TO COMMENT CLICK HERE
apr 23, 2018
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
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The rapacity of contemporary capitalism is enabled by the weakness,
dishonesty, and cowardice of the flaccid and collaborationist left.
Luciana Bohne
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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.
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“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
Crony capitalism is defined as an economy tilted in favor of businesses that have close relationships with the government and lean on those relationships for special treatment — tax breaks or some other form of state intervention. To an extent, this arrangement has long been part of the American economy. But the problem has grown worldwide as globalization has taken off in the last two decades. This has meant a rise in billionaire wealth around the world and an enormous increase in the inequality gap between the world’s richest and poorest people.
articles
*The Irresponsibility of Fiscal Responsibility
(ARTICLE BELOW)
*The US is entering a golden age of corporate medicine
(ARTICLE BELOW)
*Big Banks Saved $3.6B in Taxes Last Quarter Under New Law
(ARTICLE BELOW)
*I'm a millionaire who creates zero jobs. Why do I pay less tax than you?
(ARTICLE BELOW)
*Harvard Teaches Us That Hedge Fund Managers Get Rich Even When They Mess Up
(ARTICLE BELOW)
*Jim Hightower: How Low Can the Barons of High Finance Go?
(ARTICLE BELOW)
*DC Joins Seven States With Campaigns to Close Carried Interest Loophole
(ARTICLE BELOW)
*High CEO Pay: It's What Friends Are For
(ARTICLE BELOW)
*Battered by Great Recession, underfunded public pensions to persist
(ARTICLE BELOW)
*HOW FOOD STAMPS ARE KEEPING SMALL FARMS IN BUSINESS(ARTICLE BELOW)
*Tariffs Aren’t a Terrible Idea—If They’re About Well-Being of People, Not Corporations
(ARTICLE BELOW)
*A 2% Financial Wealth Tax Would Provide a $12,000 Annual Stipend to Every American Household
(ARTICLE BELOW)
*No CEO should earn 1,000 times more than a regular employee
(ARTICLE BELOW)
*The Sick Paying for the Healthy: How Insurance Companies Drive Up Drug Prices
(ARTICLE BELOW)
*The Battle of 1498(ARTICLE BELOW)
*Report Discovers Multinational Companies Found Even More Ways to Avoid Taxes Following the Financial Crisis(ARTICLE BELOW)
*Our corporation tax system is broken. Here’s how to fix it(ARTICLE BELOW)
*The Other Problem Banks(ARTICLE BELOW)
*IN 2017, AMAZON PAID $0 IN U.S. TAXES DESPITE MAKING $5.6 BN(ARTICLE BELOW)
*'Corporations Are People' Is Built on an Incredible 19th-Century Lie
(ARTICLE BELOW)
*TRUMP TAX CUTS LEAD TO EXPLOSION OF CORPORATE STOCK BUYBACK NOT RISING WAGES
(ARTICLE BELOW)
*How Big Pharma Is Corrupting the Truth About the Drugs It Sells Us
(ARTICLE BELOW)
*AMERICA'S RICHEST 2% MADE MORE MONEY IN 2017 THAN THE COST OF THE ENTIRE SAFETY NET
(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
...Magical thinking is not limited to the beliefs and practices of pre-modern cultures. It defines the ideology of capitalism. Quotas and projected sales can always be met. Profits can always be raised. Growth is inevitable. The impossible is always possible. Human societies, if they bow before the dictates of the marketplace, will be ushered into capitalist paradise. It is only a question of having the right attitude and the right technique. When capitalism thrives, we are assured, we thrive. The merging of the self with the capitalist collective has robbed us of our agency, creativity, capacity for self-reflection and moral autonomy. We define our worth not by our independence or our character but by the material standards set by capitalism—personal wealth, brands, status and career advancement. We are molded into a compliant and repressed collective. This mass conformity is characteristic of totalitarian and authoritarian states. It is the Disneyfication of America, the land of eternally happy thoughts and positive attitudes. And when magical thinking does not work, we are told, and often accept, that we are the problem. We must have more faith. We must envision what we want. We must try harder. The system is never to blame. We failed it. It did not fail us...
Reign of Idiots By Chris Hedges - apr 30, 2017
fundamentals of american capitalism
*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
The Irresponsibility of Fiscal Responsibility
Monday, April 23, 2018
By Dean Baker, Truthout | Op-Ed
It's official: New York Times columnist David Leonhardt pronounced the Democrats as the party of fiscal responsibility. In contrast to three of the last four Republican presidents who raised deficits with big tax cuts for the rich and increases in military spending, the last Democratic presidents sharply reduced the budget deficit during their term in office.
Leonhardt obviously intends the designation to be praise for the party, but it really shows his confusion about budget deficits and their impact on the economy. Unfortunately, this confusion is widely shared.
Contrary to what Leonhardt seems to think, the economy doesn't get a gold star for a balanced budget or lower deficit. In fact, lower deficits can inflict devastating damage on the economy by reducing demand, leading to millions of workers needlessly unemployed.
This has a permanent cost as many of the long-term unemployed may lose their attachment to the labor market and never work again. Their children will also pay a big price as children of unemployed parent(s) tend to fare worse in life by a wide variety of measures, especially when unemployment is associated with family breakup, frequent moves and possible evictions. Also, lower levels of output will mean less investment, making the economy less productive in the future.
We actually have some basis for estimating the cost of long periods where the economy suffers from insufficient demand. If we compare the Congressional Budget Office's (CBO) projections for potential GDP in 2018 made before the Great Recession, with their current projections, the gap is more than $2 trillion, or 10 percent of GDP.
That loss comes to more than $15,000 a year for every household in the country. In other words, the CBO's projections imply that if we had managed to sustain high levels of demand in 2008 and subsequent years, rather than falling into a severe recession with a weak recovery, the annual income of the average household would be $15,000 a year higher.
Perhaps the CBO didn't know what it was talking about when it made these projections back in 2008. (Of course, we are now supposed to take the CBO's projections of deficits and interest burdens as sanctified, but maybe they have gotten much smarter in the last decade.) Let's suppose that if we had managed to avoid the recession and maintain high levels of output, potential GDP would be just 5 percent higher today, half as much as the CBO had projected back in 2008.
In that case, the loss from too much fiscal responsibility (deficits that were too small) would be $1 trillion a year or $7,500 per household. That dwarfs the amount at stake in most of the policies we debate. For example, the International Trade Commission projected that the Trans-Pacific Partnership would generate gains of just 0.23 percent of GDP after 15 years, when its benefits were fully realized.
It would be difficult to get an accurate measure of the full costs caused by the weak recovery from the recession; both in terms of lost output at the time, and the permanent damage to the economy and people's lives, but there can be little doubt that it is enormous. Nonetheless, the proponents of fiscal responsibility, who are largely responsible for these costs, continue to be treated as paragons of virtue. After all, we are supposed to want balanced budgets or at least small deficits, right?
Economic policy will continue to suffer as long as the loudest voices in the debate have no understanding of how the economy works. Deficits can undoubtedly be harmful. When the economy is reaching its limits, as indicated by a shortage of workers or other inputs and rapidly rising wages and prices, a higher deficit will make this problem worse.
But we have not reached this point yet, and honest people who understand the economy will acknowledge that we don't know how close we are to this point. In that context, why should we think there is any big problem with a larger deficit. This does not mean we want to give more tax breaks to rich people and have useless or even harmful military spending.
Regarding the interest burden of the debt, it remains below the 1990s level when measured as a share of GDP. That is likely to be the case for many years to come under plausible scenarios.
Furthermore, the burden of interest on the debt is enveloped by the burden the government created by its grants of patent and copyright monopoly. These cost us almost $400 billion a year (2 percent of GDP) in higher prescription drug prices alone. And, if you don't understand how the burden from government-granted patent and copyright monopolies are like the burden of debt, it's time you do your homework.
Leonhardt obviously intends the designation to be praise for the party, but it really shows his confusion about budget deficits and their impact on the economy. Unfortunately, this confusion is widely shared.
Contrary to what Leonhardt seems to think, the economy doesn't get a gold star for a balanced budget or lower deficit. In fact, lower deficits can inflict devastating damage on the economy by reducing demand, leading to millions of workers needlessly unemployed.
This has a permanent cost as many of the long-term unemployed may lose their attachment to the labor market and never work again. Their children will also pay a big price as children of unemployed parent(s) tend to fare worse in life by a wide variety of measures, especially when unemployment is associated with family breakup, frequent moves and possible evictions. Also, lower levels of output will mean less investment, making the economy less productive in the future.
We actually have some basis for estimating the cost of long periods where the economy suffers from insufficient demand. If we compare the Congressional Budget Office's (CBO) projections for potential GDP in 2018 made before the Great Recession, with their current projections, the gap is more than $2 trillion, or 10 percent of GDP.
That loss comes to more than $15,000 a year for every household in the country. In other words, the CBO's projections imply that if we had managed to sustain high levels of demand in 2008 and subsequent years, rather than falling into a severe recession with a weak recovery, the annual income of the average household would be $15,000 a year higher.
Perhaps the CBO didn't know what it was talking about when it made these projections back in 2008. (Of course, we are now supposed to take the CBO's projections of deficits and interest burdens as sanctified, but maybe they have gotten much smarter in the last decade.) Let's suppose that if we had managed to avoid the recession and maintain high levels of output, potential GDP would be just 5 percent higher today, half as much as the CBO had projected back in 2008.
In that case, the loss from too much fiscal responsibility (deficits that were too small) would be $1 trillion a year or $7,500 per household. That dwarfs the amount at stake in most of the policies we debate. For example, the International Trade Commission projected that the Trans-Pacific Partnership would generate gains of just 0.23 percent of GDP after 15 years, when its benefits were fully realized.
It would be difficult to get an accurate measure of the full costs caused by the weak recovery from the recession; both in terms of lost output at the time, and the permanent damage to the economy and people's lives, but there can be little doubt that it is enormous. Nonetheless, the proponents of fiscal responsibility, who are largely responsible for these costs, continue to be treated as paragons of virtue. After all, we are supposed to want balanced budgets or at least small deficits, right?
Economic policy will continue to suffer as long as the loudest voices in the debate have no understanding of how the economy works. Deficits can undoubtedly be harmful. When the economy is reaching its limits, as indicated by a shortage of workers or other inputs and rapidly rising wages and prices, a higher deficit will make this problem worse.
But we have not reached this point yet, and honest people who understand the economy will acknowledge that we don't know how close we are to this point. In that context, why should we think there is any big problem with a larger deficit. This does not mean we want to give more tax breaks to rich people and have useless or even harmful military spending.
Regarding the interest burden of the debt, it remains below the 1990s level when measured as a share of GDP. That is likely to be the case for many years to come under plausible scenarios.
Furthermore, the burden of interest on the debt is enveloped by the burden the government created by its grants of patent and copyright monopoly. These cost us almost $400 billion a year (2 percent of GDP) in higher prescription drug prices alone. And, if you don't understand how the burden from government-granted patent and copyright monopolies are like the burden of debt, it's time you do your homework.
opinion: The US is entering a golden age of corporate medicine
The recent slew of mergers and acquisitions is part of a larger corporate transformation that is remaking American healthcare – for the worse
ADAM GAFFNEY - the guardian
Sun 22 Apr 2018 06.00 EDT
A golden age of corporate medicine may be dawning. A slew of mergers and acquisitions looks set to transform American healthcare, drawing health insurance giants, pharmacy benefit managers, physicians’ practices, drugstores, surgical centers and “retail clinics” in pharmacies and supermarkets together into giant corporate healthcare blobs. Whether you view this as a positive development may depend on your stock portfolio: good for industry profits, perhaps, but almost certainly detrimental to the public’s health.
Last week, health insurance giant Humana bought a large physicians’ group based in Florida, which comes on the heels of recent news that retail behemoth Walmart may be angling to buy Humana. Meanwhile, drugstore giant CVS, which already runs a pharmaceutical benefits program and the nation’s largest chain of retail clinics, is buying insurer Aetna for $69bn even as it expands into the dialysis game. And health insurer UnitedHealth Group has been gobbling up physicians’ practices from coast to coast, building a powerful “army of tens of thousands of physicians”, as Bloomberg puts it, alongside more than 200 surgical facilities and 230 urgent care centers.
Some contend that assembling different healthcare enterprises under one roof might sometimes deliver value to “consumers”. By buying Aetna and “more closely aligning management of drug benefits and other types of benefits in one organization”, health policy expert Austin Frakt noted in the New York Times, “CVS could be acting in ways that ultimately benefit consumers”. And as Craig Garthwaite, professor of strategy at Northwestern University’s Kellogg School of Management, said of another deal to Bloomberg: “You can see the strategy by which they could make investments that make people healthier for a patient that’s both a Humana enrollee and a Walmart customer.”
But whatever the purported efficiencies of vertical integration may be, these deals should be seen as part of a larger corporate transformation that is remaking American healthcare – for the worse.
Consider corporate medicine’s track record. Dialysis is dominated by corporations – the two largest are DaVita and Fresenius – that do a comparatively poor job keeping their patients alive. A 2011 study in Health Services Research found that for-profit chains had 13% higher risk of mortality than not-for-profits. DaVita, meanwhile, has paid out hundreds of millions in recent years to settle claims including Medicare fraud and overuse of a potentially harmful medication.
Evidence of corporate medicine’s paltry performance goes beyond dialysis. A 2014 study found that although there were gaps in the literature, for-profit providers overall achieved inferior outcomes, while a 2002 meta-analysis found that patients at for-profit hospitals had a higher risk of death as compared with not-for-profits.
Why? The investigators of the latter study offer one theory. For-profit institutions have unique expenses (eg profits and high executive salaries) but receive similar reimbursements, which creates a challenge: “They must achieve the same outcomes … while devoting fewer resources to patient care.” Not surprisingly, they often fail.
Corporate providers also seem prone to unsavory behavior. A decade and a half ago, the Hospital Corporation of America (HCA), the nation’s largest for-profit hospital chain, reached settlements with the federal government totaling $1.7bn for what the Department of Justice called the “largest health care fraud case in US history”. And a 2012 New York Times investigation found that HCA has more recently shaved costs by deciding “not to treat patients who came in [to the emergency room] with nonurgent conditions, like a cold or the flu or even a sprained wrist, unless those patients paid in advance”.
The comparative performance of physicians’ practices operating under new corporate roofs, “retail clinics” sprouting up in pharmacies and supermarkets and for-profit free-standing emergency rooms and urgent care centers is not yet entirely clear. However, there is reason to believe that they are increasing costs (such as by inducing excess healthcare use where it may not be needed), while doing little to increase healthcare access. A 2016 study in Health Affairs, for instance, found that retail clinics increased spending for “low-acuity conditions”, like colds, by 21%. And both free-standing ERs and retail clinics are disproportionately located in high-income areas, where new healthcare facilities are least needed.
It’s still too early to know if these new, vertically integrated corporate healthcare ventures will succeed financially. Squeezing profits from sick people is, after all, a tricky business.
But whatever their financial future, the advancing corporatization of American healthcare will fail for a more fundamental reason: cutthroat corporate profiteering and the humane provision of healthcare don’t mix. As healthcare reform returns to the national political discussion, we should be talking about cutting corporate America out of the healthcare system altogether – not welcoming them in.
Last week, health insurance giant Humana bought a large physicians’ group based in Florida, which comes on the heels of recent news that retail behemoth Walmart may be angling to buy Humana. Meanwhile, drugstore giant CVS, which already runs a pharmaceutical benefits program and the nation’s largest chain of retail clinics, is buying insurer Aetna for $69bn even as it expands into the dialysis game. And health insurer UnitedHealth Group has been gobbling up physicians’ practices from coast to coast, building a powerful “army of tens of thousands of physicians”, as Bloomberg puts it, alongside more than 200 surgical facilities and 230 urgent care centers.
Some contend that assembling different healthcare enterprises under one roof might sometimes deliver value to “consumers”. By buying Aetna and “more closely aligning management of drug benefits and other types of benefits in one organization”, health policy expert Austin Frakt noted in the New York Times, “CVS could be acting in ways that ultimately benefit consumers”. And as Craig Garthwaite, professor of strategy at Northwestern University’s Kellogg School of Management, said of another deal to Bloomberg: “You can see the strategy by which they could make investments that make people healthier for a patient that’s both a Humana enrollee and a Walmart customer.”
But whatever the purported efficiencies of vertical integration may be, these deals should be seen as part of a larger corporate transformation that is remaking American healthcare – for the worse.
Consider corporate medicine’s track record. Dialysis is dominated by corporations – the two largest are DaVita and Fresenius – that do a comparatively poor job keeping their patients alive. A 2011 study in Health Services Research found that for-profit chains had 13% higher risk of mortality than not-for-profits. DaVita, meanwhile, has paid out hundreds of millions in recent years to settle claims including Medicare fraud and overuse of a potentially harmful medication.
Evidence of corporate medicine’s paltry performance goes beyond dialysis. A 2014 study found that although there were gaps in the literature, for-profit providers overall achieved inferior outcomes, while a 2002 meta-analysis found that patients at for-profit hospitals had a higher risk of death as compared with not-for-profits.
Why? The investigators of the latter study offer one theory. For-profit institutions have unique expenses (eg profits and high executive salaries) but receive similar reimbursements, which creates a challenge: “They must achieve the same outcomes … while devoting fewer resources to patient care.” Not surprisingly, they often fail.
Corporate providers also seem prone to unsavory behavior. A decade and a half ago, the Hospital Corporation of America (HCA), the nation’s largest for-profit hospital chain, reached settlements with the federal government totaling $1.7bn for what the Department of Justice called the “largest health care fraud case in US history”. And a 2012 New York Times investigation found that HCA has more recently shaved costs by deciding “not to treat patients who came in [to the emergency room] with nonurgent conditions, like a cold or the flu or even a sprained wrist, unless those patients paid in advance”.
The comparative performance of physicians’ practices operating under new corporate roofs, “retail clinics” sprouting up in pharmacies and supermarkets and for-profit free-standing emergency rooms and urgent care centers is not yet entirely clear. However, there is reason to believe that they are increasing costs (such as by inducing excess healthcare use where it may not be needed), while doing little to increase healthcare access. A 2016 study in Health Affairs, for instance, found that retail clinics increased spending for “low-acuity conditions”, like colds, by 21%. And both free-standing ERs and retail clinics are disproportionately located in high-income areas, where new healthcare facilities are least needed.
It’s still too early to know if these new, vertically integrated corporate healthcare ventures will succeed financially. Squeezing profits from sick people is, after all, a tricky business.
But whatever their financial future, the advancing corporatization of American healthcare will fail for a more fundamental reason: cutthroat corporate profiteering and the humane provision of healthcare don’t mix. As healthcare reform returns to the national political discussion, we should be talking about cutting corporate America out of the healthcare system altogether – not welcoming them in.
Big Banks Saved $3.6B in Taxes Last Quarter Under New Law
The nation's six big Wall Street banks saved at least $3.59 billion in taxes just last quarter due to new tax law, giving public a first glimpse in how Corporate America is benefiting from the new Trump tax law.
BY KEN SWEET, AP Business Writer - us news
April 20, 2018, at 9:59 a.m.
NEW YORK (AP) — The nation's six big Wall Street banks posted record, or near record, profits in the first quarter, and they can thank one person in particular: President Donald Trump.
While higher interest rates allowed banks to earn more from lending in the first quarter, the main boost to bank came from the billions of dollars they saved in taxes under the tax law Trump signed in December. Combined, the six banks saved at least $3.59 billion last quarter, according to an Associated Press estimate, using the bank's tax rates going back to 2015.
Big publicly traded banks — such JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley and Bank of America — typically kick off the earnings season. Their reports for the January-March quarter are giving investors and the public their first glimpse into how the new tax law is impacting Corporate America.
Before the change in tax law, the maximum U.S. corporate income tax rate was 35 percent, not including what companies paid in state income taxes. Banks historically paid some of the highest taxes among the major industries, due to their U.S.-centric business models. Before the Trump tax cuts, these banks paid between 28 to 31 percent of their income each year in corporate taxes.
The results released over the past week show how sharply those rates have dropped. JPMorgan Chase said it had a first-quarter tax rate of 18.3 percent, Goldman Sachs paid just 17.2 percent in taxes, and the highest-taxed bank of the six majors, Citigroup, had a tax rate of 23.7 percent. This is just one quarter's results, however, and bank executives at the big six firms have estimated that their full-year tax rates will be something closer to 20 percent to 22 percent.
