, if so, for how long.
It’s a bailout of capital. “If the theory is: Let’s make sure companies are solvent and the workers will be OK, that theory could work. But it’s a trickle-down theory,” said Lev Menand, a former New York Fed economist who now teaches at Columbia Law School.
We do know one thing, he said: “It worked for asset holders.”
The Fed’s efforts, universally praised for their boldness and speed, have come in two stages. First, in February and March, the central bank shored up capital market “liquidity,” which marks how willing investors are to buy and sell. The central bank role is to be a “lender of last resort,” working through banks so they can get money to companies and people.
That expanded in the wake of the 2008 global financial crisis. The Federal Reserve, historically viewed as reserved Brahmins who controlled the money supply, stepped into a new job: “the dealer of last resort,” in the words of economist Perry Mehrling. The Fed bought assets and it bailed out the shadow banking system. “Shadow banking” takes many forms and can mean many things, but generally it describes activities that look like classic banking — taking in deposits and lending out that money — that are undertaken by, for example, a private-equity fund or another institution outside the traditional system of federally insured deposits.
The beneficiaries of this Federal Reserve help in 2008 were money market funds, and short-term lending markets for corporations and financial institutions such as the commercial paper and repurchase agreement markets — all of which had seized up and stopped functioning. Then this year, the Fed came to the rescue of these markets again, doing “such a great job with this that everyone has forgotten this has happened,” Menand said.
Those Fed moves were necessary. But they should not be consigned to the memory hole.
Everyone learned in 2008 that those corners of the markets were vulnerable, but the lessons didn’t stick, apparently. The government tried to install new rules governing different pockets of these markets in piecemeal fashion; financial interests bitterly opposed much of that new regulation. And now, just a short 12 years later, the Fed had to step in to protect these markets and interests once again.
The second stage of the Fed’s extraordinary rescue goes beyond liquidity. It has said it will buy assets it has never bought before. For almost 100 years, the Fed purchased only government bonds. Now it has announced a wide variety of programs to buy various forms of corporate and other debt, either by direct lending, by buying bonds, or buying loans.
The mere announcement that the Fed would do this had an immediate effect, spurring the boom in corporate borrowing.
The Fed didn’t stop with the most solid, safest corporate stalwarts. In early April, it also announced something unprecedented. The central bank said it would buy junk bonds, debt issued by fragile companies, many of which already have crushing debt loads. Sure enough, junk bonds roared back and their cousins, leveraged loans, revived.
In doing so, the Fed backstopped the riskiest markets in the world. The most dangerous investments in the world, it should go without saying, are not owned by middle- and working-class Americans, to whom every politician pledges fealty. No, they are owned by the most risk-seeking investors in the world, the ones that need the highest returns: private equity firms and hedge funds.
But wait, there’s more. The riskiest markets only got more so during the long boom era of the last decade. In the past several years, regulators — especially the former chair of the Federal Reserve, Janet Yellen — repeatedly worried that companies had too much debt. They were concerned how lenders had raced to ease conditions, or covenants, on their loans to elbow out their competitors to fork over money, just as they had in the run-up to 2008. At a moment of record profits, the ratio of corporate debt to earnings steadily rose, while corporate stock buybacks hit records. Those cautions were treated like a parental exhortation to their kids to get off TikTok and brush their teeth.
Yet after all that worry, the Fed then stepped in to save the wealthiest speculators. The mere word that the Fed will make some purchases in this market has swelled these investors’ net worth. Meanwhile, images of mile-long food lines have become common.
In some ways, it’s unfair to blame the Fed. The speed of its actions and its ability to deploy groundbreaking new approaches mask the paucity of its tools. It must work through the capital markets. And only through credit, at that. The Fed has no ability to help regular people directly. “It’s really ill-suited to get money to where it’s most needed and on terms that are the most appropriate,” said Kate Judge, a Columbia law professor and expert in the Federal Reserve.
The House and Senate have much greater powers, the power of the purse and of legislation. Congress could have passed laws that directed help in different ways. Europe has essentially nationalized payrolls, a much more direct form of aid to people who have lost the ability to work. But Congress has been reluctant to use sufficient fiscal measures going back to the 2008 rescue.
What happens if the economy doesn’t come back soon? The Fed’s saddle-ʼem-with-more-debt approach is premised on a sharp and rapid recovery. The virus burns itself out, people go back to work, they buy and sell, and everything snaps back. Companies pay back their loans, and all is forgiven and forgotten.
If the health crisis does not pass quickly, or if the economy does not roar back, the Fed’s actions might prove inadequate. But investors shouldn’t be too worried. They have been taught they can count on the government.
The clearest illustration of that came on Friday, when the government reported that 20.5 million people lost their jobs in April. It marked a period of unfathomable pain across the country not seen since the Great Depression. Also on Friday, the stock market rallied.
The S&P 500 is now up 30% from its lows in mid-March and back to where it was last October, when the outlook for 2020 corporate earnings looked sunshiny. Companies have sold record amounts of debt in recent weeks for investment-grade companies. Junk bonds, historically dodgy during an economic swoon, have roared back.
If you’re looking for investors’ verdict on who has won the bailout, consider these returns: Shares of Apollo Group, the giant private equity firm, have soared 80% from their lows. The stock of Blackstone, another private equity behemoth, has risen 50%.
The reason: Asset holders like Apollo and Blackstone — disproportionately the wealthiest and most influential — have been insured by the world’s most powerful central bank. This largess is boundless and without conditions.
“Even if a second wave of outbreaks were to occur,” JPMorgan economists wrote in a celebratory note on Friday, “the Fed has explicitly indicated that there is no dollar limit and no danger of running out of ammunition.”
Many aspects of the coronavirus bailout that assist individuals or small businesses, meanwhile, are short-term or contingent. Aid to small businesses comes with conditions on what they can do with the money. The sums allocated by the CARES Act for stimulus and expanded unemployment insurance are vast by historical standards. But the relief they provide didn’t prevent tens of millions from losing their jobs. The assistance runs out in weeks, and the jobless live at the mercy of a divided Congress, which will decide whether that help gets extended and, if so, for how long.
It’s a bailout of capital. “If the theory is: Let’s make sure companies are solvent and the workers will be OK, that theory could work. But it’s a trickle-down theory,” said Lev Menand, a former New York Fed economist who now teaches at Columbia Law School.
We do know one thing, he said: “It worked for asset holders.”
The Fed’s efforts, universally praised for their boldness and speed, have come in two stages. First, in February and March, the central bank shored up capital market “liquidity,” which marks how willing investors are to buy and sell. The central bank role is to be a “lender of last resort,” working through banks so they can get money to companies and people.
That expanded in the wake of the 2008 global financial crisis. The Federal Reserve, historically viewed as reserved Brahmins who controlled the money supply, stepped into a new job: “the dealer of last resort,” in the words of economist Perry Mehrling. The Fed bought assets and it bailed out the shadow banking system. “Shadow banking” takes many forms and can mean many things, but generally it describes activities that look like classic banking — taking in deposits and lending out that money — that are undertaken by, for example, a private-equity fund or another institution outside the traditional system of federally insured deposits.
The beneficiaries of this Federal Reserve help in 2008 were money market funds, and short-term lending markets for corporations and financial institutions such as the commercial paper and repurchase agreement markets — all of which had seized up and stopped functioning. Then this year, the Fed came to the rescue of these markets again, doing “such a great job with this that everyone has forgotten this has happened,” Menand said.
Those Fed moves were necessary. But they should not be consigned to the memory hole.
Everyone learned in 2008 that those corners of the markets were vulnerable, but the lessons didn’t stick, apparently. The government tried to install new rules governing different pockets of these markets in piecemeal fashion; financial interests bitterly opposed much of that new regulation. And now, just a short 12 years later, the Fed had to step in to protect these markets and interests once again.
The second stage of the Fed’s extraordinary rescue goes beyond liquidity. It has said it will buy assets it has never bought before. For almost 100 years, the Fed purchased only government bonds. Now it has announced a wide variety of programs to buy various forms of corporate and other debt, either by direct lending, by buying bonds, or buying loans.
The mere announcement that the Fed would do this had an immediate effect, spurring the boom in corporate borrowing.
The Fed didn’t stop with the most solid, safest corporate stalwarts. In early April, it also announced something unprecedented. The central bank said it would buy junk bonds, debt issued by fragile companies, many of which already have crushing debt loads. Sure enough, junk bonds roared back and their cousins, leveraged loans, revived.
In doing so, the Fed backstopped the riskiest markets in the world. The most dangerous investments in the world, it should go without saying, are not owned by middle- and working-class Americans, to whom every politician pledges fealty. No, they are owned by the most risk-seeking investors in the world, the ones that need the highest returns: private equity firms and hedge funds.
But wait, there’s more. The riskiest markets only got more so during the long boom era of the last decade. In the past several years, regulators — especially the former chair of the Federal Reserve, Janet Yellen — repeatedly worried that companies had too much debt. They were concerned how lenders had raced to ease conditions, or covenants, on their loans to elbow out their competitors to fork over money, just as they had in the run-up to 2008. At a moment of record profits, the ratio of corporate debt to earnings steadily rose, while corporate stock buybacks hit records. Those cautions were treated like a parental exhortation to their kids to get off TikTok and brush their teeth.
Yet after all that worry, the Fed then stepped in to save the wealthiest speculators. The mere word that the Fed will make some purchases in this market has swelled these investors’ net worth. Meanwhile, images of mile-long food lines have become common.
In some ways, it’s unfair to blame the Fed. The speed of its actions and its ability to deploy groundbreaking new approaches mask the paucity of its tools. It must work through the capital markets. And only through credit, at that. The Fed has no ability to help regular people directly. “It’s really ill-suited to get money to where it’s most needed and on terms that are the most appropriate,” said Kate Judge, a Columbia law professor and expert in the Federal Reserve.
The House and Senate have much greater powers, the power of the purse and of legislation. Congress could have passed laws that directed help in different ways. Europe has essentially nationalized payrolls, a much more direct form of aid to people who have lost the ability to work. But Congress has been reluctant to use sufficient fiscal measures going back to the 2008 rescue.
What happens if the economy doesn’t come back soon? The Fed’s saddle-ʼem-with-more-debt approach is premised on a sharp and rapid recovery. The virus burns itself out, people go back to work, they buy and sell, and everything snaps back. Companies pay back their loans, and all is forgiven and forgotten.
If the health crisis does not pass quickly, or if the economy does not roar back, the Fed’s actions might prove inadequate. But investors shouldn’t be too worried. They have been taught they can count on the government.
Top US companies lay off thousands of workers while rewarding shareholders amid coronavirus pandemic
Companies like Caterpillar and Levi Strauss showered cash on shareholders days after cutting thousands of employees
IGOR DERYSH - salon
MAY 6, 2020 12:04AM (UTC)
Some of the largest companies in the U.S. have rewarded their shareholders amid the coronavirus pandemic after firing thousands of employees.
Companies like heavy machinery manufacturer Caterpillar, denim-maker Levi Strauss, toolmaker Stanley Black & Decker, furniture manufacturer Steelcase and World Wrestling Entertainment have doled out more than $700 million to shareholders in cash dividends while slashing jobs and shuttering facilities, The Washington Post reported. Many other companies have likewise rewarded shareholders while laying off workers.
Caterpillar, for example, announced a $500 million distribution to shareholders in early April, according to the report, about two weeks after it announced that it was "temporarily suspending operations at certain facilities." The company did not say how many workers would be impacted.
"We are taking a variety of actions globally, but we aren't going to discuss the number of impacted people," a spokesperson told the outlet. "We are taking a variety of actions at our global facilities to reduce production due to weaker customer demand, potential supply constraints and the spread of the COVID-19 pandemic and related government actions. These actions include temporary facility shutdowns, indefinite or temporary layoffs."
Levi Strauss announced that it would distribute $32 million to shareholders on April 7, the same day that the company said it would furlough retail workers. About 4,000 workers have been affected, according to The Post.
"As this human and economic tragedy unfolds globally over the coming months, we are taking swift and decisive action that will ensure we remain a winner in our industry," Levi CEO Chip Bergh said at the time, after reporting big earnings in Q1.
Stanley Black & Decker announced in early April that it would furlough and lay off "non-essential" workers. It distributed $106 million in dividends to shareholders just two weeks later, The Post reported.
"Throughout our company's 177-year history, Stanley Black & Decker has weathered a series of exogenous shocks and thrived," CEO James Loree said in the statement last month. "We are in a strong position as we face today's challenges and are taking the necessary actions now to protect our employees and the business while positioning the company to thrive into the future."
Steelcase announced in March that it would cut operations in four states, issuing a statement saying it took "these actions in an effort to avoid permanent headcount reductions so the company and its employees can come through this crisis together."
It announced the same day that it would issue a dividend of roughly $8 million to shareholders. Earlier that month, the company bought back $38 million in stock from shareholders.
The WWE, a company whose longtime former CEO Linda McMahon served in Trump's Cabinet and now works on his re-election campaign, cut 10% of its workers and fired about 20 wrestlers a day before it announced $9 million in dividends for shareholders.
These five companies are far from the only corporations rewarding shareholders while cutting workers, but many other companies took steps to end dividends and buybacks in response to the economic crisis caused by the coronavirus.
The Gap, American Eagle and Darden Restaurants — which owns Olive Garden and LongHorn Steakhouse — announced that they would pause dividends and stop buybacks, according to The Post. Williams Sonoma said it would continue to pay full-time employees after shuttering its stores.
Chris Lu, who served as the Deputy Secretary of Labor under President Obama, called out the Trump administration for pushing to protect companies from being sued by workers who contract COVID-19 while ignoring businesses that reward shareholders at the expense of workers.
"In Trump's economy, these companies won't get punished," he said. "Instead, he wants to give them liability protection."
"In a downturn like this the first thing a company should do is give up any distributions to shareholders," William Lazonick, an economist at the University of Massachusetts Lowell, told The Post. "But in a crisis, companies will differ. Some will care . . . and some will rob the workers, who should expect that their continued employment will be the company's first concern."
Companies like heavy machinery manufacturer Caterpillar, denim-maker Levi Strauss, toolmaker Stanley Black & Decker, furniture manufacturer Steelcase and World Wrestling Entertainment have doled out more than $700 million to shareholders in cash dividends while slashing jobs and shuttering facilities, The Washington Post reported. Many other companies have likewise rewarded shareholders while laying off workers.
Caterpillar, for example, announced a $500 million distribution to shareholders in early April, according to the report, about two weeks after it announced that it was "temporarily suspending operations at certain facilities." The company did not say how many workers would be impacted.
"We are taking a variety of actions globally, but we aren't going to discuss the number of impacted people," a spokesperson told the outlet. "We are taking a variety of actions at our global facilities to reduce production due to weaker customer demand, potential supply constraints and the spread of the COVID-19 pandemic and related government actions. These actions include temporary facility shutdowns, indefinite or temporary layoffs."
Levi Strauss announced that it would distribute $32 million to shareholders on April 7, the same day that the company said it would furlough retail workers. About 4,000 workers have been affected, according to The Post.
"As this human and economic tragedy unfolds globally over the coming months, we are taking swift and decisive action that will ensure we remain a winner in our industry," Levi CEO Chip Bergh said at the time, after reporting big earnings in Q1.
Stanley Black & Decker announced in early April that it would furlough and lay off "non-essential" workers. It distributed $106 million in dividends to shareholders just two weeks later, The Post reported.
"Throughout our company's 177-year history, Stanley Black & Decker has weathered a series of exogenous shocks and thrived," CEO James Loree said in the statement last month. "We are in a strong position as we face today's challenges and are taking the necessary actions now to protect our employees and the business while positioning the company to thrive into the future."
Steelcase announced in March that it would cut operations in four states, issuing a statement saying it took "these actions in an effort to avoid permanent headcount reductions so the company and its employees can come through this crisis together."
It announced the same day that it would issue a dividend of roughly $8 million to shareholders. Earlier that month, the company bought back $38 million in stock from shareholders.
The WWE, a company whose longtime former CEO Linda McMahon served in Trump's Cabinet and now works on his re-election campaign, cut 10% of its workers and fired about 20 wrestlers a day before it announced $9 million in dividends for shareholders.
These five companies are far from the only corporations rewarding shareholders while cutting workers, but many other companies took steps to end dividends and buybacks in response to the economic crisis caused by the coronavirus.
The Gap, American Eagle and Darden Restaurants — which owns Olive Garden and LongHorn Steakhouse — announced that they would pause dividends and stop buybacks, according to The Post. Williams Sonoma said it would continue to pay full-time employees after shuttering its stores.
Chris Lu, who served as the Deputy Secretary of Labor under President Obama, called out the Trump administration for pushing to protect companies from being sued by workers who contract COVID-19 while ignoring businesses that reward shareholders at the expense of workers.
"In Trump's economy, these companies won't get punished," he said. "Instead, he wants to give them liability protection."
"In a downturn like this the first thing a company should do is give up any distributions to shareholders," William Lazonick, an economist at the University of Massachusetts Lowell, told The Post. "But in a crisis, companies will differ. Some will care . . . and some will rob the workers, who should expect that their continued employment will be the company's first concern."
Robert Reich breaks down the sham of corporate social responsibility
Robert Reich / Robert Reich's Blog - alternet
May 6, 2020
Last August, the Business Roundtable – an association of CEOs of America’s biggest corporations – announced with great fanfare a “fundamental commitment to all of our stakeholders” and not just their shareholders.
They said “investing in employees, delivering value to customers, and supporting outside communities“ is now at the forefront of their business goals — not maximizing profits.
Baloney. Corporate social responsibility is a sham.
One Business Roundtable director is Mary Barra, CEO of General Motors. Just weeks after making the Roundtable commitment, and despite GM’s hefty profits and large tax breaks, Barra rejected workers’ demands that GM raise their wages and stop outsourcing their jobs. Earlier in the year GM shut its giant assembly plant in Lordstown, Ohio.
Nearly 50,000 GM workers then staged the longest auto strike in 50 years. They won a few wage gains but didn’t save any jobs. Barra was paid $22 million last year. How’s that for corporate social responsibility?
Another prominent CEO who made the phony Business Roundtable commitment was AT&T’s Randall Stephenson, who promised to use the billions in savings from the Trump tax cut to invest in the company’s broadband network and create at least 7,000 new jobs.
Instead, even before the coronavirus pandemic, AT&T cut more than 23,000 jobs and demanded that employees train lower-wage foreign workers to replace them.
Let’s not forget Jeff Bezos, CEO of Amazon and its Whole Foods subsidiary. Just weeks after Bezos made the Business Roundtable commitment, Whole Foods announced it would be cutting medical benefits for its entire part-time workforce.
The annual saving to Amazon from this cost-cutting move is roughly what Bezos – whose net worth is $117 billion – makes in a few hours. Bezos’ wealth grows so quickly, this number has gone up since you started watching this video.
GE’s CEO Larry Culp is also a member of the Business Roundtable. Two months after he made the commitment to all his stakeholders, General Electric froze the pensions of 20,000 workers in order to cut costs. So much for investing in employees.
Dennis Muilenburg, the former CEO of Boeing, also committed to the phony Business Roundtable pledge. Shortly after making the commitment to “deliver value to customers,” Muilenburg was fired for failing to act to address the safety problems that caused the 737 Max crashes that killed 346 people. After the crashes, he didn’t issue a meaningful apology or even express remorse to the victims’ families and downplayed the severity of the fallout to investors, regulators, airlines, and the public. He was rewarded with a $62 million farewell gift from Boeing on his way out.
Oh, and the chairman of the Business Roundtable is Jamie Dimon, CEO of Wall Street’s largest bank, JPMorgan Chase. Dimon lobbied Congress personally and intensively for the biggest corporate tax cut in history, and got the Business Roundtable to join him. JPMorgan raked in $3.7 billion from the tax cut. Dimon alone made $31 million in 2018.
That tax cut increased the federal debt by almost $2 trillion. This was before Congress spent almost $3 trillion fighting the pandemic – and delivering a hefty portion as bailouts to the biggest corporations, many of whom signed the Business Roundtable pledge.
As usual, almost nothing has trickled down to America’s working class and poor.
The truth is, American corporations are sacrificing workers and communities as never before in order to further boost runaway profits and unprecedented CEO pay. And not even a tragic pandemic is changing that.
Americans know this. A record 76 percent of U.S. adults believe major corporations have too much power.
The only way to make corporations socially responsible is through laws requiring them to be – for example, giving workers a bigger voice in corporate decision making, requiring that corporations pay severance to communities they abandon, raising corporate taxes, busting up monopolies, and preventing dangerous products (including faulty airplanes) from ever reaching the light of day.
If the CEOs of the Business Roundtable and other corporations were truly socially responsible, they’d support such laws, not make phony promises they clearly have no intention of keeping. Don’t hold your breath.
The only way to get such laws enacted is by reducing corporate power and getting big money out of our politics.
The first step is to see corporate social responsibility for the sham it is. The next step is to emerge from this pandemic and economic crisis more resolved than ever to rein in corporate power, and make the economy work for all.
They said “investing in employees, delivering value to customers, and supporting outside communities“ is now at the forefront of their business goals — not maximizing profits.
Baloney. Corporate social responsibility is a sham.
One Business Roundtable director is Mary Barra, CEO of General Motors. Just weeks after making the Roundtable commitment, and despite GM’s hefty profits and large tax breaks, Barra rejected workers’ demands that GM raise their wages and stop outsourcing their jobs. Earlier in the year GM shut its giant assembly plant in Lordstown, Ohio.
Nearly 50,000 GM workers then staged the longest auto strike in 50 years. They won a few wage gains but didn’t save any jobs. Barra was paid $22 million last year. How’s that for corporate social responsibility?
Another prominent CEO who made the phony Business Roundtable commitment was AT&T’s Randall Stephenson, who promised to use the billions in savings from the Trump tax cut to invest in the company’s broadband network and create at least 7,000 new jobs.
Instead, even before the coronavirus pandemic, AT&T cut more than 23,000 jobs and demanded that employees train lower-wage foreign workers to replace them.
Let’s not forget Jeff Bezos, CEO of Amazon and its Whole Foods subsidiary. Just weeks after Bezos made the Business Roundtable commitment, Whole Foods announced it would be cutting medical benefits for its entire part-time workforce.
The annual saving to Amazon from this cost-cutting move is roughly what Bezos – whose net worth is $117 billion – makes in a few hours. Bezos’ wealth grows so quickly, this number has gone up since you started watching this video.
GE’s CEO Larry Culp is also a member of the Business Roundtable. Two months after he made the commitment to all his stakeholders, General Electric froze the pensions of 20,000 workers in order to cut costs. So much for investing in employees.
Dennis Muilenburg, the former CEO of Boeing, also committed to the phony Business Roundtable pledge. Shortly after making the commitment to “deliver value to customers,” Muilenburg was fired for failing to act to address the safety problems that caused the 737 Max crashes that killed 346 people. After the crashes, he didn’t issue a meaningful apology or even express remorse to the victims’ families and downplayed the severity of the fallout to investors, regulators, airlines, and the public. He was rewarded with a $62 million farewell gift from Boeing on his way out.
Oh, and the chairman of the Business Roundtable is Jamie Dimon, CEO of Wall Street’s largest bank, JPMorgan Chase. Dimon lobbied Congress personally and intensively for the biggest corporate tax cut in history, and got the Business Roundtable to join him. JPMorgan raked in $3.7 billion from the tax cut. Dimon alone made $31 million in 2018.
That tax cut increased the federal debt by almost $2 trillion. This was before Congress spent almost $3 trillion fighting the pandemic – and delivering a hefty portion as bailouts to the biggest corporations, many of whom signed the Business Roundtable pledge.
As usual, almost nothing has trickled down to America’s working class and poor.
The truth is, American corporations are sacrificing workers and communities as never before in order to further boost runaway profits and unprecedented CEO pay. And not even a tragic pandemic is changing that.
Americans know this. A record 76 percent of U.S. adults believe major corporations have too much power.
The only way to make corporations socially responsible is through laws requiring them to be – for example, giving workers a bigger voice in corporate decision making, requiring that corporations pay severance to communities they abandon, raising corporate taxes, busting up monopolies, and preventing dangerous products (including faulty airplanes) from ever reaching the light of day.
If the CEOs of the Business Roundtable and other corporations were truly socially responsible, they’d support such laws, not make phony promises they clearly have no intention of keeping. Don’t hold your breath.
The only way to get such laws enacted is by reducing corporate power and getting big money out of our politics.
The first step is to see corporate social responsibility for the sham it is. The next step is to emerge from this pandemic and economic crisis more resolved than ever to rein in corporate power, and make the economy work for all.
screwing the taxpayer!!!
Big companies that gave executives huge bonuses, paid massive fines, cash in on small business aid
More than 200 publicly-traded companies have received more than $750 million intended to help small businesses
IGOR DERYSH - salon
APRIL 28, 2020 9:00AM (UTC)
Companies that paid millions in fines, doled out big executive bonuses, and donated to the Trump campaign were among the firms that received millions of dollars in aid aimed at helping small businesses weather the coronavirus crisis.
The Paycheck Protection Program was created in the $2.2 trillion stimulus bill to help small businesses that could no longer sustain themselves after large swaths of the economy shut down to contain the spread of the coronavirus. But the program quickly ran out of money and needed to be replenished after dozens of large companies secured millions in low-interest loans, which would be forgiven if the companies retain their employees.
Though some restaurant chains like Shake Shack and Ruth's Chris Steakhouse returned tens of millions they got from the program after public outcry, about 200 publicly traded companies have disclosed that they received more than $750 million in total from the program, according to The New York Times. Other companies secured loans even though they were able to raise millions from private investors.
At least seven companies that received a combined $45 million in loans from the program recently had to pay big fines to the federal government.
MiMedx Group, a Georgia pharmaceutical company, received a $10 million loan just days after it agreed to pay the Justice Department $6.5 million after allegedly overcharging the Department of Veterans Affairs for medical supplies. The company also paid a $1.5 million settlement to the Securities and Exchange Commission.
US Auto Parts Network received a $4.1 million loan even though Customs and Border Protection recently seized some of the company's products because they were reportedly counterfeit, according to the Times.
Companies that have paid their executives big bonuses have also cashed in on the program.
AutoWeb received a $1.4 million loan just days after disclosing that CEO Jared Rowe got a $1.7 million bonus in 2019, despite the company's stock price having plunged by more than 70%.
Manning & Napier, a New York investment firm, received a $6.7 million loan after disclosing last month that it paid CEO Marc Mayer nearly $5 million last year, according to the Times. The company received the loans even after it vowed to pay out quarterly dividends to shareholders.
Applicants for loans are not required to show that they have been affected by the pandemic and must only certify that "current economic uncertainty makes this loan request necessary." As a result, companies that have recently secured big investments pounced on the program.
Legacy Housing, a Texas home manufacturer, announced that it received $6.5 million from the program just weeks after it announced that it had secured a new $25 million credit line. After drawing scrutiny from the Times, top executive Curtis Hodgson told the paper that the company would pay back the money.
Escalade Sports, a sporting goods manufacturer, received a $5.6 million loan despite already securing a $50 million credit line from JPMorgan Chase, according to the Times. The company told the Times that it "fully met all required conditions" for the loan even though CEO Dave Fetherman told investors earlier this month the company had a "strong balance sheet."
Several companies with ties to President Trump also received big loans.
Phunware, a data-collection company that works with the Trump campaign and Fox News, received a $2.9 million loan.
Continental Materials, a construction supply company, received $5.5 million in loans after CEO James Gidwitz contributed to the Trump campaign. His brother Ronald was tapped to serve as Trump's ambassador to Belgium after serving as the Illinois campaign finance chairman for the president's 2016 campaign.
The Main Street Alliance, an advocacy group for small businesses, said the funds were not going to the companies Congress ostensibly set out to help.
"It's outrageous," Amanda Ballantyne, the group's executive director, told the Times, adding that there were countless small business owners "who have laid off all their staff, are trying to file for unemployment and will go bankrupt because of the problems with the way this Paycheck Protection Program was designed."
The Trump administration has refused to disclose which companies have received the aid, so most information about recipients has come from the companies themselves. Trump and Treasury Secretary Steven Mnuchin have said they hope that companies that should not have gotten the loans will voluntarily return the money.
Banks distributing the aid have also pocketed some $10 billion in fees. Several of the banks have been accused of prioritizing large corporate customers ahead of small businesses that desperately need the aid to stay afloat.
Democrats and Republicans alike have criticized the program for misdirecting the funds.
"Many businesses with thousands of employees have found loopholes to qualify for these loans meant for small businesses. Unfortunately, when it comes to the PPP, millions of dollars are being wasted," Sen. Rick Scott, R-Fla., told CNN. "Right now, companies that are not being harmed at all by the coronavirus crisis have the ability to receive taxpayer-funded loans that can be forgiven. That's wrong, and it takes money out of the hands of those Americans who really need it."
The Paycheck Protection Program was created in the $2.2 trillion stimulus bill to help small businesses that could no longer sustain themselves after large swaths of the economy shut down to contain the spread of the coronavirus. But the program quickly ran out of money and needed to be replenished after dozens of large companies secured millions in low-interest loans, which would be forgiven if the companies retain their employees.
Though some restaurant chains like Shake Shack and Ruth's Chris Steakhouse returned tens of millions they got from the program after public outcry, about 200 publicly traded companies have disclosed that they received more than $750 million in total from the program, according to The New York Times. Other companies secured loans even though they were able to raise millions from private investors.
At least seven companies that received a combined $45 million in loans from the program recently had to pay big fines to the federal government.
MiMedx Group, a Georgia pharmaceutical company, received a $10 million loan just days after it agreed to pay the Justice Department $6.5 million after allegedly overcharging the Department of Veterans Affairs for medical supplies. The company also paid a $1.5 million settlement to the Securities and Exchange Commission.
US Auto Parts Network received a $4.1 million loan even though Customs and Border Protection recently seized some of the company's products because they were reportedly counterfeit, according to the Times.
Companies that have paid their executives big bonuses have also cashed in on the program.
AutoWeb received a $1.4 million loan just days after disclosing that CEO Jared Rowe got a $1.7 million bonus in 2019, despite the company's stock price having plunged by more than 70%.
Manning & Napier, a New York investment firm, received a $6.7 million loan after disclosing last month that it paid CEO Marc Mayer nearly $5 million last year, according to the Times. The company received the loans even after it vowed to pay out quarterly dividends to shareholders.
Applicants for loans are not required to show that they have been affected by the pandemic and must only certify that "current economic uncertainty makes this loan request necessary." As a result, companies that have recently secured big investments pounced on the program.
Legacy Housing, a Texas home manufacturer, announced that it received $6.5 million from the program just weeks after it announced that it had secured a new $25 million credit line. After drawing scrutiny from the Times, top executive Curtis Hodgson told the paper that the company would pay back the money.
Escalade Sports, a sporting goods manufacturer, received a $5.6 million loan despite already securing a $50 million credit line from JPMorgan Chase, according to the Times. The company told the Times that it "fully met all required conditions" for the loan even though CEO Dave Fetherman told investors earlier this month the company had a "strong balance sheet."
Several companies with ties to President Trump also received big loans.
Phunware, a data-collection company that works with the Trump campaign and Fox News, received a $2.9 million loan.
Continental Materials, a construction supply company, received $5.5 million in loans after CEO James Gidwitz contributed to the Trump campaign. His brother Ronald was tapped to serve as Trump's ambassador to Belgium after serving as the Illinois campaign finance chairman for the president's 2016 campaign.
The Main Street Alliance, an advocacy group for small businesses, said the funds were not going to the companies Congress ostensibly set out to help.
"It's outrageous," Amanda Ballantyne, the group's executive director, told the Times, adding that there were countless small business owners "who have laid off all their staff, are trying to file for unemployment and will go bankrupt because of the problems with the way this Paycheck Protection Program was designed."
The Trump administration has refused to disclose which companies have received the aid, so most information about recipients has come from the companies themselves. Trump and Treasury Secretary Steven Mnuchin have said they hope that companies that should not have gotten the loans will voluntarily return the money.
Banks distributing the aid have also pocketed some $10 billion in fees. Several of the banks have been accused of prioritizing large corporate customers ahead of small businesses that desperately need the aid to stay afloat.
Democrats and Republicans alike have criticized the program for misdirecting the funds.
"Many businesses with thousands of employees have found loopholes to qualify for these loans meant for small businesses. Unfortunately, when it comes to the PPP, millions of dollars are being wasted," Sen. Rick Scott, R-Fla., told CNN. "Right now, companies that are not being harmed at all by the coronavirus crisis have the ability to receive taxpayer-funded loans that can be forgiven. That's wrong, and it takes money out of the hands of those Americans who really need it."
|
|
Bezos, Musk among billionaires gaining net worth in pandemic: report
APRIL 23, 2020 / 7:51 AM
(Reuters) - The combined wealth of America’s billionaires, including Amazon.com (AMZN.O) Inc founder Jeff Bezos and Tesla Inc (TSLA.O) chief Elon Musk, increased nearly 10% during the ongoing COVID-19 pandemic, according to a report published by the Institute for Policy Studies (IPS).
The wealth surge of America’s richest men happened during a period that saw as many as 22 million Americans file for unemployment.
Even as the broader economy faced a recession, tech and stay-at-home stocks like Zoom (ZM.O) have rallied in recent weeks, due to a surge in usage of video conferencing and remote work technology, thus boosting the net worth of billionaire founders with holdings in those companies.
“This is the tale of two pandemics, with very unequal sacrifice,” said Chuck Collins, a co-author of the report.
During the period between January 1 to April 10 this year, 34 of the nation’s wealthiest billionaires have seen their net worth increase by tens of millions of dollars, the report said.
According to the IPS report, eight of these billionaires including Bezos, Zoom Video Communications Inc founder Eric Yuan and Musk saw a $1-billion jump in their total net worth.
Musk holds an 18.5% stake in Tesla shares, which has soared over 73% since the beginning of the year as traders looked beyond the short-term impact of the coronavirus pandemic.
Bezos owns about 15.1% in Amazon stock, which has gained nearly 31% this year as online orders on its platform have surged due to people staying indoors.
In the last decade, wealth of U.S. billionaires jumped over 80.6% adjusted for inflation, the report added.
The wealth surge of America’s richest men happened during a period that saw as many as 22 million Americans file for unemployment.
Even as the broader economy faced a recession, tech and stay-at-home stocks like Zoom (ZM.O) have rallied in recent weeks, due to a surge in usage of video conferencing and remote work technology, thus boosting the net worth of billionaire founders with holdings in those companies.
“This is the tale of two pandemics, with very unequal sacrifice,” said Chuck Collins, a co-author of the report.
During the period between January 1 to April 10 this year, 34 of the nation’s wealthiest billionaires have seen their net worth increase by tens of millions of dollars, the report said.
According to the IPS report, eight of these billionaires including Bezos, Zoom Video Communications Inc founder Eric Yuan and Musk saw a $1-billion jump in their total net worth.
Musk holds an 18.5% stake in Tesla shares, which has soared over 73% since the beginning of the year as traders looked beyond the short-term impact of the coronavirus pandemic.
Bezos owns about 15.1% in Amazon stock, which has gained nearly 31% this year as online orders on its platform have surged due to people staying indoors.
In the last decade, wealth of U.S. billionaires jumped over 80.6% adjusted for inflation, the report added.
Cash-strapped hospitals lay off thousands of health workers despite COVID-19 staff shortages
Thousands of medical workers are out of a job as the crisis exposes the perils of the for-profit health care system
IGOR DERYSH - salon
APRIL 18, 2020 2:00PM (UTC)
Hospitals across the country are laying off thousands of medical workers despite facing severe staff shortages as they treat an influx of patients infected with the coronavirus.
Hospitals have been feeling the effects of the pandemic for weeks as the number of coronavirus infections continued to rise, overwhelming medical systems and exhausting protective equipment stockpiles. But as the economic crisis continues to grow due to social distancing restrictions, for-profit hospitals are increasingly unable to maintain their staffing levels.
The Department of Veterans Affairs is racing to find enough new medical workers to staff hospitals in hard-hit areas like Detroit and New Orleans. It recently even sought to bring medical personnel out of retirement to assist with the crisis.
New York City Mayor Bill de Blasio pleaded for the federal government to assist his hard-hit city with staffing its hospital system.
"Unless there is a national effort to enlist doctors, nurses, hospital workers of all kinds and get them where they are needed most in the country in time, I don't see, honestly, how we're going to have the professionals we need to get through this crisis," he told MSNBC earlier this month.
Despite the growing need to find enough able medical workers to staff hospitals seeing an unprecedented number of patients, tens of thousands of medical workers have lost their jobs, in part due to state restrictions imposed to contain the virus spread.
Altarum, a nonprofit health research and consulting firm, reported last week that 43,000 health workers lost their jobs in just the first month of the crisis. Most of the losses were among non-hospital workers that are employed at physician and dentist offices that closed amid statewide lockdowns. However, the trend has now expanded to hospitals.
In Michigan, one of the areas hit hardest by the outbreak, Beaumont Health announced that it would lay off at least 300 workers at a Detroit-area hospital while the Detroit Medical Center furloughed about 480 employees.
The Medical University of South Carolina is laying off about 900 workers and asking full-time staff to take a 15% pay cut, according to the Charleston Post & Courier. Mercy Health, the largest medical system in Ohio, is temporarily cutting 700 workers, according to the Cincinnati Enquirer. Essentia Health, a top medical provider in Minnesota, is laying off 500 workers, according to the Duluth News Tribune. Two hospital systems in West Virginia will furlough about 1,000 workers, according to the Associated Press. The biggest health system in eastern Kentucky is cutting 500 workers, according to the Lexington Herald-Leader.
These layoffs are just the tip of the iceberg as hospitals face rising costs coupled with plummeting revenues. Hospitals have been forced to purchase unprecedented numbers of ventilators and personal protective equipment at exorbitant prices while also setting up drive-through testing sites. At the same time, many states and Surgeon General Jerome Adams directed hospitals to halt non-urgent surgeries in order to conserve protective equipment and bed space and prevent the spread of the virus to non-infected patients.
Elective surgeries make up a large part of hospital revenues. Beaumont Health, for example, earns about $16 million more than it spends in a typical month; now, it is losing about $100 million per month since the elective surgery ban, according to The Washington Post. Mercy First is also losing about $100 million each month. Virginia hospitals are expected to lose a combined $600 million in just 30 days.