In its calculation, the AP used an average of full-year tax rates paid by the banks in 2015 and 2016. Full-year tax rates for 2017 were excluded from the calculation since all the banks, with the exception of Wells Fargo, had to take significant one-time charges late last year to come into compliance with the new tax law.
These charges were largely accounting adjustments but caused most of the banks to report a much higher tax rate in 2017 than they would have historically. Including them in the calculations would have distorted the amount of tax savings each bank would have hypothetically had.
The AP's calculations are roughly in line with what Wall Street analysts predicted earlier this year. A report by bank industry analyst Mike Mayo of Wells Fargo Securities estimated that that the big U.S. banks combined would save roughly $19 billion in taxes for the full year.
"If there was one significant factor this quarter for the big banks that I follow, it was taxes," said James Shanahan, an analyst with Edward Jones.
Bank executives have said the majority of the savings from the lower tax rates will be returned to shareholders in the form of higher dividends and stock buybacks. Some of the money has gone toward higher wages for employees, and new business investments.(sure!!!)
JPMorgan Chase announced soon after Trump signed the tax law into effect that it would open branches in Washington, D.C., Boston and Philadelphia, all markets where it currently does not have a branch network. Bank of America also announced a branch expansion this year, fueled partly by the tax cuts.
One large financial company that was not included in the AP's estimate was American Express. The credit card giant saw its effective tax rate drop from 33 percent in 2016 to 21.5 percent this past quarter. American Express paid $262 million less in taxes this past quarter than it would have under the old tax rate. American Express also reported near-record profits last quarter.
While higher interest rates allowed banks to earn more from lending in the first quarter, the main boost to bank came from the billions of dollars they saved in taxes under the tax law Trump signed in December. Combined, the six banks saved at least $3.59 billion last quarter, according to an Associated Press estimate, using the bank's tax rates going back to 2015.
Big publicly traded banks — such JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley and Bank of America — typically kick off the earnings season. Their reports for the January-March quarter are giving investors and the public their first glimpse into how the new tax law is impacting Corporate America.
Before the change in tax law, the maximum U.S. corporate income tax rate was 35 percent, not including what companies paid in state income taxes. Banks historically paid some of the highest taxes among the major industries, due to their U.S.-centric business models. Before the Trump tax cuts, these banks paid between 28 to 31 percent of their income each year in corporate taxes.
The results released over the past week show how sharply those rates have dropped. JPMorgan Chase said it had a first-quarter tax rate of 18.3 percent, Goldman Sachs paid just 17.2 percent in taxes, and the highest-taxed bank of the six majors, Citigroup, had a tax rate of 23.7 percent. This is just one quarter's results, however, and bank executives at the big six firms have estimated that their full-year tax rates will be something closer to 20 percent to 22 percent.
In its calculation, the AP used an average of full-year tax rates paid by the banks in 2015 and 2016. Full-year tax rates for 2017 were excluded from the calculation since all the banks, with the exception of Wells Fargo, had to take significant one-time charges late last year to come into compliance with the new tax law.
These charges were largely accounting adjustments but caused most of the banks to report a much higher tax rate in 2017 than they would have historically. Including them in the calculations would have distorted the amount of tax savings each bank would have hypothetically had.
The AP's calculations are roughly in line with what Wall Street analysts predicted earlier this year. A report by bank industry analyst Mike Mayo of Wells Fargo Securities estimated that that the big U.S. banks combined would save roughly $19 billion in taxes for the full year.
"If there was one significant factor this quarter for the big banks that I follow, it was taxes," said James Shanahan, an analyst with Edward Jones.
Bank executives have said the majority of the savings from the lower tax rates will be returned to shareholders in the form of higher dividends and stock buybacks. Some of the money has gone toward higher wages for employees, and new business investments.(sure!!!)
JPMorgan Chase announced soon after Trump signed the tax law into effect that it would open branches in Washington, D.C., Boston and Philadelphia, all markets where it currently does not have a branch network. Bank of America also announced a branch expansion this year, fueled partly by the tax cuts.
One large financial company that was not included in the AP's estimate was American Express. The credit card giant saw its effective tax rate drop from 33 percent in 2016 to 21.5 percent this past quarter. American Express paid $262 million less in taxes this past quarter than it would have under the old tax rate. American Express also reported near-record profits last quarter.
I'm a millionaire who creates zero jobs. Why do I pay less tax than you?
Morris Pearl - the guardian
Our tax code is deliberately designed to reward money over work, and the corporate tax cut financially rewards companies for moving money and jobs overseas
4/17/18
In 2013, just a few years after the 2008 financial crisis, I was part of BlackRock’s Financial Markets Advisory Group working for the Greek Central Bank, assessing the capital requirements of the bailouts of the Greek banks. I was on the top floor of a bank building in Athens with about 20 bank executives taking a lunch break, when I glanced out the window and saw a huge crowd of people on the street.
For a moment I thought it was a parade, and then I realized it was something between a protest and a riot. As I looked out the window to the heated crowd below, and looked behind me to the well–fed bankers at the table, I wondered if I was actually helping anyone beyond the people having lunch with me.
A few months later, I left a 30-year career on Wall Street to work full time as chair of the board of the Patriotic Millionaires. I haven’t looked back since.
There’s a Greek proverb that goes: “A society grows great when old men plant trees whose shade they know they will never sit in.”
Lately, the old men running our country haven’t been planting trees, they’ve been cutting them down to make room for private golf courses.
Right now, millionaires and billionaires are building luxury bomb shelters and private islands, high end sanctuaries for the end of days. They’re willing to pay millions to live through the collapse of society in comfort, but how many of them have spent that same amount – or anything for that matter – to change the dynamics that are creating that threat in the first place?
And while I’d like to believe my fellow millionaires will see the light soon, we can’t rely on them.
In these divided times, with noise and spin coming from every corner of Washington and the media, it’s hard to know whom to trust. Taxes are even worse than most other issues, because not only does everyone have a point they’re trying to sell to you, they present it in what seems like the most dense, complicated way possible. It’s almost like they want you to be confused.
So what I want to do is give Americans of every political stripe and no political stripe a clear explanation of who actually benefits from our country’s tax code and the most recent GOP tax bill.
Their money v your sweat
Our elected officials may speak eloquently about the nobility of labor and the value of a hard day’s work, but money talks louder, and our tax code is deliberately designed to reward money over work.
Here’s how: our tax code has two different rates for two distinct types of earnings: “ordinary” income and “capital gains” income.
Most of the ultra–rich make the vast majority of their money through capital gains, not income. They don’t work in the way most Americans work, because they live off of their investments. And it’s a lucrative path, because the top capital gains rate is barely over half of that paid for ordinary income.
That means a billionaire whose investments earn him millions of dollars while he sits around at the beach and goes to fancy cocktail parties pays a lower tax rate on his earnings than almost any working American.
Investing is not inherently more valuable than labor, and it’s simply not true that investing in the stock market creates jobs.
Take it from me: I am an investor. I have not actually worked in years. I let my money make me money. Over the past year, do you know how many jobs I’ve created? Zero. The only thing that does create jobs is consumer demand for products and services that people can make and provide, not my investment dollars.
If we want to create jobs, we should be implementing policies that grow the middle class and help bring people up out of poverty so they can participate in the economy.
Unfortunately, the “Tax Cuts and Jobs Act” will do just the opposite.
The biggest rewrite of the tax code in decades
In the past few years corporate profits have reached record highs, and two–thirds of Americans agree that corporations pay too little in taxes. The Republican-controlled Congress disagreed.
Instead of closing loopholes and putting in place rules to ensure that corporations pay more, they passed a massive corporate tax cut that financially rewards companies for moving money and jobs overseas.
Now, corporations actually pay lower taxes rate (about half) on income earned overseas. Imagine that I have a business selling computer systems, and I have an 800 number that people call to get help using the systems. That support is a key part of the value of these system, and about half of my company’s costs involve running the telephone support center.
With the new tax system, I can:
The new system put in place by the Republican tax bill is what economists call a modified territorial tax system.
In it, not only is the corporate tax rate on overseas profits just half the normal rate (10.5% versus 21%), companies still receive credits for the foreign taxes they pay. So if a corporation earns its profits in a country where the corporate tax rate is above 13.1% (nearly every other country), then it ends up paying nothing in US taxes.
Not only does the tax bill encourage corporations to move their money and their corporate headquarters overseas, it actually incentivizes them to move plants and manufacturing facilities to other countries as well.
That’s right – rather than help bring back American manufacturing, this bill actually gives companies a tax break for moving their factories to other countries.
Tax jargon aside, this means that the more equipment and factories a company has in other countries, the more tax–free income it can earn.
If that isn’t a strong incentive to shut down American factories and move them overseas then I don’t know what is.
So if corporate tax cuts don’t bring back manufacturing, or lead to job or wage growth, who benefits?
The answer is clear: CEOs and stockholders.
This is unsurprising to anyone who’s tracked corporate responses to last year’s bill. While some corporations have given raises or bonuses, the amount given to workers is dwarfed by the hundreds of billions of dollars that have been spent on stock buybacks. It took less than two months in 2018 for companies to announce over $200 billion in share buybacks, more than double the amount from the same period in 2017.
Many millionaires and billionaires want special treatment. They honestly believe that they deserve special treatment. They puff up their chests, call themselves “job creators” and insist the economy will collapse if (god forbid!) they are asked to pay a single penny more in taxes.
Nonsense. Millionaires put their pants on one leg at a time, just like everyone else. Consumer demand is the only real “job creator”. And nothing is going to collapse if millionaires pay their fair share (except for possibly an over–inflated ego or two).
I’m writing this in the hopes that some of my fellow citizens – those who are millionaires and those who are not, people in both parties and no party at all – will read it and be inspired to think differently about taxes. Then I hope they will act.
Together, we can build the next best century for our nation.
Morris Pearl, a former managing director at BlackRock, is chair of the Patriotic Millionaires. This is an adapted extract from his book, How to Think Like a Patriotic Millionaire: Taxes, published by Strong Arm Press
For a moment I thought it was a parade, and then I realized it was something between a protest and a riot. As I looked out the window to the heated crowd below, and looked behind me to the well–fed bankers at the table, I wondered if I was actually helping anyone beyond the people having lunch with me.
A few months later, I left a 30-year career on Wall Street to work full time as chair of the board of the Patriotic Millionaires. I haven’t looked back since.
There’s a Greek proverb that goes: “A society grows great when old men plant trees whose shade they know they will never sit in.”
Lately, the old men running our country haven’t been planting trees, they’ve been cutting them down to make room for private golf courses.
Right now, millionaires and billionaires are building luxury bomb shelters and private islands, high end sanctuaries for the end of days. They’re willing to pay millions to live through the collapse of society in comfort, but how many of them have spent that same amount – or anything for that matter – to change the dynamics that are creating that threat in the first place?
And while I’d like to believe my fellow millionaires will see the light soon, we can’t rely on them.
In these divided times, with noise and spin coming from every corner of Washington and the media, it’s hard to know whom to trust. Taxes are even worse than most other issues, because not only does everyone have a point they’re trying to sell to you, they present it in what seems like the most dense, complicated way possible. It’s almost like they want you to be confused.
So what I want to do is give Americans of every political stripe and no political stripe a clear explanation of who actually benefits from our country’s tax code and the most recent GOP tax bill.
Their money v your sweat
Our elected officials may speak eloquently about the nobility of labor and the value of a hard day’s work, but money talks louder, and our tax code is deliberately designed to reward money over work.
Here’s how: our tax code has two different rates for two distinct types of earnings: “ordinary” income and “capital gains” income.
Most of the ultra–rich make the vast majority of their money through capital gains, not income. They don’t work in the way most Americans work, because they live off of their investments. And it’s a lucrative path, because the top capital gains rate is barely over half of that paid for ordinary income.
That means a billionaire whose investments earn him millions of dollars while he sits around at the beach and goes to fancy cocktail parties pays a lower tax rate on his earnings than almost any working American.
Investing is not inherently more valuable than labor, and it’s simply not true that investing in the stock market creates jobs.
Take it from me: I am an investor. I have not actually worked in years. I let my money make me money. Over the past year, do you know how many jobs I’ve created? Zero. The only thing that does create jobs is consumer demand for products and services that people can make and provide, not my investment dollars.
If we want to create jobs, we should be implementing policies that grow the middle class and help bring people up out of poverty so they can participate in the economy.
Unfortunately, the “Tax Cuts and Jobs Act” will do just the opposite.
The biggest rewrite of the tax code in decades
In the past few years corporate profits have reached record highs, and two–thirds of Americans agree that corporations pay too little in taxes. The Republican-controlled Congress disagreed.
Instead of closing loopholes and putting in place rules to ensure that corporations pay more, they passed a massive corporate tax cut that financially rewards companies for moving money and jobs overseas.
Now, corporations actually pay lower taxes rate (about half) on income earned overseas. Imagine that I have a business selling computer systems, and I have an 800 number that people call to get help using the systems. That support is a key part of the value of these system, and about half of my company’s costs involve running the telephone support center.
With the new tax system, I can:
- Open an affiliate in India to provide call center services.
- Send half of my money to the India affiliate.
- Pay the workers in India (where middle wages range from the equivalent of about $3,500 to about $13,000).
- Pay a tax rate of only 10.5% on half of company profits.
The new system put in place by the Republican tax bill is what economists call a modified territorial tax system.
In it, not only is the corporate tax rate on overseas profits just half the normal rate (10.5% versus 21%), companies still receive credits for the foreign taxes they pay. So if a corporation earns its profits in a country where the corporate tax rate is above 13.1% (nearly every other country), then it ends up paying nothing in US taxes.
Not only does the tax bill encourage corporations to move their money and their corporate headquarters overseas, it actually incentivizes them to move plants and manufacturing facilities to other countries as well.
That’s right – rather than help bring back American manufacturing, this bill actually gives companies a tax break for moving their factories to other countries.
Tax jargon aside, this means that the more equipment and factories a company has in other countries, the more tax–free income it can earn.
If that isn’t a strong incentive to shut down American factories and move them overseas then I don’t know what is.
So if corporate tax cuts don’t bring back manufacturing, or lead to job or wage growth, who benefits?
The answer is clear: CEOs and stockholders.
This is unsurprising to anyone who’s tracked corporate responses to last year’s bill. While some corporations have given raises or bonuses, the amount given to workers is dwarfed by the hundreds of billions of dollars that have been spent on stock buybacks. It took less than two months in 2018 for companies to announce over $200 billion in share buybacks, more than double the amount from the same period in 2017.
Many millionaires and billionaires want special treatment. They honestly believe that they deserve special treatment. They puff up their chests, call themselves “job creators” and insist the economy will collapse if (god forbid!) they are asked to pay a single penny more in taxes.
Nonsense. Millionaires put their pants on one leg at a time, just like everyone else. Consumer demand is the only real “job creator”. And nothing is going to collapse if millionaires pay their fair share (except for possibly an over–inflated ego or two).
I’m writing this in the hopes that some of my fellow citizens – those who are millionaires and those who are not, people in both parties and no party at all – will read it and be inspired to think differently about taxes. Then I hope they will act.
Together, we can build the next best century for our nation.
Morris Pearl, a former managing director at BlackRock, is chair of the Patriotic Millionaires. This is an adapted extract from his book, How to Think Like a Patriotic Millionaire: Taxes, published by Strong Arm Press
Harvard Teaches Us That Hedge Fund Managers Get Rich Even When They Mess Up
Monday, April 16, 2018
By Dean Baker, Truthout | Op-Ed
While we all know that it is important for people to get a good education if they want to do well in today's economy, it remains the case that who you know matters much more than what you know. Harvard has taught us this lesson well with the management of its endowment in recent years.
Businessweek reported that the returns on Harvard's endowment over the last decade averaged just 4.4 percent annually. This performance trailed both stock index returns and the returns received by other major university endowments. This means that Harvard would have had considerably more money to pay its faculty and staff if it simply bought a Vanguard index fund.
If this were just bad luck, one could be sympathetic, but according to Businessweek, the school paid $242 million to the people who managed its money over the period from 2010 to 2014, an average of $48.4 million annually. While Harvard's endowment fared poorly, these money managers did very well, with the top-paid managers undoubtedly pocketing paychecks well in excess of $1 million a year (approximately 8,000 food stamp months). In other words, Harvard's money managers were paid huge sums to lose the school money. Nice work if you can get it.
It is difficult to understand how Harvard, or any university, could pay so much money to lose the school money. Harvard's money managers surely have good credentials, and probably even good track records with their past performance. How could the university write contracts that allow these people to get huge paychecks that end up costing Harvard money due to their poor investment decisions?
Unfortunately, universities are not the only ones who often pay big bucks to lose money. Pension funds routinely sign contracts with private equity companies that allow the private equity partners to get rich even if investment returns to the funds are no better, and often worse, than the returns from equivalent stock index funds. The key is to be on the inside: a well-connected private equity fund manager. Being able to find good investment opportunities is secondary.
It is not only the financial sector where good contacts mean everything. The story of the exploding pay of top corporate executives is also largely a story of friends in high places. CEOs have always been well-paid, but in the last four decades their pay went from being in a range of 20- to 30-times the pay of a typical worker, to being 200- to 300-times the pay of a typical worker.
The deal with CEOs and other top management is that they play a large role in selecting the members of the corporate boards that oversee their work and set their pay. Being a director of a major corporation is an incredibly cushy job. It involves around 100 to 150 hours of work a year and typically pays over $100,000 a year and can pay $200,000 or $300,000 a year.
Directors can generally count on keeping their jobs as long as they stay on the good side of their peers and top management. In principle, shareholders get to vote on whether directors should be retained. In practice, more than 99 percent of the directors who are put forward by the board are re-elected.
In this environment, there is little incentive for directors to ask questions like, "can we get away with paying our CEO less money?" Even though it is supposed to be the responsibility of the director to shareholders to minimize the pay to CEOs, few directors seem to take this aspect of their job seriously. They have no incentive to try to push down the pay CEOs receive. As a result, we see a continuing upward spiral of CEO pay, where the high pay of one CEO can provide the basis for raising the pay of a competitor. However, low CEO pay in one company is rarely used as a basis for cutting the pay of a CEO elsewhere.
And, this is a big deal. When the CEO gets $20 million a year, the next tier of corporate management will likely get paychecks well into the millions, with third-tier paychecks at least in the high hundreds of thousands. It is basic logic that the more money the folks at the top get, the less money is available for everyone else. The chief financial officer may get a jump in pay that corresponds to the raise received by her CEO; the custodian almost certainly will not.
In short, as Harvard teaches us, the key is to get into the right social circles. While performance may still be rewarded, it is not necessary, as Harvard's money managers demonstrate so well.
Businessweek reported that the returns on Harvard's endowment over the last decade averaged just 4.4 percent annually. This performance trailed both stock index returns and the returns received by other major university endowments. This means that Harvard would have had considerably more money to pay its faculty and staff if it simply bought a Vanguard index fund.
If this were just bad luck, one could be sympathetic, but according to Businessweek, the school paid $242 million to the people who managed its money over the period from 2010 to 2014, an average of $48.4 million annually. While Harvard's endowment fared poorly, these money managers did very well, with the top-paid managers undoubtedly pocketing paychecks well in excess of $1 million a year (approximately 8,000 food stamp months). In other words, Harvard's money managers were paid huge sums to lose the school money. Nice work if you can get it.
It is difficult to understand how Harvard, or any university, could pay so much money to lose the school money. Harvard's money managers surely have good credentials, and probably even good track records with their past performance. How could the university write contracts that allow these people to get huge paychecks that end up costing Harvard money due to their poor investment decisions?
Unfortunately, universities are not the only ones who often pay big bucks to lose money. Pension funds routinely sign contracts with private equity companies that allow the private equity partners to get rich even if investment returns to the funds are no better, and often worse, than the returns from equivalent stock index funds. The key is to be on the inside: a well-connected private equity fund manager. Being able to find good investment opportunities is secondary.
It is not only the financial sector where good contacts mean everything. The story of the exploding pay of top corporate executives is also largely a story of friends in high places. CEOs have always been well-paid, but in the last four decades their pay went from being in a range of 20- to 30-times the pay of a typical worker, to being 200- to 300-times the pay of a typical worker.
The deal with CEOs and other top management is that they play a large role in selecting the members of the corporate boards that oversee their work and set their pay. Being a director of a major corporation is an incredibly cushy job. It involves around 100 to 150 hours of work a year and typically pays over $100,000 a year and can pay $200,000 or $300,000 a year.
Directors can generally count on keeping their jobs as long as they stay on the good side of their peers and top management. In principle, shareholders get to vote on whether directors should be retained. In practice, more than 99 percent of the directors who are put forward by the board are re-elected.
In this environment, there is little incentive for directors to ask questions like, "can we get away with paying our CEO less money?" Even though it is supposed to be the responsibility of the director to shareholders to minimize the pay to CEOs, few directors seem to take this aspect of their job seriously. They have no incentive to try to push down the pay CEOs receive. As a result, we see a continuing upward spiral of CEO pay, where the high pay of one CEO can provide the basis for raising the pay of a competitor. However, low CEO pay in one company is rarely used as a basis for cutting the pay of a CEO elsewhere.
And, this is a big deal. When the CEO gets $20 million a year, the next tier of corporate management will likely get paychecks well into the millions, with third-tier paychecks at least in the high hundreds of thousands. It is basic logic that the more money the folks at the top get, the less money is available for everyone else. The chief financial officer may get a jump in pay that corresponds to the raise received by her CEO; the custodian almost certainly will not.
In short, as Harvard teaches us, the key is to get into the right social circles. While performance may still be rewarded, it is not necessary, as Harvard's money managers demonstrate so well.
Jim Hightower: How Low Can the Barons of High Finance Go?
Bankers do not have a legal right to profit.
By Jim Hightower / AlterNet
April 3, 2018, 12:06 PM GMT
Question: What do you get when you combine ignorance, ideological know-nothingism, imperiousness and incompetence? Answer: Betsy DeVos.
She is Donald Trump's multi-billionaire Education Secretary who hates the very idea of public education and loves the plutocratic idea of corporate rule over Democracy. DeVos presently holds first place in the contest for worst member of Donald Trump's cabinet (a little like winning the title of ugliest toad in the swamp). Her claim to be first among the worst has been buttressed by her bizarre eagerness to shill for one of the ugliest parts of the financial services industry: the Wall Street-backed corporations that lure people into high-interest, financially-ruinous student loans to attend rip-off for-profit colleges.
All across the country, 5 million students -- largely single moms, veterans and other low-income people targeted by this nefarious network of colleges, lenders and collection agencies -- have defaulted on their student loan debt and have had their credit ratings and job improvement prospects destroyed by the profiteering private education system that DeVos carelessly promotes. Her latest favor for them is an insidious new policy she issued unilaterally asserting that her agency can pre-empt any state laws designed to stop the blatant lies and abuses of these loan-servicing corporations. Her bureaucratic claim is that such a state effort to protect student borrowers "undermines uniform administration" of student loans. In her shriveled world laissez-fairy values, you see, program efficiency trumps such basic human values as economic fairness and social justice.
Heavens to Betsy, what's wrong with this lady? Just in fiscal terms, our nation's student loan debt has ballooned to $1.4 trillion, threatening to blow another big hole in our democracy. We need an education secretary who's smart enough work with state officials, students and responsible lenders, rather than conspiring and cavorting in her department's back rooms with fast-buck educational exploiters.
DeVos is bad, but the bankers she serves are even worse. "Greed is good," proclaimed Gordon Gekko, the lead character in a 1987 film lampooning the low ethics of Wall Street's barons of high finance.
You might think that, surely, this Hollywood portrayal of big banker mentality is a gross exaggeration, but check out an egregious example of Gekko-level greed being pushed by today's finance industry. Big banks like Capital One, Citi, Bank of America and Wells Fargo -- through their lobbying front, the Financial Services Roundtable -- have been going all out to kill a sensible labor department rule meant to protect people's retirement accounts from the self-serving guile of financial manipulators. The rule simply requires firms that manage these accounts to put our money in investments expected to produce the best returns for us, rather than in investments that pay the highest interest fees to them.
It's hardly harsh to require these massive financial institutions to treat us common customers with basic honesty, applying a fiduciary duty that amounts to a Golden Rule for bankers. But, oh, the howls of outrage exploded from the Wall Street baronies, their lobbyists swarmed into Washington and scores of lawyers rushed into courts. To defend their right to be dishonest, the greed-fueled bankers resorted to more dishonesty claiming that the fiduciary rule would hurt "smaller investors."
Huh? Well, they prevaricated; only by misdirecting small retirement savers into high-fee investments can we make enough profit to give "affordable financial advice" to workaday folks. Again, huh? These banks are wallowing in unconscionable levels of profits, but only the affordable advice they want to offer to us is blatantly bad advice, funneling our retirement stash into deals that benefit them at our expense.
Bankers claiming that they have a legal right to profit by deceiving and cheating their own customers is a level of gluttony so gross that it would even gag Gordon Gekko. To fight their absurd claim, connect with Consumer Federation of America.
She is Donald Trump's multi-billionaire Education Secretary who hates the very idea of public education and loves the plutocratic idea of corporate rule over Democracy. DeVos presently holds first place in the contest for worst member of Donald Trump's cabinet (a little like winning the title of ugliest toad in the swamp). Her claim to be first among the worst has been buttressed by her bizarre eagerness to shill for one of the ugliest parts of the financial services industry: the Wall Street-backed corporations that lure people into high-interest, financially-ruinous student loans to attend rip-off for-profit colleges.
All across the country, 5 million students -- largely single moms, veterans and other low-income people targeted by this nefarious network of colleges, lenders and collection agencies -- have defaulted on their student loan debt and have had their credit ratings and job improvement prospects destroyed by the profiteering private education system that DeVos carelessly promotes. Her latest favor for them is an insidious new policy she issued unilaterally asserting that her agency can pre-empt any state laws designed to stop the blatant lies and abuses of these loan-servicing corporations. Her bureaucratic claim is that such a state effort to protect student borrowers "undermines uniform administration" of student loans. In her shriveled world laissez-fairy values, you see, program efficiency trumps such basic human values as economic fairness and social justice.
Heavens to Betsy, what's wrong with this lady? Just in fiscal terms, our nation's student loan debt has ballooned to $1.4 trillion, threatening to blow another big hole in our democracy. We need an education secretary who's smart enough work with state officials, students and responsible lenders, rather than conspiring and cavorting in her department's back rooms with fast-buck educational exploiters.
DeVos is bad, but the bankers she serves are even worse. "Greed is good," proclaimed Gordon Gekko, the lead character in a 1987 film lampooning the low ethics of Wall Street's barons of high finance.
You might think that, surely, this Hollywood portrayal of big banker mentality is a gross exaggeration, but check out an egregious example of Gekko-level greed being pushed by today's finance industry. Big banks like Capital One, Citi, Bank of America and Wells Fargo -- through their lobbying front, the Financial Services Roundtable -- have been going all out to kill a sensible labor department rule meant to protect people's retirement accounts from the self-serving guile of financial manipulators. The rule simply requires firms that manage these accounts to put our money in investments expected to produce the best returns for us, rather than in investments that pay the highest interest fees to them.
It's hardly harsh to require these massive financial institutions to treat us common customers with basic honesty, applying a fiduciary duty that amounts to a Golden Rule for bankers. But, oh, the howls of outrage exploded from the Wall Street baronies, their lobbyists swarmed into Washington and scores of lawyers rushed into courts. To defend their right to be dishonest, the greed-fueled bankers resorted to more dishonesty claiming that the fiduciary rule would hurt "smaller investors."
Huh? Well, they prevaricated; only by misdirecting small retirement savers into high-fee investments can we make enough profit to give "affordable financial advice" to workaday folks. Again, huh? These banks are wallowing in unconscionable levels of profits, but only the affordable advice they want to offer to us is blatantly bad advice, funneling our retirement stash into deals that benefit them at our expense.
Bankers claiming that they have a legal right to profit by deceiving and cheating their own customers is a level of gluttony so gross that it would even gag Gordon Gekko. To fight their absurd claim, connect with Consumer Federation of America.
DC Joins Seven States With Campaigns to Close Carried Interest Loophole
Sunday, April 01, 2018
By Sarah Anderson, Inequality.org | Report - truthout
"All over the city we have huge needs. We need better public transport that works for all of us. We need affordable housing," said Elizabeth Falcon, speaking into a megaphone in front of the downtown Washington, D.C. office building of the Carlyle Group private equity fund.
"But we can't do those things while these guys are up here making $2 billion a year and paying less on the profits that they make than the folks who are picking up our trash and cleaning our streets and teaching our children."
Falcon, Executive Director of DC Jobs with Justice, was among leaders of several activist groups, including SPACEs, the Take On Wall Street campaign, and the Patriotic Millionaires, who spoke at a March 23 rally in front of Carlyle's Pennsylvania Avenue office. Their aim was to hold up the top guys at this fund as prime examples of the need to close a tax loophole that has made obscenely wealthy financial executives even wealthier.
The three Carlyle Group founders -- David Rubenstein, William Conway, and Daniel D'Aniello -- are each worth $2.8 billion, according to Forbes. They owe a substantial share of their wealth to the "carried interest" loophole, which allows hedge fund and private equity managers to claim most of their income as capital gains rather than ordinary income.
The top tax rate on capital gains is currently 20 percent (plus a Medicare surtax of 3.8 percent), while the top marginal income tax rate has just dropped from 39.6 to 37 percent.
During his presidential campaign, President Donald Trump pledged to close the carried interest loophole. Instead, the new tax law merely lengthened the holding period for assets that qualify for the favorable capital gains rate from one to three years, and some tax experts fear funds structured as partnerships may be able to get around even this modest change.
"These guys here and around the country have gotten a break for too long because they have close ties to Congress, and Congress has cut them a deal," said rally speaker David Grosso, an at-large member of the DC Council and the champion of a bill to close the loophole for the District of Columbia.
"I continually am told by my colleagues that there's not enough money. There's not enough money for housing, there's not enough money for the poor, there's not enough money for healthcare, there's not enough money for education," Grosso explained. "What I've decided to do is join you in your effort to close the carried interest loophole in order to expand the District of Columbia's bank accounts to make it possible for us to invest more money in the people."
Grosso's bill is similar to proposals now pending in seven states (New York, New Jersey, Connecticut, Illinois, Maryland, California, Rhode Island, and Massachusetts) that would apply surtaxes on "carried interest" income to raise revenue for state and local needs and to address the failure to close the carried interest loophole at the federal level. New Jersey Governor Phil Murphy reiterated his support for such a fix in a March 23 speech.
According to a new report by the Hedge Clippers campaign, such surtaxes could raise as much as $223 million per year in the "DMV" region ($152 million for Washington, D.C., $32 million for Maryland, and $39 million for Virginia). For the seven other states, revenue estimates range from $39 million for Rhode Island to $3.5 billion for Wall Street's home state of New York.
The Hedge Clippers campaign works to expose the mechanisms hedge funds and billionaires use to influence government and politics. Their new report puts human faces on many of the biggest beneficiaries of the carried interest loophole in the nation's capital.
While the city is known as a political rather than a financial center, the area is home to not only the Carlyle Group behemoth, but several other major investment funds:
"My family and other families alike want fully funded social services programs that the most vulnerable people in our city need," Sequnely Gray of DC Jobs With Justice told the rally crowd. "Instead, we're letting these millionaires and billionaires get away without paying their fair share. But now we have the opportunity to act when Congress won't."
"But we can't do those things while these guys are up here making $2 billion a year and paying less on the profits that they make than the folks who are picking up our trash and cleaning our streets and teaching our children."
Falcon, Executive Director of DC Jobs with Justice, was among leaders of several activist groups, including SPACEs, the Take On Wall Street campaign, and the Patriotic Millionaires, who spoke at a March 23 rally in front of Carlyle's Pennsylvania Avenue office. Their aim was to hold up the top guys at this fund as prime examples of the need to close a tax loophole that has made obscenely wealthy financial executives even wealthier.
The three Carlyle Group founders -- David Rubenstein, William Conway, and Daniel D'Aniello -- are each worth $2.8 billion, according to Forbes. They owe a substantial share of their wealth to the "carried interest" loophole, which allows hedge fund and private equity managers to claim most of their income as capital gains rather than ordinary income.
The top tax rate on capital gains is currently 20 percent (plus a Medicare surtax of 3.8 percent), while the top marginal income tax rate has just dropped from 39.6 to 37 percent.
During his presidential campaign, President Donald Trump pledged to close the carried interest loophole. Instead, the new tax law merely lengthened the holding period for assets that qualify for the favorable capital gains rate from one to three years, and some tax experts fear funds structured as partnerships may be able to get around even this modest change.
"These guys here and around the country have gotten a break for too long because they have close ties to Congress, and Congress has cut them a deal," said rally speaker David Grosso, an at-large member of the DC Council and the champion of a bill to close the loophole for the District of Columbia.
"I continually am told by my colleagues that there's not enough money. There's not enough money for housing, there's not enough money for the poor, there's not enough money for healthcare, there's not enough money for education," Grosso explained. "What I've decided to do is join you in your effort to close the carried interest loophole in order to expand the District of Columbia's bank accounts to make it possible for us to invest more money in the people."
Grosso's bill is similar to proposals now pending in seven states (New York, New Jersey, Connecticut, Illinois, Maryland, California, Rhode Island, and Massachusetts) that would apply surtaxes on "carried interest" income to raise revenue for state and local needs and to address the failure to close the carried interest loophole at the federal level. New Jersey Governor Phil Murphy reiterated his support for such a fix in a March 23 speech.
According to a new report by the Hedge Clippers campaign, such surtaxes could raise as much as $223 million per year in the "DMV" region ($152 million for Washington, D.C., $32 million for Maryland, and $39 million for Virginia). For the seven other states, revenue estimates range from $39 million for Rhode Island to $3.5 billion for Wall Street's home state of New York.
The Hedge Clippers campaign works to expose the mechanisms hedge funds and billionaires use to influence government and politics. Their new report puts human faces on many of the biggest beneficiaries of the carried interest loophole in the nation's capital.
While the city is known as a political rather than a financial center, the area is home to not only the Carlyle Group behemoth, but several other major investment funds:
- EJF Capital, a $6 billion hedge fund whose CEO, Emanuel "Manny" Joshua Friedman, paid a $1.2 million fine as part of an SEC insider trading case settlement. Friedman and his colleague Neal Wilson are currently financing a PAC to unseat financial industry watchdog Senator Elizabeth Warren.
- DC Capital Partners, an Alexandria, Virginia-based private equity firm that has made a killing investing in military contractors.
- Quantitative Investment Management, a $3.1 billion hedge fund based in Charlottesville, Virginia that specializes in algorithm-based trading techniques designed to drain profits from traditional investors.
- Rock Creek Group, a Carlyle Group spinoff that manages the investments of wealthy clients in private equity and hedge funds. Wells Fargo is a majority owner of the firm.
- Revolution, a D.C.-based venture capital firm co-founded by Steve Case, better known as the man who presided over the failed merger of the company he founded, AOL, and Time Warner. Case's net worth: $1.3 billion.
- Interprise Partners, a Columbia, Maryland-based private equity firm co-founded by Ben Carson, Jr., the son of Trump cabinet member Ben Carson.
"My family and other families alike want fully funded social services programs that the most vulnerable people in our city need," Sequnely Gray of DC Jobs With Justice told the rally crowd. "Instead, we're letting these millionaires and billionaires get away without paying their fair share. But now we have the opportunity to act when Congress won't."
High CEO Pay: It's What Friends Are For
Monday, March 26, 2018
By Dean Baker, Truthout | Op-Ed
The explosion in the pay of corporate CEOs is well documented. While the heads of major corporations were always well paid, we saw their pay go from 20- to 30-times the pay of ordinary workers in the 1960s and 1970s to 200- or 300-times the pay of ordinary workers in recent years. Paychecks of more than $20 million a year are now standard, and it's not uncommon to see a top executive haul in more than $40 or $50 million in a single year.
Soaring CEO pay is an important part of the story of the rise in inequality over the last four decades. These people are all in the top 0.01 percent or even 0.001 percent of the income distribution.
The high pay of CEOs lifts the pay for other top executives. If the CEO is getting $25 million a year, it is likely that people directly under her are making salaries of $3 to $5 million, and quite possibly considerably more. If CEOs were earning $2 million, most likely the next tier of workers would be earning in the neighborhood of $1 million. And, it's just straight logic that higher pay at the top means less for everyone else.
In addition, the high pay at the top of the corporate ladder gets transmitted to other sectors. It is now common to see university presidents and heads of charities and other nonprofits get pay in excess of $1 million or even $2 million a year. They can truthfully say that they would get far higher pay if they ran comparably sized organizations in the corporate sector.
There is an ongoing debate in the economics profession over the reason for the jump in CEO pay. Many economists argue that higher pay reflects the growing importance of CEO performance to the company. Their argument is that a good CEO, who can skillfully steer a company through a rapidly changing market environment, can add billions of dollars to shareholder value. In this context, the shareholders can still come out way ahead even if they are paying out $40 or $50 million a year to their CEOs.
The contrasting position is that CEOs often walk away with massive paychecks even when they have done little or nothing to add value for shareholders. (It is assumed that CEOs are being rewarded for helping shareholders, not for benefitting employees or society as a whole.) The CEOs of major oil companies got huge pay raises as a result of the rise in world oil prices in the last decade, a factor that was pretty much out of their control. This implies that high pay is a result of the failure of corporate governance, where shareholders lack the ability to effectively control CEO pay.
In a new paper, Jessica Schieder of the Economic Policy Institute and I examined the impact of a cap in the deductibility of CEO pay. A provision in the Affordable Care Act (ACA) prevented health insurers from deducting more than $500,000 of CEO pay from their taxes. This meant that a dollar of CEO pay went from costing companies 65 cents in after-tax dollars to costing them a full dollar, an increase of more than 50 percent.
If CEO pay was closely related to the returns the CEOs provided to shareholders, this provision should have led to a fall in the pay of CEOs at health insurers, relative to other companies. We tested the impact of this ACA provision, controlling for profits, revenues, stock prices and other factors expected to affect CEO pay. We could find zero evidence that the provision had any effect whatsoever in lowering the pay of CEOs in the insurance industry.
The fact that making CEO pay more costly to the company had no effect on their compensation supports the broken corporate governance view. CEOs don't get paid the big bucks because they are so valuable to their companies. They get paid the big bucks because the boards of directors, who most immediately determine their pay, are their friends.
The directors are appointed through a process that is dominated by top management. Being a director is a very cushy job, typically paying in the hundreds of thousands of dollars for perhaps a 150 hours of work annually. As long as directors have the support of management, it is almost impossible for them to be removed. Over 99 percent are reelected. In this context, directors have no incentive to ask questions like "can we pay our CEO less?"
It is possible to change the incentive structure. A provision in the Dodd-Frank financial reform bill requires a triannual "say on pay" vote by shareholders. This is a nonbinding vote in which shareholders vote yes or no on a CEO pay package. Less than 3 percent of packages are voted down. Interest is generally low because there is little consequence from a no vote.
But the law could be changed to have more consequence. Suppose directors sacrificed their pay if the shareholders voted no. This would give them a real incentive to ask whether they could pay their CEO less.
This, and other changes to corporate governance could rein in CEO pay and help to reduce inequality. It will require more thought and much struggle to determine the best set of reforms. However, there is one thing on which we feel confident, based on this new research: Limiting tax deductibility of CEO pay is not the answer.
Soaring CEO pay is an important part of the story of the rise in inequality over the last four decades. These people are all in the top 0.01 percent or even 0.001 percent of the income distribution.
The high pay of CEOs lifts the pay for other top executives. If the CEO is getting $25 million a year, it is likely that people directly under her are making salaries of $3 to $5 million, and quite possibly considerably more. If CEOs were earning $2 million, most likely the next tier of workers would be earning in the neighborhood of $1 million. And, it's just straight logic that higher pay at the top means less for everyone else.
In addition, the high pay at the top of the corporate ladder gets transmitted to other sectors. It is now common to see university presidents and heads of charities and other nonprofits get pay in excess of $1 million or even $2 million a year. They can truthfully say that they would get far higher pay if they ran comparably sized organizations in the corporate sector.