"Elective surgeries are the cornerstone of our hospital system's operating model — and the negative impact due to the cancellations of these procedures cannot be overstated," Texas-based Steward Health Care said in a statement to NPR. "In addition, patients are understandably cautious and choosing to defer any non-emergency treatments or routine visits until this crisis has passed."
Many of the layoffs have hit workers who are not directly involved in treating coronavirus patients, executives told the Post, but the reduced staff has put a "strain" on health systems dealing with a surge of patients.
---
The $2.2 trillion stimulus bill approved by Congress last month allocated $100 billion to help hospitals alleviate the pain. Yet experts say that is not enough, since the hospital industry sees about $100 billion in revenues in just a single month.
The Trump administration has also taken steps that could leave the worst-off hospitals out of luck. Seema Verma, the administrator of the Centers for Medicare and Medicaid, said that the first $30 billion of the aforementioned allocation will be doled out based on the volume of Medicare recipients billed by hospitals. That could leave hospitals that treat higher numbers of Medicaid recipients and the uninsured without any assistance, as those patients are left out of the aid calculation.
The rest of the money would theoretically go to the other hospitals, but President Donald Trump announced earlier this month that the administration would dip into the hospital fund to cover the cost of coronavirus testing and treatment for uninsured patients after he refused to open a special Obamacare enrollment period instead. The Kaiser Family Foundation estimated that the plan will cost up to $42 billion of the remaining $70 billion allocation.
This could leave hospitals that primarily treat low-income workers and uninsured patients "in the greatest need of funding support," warned Bruce Siegel, the head of America's Essential Hospitals.
The American Hospital Association called on Verma and HHS Secretary Alex Azar to allocate funds based on need by providing $30,000 per every occupied bed in "hot spots" like New York and Detroit, and $25,000 per bed to every other hospital.
"In addition, all types of hospitals, including rural and urban short-term acute-care, long-term care and critical access hospitals, as well as inpatient rehabilitation and inpatient psychiatric facilities, are incurring expenses related to COVID-19 as they work to treat patients and expand the capacity of the health care system," the organization said. "Thus, all types of hospitals must be eligible for funds."
Fox told The Post that even this massive expenditure would only "take care of April."
Asked how much he believed hospitals needed to ride out the crisis, he replied, "tell me how long the virus lasts, and I can answer that."
The uncertainty has left many health workers, who have been accurately praised as heroes during the crisis, stuck in limbo. Colby Pacheco, a contract nurse in Oklahoma, said he was considering traveling to a hotspot to find work as he faces a potential furlough.
"It's a weird position to be in as a nurse, not knowing if you'll have a job during a pandemic," Pacheco told ABC News. "I just hope big business doesn't get in the way of nurses doing their jobs and helping people."
Hospitals have been feeling the effects of the pandemic for weeks as the number of coronavirus infections continued to rise, overwhelming medical systems and exhausting protective equipment stockpiles. But as the economic crisis continues to grow due to social distancing restrictions, for-profit hospitals are increasingly unable to maintain their staffing levels.
The Department of Veterans Affairs is racing to find enough new medical workers to staff hospitals in hard-hit areas like Detroit and New Orleans. It recently even sought to bring medical personnel out of retirement to assist with the crisis.
New York City Mayor Bill de Blasio pleaded for the federal government to assist his hard-hit city with staffing its hospital system.
"Unless there is a national effort to enlist doctors, nurses, hospital workers of all kinds and get them where they are needed most in the country in time, I don't see, honestly, how we're going to have the professionals we need to get through this crisis," he told MSNBC earlier this month.
Despite the growing need to find enough able medical workers to staff hospitals seeing an unprecedented number of patients, tens of thousands of medical workers have lost their jobs, in part due to state restrictions imposed to contain the virus spread.
Altarum, a nonprofit health research and consulting firm, reported last week that 43,000 health workers lost their jobs in just the first month of the crisis. Most of the losses were among non-hospital workers that are employed at physician and dentist offices that closed amid statewide lockdowns. However, the trend has now expanded to hospitals.
In Michigan, one of the areas hit hardest by the outbreak, Beaumont Health announced that it would lay off at least 300 workers at a Detroit-area hospital while the Detroit Medical Center furloughed about 480 employees.
The Medical University of South Carolina is laying off about 900 workers and asking full-time staff to take a 15% pay cut, according to the Charleston Post & Courier. Mercy Health, the largest medical system in Ohio, is temporarily cutting 700 workers, according to the Cincinnati Enquirer. Essentia Health, a top medical provider in Minnesota, is laying off 500 workers, according to the Duluth News Tribune. Two hospital systems in West Virginia will furlough about 1,000 workers, according to the Associated Press. The biggest health system in eastern Kentucky is cutting 500 workers, according to the Lexington Herald-Leader.
These layoffs are just the tip of the iceberg as hospitals face rising costs coupled with plummeting revenues. Hospitals have been forced to purchase unprecedented numbers of ventilators and personal protective equipment at exorbitant prices while also setting up drive-through testing sites. At the same time, many states and Surgeon General Jerome Adams directed hospitals to halt non-urgent surgeries in order to conserve protective equipment and bed space and prevent the spread of the virus to non-infected patients.
Elective surgeries make up a large part of hospital revenues. Beaumont Health, for example, earns about $16 million more than it spends in a typical month; now, it is losing about $100 million per month since the elective surgery ban, according to The Washington Post. Mercy First is also losing about $100 million each month. Virginia hospitals are expected to lose a combined $600 million in just 30 days.
"Elective surgeries are the cornerstone of our hospital system's operating model — and the negative impact due to the cancellations of these procedures cannot be overstated," Texas-based Steward Health Care said in a statement to NPR. "In addition, patients are understandably cautious and choosing to defer any non-emergency treatments or routine visits until this crisis has passed."
Many of the layoffs have hit workers who are not directly involved in treating coronavirus patients, executives told the Post, but the reduced staff has put a "strain" on health systems dealing with a surge of patients.
---
The $2.2 trillion stimulus bill approved by Congress last month allocated $100 billion to help hospitals alleviate the pain. Yet experts say that is not enough, since the hospital industry sees about $100 billion in revenues in just a single month.
The Trump administration has also taken steps that could leave the worst-off hospitals out of luck. Seema Verma, the administrator of the Centers for Medicare and Medicaid, said that the first $30 billion of the aforementioned allocation will be doled out based on the volume of Medicare recipients billed by hospitals. That could leave hospitals that treat higher numbers of Medicaid recipients and the uninsured without any assistance, as those patients are left out of the aid calculation.
The rest of the money would theoretically go to the other hospitals, but President Donald Trump announced earlier this month that the administration would dip into the hospital fund to cover the cost of coronavirus testing and treatment for uninsured patients after he refused to open a special Obamacare enrollment period instead. The Kaiser Family Foundation estimated that the plan will cost up to $42 billion of the remaining $70 billion allocation.
This could leave hospitals that primarily treat low-income workers and uninsured patients "in the greatest need of funding support," warned Bruce Siegel, the head of America's Essential Hospitals.
The American Hospital Association called on Verma and HHS Secretary Alex Azar to allocate funds based on need by providing $30,000 per every occupied bed in "hot spots" like New York and Detroit, and $25,000 per bed to every other hospital.
"In addition, all types of hospitals, including rural and urban short-term acute-care, long-term care and critical access hospitals, as well as inpatient rehabilitation and inpatient psychiatric facilities, are incurring expenses related to COVID-19 as they work to treat patients and expand the capacity of the health care system," the organization said. "Thus, all types of hospitals must be eligible for funds."
Fox told The Post that even this massive expenditure would only "take care of April."
Asked how much he believed hospitals needed to ride out the crisis, he replied, "tell me how long the virus lasts, and I can answer that."
The uncertainty has left many health workers, who have been accurately praised as heroes during the crisis, stuck in limbo. Colby Pacheco, a contract nurse in Oklahoma, said he was considering traveling to a hotspot to find work as he faces a potential furlough.
"It's a weird position to be in as a nurse, not knowing if you'll have a job during a pandemic," Pacheco told ABC News. "I just hope big business doesn't get in the way of nurses doing their jobs and helping people."
How The Federal Reserve Is Bailing Out Big Corporations And Wall Street Banks
Panicked by Trump’s Crashing Economy, the Central Bank Is ‘Money Washing’ Billions of Dollars Worth of Junk Company Bonds
By Erik Sherman - dc report
4/13/2020
Money laundering is a dirty word. Shady characters move illicit wealth to make it look legitimately gained. Think “Breaking Bad,” but for embezzlers, extortionists and tax evaders as well as drug traffickers.
Regulators, mostly in the United States, fined large banks almost $10 billion over a recent 15-month period for violating anti-money laundering rules.
Now we’re seeing a new kind of activity involving hiding the real value of money held not in greenbacks but in the usually more durable paper known as corporate bonds. In the end, you will almost certainly pay the price as your 401(k) or other retirement or investment account gets dinged and perhaps deeply gouged for the immediate benefit of big Wall Street clients.
Now, think of a variation of money laundering that we’ll call money washing. Instead of trying to cleanse away criminality, money washing removes a kind of financial dirt that reduces the value of corporate bonds just like dirt reduces the value of most other things.
Unlike money laundering, this new technique is perfectly legal.
Pretend that last year you bought a single bond from a company with a sterling financial record. You paid $1,000 and expected to collect interest for 20 years and then get your $1,000 back.
Then, the coronavirus came this year and the company’s revenues have shriveled. The likelihood that you will ever get your full $1,000 back, let alone all the interest payments, has gone from near certainty to highly unlikely.
A Money-Back Guarantee
You could sell your bond but, understandably, buyers won’t give you $1,000 for it. Whether you get a discounted price of $990 or $900 or just $90 will depend on how Wall Street traders rate the chance of recouping the interest and principal from the company.
Now, a buyer comes along willing to pay you the full $1,000. If you’re smart, you sell the bond, take the cash and run.
If you were not just smart but big enough and rich enough, you’d buy all the bonds you could at those discounted prices, sell them to this generous (or crazy) buyer at $1,000 each and turn a quick guaranteed profit.
While you don’t have the money to buy up millions of these distressed bonds, Wall Street does.
Ladies and gentlemen meet this generous (or crazy) bond buyer: The Federal Reserve.
The Fed has been visibly panicked by the economy plummeting.
‘Investment-Grade’ vs. Junk
Since March 23, the central bank has been buying high-grade corporate bonds issued by companies with a solid history of paying their debts. Think household brand names.
Fed purchases of those quality bonds inject dollars into the economy. That provides banks, businesses and pension plans with cash to pay to employees, retirees and vendors. This bond-buying spree is officially unlimited. It will be multiples of the Fed’s bond purchases in the depths of the Great Recession just a few years ago.
The Fed did restrict the exchange of corporate bonds at their full face value for dollars to what’s known as investment-grade debt. Investment grade means the face value of the bond and the interest are likely to be paid on time and in full.
Last week, the Fed did what was previously unthinkable. It started buying bonds now worth far less than they were just weeks ago—some of the riskiest corporate debt in existence. It started buying junk.
Fallen Angels
When investment-grade companies get into trouble their credit ratings drop—as happened with the likes of Ford, Macy’s, and The Gap as sales collapsed due to the coronavirus. Companies in this situation are called “fallen angels.” These once sound companies—which suffer in part from bad past decisions like overexpansion and highly leveraged acquisitions—find themselves in need of raising money just when their borrowing costs increase because lenders demand higher interest rates. That’s a prescription for unhealthy finances.
When corporate credit ratings fall, the bonds these companies issued in the past start to trade at lower prices because of the increased risk that bondholders will not be paid off in full.
So, what happened when the Fed said on Thursday that it would pay good money for risky bonds? Deeply discounted Ford bonds jumped 22% overnight by midday Friday. Other junk debt suddenly rose in value, too, as savvy Wall Streeters cashed in by buying bonds cheap and selling them at their much higher face value.
Legal Loan Sharking
While once-solid bonds issued by companies like Ford have fallen to junk status, there also exists a market for risky corporate debt on the day that bonds are sold. In personal deals, we call such lenders loan sharks and make their activity a crime. In the corporate world, however, we call the sellers of these risky loans investment banks and declare it legal.
Because junk bonds are sold with a significant chance of never being repaid in full, buyers insist on high rates of interest. Junk bonds are currently yielding investors more than 8% annually compared with as little as 2% on the most trustworthy corporate debt and less than 1% for some U.S. government debt.
Junk bonds were popularized in the 1980s by Michael Milken, the financial manipulator who went to prison after he confessed to six securities fraud charges. The companies that turned to Milken to sell their junk bonds were seen by banks as unworthy of loans.
Junk bonds financed Donald Trump’s brief and personally lucrative rise in the Atlantic City casino business. He walked away with hundreds of millions while buyers of Trump’s junk bonds lost their shirts. Trump’s worst bonds were sold in 1990 by Merrill Lynch, now part of Bank of America.
Many Hazards
Maybe this Fed move to swap damaged paper for clean cash is necessary to stave off a Great Depression 2.0. But it has predictable consequences.
One is that corporations and high net-worth individuals, who are supposed to understand the risks they take, escape the consequences for their decisions. That’s a form of socialism for the rich and corporations, but it’s also the smallest problem.
Next is “moral hazard.” When companies get bailed out, they began figuring they can keep doing what they’ve always done, even if dangerous and risky. This encourages more and worse risky behavior instead of prudence.
“As painful as failure and recessions are, we keep putting bigger and bigger band-aids on our problems, expecting them to change,” says Craig Kirsner, president of Stuart Estate Planning Wealth Advisors in South Florida. “When will we learn?”
Given past performance, apparently never.
‘Fictional Value’
Another problem is that ordinary investors will have no idea what their investments are worth without Fed props. “It’s fictional value,” says Allen Sukholitsky, chief macro strategist for Xallarap Advisory in New York. “It’s not fact-based.”
That problem worsens as the props may not stop. Like a junkie needing larger doses of a drug to get high, markets will require ongoing and larger intervention for satisfaction. The result is a dilemma because market capitalism depends on reliable price information.
Price is crucial to a market economy as opposed to one run by the government, as in the old Soviet system. While people have an idea of what a gallon of gas or milk or distilled water costs from experience, without deep education in finance and accounting they have no independent way to value the stocks, bonds and other financial investments in an era of self-managed retirement savings.
This Fed interference with market prices infects more than bonds. Sukholitsky noted that you might eventually see higher prices at the grocery store in the future. As the Fed artificially inflates the value of assets like troubled corporate bonds, there’s additional perceived money to pay for products so sellers raise prices to capture more of the value.
The ultimate irony is the wealthy regularly lecture those who aren’t about responsibility and actions having consequences while getting their own bailouts.
This is a real American exceptionalism: Everyone wants their own exceptions, but only the select get exceptional Fed favors.
Regulators, mostly in the United States, fined large banks almost $10 billion over a recent 15-month period for violating anti-money laundering rules.
Now we’re seeing a new kind of activity involving hiding the real value of money held not in greenbacks but in the usually more durable paper known as corporate bonds. In the end, you will almost certainly pay the price as your 401(k) or other retirement or investment account gets dinged and perhaps deeply gouged for the immediate benefit of big Wall Street clients.
Now, think of a variation of money laundering that we’ll call money washing. Instead of trying to cleanse away criminality, money washing removes a kind of financial dirt that reduces the value of corporate bonds just like dirt reduces the value of most other things.
Unlike money laundering, this new technique is perfectly legal.
Pretend that last year you bought a single bond from a company with a sterling financial record. You paid $1,000 and expected to collect interest for 20 years and then get your $1,000 back.
Then, the coronavirus came this year and the company’s revenues have shriveled. The likelihood that you will ever get your full $1,000 back, let alone all the interest payments, has gone from near certainty to highly unlikely.
A Money-Back Guarantee
You could sell your bond but, understandably, buyers won’t give you $1,000 for it. Whether you get a discounted price of $990 or $900 or just $90 will depend on how Wall Street traders rate the chance of recouping the interest and principal from the company.
Now, a buyer comes along willing to pay you the full $1,000. If you’re smart, you sell the bond, take the cash and run.
If you were not just smart but big enough and rich enough, you’d buy all the bonds you could at those discounted prices, sell them to this generous (or crazy) buyer at $1,000 each and turn a quick guaranteed profit.
While you don’t have the money to buy up millions of these distressed bonds, Wall Street does.
Ladies and gentlemen meet this generous (or crazy) bond buyer: The Federal Reserve.
The Fed has been visibly panicked by the economy plummeting.
‘Investment-Grade’ vs. Junk
Since March 23, the central bank has been buying high-grade corporate bonds issued by companies with a solid history of paying their debts. Think household brand names.
Fed purchases of those quality bonds inject dollars into the economy. That provides banks, businesses and pension plans with cash to pay to employees, retirees and vendors. This bond-buying spree is officially unlimited. It will be multiples of the Fed’s bond purchases in the depths of the Great Recession just a few years ago.
The Fed did restrict the exchange of corporate bonds at their full face value for dollars to what’s known as investment-grade debt. Investment grade means the face value of the bond and the interest are likely to be paid on time and in full.
Last week, the Fed did what was previously unthinkable. It started buying bonds now worth far less than they were just weeks ago—some of the riskiest corporate debt in existence. It started buying junk.
Fallen Angels
When investment-grade companies get into trouble their credit ratings drop—as happened with the likes of Ford, Macy’s, and The Gap as sales collapsed due to the coronavirus. Companies in this situation are called “fallen angels.” These once sound companies—which suffer in part from bad past decisions like overexpansion and highly leveraged acquisitions—find themselves in need of raising money just when their borrowing costs increase because lenders demand higher interest rates. That’s a prescription for unhealthy finances.
When corporate credit ratings fall, the bonds these companies issued in the past start to trade at lower prices because of the increased risk that bondholders will not be paid off in full.
So, what happened when the Fed said on Thursday that it would pay good money for risky bonds? Deeply discounted Ford bonds jumped 22% overnight by midday Friday. Other junk debt suddenly rose in value, too, as savvy Wall Streeters cashed in by buying bonds cheap and selling them at their much higher face value.
Legal Loan Sharking
While once-solid bonds issued by companies like Ford have fallen to junk status, there also exists a market for risky corporate debt on the day that bonds are sold. In personal deals, we call such lenders loan sharks and make their activity a crime. In the corporate world, however, we call the sellers of these risky loans investment banks and declare it legal.
Because junk bonds are sold with a significant chance of never being repaid in full, buyers insist on high rates of interest. Junk bonds are currently yielding investors more than 8% annually compared with as little as 2% on the most trustworthy corporate debt and less than 1% for some U.S. government debt.
Junk bonds were popularized in the 1980s by Michael Milken, the financial manipulator who went to prison after he confessed to six securities fraud charges. The companies that turned to Milken to sell their junk bonds were seen by banks as unworthy of loans.
Junk bonds financed Donald Trump’s brief and personally lucrative rise in the Atlantic City casino business. He walked away with hundreds of millions while buyers of Trump’s junk bonds lost their shirts. Trump’s worst bonds were sold in 1990 by Merrill Lynch, now part of Bank of America.
Many Hazards
Maybe this Fed move to swap damaged paper for clean cash is necessary to stave off a Great Depression 2.0. But it has predictable consequences.
One is that corporations and high net-worth individuals, who are supposed to understand the risks they take, escape the consequences for their decisions. That’s a form of socialism for the rich and corporations, but it’s also the smallest problem.
Next is “moral hazard.” When companies get bailed out, they began figuring they can keep doing what they’ve always done, even if dangerous and risky. This encourages more and worse risky behavior instead of prudence.
“As painful as failure and recessions are, we keep putting bigger and bigger band-aids on our problems, expecting them to change,” says Craig Kirsner, president of Stuart Estate Planning Wealth Advisors in South Florida. “When will we learn?”
Given past performance, apparently never.
‘Fictional Value’
Another problem is that ordinary investors will have no idea what their investments are worth without Fed props. “It’s fictional value,” says Allen Sukholitsky, chief macro strategist for Xallarap Advisory in New York. “It’s not fact-based.”
That problem worsens as the props may not stop. Like a junkie needing larger doses of a drug to get high, markets will require ongoing and larger intervention for satisfaction. The result is a dilemma because market capitalism depends on reliable price information.
Price is crucial to a market economy as opposed to one run by the government, as in the old Soviet system. While people have an idea of what a gallon of gas or milk or distilled water costs from experience, without deep education in finance and accounting they have no independent way to value the stocks, bonds and other financial investments in an era of self-managed retirement savings.
This Fed interference with market prices infects more than bonds. Sukholitsky noted that you might eventually see higher prices at the grocery store in the future. As the Fed artificially inflates the value of assets like troubled corporate bonds, there’s additional perceived money to pay for products so sellers raise prices to capture more of the value.
The ultimate irony is the wealthy regularly lecture those who aren’t about responsibility and actions having consequences while getting their own bailouts.
This is a real American exceptionalism: Everyone wants their own exceptions, but only the select get exceptional Fed favors.
‘Who cares? Let ’em get wiped out’: Stunning CNBC anchor, venture capitalist says let hedge funds fail and save Main Street
April 10, 2020
By Jake Johnson, Common Dreams - raw story
“A hedge fund that serves a bunch of billionaire family offices? Who cares? They don’t get to summer in the Hamptons? Who cares!”
Venture capitalist Chamath Palihapitiya stunned CNBC anchor Scott Wapner and generated widespread applause on social media by declaring in a television interview Thursday that the U.S. government should let hedge funds and billionaire CEOs “get wiped out” by the coronavirus-induced economic collapse and instead focus its attention on rescuing Main Street.
“On Main Street today, people are getting wiped out. And right now, rich CEOs are not, boards that had horrible governance are not, hedge funds are not. People are.”
—Chamath Palihapitiya, CEO of Social Capital
When Wapner, seemingly incredulous at what he was hearing, asked Palihapitiya why he would support the collapse of large companies, the Social Capital CEO said “this is a lie that’s been purported by Wall Street.”
“When a company fails, it does not fire their employees, it goes through a packaged bankruptcy,” said Palihapitiya. “If anything what happens is the people who have the pensions inside the companies, the employees of these companies, end up owning more of the company. The people that get wiped out are the speculators that own the unsecured tranches of debt or the folks that own the equity. And by the way, those are the rules of the game. That’s right. These are the people that purport to be the most sophisticated investors in the world. They deserve to get wiped out.”
“Why does anybody ‘deserve,’ using your word, to get wiped out from a crisis created like this?” replied Wapner.
“Just be clear, like, who are we talking about?” said Palihapitiya, himself a billionaire. “A hedge fund that serves a bunch of billionaire family offices? Who cares? Let ’em get wiped out. Who cares? They don’t get to summer in the Hamptons? Who cares!”
After Wapner suggested it would be “immoral” to let any company get wiped out in the economic crisis, Palihapitiya responded that “on Main Street today, people are getting wiped out.”
“And right now, rich CEOs are not, boards that had horrible governance are not, hedge funds are not. People are,” said Palihapitiya. “Six million people just this week alone basically saying, ‘Holy mackerel, I don’t know how I’m going to make my own expenses for the next few weeks, days, months. So it’s happening today to individual Americans. And what we’ve done is disproportionately prop up and protect poor performing CEOs, companies, and boards. And you have to wash these people out.”
Palihapitiya’s interview quickly went viral on social media.
“This guy is great, hilarious, and right,” tweeted Matt Bruenig, founder of the People’s Policy Project, “though it is better to wipe them out through equity dilution (bailouts-for-equity) than through bankruptcy restructuring.”
Venture capitalist Chamath Palihapitiya stunned CNBC anchor Scott Wapner and generated widespread applause on social media by declaring in a television interview Thursday that the U.S. government should let hedge funds and billionaire CEOs “get wiped out” by the coronavirus-induced economic collapse and instead focus its attention on rescuing Main Street.
“On Main Street today, people are getting wiped out. And right now, rich CEOs are not, boards that had horrible governance are not, hedge funds are not. People are.”
—Chamath Palihapitiya, CEO of Social Capital
When Wapner, seemingly incredulous at what he was hearing, asked Palihapitiya why he would support the collapse of large companies, the Social Capital CEO said “this is a lie that’s been purported by Wall Street.”
“When a company fails, it does not fire their employees, it goes through a packaged bankruptcy,” said Palihapitiya. “If anything what happens is the people who have the pensions inside the companies, the employees of these companies, end up owning more of the company. The people that get wiped out are the speculators that own the unsecured tranches of debt or the folks that own the equity. And by the way, those are the rules of the game. That’s right. These are the people that purport to be the most sophisticated investors in the world. They deserve to get wiped out.”
“Why does anybody ‘deserve,’ using your word, to get wiped out from a crisis created like this?” replied Wapner.
“Just be clear, like, who are we talking about?” said Palihapitiya, himself a billionaire. “A hedge fund that serves a bunch of billionaire family offices? Who cares? Let ’em get wiped out. Who cares? They don’t get to summer in the Hamptons? Who cares!”
After Wapner suggested it would be “immoral” to let any company get wiped out in the economic crisis, Palihapitiya responded that “on Main Street today, people are getting wiped out.”
“And right now, rich CEOs are not, boards that had horrible governance are not, hedge funds are not. People are,” said Palihapitiya. “Six million people just this week alone basically saying, ‘Holy mackerel, I don’t know how I’m going to make my own expenses for the next few weeks, days, months. So it’s happening today to individual Americans. And what we’ve done is disproportionately prop up and protect poor performing CEOs, companies, and boards. And you have to wash these people out.”
Palihapitiya’s interview quickly went viral on social media.
“This guy is great, hilarious, and right,” tweeted Matt Bruenig, founder of the People’s Policy Project, “though it is better to wipe them out through equity dilution (bailouts-for-equity) than through bankruptcy restructuring.”
CORONAVIRUS
Medical Staffing Companies Owned by Rich Investors Cut Doctor Pay and Now Want Bailout Money
Companies that employ emergency room medical personnel, many owned by private equity firms, say they are reeling from vanishing demand for non-coronavirus care. But critics worry that bailout money would be a windfall for rich investors.
by Isaac Arnsdorf - propublica
April 10, 10:40 a.m. EDT
Medical staffing companies — some of which are owned by some of the country’s richest investors and have been cutting pay for doctors on the front lines of the coronavirus pandemic — are seeking government bailout money.
Private equity firms have increasingly bought up doctors’ practices that contract with hospitals to staff emergency rooms and other departments. These staffing companies say the coronavirus pandemic is, counterintuitively, bad for business because most everyone who isn’t critically ill with COVID-19 is avoiding the ER. The companies have responded with pay cuts, reduced hours and furloughs for doctors.
Emergency room visits across the country have fallen roughly 30%, and the patients who are coming tend to be sicker and costlier to treat, the American College of Emergency Physicians said in an April 3 letter to Health and Human Services Secretary Alex Azar. The professional group asked the Trump administration to provide $3.6 billion of aid to emergency physician practices.
“Without immediate federal financial resources and support separate from what is provided to hospitals, fewer emergency physicians will be left to care for patients, a shortfall which will only be further exacerbated as they try to make preparations for the COVID-19 surge,” the organization said in the letter.
The American College of Emergency Physicians’ 38,000 members include employees of large staffing firms as well as academic medical centers and small doctor-owned practice groups. The letter was signed by the group’s president, William P. Jaquis, whose day job is as a senior vice president at Envision Healthcare, a top staffing firm owned by private equity giant KKR.
Envision, which has 27,000 clinicians, said it’s cutting doctors’ pay in areas that are seeing fewer patients, as well as delaying bonuses and profit-sharing, retirement contributions, raises and promotions. The company also cut senior executives’ salaries in half and will impose pay cuts or furloughs for nonclinical employees. However, Envision said that it’s adding doctors in hard-hit New York and other coronavirus hot spots.
“Where they lose their normal billing revenue, medical groups are losing money. Where medical groups are losing money, they have to reduce salaries and furlough workers,” Envision CEO Jim Rechtin said in a statement. “Unfortunately, we are no different.”
KKR didn’t respond to requests for comment. Co-founders Henry Kravis and George Roberts said they’ll donate $50 million to first responders and health workers, as well as forgoing bonuses and the rest of their salaries for the year, Forbes reported. Forbes estimates Kravis’ wealth at $5.6 billion and Roberts’ at $5.8 billion.
Before the pandemic, Envision made a lucrative business out of buying practice groups in specialties where patients don’t choose their provider, such as ER physicians and anesthesiologists, according to Dr. Marty Makary, a surgical oncologist at Johns Hopkins Medicine who studies health care costs. Envision could then charge patients high prices for out-of-network care, a practice known as “surprise billing.” The model was profitable until a public backlash led lawmakers to investigate the practice, according to Makary.
“Private equity consolidated large physician groups in an unprecedented financial gamble using capital and banking on revenue not skipping a beat,” Makary said. “When the investment model works, investors get rich. When the investment goes sour, who bears the risk? As in the mortgage crisis of 2008, taxpayers are bearing the risk of financial gambles of investors.”
Envision won’t send surprise bills to COVID-19 patients, the company said; patients will be responsible only for in-network copays.
Health insurance companies, which are often at odds with doctors and staffing companies over payment disputes, have said they support government aid to hospitals and doctors, but they specified that relief should go to “small and independent practices.” A lobbying group representing insurers and business groups raised concerns about the potential for investors to benefit from the emergency physicians’ request for $3.6 billion.
“We need to do everything to support health care workers on the frontlines of this pandemic, and we want to make sure they get the resources they need to care for patients and protect themselves,” the Coalition Against Surprise Medical Billing said in a statement to ProPublica. “At the same time, federal funds should not be used to bail out private equity firms during a public health emergency, especially when there are no federal surprise billing protections in place to protect consumers at their most vulnerable.”
The top lobbyist for the American College of Emergency Physicians, Laura Wooster, warned that efforts to single out companies with rich backers could catch patients in the crossfire. “If you start trying to parse big or small, independent or not, it’s going to get messy really quickly,” Wooster said in an interview. “This isn’t the time to figure out too late that unintended consequences left a rural emergency department understaffed because it happened to be staffed by one of the bigger groups.”
Wooster noted that it’s not only big private equity-backed staffing firms that are hurting, and she provided data from small practice groups that are also losing business and scaling back. She said she couldn’t commit to conditions on receiving aid — such as restricting “surprise billing,” investor payouts or executive bonuses — without seeing how the terms are structured. She said the administration hasn’t offered a proposal at that level of detail nor asked for one.
Katy Talento, a health adviser to President Donald Trump from 2017 to 2019, offered a different view. “If they’re private equity-owned, I have no sympathy, and I don’t think any patient out there struggling paycheck to paycheck — if they have a paycheck — is remotely interested in the crocodile tears of private equity firms and their revenue losses,” she said. “We have to target rescue funds to the hardest-hit areas, and emergency physicians are not the hardest-hit target of our charity.”
The administration hasn’t said much about how it plans to distribute a $100 billion fund for health care providers that was part of the $2 trillion coronavirus stimulus package. Last Friday, Azar said “a portion” of the money would reimburse hospitals for caring for uninsured patients. He said providers would get paid at Medicare rates and prohibited from billing patients beyond that.
Lawmakers have spent months working on legislation to address surprise billing, attempting to accommodate the interests of patients, doctors and insurers. Medical staffing companies including Envision launched attack ads against some proposals but agreed to a provider-friendly bill advanced by Sen. Bill Cassidy, R-La. (who is a gastroenterologist). A bipartisan compromise failed to make it into the December spending deal because of a turf war between congressional committees. Lawmakers briefly considered reviving the compromise as part of the coronavirus stimulus package but didn’t want to slow down getting relief into the economy quickly, according to congressional aides.
Medical staffing companies said they have benefited from tax relief and advance Medicare payments included in the stimulus package. Still, Envision and other private equity-backed staffing firms have swiftly responded to lost income by cutting pay and hours for doctors.
One Envision anesthesiologist in the mid-Atlantic region said his base salary was cut by 30% even as he’s being asked to intubate COVID-19 patients — a procedure that puts providers at high risk of exposure to the virus.
“My hope in any type of bailout going toward health care providers is it should go to them,” said the anesthesiologist, who spoke on the condition of anonymity for fear of losing his job. “It should not be going toward rewarding executives or shareholder profits. Anybody actually coming in physical contact is taking all the risk, so that’s where the relief should be going.”
Private equity firms have increasingly bought up doctors’ practices that contract with hospitals to staff emergency rooms and other departments. These staffing companies say the coronavirus pandemic is, counterintuitively, bad for business because most everyone who isn’t critically ill with COVID-19 is avoiding the ER. The companies have responded with pay cuts, reduced hours and furloughs for doctors.
Emergency room visits across the country have fallen roughly 30%, and the patients who are coming tend to be sicker and costlier to treat, the American College of Emergency Physicians said in an April 3 letter to Health and Human Services Secretary Alex Azar. The professional group asked the Trump administration to provide $3.6 billion of aid to emergency physician practices.
“Without immediate federal financial resources and support separate from what is provided to hospitals, fewer emergency physicians will be left to care for patients, a shortfall which will only be further exacerbated as they try to make preparations for the COVID-19 surge,” the organization said in the letter.
The American College of Emergency Physicians’ 38,000 members include employees of large staffing firms as well as academic medical centers and small doctor-owned practice groups. The letter was signed by the group’s president, William P. Jaquis, whose day job is as a senior vice president at Envision Healthcare, a top staffing firm owned by private equity giant KKR.
Envision, which has 27,000 clinicians, said it’s cutting doctors’ pay in areas that are seeing fewer patients, as well as delaying bonuses and profit-sharing, retirement contributions, raises and promotions. The company also cut senior executives’ salaries in half and will impose pay cuts or furloughs for nonclinical employees. However, Envision said that it’s adding doctors in hard-hit New York and other coronavirus hot spots.
“Where they lose their normal billing revenue, medical groups are losing money. Where medical groups are losing money, they have to reduce salaries and furlough workers,” Envision CEO Jim Rechtin said in a statement. “Unfortunately, we are no different.”
KKR didn’t respond to requests for comment. Co-founders Henry Kravis and George Roberts said they’ll donate $50 million to first responders and health workers, as well as forgoing bonuses and the rest of their salaries for the year, Forbes reported. Forbes estimates Kravis’ wealth at $5.6 billion and Roberts’ at $5.8 billion.
Before the pandemic, Envision made a lucrative business out of buying practice groups in specialties where patients don’t choose their provider, such as ER physicians and anesthesiologists, according to Dr. Marty Makary, a surgical oncologist at Johns Hopkins Medicine who studies health care costs. Envision could then charge patients high prices for out-of-network care, a practice known as “surprise billing.” The model was profitable until a public backlash led lawmakers to investigate the practice, according to Makary.
“Private equity consolidated large physician groups in an unprecedented financial gamble using capital and banking on revenue not skipping a beat,” Makary said. “When the investment model works, investors get rich. When the investment goes sour, who bears the risk? As in the mortgage crisis of 2008, taxpayers are bearing the risk of financial gambles of investors.”
Envision won’t send surprise bills to COVID-19 patients, the company said; patients will be responsible only for in-network copays.
Health insurance companies, which are often at odds with doctors and staffing companies over payment disputes, have said they support government aid to hospitals and doctors, but they specified that relief should go to “small and independent practices.” A lobbying group representing insurers and business groups raised concerns about the potential for investors to benefit from the emergency physicians’ request for $3.6 billion.
“We need to do everything to support health care workers on the frontlines of this pandemic, and we want to make sure they get the resources they need to care for patients and protect themselves,” the Coalition Against Surprise Medical Billing said in a statement to ProPublica. “At the same time, federal funds should not be used to bail out private equity firms during a public health emergency, especially when there are no federal surprise billing protections in place to protect consumers at their most vulnerable.”
The top lobbyist for the American College of Emergency Physicians, Laura Wooster, warned that efforts to single out companies with rich backers could catch patients in the crossfire. “If you start trying to parse big or small, independent or not, it’s going to get messy really quickly,” Wooster said in an interview. “This isn’t the time to figure out too late that unintended consequences left a rural emergency department understaffed because it happened to be staffed by one of the bigger groups.”
Wooster noted that it’s not only big private equity-backed staffing firms that are hurting, and she provided data from small practice groups that are also losing business and scaling back. She said she couldn’t commit to conditions on receiving aid — such as restricting “surprise billing,” investor payouts or executive bonuses — without seeing how the terms are structured. She said the administration hasn’t offered a proposal at that level of detail nor asked for one.
Katy Talento, a health adviser to President Donald Trump from 2017 to 2019, offered a different view. “If they’re private equity-owned, I have no sympathy, and I don’t think any patient out there struggling paycheck to paycheck — if they have a paycheck — is remotely interested in the crocodile tears of private equity firms and their revenue losses,” she said. “We have to target rescue funds to the hardest-hit areas, and emergency physicians are not the hardest-hit target of our charity.”
The administration hasn’t said much about how it plans to distribute a $100 billion fund for health care providers that was part of the $2 trillion coronavirus stimulus package. Last Friday, Azar said “a portion” of the money would reimburse hospitals for caring for uninsured patients. He said providers would get paid at Medicare rates and prohibited from billing patients beyond that.
Lawmakers have spent months working on legislation to address surprise billing, attempting to accommodate the interests of patients, doctors and insurers. Medical staffing companies including Envision launched attack ads against some proposals but agreed to a provider-friendly bill advanced by Sen. Bill Cassidy, R-La. (who is a gastroenterologist). A bipartisan compromise failed to make it into the December spending deal because of a turf war between congressional committees. Lawmakers briefly considered reviving the compromise as part of the coronavirus stimulus package but didn’t want to slow down getting relief into the economy quickly, according to congressional aides.
Medical staffing companies said they have benefited from tax relief and advance Medicare payments included in the stimulus package. Still, Envision and other private equity-backed staffing firms have swiftly responded to lost income by cutting pay and hours for doctors.
One Envision anesthesiologist in the mid-Atlantic region said his base salary was cut by 30% even as he’s being asked to intubate COVID-19 patients — a procedure that puts providers at high risk of exposure to the virus.
“My hope in any type of bailout going toward health care providers is it should go to them,” said the anesthesiologist, who spoke on the condition of anonymity for fear of losing his job. “It should not be going toward rewarding executives or shareholder profits. Anybody actually coming in physical contact is taking all the risk, so that’s where the relief should be going.”
the bloodsuckers and surprise medical billing!!!