There is an ongoing debate in the economics profession over the reason for the jump in CEO pay. Many economists argue that higher pay reflects the growing importance of CEO performance to the company. Their argument is that a good CEO, who can skillfully steer a company through a rapidly changing market environment, can add billions of dollars to shareholder value. In this context, the shareholders can still come out way ahead even if they are paying out $40 or $50 million a year to their CEOs.
The contrasting position is that CEOs often walk away with massive paychecks even when they have done little or nothing to add value for shareholders. (It is assumed that CEOs are being rewarded for helping shareholders, not for benefitting employees or society as a whole.) The CEOs of major oil companies got huge pay raises as a result of the rise in world oil prices in the last decade, a factor that was pretty much out of their control. This implies that high pay is a result of the failure of corporate governance, where shareholders lack the ability to effectively control CEO pay.
In a new paper, Jessica Schieder of the Economic Policy Institute and I examined the impact of a cap in the deductibility of CEO pay. A provision in the Affordable Care Act (ACA) prevented health insurers from deducting more than $500,000 of CEO pay from their taxes. This meant that a dollar of CEO pay went from costing companies 65 cents in after-tax dollars to costing them a full dollar, an increase of more than 50 percent.
If CEO pay was closely related to the returns the CEOs provided to shareholders, this provision should have led to a fall in the pay of CEOs at health insurers, relative to other companies. We tested the impact of this ACA provision, controlling for profits, revenues, stock prices and other factors expected to affect CEO pay. We could find zero evidence that the provision had any effect whatsoever in lowering the pay of CEOs in the insurance industry.
The fact that making CEO pay more costly to the company had no effect on their compensation supports the broken corporate governance view. CEOs don't get paid the big bucks because they are so valuable to their companies. They get paid the big bucks because the boards of directors, who most immediately determine their pay, are their friends.
The directors are appointed through a process that is dominated by top management. Being a director is a very cushy job, typically paying in the hundreds of thousands of dollars for perhaps a 150 hours of work annually. As long as directors have the support of management, it is almost impossible for them to be removed. Over 99 percent are reelected. In this context, directors have no incentive to ask questions like "can we pay our CEO less?"
It is possible to change the incentive structure. A provision in the Dodd-Frank financial reform bill requires a triannual "say on pay" vote by shareholders. This is a nonbinding vote in which shareholders vote yes or no on a CEO pay package. Less than 3 percent of packages are voted down. Interest is generally low because there is little consequence from a no vote.
But the law could be changed to have more consequence. Suppose directors sacrificed their pay if the shareholders voted no. This would give them a real incentive to ask whether they could pay their CEO less.
This, and other changes to corporate governance could rein in CEO pay and help to reduce inequality. It will require more thought and much struggle to determine the best set of reforms. However, there is one thing on which we feel confident, based on this new research: Limiting tax deductibility of CEO pay is not the answer.
Battered by Great Recession, underfunded public pensions to persist
Karen Pierog, Daniel Bases reuters
MARCH 25, 2018 / 10:16 PM
CHICAGO (Reuters) - Ten years on from the financial crisis, many U.S. state and local public pension systems are still the worse for wear.
Investment returns have been uneven and funding levels have yet to recover. Many pension funds have meanwhile attempted to boost returns by loading up on alternative investments to levels unheard of a decade earlier.
“Some just cannot grow their way out of it. We have had several years of stellar (stock market) returns and it barely improved the underfunding situation,” said Mikhail Foux, municipal credit analyst at Barclays in New York.
The benchmark S&P 500 U.S. stock index has tripled in the past nine years, driven in part by unprecedented zero interest rate policies and massive monetary stimulus from central banks around the globe aimed at combating the deepest recession in a generation.
But pension returns struggled to match the broad market, and recent wobbles in U.S. equities have fed fears of another downturn.
“Now what happens when markets are falling 10 to 15 percent?” Foux asked.
For an interactive graphic on public pension plan funded levels, click: tmsnrt.rs/2tPyAFf
In 2007, a year before the crisis began, the median funded level was 92 percent for state retirement and 97 percent for local plans, according to Wilshire Funding Studies. That fell to 68 percent for states and 72 percent for local governments by 2016, the most recent data.
A lower funded ratio indicates the overall soundness of a pension fund is weaker and more money is required to meet future obligations.
EXPOSED
Persistently low post-crisis interest rates meant pension funds could no longer depend to the same degree on fixed income to help meet withdrawal demands of an aging pensioner population.
“When the crisis hit, it exposed the kind of precarious nature of the status of plans,” said Jean-Pierre Aubry, state and local research director at Boston College’s Center for Retirement Research.
Even with U.S. rates inching higher since 2016 and stocks mounting record highs, pensions still struggled to generate consistent returns.
For an interactive graphic on public pension annual median returns, click: tmsnrt.rs/2tRGptV
The number of active public sector workers per retiree has been falling. That ratio declined to 1.42 in 2016 from 2.43 in 2001, according to a November 2017 National Association of State Retirement Administrators (NASRA) Public Fund Survey. That can boost pension costs when combined with a poorly funded plan.
For an interactive graphic of state and local government pension plan membership, click: tmsnrt.rs/2oZwAVq
RISK TAKERS
The sharp economic downturn that accompanied the 2007-2009 financial crisis weighed on core tax revenue, leading governments to pursue an unprecedented amount of reform measures to shore up pensions by boosting contributions and cutting benefits.
“Just as these pension funds required higher contributions as a result of the market decline, the plan sponsors were less able to pay those higher contributions,” said Keith Brainard, NASRA’s research director.
That prompted retirement systems to turn to riskier alternative investments such as hedge funds, private equity, real estate and commodities to pad returns.
U.S. public pension funds became the biggest risk-takers among pension funds internationally, according to one academic study updated in February 2017.
To read the study, click: here
Alternative investment allocations jumped to 24 percent in 2015 from 9 percent in 2005, according the Center for Retirement Research.
“We know for the most part that alternatives have not been the panacea since the financial crisis,” Aubry, noting that hedge funds and commodities have underperformed equities during that period.
Public pension funds’ assumed rates of investment return have trended lower since the crisis. If a plan’s returns fall below that expected rate, government sponsors need to make up for the loss.
But public plans in general have tended to lag private-sector pension plans in lowering those discount rates, according to data cited by New York’s Rockefeller Institute of Government last year.
Between 1993 and 2012, as 10-year U.S Treasury yields fell by 4.3 percentage points, large private-sector U.S. plans reduced their discount rates to 4.4 percent from 8.2 percent.
For large public plans for funding purposes, the rate only fell from 7.8 percent to 7.7 percent in the same period, according to the institute’s report.
LEGAL BATTLES
In the years since the crisis it has proven difficult for some governments to modify retirement benefits, and legal wranglings are ongoing.
Legal or political constraints have stymied changes in states like Illinois, Kentucky and New Jersey, where contributions have lagged actuarially required levels for decades.
Lawsuits filed against more than 40 state and local governments since 2008 contested pension changes on constitutional grounds, according to the Laura and John Arnold Foundation, which tracks the litigation.
Courts in 13 states have upheld reductions in cost-of-living adjustments (COLA) for retirees’ pension payments, but have struck reductions down in four.
In California, long-standing judicial rulings prohibiting the state and local governments from reducing benefits will be tested in three lawsuits before the state supreme court, according to Stuart Buck, the Arnold Foundation’s vice president of research.
Investment returns have been uneven and funding levels have yet to recover. Many pension funds have meanwhile attempted to boost returns by loading up on alternative investments to levels unheard of a decade earlier.
“Some just cannot grow their way out of it. We have had several years of stellar (stock market) returns and it barely improved the underfunding situation,” said Mikhail Foux, municipal credit analyst at Barclays in New York.
The benchmark S&P 500 U.S. stock index has tripled in the past nine years, driven in part by unprecedented zero interest rate policies and massive monetary stimulus from central banks around the globe aimed at combating the deepest recession in a generation.
But pension returns struggled to match the broad market, and recent wobbles in U.S. equities have fed fears of another downturn.
“Now what happens when markets are falling 10 to 15 percent?” Foux asked.
For an interactive graphic on public pension plan funded levels, click: tmsnrt.rs/2tPyAFf
In 2007, a year before the crisis began, the median funded level was 92 percent for state retirement and 97 percent for local plans, according to Wilshire Funding Studies. That fell to 68 percent for states and 72 percent for local governments by 2016, the most recent data.
A lower funded ratio indicates the overall soundness of a pension fund is weaker and more money is required to meet future obligations.
EXPOSED
Persistently low post-crisis interest rates meant pension funds could no longer depend to the same degree on fixed income to help meet withdrawal demands of an aging pensioner population.
“When the crisis hit, it exposed the kind of precarious nature of the status of plans,” said Jean-Pierre Aubry, state and local research director at Boston College’s Center for Retirement Research.
Even with U.S. rates inching higher since 2016 and stocks mounting record highs, pensions still struggled to generate consistent returns.
For an interactive graphic on public pension annual median returns, click: tmsnrt.rs/2tRGptV
The number of active public sector workers per retiree has been falling. That ratio declined to 1.42 in 2016 from 2.43 in 2001, according to a November 2017 National Association of State Retirement Administrators (NASRA) Public Fund Survey. That can boost pension costs when combined with a poorly funded plan.
For an interactive graphic of state and local government pension plan membership, click: tmsnrt.rs/2oZwAVq
RISK TAKERS
The sharp economic downturn that accompanied the 2007-2009 financial crisis weighed on core tax revenue, leading governments to pursue an unprecedented amount of reform measures to shore up pensions by boosting contributions and cutting benefits.
“Just as these pension funds required higher contributions as a result of the market decline, the plan sponsors were less able to pay those higher contributions,” said Keith Brainard, NASRA’s research director.
That prompted retirement systems to turn to riskier alternative investments such as hedge funds, private equity, real estate and commodities to pad returns.
U.S. public pension funds became the biggest risk-takers among pension funds internationally, according to one academic study updated in February 2017.
To read the study, click: here
Alternative investment allocations jumped to 24 percent in 2015 from 9 percent in 2005, according the Center for Retirement Research.
“We know for the most part that alternatives have not been the panacea since the financial crisis,” Aubry, noting that hedge funds and commodities have underperformed equities during that period.
Public pension funds’ assumed rates of investment return have trended lower since the crisis. If a plan’s returns fall below that expected rate, government sponsors need to make up for the loss.
But public plans in general have tended to lag private-sector pension plans in lowering those discount rates, according to data cited by New York’s Rockefeller Institute of Government last year.
Between 1993 and 2012, as 10-year U.S Treasury yields fell by 4.3 percentage points, large private-sector U.S. plans reduced their discount rates to 4.4 percent from 8.2 percent.
For large public plans for funding purposes, the rate only fell from 7.8 percent to 7.7 percent in the same period, according to the institute’s report.
LEGAL BATTLES
In the years since the crisis it has proven difficult for some governments to modify retirement benefits, and legal wranglings are ongoing.
Legal or political constraints have stymied changes in states like Illinois, Kentucky and New Jersey, where contributions have lagged actuarially required levels for decades.
Lawsuits filed against more than 40 state and local governments since 2008 contested pension changes on constitutional grounds, according to the Laura and John Arnold Foundation, which tracks the litigation.
Courts in 13 states have upheld reductions in cost-of-living adjustments (COLA) for retirees’ pension payments, but have struck reductions down in four.
In California, long-standing judicial rulings prohibiting the state and local governments from reducing benefits will be tested in three lawsuits before the state supreme court, according to Stuart Buck, the Arnold Foundation’s vice president of research.
How Food Stamps Are Keeping Small Farms In Business
March 23, 2018
Debbie Weingarten - talk poverty
On a weekend morning, the farmers market stretches out like a long caterpillar. Customers mill about, pushing strollers and walking dogs. A band is playing something folksy. Vendors stand behind tables that are literally spilling over with winter greens and root vegetables. It’s a picture-perfect image that connotes abundance and community—if you have the cash for it.
The local food movement has been criticized for catering to middle- and upper-class Americans, and for leaving behind the low-income in all of the hype for Community Supported Agriculture (CSA) and “know your farmer” initiatives touted in glossy food magazines. But in the last decade, food justice activists have sought to correct this, connecting low-income consumers with cooking classes, gardening workshops, children’s programming, and locally grown and culturally appropriate foods.
Enter Double Up Food Bucks, a program that doubles Supplemental Nutrition Assistance Program (SNAP, commonly known as food stamps) benefits for recipients shopping at participating farmers markets or grocery stores, up to $20 per visit. Launched by the nonprofit Fair Food Network, Double Up Food Bucks began at five Detroit farmers markets in 2009. Today, 20 states have launched programs modeled after the original, including my home state of Arizona.
“Double Up is a win-win-win,” says Adrienne Udarbe, executive director of Pinnacle Prevention, the nonprofit that manages Arizona’s statewide Double Up initiative. “SNAP recipients have access to more fruits and vegetables, local farmers make more money, and more dollars stay in the local economy.“
Pinnacle Prevention operates 23 Double Up sites across Arizona under the Fair Food Network national umbrella, including a mobile market with 80 stops on its route. Each of them has seen an uptick in SNAP spending, and Udarbe says local produce vendors have indicated an increase in sales since the program started.
Since Pinnacle Prevention’s Double Up program began in 2016, Udarbe says SNAP spending at participating farmers markets has increased by between 67 and 290 percent. Additionally, 84 percent of SNAP customers shopping at Pinnacle Prevention’s Double Up sites responded that they “buy and eat a greater variety of fruits and vegetables as a result of Double Up Food Bucks.” This increase in spending is significant, especially since in 2016, nationwide SNAP spending dropped to its lowest point since 2010.
The handful of Double Up programs in Arizona that are not managed by Pinnacle Prevention have also reported ballooning SNAP spending after their programs began. The Community Food Bank of Southern Arizona (CFBSA), one of Arizona’s earliest adapters of the Double Up concept, reported $9,000 in SNAP spending at its Tucson farmers markets in 2015. But in 2016, after receiving federal funding to implement Double Up, program manager Audra Christophel says SNAP spending at CFBSA markets increased to $37,000. And in 2017, the total SNAP spending exceeded $43,000—nearly half of which was spent on Arizona-grown fruits and vegetables.
*****
In September 2018, the federal Farm Bill will expire. This means legislators are working now to craft a nearly $900 billion piece of legislation to steer food and agriculture programs over the next five years, including crop insurance, farmer loans, SNAP, and the Food Insecurity Nutrition Incentive (FINI) grants program that funds Pinnacle Prevention’s Double Up program. Udarbe says including FINI in the 2018 Farm Bill is important for the SNAP customers and farmers who count on similar produce incentive programs across the country.
But the recent unveiling of the USDA America’s Harvest Box, part of a theoretical overhaul to the SNAP program that would include deep cuts, shows that the Trump administration may have a different plan in mind. America’s Harvest Box—a Blue Apron-style box for SNAP recipients—would contain pre-determined rations of U.S.-produced breads, shelf-stable milk, pastas, and canned goods.
The box program was immediately met with widespread criticism from individuals and organizations working in the fields of nutrition and food security. In February, when a USDA official discussed the concept of America’s Harvest Box during a National Anti-Hunger Policy Conference, Politico reported that “boos and mocking laughter erupted” from a crowd of 1,200 anti-hunger advocates, and “at least 20 people walked out in protest.”
Udarbe says, “The Harvest Box idea contradicts everything we have been doing over the past decade to move in a direction that best supports food-insecure families and farmers.” Indeed, America’s Harvest Box would remove the element of choice and would not provide fresh fruits or vegetables. It would also cut back on the economic opportunities for local produce farmers across the United States, who have come to count on the Double Up program for sales.
The far-reaching benefits of Double Up, combined with increased pressure by the federal government for states to cough up funding for such programs, are at the foundation of SB 1245, a new bill introduced by State Sen. Kate Brophy McGee (R).
If passed, SB 1245 would allocate $400,000 from the Arizona state general fund to be used as a match for Double Up Food Bucks. Udarbe and Christophel each say that federal grant applications will be more competitive if they can show a match from the state. “While match requirements aren’t new to USDA grants,” says Udarbe, it helps if applicants can show “evidence of buy-in and support from local leaders.”
And though SB 1245 was introduced before the unveiling of America’s Harvest Box by the USDA, it’s hard not to contrast the two strategies—they’re literally at opposite ends of the continuum. “I passionately, passionately believe in this bill,” said McGee during public hearing for the bill. “If we are going to be spending food stamp dollars, this is where we need to be spending them.”
******
As a former vegetable farmer and SNAP recipient, I’ve been on both sides of the table—I actually qualified for SNAP when I was growing food for my community, a cruel irony replicated among the millions of food insecure food workers in America. Farmers are often low-income (in fact, median farm income is projected to be negative$1,316 in 2018), a fact that highlights the role of programs like Double Up in providing economic benefits for direct-market farmers.
“Funding for this program truly is the world to local farmers who sell directly at farmers markets in terms of being able to not only feed their families, but keep lights on and keep a roof over their heads,” says Udarbe.
This sentiment is echoed by Dave Brady, a vegetable producer from Pinal County in Arizona, who testified in support of SB 1245. “I was basically at the point where farmers markets just weren’t working for me,” he says. “But the one thing that made sense to me was Double Up SNAP program. It just makes it possible for me to get my volumes up to a level that’s practical, that I can actual make a decent living at it.”
Because of Double Up, Brady has started experimenting with a box program for seniors in his community who are SNAP recipients. A far cry from America’s Harvest Box, Brady’s boxes are comprised of fresh fruits and vegetables and customized to meet the needs of the seniors.
“When seniors participate in Double Up, I can help them stretch their food dollars and supply them with enough locally grown produce for an entire month,” he says.
In the months ahead, votes by federal and state lawmakers may determine the future of the Double Up program—and the lives of the consumers and farmers like Brady who depend on it.
The local food movement has been criticized for catering to middle- and upper-class Americans, and for leaving behind the low-income in all of the hype for Community Supported Agriculture (CSA) and “know your farmer” initiatives touted in glossy food magazines. But in the last decade, food justice activists have sought to correct this, connecting low-income consumers with cooking classes, gardening workshops, children’s programming, and locally grown and culturally appropriate foods.
Enter Double Up Food Bucks, a program that doubles Supplemental Nutrition Assistance Program (SNAP, commonly known as food stamps) benefits for recipients shopping at participating farmers markets or grocery stores, up to $20 per visit. Launched by the nonprofit Fair Food Network, Double Up Food Bucks began at five Detroit farmers markets in 2009. Today, 20 states have launched programs modeled after the original, including my home state of Arizona.
“Double Up is a win-win-win,” says Adrienne Udarbe, executive director of Pinnacle Prevention, the nonprofit that manages Arizona’s statewide Double Up initiative. “SNAP recipients have access to more fruits and vegetables, local farmers make more money, and more dollars stay in the local economy.“
Pinnacle Prevention operates 23 Double Up sites across Arizona under the Fair Food Network national umbrella, including a mobile market with 80 stops on its route. Each of them has seen an uptick in SNAP spending, and Udarbe says local produce vendors have indicated an increase in sales since the program started.
Since Pinnacle Prevention’s Double Up program began in 2016, Udarbe says SNAP spending at participating farmers markets has increased by between 67 and 290 percent. Additionally, 84 percent of SNAP customers shopping at Pinnacle Prevention’s Double Up sites responded that they “buy and eat a greater variety of fruits and vegetables as a result of Double Up Food Bucks.” This increase in spending is significant, especially since in 2016, nationwide SNAP spending dropped to its lowest point since 2010.
The handful of Double Up programs in Arizona that are not managed by Pinnacle Prevention have also reported ballooning SNAP spending after their programs began. The Community Food Bank of Southern Arizona (CFBSA), one of Arizona’s earliest adapters of the Double Up concept, reported $9,000 in SNAP spending at its Tucson farmers markets in 2015. But in 2016, after receiving federal funding to implement Double Up, program manager Audra Christophel says SNAP spending at CFBSA markets increased to $37,000. And in 2017, the total SNAP spending exceeded $43,000—nearly half of which was spent on Arizona-grown fruits and vegetables.
*****
In September 2018, the federal Farm Bill will expire. This means legislators are working now to craft a nearly $900 billion piece of legislation to steer food and agriculture programs over the next five years, including crop insurance, farmer loans, SNAP, and the Food Insecurity Nutrition Incentive (FINI) grants program that funds Pinnacle Prevention’s Double Up program. Udarbe says including FINI in the 2018 Farm Bill is important for the SNAP customers and farmers who count on similar produce incentive programs across the country.