How Private-Equity Firms Squeeze Hospital Patients for Profits
“As sick people come to hospital E.R.s, and as they are admitted to hospitals, we can expect the number of people getting surprise medical bills to explode,” she said. “Our representatives in Congress really need to get their act together.”
By Sheelah Kolhatkar - the new yorker
April 9, 2020
...Outrage over surprise billing transcended partisan lines. A poll conducted by the Kaiser Family Foundation indicated that more than seventy-five per cent of the public wanted the government to do something to prevent it. Congress members starting hearing complaints from their constituents. In early May, 2019, even President Trump expressed a desire to address the practice, saying during a speech, “We are determined to end surprise medical billing.” That July, Democrats and Republicans in the House Energy and Commerce Committee introduced a bill, called the No Surprises Act, that would require medical providers to give patients twenty-four hours’ notice if they were going to be treated by a medical provider who was outside their insurance network, and would create a benchmark to restrict how far above the median price out-of-network providers could charge. In June, senators had introduced a similar bill, called the Lower Health Care Costs Act, which included an arbitration provision that would help manage disputes over how much out-of-network providers would be permitted to charge. One of the bill’s sponsors, Lamar Alexander, Republican of Tennessee, had been contacted by a father in Knoxville who had taken his son to an emergency room after a bicycle accident; the father paid a hundred-and-fifty-dollar co-pay but later received a bill for eighteen hundred dollars from the doctor, who was out of network.
The legislation seemed sure to pass. But, soon after the Senate version was introduced, a barrage of television ads criticizing the bills appeared across the country. The ads were slickly produced and ominous-sounding; they described the bills as “government rate-setting” that was likely to shutter hospitals and endanger lives. In one, a pair of emergency responders rush a bloody sixteen-year-old strapped to a gurney through the doors of a hospital, only to find that it has closed. Some highlighted the profits that insurance companies made in 2018—in the billions of dollars—and suggested that these companies were responsible for the surprise bills, and that they should be the ones to face increased regulation. At the same time, mailers were sent to people’s homes, and hundreds of thousands of dollars’ worth of ads appeared on Facebook. The ads all urged people to tell their representatives in Congress to vote against the bills. The campaign was paid for by an organization called Doctor Patient Unity, which was classified as a dark-money group and did not disclose its staff or where it got its money.
Eileen Appelbaum, an economist, had been following the saga, and thought she knew who might be behind the ads. Appelbaum has hazel eyes and speaks with passion about the intricacies of financial engineering. She taught for many years at Rutgers University and is now the co-director of the Center for Economic and Policy Research, a Washington, D.C., economic-policy think tank. Much of her research has focussed on the ways that private-equity firms—investment funds that purchase companies and try to increase their profitability—reshape the businesses that they buy. Appelbaum and her frequent collaborator, Rosemary Batt, a management and labor-relations expert at Cornell University, were in the midst of a research project looking at the role of private equity in health care. They knew that two of the largest private-equity firms, Blackstone and K.K.R., owned Envision Healthcare and TeamHealth, large physician groups that staff hospitals around the country with doctors; they found that bills from doctors within those groups were responsible for much of the sudden increase in surprise medical bills. (A spokesperson from TeamHealth said that the company does not send out-of-network charges directly to patients, but litigates them with insurance companies. A spokesperson from Envision Healthcare declined to comment.) “We already knew a lot about P.E. buying up doctors’ practices,” Appelbaum told me recently. “Now surprise medical bills were out of sight. That’s their business model.” Appelbaum suspected that the P.E. companies were behind the practice, as well as behind the ad campaign to stop the legislation.
Appelbaum grew up in Philadelphia, where her father ran an appliance store. Neither of her parents had gone to college; Appelbaum earned a master’s in mathematics and a Ph.D. in economics from the University of Pennsylvania. Her research centered on the relationship between workers and a company’s management. When Appelbaum started out, the prevailing view was that companies could make themselves more productive by investing in their workers. In the nineteen-nineties, she and Batt undertook a study and found that, for example, giving workers more decision-making authority over how work got done led to increased company profits.
The book that they produced from this research, “The New American Workplace,” was published in 1993. But in the years after, the thinking in the business world shifted. A newly dominant business philosophy, called “shareholder value theory,” held that companies exist primarily to deliver profits to their shareholders, and that managers should increase revenue and cut costs, with little regard for the long-term effects. Appelbaum and Batt saw this playing out in the real world. In many cases, companies were sending work to other countries where labor costs were lower. In others, they were practicing “domestic outsourcing”: subcontracting out parts of their businesses to other U.S.-based companies, to run their accounting departments, corporate cafeterias, or janitorial services, among others, rather than employing those workers directly. “They moved away from the idea of, How do we make our current workforce more productive? and to, How do we move workers off our payroll and onto a contract company? And then they can do whatever they want with the workers,” Appelbaum said. “And, if you’re a contract company, how do you get the contract? By being the lowest bidder. You’re at rock bottom, offering just barely enough to attract any workers at all.”
Appelbaum and Batt found that the pressure for these practices seemed to be coming from Wall Street analysts and shareholders. “People had a very old view of what the corporation was, as a kind of stand-alone, publicly traded entity, free to make decisions on its own,” Batt told me. “We understood globalization, deregulation, and labor markets, but we didn’t understand capital markets. There was this big hole in the academic research.” The 2008 financial crisis made the issue seem even more pressing, and they decided to focus their research on private-equity funds. “You needed to look at the most extreme example if you wanted to understand the idea,” she said. They endeavored to write a book about private equity aimed at people who dealt with labor issues, including union leaders, who often didn’t realize that, when they were negotiating with corporations over contracts and working conditions, the managers of private-equity firms were actually pulling the strings.
---
Appelbaum and Batt found that private-equity firms often engaged in financial maneuvers that brought them profits but weakened their target companies. Firms usually borrowed heavily to finance takeovers; the new debt was put on the books of whatever company was being purchased, and that company was responsible for making the interest payments. The firms sometimes used a strategy called “dividend recapitalization,” in which the target company borrows even more money and uses it to pay “dividends” to the private-equity owners. The target company was also often made to pay fees to its private-equity owners for consulting and other services. These strategies meant that the investors made returns right away, but they increased the debt load on companies that were often already heavily in debt. In 2005, for example, Toys R Us was taken over by K.K.R., Bain Capital, and Vornado Realty Trust, which put five billion dollars of debt on the company’s books to finance the takeover. In 2017, the company posted eleven billion dollars in sales, but much of that had to go toward interest payments on loans. In September of that year, Toys R Us filed for bankruptcy, went into liquidation, closed hundreds of stores, and laid off thirty-three thousand workers.
Appelbaum and Batt tried to acknowledge when they felt that private equity played a positive role—for example, when P.E. firms took over small companies that didn’t have access to more traditional business loans and helped them grow. Over all, though, they concluded that the firms encouraged short-term thinking that damaged industries. They found that the method that the firms used to report their returns also made them sound better than they actually were. The firms then used the inflated projections to pitch themselves to pension funds, which invest money for workers. Teachers, police officers, and firefighters all ended up providing capital to funds that were implementing layoffs or sending jobs overseas.[...]
The legislation seemed sure to pass. But, soon after the Senate version was introduced, a barrage of television ads criticizing the bills appeared across the country. The ads were slickly produced and ominous-sounding; they described the bills as “government rate-setting” that was likely to shutter hospitals and endanger lives. In one, a pair of emergency responders rush a bloody sixteen-year-old strapped to a gurney through the doors of a hospital, only to find that it has closed. Some highlighted the profits that insurance companies made in 2018—in the billions of dollars—and suggested that these companies were responsible for the surprise bills, and that they should be the ones to face increased regulation. At the same time, mailers were sent to people’s homes, and hundreds of thousands of dollars’ worth of ads appeared on Facebook. The ads all urged people to tell their representatives in Congress to vote against the bills. The campaign was paid for by an organization called Doctor Patient Unity, which was classified as a dark-money group and did not disclose its staff or where it got its money.
Eileen Appelbaum, an economist, had been following the saga, and thought she knew who might be behind the ads. Appelbaum has hazel eyes and speaks with passion about the intricacies of financial engineering. She taught for many years at Rutgers University and is now the co-director of the Center for Economic and Policy Research, a Washington, D.C., economic-policy think tank. Much of her research has focussed on the ways that private-equity firms—investment funds that purchase companies and try to increase their profitability—reshape the businesses that they buy. Appelbaum and her frequent collaborator, Rosemary Batt, a management and labor-relations expert at Cornell University, were in the midst of a research project looking at the role of private equity in health care. They knew that two of the largest private-equity firms, Blackstone and K.K.R., owned Envision Healthcare and TeamHealth, large physician groups that staff hospitals around the country with doctors; they found that bills from doctors within those groups were responsible for much of the sudden increase in surprise medical bills. (A spokesperson from TeamHealth said that the company does not send out-of-network charges directly to patients, but litigates them with insurance companies. A spokesperson from Envision Healthcare declined to comment.) “We already knew a lot about P.E. buying up doctors’ practices,” Appelbaum told me recently. “Now surprise medical bills were out of sight. That’s their business model.” Appelbaum suspected that the P.E. companies were behind the practice, as well as behind the ad campaign to stop the legislation.
Appelbaum grew up in Philadelphia, where her father ran an appliance store. Neither of her parents had gone to college; Appelbaum earned a master’s in mathematics and a Ph.D. in economics from the University of Pennsylvania. Her research centered on the relationship between workers and a company’s management. When Appelbaum started out, the prevailing view was that companies could make themselves more productive by investing in their workers. In the nineteen-nineties, she and Batt undertook a study and found that, for example, giving workers more decision-making authority over how work got done led to increased company profits.
The book that they produced from this research, “The New American Workplace,” was published in 1993. But in the years after, the thinking in the business world shifted. A newly dominant business philosophy, called “shareholder value theory,” held that companies exist primarily to deliver profits to their shareholders, and that managers should increase revenue and cut costs, with little regard for the long-term effects. Appelbaum and Batt saw this playing out in the real world. In many cases, companies were sending work to other countries where labor costs were lower. In others, they were practicing “domestic outsourcing”: subcontracting out parts of their businesses to other U.S.-based companies, to run their accounting departments, corporate cafeterias, or janitorial services, among others, rather than employing those workers directly. “They moved away from the idea of, How do we make our current workforce more productive? and to, How do we move workers off our payroll and onto a contract company? And then they can do whatever they want with the workers,” Appelbaum said. “And, if you’re a contract company, how do you get the contract? By being the lowest bidder. You’re at rock bottom, offering just barely enough to attract any workers at all.”
Appelbaum and Batt found that the pressure for these practices seemed to be coming from Wall Street analysts and shareholders. “People had a very old view of what the corporation was, as a kind of stand-alone, publicly traded entity, free to make decisions on its own,” Batt told me. “We understood globalization, deregulation, and labor markets, but we didn’t understand capital markets. There was this big hole in the academic research.” The 2008 financial crisis made the issue seem even more pressing, and they decided to focus their research on private-equity funds. “You needed to look at the most extreme example if you wanted to understand the idea,” she said. They endeavored to write a book about private equity aimed at people who dealt with labor issues, including union leaders, who often didn’t realize that, when they were negotiating with corporations over contracts and working conditions, the managers of private-equity firms were actually pulling the strings.
---
Appelbaum and Batt found that private-equity firms often engaged in financial maneuvers that brought them profits but weakened their target companies. Firms usually borrowed heavily to finance takeovers; the new debt was put on the books of whatever company was being purchased, and that company was responsible for making the interest payments. The firms sometimes used a strategy called “dividend recapitalization,” in which the target company borrows even more money and uses it to pay “dividends” to the private-equity owners. The target company was also often made to pay fees to its private-equity owners for consulting and other services. These strategies meant that the investors made returns right away, but they increased the debt load on companies that were often already heavily in debt. In 2005, for example, Toys R Us was taken over by K.K.R., Bain Capital, and Vornado Realty Trust, which put five billion dollars of debt on the company’s books to finance the takeover. In 2017, the company posted eleven billion dollars in sales, but much of that had to go toward interest payments on loans. In September of that year, Toys R Us filed for bankruptcy, went into liquidation, closed hundreds of stores, and laid off thirty-three thousand workers.
Appelbaum and Batt tried to acknowledge when they felt that private equity played a positive role—for example, when P.E. firms took over small companies that didn’t have access to more traditional business loans and helped them grow. Over all, though, they concluded that the firms encouraged short-term thinking that damaged industries. They found that the method that the firms used to report their returns also made them sound better than they actually were. The firms then used the inflated projections to pitch themselves to pension funds, which invest money for workers. Teachers, police officers, and firefighters all ended up providing capital to funds that were implementing layoffs or sending jobs overseas.[...]
dividend payouts vs workers, guess who losses!!!
U.S. companies criticized for cutting jobs rather than investor payouts
Alwyn Scott, Ross Kerber, Jessica DiNapoli, Rebecca Spalding - reuters
APRIL 8, 2020 / 7:37 AM
NEW YORK/BOSTON (Reuters) - U.S. companies laying off workers in response to the coronavirus pandemic but still paying dividends and buying back shares are drawing criticism from labor unions, pension fund advisers, lawmakers and corporate governance experts.
While most U.S. companies are scaling back payouts after a decade in which the amount of money paid to investors through buybacks and dividends more than tripled, some are maintaining their policies despite the economic pain.
Royal Caribbean Cruises Ltd (RCL.N), Halliburton Co (HAL.N), General Motors Co (GM.N) and McDonald’s Corp (MCD.N) have all laid off staff, cut their hours, or slashed salaries while maintaining payouts, according to a Reuters review of regulatory filings, company announcements and company officials.
“This is the time for large companies to try to help, for systemic reasons, to keep things flowing,” said Ken Bertsch, executive director of the Council of Institutional Investors. The council’s members include public pension funds and endowments that manage assets worth about $4 trillion.
Royal Caribbean, which has halted its cruises in response to the pandemic and borrowed to boost its liquidity to more than $3.6 billion, said it began laying off contract workers in mid-March, though the moves did not affect its full-time employees.
The company has not suspended its remaining $600 million share buyback program, which expires in May, or its dividend, which totaled $602 million last year and is set quarterly.
“We continue to take decisive actions to protect (our) financial and liquidity positions,” Royal Caribbean spokesman Jonathon Fishman said. He declined to comment specifically on the layoffs or shareholder payouts.
While Royal Caribbean’s rival Carnival Corp (CCL.N) has also laid off contract workers, it has suspended dividends and buybacks as it raised more than $6 billion in capital markets to weather the coronavirus storm.
UNEMPLOYMENT SURGE
Goldman Sachs analysts forecast this week that S&P 500 companies would cut dividends in 2020 by an average of 50% because of the fallout from the coronavirus pandemic.
For a graphic on S&P 500 shareholder payouts from 2009 to 2018, please click on: reut.rs/349G2JV
While there has been criticism of companies maintaining investor payouts, only those receiving financial support from the U.S. government under a $2.3 trillion stimulus package are obliged to suspend share buybacks.
Layoffs contributed to U.S. unemployment skyrocketing last month. Jobless claims topped 6.6 million in the week ended March 28 - double the record set the prior week and far above the previous record of 695,000 set in 1982.
Companies say job cuts are necessary to offset a plunge in revenue but their critics say they should consider turning off the spigots to shareholders before letting employees go.
“If companies are paying dividends and doing buybacks, they do not have to lay off workers,” said William Lazonick, a corporate governance expert at the University of Massachusetts.
Workers at franchised McDonald’s restaurants say they are getting fewer shifts since dining areas were closed in March, leaving only carry-out and drive-through services open.
Alma Ceballos, 31, who has worked at a franchised McDonald’s near San Francisco for 14 years, said she could not pay her rent after her schedule was cut to 16 hours from 40 and her husband, a janitor at Apple Inc’s (AAPL.O) Cupertino, California, campus was laid off.
McDonald’s, which has suspended buybacks but maintained its annual dividend, worth $3.6 billion in 2019, told Reuters its staffing and opening hours were not related to “making a choice between employees and dividends”.
About 95% of its U.S. restaurants are run by franchisees who decide staffing. McDonald’s said it was offering rent deferrals and other help to keep franchises open and employing workers.
“McDonald’s could commit to 30 days of income for all workers,” Mary Kay Henry, president of the labor union SEIU which has 2 million members, said in an interview with Reuters. “Corporations need to pay their fair share here.”
‘IT’S JUST WRONG’
General Motors has halted normal production in North America and temporarily reduced cash pay for salaried workers by 20%. It paid its first-quarter dividend on March 20 and has a month before declaring its next dividend, a spokeswoman said, adding that GM would assess economic conditions before deciding.
“Our focus in the near term is to protect the health of our employees and customers, ensure we have ample liquidity for a very wide range of scenarios, and implement austerity measures to preserve cash,” spokeswoman Lauren Langille said.
Oilfield services firm Halliburton furloughed about 3,500 workers in its Houston office starting on March 23, according to a letter sent to the Texas Workforce Commission obtained by Reuters. It has also cut 350 positions in Oklahoma.
Halliburton cited disruption from the coronavirus as well as plunging oil prices as the reason for the furlough. In March, it paid its first-quarter dividend to shareholders as planned.
A Halliburton spokeswoman declined to comment on the furlough and the company’s dividend policy.
Some of the companies laying off workers while still paying out shareholders, such as General Motors, signed an initiative last year from the Business Roundtable, a group of chief executives, pledging to make business decisions in the interest of employees and other stakeholders, not just shareholders.
Large asset managers such as BlackRock and Vanguard have cited managing “human capital” as a priority for companies in which they invest. Yet they have been reluctant to publicly press companies to avoid layoffs during the crisis.
Vanguard told Reuters it “recognizes the need for companies to exercise judgment and flexibility as they balance short- and long-term business considerations”.
BlackRock did not respond with a statement when contacted for comment.
“Profits should be shared with the workers who actually create them,” U.S. Senator Tammy Baldwin, a long-standing critic of share buybacks, told Reuters in an email.
“It’s just wrong for big corporations to reward the wealthy or top executives with more stock buybacks, while closing facilities and laying off workers.”
While most U.S. companies are scaling back payouts after a decade in which the amount of money paid to investors through buybacks and dividends more than tripled, some are maintaining their policies despite the economic pain.
Royal Caribbean Cruises Ltd (RCL.N), Halliburton Co (HAL.N), General Motors Co (GM.N) and McDonald’s Corp (MCD.N) have all laid off staff, cut their hours, or slashed salaries while maintaining payouts, according to a Reuters review of regulatory filings, company announcements and company officials.
“This is the time for large companies to try to help, for systemic reasons, to keep things flowing,” said Ken Bertsch, executive director of the Council of Institutional Investors. The council’s members include public pension funds and endowments that manage assets worth about $4 trillion.
Royal Caribbean, which has halted its cruises in response to the pandemic and borrowed to boost its liquidity to more than $3.6 billion, said it began laying off contract workers in mid-March, though the moves did not affect its full-time employees.
The company has not suspended its remaining $600 million share buyback program, which expires in May, or its dividend, which totaled $602 million last year and is set quarterly.
“We continue to take decisive actions to protect (our) financial and liquidity positions,” Royal Caribbean spokesman Jonathon Fishman said. He declined to comment specifically on the layoffs or shareholder payouts.
While Royal Caribbean’s rival Carnival Corp (CCL.N) has also laid off contract workers, it has suspended dividends and buybacks as it raised more than $6 billion in capital markets to weather the coronavirus storm.
UNEMPLOYMENT SURGE
Goldman Sachs analysts forecast this week that S&P 500 companies would cut dividends in 2020 by an average of 50% because of the fallout from the coronavirus pandemic.
For a graphic on S&P 500 shareholder payouts from 2009 to 2018, please click on: reut.rs/349G2JV
While there has been criticism of companies maintaining investor payouts, only those receiving financial support from the U.S. government under a $2.3 trillion stimulus package are obliged to suspend share buybacks.
Layoffs contributed to U.S. unemployment skyrocketing last month. Jobless claims topped 6.6 million in the week ended March 28 - double the record set the prior week and far above the previous record of 695,000 set in 1982.
Companies say job cuts are necessary to offset a plunge in revenue but their critics say they should consider turning off the spigots to shareholders before letting employees go.
“If companies are paying dividends and doing buybacks, they do not have to lay off workers,” said William Lazonick, a corporate governance expert at the University of Massachusetts.
Workers at franchised McDonald’s restaurants say they are getting fewer shifts since dining areas were closed in March, leaving only carry-out and drive-through services open.
Alma Ceballos, 31, who has worked at a franchised McDonald’s near San Francisco for 14 years, said she could not pay her rent after her schedule was cut to 16 hours from 40 and her husband, a janitor at Apple Inc’s (AAPL.O) Cupertino, California, campus was laid off.
McDonald’s, which has suspended buybacks but maintained its annual dividend, worth $3.6 billion in 2019, told Reuters its staffing and opening hours were not related to “making a choice between employees and dividends”.
About 95% of its U.S. restaurants are run by franchisees who decide staffing. McDonald’s said it was offering rent deferrals and other help to keep franchises open and employing workers.
“McDonald’s could commit to 30 days of income for all workers,” Mary Kay Henry, president of the labor union SEIU which has 2 million members, said in an interview with Reuters. “Corporations need to pay their fair share here.”
‘IT’S JUST WRONG’
General Motors has halted normal production in North America and temporarily reduced cash pay for salaried workers by 20%. It paid its first-quarter dividend on March 20 and has a month before declaring its next dividend, a spokeswoman said, adding that GM would assess economic conditions before deciding.
“Our focus in the near term is to protect the health of our employees and customers, ensure we have ample liquidity for a very wide range of scenarios, and implement austerity measures to preserve cash,” spokeswoman Lauren Langille said.
Oilfield services firm Halliburton furloughed about 3,500 workers in its Houston office starting on March 23, according to a letter sent to the Texas Workforce Commission obtained by Reuters. It has also cut 350 positions in Oklahoma.
Halliburton cited disruption from the coronavirus as well as plunging oil prices as the reason for the furlough. In March, it paid its first-quarter dividend to shareholders as planned.
A Halliburton spokeswoman declined to comment on the furlough and the company’s dividend policy.
Some of the companies laying off workers while still paying out shareholders, such as General Motors, signed an initiative last year from the Business Roundtable, a group of chief executives, pledging to make business decisions in the interest of employees and other stakeholders, not just shareholders.
Large asset managers such as BlackRock and Vanguard have cited managing “human capital” as a priority for companies in which they invest. Yet they have been reluctant to publicly press companies to avoid layoffs during the crisis.
Vanguard told Reuters it “recognizes the need for companies to exercise judgment and flexibility as they balance short- and long-term business considerations”.
BlackRock did not respond with a statement when contacted for comment.
“Profits should be shared with the workers who actually create them,” U.S. Senator Tammy Baldwin, a long-standing critic of share buybacks, told Reuters in an email.
“It’s just wrong for big corporations to reward the wealthy or top executives with more stock buybacks, while closing facilities and laying off workers.”
in the name of profits: poor quality, cheap wages, greed!!
One Reason Caregivers Are Wearing Trash Bags: A U.S. Firm Had to Recall 9 Million Surgical Gowns
Cardinal Health withdrew the gowns just before the pandemic because a Chinese supplier failed to sterilize them properly. The recall has created what a hospital association official called a “ripple effect.”
by David Armstrong and Topher Sanders - propublica
April 3, 10:08 a.m. EDT
There’s an overlooked reason why hospitals treating COVID-19 patients are so short of protective gear. In January, just before the pandemic hit the United States, a key distributor recalled more than 9 million gowns produced by a Chinese supplier because they had not been properly sterilized.
“At this time, we cannot provide sterility assurances with respect to the gowns or the packs containing the gowns because of the potential for cross-contamination,” Cardinal Health wrote to customers on Jan. 15. It added, “We recognize the criticality of our gowns and procedure packs to performing surgeries, and we apologize for the challenges this supply disruption will cause.”
The recall immediately forced the canceling of some elective surgeries. It also meant that supplies of medical gowns were already low when hospitals and state governments began desperately searching for protective gear to cope with the pandemic. Most gowns are supposed to be worn once and not reused. As some doctors and nurses have resorted to covering themselves with trash bags, raincoats and hazardous materials suits bought online, many health care workers have contracted the virus, further taxing already overwhelmed hospitals.
“Demand has gone up at a time when supply was already constrained,” said Bindiya Vakil, the chief executive of Resilinc, a Milpitas, California, firm that monitors supply chain disruptions worldwide. “Coronavirus made what was already a bad situation a lot worse.”
Colin Milligan, a spokesman for the American Hospital Association, said that the group’s members continue to experience shortages of medical gowns and that the Cardinal recall “has had a ripple effect.”
A Cardinal spokeswoman said that “the supply of surgical gowns should not impact the supply of PPE,” or personal protective equipment, for health care workers because they usually wear another type of outer garment, isolation gowns, when tending to coronavirus patients.
Cardinal received approval Tuesday from the federal government to donate the 2.2 million recalled gowns that remain in its inventory to the Strategic National Stockpile for distribution as isolation gowns. Each pallet must be “labeled in with a warning that the articles are for use for non-sterile apparel purposes only,” according to the approval letter.
The company is “working around the clock to meet the needs of healthcare providers so they can safely serve the patients who depend on them,” a Cardinal spokeswoman wrote in an email.
The shortage of gowns even before the coronavirus outbreak highlights the vulnerabilities of a U.S. health care system that depends on protective equipment largely made in other countries, led by China. The quality of gowns and other gear has been a recurring problem, including a dead insect in the packaging of a Cardinal gown, complaint records show. Replacing an overseas supplier can take months, and even if a new one is found quickly, it still has to ramp up production and arrange shipping.
“Unfortunately, like others, we are learning in this crisis that overdependence on other countries as a source of cheap medical products and supplies has created a strategic vulnerability to our economy,” U.S. Trade Representative Robert Lighthizer said at a meeting Monday. “For the United States, we are encouraging diversification of supply chains and seeking to promote more manufacturing at home.”
The recall also exposes flaws in how both companies and government regulators monitor the overseas manufacturers that produce much of the country’s inventory of protective medical gear. Because surgical gowns are considered a medical device, their quality is monitored by the U.S. Food and Drug Administration, which inspects manufacturing plants every two years.
A spokeswoman for Cardinal, which is based in Dublin, Ohio, said that it has a “broad and diverse manufacturing and supplier network” that includes the U.S. and is not dependent on any one locale. Cardinal is also one of the largest prescription drug distributors in the world. It had revenues in 2019 of more than $145 billion, making it the 16th largest company in the U.S., according to Fortune.
Cardinal chief executive Mike Kaufmann told Wall Street analysts in February that the company understood “the gravity” of the recall. He said it had hired outside experts to review Cardinal’s quality assurance procedures.
The company’s board has established a special committee to review management’s actions pertaining to the recall, according to Cardinal’s website. The outside experts continue to scrutinize the company’s practices, a spokeswoman said.
Of the recalled gowns, Cardinal had already distributed almost 8 million to health care facilities; the others had not reached customers. Some had been manufactured as early as the fall of 2018, the company has said. Cardinal does not have information on how many of the gowns were used but believes a majority of them were, a spokeswoman told ProPublica. Asked if any health workers or patients were infected as a result, she said that “we continue to track and analyze complaint data.”
The FDA last inspected the problematic Chinese plant in April 2018 and did not identify any violations, an agency spokeswoman said. Manufacturers are responsible for detecting problems and reporting them to the FDA, she said, adding that the Chinese company did not report any such issues during the period covered by the recall.
The January recall was not the first time Cardinal had a problem with the supplier, which it has identified as Siyang HolyMed Products Co. in Jiangsu province on China’s coast. Cardinal disclosed in a January press release that in the spring of 2018, around the same time the FDA was inspecting the Chinese company’s manufacturing facility, the company learned that Siyang outsourced some of its production to an unqualified facility. Cardinal tested products at the time and determined there was no reason to take further action such as a recall, it said.
Then, last Dec. 10, Cardinal received a tip that Siyang was making gowns at two sites that weren’t approved by the U.S. company or registered with the FDA, a Cardinal spokeswoman said. Ten days later, an on-site investigation confirmed the tip, she said.
In a Jan. 21 letter to customers, Cardinal said it couldn’t guarantee that the gowns were sterile because Siyang made some of them at locations that “did not maintain proper environmental conditions as required by law.” They were “commingled with properly manufactured gowns,” Cardinal said.[..] read more
“At this time, we cannot provide sterility assurances with respect to the gowns or the packs containing the gowns because of the potential for cross-contamination,” Cardinal Health wrote to customers on Jan. 15. It added, “We recognize the criticality of our gowns and procedure packs to performing surgeries, and we apologize for the challenges this supply disruption will cause.”
The recall immediately forced the canceling of some elective surgeries. It also meant that supplies of medical gowns were already low when hospitals and state governments began desperately searching for protective gear to cope with the pandemic. Most gowns are supposed to be worn once and not reused. As some doctors and nurses have resorted to covering themselves with trash bags, raincoats and hazardous materials suits bought online, many health care workers have contracted the virus, further taxing already overwhelmed hospitals.
“Demand has gone up at a time when supply was already constrained,” said Bindiya Vakil, the chief executive of Resilinc, a Milpitas, California, firm that monitors supply chain disruptions worldwide. “Coronavirus made what was already a bad situation a lot worse.”
Colin Milligan, a spokesman for the American Hospital Association, said that the group’s members continue to experience shortages of medical gowns and that the Cardinal recall “has had a ripple effect.”
A Cardinal spokeswoman said that “the supply of surgical gowns should not impact the supply of PPE,” or personal protective equipment, for health care workers because they usually wear another type of outer garment, isolation gowns, when tending to coronavirus patients.
Cardinal received approval Tuesday from the federal government to donate the 2.2 million recalled gowns that remain in its inventory to the Strategic National Stockpile for distribution as isolation gowns. Each pallet must be “labeled in with a warning that the articles are for use for non-sterile apparel purposes only,” according to the approval letter.
The company is “working around the clock to meet the needs of healthcare providers so they can safely serve the patients who depend on them,” a Cardinal spokeswoman wrote in an email.
The shortage of gowns even before the coronavirus outbreak highlights the vulnerabilities of a U.S. health care system that depends on protective equipment largely made in other countries, led by China. The quality of gowns and other gear has been a recurring problem, including a dead insect in the packaging of a Cardinal gown, complaint records show. Replacing an overseas supplier can take months, and even if a new one is found quickly, it still has to ramp up production and arrange shipping.
“Unfortunately, like others, we are learning in this crisis that overdependence on other countries as a source of cheap medical products and supplies has created a strategic vulnerability to our economy,” U.S. Trade Representative Robert Lighthizer said at a meeting Monday. “For the United States, we are encouraging diversification of supply chains and seeking to promote more manufacturing at home.”
The recall also exposes flaws in how both companies and government regulators monitor the overseas manufacturers that produce much of the country’s inventory of protective medical gear. Because surgical gowns are considered a medical device, their quality is monitored by the U.S. Food and Drug Administration, which inspects manufacturing plants every two years.
A spokeswoman for Cardinal, which is based in Dublin, Ohio, said that it has a “broad and diverse manufacturing and supplier network” that includes the U.S. and is not dependent on any one locale. Cardinal is also one of the largest prescription drug distributors in the world. It had revenues in 2019 of more than $145 billion, making it the 16th largest company in the U.S., according to Fortune.
Cardinal chief executive Mike Kaufmann told Wall Street analysts in February that the company understood “the gravity” of the recall. He said it had hired outside experts to review Cardinal’s quality assurance procedures.
The company’s board has established a special committee to review management’s actions pertaining to the recall, according to Cardinal’s website. The outside experts continue to scrutinize the company’s practices, a spokeswoman said.
Of the recalled gowns, Cardinal had already distributed almost 8 million to health care facilities; the others had not reached customers. Some had been manufactured as early as the fall of 2018, the company has said. Cardinal does not have information on how many of the gowns were used but believes a majority of them were, a spokeswoman told ProPublica. Asked if any health workers or patients were infected as a result, she said that “we continue to track and analyze complaint data.”
The FDA last inspected the problematic Chinese plant in April 2018 and did not identify any violations, an agency spokeswoman said. Manufacturers are responsible for detecting problems and reporting them to the FDA, she said, adding that the Chinese company did not report any such issues during the period covered by the recall.
The January recall was not the first time Cardinal had a problem with the supplier, which it has identified as Siyang HolyMed Products Co. in Jiangsu province on China’s coast. Cardinal disclosed in a January press release that in the spring of 2018, around the same time the FDA was inspecting the Chinese company’s manufacturing facility, the company learned that Siyang outsourced some of its production to an unqualified facility. Cardinal tested products at the time and determined there was no reason to take further action such as a recall, it said.
Then, last Dec. 10, Cardinal received a tip that Siyang was making gowns at two sites that weren’t approved by the U.S. company or registered with the FDA, a Cardinal spokeswoman said. Ten days later, an on-site investigation confirmed the tip, she said.
In a Jan. 21 letter to customers, Cardinal said it couldn’t guarantee that the gowns were sterile because Siyang made some of them at locations that “did not maintain proper environmental conditions as required by law.” They were “commingled with properly manufactured gowns,” Cardinal said.[..] read more
a bloodsucker operates while biden dodges!!!
A PRIVATE EQUITY BARON SITTING ON AN EMPTY PHILADELPHIA HOSPITAL IS IN LINE FOR HUGE TAX GIFT IN THE COVID-19 STIMULUS
Akela Lacy - the intercept
April 1 2020, 6:55 a.m.
AS PHILADELPHIA SEARCHES for a place to house its growing number of coronavirus patients, a millionaire health care and private equity executive is effectively holding a hospital he owns hostage — and is in line for a massive tax break under the coronavirus stimulus plan signed into law last week.
Joel Freedman bought Philadelphia’s Hahnemann University Hospital, which primarily served low-income residents, along with St. Christopher Children Hospital, in 2018 for a total of $170 million. Despite community protests that captured national attention, he shuttered it in September, hoping to turn a profit by selling the building, possibly to turn it into luxury condos. Amid the coronavirus pandemic, city officials said they could not afford Freedman’s offer for the building, which he said was a fraction of market value. They were negotiating its use until last week, when they said Freedman’s offer to rent the building to the city for just under $1 million a month, including necessary improvements and expenses was “unreasonable.”
Meanwhile, the Los Angeles-based Freedman could benefit from the $2 trillion stimulus, which temporarily and retroactively lifts a cap on the property-related depreciation real estate investors are allowed to use to lessen their tax bill. Depreciation is a paper cost that real estate investors can use to factor in losses to offset other income and reduce what they pay in taxes. In Freedman’s case, that means he can use recent “losses” from the hospital as it depreciates to offset his overall taxable income and, as a result, what he owes in taxes. A spokesperson for Freedman did not respond to requests for comment.
“Depreciation on the real estate from Hahnemann from the last two years plus this year can be used to offset any tax liabilities for his household, to the extent that he’s got profit from other things that he’s done” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research in Washington, D.C.
Under the stimulus, Freedman would no longer be limited in the amount of business losses he could use to offset wages or investment income, according to a professor at the University of Pennsylvania Law School.
Other hospitals are benefiting from the 800-page stimulus, which includes a $100 billion allocation for hospitals, in part to help fight the coronavirus. Easton hospital, another private equity-owned hospital in Pennsylvania, got one of the first payouts of the coronavirus stimulus plan for $8 million after threatening to shut down on Friday at midnight. “They’re just shameless,” said Appelbaum. “The very first payment out of that stimulus package went to a hospital owned by private equity that was blackmailing the governor of Pennsylvania.”
HAHNEMANN, WHICH HAD served the city’s poorest and most critically ill residents since 1848, was acquired in 2018 by a subsidiary of American Academic Health System LLC, of which Freedman is the founder and chief executive officer. That subsidiary, Philadelphia Academic Health Systems, filed for bankruptcy in June. Freedman said Hahnemann had been losing millions of dollars a month, but the hospital’s real estate was not included in the bankruptcy filing. Rather, it was redistributed to another of Freedman’s companies, Broad Street Health Care Properties.
Under the federal stimulus, which passed unanimously in the Senate and by a voice vote in the House, corporations and businesses will still see the bulk of dollars allocated, while workers get modest increases in unemployment benefits and a one-time check of up to $1,200 per individual. At least one provision benefitting real estate investors, which increases the amount of nonbusiness income and capital gains they can protect from taxation, could result in tax breaks up to $170 billion over 10 years.
“That group comprises the top 1 percent of taxpayers, according to Internal Revenue Service data,” the New York Times reported. “The result is that people can enjoy big tax breaks stemming from only-on-paper losses, even if they enjoy big cash profits in the real world.”
Philadelphia’s St. Christopher Hospital, which Freedman acquired along with Hahnemann in 2018, was purchased earlier this year. Affiliates of Freedman’s company, a number of which he also owns, have run facilities across the country including the Howard University Hospital in Washington, D.C. After Hahnemann’s closing last year, Freedman listed his Rittenhouse Square home for $3.5 million.
“We’d have to know more about his personal situation to know if he will personally benefit,” Appelbaum said. “But if he owns businesses that have made a profit anywhere in the last two years or this year, he can use the paper losses from depreciation on real estate to offset that profit and reduce any taxes he would have to pay.”
Since it’s retroactive, Freedman could be in for a substantial rebate if the paper losses can offset taxes he paid in previous years.
Hahnemann’s parent company is an LLC, which are treated as partnerships for tax purposes. That means income from the company is partially Freedman’s own and would qualify for the new stimulus tax break. Freedman is also the president and founder of Paladin Healthcare, AAHS’s parent company.
PENNSYLVANIA SO FAR has 4,843 confirmed Covid-19 cases, and 63 deaths, including 1,315 cases and 14 deaths in Philadelphia. The city is preparing to face a rapid increase in cases and deaths already seen in New York City, the epicenter of the pandemic, where health care workers have already begun to face the impacts of shortages in hospital space and supplies, and are bracing to run out of space in city morgues.
City officials last week said Freedman was using his position to profit while the city was trying to deal with a public health crisis. “I think he’s looking at this as a business transaction rather than providing an imminent and important aid to the city and our residents,” City Managing Director Brian Abernathy told reporters. A representative for Freedman has cited having an interested buyer as one reason he can’t allow the city to use the hospital. Freedman also said he offered the city a rate at a fraction of market cost.
Officials seeking additional space to treat patients said last week that they had scrapped attempts to negotiate with Freedman to use the 496-bed facility because they couldn’t accept his offer. Philadelphia Mayor Jim Kenney said during a press conference last week that the city needed “to find facilities that could contain several hundred hospital beds.” Kenney said the city had offered to pay a smaller amount in rent and to cover costs of what would be time-consuming repair and upkeep to make the hospital usable again, which Freedman refused.
The next day, the city announced that Temple University would allow use of its Liacouras Center as an overflow hospital, free of charge. In Philadelphia, which has the highest poverty rate of the nation’s 10 most populous cities, experts have expressed concern that the coronavirus could disproportionately impact poor residents.
Philadelphia City Council Member Helen Gym, who has been an outspoken voice in efforts to save Hahnemann and prevent similar financial mismanagement in the future, called last week for the city to acquire Hahnemann through eminent domain. “We cannot allow unconscionable greed to get in the way of saving lives,” Gym tweeted last week. Kenney said the city had determined that proposal to be too costly and time consuming.
“It is outrageous that a Philadelphia real estate investor who closed a hospital is now trying to gouge the city to re-open it,” Democratic presidential candidate Bernie Sanders tweeted Monday. “@HelenGymPHL is right: the city should reopen Hahnemann hospital immediately.” In July, Sanders joined a demonstration protesting Hahnemann’s closing.
Former Vice President Joe Biden, a Pennsylvania native whose campaign headquarters is in Philadelphia, has not taken a position on the issue. Biden’s campaign did not respond to a request for comment.
Days after Kenney announced the city was ending attempts to use the hospital, Freedman’s Rittenhouse Square-area residence was vandalized with the phrases “JOEL KILLS,” and “FREE HAHNEMANN.”
At least “many of the hospitals owned by private equity are in very bad shape,” Appelbaum said. “I imagine we’re gonna see a lot more of what just happened with Hahnemann, and what just happened at Easton.”
Joel Freedman bought Philadelphia’s Hahnemann University Hospital, which primarily served low-income residents, along with St. Christopher Children Hospital, in 2018 for a total of $170 million. Despite community protests that captured national attention, he shuttered it in September, hoping to turn a profit by selling the building, possibly to turn it into luxury condos. Amid the coronavirus pandemic, city officials said they could not afford Freedman’s offer for the building, which he said was a fraction of market value. They were negotiating its use until last week, when they said Freedman’s offer to rent the building to the city for just under $1 million a month, including necessary improvements and expenses was “unreasonable.”
Meanwhile, the Los Angeles-based Freedman could benefit from the $2 trillion stimulus, which temporarily and retroactively lifts a cap on the property-related depreciation real estate investors are allowed to use to lessen their tax bill. Depreciation is a paper cost that real estate investors can use to factor in losses to offset other income and reduce what they pay in taxes. In Freedman’s case, that means he can use recent “losses” from the hospital as it depreciates to offset his overall taxable income and, as a result, what he owes in taxes. A spokesperson for Freedman did not respond to requests for comment.
“Depreciation on the real estate from Hahnemann from the last two years plus this year can be used to offset any tax liabilities for his household, to the extent that he’s got profit from other things that he’s done” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research in Washington, D.C.
Under the stimulus, Freedman would no longer be limited in the amount of business losses he could use to offset wages or investment income, according to a professor at the University of Pennsylvania Law School.
Other hospitals are benefiting from the 800-page stimulus, which includes a $100 billion allocation for hospitals, in part to help fight the coronavirus. Easton hospital, another private equity-owned hospital in Pennsylvania, got one of the first payouts of the coronavirus stimulus plan for $8 million after threatening to shut down on Friday at midnight. “They’re just shameless,” said Appelbaum. “The very first payment out of that stimulus package went to a hospital owned by private equity that was blackmailing the governor of Pennsylvania.”
HAHNEMANN, WHICH HAD served the city’s poorest and most critically ill residents since 1848, was acquired in 2018 by a subsidiary of American Academic Health System LLC, of which Freedman is the founder and chief executive officer. That subsidiary, Philadelphia Academic Health Systems, filed for bankruptcy in June. Freedman said Hahnemann had been losing millions of dollars a month, but the hospital’s real estate was not included in the bankruptcy filing. Rather, it was redistributed to another of Freedman’s companies, Broad Street Health Care Properties.
Under the federal stimulus, which passed unanimously in the Senate and by a voice vote in the House, corporations and businesses will still see the bulk of dollars allocated, while workers get modest increases in unemployment benefits and a one-time check of up to $1,200 per individual. At least one provision benefitting real estate investors, which increases the amount of nonbusiness income and capital gains they can protect from taxation, could result in tax breaks up to $170 billion over 10 years.
“That group comprises the top 1 percent of taxpayers, according to Internal Revenue Service data,” the New York Times reported. “The result is that people can enjoy big tax breaks stemming from only-on-paper losses, even if they enjoy big cash profits in the real world.”
Philadelphia’s St. Christopher Hospital, which Freedman acquired along with Hahnemann in 2018, was purchased earlier this year. Affiliates of Freedman’s company, a number of which he also owns, have run facilities across the country including the Howard University Hospital in Washington, D.C. After Hahnemann’s closing last year, Freedman listed his Rittenhouse Square home for $3.5 million.
“We’d have to know more about his personal situation to know if he will personally benefit,” Appelbaum said. “But if he owns businesses that have made a profit anywhere in the last two years or this year, he can use the paper losses from depreciation on real estate to offset that profit and reduce any taxes he would have to pay.”
Since it’s retroactive, Freedman could be in for a substantial rebate if the paper losses can offset taxes he paid in previous years.
Hahnemann’s parent company is an LLC, which are treated as partnerships for tax purposes. That means income from the company is partially Freedman’s own and would qualify for the new stimulus tax break. Freedman is also the president and founder of Paladin Healthcare, AAHS’s parent company.
PENNSYLVANIA SO FAR has 4,843 confirmed Covid-19 cases, and 63 deaths, including 1,315 cases and 14 deaths in Philadelphia. The city is preparing to face a rapid increase in cases and deaths already seen in New York City, the epicenter of the pandemic, where health care workers have already begun to face the impacts of shortages in hospital space and supplies, and are bracing to run out of space in city morgues.
City officials last week said Freedman was using his position to profit while the city was trying to deal with a public health crisis. “I think he’s looking at this as a business transaction rather than providing an imminent and important aid to the city and our residents,” City Managing Director Brian Abernathy told reporters. A representative for Freedman has cited having an interested buyer as one reason he can’t allow the city to use the hospital. Freedman also said he offered the city a rate at a fraction of market cost.
Officials seeking additional space to treat patients said last week that they had scrapped attempts to negotiate with Freedman to use the 496-bed facility because they couldn’t accept his offer. Philadelphia Mayor Jim Kenney said during a press conference last week that the city needed “to find facilities that could contain several hundred hospital beds.” Kenney said the city had offered to pay a smaller amount in rent and to cover costs of what would be time-consuming repair and upkeep to make the hospital usable again, which Freedman refused.
The next day, the city announced that Temple University would allow use of its Liacouras Center as an overflow hospital, free of charge. In Philadelphia, which has the highest poverty rate of the nation’s 10 most populous cities, experts have expressed concern that the coronavirus could disproportionately impact poor residents.
Philadelphia City Council Member Helen Gym, who has been an outspoken voice in efforts to save Hahnemann and prevent similar financial mismanagement in the future, called last week for the city to acquire Hahnemann through eminent domain. “We cannot allow unconscionable greed to get in the way of saving lives,” Gym tweeted last week. Kenney said the city had determined that proposal to be too costly and time consuming.
“It is outrageous that a Philadelphia real estate investor who closed a hospital is now trying to gouge the city to re-open it,” Democratic presidential candidate Bernie Sanders tweeted Monday. “@HelenGymPHL is right: the city should reopen Hahnemann hospital immediately.” In July, Sanders joined a demonstration protesting Hahnemann’s closing.
Former Vice President Joe Biden, a Pennsylvania native whose campaign headquarters is in Philadelphia, has not taken a position on the issue. Biden’s campaign did not respond to a request for comment.
Days after Kenney announced the city was ending attempts to use the hospital, Freedman’s Rittenhouse Square-area residence was vandalized with the phrases “JOEL KILLS,” and “FREE HAHNEMANN.”
At least “many of the hospitals owned by private equity are in very bad shape,” Appelbaum said. “I imagine we’re gonna see a lot more of what just happened with Hahnemann, and what just happened at Easton.”
*AT LAST: TIME TO KILL "USELESS EATERS"
Trump's death cult finally says it: Time to kill the "useless eaters" for capitalism
Republicans say the quiet part out loud: Americans must die of the coronavirus in order to save capitalism
CHAUNCEY DEVEGA - SALON
MARCH 27, 2020 11:00AM (UTC)
...On Wednesday, Trump said the quiet part loud, basically admitting on Twitter that his electoral fortunes are tied to the pandemic's impact on the American economy:
The LameStream Media is the dominant force in trying to get me to keep our Country closed as long as possible in the hope that it will be detrimental to my election success. The real people want to get back to work ASAP. We will be stronger than ever before!
To paraphrase the character Ivan Drago in the movie "Rocky IV": "If they die, they die". Or as another famous Russian, Joseph Stalin, is reported to have said: "One death is a tragedy. A million deaths is a statistic."
For Trump and his allies, worsening the coronavirus pandemic, even at the risk of many lives, is of little importance compared to keeping him in office to continue a regime of looting, extortion and massive corruption.
The Democratic Party needs new slogans for the 2020 presidential election. I would suggest these:
These calls by Trump and his allies for millions of Americans to sacrifice themselves for such abstractions as "the country," "the economy" and "the market" should not be a surprise. Such madness and cruelty are the logical and inevitable results of decades of right-wing strategy and policies.
These plans were never hidden. Indeed, they were clumsily obvious. Since the 1970s, predatory gangster capitalism has been accepted as either "normal" or "inevitable" in the United States (as well as the United Kingdom and elsewhere). To that end, the "free market" was presented by the news media, many Democrats, virtually all Republicans, and most of the educational system as somehow synonymous or interchangeable with "freedom" and "democracy."
This form of predatory gangster capitalism, now often called "neoliberalism," rests upon several basic tenets.
Of course the harsh realities and negative consequences of predatory gangster capitalism have been effectively concealed from the public, which has come to accept this ideology through the use of anodyne language like "entrepreneurship," "efficiency," "transparency," "accountability," "public-private" and "opportunity."
All claims that this system has been successful are dubious. Serious economists and other intellectually honest policy experts have repeatedly proven that its premises are fundamentally incorrect.
Gangster capitalists exploit system shocks and other crises (sometimes crises they themselves have caused) as a means of advancing their agenda.
Consider the coronavirus relief bill as originally submitted by the Republicans, which proposed creating a $500 billion slush fund to subsidize the richest corporations and wealthiest Americans, with no accountability and no oversight – a fund that Donald Trump and his vassals could loot at will — while handing out much smaller sums to ordinary Americans who are struggling to survive in a moment of economic calamity.
The moral obscenity of that bill even included petty cruelty: The poorest Americans would receive little if any money in direct payments, while money flowed to corporations and the ultra-rich by the billions.
These disparities have been somewhat painted over in the Democrats' counterproposals in the House and Senate. But on a grand scale, the picture is not that different: The largest corporations will still receive at least $500 billion — with minor oversight and a few insignificant restraints — that they will inevitably use to enrich their shareholders at the expense of their employees and the public.
In practice, neoliberalism amounts to socialism for the rich and the powerful and the harsh medicine of the "free market" for everyone else. The coronavirus relief bill is more proof of that fact.
This is the logic of "too big to fail." It's also a function of the moral hazard that allows a plutocrat like Donald Trump to gain control over a so-called democracy with the goal of funneling resources (through tax policies, government subsidies and other laws) to themselves and other members of his class, while denying resources and opportunities to the vast majority of Americans.
Donald Trump's proposed 2021 federal budget is a statement of values. As with the coronavirus relief bill, it punishes the poor and vulnerable by gutting the social safety net and transferring more money, both in the form of tax cuts and direct subsidies, to huge corporations and the richest Americans.
As documented by Dr. James Gilligan in his book "Why Some Politicians Are More Dangerous Than Others," the policies of the Republican Party on issues ranging from health care to guns, the environment and tax policy have shortened the American people's lifespans and caused other forms of physical harm.
Predatory gangster capitalism needs agents and other actors to advance its goals. The corporation is one of the primary means through which this form of capitalism wages its "revolutionary" struggle against a humane and democratic society.
As has been widely noted, if the corporation was a person, it would be a sociopath. This makes the corporation an indispensable part of Donald Trump's coronavirus death cult.
James Gamble, a retired corporate attorney who is now director of the National Center for Access to Justice, offered a warning, in a recent article at Medium, about "the extraordinary power of corporate 'persons' who are legally obligated to act like sociopaths":
Sociopath? Yes. The corporate entity is obligated to care only about itself and to define what is good as what makes it more money. Pretty close to a textbook case of antisocial personality disorder. And corporate persons are the most powerful people in our world.
The "maximize rule" does its damage in two ways. Corporate entities are direct actors in the world. A decision to build a factory in a place with weak environmental laws, low wages and poor worker protection matters. Preferring share buybacks to increased wages or lower prices matters. Lobbying for taxpayer subsidies that transfer wealth from poor to rich matters. They contribute to the problems listed in paragraph one in obvious ways. More damaging: the maximize rule infects real people with tragic faith in the magic of markets.[...]
(Read complete article)
The LameStream Media is the dominant force in trying to get me to keep our Country closed as long as possible in the hope that it will be detrimental to my election success. The real people want to get back to work ASAP. We will be stronger than ever before!
To paraphrase the character Ivan Drago in the movie "Rocky IV": "If they die, they die". Or as another famous Russian, Joseph Stalin, is reported to have said: "One death is a tragedy. A million deaths is a statistic."
For Trump and his allies, worsening the coronavirus pandemic, even at the risk of many lives, is of little importance compared to keeping him in office to continue a regime of looting, extortion and massive corruption.
The Democratic Party needs new slogans for the 2020 presidential election. I would suggest these:
- Trump wants you to die — so he can stay in office forever.
- Trump and the Republicans are trying to kill you — for money.
- Are you 60 or older? Have a pre-existing health condition? Donald Trump and his Republican Party don't care if you die from the coronavirus.
- Donald Trump could have stopped the coronavirus. He lied, and people died.
- Yes, Trump and the right are embracing and celebrating death. It is ghoulish. It is also one more illustration that the Age of Trump is an American dystopia where what was previously unimaginable (for most decent people) has become "normal."
- Yes, Trump and his movement's death impulses are part of a natural progression in which an authoritarian regime maximizes its power by terrorizing the public.
These calls by Trump and his allies for millions of Americans to sacrifice themselves for such abstractions as "the country," "the economy" and "the market" should not be a surprise. Such madness and cruelty are the logical and inevitable results of decades of right-wing strategy and policies.
These plans were never hidden. Indeed, they were clumsily obvious. Since the 1970s, predatory gangster capitalism has been accepted as either "normal" or "inevitable" in the United States (as well as the United Kingdom and elsewhere). To that end, the "free market" was presented by the news media, many Democrats, virtually all Republicans, and most of the educational system as somehow synonymous or interchangeable with "freedom" and "democracy."
This form of predatory gangster capitalism, now often called "neoliberalism," rests upon several basic tenets.
- Profits are more important than people.
- Every part of human life and existence should become a commodity or a financial instrument.
- Society should be organized around the "survival of the fittest," in Malthusian or social-Darwinist terms: Those who cannot survive and prosper under "free markets" will be abandoned, quite likely to die.
- Notions of the collective good, the commons, the social safety net and other aspects of social democracy, as well as the very idea of government and collective action, are to be undermined and eventually eliminated in service to "freedom" and "individual liberty."
- There should be few if any restrictions on the behavior of corporations, banks and the ultra-rich, or on the financier class.
- There are "winners" and "losers" in society, "makers" and "takers" in society.
- These are natural and almost inexorable categories. The winners are to be subsidized by the state and the public. The losers are to be punished, and if possible eliminated.
- Capitalism and democracy are the same thing.
Of course the harsh realities and negative consequences of predatory gangster capitalism have been effectively concealed from the public, which has come to accept this ideology through the use of anodyne language like "entrepreneurship," "efficiency," "transparency," "accountability," "public-private" and "opportunity."
All claims that this system has been successful are dubious. Serious economists and other intellectually honest policy experts have repeatedly proven that its premises are fundamentally incorrect.
Gangster capitalists exploit system shocks and other crises (sometimes crises they themselves have caused) as a means of advancing their agenda.
Consider the coronavirus relief bill as originally submitted by the Republicans, which proposed creating a $500 billion slush fund to subsidize the richest corporations and wealthiest Americans, with no accountability and no oversight – a fund that Donald Trump and his vassals could loot at will — while handing out much smaller sums to ordinary Americans who are struggling to survive in a moment of economic calamity.
The moral obscenity of that bill even included petty cruelty: The poorest Americans would receive little if any money in direct payments, while money flowed to corporations and the ultra-rich by the billions.
These disparities have been somewhat painted over in the Democrats' counterproposals in the House and Senate. But on a grand scale, the picture is not that different: The largest corporations will still receive at least $500 billion — with minor oversight and a few insignificant restraints — that they will inevitably use to enrich their shareholders at the expense of their employees and the public.
In practice, neoliberalism amounts to socialism for the rich and the powerful and the harsh medicine of the "free market" for everyone else. The coronavirus relief bill is more proof of that fact.
This is the logic of "too big to fail." It's also a function of the moral hazard that allows a plutocrat like Donald Trump to gain control over a so-called democracy with the goal of funneling resources (through tax policies, government subsidies and other laws) to themselves and other members of his class, while denying resources and opportunities to the vast majority of Americans.
Donald Trump's proposed 2021 federal budget is a statement of values. As with the coronavirus relief bill, it punishes the poor and vulnerable by gutting the social safety net and transferring more money, both in the form of tax cuts and direct subsidies, to huge corporations and the richest Americans.
As documented by Dr. James Gilligan in his book "Why Some Politicians Are More Dangerous Than Others," the policies of the Republican Party on issues ranging from health care to guns, the environment and tax policy have shortened the American people's lifespans and caused other forms of physical harm.
Predatory gangster capitalism needs agents and other actors to advance its goals. The corporation is one of the primary means through which this form of capitalism wages its "revolutionary" struggle against a humane and democratic society.
As has been widely noted, if the corporation was a person, it would be a sociopath. This makes the corporation an indispensable part of Donald Trump's coronavirus death cult.
James Gamble, a retired corporate attorney who is now director of the National Center for Access to Justice, offered a warning, in a recent article at Medium, about "the extraordinary power of corporate 'persons' who are legally obligated to act like sociopaths":
Sociopath? Yes. The corporate entity is obligated to care only about itself and to define what is good as what makes it more money. Pretty close to a textbook case of antisocial personality disorder. And corporate persons are the most powerful people in our world.
The "maximize rule" does its damage in two ways. Corporate entities are direct actors in the world. A decision to build a factory in a place with weak environmental laws, low wages and poor worker protection matters. Preferring share buybacks to increased wages or lower prices matters. Lobbying for taxpayer subsidies that transfer wealth from poor to rich matters. They contribute to the problems listed in paragraph one in obvious ways. More damaging: the maximize rule infects real people with tragic faith in the magic of markets.[...]
(Read complete article)
op - ed: The Virus of Capitalism Has Infected the COVID-19 Fight
BY William Rivers Pitt, Truthout
PUBLISHED March 23, 2020
Around two weeks ago, when the first wave of closures — the schools, the ballgames, the bars — began to roll across the country, a clock began ticking in my head. How long will it be, I wondered, before some rich person goes on TV and starts quacking about “getting the country going again” because they’re losing money?
Flash-forward to this past Sunday morning, and wouldn’t you know it, some self-satisfied capitalist was on one of the cable networks arguing that “low-risk,” low-wage workers (who are the economy even as they seldom benefit from the economy) should go back to work and just let the virus “burn through” their ranks.
He labeled them “low risk” because the workers he referred to are younger and allegedly less likely to fall deeply ill if infected, but new data from the Centers for Disease Control and Prevention (CDC) shows that about 40 percent of COVID-19 patients requiring hospitalization are between 20 and 54 years old. That is not a small number of patients.
Under vastly different circumstances, perhaps it would have been possible to argue for a different path of action than dramatic physical-distancing measures, following from the idea that to develop a herd immunity to COVID-19, a certain number of people have to contract it and recover (assuming we are even capable of developing an immunity, which is not yet confirmed). To even countenance this idea, however, we would need a robust and fully functional health care system to aid in the recovery process.
In point of fact, the U.S. health care system lags far behind much of the developed world. Even countries with strong systems, such as Germany, are at risk of being subsumed by COVID-19 for the same reason the U.S. system is perhaps days away from collapse: The for-profit commodification of health care itself has thoroughly denuded the ability of those systems to react to this crisis.
“Germany is home to one of the most modern, richest and most powerful health-care systems in the world,” reports Der Spiegel. “The coronavirus is mercilessly exposing the problems that have been burdening the German health-care system for years: the pitfalls of profit-driven hospital financing. The pressure to cut spending. The chronic shortage of nursing staff. The often poor equipping of public health departments. The lag in digitalization.”
Yet the absence of a health care infrastructure capable of absorbing and treating thousands of patients — even “low-risk” ones — did not stop Captain Capitalist from going on TV and suggesting that maybe it’s about time workers started feeding the beast again. The machine is groaning for lack of lubrication, see. Can’t shut it down and be kind to each other, share our vast yet vastly imbalanced resources, and simply be for awhile until this thing runs its course, saving lives every step of the way. There’s no money in it.
On Sunday night, in yet another Twitter rant, Donald Trump indicated he may be edging toward ignoring the advice of the experts and lift the social distancing strictures intended to thwart the spread of COVID-19:
Donald J. Trump✔
@realDonaldTrump
WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF. AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!
8:50 PM - Mar 22, 2020
Why? Money.
There’s money to be made elsewhere, to be sure. “Over the past few weeks, investment bankers have been candid on investor calls and during health care conferences about the opportunity to raise drug prices,” reports Lee Fang for The Intercept. As media outlets focus on individuals hoarding toilet paper and hand sanitizer, the real money hoarders are leaning into this once-in-a-lifetime opportunity to peel massive profit from a desperate land.
Partnership for America’s Health Care Future (PAHCF), a major health care industry lobbying group that is stoutly opposed to Medicare for All, launched a multimillion-dollar ad campaign last week to push back against any effort to fix our broken for-profit system. This comes on the heels of insurance industry efforts against waiving costs for COVID-19 treatments.
Meanwhile, mayors and governors are screaming at Trump to use the Defense Production Act, a law that allows the president to essentially nationalize privately held portions of the means of production in order to churn out needed materials. Those mayors and governors need ventilators, masks and coronavirus test kits. They needed them a month ago. Trump has invoked the law, but he steadfastly refuses to actually use it.
Why? Because we have reached the apotheosis of Ronald Reagan’s most rancid gift to the nation: “Government is the problem.” This pestiferous ethos, voiced during Reagan’s first inaugural address, has become holy Republican writ over the course of the last 40 years.
Now, in Trump, it has its greatest champion. Trump is refusing to let government influence business, even in this moment of life-and-death crisis, because the advisers who have his ear worship at the altar of Reagan. For them, right-wing ideology and the profit margin are more important than your life, or mine.
Of course, there is also an angle to be played. “In declining to actually make use of the Korean War-era production act that he invoked last week,” reports The New York Times, “Mr. Trump is also avoiding taking personal responsibility for how fast the acute shortages of personal protective gear and lifesaving equipment are addressed.”
And then there is the currently stalled $1.8 trillion COVID-19 relief bill, which hit the reef in Congress over the weekend. Democrats are balking at the Senate GOP’s version of the bill because it is far too top-heavy with financial assistance to corporations and lacks sufficient assistance for working families.
The main sticking point, however, is a $500 billion slush fund included in the bill, which was originally a $208 billion slush fund until the lobbyists dogpiled the process. This money would be disbursed by Treasury Secretary Steve Mnuchin, presumably at the behest of Trump, with no oversight.
“The Treasury Department would have broad discretion over where the money would go,” reports The Washington Post. “President Trump already has said he wants the money to be used to rescue the cruise ship and hotel industries, making his preferences clear, but at a press conference on Sunday refused to say whether his own hotel properties would apply for the funding.”
Natch. These fellows never, ever, ever miss an opportunity to loot the till.
And therein lies the rub. The priority of the people (for the most part) is to stay safe, to get well if they fall ill, and to do what must be done to eventually return to some semblance of a normal life. The priority of the capitalists is to get the money machine going again, to take full advantage of the crisis in the name of profit, and to defend their well-staked financial turf from any reforms that may be proposed in the aftermath.
U.S.-style capitalism is also a virus, and it has infected every aspect of this situation. Worker safety, insurance coverage and costs, medical preparedness, and vital supplies — even the bill intended to rescue the country from some final financial calamity: All have been perverted and disrupted by the profit motive that never, ever, ever sleeps.
Flash-forward to this past Sunday morning, and wouldn’t you know it, some self-satisfied capitalist was on one of the cable networks arguing that “low-risk,” low-wage workers (who are the economy even as they seldom benefit from the economy) should go back to work and just let the virus “burn through” their ranks.
He labeled them “low risk” because the workers he referred to are younger and allegedly less likely to fall deeply ill if infected, but new data from the Centers for Disease Control and Prevention (CDC) shows that about 40 percent of COVID-19 patients requiring hospitalization are between 20 and 54 years old. That is not a small number of patients.
Under vastly different circumstances, perhaps it would have been possible to argue for a different path of action than dramatic physical-distancing measures, following from the idea that to develop a herd immunity to COVID-19, a certain number of people have to contract it and recover (assuming we are even capable of developing an immunity, which is not yet confirmed). To even countenance this idea, however, we would need a robust and fully functional health care system to aid in the recovery process.
In point of fact, the U.S. health care system lags far behind much of the developed world. Even countries with strong systems, such as Germany, are at risk of being subsumed by COVID-19 for the same reason the U.S. system is perhaps days away from collapse: The for-profit commodification of health care itself has thoroughly denuded the ability of those systems to react to this crisis.
“Germany is home to one of the most modern, richest and most powerful health-care systems in the world,” reports Der Spiegel. “The coronavirus is mercilessly exposing the problems that have been burdening the German health-care system for years: the pitfalls of profit-driven hospital financing. The pressure to cut spending. The chronic shortage of nursing staff. The often poor equipping of public health departments. The lag in digitalization.”
Yet the absence of a health care infrastructure capable of absorbing and treating thousands of patients — even “low-risk” ones — did not stop Captain Capitalist from going on TV and suggesting that maybe it’s about time workers started feeding the beast again. The machine is groaning for lack of lubrication, see. Can’t shut it down and be kind to each other, share our vast yet vastly imbalanced resources, and simply be for awhile until this thing runs its course, saving lives every step of the way. There’s no money in it.
On Sunday night, in yet another Twitter rant, Donald Trump indicated he may be edging toward ignoring the advice of the experts and lift the social distancing strictures intended to thwart the spread of COVID-19:
Donald J. Trump✔
@realDonaldTrump
WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF. AT THE END OF THE 15 DAY PERIOD, WE WILL MAKE A DECISION AS TO WHICH WAY WE WANT TO GO!
8:50 PM - Mar 22, 2020
Why? Money.
There’s money to be made elsewhere, to be sure. “Over the past few weeks, investment bankers have been candid on investor calls and during health care conferences about the opportunity to raise drug prices,” reports Lee Fang for The Intercept. As media outlets focus on individuals hoarding toilet paper and hand sanitizer, the real money hoarders are leaning into this once-in-a-lifetime opportunity to peel massive profit from a desperate land.
Partnership for America’s Health Care Future (PAHCF), a major health care industry lobbying group that is stoutly opposed to Medicare for All, launched a multimillion-dollar ad campaign last week to push back against any effort to fix our broken for-profit system. This comes on the heels of insurance industry efforts against waiving costs for COVID-19 treatments.
Meanwhile, mayors and governors are screaming at Trump to use the Defense Production Act, a law that allows the president to essentially nationalize privately held portions of the means of production in order to churn out needed materials. Those mayors and governors need ventilators, masks and coronavirus test kits. They needed them a month ago. Trump has invoked the law, but he steadfastly refuses to actually use it.
Why? Because we have reached the apotheosis of Ronald Reagan’s most rancid gift to the nation: “Government is the problem.” This pestiferous ethos, voiced during Reagan’s first inaugural address, has become holy Republican writ over the course of the last 40 years.
Now, in Trump, it has its greatest champion. Trump is refusing to let government influence business, even in this moment of life-and-death crisis, because the advisers who have his ear worship at the altar of Reagan. For them, right-wing ideology and the profit margin are more important than your life, or mine.
Of course, there is also an angle to be played. “In declining to actually make use of the Korean War-era production act that he invoked last week,” reports The New York Times, “Mr. Trump is also avoiding taking personal responsibility for how fast the acute shortages of personal protective gear and lifesaving equipment are addressed.”
And then there is the currently stalled $1.8 trillion COVID-19 relief bill, which hit the reef in Congress over the weekend. Democrats are balking at the Senate GOP’s version of the bill because it is far too top-heavy with financial assistance to corporations and lacks sufficient assistance for working families.
The main sticking point, however, is a $500 billion slush fund included in the bill, which was originally a $208 billion slush fund until the lobbyists dogpiled the process. This money would be disbursed by Treasury Secretary Steve Mnuchin, presumably at the behest of Trump, with no oversight.
“The Treasury Department would have broad discretion over where the money would go,” reports The Washington Post. “President Trump already has said he wants the money to be used to rescue the cruise ship and hotel industries, making his preferences clear, but at a press conference on Sunday refused to say whether his own hotel properties would apply for the funding.”
Natch. These fellows never, ever, ever miss an opportunity to loot the till.
And therein lies the rub. The priority of the people (for the most part) is to stay safe, to get well if they fall ill, and to do what must be done to eventually return to some semblance of a normal life. The priority of the capitalists is to get the money machine going again, to take full advantage of the crisis in the name of profit, and to defend their well-staked financial turf from any reforms that may be proposed in the aftermath.
U.S.-style capitalism is also a virus, and it has infected every aspect of this situation. Worker safety, insurance coverage and costs, medical preparedness, and vital supplies — even the bill intended to rescue the country from some final financial calamity: All have been perverted and disrupted by the profit motive that never, ever, ever sleeps.
Late-stage capitalism primed us for this pandemic
A decimated welfare state and a government that serves only the rich created the perfect conditions for coronavirus
BOB HENNELLY - salon
MARCH 15, 2020 12:00PM (UTC)
No, this not a bad dream.
You really did just wake up in these "great" United States to find that no matter where you live, your freedom of movement is now constricted. Not by the military, but by the fear of the invisible — a virus you never heard of before it shackled you and your family in a form of self-imposed lockdown.
The power dynamic here is merely a biological progression of what we feel when some malignant cyber-force zeros in on our laptop computer and takes control of it, holding us hostage.
If you are a regular consumer of the corporate news media this unprecedented national public health crisis is being covered through the partisan prism over the incompetence and malevolence of the current occupant of the Oval Office, Donald Trump.
What is being avoided meticulously is any broader and essential discussion about how this precarious planetary moment is a gift to us from late-stage vulture capitalism, which rents our national government as it subordinates the accumulation of wealth over every other human endeavor — including public health.
To start the coronavirus meltdown narrative with Trump's efforts to deliberately play down the risks we faced, which hobbled the U.S. response and will lead to potentially thousands of deaths, is to miss the reality that this systemic failure has been decades in the making.
Subjugation of labor
As the concentration of wealth accelerated and the income gap opened up to a canyon, the balance of political power tilted increasingly to the forces of capital, costing organized labor its leverage. Over that time the world was increasingly made safer for U.S. multinationals who successfully played labor markets off of each other as they captured the regulatory and taxation regimes of sovereign nations.
Everything was measured and governed by what encouraged economic growth and the amassing of wealth. Other vital spheres, from the environment to the public health, became secondary to the private pursuit of profit. Consider how hard it was to overcome the entrenched interests of the tobacco industry to provide the public health warnings on cigarettes.
After the Second World War in the early fifties, over a third of the U.S. workforce was represented by a labor union. Though unions have had their issues with corruption, on the whole they offer countervailing pressure to the potential predations of capitalism.
By the time President Reagan fired all of the Air Traffic Controllers (PATCO) in 1981, organized labor represented just a fifth of American workers. By 2019, it was just barely over 10 percent.
What has followed as a consequence is the massive growth of a contingent workforce hovering by the phone or checking their email to see if they have a "gig" or work for the day. This ability of capital to so greatly limit its social contract with workers creates a race to the bottom and leaves tens of millions without health care, unemployment or disability insurance.
It also puts employers and small businesses at a distinct competitive disadvantage if they choose to provide those basic benefits to their employees.
This is where there is an intersection with labor's marginal circumstance and our current national crisis —in which so many Americans will hesitate to get tested for coronavirus or stay home if they are sick. Millions upon millions of Americans cannot afford the expense or the loss of wages; they have absolutely no safety net in the event the test comes back positive and they are sidelined without work for 14 days, much less left with a hospital bill.
The essential role of labor unions as a countervailing pressure against the predations of unfettered capital is most clearly apparent in the airline industry, which is ground zero for many pandemics including this one.
Unions in the public interest
John Samuelsen is the president of the Transport Workers Union International (TWU) that represents 150,000 members in the airline, railroad, transit, university, utilities and service sector.
Last week, TWU had to back up the decision by a flight crew for a major national air carrier to refuse the orders they were given to go right back to work after they had successfully removed a passenger who had disclosed to crew after his flight landed that he had the coronavirus.
As reported by the Daily News, a Long Island man flew from New York to Florida while he had a test pending for the coronavirus. Upon landing in West Palm Beach, he got the call informing him of his status.
"Our crew facilitated the passenger's removal in a very sophisticated way that limited everyone's potential exposure out the back door of the plane with the help of medical professionals that escorted him off the flight," said Samuelsen. "But the crew was ordered back to work by the air carrier to crew up another flight and they rightfully refused because they knew they were now potentially carriers of the virus."
He continued. "They were still in shock and understandably concerned about their own health and when they were ordered to get back on another flight, they said no. The carrier had said the crew could work because they were asymptomatic and that's when the union stepped in."
Samuelsen recounted how, after the union's intervention, elected officials called the air carrier, as did the Daily News.
"We negotiated a package for the crew that guaranteed their economic security with paid sick leave. Ironically, in the process of doing what was right by our members we helped preserve the public health, which was the original goal of the flight crew. Without the union. we would have had another few planes loads of hundreds of unsuspecting members of the public exposed to the virus."
As Samuelsen sees it, proposals that were considered as radical ideas pre-coronavirus, like Senator Bernie Sander's universal health care plan or former presidential candidate Andrew Yang's proposal for a universal basic income, are no longer radical.
"Can you imagine how much less anxiety all American workers would feel right now if things like this were already in place," he said. "It would be a 365 day-a-year economic stimulus plan."
Public health versus private profit?
Such a realignment of the balance of power, where private capital's interest and the public interest could be potentially reconciled in the face of something like our current existential crisis, is already happening elsewhere on the planet.
Professor Richard Wolff is an economist who teaches at the New School. He says there is no better example of harmonizing these tensions then in China and South Korea, which have gotten their public and private sectors to collaborate in the face of the current pandemic.
"Look at the percentage of the population that has been tested in these two places and you can see the results of the close coordination between the government and the private sector which we don't have, and our testing numbers reflect that," he said.
Wolff says that the current crisis brings into sharp relief the fundamental divergence between American capitalism and the public health. "There was just no profit incentive for the big drug companies to produce a million of these kinds of tests," he added.
He continued: "Looking at the Center for Disease Control's own press releases we see as of Jan. 17 they publicly acknowledged they were following this virus in China . . . . what we have seen since is this ad hoc, last-minute, under-the-gun response with one eye looking out for the interests of the profit making medical industrial complex and the other eye looking out for the re-election of the President."
If there is a silver lining in the coronavirus moment, it is that it can serve as a teachable moment for our entire civilization. It can help us muster the will to make the lifestyle and economic changes required to face up to the challenge of global warming.
You really did just wake up in these "great" United States to find that no matter where you live, your freedom of movement is now constricted. Not by the military, but by the fear of the invisible — a virus you never heard of before it shackled you and your family in a form of self-imposed lockdown.
The power dynamic here is merely a biological progression of what we feel when some malignant cyber-force zeros in on our laptop computer and takes control of it, holding us hostage.
If you are a regular consumer of the corporate news media this unprecedented national public health crisis is being covered through the partisan prism over the incompetence and malevolence of the current occupant of the Oval Office, Donald Trump.
What is being avoided meticulously is any broader and essential discussion about how this precarious planetary moment is a gift to us from late-stage vulture capitalism, which rents our national government as it subordinates the accumulation of wealth over every other human endeavor — including public health.
To start the coronavirus meltdown narrative with Trump's efforts to deliberately play down the risks we faced, which hobbled the U.S. response and will lead to potentially thousands of deaths, is to miss the reality that this systemic failure has been decades in the making.
Subjugation of labor
As the concentration of wealth accelerated and the income gap opened up to a canyon, the balance of political power tilted increasingly to the forces of capital, costing organized labor its leverage. Over that time the world was increasingly made safer for U.S. multinationals who successfully played labor markets off of each other as they captured the regulatory and taxation regimes of sovereign nations.
Everything was measured and governed by what encouraged economic growth and the amassing of wealth. Other vital spheres, from the environment to the public health, became secondary to the private pursuit of profit. Consider how hard it was to overcome the entrenched interests of the tobacco industry to provide the public health warnings on cigarettes.
After the Second World War in the early fifties, over a third of the U.S. workforce was represented by a labor union. Though unions have had their issues with corruption, on the whole they offer countervailing pressure to the potential predations of capitalism.