But the recent unveiling of the USDA America’s Harvest Box, part of a theoretical overhaul to the SNAP program that would include deep cuts, shows that the Trump administration may have a different plan in mind. America’s Harvest Box—a Blue Apron-style box for SNAP recipients—would contain pre-determined rations of U.S.-produced breads, shelf-stable milk, pastas, and canned goods.
The box program was immediately met with widespread criticism from individuals and organizations working in the fields of nutrition and food security. In February, when a USDA official discussed the concept of America’s Harvest Box during a National Anti-Hunger Policy Conference, Politico reported that “boos and mocking laughter erupted” from a crowd of 1,200 anti-hunger advocates, and “at least 20 people walked out in protest.”
Udarbe says, “The Harvest Box idea contradicts everything we have been doing over the past decade to move in a direction that best supports food-insecure families and farmers.” Indeed, America’s Harvest Box would remove the element of choice and would not provide fresh fruits or vegetables. It would also cut back on the economic opportunities for local produce farmers across the United States, who have come to count on the Double Up program for sales.
The far-reaching benefits of Double Up, combined with increased pressure by the federal government for states to cough up funding for such programs, are at the foundation of SB 1245, a new bill introduced by State Sen. Kate Brophy McGee (R).
If passed, SB 1245 would allocate $400,000 from the Arizona state general fund to be used as a match for Double Up Food Bucks. Udarbe and Christophel each say that federal grant applications will be more competitive if they can show a match from the state. “While match requirements aren’t new to USDA grants,” says Udarbe, it helps if applicants can show “evidence of buy-in and support from local leaders.”
And though SB 1245 was introduced before the unveiling of America’s Harvest Box by the USDA, it’s hard not to contrast the two strategies—they’re literally at opposite ends of the continuum. “I passionately, passionately believe in this bill,” said McGee during public hearing for the bill. “If we are going to be spending food stamp dollars, this is where we need to be spending them.”
******
As a former vegetable farmer and SNAP recipient, I’ve been on both sides of the table—I actually qualified for SNAP when I was growing food for my community, a cruel irony replicated among the millions of food insecure food workers in America. Farmers are often low-income (in fact, median farm income is projected to be negative$1,316 in 2018), a fact that highlights the role of programs like Double Up in providing economic benefits for direct-market farmers.
“Funding for this program truly is the world to local farmers who sell directly at farmers markets in terms of being able to not only feed their families, but keep lights on and keep a roof over their heads,” says Udarbe.
This sentiment is echoed by Dave Brady, a vegetable producer from Pinal County in Arizona, who testified in support of SB 1245. “I was basically at the point where farmers markets just weren’t working for me,” he says. “But the one thing that made sense to me was Double Up SNAP program. It just makes it possible for me to get my volumes up to a level that’s practical, that I can actual make a decent living at it.”
Because of Double Up, Brady has started experimenting with a box program for seniors in his community who are SNAP recipients. A far cry from America’s Harvest Box, Brady’s boxes are comprised of fresh fruits and vegetables and customized to meet the needs of the seniors.
“When seniors participate in Double Up, I can help them stretch their food dollars and supply them with enough locally grown produce for an entire month,” he says.
In the months ahead, votes by federal and state lawmakers may determine the future of the Double Up program—and the lives of the consumers and farmers like Brady who depend on it.
Tariffs Aren’t a Terrible Idea—If They’re About Well-Being of People, Not Corporations
by David Korten - the smirking chimp
March 22, 2018 - 5:25am
Those who pay attention to trade and economics saw President Trump’s imposition of new tariffs—25 percent on steel and 10 percent on aluminum—as just one more bad policy decision by an administration in disarray. Trump may, however, have done us all the favor of reopening a discussion of tariffs, trade, and the competing interests of communities and corporations.
Contrary to the position of most media pundits, tariffs on imports are not necessarily bad. In fact, they may be just what we need as part of a larger set of policy measures to turn from a global economy that maximizes corporate profits to one that maximizes the well-being of people and nature.
Trump is right that free trade agreements are bad for American workers. The corporate lobbyists who supervise their crafting aren’t paid to benefit workers. They are paid to serve the bottom lines of the corporations that hire them—in part by minimizing labor costs.
Consequently, existing agreements are mostly bad for workers everywhere. Yet Trump’s critics are also right that the precipitous imposition of a tariff on steel and aluminum is a bad idea. We need a dialogue in search of a better framework.
Corporations seek international agreements and domestic laws that secure their self-proclaimed right to move jobs to wherever labor is cheapest, regulations are weakest, and taxes are lowest. In the name of market freedom, they fight restrictions on contributing to political campaigns, concentrating monopoly power, deceiving consumers, extracting resources from public lands, and contaminating Earth’s air, water, and land. These actions increase corporate profits and leave impacted communities struggling to deal with the consequences.
The “free” in free trade and investment mostly refers to corporate freedom to dump the consequences of their decisions onto communities stripped of their right to protect themselves. That “freedom” violates the fundamental principle of market theory (not to be confused with free market ideology), that markets allocate efficiently only when decision makers bear the full cost of their decisions. The question is not whether protectionism is good or bad, but rather of who is protected.
Although the corporate PR machine floods the media with claims that the global economy is ending poverty and bringing unprecedented prosperity to everyone, the daily experience for most people is an increasingly desperate struggle to make ends meet. This is an inevitable consequence of a global economy that is:
These are indicators of terminal economic failure.
We have thoroughly tested the neoliberal theory that whatever profits a global corporation serves the common good. The result is that it doesn’t.
We now face a defining choice. We can continue to protect the freedom of global corporations to maximize returns to their managers and shareholders. Or we can reorganize to maximize the ability of communities to make their living in a balanced relationship with one another and nature. These are mutually exclusive choices and call for very different global rules.
An organizing framework for the community option was succinctly outlined in 1933 by economist John Maynard Keynes: “I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel—these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national.”
In line with these foundational principles, future international trade and investment agreements should support national communities in meeting self-defined needs in ways that support full domestic employment and the continuous recycling and regeneration of domestic resources. In such agreements, tariffs can and should be applied judiciously, to prioritize domestic ownership and banking. These agreements also need to prohibit financial speculation, penalize monopolistic concentrations of corporate power, and reward local cooperative ownership.
A universal tariff on cross-border exchange, of 10 percent, for example, would provide a modest initial advantage for domestic sourcing of raw materials and consumer goods. Compensatory tariffs might be added to products from countries that do not maintain international standards of environmental protection, wages, health and safety standards, and social safety nets, thus encouraging higher standards for all people everywhere.
Allowing corporations to write the rules of global commerce to favor their purely private interests was a grave error. Now is the time to examine how best to rewrite international trade and investment agreements so that they truly serve humanity and sustain a living Earth. The consequences of inaction are simply unacceptable.
Contrary to the position of most media pundits, tariffs on imports are not necessarily bad. In fact, they may be just what we need as part of a larger set of policy measures to turn from a global economy that maximizes corporate profits to one that maximizes the well-being of people and nature.
Trump is right that free trade agreements are bad for American workers. The corporate lobbyists who supervise their crafting aren’t paid to benefit workers. They are paid to serve the bottom lines of the corporations that hire them—in part by minimizing labor costs.
Consequently, existing agreements are mostly bad for workers everywhere. Yet Trump’s critics are also right that the precipitous imposition of a tariff on steel and aluminum is a bad idea. We need a dialogue in search of a better framework.
Corporations seek international agreements and domestic laws that secure their self-proclaimed right to move jobs to wherever labor is cheapest, regulations are weakest, and taxes are lowest. In the name of market freedom, they fight restrictions on contributing to political campaigns, concentrating monopoly power, deceiving consumers, extracting resources from public lands, and contaminating Earth’s air, water, and land. These actions increase corporate profits and leave impacted communities struggling to deal with the consequences.
The “free” in free trade and investment mostly refers to corporate freedom to dump the consequences of their decisions onto communities stripped of their right to protect themselves. That “freedom” violates the fundamental principle of market theory (not to be confused with free market ideology), that markets allocate efficiently only when decision makers bear the full cost of their decisions. The question is not whether protectionism is good or bad, but rather of who is protected.
Although the corporate PR machine floods the media with claims that the global economy is ending poverty and bringing unprecedented prosperity to everyone, the daily experience for most people is an increasingly desperate struggle to make ends meet. This is an inevitable consequence of a global economy that is:
- Destroying Earth’s capacity to support life.
- Creating the greatest economic inequality in human history.
- Driving disintegration of community and family relationships.
- Stripping funding from social safety nets.
These are indicators of terminal economic failure.
We have thoroughly tested the neoliberal theory that whatever profits a global corporation serves the common good. The result is that it doesn’t.
We now face a defining choice. We can continue to protect the freedom of global corporations to maximize returns to their managers and shareholders. Or we can reorganize to maximize the ability of communities to make their living in a balanced relationship with one another and nature. These are mutually exclusive choices and call for very different global rules.
An organizing framework for the community option was succinctly outlined in 1933 by economist John Maynard Keynes: “I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel—these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national.”
In line with these foundational principles, future international trade and investment agreements should support national communities in meeting self-defined needs in ways that support full domestic employment and the continuous recycling and regeneration of domestic resources. In such agreements, tariffs can and should be applied judiciously, to prioritize domestic ownership and banking. These agreements also need to prohibit financial speculation, penalize monopolistic concentrations of corporate power, and reward local cooperative ownership.
A universal tariff on cross-border exchange, of 10 percent, for example, would provide a modest initial advantage for domestic sourcing of raw materials and consumer goods. Compensatory tariffs might be added to products from countries that do not maintain international standards of environmental protection, wages, health and safety standards, and social safety nets, thus encouraging higher standards for all people everywhere.
Allowing corporations to write the rules of global commerce to favor their purely private interests was a grave error. Now is the time to examine how best to rewrite international trade and investment agreements so that they truly serve humanity and sustain a living Earth. The consequences of inaction are simply unacceptable.
A 2% Financial Wealth Tax Would Provide a $12,000 Annual Stipend to Every American Household
America needs a universal basic income.
By Paul Buchheit / AlterNet
March 20, 2018, 7:49 AM GMT
It's not hard to envision the benefits in work opportunities, stress reduction, child care, entrepreneurial activity, and artistic pursuits for American households given an extra $1,000 per month. It's also very easy to justify a financial wealth tax, given that the dramatic stock market surge in recent years is largely due to an unprecedented degree of technological and financial productivity that derives from the work efforts and taxes of all Americans. A 2% annual tax on financial wealth is a small price to pay for the great fortunes bestowed on the most fortunate Americans.
The reasons? Careful analysis reveals a number of excellent arguments for the implementation of a universal basic income (UBI).
1. Our jobs are disappearing.
A 2013 Oxford study determined that nearly half of American jobs are at risk of being replaced by computers, AI and robots. Society simply can't keep up with technology. As for the skeptics who cite the Industrial Revolution and its job-enhancing aftermath (which actually took 60 years to develop), the McKinsey Global Institute says that society is being transformed at a pace "ten times faster and at 300 times the scale" of the radical changes of 200 years ago.
2. Half of America is stressed out or sick.
Half of all Americans are in or near poverty, unable to meet emergency expenses, living from paycheck to paycheck, and getting physically and emotionally ill because of it. Numerous UBI experiments have led to increased well-being for their participants. A guaranteed income reduces the debilitating effects of inequality. As one recipient put it, "It takes me out of depression...I feel more sociable."
3. Children need our help.
This could be the best reason for monthly household stipends. Parents, especially mothers, are unable to work outside the home because of the need to care for their children. Because we currently lack a UBI, more and more childrenare facing hunger and health problems and educational disadvantages.
4. We need more entrepreneurs.
A sudden influx of $12,000 per year for 126 million households would greatly stimulate the economy, potentially allowing millions of Americans to take risksthat could lead to new forms of innovation and productivity.
Perhaps most significantly, a guaranteed income could relieve some of the pressure on our newest generation of young adults, who are deep in debt, underemployed, increasingly unable to live on their own, and ill-positioned to take the entrepreneurial chances that are needed to spur innovative business growth. No other group of Americans could make more productive use of an immediate boost in income.
5. We need the arts and sciences.
A recent Gallup poll found that nearly 70% of workers don't feel "engaged" (enthusiastic and committed) in their jobs. The work chosen by UBI recipients could unleash artistic talents and creative impulses that have been suppressed by personal financial concerns, leading, very possibly, to a repeat of the 1930s, when the Works Progress Administration hired thousands of artists and actors and musicians to help sustain the cultural needs of the nation.
Arguments Against
The usual uninformed and condescending opposing argument is that UBI recipients will waste the money, spending it on alcohol and drugs and other "temptation" goods. Not true. Studies from the World Bank and the Brooks World Poverty Institute found that money going to poor families is used primarily for essential needs, and that the recipients experience greater physical and mental well-being as a result of their increased incomes.
Other arguments against the workability of the UBI are countered by the many successful experiments conducted in the present and recent past: Finland, Canada, Netherlands, Kenya, India, Great Britain, Uganda, Namibia, and in the U.S. in Alaska and California.
How to Pay for It
Largely because of the stock market, U.S. financial wealth has surged to $77 trillion, with the richest 10% owning over three-quarters of it. Just a 2 percent tax on total financial wealth would generate enough revenue to provide a $12,000 annual stipend to every American household (including those of the richest families).
It's easy to justify a wealth tax. Over half of all basic research is paid for by our tax dollars. All the technology in our phones and computers started with government research and funding. Pharmaceutical companies wouldn't exist without decades of support from the National Institutes of Health. Yet the tech and pharmaceutical companies claim patents on the products paid for and developed by the American people.
The collection of a wealth tax would not be simple, since only about half of U.S. financial wealth is held directly in equities and liquid assets (Table 5-2). But it's doable. As Thomas Piketty notes, "A progressive tax on net wealth is better than a progressive tax on consumption because first, net wealth is better defined for very wealthy individuals."
And certainly a financial industry that knows how to package worthless loans into A-rated mortgage-backed securities should be able to figure out how to tax the investment companies that manage the rest of our ever-increasing national wealth.
The reasons? Careful analysis reveals a number of excellent arguments for the implementation of a universal basic income (UBI).
1. Our jobs are disappearing.
A 2013 Oxford study determined that nearly half of American jobs are at risk of being replaced by computers, AI and robots. Society simply can't keep up with technology. As for the skeptics who cite the Industrial Revolution and its job-enhancing aftermath (which actually took 60 years to develop), the McKinsey Global Institute says that society is being transformed at a pace "ten times faster and at 300 times the scale" of the radical changes of 200 years ago.
2. Half of America is stressed out or sick.
Half of all Americans are in or near poverty, unable to meet emergency expenses, living from paycheck to paycheck, and getting physically and emotionally ill because of it. Numerous UBI experiments have led to increased well-being for their participants. A guaranteed income reduces the debilitating effects of inequality. As one recipient put it, "It takes me out of depression...I feel more sociable."
3. Children need our help.
This could be the best reason for monthly household stipends. Parents, especially mothers, are unable to work outside the home because of the need to care for their children. Because we currently lack a UBI, more and more childrenare facing hunger and health problems and educational disadvantages.
4. We need more entrepreneurs.
A sudden influx of $12,000 per year for 126 million households would greatly stimulate the economy, potentially allowing millions of Americans to take risksthat could lead to new forms of innovation and productivity.
Perhaps most significantly, a guaranteed income could relieve some of the pressure on our newest generation of young adults, who are deep in debt, underemployed, increasingly unable to live on their own, and ill-positioned to take the entrepreneurial chances that are needed to spur innovative business growth. No other group of Americans could make more productive use of an immediate boost in income.
5. We need the arts and sciences.
A recent Gallup poll found that nearly 70% of workers don't feel "engaged" (enthusiastic and committed) in their jobs. The work chosen by UBI recipients could unleash artistic talents and creative impulses that have been suppressed by personal financial concerns, leading, very possibly, to a repeat of the 1930s, when the Works Progress Administration hired thousands of artists and actors and musicians to help sustain the cultural needs of the nation.
Arguments Against
The usual uninformed and condescending opposing argument is that UBI recipients will waste the money, spending it on alcohol and drugs and other "temptation" goods. Not true. Studies from the World Bank and the Brooks World Poverty Institute found that money going to poor families is used primarily for essential needs, and that the recipients experience greater physical and mental well-being as a result of their increased incomes.
Other arguments against the workability of the UBI are countered by the many successful experiments conducted in the present and recent past: Finland, Canada, Netherlands, Kenya, India, Great Britain, Uganda, Namibia, and in the U.S. in Alaska and California.
How to Pay for It
Largely because of the stock market, U.S. financial wealth has surged to $77 trillion, with the richest 10% owning over three-quarters of it. Just a 2 percent tax on total financial wealth would generate enough revenue to provide a $12,000 annual stipend to every American household (including those of the richest families).
It's easy to justify a wealth tax. Over half of all basic research is paid for by our tax dollars. All the technology in our phones and computers started with government research and funding. Pharmaceutical companies wouldn't exist without decades of support from the National Institutes of Health. Yet the tech and pharmaceutical companies claim patents on the products paid for and developed by the American people.
The collection of a wealth tax would not be simple, since only about half of U.S. financial wealth is held directly in equities and liquid assets (Table 5-2). But it's doable. As Thomas Piketty notes, "A progressive tax on net wealth is better than a progressive tax on consumption because first, net wealth is better defined for very wealthy individuals."
And certainly a financial industry that knows how to package worthless loans into A-rated mortgage-backed securities should be able to figure out how to tax the investment companies that manage the rest of our ever-increasing national wealth.
courageous capitalist!!!
No CEO should earn 1,000 times more than a regular employee
Sarah Anderson -the guardian
Sun 18 Mar 2018 06.00 EDT
The CEO of Marathon Petroleum, Gary Heminger, took home an astonishing 935 times more pay than his typical employee in 2017. In other words, one of Marathon’s gas station workers would have to toil more than nine centuries to make as much as Heminger grabbed in just one year.
Employees of at least five other US firms would have to work even longer – more than a millennium – to catch up with their top bosses. These companies include the auto parts maker Aptiv (CEO-worker pay ratio: 2,526 to 1), the temp agency Manpower (2,483 to 1), amusement park owner Six Flags (1,920 to 1), Del Monte Produce (1,465 to 1), and apparel maker VF (1,353 to 1).
These revelations come thanks to a new federal regulation that requires publicly traded US corporations to disclose, for the first time ever, how much their chief executives are making compared with their median workers. The disclosures are just now starting to flow in.
Up until this year, comparisons of CEO and worker pay have had to rely on the average take-homes of US workers overall – not the pay of workers at individual corporations. Those generalized figures helped us track the soaring trajectory of executive compensation at big US corporations, from 30 times average worker pay in the 1960s to over 300 times more recently.
But headlines around those average figures did next to nothing to slow our CEO pay-hike express. Will the release of the ratios at individual corporations make any more of a difference?
Corporate America must surely think so. Ever since 2010, the year Congress plugged a ratio disclosure mandate into the Dodd-Frank financial reform act, corporate lobbyists have been scheming to delay and repeal that mandate’s implementation. But responsible investors and other activists rallied and kept the mandate in place.
The new ratios offer a benchmark for corporate greed that exposes exactly which firms are sharing the wealth their employees create and which aren’t, knowledge we can use to impose consequences on the corporations doing the most to make the United States more unequal.
What sort of consequences?
In Oregon, the city of Portland has adopted what the economist Branko Milanović has labeled “the first tax that targets inequality as such”. Portland’s new levy imposes a 10% business tax surcharge on companies with top execs making over 100 times their median worker pay – and a 20% surcharge on firms with pay gaps that stretch past 250 times.
City officials in San Francisco are bringing a similar measure before voters this November. At the state level, lawmakers in Minnesota, Rhode Island, Connecticut, Illinois, and Massachusetts are getting into the pay-ratio tax act as well.
In California, a state senate bill that took the same approach nearly passed. The key sponsor of that measure, Mark DeSaulnier, now sits in Congress, where he’s co-sponsoring a like-minded federal bill.
Other lawmakers are advancing proposals to link government procurement to pay ratios. Existing public policies deny government contracts to companies with employment practices that contribute to race and gender inequality. Why should tax dollars be subsidizing firms that increase economic inequality?