By the time President Reagan fired all of the Air Traffic Controllers (PATCO) in 1981, organized labor represented just a fifth of American workers. By 2019, it was just barely over 10 percent.
What has followed as a consequence is the massive growth of a contingent workforce hovering by the phone or checking their email to see if they have a "gig" or work for the day. This ability of capital to so greatly limit its social contract with workers creates a race to the bottom and leaves tens of millions without health care, unemployment or disability insurance.
It also puts employers and small businesses at a distinct competitive disadvantage if they choose to provide those basic benefits to their employees.
This is where there is an intersection with labor's marginal circumstance and our current national crisis —in which so many Americans will hesitate to get tested for coronavirus or stay home if they are sick. Millions upon millions of Americans cannot afford the expense or the loss of wages; they have absolutely no safety net in the event the test comes back positive and they are sidelined without work for 14 days, much less left with a hospital bill.
The essential role of labor unions as a countervailing pressure against the predations of unfettered capital is most clearly apparent in the airline industry, which is ground zero for many pandemics including this one.
Unions in the public interest
John Samuelsen is the president of the Transport Workers Union International (TWU) that represents 150,000 members in the airline, railroad, transit, university, utilities and service sector.
Last week, TWU had to back up the decision by a flight crew for a major national air carrier to refuse the orders they were given to go right back to work after they had successfully removed a passenger who had disclosed to crew after his flight landed that he had the coronavirus.
As reported by the Daily News, a Long Island man flew from New York to Florida while he had a test pending for the coronavirus. Upon landing in West Palm Beach, he got the call informing him of his status.
"Our crew facilitated the passenger's removal in a very sophisticated way that limited everyone's potential exposure out the back door of the plane with the help of medical professionals that escorted him off the flight," said Samuelsen. "But the crew was ordered back to work by the air carrier to crew up another flight and they rightfully refused because they knew they were now potentially carriers of the virus."
He continued. "They were still in shock and understandably concerned about their own health and when they were ordered to get back on another flight, they said no. The carrier had said the crew could work because they were asymptomatic and that's when the union stepped in."
Samuelsen recounted how, after the union's intervention, elected officials called the air carrier, as did the Daily News.
"We negotiated a package for the crew that guaranteed their economic security with paid sick leave. Ironically, in the process of doing what was right by our members we helped preserve the public health, which was the original goal of the flight crew. Without the union. we would have had another few planes loads of hundreds of unsuspecting members of the public exposed to the virus."
As Samuelsen sees it, proposals that were considered as radical ideas pre-coronavirus, like Senator Bernie Sander's universal health care plan or former presidential candidate Andrew Yang's proposal for a universal basic income, are no longer radical.
"Can you imagine how much less anxiety all American workers would feel right now if things like this were already in place," he said. "It would be a 365 day-a-year economic stimulus plan."
Public health versus private profit?
Such a realignment of the balance of power, where private capital's interest and the public interest could be potentially reconciled in the face of something like our current existential crisis, is already happening elsewhere on the planet.
Professor Richard Wolff is an economist who teaches at the New School. He says there is no better example of harmonizing these tensions then in China and South Korea, which have gotten their public and private sectors to collaborate in the face of the current pandemic.
"Look at the percentage of the population that has been tested in these two places and you can see the results of the close coordination between the government and the private sector which we don't have, and our testing numbers reflect that," he said.
Wolff says that the current crisis brings into sharp relief the fundamental divergence between American capitalism and the public health. "There was just no profit incentive for the big drug companies to produce a million of these kinds of tests," he added.
He continued: "Looking at the Center for Disease Control's own press releases we see as of Jan. 17 they publicly acknowledged they were following this virus in China . . . . what we have seen since is this ad hoc, last-minute, under-the-gun response with one eye looking out for the interests of the profit making medical industrial complex and the other eye looking out for the re-election of the President."
If there is a silver lining in the coronavirus moment, it is that it can serve as a teachable moment for our entire civilization. It can help us muster the will to make the lifestyle and economic changes required to face up to the challenge of global warming.
The real global threat to 21st century freedom is authoritarian capitalism — not democratic socialism
Peter Bloom / Common Dreams - alternet
March 1, 2020
Only days after firmly establishing himself as the clear Democratic nominee frontrunner with a decisive victory in the Nevada caucus last week, Bernie Sanders found himself mired in a fresh controversy. In a widely watched and shared primetime interview he appeared to partially support recently deceased former Cuban leader Fidel Castro, condemning his authoritarianism while praising his mass literacy campaign and health program. Whatever the historical veracity of these arguments, it raised fears again of Sanders supposed “communist” sympathies as a self-described “democratic socialist.”
The onslaught by Republicans and establishment Democrats was as swift as it was predictable. Florida Democrats were particularly strong in their criticisms. Rep. Debbie Mucarsel-Powel (D-Fla.) tweeted “as the first South American immigrant member of Congress who proudly represents thousands of Cuban Americans, I find Senator Bernie Sanders’ comments on Castro’s Cuba absolutely unacceptable.”
The larger worry is that this will be a preview of the general election if Sanders is the nominee. According to conventional thinking, the chance to stop Trump will be halted in its tracks by a Republican-led “red scare.” However, it also offers Sanders an opportunity to fundamentally change the debate to show that the biggest threat to freedom is capitalist oligarchy and militarism not progressives or socialism.
Beyond Damage Control
The obvious and understandable first instinct of the Sanders campaign is to go into damage control mode. In a town hall following the interview, Sanders reiterated once again his rejection of authoritarianism of all types while still highlighting the benefits of mass literacy campaigns—proclaiming “truth is truth.” This commitment to freedom is backed up by his 100% legislative score from the ACLU and the fact that he is the only candidate to completely reject the Patriot Act.
Further, Sanders has sought to shift the discussion into a larger one about the dangers of right-wing authoritarianism, often backed by U.S. imperialism past and present. At the last debate before the South Caroline primary, he declared: “Occasionally it might be good idea to be honest about American foreign policy, and that includes the fact that America has overthrown governments all over the world in Chile and Guatemala in Iran.” While the effects of this tactic remains ambiguous, it represents a substantive and strategically important attempt to put into question the actual cause of authoritarianism both at home and abroad.
It is almost gospel in mainstream U.S. political discourse that socialism and Communism are the greatest threats to liberty. Yet the actual historical record suggests otherwise. While recognizing the death and misery caused by past totalitarian Communist regimes, too often ignored is the role of the free market for spreading oligarchy, dictatorship, and illiberalism across the world. If Sanders wants to win the nomination and generation election, he must go beyond damage control and show progressive values and his brand of democratic socialism is the best defense against such tyranny.
The Global Threat of Authoritarian Capitalism
A huge problem, in this respect, is the narrowness of traditional U.S. popular understandings of authoritarianism and fascism—and the distinctions between such terms as socialism, democratic socialism, and communism. Mounting fears of a Trump dictatorship, for instance, have brought renewed historical attention to the rise of Hitler and the Nazis. Tellingly, the emphasis has been on the increase in mass intolerance (especially anti-Semitism) and even the “authoritarian personality” both of which are thought to have resonances with the present day situation. While all these factors had a role to play, conveniently forgotten is how economic and social elites supported Nazism to protect their own wealth and status.
This holds strong lessons for our own times. The encroachment of fascism is being enabled through the funding and at times direct political support of the 1% defending their privileges by seemingly any means necessary. The are willing to do whatever they can to protect the upward redistribution of wealth to the rich following decades of neoliberalism. Indeed, we are now confronted with the troubling prospect of a U.S. election between two billionaires—one who has mused that it might be nice to be “President for Life” and another whose campaign merchandise trumpets the need to “bring in the boss.”
Fundamentally, it points to the wider danger corporations and the very wealthy pose to the very survival of democracy and civil liberties. Internally, they have eroded democratic institutions such as union based collective bargaining and idolised the top down dictator like leadership of the “CEO politician”. The scourge of private prisons, moreover, reveals the desire by these conglomerates to profit off the lessening of our freedom and human rights. Internationally, the U.S. continues to undermine democracies that do not serve its corporate interests ranging from Honduras to the Ukraine to Haiti.
This speaks to the broader rise of the 21st century authoritarian capitalism. It reveals the willingness and enhanced ability for governments and corporations to work together to defend the “free market” against social unrest and demands for greater equality and justice.
The Real Danger to Freedom
Again and again Sanders is being attacked as a socialist and by association a friend of totalitarianism. The question instead should be how corporate-funded Democrats and Republicans will be able to stave off the threat of “authoritarian capitalism” despite being primarily funded by the very autocrats who most benefit from and promote it. Indeed, how can they answer for their support for a market system that seems to incetivize and without serious socialist safeguards leads naturally too increased economic repression, political oppression, and military intervention?
To his credit, Sanders has in the past laid out his own foreign policy division that explicitly stresses the global danger of oligarchy to democracy. In a 2017 speech he proclaimed:
Inequality, corruption, oligarchy and authoritarianism are inseparable. They must be understood as part of the same system, and fought in the same way. Around the world we have witnessed the rise of demagogues who once in power use their positions to loot the state of its resources. These kleptocrats, like Putin in Russia, use divisiveness and abuse as a tool for enriching themselves and those loyal to them.
This is the precise argument he must continue to make not just for his own political survival but democracy and freedom worldwide. The real danger to freedom in the 21st century is authoritarian capitalism not democratic socialism and this election is a choice once more for a new generation between “socialism and barbarianism.”
The onslaught by Republicans and establishment Democrats was as swift as it was predictable. Florida Democrats were particularly strong in their criticisms. Rep. Debbie Mucarsel-Powel (D-Fla.) tweeted “as the first South American immigrant member of Congress who proudly represents thousands of Cuban Americans, I find Senator Bernie Sanders’ comments on Castro’s Cuba absolutely unacceptable.”
The larger worry is that this will be a preview of the general election if Sanders is the nominee. According to conventional thinking, the chance to stop Trump will be halted in its tracks by a Republican-led “red scare.” However, it also offers Sanders an opportunity to fundamentally change the debate to show that the biggest threat to freedom is capitalist oligarchy and militarism not progressives or socialism.
Beyond Damage Control
The obvious and understandable first instinct of the Sanders campaign is to go into damage control mode. In a town hall following the interview, Sanders reiterated once again his rejection of authoritarianism of all types while still highlighting the benefits of mass literacy campaigns—proclaiming “truth is truth.” This commitment to freedom is backed up by his 100% legislative score from the ACLU and the fact that he is the only candidate to completely reject the Patriot Act.
Further, Sanders has sought to shift the discussion into a larger one about the dangers of right-wing authoritarianism, often backed by U.S. imperialism past and present. At the last debate before the South Caroline primary, he declared: “Occasionally it might be good idea to be honest about American foreign policy, and that includes the fact that America has overthrown governments all over the world in Chile and Guatemala in Iran.” While the effects of this tactic remains ambiguous, it represents a substantive and strategically important attempt to put into question the actual cause of authoritarianism both at home and abroad.
It is almost gospel in mainstream U.S. political discourse that socialism and Communism are the greatest threats to liberty. Yet the actual historical record suggests otherwise. While recognizing the death and misery caused by past totalitarian Communist regimes, too often ignored is the role of the free market for spreading oligarchy, dictatorship, and illiberalism across the world. If Sanders wants to win the nomination and generation election, he must go beyond damage control and show progressive values and his brand of democratic socialism is the best defense against such tyranny.
The Global Threat of Authoritarian Capitalism
A huge problem, in this respect, is the narrowness of traditional U.S. popular understandings of authoritarianism and fascism—and the distinctions between such terms as socialism, democratic socialism, and communism. Mounting fears of a Trump dictatorship, for instance, have brought renewed historical attention to the rise of Hitler and the Nazis. Tellingly, the emphasis has been on the increase in mass intolerance (especially anti-Semitism) and even the “authoritarian personality” both of which are thought to have resonances with the present day situation. While all these factors had a role to play, conveniently forgotten is how economic and social elites supported Nazism to protect their own wealth and status.
This holds strong lessons for our own times. The encroachment of fascism is being enabled through the funding and at times direct political support of the 1% defending their privileges by seemingly any means necessary. The are willing to do whatever they can to protect the upward redistribution of wealth to the rich following decades of neoliberalism. Indeed, we are now confronted with the troubling prospect of a U.S. election between two billionaires—one who has mused that it might be nice to be “President for Life” and another whose campaign merchandise trumpets the need to “bring in the boss.”
Fundamentally, it points to the wider danger corporations and the very wealthy pose to the very survival of democracy and civil liberties. Internally, they have eroded democratic institutions such as union based collective bargaining and idolised the top down dictator like leadership of the “CEO politician”. The scourge of private prisons, moreover, reveals the desire by these conglomerates to profit off the lessening of our freedom and human rights. Internationally, the U.S. continues to undermine democracies that do not serve its corporate interests ranging from Honduras to the Ukraine to Haiti.
This speaks to the broader rise of the 21st century authoritarian capitalism. It reveals the willingness and enhanced ability for governments and corporations to work together to defend the “free market” against social unrest and demands for greater equality and justice.
The Real Danger to Freedom
Again and again Sanders is being attacked as a socialist and by association a friend of totalitarianism. The question instead should be how corporate-funded Democrats and Republicans will be able to stave off the threat of “authoritarian capitalism” despite being primarily funded by the very autocrats who most benefit from and promote it. Indeed, how can they answer for their support for a market system that seems to incetivize and without serious socialist safeguards leads naturally too increased economic repression, political oppression, and military intervention?
To his credit, Sanders has in the past laid out his own foreign policy division that explicitly stresses the global danger of oligarchy to democracy. In a 2017 speech he proclaimed:
Inequality, corruption, oligarchy and authoritarianism are inseparable. They must be understood as part of the same system, and fought in the same way. Around the world we have witnessed the rise of demagogues who once in power use their positions to loot the state of its resources. These kleptocrats, like Putin in Russia, use divisiveness and abuse as a tool for enriching themselves and those loyal to them.
This is the precise argument he must continue to make not just for his own political survival but democracy and freedom worldwide. The real danger to freedom in the 21st century is authoritarian capitalism not democratic socialism and this election is a choice once more for a new generation between “socialism and barbarianism.”
opinion: The Disaster of Utopian Engineering
Chris Hedges - truthdig
...The ideology of neoliberalism, which makes no economic sense and requires a willful ignorance of social and economic history, is the latest iteration of utopian projects. It posits that human society achieves its apex when individual entrepreneurial actions are free from government constraints. Society and culture should be dictated by the primacy of property rights, open trade — which sends manufacturing jobs to sweatshops in China and the global south and permits the flow of money across borders — and unfettered global markets. Labor and product markets should be deregulated and freed from government oversight. Global financiers should be given control of the economies of nation-states. The role of the state should be reduced to ensuring the quality and integrity of money, along with internal and external security, and to privatizing control of land, water, public utilities, education and government services such as intelligence and often the military, prisons, health care and the management of natural resources. Neoliberalism turns capitalism into a religious idol.
This utopian vision of the market, of course, bears no relationship to its reality. Capitalists hate free markets. They seek to control markets through mergers and acquisitions, buying out the competition. They saturate the culture with advertising to manipulate public tastes and consumption. They engage in price fixing. They build unassailable monopolies. They carry out schemes, without checks or oversight, of wild speculation, predation, fraud and theft. They enrich themselves through stock buybacks, Ponzi schemes, structured asset destruction through inflation, asset stripping and the imposition of crippling debt peonage on the public. In the United States, they saturate the electoral process with money, buying the allegiance of elected officials from the two ruling parties to legislate tax boycotts, demolish regulations and further consolidate their wealth and power.
These corporate capitalists spend hundreds of millions of dollars to fund organizations such as Business Roundtable and the Chamber of Commerce and think tanks such as The Heritage Foundation to sell the ideology to the public. They lavish universities with donations, as long as the universities pay fealty to the ruling ideology. They use their influence and wealth, as well as their ownership of media platforms, to transform the press into their mouthpiece. And they silence heretics or make it hard for them to find employment. Soaring stock values, rather than production, become the new measure of the economy. Everything is financialized and commodified.
These utopians mutilate the social fabric through deindustrialization, turning once-great manufacturing centers into decayed wastelands, and the middle and working class, the bulwark of any democracy, into a frustrated and enraged precariat. They “offshore” work, carry out massive layoffs and depress wages. They destroy unions. Neoliberalism — because it was always a class project and this was its goal — redistributes wealth upward. “Robbed of the protective covering of cultural institutions,” Karl Polanyi writes in his book “The Great Transformation,” human beings “perish from the effects of social exposure” and die as “victims of acute social dislocation.”
Neoliberalism, as a class project, is a brilliant success. Eight families now hold as much wealth as 50% of the world’s population. The world’s 500 richest people in 2019 added $12 trillion to their assets, while nearly half of all Americans had no savings and nearly 70% could not have come up with $1,000 in an emergency without going into debt. David Harvey calls this “accumulation by dispossession.” This neoliberal assault, antagonistic to all forms of social solidarity that put restraints on amassing capital, has obliterated the self-corrective democratic mechanisms that once made incremental and piecemeal reform possible. It has turned human beings and the natural world into commodities to be exploited until exhaustion or collapse. The ruling elites’ slavish devotion to corporate profit and the accumulation of wealth by the global oligarchy means they are unwilling or incapable of addressing perhaps the greatest existential crisis facing the human species — the climate emergency.
---
Unfettered capitalism, as Karl Marx pointed out, destroys the so-called free market. It is hostile to the values and traditions of a capitalist democracy. Capitalism’s final stage, Marx wrote, is marked by the pillage of the systems and structures that make capitalism possible. It is not capitalism at all. The arms industry, for example, with its official $612 billion defense authorization bill — a figure that ignores numerous other military expenditures tucked away in other budgets, masking the fact that our real expenditure on national security expenses is over $1 trillion a year — has gotten the government to commit to spending $348 billion over the next decade to modernize our nuclear weapons and build 12 new Ohio-class nuclear submarines, estimated at $8 billion each. We spend some $100 billion a year on intelligence —read surveillance — and 70% of that money goes to private contractors such as Booz Allen Hamilton, which gets 99% of its revenues from the U.S. government. We are the largest exporters of arms in the world.
The fossil fuel industry swallows up $5.3 trillion a year worldwide in hidden costs to keep burning fossil fuels, according to the International Monetary Fund. This money, the IMF notes, is in addition to the $492 billion in direct subsidies offered by governments around the world through write-offs, write-downs and land-use loopholes.
---
The pharmaceutical and insurance corporations that manage our for-profit health care industry extracted $812 billion from Americans in 2017. This represents more than one-third (34.2%) of total expenditures for doctor visits, hospitals, long-term care and health insurance. If we had a public health system, such as in Canada, it would save us $600 billion in costs in a single year, according to a report by Physicians for a National Health Plan. Health administration costs in 2017 were more than fourfold higher per capita in the U.S. than in Canada ($2,479 versus $551 per person), the group notes. Canada implemented a single-payer “Medicare for All” system in 1962. In 2017, Americans spent $844 per person on insurers’ overhead. Canadians spent $146.
Neoliberalism cannot be defended as more innovative or more efficient. It has not spread democracy, and by orchestrating unprecedented levels of income inequality and political stagnation has vomited up demagogues and authoritarian regimes that falsely promise vengeance against ruling elites who betrayed the people. Our democracy under this assault has been replaced with meaningless political theater.
As the academics Benjamin Page and Martin Gilens detailed in their exhaustive 2017 study “Democracy in America?”:
the best evidence indicates that the wishes of ordinary Americans [have] little or no impact on the making of federal government policy. Wealthy individuals and organized interest groups—especially business corporations—have … much more political clout. … [T]he general public [is] … virtually powerless. … The will of majorities is … thwarted by the affluent and the well-organized, who block popular policy proposals and enact special favors for themselves. … Majorities of Americans favor specific policies designed to deal with such problems as climate change, gun violence, an untenable immigration system, inadequate public schools, and crumbling bridges and highways. … Large majorities of America favor various programs to help provide jobs, increase wages, help the unemployed, provide universal medical insurance, ensure decent retirement pensions, and pay for such programs with progressive taxes. Most Americans also want to cut “corporate welfare.” Yet the wealthy, business groups, and structural gridlock have mostly blocked such new policies. …
This utopian vision of the market, of course, bears no relationship to its reality. Capitalists hate free markets. They seek to control markets through mergers and acquisitions, buying out the competition. They saturate the culture with advertising to manipulate public tastes and consumption. They engage in price fixing. They build unassailable monopolies. They carry out schemes, without checks or oversight, of wild speculation, predation, fraud and theft. They enrich themselves through stock buybacks, Ponzi schemes, structured asset destruction through inflation, asset stripping and the imposition of crippling debt peonage on the public. In the United States, they saturate the electoral process with money, buying the allegiance of elected officials from the two ruling parties to legislate tax boycotts, demolish regulations and further consolidate their wealth and power.
These corporate capitalists spend hundreds of millions of dollars to fund organizations such as Business Roundtable and the Chamber of Commerce and think tanks such as The Heritage Foundation to sell the ideology to the public. They lavish universities with donations, as long as the universities pay fealty to the ruling ideology. They use their influence and wealth, as well as their ownership of media platforms, to transform the press into their mouthpiece. And they silence heretics or make it hard for them to find employment. Soaring stock values, rather than production, become the new measure of the economy. Everything is financialized and commodified.
These utopians mutilate the social fabric through deindustrialization, turning once-great manufacturing centers into decayed wastelands, and the middle and working class, the bulwark of any democracy, into a frustrated and enraged precariat. They “offshore” work, carry out massive layoffs and depress wages. They destroy unions. Neoliberalism — because it was always a class project and this was its goal — redistributes wealth upward. “Robbed of the protective covering of cultural institutions,” Karl Polanyi writes in his book “The Great Transformation,” human beings “perish from the effects of social exposure” and die as “victims of acute social dislocation.”
Neoliberalism, as a class project, is a brilliant success. Eight families now hold as much wealth as 50% of the world’s population. The world’s 500 richest people in 2019 added $12 trillion to their assets, while nearly half of all Americans had no savings and nearly 70% could not have come up with $1,000 in an emergency without going into debt. David Harvey calls this “accumulation by dispossession.” This neoliberal assault, antagonistic to all forms of social solidarity that put restraints on amassing capital, has obliterated the self-corrective democratic mechanisms that once made incremental and piecemeal reform possible. It has turned human beings and the natural world into commodities to be exploited until exhaustion or collapse. The ruling elites’ slavish devotion to corporate profit and the accumulation of wealth by the global oligarchy means they are unwilling or incapable of addressing perhaps the greatest existential crisis facing the human species — the climate emergency.
---
Unfettered capitalism, as Karl Marx pointed out, destroys the so-called free market. It is hostile to the values and traditions of a capitalist democracy. Capitalism’s final stage, Marx wrote, is marked by the pillage of the systems and structures that make capitalism possible. It is not capitalism at all. The arms industry, for example, with its official $612 billion defense authorization bill — a figure that ignores numerous other military expenditures tucked away in other budgets, masking the fact that our real expenditure on national security expenses is over $1 trillion a year — has gotten the government to commit to spending $348 billion over the next decade to modernize our nuclear weapons and build 12 new Ohio-class nuclear submarines, estimated at $8 billion each. We spend some $100 billion a year on intelligence —read surveillance — and 70% of that money goes to private contractors such as Booz Allen Hamilton, which gets 99% of its revenues from the U.S. government. We are the largest exporters of arms in the world.
The fossil fuel industry swallows up $5.3 trillion a year worldwide in hidden costs to keep burning fossil fuels, according to the International Monetary Fund. This money, the IMF notes, is in addition to the $492 billion in direct subsidies offered by governments around the world through write-offs, write-downs and land-use loopholes.
---
The pharmaceutical and insurance corporations that manage our for-profit health care industry extracted $812 billion from Americans in 2017. This represents more than one-third (34.2%) of total expenditures for doctor visits, hospitals, long-term care and health insurance. If we had a public health system, such as in Canada, it would save us $600 billion in costs in a single year, according to a report by Physicians for a National Health Plan. Health administration costs in 2017 were more than fourfold higher per capita in the U.S. than in Canada ($2,479 versus $551 per person), the group notes. Canada implemented a single-payer “Medicare for All” system in 1962. In 2017, Americans spent $844 per person on insurers’ overhead. Canadians spent $146.
Neoliberalism cannot be defended as more innovative or more efficient. It has not spread democracy, and by orchestrating unprecedented levels of income inequality and political stagnation has vomited up demagogues and authoritarian regimes that falsely promise vengeance against ruling elites who betrayed the people. Our democracy under this assault has been replaced with meaningless political theater.
As the academics Benjamin Page and Martin Gilens detailed in their exhaustive 2017 study “Democracy in America?”:
the best evidence indicates that the wishes of ordinary Americans [have] little or no impact on the making of federal government policy. Wealthy individuals and organized interest groups—especially business corporations—have … much more political clout. … [T]he general public [is] … virtually powerless. … The will of majorities is … thwarted by the affluent and the well-organized, who block popular policy proposals and enact special favors for themselves. … Majorities of Americans favor specific policies designed to deal with such problems as climate change, gun violence, an untenable immigration system, inadequate public schools, and crumbling bridges and highways. … Large majorities of America favor various programs to help provide jobs, increase wages, help the unemployed, provide universal medical insurance, ensure decent retirement pensions, and pay for such programs with progressive taxes. Most Americans also want to cut “corporate welfare.” Yet the wealthy, business groups, and structural gridlock have mostly blocked such new policies. …
Off the radar: U.S. CEOs' jet perks add millions to corporate tax bills
Tim McLaughlin - reuters
DECEMBER 2, 2019
BOSTON (Reuters) - As U.S. corporate jet use approaches pre-financial crisis levels and chief executives take an increasing number of personal trips on the company tab, many investors are being kept in the dark about the true cost of the perk.
For the S&P 500 companies that pay for their CEOs to use corporate jets for private trips, the estimated median value of that flying climbed 11 percent last year to $107,286 from $96,532 in 2017, according to the latest available figures from compensation research firm Equilar Inc. That is up 27 percent from $84,636 in 2007, the year before the financial crisis.
This is taxable income for executives. The estimates are often based on what a first-class seat would have cost on a commercial flight rather than on the true, much higher cost of using a corporate jet.
But not only are companies left to pay the full cost of those flights, which can be for anything from family vacations to trips to major sports events or a commute from a distant family home, but they can also find that their tax bills can be significantly higher because of lost deductions.
That is because the U.S. Internal Revenue Service has limited a company’s deductions on personal aircraft use to the estimated valuation of the executives’ flights.
As a result, companies forfeit a long list of tax deductions for the time the jets are used for personal trips, including pilots’ salaries, maintenance costs, insurance, aircraft depreciation and finance charges. Companies usually can deduct the full cost of these expenses when planes are used for business flights.
Exacerbating the issue, U.S. President Donald Trump’s 2017 Tax Cuts and Jobs Act eliminated deductions on two kinds of flights, said Ruth Wimer, a tax expert and partner at law firm Winston & Strawn LLP in Washington. They are for trips taken purely for business entertainment - such as a CEO taking clients to a golf tournament - and an executive’s use of a corporate jet to commute to work from his home, she said.
However, given that the U.S. Securities and Exchange Commission does not require disclosure of such lost deductions, investors are none the wiser.
U.S. business jet operations are on track to top 4.5 million arrivals and departures in 2019, the highest since 2007, according to U.S. Federal Aviation Administration data, though only a small percentage are by major company executives.
Popular perceptions of U.S. corporate jet use hit a nadir in 2008 as the financial crisis was worsening. That was when members of Congress blasted the CEOs of the three big U.S. automakers for flying to Washington on corporate jets to ask for financial help.
The fallout was so bad that in the terms of its bailout General Motors Co was initially barred from corporate jet use.
“But since then, the whole economy has turned around. The stock market is setting records and jet use has rebounded along with it,” said Nick Copley, president of SherpaReport.com, which analyzes private aviation trends.
GM is back to operating its own corporate aircraft, according to its disclosures.
‘HIDDEN ELEMENT OF EXECUTIVE PAY’
The true cost of corporate jets are a mystery for investors in many companies, though.
A Reuters analysis of proxy filings by companies in the S&P 500 found that only a handful detailed the value of lost deductions in their public filings.
Among the few to disclose was payments system and credit card company Visa Inc. Its lost deductions from the personal use of company jets by executives and their guests have more than quadrupled between 2016 and 2018, and totaled $4.8 million in its fiscal year to September 2018, according to the company’s last proxy statement.
Visa did not reply to messages seeking comment.
Another exception is cable and broadcast TV group Comcast Corp, which reported $8.8 million in disallowed deductions in 2018 on flights taken by its executives and guests.
Comcast declined to comment.
This is a hidden element of executive pay, said Dieter Waizenegger, executive director of CtW Investment Group, which represents union-sponsored pension funds with nearly 5 million members.
“Having a better sense of how expensive the C-suite is for the company is a very relevant number,” Waizenegger said. “If they aren’t disclosed, investors won’t know about these lost deductions.”
While the costs for Visa and Comcast, both with annual net earnings of more than $10 billion, may be a drop in the bucket, lost deductions for smaller companies can have a much bigger impact.
Earlier this year, San Francisco-based hedge fund Voce Capital Management LLC targeted disallowed tax deductions in its campaign to gain board seats at insurer Argo Group International Holdings Ltd.
The hedge fund argued the Bermuda-based insurance company, which had net income of $63.6 million in 2018, was hurting investors by racking up disallowed tax deductions from corporate jets “crisscrossing the globe at a dizzying pace.”
Argo declined to comment for this story. It has said previously that when its executives use corporate aircraft for personal trips they do so at their own expense. However, it does not disclose how that is calculated or detail any lost tax deductions as a result of personal travel.
Voce has not provided any estimates for lost tax deductions. It did not reply to messages seeking comment.
However, it did outline in a statement earlier this year what it said “most ordinary people would consider the trip of a lifetime,” by then Argo CEO Mark Watson and his family on an Argo Gulfstream jet during the 2017 Christmas holidays.
The trip began in San Antonio, Texas, with stops in Bermuda, New York, Copenhagen and the Malabar Coast of India, Jaipur in northern India, Amsterdam, and then back to Texas over a three-week period.
The company said in October the SEC was investigating Argo’s disclosures about executive compensation. Within a few weeks, the company announced Watson’s departure.
For the S&P 500 companies that pay for their CEOs to use corporate jets for private trips, the estimated median value of that flying climbed 11 percent last year to $107,286 from $96,532 in 2017, according to the latest available figures from compensation research firm Equilar Inc. That is up 27 percent from $84,636 in 2007, the year before the financial crisis.
This is taxable income for executives. The estimates are often based on what a first-class seat would have cost on a commercial flight rather than on the true, much higher cost of using a corporate jet.
But not only are companies left to pay the full cost of those flights, which can be for anything from family vacations to trips to major sports events or a commute from a distant family home, but they can also find that their tax bills can be significantly higher because of lost deductions.
That is because the U.S. Internal Revenue Service has limited a company’s deductions on personal aircraft use to the estimated valuation of the executives’ flights.
As a result, companies forfeit a long list of tax deductions for the time the jets are used for personal trips, including pilots’ salaries, maintenance costs, insurance, aircraft depreciation and finance charges. Companies usually can deduct the full cost of these expenses when planes are used for business flights.
Exacerbating the issue, U.S. President Donald Trump’s 2017 Tax Cuts and Jobs Act eliminated deductions on two kinds of flights, said Ruth Wimer, a tax expert and partner at law firm Winston & Strawn LLP in Washington. They are for trips taken purely for business entertainment - such as a CEO taking clients to a golf tournament - and an executive’s use of a corporate jet to commute to work from his home, she said.
However, given that the U.S. Securities and Exchange Commission does not require disclosure of such lost deductions, investors are none the wiser.
U.S. business jet operations are on track to top 4.5 million arrivals and departures in 2019, the highest since 2007, according to U.S. Federal Aviation Administration data, though only a small percentage are by major company executives.
Popular perceptions of U.S. corporate jet use hit a nadir in 2008 as the financial crisis was worsening. That was when members of Congress blasted the CEOs of the three big U.S. automakers for flying to Washington on corporate jets to ask for financial help.
The fallout was so bad that in the terms of its bailout General Motors Co was initially barred from corporate jet use.
“But since then, the whole economy has turned around. The stock market is setting records and jet use has rebounded along with it,” said Nick Copley, president of SherpaReport.com, which analyzes private aviation trends.
GM is back to operating its own corporate aircraft, according to its disclosures.
‘HIDDEN ELEMENT OF EXECUTIVE PAY’
The true cost of corporate jets are a mystery for investors in many companies, though.
A Reuters analysis of proxy filings by companies in the S&P 500 found that only a handful detailed the value of lost deductions in their public filings.
Among the few to disclose was payments system and credit card company Visa Inc. Its lost deductions from the personal use of company jets by executives and their guests have more than quadrupled between 2016 and 2018, and totaled $4.8 million in its fiscal year to September 2018, according to the company’s last proxy statement.
Visa did not reply to messages seeking comment.
Another exception is cable and broadcast TV group Comcast Corp, which reported $8.8 million in disallowed deductions in 2018 on flights taken by its executives and guests.
Comcast declined to comment.
This is a hidden element of executive pay, said Dieter Waizenegger, executive director of CtW Investment Group, which represents union-sponsored pension funds with nearly 5 million members.
“Having a better sense of how expensive the C-suite is for the company is a very relevant number,” Waizenegger said. “If they aren’t disclosed, investors won’t know about these lost deductions.”
While the costs for Visa and Comcast, both with annual net earnings of more than $10 billion, may be a drop in the bucket, lost deductions for smaller companies can have a much bigger impact.
Earlier this year, San Francisco-based hedge fund Voce Capital Management LLC targeted disallowed tax deductions in its campaign to gain board seats at insurer Argo Group International Holdings Ltd.
The hedge fund argued the Bermuda-based insurance company, which had net income of $63.6 million in 2018, was hurting investors by racking up disallowed tax deductions from corporate jets “crisscrossing the globe at a dizzying pace.”
Argo declined to comment for this story. It has said previously that when its executives use corporate aircraft for personal trips they do so at their own expense. However, it does not disclose how that is calculated or detail any lost tax deductions as a result of personal travel.
Voce has not provided any estimates for lost tax deductions. It did not reply to messages seeking comment.
However, it did outline in a statement earlier this year what it said “most ordinary people would consider the trip of a lifetime,” by then Argo CEO Mark Watson and his family on an Argo Gulfstream jet during the 2017 Christmas holidays.
The trip began in San Antonio, Texas, with stops in Bermuda, New York, Copenhagen and the Malabar Coast of India, Jaipur in northern India, Amsterdam, and then back to Texas over a three-week period.
The company said in October the SEC was investigating Argo’s disclosures about executive compensation. Within a few weeks, the company announced Watson’s departure.
The monopolization of milk
Claire Kelloway / Washington Monthly - alternet
November 21, 2019
Earlier this year, both The New York Times and National Public Radio reported that Chinese retaliatory tariffs in Trump’s trade war were accelerating the loss of U.S. dairy farms. In the first half of 2019, dairy exports to China were down 54 percent from the previous year, at a time when dairy farmers rely on exports to market a surplus of milk that’s driven milk prices below most farmers’ break-even point for nearly four years.
Meanwhile, Trump’s Secretary of Agriculture has told dairy farmers that the only way to stay afloat in these tough times is to get big, or get out, while promising new markets for U.S. dairy products in the yet-to-be-ratified U.S.-Mexico-Canada agreement.
These declarations reflect a powerful conventional wisdom about the plight of America’s farmers, namely, that agricultural consolidation is inevitable, and that American farmers must export their way to profitability. But that conventional wisdom, which is shared even by some leading voices in the Democratic Party, is seriously out of focus. Although trariffs and technology play a role, they are hardly the main factors in the dairy crisis.
One critical reason dairy farms feel pressure to consolidate is because milk retailers, buyers, and, processors have spent years consolidating around them—and neither the Trump nor previous administrations have done much to stop it. Now, a merger between major milk monopolists threatens to deal another blow to ailing dairy farmers, and its not clear if federal enforcers will do anything to stop it.
Last week, America’s largest dairy processor, Dean Foods, filed for Chapter 11 bankruptcy and announced that it was in advanced talks to sell to America’s largest cooperative, Dairy Farmers of America (DFA). These two goliaths are a case study in how unchecked mergers beget abusive monopolies that harm both farmers and consumers. But because Dean has filed for bankruptcy, this otherwise questionable union could avoid antitrust scrutiny under the failing firm defense, which allows for mergers when one firm would otherwise go out of business. In other words, two monopolists may soon join forces to create an even bigger monopoly.
DFA is the amalgamate of a three-way cooperative merger in late 1997 and Dean Foods rose to prominence by buying up regional milk brands since the 1980s. Today, DFA has a near monopoly in many regional markets, and controls roughly 30 percent of all raw milk in the U.S., handling more than two and a half times as much milk as the next largest co-op. At the same time, Dean sells 12 percent of all fluid milk and claimed to be five times larger than its next competitor in 2013.
As detailed by Leah Douglas in the Washington Monthly last year, these giants have been accused of colluding against the interest of dairy farmers and consumers for years. Two groups of farmers have settled multi-million-dollar antitrust claims with DFA, and another has spun-off a case to seek more damages in court. On the consumer end, Dean Foods reached an antitrust settlement with grocery chain Food Lion in 2017 over allegations thatthe firm avoided competing with DFA-owned National Dairy Holdings to raise retail milk prices.
A Dean Foods-DFA merger would make this otherwise illegal collusion perfectly legal, since our antitrust laws permit collusion once it occurs within a single corporation. “The more DFA expands downstream into fluid milk processing the greater the leverage it’s going to have in a variety of ways,” Peter Carstensen, a Professor Emeritus at the University of Wisconsin Law School and former Department of Justice antitrust attorney, told me. So-called “‘tacit’coordination becomes much more possible because … that will be an internal corporate [decision].”
The merger means that dairy farmers have even fewer processors competing to buy their milk. “As a producer, I’m concerned about DFA making this large a purchase,” said Charles Untz, a farmer and former DFA board member. “It puts a lot of the control of the fluid market in the hands of one co-op. That sends a little fear as far as the milk price goes, because they can literally dictate what they pay for milk.”