In Rhode Island, a pending Senate bill would give preferential treatment in state contracting to corporations that pay their CEOs no more than 25 times their median worker pay. Several congressional offices are now preparing legislation that aims in the same direction.
Even some Republicans have shown interest in leveraging the power of the public purse against firms that pay top execs astronomically more than workers. In 2015, then Republican congressman (now the White House budget director) Mick Mulvaney tried to prevent the US Export-Import Bank from subsidizing any company with CEO pay over 100 times median worker pay. Lawmakers could easily apply the same standard to other forms of corporate welfare.
Ratio disclosure also opens doors for trade unions to bring demands tied to pay gaps into collective bargaining. Consumers can shun corporations that lavish pay on their top execs at the expense of their employees. Investors can put their 401(k) dollars in mutual funds that screen out corporations with chronic pay-gap excess.
All this activity could make a significant dent in inequality. Corporate execs today head up about two-thirds of America’s top 1% households.
We don’t have to just complain any more about runaway executive pay. Now we can make corporations that pay their CEOs unconscionably more than their workers change their ways – or pay the consequences.
Employees of at least five other US firms would have to work even longer – more than a millennium – to catch up with their top bosses. These companies include the auto parts maker Aptiv (CEO-worker pay ratio: 2,526 to 1), the temp agency Manpower (2,483 to 1), amusement park owner Six Flags (1,920 to 1), Del Monte Produce (1,465 to 1), and apparel maker VF (1,353 to 1).
These revelations come thanks to a new federal regulation that requires publicly traded US corporations to disclose, for the first time ever, how much their chief executives are making compared with their median workers. The disclosures are just now starting to flow in.
Up until this year, comparisons of CEO and worker pay have had to rely on the average take-homes of US workers overall – not the pay of workers at individual corporations. Those generalized figures helped us track the soaring trajectory of executive compensation at big US corporations, from 30 times average worker pay in the 1960s to over 300 times more recently.
But headlines around those average figures did next to nothing to slow our CEO pay-hike express. Will the release of the ratios at individual corporations make any more of a difference?
Corporate America must surely think so. Ever since 2010, the year Congress plugged a ratio disclosure mandate into the Dodd-Frank financial reform act, corporate lobbyists have been scheming to delay and repeal that mandate’s implementation. But responsible investors and other activists rallied and kept the mandate in place.
The new ratios offer a benchmark for corporate greed that exposes exactly which firms are sharing the wealth their employees create and which aren’t, knowledge we can use to impose consequences on the corporations doing the most to make the United States more unequal.
What sort of consequences?
In Oregon, the city of Portland has adopted what the economist Branko Milanović has labeled “the first tax that targets inequality as such”. Portland’s new levy imposes a 10% business tax surcharge on companies with top execs making over 100 times their median worker pay – and a 20% surcharge on firms with pay gaps that stretch past 250 times.
City officials in San Francisco are bringing a similar measure before voters this November. At the state level, lawmakers in Minnesota, Rhode Island, Connecticut, Illinois, and Massachusetts are getting into the pay-ratio tax act as well.
In California, a state senate bill that took the same approach nearly passed. The key sponsor of that measure, Mark DeSaulnier, now sits in Congress, where he’s co-sponsoring a like-minded federal bill.
Other lawmakers are advancing proposals to link government procurement to pay ratios. Existing public policies deny government contracts to companies with employment practices that contribute to race and gender inequality. Why should tax dollars be subsidizing firms that increase economic inequality?
In Rhode Island, a pending Senate bill would give preferential treatment in state contracting to corporations that pay their CEOs no more than 25 times their median worker pay. Several congressional offices are now preparing legislation that aims in the same direction.
Even some Republicans have shown interest in leveraging the power of the public purse against firms that pay top execs astronomically more than workers. In 2015, then Republican congressman (now the White House budget director) Mick Mulvaney tried to prevent the US Export-Import Bank from subsidizing any company with CEO pay over 100 times median worker pay. Lawmakers could easily apply the same standard to other forms of corporate welfare.
Ratio disclosure also opens doors for trade unions to bring demands tied to pay gaps into collective bargaining. Consumers can shun corporations that lavish pay on their top execs at the expense of their employees. Investors can put their 401(k) dollars in mutual funds that screen out corporations with chronic pay-gap excess.
All this activity could make a significant dent in inequality. Corporate execs today head up about two-thirds of America’s top 1% households.
We don’t have to just complain any more about runaway executive pay. Now we can make corporations that pay their CEOs unconscionably more than their workers change their ways – or pay the consequences.
The Sick Paying for the Healthy: How Insurance Companies Drive Up Drug Prices
Thursday, March 15, 2018
By Mike Ludwig, Truthout | Report
Faced with angry consumers and impending political reforms, the massive corporations that shape the way we pay for medicine are clamoring to preserve their public image, profit margins and political clout -- often by pointing the finger of blame at each other. The poster child for the debate is insulin, a hormone replacement drug that many people with diabetes need to stay alive. As Truthout has reported, the market price of popular insulin products has skyrocketed in recent years. Some people with diabetes go broke paying for their medicine. Others have died while attempting to ration dosages.
Despite public outrage over insulin prices, three of the largest insulin manufacturers have refused to seek a settlement in a class action lawsuit filed against them on behalf of diabetes patients. The drug makers Eli Lilly, Novo Nordisk and Sanofi-Aventis asked a federal judge in New Jersey to dismiss the case and suggested that the plaintiffs turn their attention to insurance companies instead, according to briefs filed last Friday.
Court records show that plaintiff attorneys and advocates for people with diabetes have sparred over how to proceed with the case and whether to include insurance companies and their pharmacy benefit managers (who negotiate drug prices) as defendants in the lawsuit. Currently, only manufacturers are named as defendants.
Food and Drug Administration (FDA) Commissioner Scott Gottlieb has also put insurers on notice. In a speech before an insurance industry conference last Wednesday, Gottlieb said that current pharmaceutical pricing agreements between insurers and drug manufacturers have saddled people living with serious or long-term illnesses (such as diabetes) with the cost of keeping premiums lower for everyone else.
"But sick people aren't supposed to be subsidizing the healthy," Gottlieb said. "That's exactly the opposite of what most people thought they were buying when they bought into the notion of having insurance."
Gottlieb was referring to the system of "rebates" that currently controls the price of pharmaceuticals. Under this system, drug makers pay billions of dollars to insurance companies in order to sell drugs to people enrolled in health plans. It's a system that benefits people who can afford expensive insurance coverage, but for many working people, this system is a total failure. To understand why, we must consider how the different industry players use the money that flows in from drug manufacturers.
In his speech, Gottlieb applauded insurance giant UnitedHealth for announcing plans to pass savings secured by lavish rebates it receives from drug manufacturers directly to members when they buy drugs at the pharmacy, rather than using the money to pad its central coffers and lower premiums across the board.
These rebating agreements are at the center of the drug pricing system that a growing chorus of advocates and policy makers say must change.
High drug prices are usually blamed entirely on pharmaceutical companies because they make the drugs and set the prices. However, these manufacturers do not set prices in a vacuum: They say they shape prices around the costs of rebate payments they're required to make to insurance companies in exchange for selling prescription drugs to their members.
Yes, this means that insurance companies are making secret deals with drug manufactures, and that's why people with health coverage don't pay full price for drugs at the pharmacy. These "kickbacks," as advocates call them, raise an important question: Are insurance companies giving customers what they pay for?
The Sick Subsidizing the Healthy
Here's how the system works: Pharmacy benefit managers (PBMs) work with insurers to decide which drugs will be covered by their health plans. This provides PBMs with considerable leverage over drug makers. In 2017, the three largest PBMs -- Express Scripts, OptimaRx and CVS/Caremark -- controlled access to about 72 percent of the drug market, according to the Drug Channels Institute. This explains why individual insurance plans cover certain types or brands of medicines and not others.
Using this leverage, PBMs make secret agreements with manufacturers like Novo Nordisk and Eli Lilly to place their drugs on health plans in exchange for large discounts and rebate payments. The PBM keeps a percentage of the rebate, and the insurance company takes the rest.
This gives drug companies access to millions of customers in exchange for billions of dollars in discounts and rebates that can significantly lower costs for people with health coverage, depending on how insurance companies share the savings. The Drug Channels Institute estimates that drug companies spent $127 billion on rebates, discounts and price concessions in 2016 alone.
PhRMA, the industry group representing major drug makers, estimates that one third of the original price of all brand name drugs is rebated back to insurers and other members of the supply chain. Some drugs are more heavily rebated than others. Insulin, for example, secures rebates for insurers at rates of up to 75 percent of the original market price of the drug, or "list price," according to diabetes advocates.
Patient advocates say this system creates perverse incentives that push the price of drugs like insulin through the roof. Insurers can use hefty rebates from commonly used drugs to lower premiums and attract new customers, and the demand for steeper rebates pushes manufacturers to set their list prices higher and higher. As result, many pharmacy benefit plans operate like "reverse insurance," according to Drug Channel Institute CEO Adam Fein.
"The sickest people taking medicines for chronic illnesses generate the majority of manufacturer rebate payments," Fein wrote last week at Drug Channels, his oft-cited blog. "Today, these funds are used to subsidize the premiums for healthier plan members."
People who can afford robust insurance plans may not notice the price increases, but those buying medicine with cheaper plans do. Insurance companies often calculate coinsurance and deductibles with the original list price of a drug, not the after-rebate "net price" they actually pay. That means cheaper health plans with high out-of-pocket costs require patients to pay all or part of the inflated list price until deductibles are paid off. In the case of insulin, that list price could be hundreds of dollars higher than what the insurer pays after rebates.
High out-of-pocket costs are a leading reason why patients don't take their medication, which can lead to medical problems that increase the cost of health care for everyone, according to Steven Knievel, an access to medicines advocate at Public Citizen.
"The practice of raising the list price [to increase the size of rebates] benefits the drug companies and the PBMs. Both come out winners," Knievel said. "But the consumer is the loser."
Meanwhile, insurers and PBMs tend to include higher-priced drugs that bring bigger rebates on the list of drugs they cover, rather than including cheaper generics and biosimilars. (The FDA is currently promoting generics as competitive solutions to high drug prices, but that solution seems unlikely to take hold without serious changes to the pricing system.) Major PBMs are increasingly merging with insurance companies, a sign that their interests have long been aligned.
"Patients shouldn't be penalized by their biology if they need a drug that isn't on formulary," Gottlieb said, referring to a health plan's list of covered drugs. "Patients shouldn't face exorbitant out-of-pocket costs and pay money where the primary purpose is to help subsidize rebates paid to a long list of supply chain intermediaries, or is used to buy down the premium costs for everyone else."
It's a system of profit built on the backs of sick people. Faced with lawsuits from insulin users, proposed rebating reforms for Medicare and angry members of Congress, the major players in the drug supply chain have consistently blamed each other for it.
"The manufacturers point the finger at the PBMs and say, 'The rebates that you are demanding are so large that we have to raise our prices to maintain a reasonable rate of returns,'" said Patricia Danzon, a professor of health care management at the University of Pennsylvania, in an interview. "The PBMs say the drug companies are the ones that set the prices, and we are only trying to get the best prices for our customers."
The Court of Public Opinion
The result is an opaque blend of public relations messaging and raw economics. For example, manufacturers claim to be unfairly singled out by a growing number of state-level drug-pricing transparency laws, and they are eagerly promoting research suggesting that insurers are not passing savings from drug rebates on to their customers.
If lawmakers agree, they may pass transparency legislation requiring insurers to report the rebates they receive, or at least disclose the actual net cost of prescriptions to their customers. Once this information is disclosed, it's only a matter of time before consumers demand insurers pass the rebate savings on to them directly.
"The manufacturers could in theory benefit from the pass-through of the rebates to patients through co-payments," Danzon said. "This could make rebates visible. In theory, if manufacturers in any industry know how much their competitors are rebating, this visibility makes it easier for them to keep their prices in line without illegally colluding with each other."
PBMs and insurers, however, argue that rebates must remain secret in order to maintain the negotiating advantage and competitive bidding that brings prices down. Plus, if two manufacturers of a specialty drug know each other's price, they can tacitly collude to raise it. Danzon said this is why the Congressional Budget Office (CBO) has assumed in their analysis of legislative proposals that making rebates fully transparent could increase costs for programs like Medicare.
"The argument for transparency is very intuitive, people understand that, but the fact the CBO has consistently come out against full transparency -- that has economic argument behind it," Danzon said.
Meanwhile, Ben Wakana, executive director of Patients for Affordable Drugs, told Truthout that consumers would benefit from more transparency in the rebating system -- if not a different system altogether -- but rebates are not the only factors pushing up drug prices. In the United States, drug manufacturers enjoy patent exclusivity on new drugs for years, allowing them to charge monopoly prices. They also spend huge amounts of money on advertising and influencing politicians.
"Drug companies can claim they have to raise drug prices to pay PBM rebates, but ... they could take those terrible ads off the air and stop paying their CEOs a hundred million dollars," Wakana said. "It's a murky system and patients need to know where their money is going, but drug corporations have to lower their prices."
Wakana supports allowing the government to negotiate drug prices with the buying power generated by millions of Medicare members, a proposal supported by progressives in Congress. Perhaps if drug prices came down, then insurers would not be so reliant on rebates to control costs. Still, the question of whether consumers are getting what they pay for from insurance providers remains, and that's exactly how drug makers like it.
There are profiteers standing on all sides of the drug pricing equation. Consumers are stuck in the middle, shelling out monthly premiums along with rising out-of-pocket costs at the pharmacy. However, the more light we shine on this system, the more we see it beginning to crumble under its own weight -- and the weight of public opinion.
Despite public outrage over insulin prices, three of the largest insulin manufacturers have refused to seek a settlement in a class action lawsuit filed against them on behalf of diabetes patients. The drug makers Eli Lilly, Novo Nordisk and Sanofi-Aventis asked a federal judge in New Jersey to dismiss the case and suggested that the plaintiffs turn their attention to insurance companies instead, according to briefs filed last Friday.
Court records show that plaintiff attorneys and advocates for people with diabetes have sparred over how to proceed with the case and whether to include insurance companies and their pharmacy benefit managers (who negotiate drug prices) as defendants in the lawsuit. Currently, only manufacturers are named as defendants.
Food and Drug Administration (FDA) Commissioner Scott Gottlieb has also put insurers on notice. In a speech before an insurance industry conference last Wednesday, Gottlieb said that current pharmaceutical pricing agreements between insurers and drug manufacturers have saddled people living with serious or long-term illnesses (such as diabetes) with the cost of keeping premiums lower for everyone else.
"But sick people aren't supposed to be subsidizing the healthy," Gottlieb said. "That's exactly the opposite of what most people thought they were buying when they bought into the notion of having insurance."
Gottlieb was referring to the system of "rebates" that currently controls the price of pharmaceuticals. Under this system, drug makers pay billions of dollars to insurance companies in order to sell drugs to people enrolled in health plans. It's a system that benefits people who can afford expensive insurance coverage, but for many working people, this system is a total failure. To understand why, we must consider how the different industry players use the money that flows in from drug manufacturers.
In his speech, Gottlieb applauded insurance giant UnitedHealth for announcing plans to pass savings secured by lavish rebates it receives from drug manufacturers directly to members when they buy drugs at the pharmacy, rather than using the money to pad its central coffers and lower premiums across the board.
These rebating agreements are at the center of the drug pricing system that a growing chorus of advocates and policy makers say must change.
High drug prices are usually blamed entirely on pharmaceutical companies because they make the drugs and set the prices. However, these manufacturers do not set prices in a vacuum: They say they shape prices around the costs of rebate payments they're required to make to insurance companies in exchange for selling prescription drugs to their members.
Yes, this means that insurance companies are making secret deals with drug manufactures, and that's why people with health coverage don't pay full price for drugs at the pharmacy. These "kickbacks," as advocates call them, raise an important question: Are insurance companies giving customers what they pay for?
The Sick Subsidizing the Healthy
Here's how the system works: Pharmacy benefit managers (PBMs) work with insurers to decide which drugs will be covered by their health plans. This provides PBMs with considerable leverage over drug makers. In 2017, the three largest PBMs -- Express Scripts, OptimaRx and CVS/Caremark -- controlled access to about 72 percent of the drug market, according to the Drug Channels Institute. This explains why individual insurance plans cover certain types or brands of medicines and not others.
Using this leverage, PBMs make secret agreements with manufacturers like Novo Nordisk and Eli Lilly to place their drugs on health plans in exchange for large discounts and rebate payments. The PBM keeps a percentage of the rebate, and the insurance company takes the rest.
This gives drug companies access to millions of customers in exchange for billions of dollars in discounts and rebates that can significantly lower costs for people with health coverage, depending on how insurance companies share the savings. The Drug Channels Institute estimates that drug companies spent $127 billion on rebates, discounts and price concessions in 2016 alone.
PhRMA, the industry group representing major drug makers, estimates that one third of the original price of all brand name drugs is rebated back to insurers and other members of the supply chain. Some drugs are more heavily rebated than others. Insulin, for example, secures rebates for insurers at rates of up to 75 percent of the original market price of the drug, or "list price," according to diabetes advocates.
Patient advocates say this system creates perverse incentives that push the price of drugs like insulin through the roof. Insurers can use hefty rebates from commonly used drugs to lower premiums and attract new customers, and the demand for steeper rebates pushes manufacturers to set their list prices higher and higher. As result, many pharmacy benefit plans operate like "reverse insurance," according to Drug Channel Institute CEO Adam Fein.
"The sickest people taking medicines for chronic illnesses generate the majority of manufacturer rebate payments," Fein wrote last week at Drug Channels, his oft-cited blog. "Today, these funds are used to subsidize the premiums for healthier plan members."
People who can afford robust insurance plans may not notice the price increases, but those buying medicine with cheaper plans do. Insurance companies often calculate coinsurance and deductibles with the original list price of a drug, not the after-rebate "net price" they actually pay. That means cheaper health plans with high out-of-pocket costs require patients to pay all or part of the inflated list price until deductibles are paid off. In the case of insulin, that list price could be hundreds of dollars higher than what the insurer pays after rebates.
High out-of-pocket costs are a leading reason why patients don't take their medication, which can lead to medical problems that increase the cost of health care for everyone, according to Steven Knievel, an access to medicines advocate at Public Citizen.
"The practice of raising the list price [to increase the size of rebates] benefits the drug companies and the PBMs. Both come out winners," Knievel said. "But the consumer is the loser."
Meanwhile, insurers and PBMs tend to include higher-priced drugs that bring bigger rebates on the list of drugs they cover, rather than including cheaper generics and biosimilars. (The FDA is currently promoting generics as competitive solutions to high drug prices, but that solution seems unlikely to take hold without serious changes to the pricing system.) Major PBMs are increasingly merging with insurance companies, a sign that their interests have long been aligned.
"Patients shouldn't be penalized by their biology if they need a drug that isn't on formulary," Gottlieb said, referring to a health plan's list of covered drugs. "Patients shouldn't face exorbitant out-of-pocket costs and pay money where the primary purpose is to help subsidize rebates paid to a long list of supply chain intermediaries, or is used to buy down the premium costs for everyone else."
It's a system of profit built on the backs of sick people. Faced with lawsuits from insulin users, proposed rebating reforms for Medicare and angry members of Congress, the major players in the drug supply chain have consistently blamed each other for it.
"The manufacturers point the finger at the PBMs and say, 'The rebates that you are demanding are so large that we have to raise our prices to maintain a reasonable rate of returns,'" said Patricia Danzon, a professor of health care management at the University of Pennsylvania, in an interview. "The PBMs say the drug companies are the ones that set the prices, and we are only trying to get the best prices for our customers."
The Court of Public Opinion
The result is an opaque blend of public relations messaging and raw economics. For example, manufacturers claim to be unfairly singled out by a growing number of state-level drug-pricing transparency laws, and they are eagerly promoting research suggesting that insurers are not passing savings from drug rebates on to their customers.
If lawmakers agree, they may pass transparency legislation requiring insurers to report the rebates they receive, or at least disclose the actual net cost of prescriptions to their customers. Once this information is disclosed, it's only a matter of time before consumers demand insurers pass the rebate savings on to them directly.
"The manufacturers could in theory benefit from the pass-through of the rebates to patients through co-payments," Danzon said. "This could make rebates visible. In theory, if manufacturers in any industry know how much their competitors are rebating, this visibility makes it easier for them to keep their prices in line without illegally colluding with each other."
PBMs and insurers, however, argue that rebates must remain secret in order to maintain the negotiating advantage and competitive bidding that brings prices down. Plus, if two manufacturers of a specialty drug know each other's price, they can tacitly collude to raise it. Danzon said this is why the Congressional Budget Office (CBO) has assumed in their analysis of legislative proposals that making rebates fully transparent could increase costs for programs like Medicare.
"The argument for transparency is very intuitive, people understand that, but the fact the CBO has consistently come out against full transparency -- that has economic argument behind it," Danzon said.
Meanwhile, Ben Wakana, executive director of Patients for Affordable Drugs, told Truthout that consumers would benefit from more transparency in the rebating system -- if not a different system altogether -- but rebates are not the only factors pushing up drug prices. In the United States, drug manufacturers enjoy patent exclusivity on new drugs for years, allowing them to charge monopoly prices. They also spend huge amounts of money on advertising and influencing politicians.
"Drug companies can claim they have to raise drug prices to pay PBM rebates, but ... they could take those terrible ads off the air and stop paying their CEOs a hundred million dollars," Wakana said. "It's a murky system and patients need to know where their money is going, but drug corporations have to lower their prices."
Wakana supports allowing the government to negotiate drug prices with the buying power generated by millions of Medicare members, a proposal supported by progressives in Congress. Perhaps if drug prices came down, then insurers would not be so reliant on rebates to control costs. Still, the question of whether consumers are getting what they pay for from insurance providers remains, and that's exactly how drug makers like it.
There are profiteers standing on all sides of the drug pricing equation. Consumers are stuck in the middle, shelling out monthly premiums along with rising out-of-pocket costs at the pharmacy. However, the more light we shine on this system, the more we see it beginning to crumble under its own weight -- and the weight of public opinion.
The Battle of 1498
A piece of U.S. patent law could focus deepening public outrage over drug prices—and help cure an epidemic to boot.
By Alexander Zaitchik / AlterNet
March 15, 2018, 4:43 AM GMT
The Battle of 1498.
What sounds like something on a history class pop quiz is actually the answer to a civics question, one Americans are asking in mounting anger: How do we cut drug prices in the U.S., which are the highest in the world, and provide universal access to lifesaving drugs?
One answer is a statute in U.S. patent law—full name, 28 U.S. Legal Code 1498—that authorizes the government to override drug patents and license the production of cheap generics if it serves the public interest. The statute merely requires that the patent holder be “reasonably compensated,” which the government can define however it wants.
For years, 1498 has popped up, here and there, in progressive legal and political circles. Senator Bernie Sanders has talked about using 1498 to lower prices on new Hepatitis C drugs, as have Sen. Elizabeth Warren of Massachusetts and Rep. Peter Welch, Sanders’ Vermont colleague in Congress.
Now the idea is gaining traction nationwide.
Last year, Louisiana Secretary of Health Rebekah Gee publicly floated 1498 as a solution to her state’s Hepatitis C crisis. Last month, a group of 18 Democratic House members wrote a letter to Health and Human Services Secretary Alex Azar urging the use of 1498 to break the patents on the same drugs.
The revolutionary Hep C treatments to hit the market a few years ago aren’t the only drugs worthy of targeting by 1498, but they are the most urgent and obvious example. The details of this particular drug story are so grotesque, and the number of lives hanging in the balance so large, it provides a model case for using and explaining 1498. Indeed, the six-figure price tags on some Hep C drugs have become the new global symbol of pharmaceutical industry greed.
Hepatitis C is a blood virus that affects 3.5 million Americans and kills more of them than every other virus combined. So when $62 million in government basic research led to the direct-action drug sofosbuvir, which successfully treats the disease, Hep C advocates thought global eradication might be at hand.
Then something awful happened: the patent-and-profit system worked exactly as designed.
In 2011, the California-based drug giant Gilead bought the small bio-med company then in the process of bringing sofosbuvir through trials. When Gilead introduced sofosbuvir to market a few years later, it came with a price tag upwards of $100,000; even with discounts, the drug was priced well beyond the reach of most people. It also strained and busted Medicaid budgets across the country.
Gilead and Janssen, the other company selling patented Hep C treatments, have since made more than $70 billion selling the new Hep C drugs, which happen to be incredibly cheap to produce. How cheap? So cheap, one study estimates they can be produced for between $62 and $216; another study, conducted at Liverpool University, places the cost below $100.
The government has used its authority under 1498 to slash drug prices before. During the Vietnam War, the Pentagon’s Medical Supply Agency used 1498 to procure dozens of generics and name-brand drugs at pennies to dollars. In the wake of 9/11, the Pentagon decided that a “reasonable” reimbursement for a patented antibiotic used to treat anthrax was 2 percent of the sticker price.
Of course, it would be surprising, if not shocking, if Alex Azar, the former Eli Lilly executive currently in charge of HHS, chose to deploy 1498 against the pharmaceutical industry. But the arguments 18 Democratic lawmakers presented to Azar last month resonate with a furious public, and they will only get louder and more familiar in the national debate.
“When we travel and talk to constituents, one of the biggest issues we hear about is access to medicines, or huge out-of-pocket costs, and people are outraged,” said Rep. Ro Khanna, CA-17, one of the letter’s signatories. “We need to rein in the pharmaceutical industry so that they don’t make outrageous profits at the expense of American consumers and the taxpayers who fund the research. I don’t think there’s a single American who thinks it should cost $100,000 to buy a lifesaving drug. Even Donald Trump campaigned on that.”
Khanna said that he thought rounding up 18 co-signers was a good start, and sees their letter as part of a growing groundswell around the issue.
“I’m hopeful it will trigger action from the Senate and we’ll continue to build momentum,” he said. “If we don’t hear back from Azar, we’ll write him again, and consider legislation.”
Khanna continued, “The Hep C drugs present a pretty simple moral issue that highlights the need for reform. When the vast majority of scientific research in this country is being done at universities with NIH funding supported by taxpayer money, we shouldn’t be privatizing the gains. Millions of people need these drugs. We need to prioritize the public good.”
The Louisiana Department of Health continues to see 1498 as a viable option to expand access to Hep C treatment to those who can’t currently access a cure, based on legal analysis and public input. We recently worked with the National Governors Association to bring together states, payers and manufacturers for three roundtable discussions to explore solutions to exorbitant drug pricing in the context of public health crises.
What sounds like something on a history class pop quiz is actually the answer to a civics question, one Americans are asking in mounting anger: How do we cut drug prices in the U.S., which are the highest in the world, and provide universal access to lifesaving drugs?
One answer is a statute in U.S. patent law—full name, 28 U.S. Legal Code 1498—that authorizes the government to override drug patents and license the production of cheap generics if it serves the public interest. The statute merely requires that the patent holder be “reasonably compensated,” which the government can define however it wants.
For years, 1498 has popped up, here and there, in progressive legal and political circles. Senator Bernie Sanders has talked about using 1498 to lower prices on new Hepatitis C drugs, as have Sen. Elizabeth Warren of Massachusetts and Rep. Peter Welch, Sanders’ Vermont colleague in Congress.
Now the idea is gaining traction nationwide.
Last year, Louisiana Secretary of Health Rebekah Gee publicly floated 1498 as a solution to her state’s Hepatitis C crisis. Last month, a group of 18 Democratic House members wrote a letter to Health and Human Services Secretary Alex Azar urging the use of 1498 to break the patents on the same drugs.
The revolutionary Hep C treatments to hit the market a few years ago aren’t the only drugs worthy of targeting by 1498, but they are the most urgent and obvious example. The details of this particular drug story are so grotesque, and the number of lives hanging in the balance so large, it provides a model case for using and explaining 1498. Indeed, the six-figure price tags on some Hep C drugs have become the new global symbol of pharmaceutical industry greed.
Hepatitis C is a blood virus that affects 3.5 million Americans and kills more of them than every other virus combined. So when $62 million in government basic research led to the direct-action drug sofosbuvir, which successfully treats the disease, Hep C advocates thought global eradication might be at hand.
Then something awful happened: the patent-and-profit system worked exactly as designed.
In 2011, the California-based drug giant Gilead bought the small bio-med company then in the process of bringing sofosbuvir through trials. When Gilead introduced sofosbuvir to market a few years later, it came with a price tag upwards of $100,000; even with discounts, the drug was priced well beyond the reach of most people. It also strained and busted Medicaid budgets across the country.
Gilead and Janssen, the other company selling patented Hep C treatments, have since made more than $70 billion selling the new Hep C drugs, which happen to be incredibly cheap to produce. How cheap? So cheap, one study estimates they can be produced for between $62 and $216; another study, conducted at Liverpool University, places the cost below $100.
The government has used its authority under 1498 to slash drug prices before. During the Vietnam War, the Pentagon’s Medical Supply Agency used 1498 to procure dozens of generics and name-brand drugs at pennies to dollars. In the wake of 9/11, the Pentagon decided that a “reasonable” reimbursement for a patented antibiotic used to treat anthrax was 2 percent of the sticker price.
Of course, it would be surprising, if not shocking, if Alex Azar, the former Eli Lilly executive currently in charge of HHS, chose to deploy 1498 against the pharmaceutical industry. But the arguments 18 Democratic lawmakers presented to Azar last month resonate with a furious public, and they will only get louder and more familiar in the national debate.
“When we travel and talk to constituents, one of the biggest issues we hear about is access to medicines, or huge out-of-pocket costs, and people are outraged,” said Rep. Ro Khanna, CA-17, one of the letter’s signatories. “We need to rein in the pharmaceutical industry so that they don’t make outrageous profits at the expense of American consumers and the taxpayers who fund the research. I don’t think there’s a single American who thinks it should cost $100,000 to buy a lifesaving drug. Even Donald Trump campaigned on that.”
Khanna said that he thought rounding up 18 co-signers was a good start, and sees their letter as part of a growing groundswell around the issue.
“I’m hopeful it will trigger action from the Senate and we’ll continue to build momentum,” he said. “If we don’t hear back from Azar, we’ll write him again, and consider legislation.”
Khanna continued, “The Hep C drugs present a pretty simple moral issue that highlights the need for reform. When the vast majority of scientific research in this country is being done at universities with NIH funding supported by taxpayer money, we shouldn’t be privatizing the gains. Millions of people need these drugs. We need to prioritize the public good.”
The Louisiana Department of Health continues to see 1498 as a viable option to expand access to Hep C treatment to those who can’t currently access a cure, based on legal analysis and public input. We recently worked with the National Governors Association to bring together states, payers and manufacturers for three roundtable discussions to explore solutions to exorbitant drug pricing in the context of public health crises.
Report Discovers Multinational Companies Found Even More Ways to Avoid Taxes Following the Financial Crisis
Since 2000, the amount these businesses pay in taxes has dropped by one third.
By Cody Fenwick / AlterNet
March 12, 2018, 5:16 PM GMT
As growing inequality has steadily increased in American society, major multinational companies have been benefiting from lower and lower tax rates the world over, according to a new report from the Financial Times.
The paper conducted a study of the taxes paid by the top 10 multinationals across nine different sectors. These companies now pay 9 percent less in taxes than they did before the 2008 financial crisis, the Times found. And since 2000, the amount they paid in tax has dropped on average by one-third, from 34 percent to 24 percent, the report found.
"These results highlight how the long downward trend in corporate tax rates set by the countries that make up the OECD continued at a time when taxes on consumers and workers were rising after the financial crisis," reporter Rochelle Toplensky wrote.
About half of the decrease since 2008 is attributed to reduced tax rates, according to the report, while the other half likely due to tax avoidance schemes.
Toplensky notes that since 2008, personal taxes in rich countries have risen 6 percent, while corporate rates have fallen by 5 percent on average. As many countries, especially in Europe, embraced austerity as a response to the economic downturn, governments' treatment of these sprawling corporate giants was anything but austere.
Michael Devereux, an Oxford University business tax professor, told Toplensky he didn't see the interstate competition for low corporate rates subsiding anytime soon.
This is what's really troubling.
When the GOP passed its massive tax overhaul in 2017, cutting the corporate tax rate from 35 to 21 percent, Republicans frequently cited argued that we need to slash rates to attract more companies from other countries. But if all other countries embrace this logic, we end up in a race to the bottom to benefit corporations —a phenomenon we already see at the state level.
These low rates—and the fact that corporations continually find ways to avoid paying what they owe—cost the government money needed for key social programs. Conservatives then use deficits, which they intentionally increase, as an excuse to cut government spending that's meant to help the kinds of people who see no benefit from a corporate tax cut.
The paper conducted a study of the taxes paid by the top 10 multinationals across nine different sectors. These companies now pay 9 percent less in taxes than they did before the 2008 financial crisis, the Times found. And since 2000, the amount they paid in tax has dropped on average by one-third, from 34 percent to 24 percent, the report found.
"These results highlight how the long downward trend in corporate tax rates set by the countries that make up the OECD continued at a time when taxes on consumers and workers were rising after the financial crisis," reporter Rochelle Toplensky wrote.
About half of the decrease since 2008 is attributed to reduced tax rates, according to the report, while the other half likely due to tax avoidance schemes.
Toplensky notes that since 2008, personal taxes in rich countries have risen 6 percent, while corporate rates have fallen by 5 percent on average. As many countries, especially in Europe, embraced austerity as a response to the economic downturn, governments' treatment of these sprawling corporate giants was anything but austere.
Michael Devereux, an Oxford University business tax professor, told Toplensky he didn't see the interstate competition for low corporate rates subsiding anytime soon.
This is what's really troubling.
When the GOP passed its massive tax overhaul in 2017, cutting the corporate tax rate from 35 to 21 percent, Republicans frequently cited argued that we need to slash rates to attract more companies from other countries. But if all other countries embrace this logic, we end up in a race to the bottom to benefit corporations —a phenomenon we already see at the state level.
These low rates—and the fact that corporations continually find ways to avoid paying what they owe—cost the government money needed for key social programs. Conservatives then use deficits, which they intentionally increase, as an excuse to cut government spending that's meant to help the kinds of people who see no benefit from a corporate tax cut.
Our corporation tax system is broken. Here’s how to fix it
9th March 2018
Grace Blakeley - open democracy
“We are all in this together” was the familiar refrain used by former Chancellor George Osborne. If we want to pay down the public debt, we must all bear some of the burden for tax rises and spending cuts. After it was announced this week that the target for reducing the deficit had been reached, Mr Osborne announced triumphantly that “we got there in the end”.
It is, however, not at all clear who Osborne is referring to when he says “we”.
The enlarged deficit in 2009-10 was created by the slump in output that followed the global financial crisis, and the spending required to get us out of it. It was the decision to bail out the banks which added £1.5 trillion to the national debt — not overgenerous public spending by the previous Labour Government.
And yet, those people who rely most heavily on our public services have been the ones to bear most of the cost. Our schools have seen almost £3 billion worth of cuts since 2015. Local councils will see their funding fall by 77 per cent by 2020 versus 2015. The NHS funding gap stands to reach a staggering £30 billion by 2020.
Meanwhile, successive Conservative governments have reduced the rate of corporation tax from 30% in 2005/06 to just 19% today. This is the lowest rate in the G7, and one of the lowest rates among the 35 countries of the OECD. Astonishingly, a further reduction to 17% is still planned before the end of this Parliament.
These changes have seen revenues from corporation tax fall from 3.5% GDP in 2005/06, to just 2.6% today. At the same time, it has become increasingly easy for multinational companies to shift their profits to low-tax jurisdictions in order to avoid paying tax in the UK altogether.
Today, nearly half of all children in London, Birmingham, and Manchester live in poverty, whilst UK-based corporations enjoy some of the lowest tax rates in the developed world. So much for “we’re all in it together”.
It is in this context that the IPPR has released a new report calling for a fundamental rethink of the system of corporate taxation in the UK.
First, we are proposing an increase in corporation tax from 19% to 24%. We argue that the revenues from this should be used to reduce taxes on workers by reducing employers’ national insurance contributions from 13.8% to 11.8%.
Taxes on profits are more likely to be borne by the people who own a company, whilst taxes on payrolls are more likely to be borne by workers themselves. So reductions in corporation tax have benefited shareholders at the expense of workers, who have yet to see their wages recover to pre-crisis levels. This imbalance has also had important distributive effects between companies, raising the tax burden of less profitable, higher-employment companies, and reducing that of more profitable ones.
Second, we propose the introduction of a new tax designed to prevent multinational tax avoidance. Our ‘Alternative Minimum Corporation Tax’ (AMCT) would link a company’s tax liability to its sales or turnover in the UK, to ensure that firms were not able to avoid taxes by shifting their profits to low-tax jurisdictions.
While we do not currently have any reliable data on the extent of multinational profit shifting, the exchequer is estimated to lose somewhere between £3 billion and £12 billion each year as a result of these practices. Our AMCT would capture a significant portion of these lost revenues, which would go some way to closing the gap in the NHS budget.
After eight years of austerity borne primarily by the most vulnerable in our society, it’s time that all businesses started paying their fair share.
It is, however, not at all clear who Osborne is referring to when he says “we”.
The enlarged deficit in 2009-10 was created by the slump in output that followed the global financial crisis, and the spending required to get us out of it. It was the decision to bail out the banks which added £1.5 trillion to the national debt — not overgenerous public spending by the previous Labour Government.
And yet, those people who rely most heavily on our public services have been the ones to bear most of the cost. Our schools have seen almost £3 billion worth of cuts since 2015. Local councils will see their funding fall by 77 per cent by 2020 versus 2015. The NHS funding gap stands to reach a staggering £30 billion by 2020.
Meanwhile, successive Conservative governments have reduced the rate of corporation tax from 30% in 2005/06 to just 19% today. This is the lowest rate in the G7, and one of the lowest rates among the 35 countries of the OECD. Astonishingly, a further reduction to 17% is still planned before the end of this Parliament.
These changes have seen revenues from corporation tax fall from 3.5% GDP in 2005/06, to just 2.6% today. At the same time, it has become increasingly easy for multinational companies to shift their profits to low-tax jurisdictions in order to avoid paying tax in the UK altogether.
Today, nearly half of all children in London, Birmingham, and Manchester live in poverty, whilst UK-based corporations enjoy some of the lowest tax rates in the developed world. So much for “we’re all in it together”.
It is in this context that the IPPR has released a new report calling for a fundamental rethink of the system of corporate taxation in the UK.
First, we are proposing an increase in corporation tax from 19% to 24%. We argue that the revenues from this should be used to reduce taxes on workers by reducing employers’ national insurance contributions from 13.8% to 11.8%.
Taxes on profits are more likely to be borne by the people who own a company, whilst taxes on payrolls are more likely to be borne by workers themselves. So reductions in corporation tax have benefited shareholders at the expense of workers, who have yet to see their wages recover to pre-crisis levels. This imbalance has also had important distributive effects between companies, raising the tax burden of less profitable, higher-employment companies, and reducing that of more profitable ones.
Second, we propose the introduction of a new tax designed to prevent multinational tax avoidance. Our ‘Alternative Minimum Corporation Tax’ (AMCT) would link a company’s tax liability to its sales or turnover in the UK, to ensure that firms were not able to avoid taxes by shifting their profits to low-tax jurisdictions.
While we do not currently have any reliable data on the extent of multinational profit shifting, the exchequer is estimated to lose somewhere between £3 billion and £12 billion each year as a result of these practices. Our AMCT would capture a significant portion of these lost revenues, which would go some way to closing the gap in the NHS budget.
After eight years of austerity borne primarily by the most vulnerable in our society, it’s time that all businesses started paying their fair share.
The Other Problem Banks
March 8th, 2018
by Phil Mattera - dirt diggers digest
Bipartisanship has returned to Washington, thanks to the overwhelming desire of Republicans and quite a few Democrats to roll back portions of the Dodd-Frank Act. Ten years after the onset of the financial meltdown and seven years after the law went into effect, the relentless efforts of the banking lobby seem to be paying off.
The legislation, S.2155, is being sold as much needed relief for smaller banks that were supposedly treated unfairly by Dodd-Frank. Some adjustment to the law might make sense for very small banks, but the bill has evolved into something that will benefit larger institutions that still merit close scrutiny.
Using relief for community banks as a stalking horse, proponents of the bill have added provisions that will reduce the degree of supervision that would be exercised on banks with assets up to $250 billion. Those with assets between $50 billion and $100 billion would benefit the most.