What’s more, the deal would exacerbate DFA’s conflict of interest between its processing operations and its members, since processing operations reap higher profits the less they pay farmers for milk. Proponents argue that investing in processing ultimately helps DFA farmers by guaranteeing markets and eliminating the middleman, but Carstensen argues that a fair share of processing profits “never seems to make it to the farmers.”
To make matters worse, DFA takes further cuts from farmers’ milk checks to pay for its processing business under the justification that these investments help farmers in the long-run. A recent report by the Government Accountability Office found that these investment withholdings lower farmers short-term earnings.
As a former DFA board member, Untz stands behind some of the group’s processing investments, but worries that this deal with Dean could put farmers at financial risk given its substantial size. “It’s easy to buy something when it’s going broke, it’s [harder] when you got to pay for it,” he said. “It would have to be paid for by the farmers and that’s a pretty scary situation after making a lot of other purchases.”
If DFA operated the way co-ops are supposed to, its farmer owners would be able to decide if a major deal like acquiring Dean Foods was worth the risk. But because of its vast size and entrenched management, farmers have little control—an issue highlighted in the GAO’s recent report. Ironically, a third of Dean’s bondhodlers who have hired an attorney to advocate for alternative bankruptcy solutions may have a better chance at blocking the sale.
Should a Dean and DFA deal go forward, the fate of farmers will ultimately be left to the Justice Department, which may or may not embrace the faulty logic of the failing firm defense.
Carstensen, for his part, argues that there are other ways to restructure Dean’s business without selling wholesale to DFA. “My preference would be to break Dean up, seperate out more facilities, and sell to separate operators,” he told me. In fact, Carstensen sees Dean’s relentless efforts to expand as part of the reason for its bankruptcy, calling into question the very notion that bigger is better.
Because, it turns out, the consolidation of American agriculture is not a universally efficient or inevitable result of market forces. It is the product of policies that permit and reward monopoly power, regardless of the risks to producers, consumers, and even, ironically, to monopolists themselves.
Meanwhile, Trump’s Secretary of Agriculture has told dairy farmers that the only way to stay afloat in these tough times is to get big, or get out, while promising new markets for U.S. dairy products in the yet-to-be-ratified U.S.-Mexico-Canada agreement.
These declarations reflect a powerful conventional wisdom about the plight of America’s farmers, namely, that agricultural consolidation is inevitable, and that American farmers must export their way to profitability. But that conventional wisdom, which is shared even by some leading voices in the Democratic Party, is seriously out of focus. Although trariffs and technology play a role, they are hardly the main factors in the dairy crisis.
One critical reason dairy farms feel pressure to consolidate is because milk retailers, buyers, and, processors have spent years consolidating around them—and neither the Trump nor previous administrations have done much to stop it. Now, a merger between major milk monopolists threatens to deal another blow to ailing dairy farmers, and its not clear if federal enforcers will do anything to stop it.
Last week, America’s largest dairy processor, Dean Foods, filed for Chapter 11 bankruptcy and announced that it was in advanced talks to sell to America’s largest cooperative, Dairy Farmers of America (DFA). These two goliaths are a case study in how unchecked mergers beget abusive monopolies that harm both farmers and consumers. But because Dean has filed for bankruptcy, this otherwise questionable union could avoid antitrust scrutiny under the failing firm defense, which allows for mergers when one firm would otherwise go out of business. In other words, two monopolists may soon join forces to create an even bigger monopoly.
DFA is the amalgamate of a three-way cooperative merger in late 1997 and Dean Foods rose to prominence by buying up regional milk brands since the 1980s. Today, DFA has a near monopoly in many regional markets, and controls roughly 30 percent of all raw milk in the U.S., handling more than two and a half times as much milk as the next largest co-op. At the same time, Dean sells 12 percent of all fluid milk and claimed to be five times larger than its next competitor in 2013.
As detailed by Leah Douglas in the Washington Monthly last year, these giants have been accused of colluding against the interest of dairy farmers and consumers for years. Two groups of farmers have settled multi-million-dollar antitrust claims with DFA, and another has spun-off a case to seek more damages in court. On the consumer end, Dean Foods reached an antitrust settlement with grocery chain Food Lion in 2017 over allegations thatthe firm avoided competing with DFA-owned National Dairy Holdings to raise retail milk prices.
A Dean Foods-DFA merger would make this otherwise illegal collusion perfectly legal, since our antitrust laws permit collusion once it occurs within a single corporation. “The more DFA expands downstream into fluid milk processing the greater the leverage it’s going to have in a variety of ways,” Peter Carstensen, a Professor Emeritus at the University of Wisconsin Law School and former Department of Justice antitrust attorney, told me. So-called “‘tacit’coordination becomes much more possible because … that will be an internal corporate [decision].”
The merger means that dairy farmers have even fewer processors competing to buy their milk. “As a producer, I’m concerned about DFA making this large a purchase,” said Charles Untz, a farmer and former DFA board member. “It puts a lot of the control of the fluid market in the hands of one co-op. That sends a little fear as far as the milk price goes, because they can literally dictate what they pay for milk.”
What’s more, the deal would exacerbate DFA’s conflict of interest between its processing operations and its members, since processing operations reap higher profits the less they pay farmers for milk. Proponents argue that investing in processing ultimately helps DFA farmers by guaranteeing markets and eliminating the middleman, but Carstensen argues that a fair share of processing profits “never seems to make it to the farmers.”
To make matters worse, DFA takes further cuts from farmers’ milk checks to pay for its processing business under the justification that these investments help farmers in the long-run. A recent report by the Government Accountability Office found that these investment withholdings lower farmers short-term earnings.
As a former DFA board member, Untz stands behind some of the group’s processing investments, but worries that this deal with Dean could put farmers at financial risk given its substantial size. “It’s easy to buy something when it’s going broke, it’s [harder] when you got to pay for it,” he said. “It would have to be paid for by the farmers and that’s a pretty scary situation after making a lot of other purchases.”
If DFA operated the way co-ops are supposed to, its farmer owners would be able to decide if a major deal like acquiring Dean Foods was worth the risk. But because of its vast size and entrenched management, farmers have little control—an issue highlighted in the GAO’s recent report. Ironically, a third of Dean’s bondhodlers who have hired an attorney to advocate for alternative bankruptcy solutions may have a better chance at blocking the sale.
Should a Dean and DFA deal go forward, the fate of farmers will ultimately be left to the Justice Department, which may or may not embrace the faulty logic of the failing firm defense.
Carstensen, for his part, argues that there are other ways to restructure Dean’s business without selling wholesale to DFA. “My preference would be to break Dean up, seperate out more facilities, and sell to separate operators,” he told me. In fact, Carstensen sees Dean’s relentless efforts to expand as part of the reason for its bankruptcy, calling into question the very notion that bigger is better.
Because, it turns out, the consolidation of American agriculture is not a universally efficient or inevitable result of market forces. It is the product of policies that permit and reward monopoly power, regardless of the risks to producers, consumers, and even, ironically, to monopolists themselves.
The plutocrats’ most effective secret weapon is the U.S. tax code
Jim Hightower / Creators Syndicate - alternet
November 12, 2019
I should start this homily on inequality by distinguishing income from wealth. Income is your annual wages or salary, as well as your earnings from a business, pension or government benefits such as Social Security, etc.
As the average U.S. worker’s real wages have stagnated for more than a decade, income disparity has become enormous. The bottom 90% of us average $30,000 a year, while the top 0.01% and 0.001% (about 1,400 taxpayers) rake in average annual incomes of $35.1 million and $152 million, respectively.
Meanwhile, even mediocre CEOs pocket many millions a year, and the greediest Wall Street hucksters annually amass more than $1 billion in booty. Until relatively recently, the ethical standard was for workers to gain a proportionate share of the income growth we generate. But in the last dozen years, the rich have been gobbling more and more of the total income pie, so the bottom half of Americans now get only 14%.
As gross as income inequality is, though, it’s dwarfed by the lesser-known wealth disparity that has engulfed our land, mocking our egalitarian pretensions.
Wealth is your net worth, the total financial value of every asset you own: your home(s), business, stocks, cash, real estate, cars, yachts, jewels, gold, art, toys and … well, everything, minus debts.
The rapidly widening divide between the rich and the rest of us is neither natural nor accidental. During the past half-century, myriad corporate and governmental decisions — from labor law to campaign finance regulations — have methodically slanted America’s economic and political systems so that money and power flow from the many to the few. The plutocrats’ most effective and least reported-on tool is America’s tax structure.
For most of us — workers, professionals, farmers, small-business folks, etc. — income taxes are generally straightforward. The rich are different. Multimillionaires and billionaires don’t usually draw the bulk of their fabulous incomes from paychecks but from their enormous financial assets, i.e., their wealth. This inherited or accumulated wealth generates “capital income” — and further wealth — with little or no work by the asset holder.
As the Center for American Progress’ excellent report “Ending Special Tax Treatment for the Very Wealthy” details, the moral basis of U.S. tax policy has been perverted since the 1980s by legislative and regulatory twists that tax work but let these massive accretions of wealth skate by virtually untouched. Thus, the ultrarich, who benefit the most from our country’s economy and public infrastructure, pay the smallest proportion of their incomes to sustain it.
Today’s tax laws offer a carnival of loop-the-loops, whirligigs and other tax-free joyrides for those who’ve stockpiled capital income. For example, while you might pay the top tax rate of 37% on ordinary income, someone selling a capital asset like stock pays only 20% tax on income from that sale.
Nearly 70% of such capital gains are made by America’s richest 1%, who reap trillions of dollars a year in savings through such special tax treatments. This windfall allows them to amass and concentrate even more of America’s wealth in their sheltered accounts and buy the political clout to push through laws that the great majority oppose — such as 2017’s Trump-McConnell trillion-dollar tax giveaway to the rich. (Facing overwhelming public opposition, the GOP wrote the bill behind closed doors, allowed no public hearings and rammed it into law on a partisan vote.)
And round and round it goes … unless and until we stop it.
Read the Center for American Progress’ report.
As the average U.S. worker’s real wages have stagnated for more than a decade, income disparity has become enormous. The bottom 90% of us average $30,000 a year, while the top 0.01% and 0.001% (about 1,400 taxpayers) rake in average annual incomes of $35.1 million and $152 million, respectively.
Meanwhile, even mediocre CEOs pocket many millions a year, and the greediest Wall Street hucksters annually amass more than $1 billion in booty. Until relatively recently, the ethical standard was for workers to gain a proportionate share of the income growth we generate. But in the last dozen years, the rich have been gobbling more and more of the total income pie, so the bottom half of Americans now get only 14%.
As gross as income inequality is, though, it’s dwarfed by the lesser-known wealth disparity that has engulfed our land, mocking our egalitarian pretensions.
Wealth is your net worth, the total financial value of every asset you own: your home(s), business, stocks, cash, real estate, cars, yachts, jewels, gold, art, toys and … well, everything, minus debts.
- Startling statistic: 1 in 5 Americans have zero net worth — or less. Many of us owe more than we own and, living paycheck to paycheck, can’t get ahead to build a nest egg.
- More startling statistic: U.S. wealth disparity is the greatest of any advanced economy in the world, with the richest 1% holding more of our nation’s wealth than the bottom 90% of us.
- Even more startling: Just three Americans — Jeff Bezos (Amazon), Bill Gates (Microsoft) and Warren Buffett (Berkshire Hathaway) — possess more personal wealth ($248 billion) than the entire bottom half. Yes, more than 165 million of us combined.
The rapidly widening divide between the rich and the rest of us is neither natural nor accidental. During the past half-century, myriad corporate and governmental decisions — from labor law to campaign finance regulations — have methodically slanted America’s economic and political systems so that money and power flow from the many to the few. The plutocrats’ most effective and least reported-on tool is America’s tax structure.
For most of us — workers, professionals, farmers, small-business folks, etc. — income taxes are generally straightforward. The rich are different. Multimillionaires and billionaires don’t usually draw the bulk of their fabulous incomes from paychecks but from their enormous financial assets, i.e., their wealth. This inherited or accumulated wealth generates “capital income” — and further wealth — with little or no work by the asset holder.
As the Center for American Progress’ excellent report “Ending Special Tax Treatment for the Very Wealthy” details, the moral basis of U.S. tax policy has been perverted since the 1980s by legislative and regulatory twists that tax work but let these massive accretions of wealth skate by virtually untouched. Thus, the ultrarich, who benefit the most from our country’s economy and public infrastructure, pay the smallest proportion of their incomes to sustain it.
Today’s tax laws offer a carnival of loop-the-loops, whirligigs and other tax-free joyrides for those who’ve stockpiled capital income. For example, while you might pay the top tax rate of 37% on ordinary income, someone selling a capital asset like stock pays only 20% tax on income from that sale.
Nearly 70% of such capital gains are made by America’s richest 1%, who reap trillions of dollars a year in savings through such special tax treatments. This windfall allows them to amass and concentrate even more of America’s wealth in their sheltered accounts and buy the political clout to push through laws that the great majority oppose — such as 2017’s Trump-McConnell trillion-dollar tax giveaway to the rich. (Facing overwhelming public opposition, the GOP wrote the bill behind closed doors, allowed no public hearings and rammed it into law on a partisan vote.)
And round and round it goes … unless and until we stop it.
Read the Center for American Progress’ report.
OP-ED ECONOMY & LABOR
Neither Democrats Nor Republicans Will Admit the Problem Is Capitalism Itself
BY Richard D. Wolff, Truthout
PUBLISHED September 30, 2019
Leaders around the world increasingly worry about the next capitalist recession (or economic downturn) now looming globally. In Europe’s strongest economy, Germany, a recession has already arrived in all but formal naming. U.S. manufacturing has declined for the last two quarters. Negative interest rates (where lenders pay borrowers to safely make a loan) are an increasingly widespread sign. Another sign is that lenders charge higher interest rates for short-term vs. long-term loans because they fear an impending recession will make borrowers’ ability to repay riskier in the short term. Anxieties about safety reflect the sense of an impending economic crash.
Trump is perhaps the most worried among world leaders fearing recession. Having made the economy a central issue for his re-election effort, he needs the U.S. economy to be in “great” shape. He repeats the few statistics available to support such claims. Yet Trump’s fears of a looming recession and its possible consequences for his 2020 re-election are also evident. He recently branded the man he made chair of the U.S. central bank, Jerome Powell, an “enemy” like the leader of China. Powell’s refusal to cut interest rates drastically – a classic tool to slow or postpone a recession – was Trump’s target. Trump recognizes, as other leaders do, that their political futures hinge on the next recession: on when it hits, how bad it gets, and how long it lasts. Recessions have always haunted the leaders of countries where capitalism is the prevailing system.
The basic cause of current and past downturns in capitalist economies is the system itself. It has been plagued by and subjected its people to the plague of cyclically recurring economic downturns for the last 250 years. They happen on average every four to seven years, although particular conditions of time and place can occasionally make the period longer or shorter. They happen wherever in the world the capitalist system came to prevail. As that prevalence became global, so too have the cyclical downturns.
Profit-driven market capitalism has mechanisms and incentives that generate growth but also repeatedly produce imbalances in the supplies and demands for inputs and outputs. Those imbalances cause price movements that eventually and adversely affect profits. Capitalists then cut back their investments resulting in the unemployment and reduced production that comprise and define recessions and downturns. The downturns offset the initial imbalances enabling capitalism’s cycle to repeat.
The recessions are thus not instances of market failures nor instances when markets function imperfectly because of government interventions. Rather, recessions and downturns are how market capitalism “corrects” the imbalances it also causes. In other words, market capitalism has mechanisms of self-healing alongside the mechanisms that make it sick. Those who live in capitalist systems repeatedly suffer through both mechanisms so long as that system prevails.
Capitalism’s downturns hurt political leaders’ careers because of their effects on the well-being of the masses of people. Widespread losses of jobs and businesses mean many mortgages go unpaid and homes get foreclosed. Parents cannot pay for children to finish higher education. People forego needed medical care leading to later, more costly treatment. Stresses from lost jobs and incomes strain family relations often to breaking points. As all levels of government suffer reduced tax revenues, budget deficits and public debts rise and public services decline just when they are needed more than ever because of the economic downturn. Popular dissatisfaction at downturns and all their effects usually spills over to dissatisfaction with politicians and parties in power when they occur.
Capitalist downturns also provoke thoughtful victims and observers to ask two questions: Why does it happen and what might be done to stop it from happening? Will those questions extend to asking why this system reproduces such downturns so recurringly throughout its history everywhere? Will the process of answering include a discussion of the systemic nature and causes of downturns? Will capitalism itself then become a target for criticism? Might that lead to the really big question lurking in such criticism: Can we do better than capitalism with a system that does not have or need recurring downturns?
Most political leaders of countries where capitalism is the prevailing system know, consciously or not, that their job descriptions include a commandment: Thou shalt not challenge or even question capitalism as a system. Instinctively, self-preservation drives them to find and focus public attention elsewhere. Plausible other, nonsystemic causes need to be defined and denounced. If needed, suitable scapegoats – notably those that have proved useful in the past – need to be blamed. Thus, Trump focuses attacks on the Federal Reserve as the short-run scapegoat (its failure to drop interest rates as far and fast as Trump wants will “cause” recession). Likewise, he attacks Democrats and mass media for exaggerating recession risks purposely to bring the recession that will undermine Trump’s re-election.
Similarly, Boris Johnson in the U.K. blames the recession looming there on the European Union (EU), on a delayed Brexit from the EU, on immigrants, and the other usual targets and scapegoats for his Conservative Party. Likewise, many other European leaders follow suit, blaming existing or looming recessions on immigration, on U.S.-China economic warfare, on Brexit, and so on. Much the same leadership patterns appear elsewhere.
It is important to notice how leaders carefully, consistently avoid any critique of the capitalist system and its internal structure for generating yet another economic downturn in its long, long history of doing that repeatedly. That absence speaks very loudly once you note it. The lack of a systemic critique soon becomes routinized. The public is, in effect, trained to see only the external, conjunctural conditions of, and influences, on economic downturns. The taboo applied generally to systemic critique in capitalism then covers the public discussion of capitalism’s regular, socially disruptive and immensely costly systemic instability.
Instead of systemic critique, we often get overheated debates over alternative policies to limit, contain and moderate recessions. Conservatives generally have wanted to limit government countercyclical intervention in the economy. They favor minimalism and monetary actions (changing interest rates, quantity of money in circulation). Liberals and social democrats favor larger government interventions with a focus more on fiscal policy (changing taxes and government spending). Thus today, Trump hammers the Fed to get lower interest rates but waffles on a large infrastructure spending program that Democrats prefer, for example.
Far less important than the details of these debates is their shared function. Both sides keep the public from discussing the systemic causes of recurring downturns. Both sides avoid any discussion of systemic change as a logical part of a rational response to the latest or impending downturn. However nuanced or mathematicized the professional economics literature on countercyclical policies, like the popular discourses, it too, keeps system change off the agenda for discussion, let alone policy analyses or prescriptions.
Rarely, a few debaters defensively acknowledge that systemic causes and changes might belong logically in the discussion of capitalist downturns. But doing so, they assure their audiences, would be simply “unrealistic.” That is because monetary and fiscal policies fall within what politicians can do, while system change does not. In short, “realism” is their defense for the limitations they place on their studies of and responses to capitalist downturns. But that defense fails. Why and how is it “realistic” to limit public and professional debate and discussion to policies that never end or stop the problem they purport to address?
In the U.S., every president since at least Franklin D. Roosevelt promised the American people that he would not only end the capitalist downturn his administration faced, but also that his policies would make sure such downturns would not afflict succeeding generations. No president could or did keep that promise.
Current Democratic candidates for president, including Elizabeth Warren and Bernie Sanders on the left, have not yet gone beyond the combination of fiscal and monetary anti-recessionary policies captured under the phrase “New Deal.” While proposals for a Green New Deal address environmental as well as anti-recessionary needs, they once again hesitate to go beyond them to propose basic system change.
Genuine “realism” would admit those policies’ failures and open the public and professional discussion of capitalism’s recurring recessions to systemic critiques and solutions involving systemic change.
Trump is perhaps the most worried among world leaders fearing recession. Having made the economy a central issue for his re-election effort, he needs the U.S. economy to be in “great” shape. He repeats the few statistics available to support such claims. Yet Trump’s fears of a looming recession and its possible consequences for his 2020 re-election are also evident. He recently branded the man he made chair of the U.S. central bank, Jerome Powell, an “enemy” like the leader of China. Powell’s refusal to cut interest rates drastically – a classic tool to slow or postpone a recession – was Trump’s target. Trump recognizes, as other leaders do, that their political futures hinge on the next recession: on when it hits, how bad it gets, and how long it lasts. Recessions have always haunted the leaders of countries where capitalism is the prevailing system.
The basic cause of current and past downturns in capitalist economies is the system itself. It has been plagued by and subjected its people to the plague of cyclically recurring economic downturns for the last 250 years. They happen on average every four to seven years, although particular conditions of time and place can occasionally make the period longer or shorter. They happen wherever in the world the capitalist system came to prevail. As that prevalence became global, so too have the cyclical downturns.
Profit-driven market capitalism has mechanisms and incentives that generate growth but also repeatedly produce imbalances in the supplies and demands for inputs and outputs. Those imbalances cause price movements that eventually and adversely affect profits. Capitalists then cut back their investments resulting in the unemployment and reduced production that comprise and define recessions and downturns. The downturns offset the initial imbalances enabling capitalism’s cycle to repeat.
The recessions are thus not instances of market failures nor instances when markets function imperfectly because of government interventions. Rather, recessions and downturns are how market capitalism “corrects” the imbalances it also causes. In other words, market capitalism has mechanisms of self-healing alongside the mechanisms that make it sick. Those who live in capitalist systems repeatedly suffer through both mechanisms so long as that system prevails.
Capitalism’s downturns hurt political leaders’ careers because of their effects on the well-being of the masses of people. Widespread losses of jobs and businesses mean many mortgages go unpaid and homes get foreclosed. Parents cannot pay for children to finish higher education. People forego needed medical care leading to later, more costly treatment. Stresses from lost jobs and incomes strain family relations often to breaking points. As all levels of government suffer reduced tax revenues, budget deficits and public debts rise and public services decline just when they are needed more than ever because of the economic downturn. Popular dissatisfaction at downturns and all their effects usually spills over to dissatisfaction with politicians and parties in power when they occur.
Capitalist downturns also provoke thoughtful victims and observers to ask two questions: Why does it happen and what might be done to stop it from happening? Will those questions extend to asking why this system reproduces such downturns so recurringly throughout its history everywhere? Will the process of answering include a discussion of the systemic nature and causes of downturns? Will capitalism itself then become a target for criticism? Might that lead to the really big question lurking in such criticism: Can we do better than capitalism with a system that does not have or need recurring downturns?
Most political leaders of countries where capitalism is the prevailing system know, consciously or not, that their job descriptions include a commandment: Thou shalt not challenge or even question capitalism as a system. Instinctively, self-preservation drives them to find and focus public attention elsewhere. Plausible other, nonsystemic causes need to be defined and denounced. If needed, suitable scapegoats – notably those that have proved useful in the past – need to be blamed. Thus, Trump focuses attacks on the Federal Reserve as the short-run scapegoat (its failure to drop interest rates as far and fast as Trump wants will “cause” recession). Likewise, he attacks Democrats and mass media for exaggerating recession risks purposely to bring the recession that will undermine Trump’s re-election.
Similarly, Boris Johnson in the U.K. blames the recession looming there on the European Union (EU), on a delayed Brexit from the EU, on immigrants, and the other usual targets and scapegoats for his Conservative Party. Likewise, many other European leaders follow suit, blaming existing or looming recessions on immigration, on U.S.-China economic warfare, on Brexit, and so on. Much the same leadership patterns appear elsewhere.
It is important to notice how leaders carefully, consistently avoid any critique of the capitalist system and its internal structure for generating yet another economic downturn in its long, long history of doing that repeatedly. That absence speaks very loudly once you note it. The lack of a systemic critique soon becomes routinized. The public is, in effect, trained to see only the external, conjunctural conditions of, and influences, on economic downturns. The taboo applied generally to systemic critique in capitalism then covers the public discussion of capitalism’s regular, socially disruptive and immensely costly systemic instability.
Instead of systemic critique, we often get overheated debates over alternative policies to limit, contain and moderate recessions. Conservatives generally have wanted to limit government countercyclical intervention in the economy. They favor minimalism and monetary actions (changing interest rates, quantity of money in circulation). Liberals and social democrats favor larger government interventions with a focus more on fiscal policy (changing taxes and government spending). Thus today, Trump hammers the Fed to get lower interest rates but waffles on a large infrastructure spending program that Democrats prefer, for example.
Far less important than the details of these debates is their shared function. Both sides keep the public from discussing the systemic causes of recurring downturns. Both sides avoid any discussion of systemic change as a logical part of a rational response to the latest or impending downturn. However nuanced or mathematicized the professional economics literature on countercyclical policies, like the popular discourses, it too, keeps system change off the agenda for discussion, let alone policy analyses or prescriptions.
Rarely, a few debaters defensively acknowledge that systemic causes and changes might belong logically in the discussion of capitalist downturns. But doing so, they assure their audiences, would be simply “unrealistic.” That is because monetary and fiscal policies fall within what politicians can do, while system change does not. In short, “realism” is their defense for the limitations they place on their studies of and responses to capitalist downturns. But that defense fails. Why and how is it “realistic” to limit public and professional debate and discussion to policies that never end or stop the problem they purport to address?
In the U.S., every president since at least Franklin D. Roosevelt promised the American people that he would not only end the capitalist downturn his administration faced, but also that his policies would make sure such downturns would not afflict succeeding generations. No president could or did keep that promise.
Current Democratic candidates for president, including Elizabeth Warren and Bernie Sanders on the left, have not yet gone beyond the combination of fiscal and monetary anti-recessionary policies captured under the phrase “New Deal.” While proposals for a Green New Deal address environmental as well as anti-recessionary needs, they once again hesitate to go beyond them to propose basic system change.
Genuine “realism” would admit those policies’ failures and open the public and professional discussion of capitalism’s recurring recessions to systemic critiques and solutions involving systemic change.
Here’s why Capitalism vs Socialism is a false choice
DAVID KORTEN, YES! MAGAZINE - COMMENTARY - raw story
05 MAY 2019 AT 01:25 ET
Economic power is—and always has been—the foundation of political power. Those who control the peoples’ means of living rule.
In a democracy, however, each person must have a voice in the control and management of the means of their living. That requires more than a vote expressing a preference for which establishment-vetted candidatewill be in power for the next few years.
My previous column, “Confronting the Great American Myth,” distinguished true democracy from government by the wealthy, a plutocracy. Contrary to popular belief, the U.S. Constitution was written by representatives of the new nation’s wealthy class to keep people like themselves in power.
On Jan. 4, the newly elected Democratic majority in the U.S. House of Representatives introduced HR1, the For the People Act of 2019. Its aim is to make voting easier, reduce the influence of big money, and curtail gerrymandering. Even before it was introduced, the champions of having rich people rule were falsely characterizing it as an attack on the freedom of speech of ordinary Americans.
The provisions of HR1 represent an important step in a transition from the plutocracy we have to the democracy most Americans want. Unfortunately, political gridlock assures that HR1 has no chance of becoming law until at least after the 2020 election. Yet the popular yearning for democracy reflected in that bill makes this a propitious moment for a serious conversation about what a true democracy might look like and why it would be a good idea.
We stand at an epic choice point for our nation and for humanity. The plutocracy now in place has put us on a path to self-extinction—a future with no winners, rich or poor. We must now seek a path that restores the health of Earth’s regenerative systems while securing equity, material sufficiency, peace, and spiritual abundance for all—exactly the opposite of the plutocrats’ drive to secure the power, privilege, and material excess for themselves. This makes democracy far more than just a good idea; it is now an imperative.
The power of plutocracy depends on keeping the people divided against each other along gender, racial, religious, or other fault lines. The goal is to divert our attention from themselves so that they can maintain their power and continue to amass wealth.
Champions of plutocracy would also have us believe that we must choose between two options: capitalism (private ownership and management) or socialism (government ownership and management). They prefer we not notice that in their most familiar forms, both capitalism and socialism feature an undemocratic concentration of control over the means of living in the hands of the few. Democracy is essential for either to work effectively for the benefit of all.
Plutocrats generally favor capitalism, because in the extreme form we now experience, it supports virtually unlimited concentrations of wealth and power. Its practitioners are also drawn by capitalism’s ideological claim that unregulated markets will assure that the presumed benefits of a growing economy will be shared by everyone, and so the rich need not bear any personal responsibility beyond maximizing their personal financial gain.
The critical economic and political question for humanity is not whether our means of living will be controlled by corporations or government, but whether control will be concentrated for the benefit of the few or dispersed, with benefits shared by everyone.
Support for the needed economic transition can come from many places. Just as people are not necessarily racist because they are White or misogynistic because they are male, people do not necessarily become plutocrats just because they are rich. Many wealthy people work actively for economic and political democracy and support radical wealth redistribution, including through support of progressive taxation and significant taxing of inherited wealth.
The political and economic democracy we seek cannot be easily characterized as either capitalist or socialist. It is a system of substantially self-reliant local economies composed of locally owned enterprises and community-secured safety nets with responsibilities shared by families, charities, and governments. Such a system facilitates self-organizing to create healthy, happy, and productive communities.
In our complex and interconnected world, this system will require national and global institutions responsive to the people’s will and well-being to support cooperation and sharing among communities, but the real power will be dispersed locally. There would be ample room for competition among local communities to be the most beautiful, healthy, democratic, creative, and generous. There is no place for colonizing the resources of others or for predatory corporations.
These communities will most likely feature cooperative and family ownership of businesses. They will also recognize the rights of nature and their shared responsibility to care for the commons and to share its gifts.
The rules of plutocracy evolved over thousands of years. We have far less time to come up with suitable rules for democratic alternatives. That search must quickly become a centerpiece of public discussion.
In a democracy, however, each person must have a voice in the control and management of the means of their living. That requires more than a vote expressing a preference for which establishment-vetted candidatewill be in power for the next few years.
My previous column, “Confronting the Great American Myth,” distinguished true democracy from government by the wealthy, a plutocracy. Contrary to popular belief, the U.S. Constitution was written by representatives of the new nation’s wealthy class to keep people like themselves in power.
On Jan. 4, the newly elected Democratic majority in the U.S. House of Representatives introduced HR1, the For the People Act of 2019. Its aim is to make voting easier, reduce the influence of big money, and curtail gerrymandering. Even before it was introduced, the champions of having rich people rule were falsely characterizing it as an attack on the freedom of speech of ordinary Americans.
The provisions of HR1 represent an important step in a transition from the plutocracy we have to the democracy most Americans want. Unfortunately, political gridlock assures that HR1 has no chance of becoming law until at least after the 2020 election. Yet the popular yearning for democracy reflected in that bill makes this a propitious moment for a serious conversation about what a true democracy might look like and why it would be a good idea.
We stand at an epic choice point for our nation and for humanity. The plutocracy now in place has put us on a path to self-extinction—a future with no winners, rich or poor. We must now seek a path that restores the health of Earth’s regenerative systems while securing equity, material sufficiency, peace, and spiritual abundance for all—exactly the opposite of the plutocrats’ drive to secure the power, privilege, and material excess for themselves. This makes democracy far more than just a good idea; it is now an imperative.
The power of plutocracy depends on keeping the people divided against each other along gender, racial, religious, or other fault lines. The goal is to divert our attention from themselves so that they can maintain their power and continue to amass wealth.
Champions of plutocracy would also have us believe that we must choose between two options: capitalism (private ownership and management) or socialism (government ownership and management). They prefer we not notice that in their most familiar forms, both capitalism and socialism feature an undemocratic concentration of control over the means of living in the hands of the few. Democracy is essential for either to work effectively for the benefit of all.
Plutocrats generally favor capitalism, because in the extreme form we now experience, it supports virtually unlimited concentrations of wealth and power. Its practitioners are also drawn by capitalism’s ideological claim that unregulated markets will assure that the presumed benefits of a growing economy will be shared by everyone, and so the rich need not bear any personal responsibility beyond maximizing their personal financial gain.
The critical economic and political question for humanity is not whether our means of living will be controlled by corporations or government, but whether control will be concentrated for the benefit of the few or dispersed, with benefits shared by everyone.
Support for the needed economic transition can come from many places. Just as people are not necessarily racist because they are White or misogynistic because they are male, people do not necessarily become plutocrats just because they are rich. Many wealthy people work actively for economic and political democracy and support radical wealth redistribution, including through support of progressive taxation and significant taxing of inherited wealth.
The political and economic democracy we seek cannot be easily characterized as either capitalist or socialist. It is a system of substantially self-reliant local economies composed of locally owned enterprises and community-secured safety nets with responsibilities shared by families, charities, and governments. Such a system facilitates self-organizing to create healthy, happy, and productive communities.
In our complex and interconnected world, this system will require national and global institutions responsive to the people’s will and well-being to support cooperation and sharing among communities, but the real power will be dispersed locally. There would be ample room for competition among local communities to be the most beautiful, healthy, democratic, creative, and generous. There is no place for colonizing the resources of others or for predatory corporations.
These communities will most likely feature cooperative and family ownership of businesses. They will also recognize the rights of nature and their shared responsibility to care for the commons and to share its gifts.
The rules of plutocracy evolved over thousands of years. We have far less time to come up with suitable rules for democratic alternatives. That search must quickly become a centerpiece of public discussion.
Here’s Exactly Who’s Profiting from the War on Yemen
And how the U.S. could stop weapon sales if it wanted to.
the fundamentals of slave-capitalism!!!
Here’s the big problem with American capitalism
MARSHALL AUERBACK, INDEPENDENT MEDIA INSTITUTE - COMMENTARY - raw story
18 DEC 2018 AT 09:14 ET
It’s part of the American experience to find yourself in an elevator, in an airplane terminal, or at home, looking at a screen with stock numbers whizzing by, and people yammering about how America is somewhere on the spectrum between wonderful or about to disintegrate because of a 5 percent swing in Boeing or Microsoft stock. How did we get to a national economic conversation that is dominated by chatter on the rise and fall of stocks, when it’s just a small part of economic life for most of the 300 million people who live in this country?
American-style shareholder capitalism, with its incessant focus on maximizing stock value, started gaining primacy over European/Japanese-style stakeholder capitalism in the 1980s. It was premised on a notion best epitomized by Milton Friedman that the only social responsibility of a corporation is to increase its profits, laying the groundwork for the idea that shareholders, being the owners and the main risk-bearing participants, ought therefore to receive the biggest rewards. Profits therefore should be generated first and foremost with a view toward maximizing the interests of shareholders, not the executives or managers who (according to the theory) were spending too much of their time, and the shareholders’ money, worrying about employees, customers, and the community at large. The economists who built on Friedman’s work, along with increasingly aggressive institutional investors, devised solutions to ensure the primacy of enhancing shareholder value, via the advocacy of hostile takeovers, the promotion of massive stock buybacks or repurchases (which increased the stock value), higher dividend payouts and, most importantly, the introduction of stock-based pay for top executives in order to align their interests to those of the shareholders. These ideas were influenced by the idea that corporate efficiency and profitability were impinged upon by archaic regulation and unionization, which, according to the theory, precluded the ability to compete globally.
While tying corporate decision-making and its performance to stock price to incentivize efficient resource allocation and productive transformations sounds superficially attractive, the champions of this theory never bothered to show how these outcomes could be achieved if shareholder capitalism was fully implemented. In fact, the historical experience has been abysmal. GM and GE, to cite two prominent examples, were once poster boys for the success of American capitalism. More recently, they are presumed to be speculative candidates for bankruptcy. They are but a symptom of the bigger problem. And there is a growing skepticism in the ability of American capitalism to deliver on its economic promise of prosperity.
In the 1980s, we were still at the embryonic stages of shareholder capitalism, and American institutional investors aggressively proselytized both domestically and abroad. During that time, when I was working as a fund manager in Japan, Toyota became a particularly prominent target, on the grounds that the company wasn’t using its substantial cash pile “productively.” The argument was made that the company’s management was maximizing their self-regarding interests over shareholder value. Holding onto the cash reserves was thought to be a mistake, lest managers be tempted to make unproductive investments. This despite that fact that by any traditional metric—profitability, market share, sales, return on investments—Toyota remained a remarkably successful company.
Backed by domestic institutions (particularly from their associated companies), Toyota’s management resisted the push of the foreign investors like myself, many of whom were leading the charge to distribute the company cash pile to shareholders. Toyota management made the seemingly anachronistic decision that the cash was best retained to invest in future lines and cope with changing market conditions, as well as retaining valuable and skilled employees, who were key to the company’s growing productivity and global sales success (even at a cost of some short-term harm to profitability). They also argued that elevating dividend payouts would derogate from needed research and development, which was required to retain the company’s edge over global competitors.
Given that Toyota has retained the ranking of most valuable car brand in the world six years running (in fact, number one in 11 of the 13 years in which the survey has been conducted), senior management’s strategy appears to have been vindicated. There is stable ownership and decision-making structure. Focus is on enterprise-specific skill development and cultivating capabilities in-house. Toyota consolidates product and its production process planning and ensures that sufficient training and equipment (pertaining to processes required for new products) are provided or developed in-house. It largely finances operations using its internal cash flow. Neither stock buybacks nor high-dividend payouts are the norm. In short, the company has developed a long-term development strategy that fuses innovation with high-quality, sustainable management practices that operate durably at scale for many millions of customers around the world.
By contrast, Professor William Lazonick’s seminal study, “Profits without Prosperity,” underscores the notion that top-level U.S. executives, whose incentives have been increasingly based on stock-based financial targets, have lost the ability to develop the innovative capabilities of an enterprise. Instead, spurred by the prospect of stock gains, the executives have channeled their focus toward “short-termist” achievement of targets (such as by giving out excessive loans to finance customers’ purchases to boost quarterly sales targets, as Detroit’s “Big Three” have done repeatedly), increasing share valuations and increasing the variable component of their compensation (by share repurchases). As a result, their enterprises have become financialized, and their balance sheets severely weakened. The shortcomings of the companies that have fallen victim to this trend have been masked by the performance of the company stock, in itself a mirage brought about by financial engineering to boost share prices, as Rana Foroohar has documented in her book, Makers and Takers.
The focus on short-termism has ultimately degraded the financial health of the corporations concerned, as well as cannibalizing future investment opportunities. As Lazonick pointed out, in many instances where U.S. executives have resorted to stock repurchases, payouts were well above the net income, and in many cases occurred even when the company wasn’t profitable; certainly, there was little correlation to company performance per se. Cash that could be deployed toward creating a better product line has instead been spent on stock buybacks, while the strategy of expanding loans to customers to purchase the underlying product effectively steals from future sales, as well as expanding corporate leverage. Another way companies catered to shareholder capitalism was by selling off capital-intensive, but cash flow-generative businesses, as Jack Welch did when he became CEO of GE and shifted the company focus away from sales of jet engines, nuclear reactors and mining equipment, instead building up GE Capital, which ultimately became another “too big to fail” financial behemoth (and has done much to contribute to GE’s deterioration).
Additionally, a deregulated labor market that allows for “costless” hiring or firing (“costless” only from the perspective of management, obviously, not labor) in reality has reinforced this short-termism and further degraded long-term corporate performance. Executives abuse the “benefits” of a largely deregulated labor market to sack workers with impunity, thereby generating the “free” cash flow that can be used instead for share repurchases, even as the company loses valuable labor expertise, which can generate future production bottlenecks.
One must also question the notion that the stock market is an efficient gauge of corporate performance, especially when management is prone to what Professor Bill Black calls “control fraud.” There is an asymmetry of information between corporate insiders and institutional shareholders, which means that putting a “price” on managerialism so as to discipline them if the management engages in unproductive investments is a fantasy. Exposed to the harsh light of reality, this is an especially absurd idea that only an economist could love, given the divergent time frames between institutional investors monitored on the basis of quarterly performance versus executives who must make investment decisions, the results of which may not be established for years. This is exacerbated by the ludicrous notion that dilettante fund managers, relatively unschooled in anything (other than MBA degrees that propagate concepts like maximizing shareholder value), could possibly be superior judges of corporate performance and allocators of capital against those who have literally learned the business from the factory floor up.
In the “downsize and distribute” regime of American shareholder capitalism, the labor force is downsized, certain operations are discontinued, and the cash retrieved from these processes is distributed rather than retaining and reinvesting in developing the productive capabilities. American executives have proven all too willing to disgorge cash annually on buybacks at the expense of identifying the investments in organization and technology that were needed to remain competitive in the industry in which they operated.
In contrast to Germany or Japan, real engineering has been replaced by financial engineering. This is what the doctrine of “shareholder value” has actually delivered: unproductive share buybacks, which manipulate short-term share price performance, even as it derogates from long-term research and development, engenders persistent short-termism in corporate decision-making, and induces value extraction, rather than value creation. All of this financial vandalism has created multiple economic crises, long recessions, growing inequality and decades of stagnant incomes for the average American worker. Shareholder value in truth has created no real value at all.
American-style shareholder capitalism, with its incessant focus on maximizing stock value, started gaining primacy over European/Japanese-style stakeholder capitalism in the 1980s. It was premised on a notion best epitomized by Milton Friedman that the only social responsibility of a corporation is to increase its profits, laying the groundwork for the idea that shareholders, being the owners and the main risk-bearing participants, ought therefore to receive the biggest rewards. Profits therefore should be generated first and foremost with a view toward maximizing the interests of shareholders, not the executives or managers who (according to the theory) were spending too much of their time, and the shareholders’ money, worrying about employees, customers, and the community at large. The economists who built on Friedman’s work, along with increasingly aggressive institutional investors, devised solutions to ensure the primacy of enhancing shareholder value, via the advocacy of hostile takeovers, the promotion of massive stock buybacks or repurchases (which increased the stock value), higher dividend payouts and, most importantly, the introduction of stock-based pay for top executives in order to align their interests to those of the shareholders. These ideas were influenced by the idea that corporate efficiency and profitability were impinged upon by archaic regulation and unionization, which, according to the theory, precluded the ability to compete globally.
While tying corporate decision-making and its performance to stock price to incentivize efficient resource allocation and productive transformations sounds superficially attractive, the champions of this theory never bothered to show how these outcomes could be achieved if shareholder capitalism was fully implemented. In fact, the historical experience has been abysmal. GM and GE, to cite two prominent examples, were once poster boys for the success of American capitalism. More recently, they are presumed to be speculative candidates for bankruptcy. They are but a symptom of the bigger problem. And there is a growing skepticism in the ability of American capitalism to deliver on its economic promise of prosperity.
In the 1980s, we were still at the embryonic stages of shareholder capitalism, and American institutional investors aggressively proselytized both domestically and abroad. During that time, when I was working as a fund manager in Japan, Toyota became a particularly prominent target, on the grounds that the company wasn’t using its substantial cash pile “productively.” The argument was made that the company’s management was maximizing their self-regarding interests over shareholder value. Holding onto the cash reserves was thought to be a mistake, lest managers be tempted to make unproductive investments. This despite that fact that by any traditional metric—profitability, market share, sales, return on investments—Toyota remained a remarkably successful company.
Backed by domestic institutions (particularly from their associated companies), Toyota’s management resisted the push of the foreign investors like myself, many of whom were leading the charge to distribute the company cash pile to shareholders. Toyota management made the seemingly anachronistic decision that the cash was best retained to invest in future lines and cope with changing market conditions, as well as retaining valuable and skilled employees, who were key to the company’s growing productivity and global sales success (even at a cost of some short-term harm to profitability). They also argued that elevating dividend payouts would derogate from needed research and development, which was required to retain the company’s edge over global competitors.
Given that Toyota has retained the ranking of most valuable car brand in the world six years running (in fact, number one in 11 of the 13 years in which the survey has been conducted), senior management’s strategy appears to have been vindicated. There is stable ownership and decision-making structure. Focus is on enterprise-specific skill development and cultivating capabilities in-house. Toyota consolidates product and its production process planning and ensures that sufficient training and equipment (pertaining to processes required for new products) are provided or developed in-house. It largely finances operations using its internal cash flow. Neither stock buybacks nor high-dividend payouts are the norm. In short, the company has developed a long-term development strategy that fuses innovation with high-quality, sustainable management practices that operate durably at scale for many millions of customers around the world.
By contrast, Professor William Lazonick’s seminal study, “Profits without Prosperity,” underscores the notion that top-level U.S. executives, whose incentives have been increasingly based on stock-based financial targets, have lost the ability to develop the innovative capabilities of an enterprise. Instead, spurred by the prospect of stock gains, the executives have channeled their focus toward “short-termist” achievement of targets (such as by giving out excessive loans to finance customers’ purchases to boost quarterly sales targets, as Detroit’s “Big Three” have done repeatedly), increasing share valuations and increasing the variable component of their compensation (by share repurchases). As a result, their enterprises have become financialized, and their balance sheets severely weakened. The shortcomings of the companies that have fallen victim to this trend have been masked by the performance of the company stock, in itself a mirage brought about by financial engineering to boost share prices, as Rana Foroohar has documented in her book, Makers and Takers.
The focus on short-termism has ultimately degraded the financial health of the corporations concerned, as well as cannibalizing future investment opportunities. As Lazonick pointed out, in many instances where U.S. executives have resorted to stock repurchases, payouts were well above the net income, and in many cases occurred even when the company wasn’t profitable; certainly, there was little correlation to company performance per se. Cash that could be deployed toward creating a better product line has instead been spent on stock buybacks, while the strategy of expanding loans to customers to purchase the underlying product effectively steals from future sales, as well as expanding corporate leverage. Another way companies catered to shareholder capitalism was by selling off capital-intensive, but cash flow-generative businesses, as Jack Welch did when he became CEO of GE and shifted the company focus away from sales of jet engines, nuclear reactors and mining equipment, instead building up GE Capital, which ultimately became another “too big to fail” financial behemoth (and has done much to contribute to GE’s deterioration).
Additionally, a deregulated labor market that allows for “costless” hiring or firing (“costless” only from the perspective of management, obviously, not labor) in reality has reinforced this short-termism and further degraded long-term corporate performance. Executives abuse the “benefits” of a largely deregulated labor market to sack workers with impunity, thereby generating the “free” cash flow that can be used instead for share repurchases, even as the company loses valuable labor expertise, which can generate future production bottlenecks.
One must also question the notion that the stock market is an efficient gauge of corporate performance, especially when management is prone to what Professor Bill Black calls “control fraud.” There is an asymmetry of information between corporate insiders and institutional shareholders, which means that putting a “price” on managerialism so as to discipline them if the management engages in unproductive investments is a fantasy. Exposed to the harsh light of reality, this is an especially absurd idea that only an economist could love, given the divergent time frames between institutional investors monitored on the basis of quarterly performance versus executives who must make investment decisions, the results of which may not be established for years. This is exacerbated by the ludicrous notion that dilettante fund managers, relatively unschooled in anything (other than MBA degrees that propagate concepts like maximizing shareholder value), could possibly be superior judges of corporate performance and allocators of capital against those who have literally learned the business from the factory floor up.
In the “downsize and distribute” regime of American shareholder capitalism, the labor force is downsized, certain operations are discontinued, and the cash retrieved from these processes is distributed rather than retaining and reinvesting in developing the productive capabilities. American executives have proven all too willing to disgorge cash annually on buybacks at the expense of identifying the investments in organization and technology that were needed to remain competitive in the industry in which they operated.
In contrast to Germany or Japan, real engineering has been replaced by financial engineering. This is what the doctrine of “shareholder value” has actually delivered: unproductive share buybacks, which manipulate short-term share price performance, even as it derogates from long-term research and development, engenders persistent short-termism in corporate decision-making, and induces value extraction, rather than value creation. All of this financial vandalism has created multiple economic crises, long recessions, growing inequality and decades of stagnant incomes for the average American worker. Shareholder value in truth has created no real value at all.
Capitalism Is Not the “Market System”
BY
Richard D. Wolff Truthout
With the Democratic Socialists of America now counting 48,000 people within its membership and socialist candidates such as Alexandria Ocasio-Cortez pushing for free universities and Medicare for All, Americans are once again discussing capitalism versus socialism. Fortunately, they are not doing so in the old Cold War manner of uncritically celebrating one while demonizing the other. Rather, it’s a debate over the choice Americans must make now between keeping capitalism or changing the system to some form of socialism. As debates often do, this debate awakens us to problems and differences in how we understand its basic terms. For clarity and to make progress in this important debate, we need to stop conflating “capitalism” with the market. This is done far too often and on all sides of the debate.
Markets are a means of distributing resources and products, goods and services. Quid pro quo exchange defines markets: one person offers to sell to another who offers to buy at a mutually agreed ratio that may or may not be mediated by money. To say that a market exists means that such an exchange system is what accomplishes distribution. To say that a market exists says nothing about how production is accomplished or how resources are converted into products. Capitalism, on the other hand, is a description of how the production of goods and services is organized, and how the participants relate to one another in the process of production. Thus conflating “capitalism” with “the market system” loses sight of the fact that markets can exist in relation to different systems of production.
We can get at this in other words. Markets were mechanisms of distribution in societies with very different production systems. For example, in economies based on the enslavement of people, resulting in a production system involving masters and slaves, “inputs” and “outputs” — including enslaved people — were often bought and sold in markets. We might then speak of slave markets: when a slave production system coexisted with a market distribution system.
If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system.
To take another example, feudal manors were production systems that juxtaposed lords and serfs. Since serfs were not slaves, no market in serfs existed. They were distributed via other, non-market systems. However, their non-human inputs and outputs could be distributed via markets, and in European feudalism often were distributed via market exchanges. Capitalist production systems – organized around the employer-employee (rather than the master-slave or lord-serf) relationship – could likewise coexist with market systems of distribution. Under capitalism, non-human inputs, labor power (the capacity to do labor), and outputs are all often distributed via market exchanges.
Thus it is confused to refer to capitalism as a “market system.” Market distribution systems vary in their specific qualities according to the different production systems and systems of exploitation with which they co-exist. Capitalist markets differ from slave markets, and both differ from feudal markets, but they are all markets. Moreover, markets usually coexist and interact with state apparatuses. Those interactions are marked with greater or lesser degrees of state interventions: from rigid regulation of exchanges all the way over to “free” trade or markets where regulation is minimized or absent. The state apparatus can also abolish the market system and replace it with an alternative system of distribution.
In that event, however, capitalism is not abolished because the market has been abolished. If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system. For the state to replace markets with some administrative (e.g., planned) system of distribution says nothing about the production system. The resources and products of a capitalist system of production can be distributed via more or less state-regulated markets or via non-market distribution systems. The same applies to the resources and products of slave and feudal production systems.
Why does it matter to differentiate markets and other distribution systems from production systems? The answer emerges from the recognition that most economic systems combine one or more production systems with one or more distribution systems. For a long time, the observers of such combinations – both celebrants and critics – have tended to conflate the two systems combined, as if they were one. Indeed, defining capitalism as “the market” or the “free market” system is precisely such a conflation.
Karl Marx went to considerable lengths to differentiate critiques of market exchange from his critique of capitalist production. He believed that major social problems of his time – inequality, cyclical instability, etc. – emerged from the capitalist production system as much or more than from the market system. He was a critic of both, but he kept the criticisms separate for basic reasons of analytical clarity and revolutionary strategy.
From capitalism’s beginnings, reformers have sought to soften its hard edges often by means of state interventions in markets. Minimum wages, maximum interest rates, progressive taxation, and so on are among their chosen mechanisms. More generally, reformers responded to capitalism’s profit-driven distribution of wealth by having the state redistribute that wealth according to non-capitalist (non-profit) criteria.
A more extreme criticism of markets displaced them in favor of other mechanisms of distributing resources and products such as centralized or decentralized state institutions charged with distribution, private institutions similarly charged, etc. However, if and when the production system continued to juxtapose employers and employees, all the different distribution systems discussed above – “free” market, regulated market, and non-market – coexist and interact with a capitalist production system.
To the extent that capitalism’s problems – inequality, instability (cycles/crises), etc. – stem in part from its production relationships, reforms focused exclusively on regulating or supplanting markets will not succeed in solving them. For example, Keynesian monetary policies (focused on raising or lowering the quantity of money in circulation and, correspondingly, interest rates) do not touch the employer-employee relationship, however much their variations redistribute wealth, regulate markets, or displace markets in favor of state-administered investment decisions. Likewise, Keynesian fiscal policies (raising or lowering taxes and government spending) do not address the employer-employee relationship.
Keynesian policies also never ended the cyclical instability of capitalism. The New Deal and European social democracy left capitalism in place in both state and private units (enterprises) of production notwithstanding their massive reform agendas and programs. They thereby left capitalist employers facing the incentives and receiving the resources (profits) to evade, weaken and eventually dissolve most of those programs.
It is far better not to distribute wealth unequally in the first place than to re-distribute it after to undo the inequality. For example, FDR proposed in 1944 that the government establish a maximum income alongside a minimum wage; that is one among the various ways inequality could be limited and thereby redistribution avoided. Efforts to redistribute encounter evasions, oppositions, and failures that compound the effects of unequal distribution itself. Social peace and cohesion are the victims of redistribution sooner or later. Reforming markets while leaving the relations/organization of capitalist production unchanged is like redistribution. Just as redistribution schemes fail to solve the problems rooted in distribution, market-focused reforms fail to solve the problems rooted in production.
Since 2008, capitalism has showed us all yet again its deep and unsolved problems of cyclical instability, deepening inequality and the injustices they both entail. Their persistence mirrors that of the capitalist organization of production. To successfully confront and solve the problems of economic cycles, income and wealth inequality, and so on, we need to go beyond the capitalist employer-employee system of production. The democratization of enterprises – transitioning from employer-employee hierarchies to worker cooperatives – is a key way available here and now to realize the change we need.
Worker coops democratically decide the distribution of income (wages, bonuses, benefits, profit shares, etc.) among their members. No small group of owners and the boards of directors they choose would, as in capitalist corporations, make such decisions. Thus, for example, it would be far less likely that a few individuals in a worker coop would earn millions while most others could not afford to send children to college. A democratic worker coop decision on the distribution of enterprise income would be far less unequal than what typifies capitalist enterprises. A socialism for the 21st century could and should include the transition from a capitalist to a worker-coop-based economic system as central to its commitments to less inequality and less social conflict over redistribution.
Markets are a means of distributing resources and products, goods and services. Quid pro quo exchange defines markets: one person offers to sell to another who offers to buy at a mutually agreed ratio that may or may not be mediated by money. To say that a market exists means that such an exchange system is what accomplishes distribution. To say that a market exists says nothing about how production is accomplished or how resources are converted into products. Capitalism, on the other hand, is a description of how the production of goods and services is organized, and how the participants relate to one another in the process of production. Thus conflating “capitalism” with “the market system” loses sight of the fact that markets can exist in relation to different systems of production.
We can get at this in other words. Markets were mechanisms of distribution in societies with very different production systems. For example, in economies based on the enslavement of people, resulting in a production system involving masters and slaves, “inputs” and “outputs” — including enslaved people — were often bought and sold in markets. We might then speak of slave markets: when a slave production system coexisted with a market distribution system.
If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system.
To take another example, feudal manors were production systems that juxtaposed lords and serfs. Since serfs were not slaves, no market in serfs existed. They were distributed via other, non-market systems. However, their non-human inputs and outputs could be distributed via markets, and in European feudalism often were distributed via market exchanges. Capitalist production systems – organized around the employer-employee (rather than the master-slave or lord-serf) relationship – could likewise coexist with market systems of distribution. Under capitalism, non-human inputs, labor power (the capacity to do labor), and outputs are all often distributed via market exchanges.
Thus it is confused to refer to capitalism as a “market system.” Market distribution systems vary in their specific qualities according to the different production systems and systems of exploitation with which they co-exist. Capitalist markets differ from slave markets, and both differ from feudal markets, but they are all markets. Moreover, markets usually coexist and interact with state apparatuses. Those interactions are marked with greater or lesser degrees of state interventions: from rigid regulation of exchanges all the way over to “free” trade or markets where regulation is minimized or absent. The state apparatus can also abolish the market system and replace it with an alternative system of distribution.
In that event, however, capitalism is not abolished because the market has been abolished. If productive enterprises remain structured around the employer-employee relationship, they remain capitalist with or without a coexisting market system. For the state to replace markets with some administrative (e.g., planned) system of distribution says nothing about the production system. The resources and products of a capitalist system of production can be distributed via more or less state-regulated markets or via non-market distribution systems. The same applies to the resources and products of slave and feudal production systems.
Why does it matter to differentiate markets and other distribution systems from production systems? The answer emerges from the recognition that most economic systems combine one or more production systems with one or more distribution systems. For a long time, the observers of such combinations – both celebrants and critics – have tended to conflate the two systems combined, as if they were one. Indeed, defining capitalism as “the market” or the “free market” system is precisely such a conflation.
Karl Marx went to considerable lengths to differentiate critiques of market exchange from his critique of capitalist production. He believed that major social problems of his time – inequality, cyclical instability, etc. – emerged from the capitalist production system as much or more than from the market system. He was a critic of both, but he kept the criticisms separate for basic reasons of analytical clarity and revolutionary strategy.
From capitalism’s beginnings, reformers have sought to soften its hard edges often by means of state interventions in markets. Minimum wages, maximum interest rates, progressive taxation, and so on are among their chosen mechanisms. More generally, reformers responded to capitalism’s profit-driven distribution of wealth by having the state redistribute that wealth according to non-capitalist (non-profit) criteria.
A more extreme criticism of markets displaced them in favor of other mechanisms of distributing resources and products such as centralized or decentralized state institutions charged with distribution, private institutions similarly charged, etc. However, if and when the production system continued to juxtapose employers and employees, all the different distribution systems discussed above – “free” market, regulated market, and non-market – coexist and interact with a capitalist production system.
To the extent that capitalism’s problems – inequality, instability (cycles/crises), etc. – stem in part from its production relationships, reforms focused exclusively on regulating or supplanting markets will not succeed in solving them. For example, Keynesian monetary policies (focused on raising or lowering the quantity of money in circulation and, correspondingly, interest rates) do not touch the employer-employee relationship, however much their variations redistribute wealth, regulate markets, or displace markets in favor of state-administered investment decisions. Likewise, Keynesian fiscal policies (raising or lowering taxes and government spending) do not address the employer-employee relationship.
Keynesian policies also never ended the cyclical instability of capitalism. The New Deal and European social democracy left capitalism in place in both state and private units (enterprises) of production notwithstanding their massive reform agendas and programs. They thereby left capitalist employers facing the incentives and receiving the resources (profits) to evade, weaken and eventually dissolve most of those programs.
It is far better not to distribute wealth unequally in the first place than to re-distribute it after to undo the inequality. For example, FDR proposed in 1944 that the government establish a maximum income alongside a minimum wage; that is one among the various ways inequality could be limited and thereby redistribution avoided. Efforts to redistribute encounter evasions, oppositions, and failures that compound the effects of unequal distribution itself. Social peace and cohesion are the victims of redistribution sooner or later. Reforming markets while leaving the relations/organization of capitalist production unchanged is like redistribution. Just as redistribution schemes fail to solve the problems rooted in distribution, market-focused reforms fail to solve the problems rooted in production.
Since 2008, capitalism has showed us all yet again its deep and unsolved problems of cyclical instability, deepening inequality and the injustices they both entail. Their persistence mirrors that of the capitalist organization of production. To successfully confront and solve the problems of economic cycles, income and wealth inequality, and so on, we need to go beyond the capitalist employer-employee system of production. The democratization of enterprises – transitioning from employer-employee hierarchies to worker cooperatives – is a key way available here and now to realize the change we need.
Worker coops democratically decide the distribution of income (wages, bonuses, benefits, profit shares, etc.) among their members. No small group of owners and the boards of directors they choose would, as in capitalist corporations, make such decisions. Thus, for example, it would be far less likely that a few individuals in a worker coop would earn millions while most others could not afford to send children to college. A democratic worker coop decision on the distribution of enterprise income would be far less unequal than what typifies capitalist enterprises. A socialism for the 21st century could and should include the transition from a capitalist to a worker-coop-based economic system as central to its commitments to less inequality and less social conflict over redistribution.
'Corporations Are People' Is Built on an Incredible 19th-Century Lie
How a farcical series of events in the 1880s produced an enduring and controversial legal
precedent
ADAM WINKLER - the atlantic
Somewhat unintuitively, American corporations today enjoy many of the same rights as American citizens. Both, for instance, are entitled to the freedom of speech and the freedom of religion. How exactly did corporations come to be understood as “people” bestowed with the most fundamental constitutional rights? The answer can be found in a bizarre—even farcical—series of lawsuits over 130 years ago involving a lawyer who lied to the Supreme Court, an ethically challenged justice, and one of the most powerful corporations of the day.
That corporation was the Southern Pacific Railroad Company, owned by the robber baron Leland Stanford. In 1881, after California lawmakers imposed a special tax on railroad property, Southern Pacific pushed back, making the bold argument that the law was an act of unconstitutional discrimination under the Fourteenth Amendment. Adopted after the Civil War to protect the rights of the freed slaves, that amendment guarantees to every “person” the “equal protection of the laws.” Stanford’s railroad argued that it was a person too, reasoning that just as the Constitution prohibited discrimination on the basis of racial identity, so did it bar discrimination against Southern Pacific on the basis of its corporate identity.
The head lawyer representing Southern Pacific was a man named Roscoe Conkling. A leader of the Republican Party for more than a decade, Conkling had even been nominated to the Supreme Court twice. He begged off both times, the second time after the Senate had confirmed him. (He remains the last person to turn down a Supreme Court seat after winning confirmation). More than most lawyers, Conkling was seen by the justices as a peer.
It was a trust Conkling would betray. As he spoke before the Court on Southern Pacific’s behalf, Conkling recounted an astonishing tale. In the 1860s, when he was a young congressman, Conkling had served on the drafting committee that was responsible for writing the Fourteenth Amendment. Then the last member of the committee still living, Conkling told the justices that the drafters had changed the wording of the amendment, replacing “citizens” with “persons” in order to cover corporations too. Laws referring to “persons,” he said, have “by long and constant acceptance … been held to embrace artificial persons as well as natural persons.” Conkling buttressed his account with a surprising piece of evidence: a musty old journal he claimed was a previously unpublished record of the deliberations of the drafting committee.
Years later, historians would discover that Conkling’s journal was real but his story was a fraud. The journal was in fact a record of the congressional committee’s deliberations but, upon close examination, it offered no evidence that the drafters intended to protect corporations. It showed, in fact, that the language of the equal-protection clause was never changed from “citizen” to “person.” So far as anyone can tell, the rights of corporations were not raised in the public debates over the ratification of the Fourteenth Amendment or in any of the states’ ratifying conventions. And, prior to Conkling’s appearance on behalf of Southern Pacific, no member of the drafting committee had ever suggested that corporations were covered.
There’s reason to suspect Conkling’s deception was uncovered back in his time too. The justices held onto the case for three years without ever issuing a decision, until Southern Pacific unexpectedly settled the case. Then, shortly after, another case from Southern Pacific reached the Supreme Court, raising the exact same legal question. The company had the same team of lawyers, with the exception of Conkling. Tellingly, Southern Pacific’s lawyers omitted any mention of Conkling’s drafting history or his journal. Had those lawyers believed Conkling, it would have been malpractice to leave out his story.
When the Court issued its decision on this second case, the justices expressly declined to decide if corporations were people. The dispute could be, and was, resolved on other grounds, prompting an angry rebuke from one justice, Stephen J. Field, who castigated his colleagues for failing to address “the important constitutional questions involved.” “At the present day, nearly all great enterprises are conducted by corporations,” he wrote, and they deserved to know if they had equal rights too.
Rumored to carry a gun with him at all times, the colorful Field was the only sitting justice ever arrested—and the charge was murder. He was innocent, but nonetheless guilty of serious ethical violations in the Southern Pacific cases, at least by modern standards: A confidant of Leland Stanford, Field had advised the company on which lawyers to hire for this very series of cases and thus should have recused himself from them. He refused to—and, even worse, while the first case was pending, covertly shared internal memoranda of the justices with Southern Pacific’s legal team.
The rules of judicial ethics were not well developed in the Gilded Age, however, and the self-assured Field, who feared the forces of socialism, did not hesitate to weigh in. Taxing the property of railroads differently, he said, was like allowing deductions for property “owned by white men or by old men, and not deducted if owned by black men or young men.”
So, with Field on the Court, still more twists were yet to come. The Supreme Court’s opinions are officially published in volumes edited by an administrator called the reporter of decisions. By tradition, the reporter writes up a summary of the Court’s opinion and includes it at the beginning of the opinion. The reporter in the 1880s was J.C. Bancroft Davis, whose wildly inaccurate summary of the Southern Pacific case said that the Court had ruled that “corporations are persons within … the Fourteenth Amendment.” Whether his summary was an error or something more nefarious—Davis had once been the president of the Newburgh and New York Railway Company—will likely never be known.
Field nonetheless saw Davis’s erroneous summary as an opportunity. A few years later, in an opinion in an unrelated case, Field wrote that “corporations are persons within the meaning” of the Fourteenth Amendment. “It was so held in Santa Clara County v. Southern Pacific Railroad,” explained Field, who knew very well that the Court had done no such thing.
His gambit worked. In the following years, the case would be cited over and over by courts across the nation, including the Supreme Court, for deciding that corporations had rights under the Fourteenth Amendment.
Indeed, the faux precedent in the Southern Pacific case would go on to be used by a Supreme Court that in the early 20th century became famous for striking down numerous economic regulations, including federal child-labor laws, zoning laws, and wage-and-hour laws. Meanwhile, in cases like the notorious Plessy v. Ferguson (1896), those same justices refused to read the Constitution as protecting the rights of African Americans, the real intended beneficiaries of the Fourteenth Amendment. Between 1868, when the amendment was ratified, and 1912, the Supreme Court would rule on 28 cases involving the rights of African Americans and an astonishing 312 cases on the rights of corporations.
The day back in 1882 when the Supreme Court first heard Roscoe Conkling’s argument, the New-York Daily Tribune featured a story on the case with a headline that would turn out to be prophetic: “Civil Rights of Corporations.” Indeed, in a feat of deceitful legal alchemy, Southern Pacific and its wily legal team had, with the help of an audacious Supreme Court justice, set up the Fourteenth Amendment to be more of a bulwark for the rights of businesses than the rights of minorities.
That corporation was the Southern Pacific Railroad Company, owned by the robber baron Leland Stanford. In 1881, after California lawmakers imposed a special tax on railroad property, Southern Pacific pushed back, making the bold argument that the law was an act of unconstitutional discrimination under the Fourteenth Amendment. Adopted after the Civil War to protect the rights of the freed slaves, that amendment guarantees to every “person” the “equal protection of the laws.” Stanford’s railroad argued that it was a person too, reasoning that just as the Constitution prohibited discrimination on the basis of racial identity, so did it bar discrimination against Southern Pacific on the basis of its corporate identity.
The head lawyer representing Southern Pacific was a man named Roscoe Conkling. A leader of the Republican Party for more than a decade, Conkling had even been nominated to the Supreme Court twice. He begged off both times, the second time after the Senate had confirmed him. (He remains the last person to turn down a Supreme Court seat after winning confirmation). More than most lawyers, Conkling was seen by the justices as a peer.
It was a trust Conkling would betray. As he spoke before the Court on Southern Pacific’s behalf, Conkling recounted an astonishing tale. In the 1860s, when he was a young congressman, Conkling had served on the drafting committee that was responsible for writing the Fourteenth Amendment. Then the last member of the committee still living, Conkling told the justices that the drafters had changed the wording of the amendment, replacing “citizens” with “persons” in order to cover corporations too. Laws referring to “persons,” he said, have “by long and constant acceptance … been held to embrace artificial persons as well as natural persons.” Conkling buttressed his account with a surprising piece of evidence: a musty old journal he claimed was a previously unpublished record of the deliberations of the drafting committee.
Years later, historians would discover that Conkling’s journal was real but his story was a fraud. The journal was in fact a record of the congressional committee’s deliberations but, upon close examination, it offered no evidence that the drafters intended to protect corporations. It showed, in fact, that the language of the equal-protection clause was never changed from “citizen” to “person.” So far as anyone can tell, the rights of corporations were not raised in the public debates over the ratification of the Fourteenth Amendment or in any of the states’ ratifying conventions. And, prior to Conkling’s appearance on behalf of Southern Pacific, no member of the drafting committee had ever suggested that corporations were covered.
There’s reason to suspect Conkling’s deception was uncovered back in his time too. The justices held onto the case for three years without ever issuing a decision, until Southern Pacific unexpectedly settled the case. Then, shortly after, another case from Southern Pacific reached the Supreme Court, raising the exact same legal question. The company had the same team of lawyers, with the exception of Conkling. Tellingly, Southern Pacific’s lawyers omitted any mention of Conkling’s drafting history or his journal. Had those lawyers believed Conkling, it would have been malpractice to leave out his story.
When the Court issued its decision on this second case, the justices expressly declined to decide if corporations were people. The dispute could be, and was, resolved on other grounds, prompting an angry rebuke from one justice, Stephen J. Field, who castigated his colleagues for failing to address “the important constitutional questions involved.” “At the present day, nearly all great enterprises are conducted by corporations,” he wrote, and they deserved to know if they had equal rights too.
Rumored to carry a gun with him at all times, the colorful Field was the only sitting justice ever arrested—and the charge was murder. He was innocent, but nonetheless guilty of serious ethical violations in the Southern Pacific cases, at least by modern standards: A confidant of Leland Stanford, Field had advised the company on which lawyers to hire for this very series of cases and thus should have recused himself from them. He refused to—and, even worse, while the first case was pending, covertly shared internal memoranda of the justices with Southern Pacific’s legal team.
The rules of judicial ethics were not well developed in the Gilded Age, however, and the self-assured Field, who feared the forces of socialism, did not hesitate to weigh in. Taxing the property of railroads differently, he said, was like allowing deductions for property “owned by white men or by old men, and not deducted if owned by black men or young men.”
So, with Field on the Court, still more twists were yet to come. The Supreme Court’s opinions are officially published in volumes edited by an administrator called the reporter of decisions. By tradition, the reporter writes up a summary of the Court’s opinion and includes it at the beginning of the opinion. The reporter in the 1880s was J.C. Bancroft Davis, whose wildly inaccurate summary of the Southern Pacific case said that the Court had ruled that “corporations are persons within … the Fourteenth Amendment.” Whether his summary was an error or something more nefarious—Davis had once been the president of the Newburgh and New York Railway Company—will likely never be known.
Field nonetheless saw Davis’s erroneous summary as an opportunity. A few years later, in an opinion in an unrelated case, Field wrote that “corporations are persons within the meaning” of the Fourteenth Amendment. “It was so held in Santa Clara County v. Southern Pacific Railroad,” explained Field, who knew very well that the Court had done no such thing.
His gambit worked. In the following years, the case would be cited over and over by courts across the nation, including the Supreme Court, for deciding that corporations had rights under the Fourteenth Amendment.
Indeed, the faux precedent in the Southern Pacific case would go on to be used by a Supreme Court that in the early 20th century became famous for striking down numerous economic regulations, including federal child-labor laws, zoning laws, and wage-and-hour laws. Meanwhile, in cases like the notorious Plessy v. Ferguson (1896), those same justices refused to read the Constitution as protecting the rights of African Americans, the real intended beneficiaries of the Fourteenth Amendment. Between 1868, when the amendment was ratified, and 1912, the Supreme Court would rule on 28 cases involving the rights of African Americans and an astonishing 312 cases on the rights of corporations.
The day back in 1882 when the Supreme Court first heard Roscoe Conkling’s argument, the New-York Daily Tribune featured a story on the case with a headline that would turn out to be prophetic: “Civil Rights of Corporations.” Indeed, in a feat of deceitful legal alchemy, Southern Pacific and its wily legal team had, with the help of an audacious Supreme Court justice, set up the Fourteenth Amendment to be more of a bulwark for the rights of businesses than the rights of minorities.
5 Big Myths Sold by the Defenders of Capitalism
Our dominant economic system causes too many Americans too much pain.
By Valerie Vande Panne / AlterNet December 29, 2017, 11:22 AM GMT
I’ve been writing about the economic and environmental realities of marginalized communities for some time, primarily from the perspective of positive systems that are growing to support disenfranchised people. Many of these alternative economic networks, such as barter and time trade, are born out of necessity. As I explore these economies and some of the new ways communities are fostering and investing in health and growth, I am increasingly met by the same arguments against them—and every single one of these arguments is a myth. Capitalism is, at its core, an entrenched system of addiction, whose very root is the greed of over-consumption, whether it's food, sex, money, mouse clicks, or property.
Here are five myths people continue to promote that we’ll all be better off without.
1. Myth: Jobs Will Save Us!
Permits to pollute and tax breaks are just two of the things corporations receive when they promise jobs to local populations. In a city like Detroit, which has struggled for decades with unemployment and economic decay, oil companies, real estate moguls and sports teams have all offered jobs in exchange for getting something big in return. At the end of the day, the promised jobs aren’t necessarily fulfilled. The rich get richer while the poor fund corporate projects, die from corporate pollution or end up on welfare because they never got the jobs promised in the first place.
---
2. Myth: Brand Loyalty Over Small Businesses
You know it when you see it: Nike, Adidas, Apple, Polo. People identify by the logos they wear, and they’ll pay top dollar for that logo. But why pay top dollar to advertise a company you have no connection to? Brands should pay you for your loyalty, but unless you’re Instafamous, they don't. For the hundreds you spend on a label, you could pay a local tailor or seamstress to make something tailored just for you. Retail doesn’t want you to do that, but why not give it a try? You might be surprised to find what replacing brand loyalty with real-world community loyalty can bring you.
3. Myth: Trickledown Economics Works
We’ve been talking about this issue as long as I can remember, and it still doesn’t work. Just because the rich received a special tax break that will make them exponentially richer does not mean they will spend any money on you, or contribute anything healthy or beneficial to any community other than their own. Isn’t that what "A Christmas Carol" was all about? That the only way the wealthy will ever share their wealth is if they are terrorized by ghosts? Believing in the benevolent goodness of the super-rich is one of the most perverse things we do in the U.S., and perhaps it’s rooted in the myth that you, too, can one day be wealthy.
4. Myth: Pull Yourself up by Your Bootstraps
The myth that if you just work hard enough you will one day be rich is a pervasive idea in the United States. This myth relies on the absence of inherited wealth and ignores the grievous injustices often committed in creating that wealth, and denies racism, marginalization and generational disenfranchisement. Yet people continue to preach it as gospel. The exceptions are held up as rules, without a close examination of how those folks got to where they are. No one in this world makes it to the top alone, and the lower one is on the ladder, the harder it is to get to the top—especially when the structure is the ladder of capitalism. Make the system a jungle gym, and have the community work together to navigate it, and see how much more successful and happy everyone can be.
5. Myth: Everyone Is Free in a Capitalist Society
In an age of clicks, sponsored content and fake news, it’s sometimes hard to tell capitalism from freedom. After all, capitalism is marketed to you every day as freedom, on television, social media and even NPR. But capitalism doesn’t equate freedom. Look at the prison industrial complex or the number of people going to debtors prison for unaffordable and unpaid civil infractions. Look at the nearly 20,000 households in Detroit that had their water shut off just this year as a result of unpaid water bills. Look at the homelessness created by bad mortgages from which lenders continue to profit. Capitalism in each of these cases isn’t promoting freedom, but robbing freedom from millions of Americans who could, in another time and under a humane system of economic governance, might prosper in communities they are able to contribute to and benefit from.
Capitalism is fueled by many more myths than just these. But these five might be nice places to start disassembling the dominant economic system that is causing too many Americans pain.
Here are five myths people continue to promote that we’ll all be better off without.
1. Myth: Jobs Will Save Us!
Permits to pollute and tax breaks are just two of the things corporations receive when they promise jobs to local populations. In a city like Detroit, which has struggled for decades with unemployment and economic decay, oil companies, real estate moguls and sports teams have all offered jobs in exchange for getting something big in return. At the end of the day, the promised jobs aren’t necessarily fulfilled. The rich get richer while the poor fund corporate projects, die from corporate pollution or end up on welfare because they never got the jobs promised in the first place.
---
2. Myth: Brand Loyalty Over Small Businesses
You know it when you see it: Nike, Adidas, Apple, Polo. People identify by the logos they wear, and they’ll pay top dollar for that logo. But why pay top dollar to advertise a company you have no connection to? Brands should pay you for your loyalty, but unless you’re Instafamous, they don't. For the hundreds you spend on a label, you could pay a local tailor or seamstress to make something tailored just for you. Retail doesn’t want you to do that, but why not give it a try? You might be surprised to find what replacing brand loyalty with real-world community loyalty can bring you.
3. Myth: Trickledown Economics Works
We’ve been talking about this issue as long as I can remember, and it still doesn’t work. Just because the rich received a special tax break that will make them exponentially richer does not mean they will spend any money on you, or contribute anything healthy or beneficial to any community other than their own. Isn’t that what "A Christmas Carol" was all about? That the only way the wealthy will ever share their wealth is if they are terrorized by ghosts? Believing in the benevolent goodness of the super-rich is one of the most perverse things we do in the U.S., and perhaps it’s rooted in the myth that you, too, can one day be wealthy.
4. Myth: Pull Yourself up by Your Bootstraps
The myth that if you just work hard enough you will one day be rich is a pervasive idea in the United States. This myth relies on the absence of inherited wealth and ignores the grievous injustices often committed in creating that wealth, and denies racism, marginalization and generational disenfranchisement. Yet people continue to preach it as gospel. The exceptions are held up as rules, without a close examination of how those folks got to where they are. No one in this world makes it to the top alone, and the lower one is on the ladder, the harder it is to get to the top—especially when the structure is the ladder of capitalism. Make the system a jungle gym, and have the community work together to navigate it, and see how much more successful and happy everyone can be.
5. Myth: Everyone Is Free in a Capitalist Society
In an age of clicks, sponsored content and fake news, it’s sometimes hard to tell capitalism from freedom. After all, capitalism is marketed to you every day as freedom, on television, social media and even NPR. But capitalism doesn’t equate freedom. Look at the prison industrial complex or the number of people going to debtors prison for unaffordable and unpaid civil infractions. Look at the nearly 20,000 households in Detroit that had their water shut off just this year as a result of unpaid water bills. Look at the homelessness created by bad mortgages from which lenders continue to profit. Capitalism in each of these cases isn’t promoting freedom, but robbing freedom from millions of Americans who could, in another time and under a humane system of economic governance, might prosper in communities they are able to contribute to and benefit from.
Capitalism is fueled by many more myths than just these. But these five might be nice places to start disassembling the dominant economic system that is causing too many Americans pain.
Capitalism: The Nightmare
Paul Street
From Truthdig: The neoliberal, arch-capitalist era we inhabit is chock full of statistics and stories that ought to send chills down the spines of any caring, morally sentient human. Nearly three-fourths (71 percent) of the world’s population is poor, living on $10 a day or less, and 11 percent (767 million people, including 385 million children) live in what the World Bank calls “extreme poverty” (less than a $1.90 a day). Meanwhile, Oxfam reliably reports that, surreal as it sounds, the world’s eight richest people possess among themselves as much wealth as the poorest half of the entire human race.
The United States, self-described homeland and headquarters of freedom and democracy, is no exception to the harshly unequal global reality. Six of the world’s eight most absurdly rich people are U.S. citizens: Bill Gates (whose net worth of $426 billion equals the wealth of 3.6 billion people), Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), Larry Ellison (Oracle) and Michael Bloomberg (former mayor of New York City). As Bernie Sanders said repeatedly on the campaign trail in 2016, the top 10th of the upper 1 percent in the U.S. has nearly as much wealth as the nation’s bottom 90 percent. Seven heirs of the Walton family’s Walmart fortune have among them a net worth equal to that of the nation’s poorest 40 percent. Half the U.S. population is poor or near-poor and half lacks any savings.
Just over a fifth of the nation’s children, including more than a third of black and Native American children, live below the federal government’s notoriously inadequate poverty level, while parasitic financers and other capitalist overlords enjoy unimaginable hyper-opulence. One in seven U.S. citizens relies on food banks in “the world’s richest country.” Many of them are in families with full-time wage-earners—a reflection of the fact that wages have stagnated even as U.S. labor productivity consistently has risen for more than four decades.
Failure by Design
These savage inequalities reflect government policy on behalf of “the 1 percent” (better, perhaps, to say “the 0.1 percent”). U.S. economic growth since the late 1970s has been unequally distributed, thanks to regressive policy choices that have served the rich and powerful at the expense of ordinary working people. As Joshua Bivens of the Economic Policy Institute showed in his important 2011 study, “Failure By Design,” the following interrelated, bipartisan and not-so-public policies across the long neoliberal era have brought us to a level of inequality that rivals the Gilded Age of the late 19th-century robber barons era. These policies include:
● Letting the value of the minimum wage be eroded by inflation.
● Slashing labor standards for overtime, safety and health.
● Tilting the laws governing union organizing and collective bargaining strongly in favor of employers.
● Weakening the social safety net.
● Privatizing public services.
● Accelerating the integration of the U.S. economy with the world economy without adequately protecting workers from global competition.
● Shredding government oversight of international trade, currency, investment and lending.
● Deregulating the financial sector and financial markets.
● Valuing low inflation over full employment and abandoning the latter as a worthy goal of fiscal and economic policy.
These policies increased poverty and suppressed wages at the bottom and concentrated wealth at the top. They culminated in the 2007-09 Great Recession, sparked by the bursting of a housing bubble that resulted from the deregulation of the financial sector and the reliance of millions of Americans on artificially inflated real estate values and soaring household debt to compensate for poor earnings.
After the crash, the government under both George W. Bush and Barack Obama bailed out the very financial predators who pushed the economy over the cliff. The Obama administration, populated by Goldman Sachs and Citigroup operatives, left the rest of us to wonder “Where’s our bailout?” as 95 percent of the nation’s new income went to the top 1 percent during his first term. (read more)
The United States, self-described homeland and headquarters of freedom and democracy, is no exception to the harshly unequal global reality. Six of the world’s eight most absurdly rich people are U.S. citizens: Bill Gates (whose net worth of $426 billion equals the wealth of 3.6 billion people), Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), Larry Ellison (Oracle) and Michael Bloomberg (former mayor of New York City). As Bernie Sanders said repeatedly on the campaign trail in 2016, the top 10th of the upper 1 percent in the U.S. has nearly as much wealth as the nation’s bottom 90 percent. Seven heirs of the Walton family’s Walmart fortune have among them a net worth equal to that of the nation’s poorest 40 percent. Half the U.S. population is poor or near-poor and half lacks any savings.
Just over a fifth of the nation’s children, including more than a third of black and Native American children, live below the federal government’s notoriously inadequate poverty level, while parasitic financers and other capitalist overlords enjoy unimaginable hyper-opulence. One in seven U.S. citizens relies on food banks in “the world’s richest country.” Many of them are in families with full-time wage-earners—a reflection of the fact that wages have stagnated even as U.S. labor productivity consistently has risen for more than four decades.
Failure by Design
These savage inequalities reflect government policy on behalf of “the 1 percent” (better, perhaps, to say “the 0.1 percent”). U.S. economic growth since the late 1970s has been unequally distributed, thanks to regressive policy choices that have served the rich and powerful at the expense of ordinary working people. As Joshua Bivens of the Economic Policy Institute showed in his important 2011 study, “Failure By Design,” the following interrelated, bipartisan and not-so-public policies across the long neoliberal era have brought us to a level of inequality that rivals the Gilded Age of the late 19th-century robber barons era. These policies include:
● Letting the value of the minimum wage be eroded by inflation.
● Slashing labor standards for overtime, safety and health.
● Tilting the laws governing union organizing and collective bargaining strongly in favor of employers.
● Weakening the social safety net.
● Privatizing public services.
● Accelerating the integration of the U.S. economy with the world economy without adequately protecting workers from global competition.
● Shredding government oversight of international trade, currency, investment and lending.
● Deregulating the financial sector and financial markets.
● Valuing low inflation over full employment and abandoning the latter as a worthy goal of fiscal and economic policy.
These policies increased poverty and suppressed wages at the bottom and concentrated wealth at the top. They culminated in the 2007-09 Great Recession, sparked by the bursting of a housing bubble that resulted from the deregulation of the financial sector and the reliance of millions of Americans on artificially inflated real estate values and soaring household debt to compensate for poor earnings.
After the crash, the government under both George W. Bush and Barack Obama bailed out the very financial predators who pushed the economy over the cliff. The Obama administration, populated by Goldman Sachs and Citigroup operatives, left the rest of us to wonder “Where’s our bailout?” as 95 percent of the nation’s new income went to the top 1 percent during his first term. (read more)
funnies and charts
Cartoon: Hedge fund nation
By Jen Sorensen
Tuesday Dec 19, 2017 · 5:01 AM PST
This Infographic Shows How Only 10 Companies Control All the World’s Brands
Tom Cahill | December 31, 2016
From U.S. Uncut: Almost all of the food and beverage brands we know are owned by just 10 global conglomerates, according to a blistering new report.
Oxfam’s 52-page “Behind the Brands” report goes into great detail about how just ten companies — Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg, Mars, Mondelez International (previously known as Kraft), Nestle, PepsiCo, and Unilever — own basically every brand of food sold in grocery stores around the globe. The report is part of Oxfam’s GROW campaign, which seeks to provide a sustainable food supply to an estimated global population of nine billion by 2050.
The “Behind the Brands” report grades each company through a series of scorecards, gauging how attentive it is toward core issues like how it treats farm workers, women, small-scale farmers, local land and water supplies, its climate change policy, and a company’s transparency. By and large, the scorecards found that the so-called “Big 10” food companies shirk their responsibility to local populations and the environment, falling far short of where they could be given their tremendous resources and influence. In some cases, Big 10 companies actually undermine food security, natural resources, and human rights, according to Oxfam:
• Companies are overly secretive about their agricultural supply chains, making claims of ‘sustainability’ and ‘social responsibility’ difficult to verify;
• None of the Big 10 have adequate policies to protect local communities from land and water grabs along their supply chains;
• Companies are not taking sufficient steps to curb massive agricultural greenhouse gas emissions responsible for climate changes now affecting farmers;
• Most companies do not provide small-scale farmers with equal access to their supply chains and no company has made a commitment to ensure that small-scale producers are paid a fair price;
• Only a minority of the Big 10 are doing anything at all to address the exploitation of women small-scale farmers and workers in their supply chains.
In addition to those damning declarations from Oxfam, the report also found that despite the enormous financial wealth concentrated among the Big 10 companies (an estimated $872.8 billion market cap amongst all but Mars, which is privately owned), the farmers working the land owned by these companies live in abject poverty.
Globally, some 450 million men and women work in the agriculture sector, and 60 percent of those live in poverty. In a cruel ironic twist, 80 percent of the global population classified as “chronically hungry” are farmers. The “Behind the Brands” report outlined how the practices of the Big 10 companies exacerbate the global problem of chronic hunger:
“[T]he use of valuable agricultural resources for the production of snacks and sodas means less fertile land and clean water is available to grow nutritious food for local communities. And changing weather patterns due to greenhouse gas emissions – a large percentage of which come from agricultural production – continue to make these small-scale farmers increasingly vulnerable… [T]he sourcing of commodities – cocoa, sugar, potatoes, tomatoes, soy, coffee, tea and corn – is still plagued with injustice and inequity, much as it was 100 years ago.”
But these concerns aren’t just coming from one nonprofit — in conducting research for the report, Oxfam found that where food comes from and whether or not a food producer is being socially and environmentally responsible is a top concern for a wide majority consumers in developed countries. This could also produce economic blowback for companies that don’t adhere to sustainable business standards. Weber Shandwick — a New York-based public relations firm — found that 70 percent of American consumers avoid buying products from companies they don’t like....
...As far as the scorecard for the Big 10 is concerned, none of the world’s largest food producers scored in the 8-10 (“good”) range on any of the criteria used for the evaluation. While Nestle and Unilever lead their competitors in several areas, they still fall short in how they treat the land, women, and small-scale farmers. The three worst offenders — General Mills, Kellogg’s and ABF — didn’t score above a 3 out of 10 score (“poor”) except for a scant few categories. And out of a maximum score of 70, Nestle, who ranked at #1 among the Big 10, still only scored 38 (only 54 percent). If the scorecard was a college exam, Nestle would still score an F.
Oxfam’s 52-page “Behind the Brands” report goes into great detail about how just ten companies — Associated British Foods (ABF), Coca-Cola, Danone, General Mills, Kellogg, Mars, Mondelez International (previously known as Kraft), Nestle, PepsiCo, and Unilever — own basically every brand of food sold in grocery stores around the globe. The report is part of Oxfam’s GROW campaign, which seeks to provide a sustainable food supply to an estimated global population of nine billion by 2050.
The “Behind the Brands” report grades each company through a series of scorecards, gauging how attentive it is toward core issues like how it treats farm workers, women, small-scale farmers, local land and water supplies, its climate change policy, and a company’s transparency. By and large, the scorecards found that the so-called “Big 10” food companies shirk their responsibility to local populations and the environment, falling far short of where they could be given their tremendous resources and influence. In some cases, Big 10 companies actually undermine food security, natural resources, and human rights, according to Oxfam:
• Companies are overly secretive about their agricultural supply chains, making claims of ‘sustainability’ and ‘social responsibility’ difficult to verify;
• None of the Big 10 have adequate policies to protect local communities from land and water grabs along their supply chains;
• Companies are not taking sufficient steps to curb massive agricultural greenhouse gas emissions responsible for climate changes now affecting farmers;
• Most companies do not provide small-scale farmers with equal access to their supply chains and no company has made a commitment to ensure that small-scale producers are paid a fair price;
• Only a minority of the Big 10 are doing anything at all to address the exploitation of women small-scale farmers and workers in their supply chains.
In addition to those damning declarations from Oxfam, the report also found that despite the enormous financial wealth concentrated among the Big 10 companies (an estimated $872.8 billion market cap amongst all but Mars, which is privately owned), the farmers working the land owned by these companies live in abject poverty.
Globally, some 450 million men and women work in the agriculture sector, and 60 percent of those live in poverty. In a cruel ironic twist, 80 percent of the global population classified as “chronically hungry” are farmers. The “Behind the Brands” report outlined how the practices of the Big 10 companies exacerbate the global problem of chronic hunger:
“[T]he use of valuable agricultural resources for the production of snacks and sodas means less fertile land and clean water is available to grow nutritious food for local communities. And changing weather patterns due to greenhouse gas emissions – a large percentage of which come from agricultural production – continue to make these small-scale farmers increasingly vulnerable… [T]he sourcing of commodities – cocoa, sugar, potatoes, tomatoes, soy, coffee, tea and corn – is still plagued with injustice and inequity, much as it was 100 years ago.”
But these concerns aren’t just coming from one nonprofit — in conducting research for the report, Oxfam found that where food comes from and whether or not a food producer is being socially and environmentally responsible is a top concern for a wide majority consumers in developed countries. This could also produce economic blowback for companies that don’t adhere to sustainable business standards. Weber Shandwick — a New York-based public relations firm — found that 70 percent of American consumers avoid buying products from companies they don’t like....
...As far as the scorecard for the Big 10 is concerned, none of the world’s largest food producers scored in the 8-10 (“good”) range on any of the criteria used for the evaluation. While Nestle and Unilever lead their competitors in several areas, they still fall short in how they treat the land, women, and small-scale farmers. The three worst offenders — General Mills, Kellogg’s and ABF — didn’t score above a 3 out of 10 score (“poor”) except for a scant few categories. And out of a maximum score of 70, Nestle, who ranked at #1 among the Big 10, still only scored 38 (only 54 percent). If the scorecard was a college exam, Nestle would still score an F.
The "Golden Age of Capitalism" Was an Era of Racism and Secret Coups
By Emma Caterine, Truthout
From Bernie Sanders calling violently anti-Communist President Eisenhower a socialist, to a plethora of op-eds hailing the allegedly great policies the Republicans had toward labor and refugees, you have probably seen at least one liberal in your life mourn the loss of the Republicans of the so-called "Golden Age of Capitalism," the 1950s. These arguments usually rest on the achievements of that time, such as the desegregation of the military, a corporate tax rate of 50 percent, a top income tax rate of 91 percent, a rate of profit that stood above 20 percent throughout the decade and annual average Gross Domestic Product growth of 3.13 percent.
While most of these achievements are objectively true, this argument of the "once-good" Republican Party can only be sustained when one ignores the context in which these policies were created, the violent campaign against Communism domestically and abroad, and the caveats and exceptions to the policies that predominantly created wealth and welfare at the expense of people of color.
The Context
While there are disagreements as to the level of responsibility, it is generally agreed by economists and historians that the United States escaped the Great Depression, at least in part, by its engagement in World War II. There are two facets of how the war improved the economy: (1) Governmental investment and even takeover of industry created jobs and recycled stagnant fixed capital, such as factories and machinery; and (2) By bombing the post-war foreign competition out of existence, at least for a significant amount of time. The positive effect of the war on the economy was undeniable at the time, and it was a reality that the small government Republicans had to accommodate to.
But that certainly does not mean that they did not try to push for deregulation and a "free market" in the little ways that were politically feasible. President Eisenhower's election was in part due to the capitalists of the time becoming fed up with the Democrats' intervention, such as President Truman's failed attempt to seize the Youngstown Sheet & Tube Company to end strikes. President Eisenhower would employ the virtually opposite tactic during the Steel Strike of 1959 by using the "back-to-work" provision of the Taft-Harley Act. Ironically, the dispute was only settled by a politically ambitious then-Vice President Richard Nixon stepping in and telling steelmakers it was better to settle before the Democratic Congress began hearings on the strike, which would not be as supportive of the companies as Eisenhower was.
Republican US Imperialism at a Discount
With the current political debate around refugees, many liberals have pointed to the Refugee Relief Act of 1953 to shame the Republicans for their opposition to accepting more refugees. The Act did indeed result in 214,000 immigrants gaining admission to the country. But the problem is that under this Act, most -- if not all -- of the Syrian refugees would have been denied entry. The quotas for the Act were as follows: 90,000 West Germans and Austrians; 10,000 from NATO members, Turkey, Sweden, Iran and Trieste (now part of Italy); 2,000 Polish veterans; 60,000 Italians; 17,000 Greeks; 17,000 Dutch; 4,000 for those residing in US consulate districts in the "Far East;" 2,000 Chinese; and 2,000 for Jews and Palestinians of the new Israel who were part of the UN's refugee program.
These quotas show two things: (1) An obvious bias against people of color, with no quota whatsoever for North Africans who were affected by WWII and a pitifully small one for Chinese and Middle Eastern people; and (2) This Act was part of the Republican strategy against Communism abroad by rewarding NATO members and Western Europe. Iran is particularly notable because it was that same year, 1953, that Eisenhower's administration pioneered a new, cheaper version of overthrowing foreign democratic governments through a single CIA agent instigating a coup against the recently elected Prime Minister Mohammad Mosaddegh. The strategy was so successful that they did it again in Guatemala the next year, despite the previous Truman administration having aborted a similar mission in 1952 after public pressure.
Who Was Left Behind in the Golden Age?
US capitalism's "Golden Age" wasn't so golden for the people of color residing in the country. Despite the desegregation begun by President Truman and continued by President Eisenhower in the military, no effort was made to ensure that the Black veterans had equal access to the benefits of such service by either the Democrats or Republicans. President Eisenhower was the second Republican president in history get a plurality of the Southern votes during 1956, and despite his enforcement of the law at Little Rock, Arkansas (which he always maintained was not about integration, but about federal power), sympathized strongly with the Southern whites and their racist views on topics like "miscegenation."
The 83rd Republican-controlled Congress passed laws that criminalized affiliation with Communist organizations, which Attorney General Herbert Brownell, Jr., promptly used to shut down the Communist-affiliated Civil Rights Congress, which is most famous for the "We Charge Genocide" petition to the United Nations. Congress also began the privatization of the infamous Fannie Mae, ensuring that greed was prioritized over public good and setting the mortgage market down a path that has and continues to redline Black communities and systemically deprive them of wealth.
The Danger of Nostalgia
Many Bernie Sanders supporters have wondered why their candidate was not able to garner as much support from the Black community when his policy proposals were far more in favor of Black people than those proposed by Hillary Clinton. I have watched Senator Sanders' career for a long time, since I was a teenage community organizer lobbying for the Employee Free Choice Act, and I've observed him expressing the perverse kind of nostalgia that many older white leftists do for the 1950s and its middle class. Many women and people of color are justifiably skeptical about plans packaged as bringing back a "Golden Age" where they faced broad discrimination with little recourse. A political revolution against our current system would not be the return to a less megalomaniacal Republican Party, and certainly not the election of a xenophobic fascist billionaire who is an outsider in name only. The political revolution is happening every day, being carried about by the working class and the youth who know that this two-party system is a fraud. Consider this an invitation to join.
While most of these achievements are objectively true, this argument of the "once-good" Republican Party can only be sustained when one ignores the context in which these policies were created, the violent campaign against Communism domestically and abroad, and the caveats and exceptions to the policies that predominantly created wealth and welfare at the expense of people of color.
The Context
While there are disagreements as to the level of responsibility, it is generally agreed by economists and historians that the United States escaped the Great Depression, at least in part, by its engagement in World War II. There are two facets of how the war improved the economy: (1) Governmental investment and even takeover of industry created jobs and recycled stagnant fixed capital, such as factories and machinery; and (2) By bombing the post-war foreign competition out of existence, at least for a significant amount of time. The positive effect of the war on the economy was undeniable at the time, and it was a reality that the small government Republicans had to accommodate to.
But that certainly does not mean that they did not try to push for deregulation and a "free market" in the little ways that were politically feasible. President Eisenhower's election was in part due to the capitalists of the time becoming fed up with the Democrats' intervention, such as President Truman's failed attempt to seize the Youngstown Sheet & Tube Company to end strikes. President Eisenhower would employ the virtually opposite tactic during the Steel Strike of 1959 by using the "back-to-work" provision of the Taft-Harley Act. Ironically, the dispute was only settled by a politically ambitious then-Vice President Richard Nixon stepping in and telling steelmakers it was better to settle before the Democratic Congress began hearings on the strike, which would not be as supportive of the companies as Eisenhower was.
Republican US Imperialism at a Discount
With the current political debate around refugees, many liberals have pointed to the Refugee Relief Act of 1953 to shame the Republicans for their opposition to accepting more refugees. The Act did indeed result in 214,000 immigrants gaining admission to the country. But the problem is that under this Act, most -- if not all -- of the Syrian refugees would have been denied entry. The quotas for the Act were as follows: 90,000 West Germans and Austrians; 10,000 from NATO members, Turkey, Sweden, Iran and Trieste (now part of Italy); 2,000 Polish veterans; 60,000 Italians; 17,000 Greeks; 17,000 Dutch; 4,000 for those residing in US consulate districts in the "Far East;" 2,000 Chinese; and 2,000 for Jews and Palestinians of the new Israel who were part of the UN's refugee program.
These quotas show two things: (1) An obvious bias against people of color, with no quota whatsoever for North Africans who were affected by WWII and a pitifully small one for Chinese and Middle Eastern people; and (2) This Act was part of the Republican strategy against Communism abroad by rewarding NATO members and Western Europe. Iran is particularly notable because it was that same year, 1953, that Eisenhower's administration pioneered a new, cheaper version of overthrowing foreign democratic governments through a single CIA agent instigating a coup against the recently elected Prime Minister Mohammad Mosaddegh. The strategy was so successful that they did it again in Guatemala the next year, despite the previous Truman administration having aborted a similar mission in 1952 after public pressure.
Who Was Left Behind in the Golden Age?
US capitalism's "Golden Age" wasn't so golden for the people of color residing in the country. Despite the desegregation begun by President Truman and continued by President Eisenhower in the military, no effort was made to ensure that the Black veterans had equal access to the benefits of such service by either the Democrats or Republicans. President Eisenhower was the second Republican president in history get a plurality of the Southern votes during 1956, and despite his enforcement of the law at Little Rock, Arkansas (which he always maintained was not about integration, but about federal power), sympathized strongly with the Southern whites and their racist views on topics like "miscegenation."
The 83rd Republican-controlled Congress passed laws that criminalized affiliation with Communist organizations, which Attorney General Herbert Brownell, Jr., promptly used to shut down the Communist-affiliated Civil Rights Congress, which is most famous for the "We Charge Genocide" petition to the United Nations. Congress also began the privatization of the infamous Fannie Mae, ensuring that greed was prioritized over public good and setting the mortgage market down a path that has and continues to redline Black communities and systemically deprive them of wealth.
The Danger of Nostalgia
Many Bernie Sanders supporters have wondered why their candidate was not able to garner as much support from the Black community when his policy proposals were far more in favor of Black people than those proposed by Hillary Clinton. I have watched Senator Sanders' career for a long time, since I was a teenage community organizer lobbying for the Employee Free Choice Act, and I've observed him expressing the perverse kind of nostalgia that many older white leftists do for the 1950s and its middle class. Many women and people of color are justifiably skeptical about plans packaged as bringing back a "Golden Age" where they faced broad discrimination with little recourse. A political revolution against our current system would not be the return to a less megalomaniacal Republican Party, and certainly not the election of a xenophobic fascist billionaire who is an outsider in name only. The political revolution is happening every day, being carried about by the working class and the youth who know that this two-party system is a fraud. Consider this an invitation to join.
There’s No Such Thing as a ‘Free Market’
Capitalism with absolutely no government intervention is a myth — and always was.
By Jill Richardson
From Other Words: The debates leading up to the election this year will no doubt invoke the “American value” of capitalism. But what, exactly, does that mean? And what should it mean?
I’m no economist, but I took a few economics courses while earning an undergraduate business degree. Growing up in a capitalist society, I thought I understood the basic concepts underlying capitalism — free markets, competitive advantage, and so forth.
Then I actually read The Wealth of Nations by Adam Smith, the founding work that described what we call capitalism in the first place. That was a game changer.
We’re all probably familiar with Smith’s ideas at some level.
The market regulates itself, as each of us operates based on our own self-interest. Businesses try to earn profits, and consumers try to meet their needs at the best prices. The market ensures that the demand of consumers is met with supply from business.
The government’s job, the doctrinaire thinking goes, is to get the heck out of the way. It doesn’t set prices or quotas. It just lets the market function.
Adam Smith cast this arrangement in glowing terms in 1776. He was describing England during the Industrial Revolution. He thought it was amazing that millions of individual actors, each operating based on self-interest, could so efficiently revolutionize society without any central planning at all.
Only, he was wrong.
In fact, the growing British Empire was undertaking economic interventions on a colossal scale — and would do even more in the centuries to come. The British set out all over the globe, claiming colonies in the New World and later India and Africa, setting up trade policies that benefited the British at the expense of the colonized.
The British imported cotton from their colonies for their own factories, as well as wheat to feed British workers in the isles. Colonial India, meanwhile, suffered several massive famines. Even as tens of millions of Indians starved to death, record amounts of Indian wheat were exported to feed British factory workers laboring in a so-called free market.
Before the Industrial Revolution, Indian textiles reigned supreme. But British authorities kept industrial textile technologies out of India in order to capture the global textile market, impoverishing the colony further.
Other British staples — tea and sugar — were also imported from British colonies. That sugar was produced by enslaved Africans in the Caribbean.
Some invisible hand.
Smith also overlooked the utter misery textile workers lived in, even in Britain. The system “worked” at making some people rich. But the squalid and wretched lifestyles of laborers, including children — which inspired the writing of Charles Dickens — were its cost.
We in America have meddled in markets plenty in our own right — not least through historical crimes like slavery and colonialism. But we’ve also developed more benign interventions that can actually help people.
We ban child labor, for example, and enforce (admittedly inadequate) minimum wage protections. We require businesses to offer safe and healthy workplaces. We ban the sale of dangerous drugs. We try to regulate pharmaceuticals to make sure they’re safe and effective.
In other words, capitalism with absolutely no government intervention is a myth — and always was.
We can debate the pros and cons of specific regulations. But if you hear a candidate claiming that capitalism means doing away with all regulations — or that any government interference in the market equates to socialism or communism — they’re being dishonest.
I’m no economist, but I took a few economics courses while earning an undergraduate business degree. Growing up in a capitalist society, I thought I understood the basic concepts underlying capitalism — free markets, competitive advantage, and so forth.
Then I actually read The Wealth of Nations by Adam Smith, the founding work that described what we call capitalism in the first place. That was a game changer.
We’re all probably familiar with Smith’s ideas at some level.
The market regulates itself, as each of us operates based on our own self-interest. Businesses try to earn profits, and consumers try to meet their needs at the best prices. The market ensures that the demand of consumers is met with supply from business.
The government’s job, the doctrinaire thinking goes, is to get the heck out of the way. It doesn’t set prices or quotas. It just lets the market function.
Adam Smith cast this arrangement in glowing terms in 1776. He was describing England during the Industrial Revolution. He thought it was amazing that millions of individual actors, each operating based on self-interest, could so efficiently revolutionize society without any central planning at all.
Only, he was wrong.
In fact, the growing British Empire was undertaking economic interventions on a colossal scale — and would do even more in the centuries to come. The British set out all over the globe, claiming colonies in the New World and later India and Africa, setting up trade policies that benefited the British at the expense of the colonized.
The British imported cotton from their colonies for their own factories, as well as wheat to feed British workers in the isles. Colonial India, meanwhile, suffered several massive famines. Even as tens of millions of Indians starved to death, record amounts of Indian wheat were exported to feed British factory workers laboring in a so-called free market.
Before the Industrial Revolution, Indian textiles reigned supreme. But British authorities kept industrial textile technologies out of India in order to capture the global textile market, impoverishing the colony further.
Other British staples — tea and sugar — were also imported from British colonies. That sugar was produced by enslaved Africans in the Caribbean.
Some invisible hand.
Smith also overlooked the utter misery textile workers lived in, even in Britain. The system “worked” at making some people rich. But the squalid and wretched lifestyles of laborers, including children — which inspired the writing of Charles Dickens — were its cost.
We in America have meddled in markets plenty in our own right — not least through historical crimes like slavery and colonialism. But we’ve also developed more benign interventions that can actually help people.
We ban child labor, for example, and enforce (admittedly inadequate) minimum wage protections. We require businesses to offer safe and healthy workplaces. We ban the sale of dangerous drugs. We try to regulate pharmaceuticals to make sure they’re safe and effective.
In other words, capitalism with absolutely no government intervention is a myth — and always was.
We can debate the pros and cons of specific regulations. But if you hear a candidate claiming that capitalism means doing away with all regulations — or that any government interference in the market equates to socialism or communism — they’re being dishonest.
Why Tax Havens Are Political and Economic Disasters
Seeking prosperity through lax business and tax regulations leaves countries worse off
by Brooke Harrington
From The Atlantic: In the early 1990s, economists coined the term "the resource curse" to describe a paradox they observed in countries where valuable natural resources were discovered: Rather than thriving, such countries often crumbled, economically and politically. The newfound wealth, instead of raising living standards for all, generated violence, as well as accelerating the growth of inequality and corruption. Terry Karl, a Stanford political science professor, dubbed this the "paradox of plenty." The same story has played out again and again all over the world, from Venezuela (where Karl did her research on the destruction wrought by oil wealth) to Sierra Leone (home of blood diamonds) and Afghanistan (which, despite $3 trillion in mineral wealth, remains among the poorest and most corrupt countries in the world).
A similarly insidious pattern has developed in recent years among the countries serving as offshore financial centers. Many, like the countries affected by the resource curse, are former colonial states struggling to stay fiscally viable; the "resource" they discover is human capital, in the form of a population literate and numerate enough to provide financial services, such as the filing and compliance tasks linked to offshore corporations, trusts, and foundations. For these economically and politically fragile countries, the influx of cash provided by involvement in international finance seems like an unmitigated blessing, offering jobs and revenues for a relatively small investment in infrastructure, such as high-speed internet access.
But as many are finding, becoming a tax haven has unexpected costs. Precipitous economic, political, and social declines have occurred so often in such states that observers have coined a new term for it: “the finance curse.” When the "finance curse" strikes a country, there is a recurrent pattern: While its democracy, economy, and culture remain formally intact, they are increasingly oriented to and co-opted by international elites. In other words, such countries gradually become organized around the interests of people who don't even live there, to the detriment of those who do. The services produced by these countries protect cosmopolitans’ wealth, but the riches never flow to the the local producers, undermining their capacity for self-governance and social cohesion, as well as the development of infrastructure and institutions.
This has led to increasing economic fragility for offshore financial centers, along with political corruption and social decline, as evidenced by a rise in crime and violence. I experienced the latter in my own research on the global wealth-management industry: In the course of visiting 18 tax havens in every major region of the world, I encountered this social decay directly through a number of experiences, including being robbed at Pae Moana in the Cook Islands. A local fisherman I met afterwards said the rise in burglary and violent crime in the islands began with the growth of the offshore industry. Not only the wealth it brought in, but also the new value system focused on exploitation and greed, meant that “everyone calls us the ‘Crook Islands’ now.” The finance industry had begun to eat away at the nation’s democratic institutions: Referring to a recent political-corruption scandal, the fisherman said, “They’ve got our government in their pockets. I hate what they've done to my country.”
But as I learned, the workings of the finance curse have shaped not only the development of small post-colonial nations like the Cook Islands, but also that of seemingly wealthy and well-established ones. For example, recent reporting on the Channel Island of Jersey has documented the crippling of the country's economy, government, and society in one of the world's leading financial centers—a place that was once considered a "miracle of plenty" and a role model for other would-be tax havens.
The corrosion described by the finance curse has affected even some of the wealthiest financial centers, such as Luxembourg, which is the domicile of choice for $3.5 trillion worth of mutual-fund shares and over 150 banks. As a result of a robust financial-services sector that contributes 27 percent of the country’s economic production, the Grand Duchy boasts the highest per capita GDP in the Europe, far outstripping its nearest rivals, Norway and Switzerland. At first blush, Luxembourg would appear to be in terrific shape: a wealthy democracy, thriving in the center of Western Europe.
However, as the economist Gabriel Zucman has shown, Luxembourg's role as a leading tax haven has benefitted foreigners at the expense of locals, across the board. Over 60 percent of the country’s workforce is comprised of foreigners, who reap virtually all the benefits of the wealth generated by the Duchy. The society, as a result, is fracturing along expat-versus-local lines, both in economic and political terms.
As Zucman documents, inequality in the Grand Duchy has skyrocketed, with poverty doubling since 1980, and real wages for ordinary Luxembourgers stagnating for the past 20 years. Meanwhile, salaries for expat wealth managers have exploded, tripling housing prices in Luxembourg City. However, even this new wealth has not benefitted the local economy: Due to Luxembourg’s tax policies, public institutions such as the educational system are in "accelerated decline," mainly to the detriment of locals. The result, Zucman observes, is that Luxembourg has become more of a free-trade zone than a state.[...]
A similarly insidious pattern has developed in recent years among the countries serving as offshore financial centers. Many, like the countries affected by the resource curse, are former colonial states struggling to stay fiscally viable; the "resource" they discover is human capital, in the form of a population literate and numerate enough to provide financial services, such as the filing and compliance tasks linked to offshore corporations, trusts, and foundations. For these economically and politically fragile countries, the influx of cash provided by involvement in international finance seems like an unmitigated blessing, offering jobs and revenues for a relatively small investment in infrastructure, such as high-speed internet access.
But as many are finding, becoming a tax haven has unexpected costs. Precipitous economic, political, and social declines have occurred so often in such states that observers have coined a new term for it: “the finance curse.” When the "finance curse" strikes a country, there is a recurrent pattern: While its democracy, economy, and culture remain formally intact, they are increasingly oriented to and co-opted by international elites. In other words, such countries gradually become organized around the interests of people who don't even live there, to the detriment of those who do. The services produced by these countries protect cosmopolitans’ wealth, but the riches never flow to the the local producers, undermining their capacity for self-governance and social cohesion, as well as the development of infrastructure and institutions.
This has led to increasing economic fragility for offshore financial centers, along with political corruption and social decline, as evidenced by a rise in crime and violence. I experienced the latter in my own research on the global wealth-management industry: In the course of visiting 18 tax havens in every major region of the world, I encountered this social decay directly through a number of experiences, including being robbed at Pae Moana in the Cook Islands. A local fisherman I met afterwards said the rise in burglary and violent crime in the islands began with the growth of the offshore industry. Not only the wealth it brought in, but also the new value system focused on exploitation and greed, meant that “everyone calls us the ‘Crook Islands’ now.” The finance industry had begun to eat away at the nation’s democratic institutions: Referring to a recent political-corruption scandal, the fisherman said, “They’ve got our government in their pockets. I hate what they've done to my country.”
But as I learned, the workings of the finance curse have shaped not only the development of small post-colonial nations like the Cook Islands, but also that of seemingly wealthy and well-established ones. For example, recent reporting on the Channel Island of Jersey has documented the crippling of the country's economy, government, and society in one of the world's leading financial centers—a place that was once considered a "miracle of plenty" and a role model for other would-be tax havens.
The corrosion described by the finance curse has affected even some of the wealthiest financial centers, such as Luxembourg, which is the domicile of choice for $3.5 trillion worth of mutual-fund shares and over 150 banks. As a result of a robust financial-services sector that contributes 27 percent of the country’s economic production, the Grand Duchy boasts the highest per capita GDP in the Europe, far outstripping its nearest rivals, Norway and Switzerland. At first blush, Luxembourg would appear to be in terrific shape: a wealthy democracy, thriving in the center of Western Europe.
However, as the economist Gabriel Zucman has shown, Luxembourg's role as a leading tax haven has benefitted foreigners at the expense of locals, across the board. Over 60 percent of the country’s workforce is comprised of foreigners, who reap virtually all the benefits of the wealth generated by the Duchy. The society, as a result, is fracturing along expat-versus-local lines, both in economic and political terms.
As Zucman documents, inequality in the Grand Duchy has skyrocketed, with poverty doubling since 1980, and real wages for ordinary Luxembourgers stagnating for the past 20 years. Meanwhile, salaries for expat wealth managers have exploded, tripling housing prices in Luxembourg City. However, even this new wealth has not benefitted the local economy: Due to Luxembourg’s tax policies, public institutions such as the educational system are in "accelerated decline," mainly to the detriment of locals. The result, Zucman observes, is that Luxembourg has become more of a free-trade zone than a state.[...]