The two dozen banks (listed in a Congressional Research Service report) that would be affected by these provisions are hardly mom and pop financial institutions. And while the most harm to the economy was done by the likes of Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, these mid-sized banks have records that are far from spotless.
Take the case of Credit Suisse, the Swiss bank whose U.S. operation has assets of about $215 billion. During the final days of the Obama Administration it had to pay $5.3 billion to settle a case involving the sale of toxic securities a decade ago. In 2014 it paid $1.8 billion in connection with criminal charges of helping U.S. taxpayers file false returns. In 2009 it paid $268 million to settle criminal allegations relating to economic sanctions. In all, Credit Suisse has more than $9 billion documented in Violation Tracker, ranking it tenth among all corporations.
Or consider Barclays, the British bank whose U.S. operation has assets of about $180 billion. In 2015 it pled guilty to criminal charges of conspiring to manipulate foreign exchange markets and was fined $710 million while also paying $400 million to settle related civil allegations. That same year it had to pay $325 million to settle a case brought by the National Credit Union Administration concerning Barclay’s sale of toxic securities a decade earlier. Its Violation Tracker total is more than $3 billion, putting it in nineteenth place among all corporations.
Other controversial foreign banks whose U.S. subsidiaries would benefit from S.2155 relaxed regulation include Deutsche Bank ($12 billion in Violation Tracker), BNP Paribas ($9 billion) and UBS ($5 billion).
Foreign banks are not the only bad actors on the list. Atlanta-based SunTrust, with about $200 billion in assets, has racked up more than $1.5 billion in penalties, including one case in which it had to provide $500 million in relief to underwater borrowers to resolve allegations that it engaged in deceptive and illegal mortgage servicing practices.
Among the other items in its rap sheet is a $21 million payment to resolve allegations that it charged higher loan rates to black and Latino borrowers.
The S.2155 beneficiary list includes half a dozen additional domestic banks with $100 million or more in penalties: Ally Financial, American Express, Discover Financial Services, Fifth Third Bancorp, M&T Bank Corporation, and Regions Financial Corporation.
A bank does not have to be gigantic to be problematic. These culprits should not lumped together with community banks in deciding whether to tinker with Dodd-Frank.
The legislation, S.2155, is being sold as much needed relief for smaller banks that were supposedly treated unfairly by Dodd-Frank. Some adjustment to the law might make sense for very small banks, but the bill has evolved into something that will benefit larger institutions that still merit close scrutiny.
Using relief for community banks as a stalking horse, proponents of the bill have added provisions that will reduce the degree of supervision that would be exercised on banks with assets up to $250 billion. Those with assets between $50 billion and $100 billion would benefit the most.
The two dozen banks (listed in a Congressional Research Service report) that would be affected by these provisions are hardly mom and pop financial institutions. And while the most harm to the economy was done by the likes of Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, these mid-sized banks have records that are far from spotless.
Take the case of Credit Suisse, the Swiss bank whose U.S. operation has assets of about $215 billion. During the final days of the Obama Administration it had to pay $5.3 billion to settle a case involving the sale of toxic securities a decade ago. In 2014 it paid $1.8 billion in connection with criminal charges of helping U.S. taxpayers file false returns. In 2009 it paid $268 million to settle criminal allegations relating to economic sanctions. In all, Credit Suisse has more than $9 billion documented in Violation Tracker, ranking it tenth among all corporations.
Or consider Barclays, the British bank whose U.S. operation has assets of about $180 billion. In 2015 it pled guilty to criminal charges of conspiring to manipulate foreign exchange markets and was fined $710 million while also paying $400 million to settle related civil allegations. That same year it had to pay $325 million to settle a case brought by the National Credit Union Administration concerning Barclay’s sale of toxic securities a decade earlier. Its Violation Tracker total is more than $3 billion, putting it in nineteenth place among all corporations.
Other controversial foreign banks whose U.S. subsidiaries would benefit from S.2155 relaxed regulation include Deutsche Bank ($12 billion in Violation Tracker), BNP Paribas ($9 billion) and UBS ($5 billion).
Foreign banks are not the only bad actors on the list. Atlanta-based SunTrust, with about $200 billion in assets, has racked up more than $1.5 billion in penalties, including one case in which it had to provide $500 million in relief to underwater borrowers to resolve allegations that it engaged in deceptive and illegal mortgage servicing practices.
Among the other items in its rap sheet is a $21 million payment to resolve allegations that it charged higher loan rates to black and Latino borrowers.
The S.2155 beneficiary list includes half a dozen additional domestic banks with $100 million or more in penalties: Ally Financial, American Express, Discover Financial Services, Fifth Third Bancorp, M&T Bank Corporation, and Regions Financial Corporation.
A bank does not have to be gigantic to be problematic. These culprits should not lumped together with community banks in deciding whether to tinker with Dodd-Frank.
In 2017, Amazon paid $0 In U.S. Taxes Despite Making $5.6 BN
by Erica - the intellectualist
Amazon also will receive a tax break of about $789 million for 2018, thanks to the Republicans' new tax plan.
Amazon, on its way to becoming the world's first trillion-dollar company, paid zero dollars in federal taxes for 2017, despite earning $5.6 billion in income.
SFGate reports that $724 million of Amazon's $769 million tax bill for the year are foreign taxes, according to an analysis drawn from the company's 2017 10-K form.
Public companies are required to submit the form every year to the SEC in addition to quarterly updates (10-Q forms) and, when announcing major events shareholders should know about, the 8-K or "current report" form.
Matthew Gardner, senior fellow at the Institute on Taxation and Economic Policy, wrote about Amazon's tax bill that won't come due in a Feb. 13 blog post. Without being privy to the company's tax return, no one can say exactly how CEO Jeff Bezos and Co. avoided what could have been more than $1.3 billion in federal taxes based solely on the annual financial report, but there is information to be gleaned.
According to Gardner, one factor is the $917 million deduction on stock options:
"Even though these don't represent as meaningful out-of-pocket expenses for the companies, they're still allowed to deduct the fair value of the stock options when they're exercised," Gardner told SeattlePI. "When somebody who has been given this right cashes them in, the company gets to deduct this from their taxable income."
...
Another ingredient in the low tax bill is likely capital expenditure depreciation, Gardner said, where companies are allowed to write off the cost of some expenses -- say those incurred while building a distribution center, for example -- up front. Those taxes are essentially shifted to future years' tax bills.
Amazon will also benefit handsomely from the Republican tax bill passed last year.
Bezos, a frequent critic -- and target -- of President Donald Trump, nevertheless earned a windfall from the Trump administration's U.S. Tax Cuts and Jobs Act of 2017, passed in December. Amazon readjusted estimates for taxes deferred under the old 35 percent corporate tax rate to meet the new tax law's 21 percent figure, which resulted in an estimated $789 million reduction for Amazon.
And as states continue courting the company, Gardner wonders aloud just what it is that you give the "tax avoider who already has everything?"
At a time when Amazon is pitting state and local governments against each other in a Hunger Games-style contest over the location of the company’s new headquarters, the company’s new disclosure should cause some consternation among the state officials who have been most willing to pony up billions of dollars in tax incentives. In each of these states, Amazon’s sales tax dodging has pushed brick and mortar retailers to the brink of extinction, and its spectacular federal corporate tax avoidance is very likely mirrored at the state level.
Amazon, on its way to becoming the world's first trillion-dollar company, paid zero dollars in federal taxes for 2017, despite earning $5.6 billion in income.
SFGate reports that $724 million of Amazon's $769 million tax bill for the year are foreign taxes, according to an analysis drawn from the company's 2017 10-K form.
Public companies are required to submit the form every year to the SEC in addition to quarterly updates (10-Q forms) and, when announcing major events shareholders should know about, the 8-K or "current report" form.
Matthew Gardner, senior fellow at the Institute on Taxation and Economic Policy, wrote about Amazon's tax bill that won't come due in a Feb. 13 blog post. Without being privy to the company's tax return, no one can say exactly how CEO Jeff Bezos and Co. avoided what could have been more than $1.3 billion in federal taxes based solely on the annual financial report, but there is information to be gleaned.
According to Gardner, one factor is the $917 million deduction on stock options:
"Even though these don't represent as meaningful out-of-pocket expenses for the companies, they're still allowed to deduct the fair value of the stock options when they're exercised," Gardner told SeattlePI. "When somebody who has been given this right cashes them in, the company gets to deduct this from their taxable income."
...
Another ingredient in the low tax bill is likely capital expenditure depreciation, Gardner said, where companies are allowed to write off the cost of some expenses -- say those incurred while building a distribution center, for example -- up front. Those taxes are essentially shifted to future years' tax bills.
Amazon will also benefit handsomely from the Republican tax bill passed last year.
Bezos, a frequent critic -- and target -- of President Donald Trump, nevertheless earned a windfall from the Trump administration's U.S. Tax Cuts and Jobs Act of 2017, passed in December. Amazon readjusted estimates for taxes deferred under the old 35 percent corporate tax rate to meet the new tax law's 21 percent figure, which resulted in an estimated $789 million reduction for Amazon.
And as states continue courting the company, Gardner wonders aloud just what it is that you give the "tax avoider who already has everything?"
At a time when Amazon is pitting state and local governments against each other in a Hunger Games-style contest over the location of the company’s new headquarters, the company’s new disclosure should cause some consternation among the state officials who have been most willing to pony up billions of dollars in tax incentives. In each of these states, Amazon’s sales tax dodging has pushed brick and mortar retailers to the brink of extinction, and its spectacular federal corporate tax avoidance is very likely mirrored at the state level.
'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.
Trump Tax Cuts Lead To Explosion Of Corporate Stock Buyback Not Rising Wages
By Reuters - politicus usa
(Reporting by David Morgan; Editing by Lisa Shumaker)
on Thu, Mar 1st, 2018 at 9:14 am
WASHINGTON (Reuters) – U.S. corporations have announced more than $218 billion in share buybacks since Congress enacted the Republican tax overhaul in December, an investment research firm said.
The California-based firm TrimTabs, which tracks corporate buybacks, said the value of buyback programs announced in February alone surged to $153.7 billion from $59.9 billion in January, smashing a previous monthly record of $133 billion in April 2015.
“Activity has certainly accelerated. Buybacks increased for five consecutive months beginning in July 2017 and have exploded in February,” said TrimTabs analyst Winston Chua.
“If the pace keeps up, this year’s volume will smash totals from all other previous years going back more than a decade,” he added.
Meanwhile, U.S. Senate Democrats said in a separate report that $209 billion worth of U.S. corporate share buybacks have been announced since Jan. 5, claiming the figure shows that the Republican tax overhaul largely benefits corporations, corporate executives and wealthy shareholders.
Long a flash point for partisan disagreement in Washington, the tax cuts are expected to play a major role in Nov. 6 congressional mid-term elections, which will determine whether Republicans can maintain their majorities in the Senate and House of Representatives.
Republicans including President Donald Trump, who signed tax legislation into law in December, have joined U.S. companies in promoting a recent spate of bonuses, pay raises and other benefits as evidence that the tax overhaul is benefiting workers.
A spokesman for Senate Republican leader Mitch McConnell said Democrats are losing the argument on taxes and dismissed the buyback report as a desperate attempt to change the subject.
The report by Senate Democrats spans more than 30 buyback programs announced by companies from a range of industries including banking, energy, manufacturing, retailing and technology. (http://bit.ly/2F3tN49)
The California-based firm TrimTabs, which tracks corporate buybacks, said the value of buyback programs announced in February alone surged to $153.7 billion from $59.9 billion in January, smashing a previous monthly record of $133 billion in April 2015.
“Activity has certainly accelerated. Buybacks increased for five consecutive months beginning in July 2017 and have exploded in February,” said TrimTabs analyst Winston Chua.
“If the pace keeps up, this year’s volume will smash totals from all other previous years going back more than a decade,” he added.
Meanwhile, U.S. Senate Democrats said in a separate report that $209 billion worth of U.S. corporate share buybacks have been announced since Jan. 5, claiming the figure shows that the Republican tax overhaul largely benefits corporations, corporate executives and wealthy shareholders.
Long a flash point for partisan disagreement in Washington, the tax cuts are expected to play a major role in Nov. 6 congressional mid-term elections, which will determine whether Republicans can maintain their majorities in the Senate and House of Representatives.
Republicans including President Donald Trump, who signed tax legislation into law in December, have joined U.S. companies in promoting a recent spate of bonuses, pay raises and other benefits as evidence that the tax overhaul is benefiting workers.
A spokesman for Senate Republican leader Mitch McConnell said Democrats are losing the argument on taxes and dismissed the buyback report as a desperate attempt to change the subject.
The report by Senate Democrats spans more than 30 buyback programs announced by companies from a range of industries including banking, energy, manufacturing, retailing and technology. (http://bit.ly/2F3tN49)
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How Big Pharma Is Corrupting the Truth About the Drugs It Sells Us
Where's the government oversight we need to stop this?
By Kate Harveston / AlterNet
March 1, 2018, 12:49 PM GMT
Remember how appalled we felt as a society when we discovered that, for so long, we had been mistakenly taking Big Tobacco’s word that cigarettes are harmless? Rinse and repeat with lobbyists for Big Alcohol fear-mongering about legal weed. And again and again with a panoply of consumer-level commodities and goods.
Nowadays we have all these familiar worries, but about our drugs and medications instead. It’s become so bad that there's now reason to believe Big Pharma is also colluding to poison the well of scientific inquiry.
The truth is, there are many examples of private industry paying for positive press from the scientific community.
When you look closer at our spending priorities as a nation, it’s not entirely difficult to see why. As public funding for the sciences has fallen away, many scientists have had to pivot toward more consistent—and ethically fraught—sources of funding and stability as surely as politicians who, for want of public election funding, get buoyed by billionaires at $100,000-per-plate fundraising dinners.
We’ll take a look at case studies in a moment, but for right now, think about how important it is for us to be able to trust, at a minimum level, the products we invite into our bodies and our homes.
It’s become common knowledge that the pharmaceutical industry is one of the most corrupt out there. This is a serious affront to justice that has gone on for far too long. The fight for consumer protections of all kinds can and must begin with health care, medicines, prescription drugs and medical devices. Here are the stakes.
The Erosion of Trust
In 2006, GlaxoSmithKline—the esoteric name for a ubiquitous diabetes treatment brand—took a victory lap after a lengthy report in the New England Journal of Medicine declared its Avandia medication to be the most effective of the three diabetes drugs tested.
Unfortunately for readers and patients, the extent of the report’s bias was not as attention-grabbing as the headline and ensuing celebratory press releases. In fact, with the help of the FDA and renowned heart specialist Steven Nissen, the Washington Post found that GlaxoSmithKline directly funded the research itself. All 11 of the paper's authors had received consultation fees, grants or another form of monetary compensation.
There may be no clearer example of conflicts of interest in the halls of science. Given the degree to which private money may have influenced the result of this scientific endeavor, we have little choice but to assume it did.
Even worse? The drug didn’t merely fail to help patients cope with their illnesses, it actually raised their risk of heart attack. Avandia effectively doesn’t exist anymore in the U.S., in part because GlaxoSmithKline was so busy trying to force two logical dots to connect that it didn’t even pick up on all the collateral damage.
This is outrageous. Consumers shouldn’t have to second-guess the medical professionals who are supposed to help us take care of ourselves.
The Fall of Accountable Science
Between 2011 and 2012, the New England Journal of Medicine published more than 70 “original studies” of newly FDA-approved and experimental drugs. Of these 70-plus reports:
Up until about the 1980s, the federal government was the primary financier of scientific research in the world of medicine. In the '60s and '70s, the federal government had a 70 percent share of scientific research. In 2013, that number finally dropped below the 50 percent mark.
As you may have guessed, there is at least token legal oversight available for clinical investigations of new drugs in the form of FDA regulation. In addition to protecting the personal information of trial participants (patients), the FDA also maintains that no drug may reach the investigation phase until its effects—and its lack of harm—have both been documented in a lab setting. As you can likely tell, these protections no longer appear adequate.
It has become an open secret that most of the drugs the FDA concerns itself with cannot be relied upon to greatly outperform placebos, or existing treatments, in a vast majority of cases. Moreover, the wholesale regulatory capture of the FDA has resulted in a situation where this vital public office serves as a glorified rubber patent stamp for protecting medicines as privately owned, profit-generating pieces of intellectual property.
The American People Are No Longer in Control of Their Scientific Destiny
A generation or so ago, the skill with which a nation pursued and made use of scientific knowledge was one of the chief metrics of its greatness. However, starting in the 1980s, the United States took a decided turn away from public sector expansion. Reagan-era policies aimed to privatize government services in the name of balancing local and state budgets. Since then, the world has watched as Americans have continued to vote accountable government and transparent scientific study nearly out of existence by proponents of “small government” and the shifting of fiscal, bureaucratic and legislative power from the public to the private sector.
When corporatists boast of the rate of innovation in the private sector, they generally fail to mention where the money came from that makes all that innovation possible—or what America used to do with it instead. In truth, privatization does not necessarily lead to less government, as its proponents would like to believe. In many cases of privatized innovation, the government still plays a significant role along the value chain of innovation.
The difference, though, is that instead of the government being involved for the sake of oversight and accountability, profit-seeking privatized enterprises can lobby for the expansion of public funding just the same as those in the public sector would. Those private companies can then skim off only the most successful ventures. It’s simply another example of how the government continues to turn a blind eye to unethical, profit-mongering business practices in the name of “trickle down economics,” which we know have not worked in the past.
However, the winds of change seem to be shifting. For all our present social and political turmoil, we’re more aware of the problem than ever before. But before we can fix it, we must remember science is, like any other endeavor, a human institution.
Like a passionate grade-school teacher who can’t do her best work due to a lack of school funding, scientists of all stripes are, after all, human beings with their own biases, internal monologues, ideas, agendas and needs. Science is one of the most vitally important institutions we have right now. Most Americans say it’s very nearly the only thing that matters in the face of global, anthropocentric climate change, but it’s currently perishing from neglect.
Here is the silver lining: Though junk science seems to have a stubborn place in the spotlight and in our shared vocabulary, scientists are actively trying to turn the tables. Inspired in part by the fallout from the 2016 election, American scientists are seeking political office at a brisk clip—and being vocal about it, too.
Additionally, it seems that we are finally collectively beginning to wake up to the enormous disservices that Big Pharma has done our society. Throwing our support behind scientist-politicians could be one aid to the problem, but we also need to address the bigger issues at hand with how our medical knowledge is funded and who we can trust to provide us with real answers to medical questions.
Government oversight and funding are important aspects of that, and improved transparency regarding where we’re getting our “science” is something people are finally starting to advocate for, and should continue to. With this two-part awakening in both the scientific and general community, we can only hope that we are, at last, reaching the end of the road for scientific illiteracy in the States.
Nowadays we have all these familiar worries, but about our drugs and medications instead. It’s become so bad that there's now reason to believe Big Pharma is also colluding to poison the well of scientific inquiry.
The truth is, there are many examples of private industry paying for positive press from the scientific community.
When you look closer at our spending priorities as a nation, it’s not entirely difficult to see why. As public funding for the sciences has fallen away, many scientists have had to pivot toward more consistent—and ethically fraught—sources of funding and stability as surely as politicians who, for want of public election funding, get buoyed by billionaires at $100,000-per-plate fundraising dinners.
We’ll take a look at case studies in a moment, but for right now, think about how important it is for us to be able to trust, at a minimum level, the products we invite into our bodies and our homes.
It’s become common knowledge that the pharmaceutical industry is one of the most corrupt out there. This is a serious affront to justice that has gone on for far too long. The fight for consumer protections of all kinds can and must begin with health care, medicines, prescription drugs and medical devices. Here are the stakes.
The Erosion of Trust
In 2006, GlaxoSmithKline—the esoteric name for a ubiquitous diabetes treatment brand—took a victory lap after a lengthy report in the New England Journal of Medicine declared its Avandia medication to be the most effective of the three diabetes drugs tested.
Unfortunately for readers and patients, the extent of the report’s bias was not as attention-grabbing as the headline and ensuing celebratory press releases. In fact, with the help of the FDA and renowned heart specialist Steven Nissen, the Washington Post found that GlaxoSmithKline directly funded the research itself. All 11 of the paper's authors had received consultation fees, grants or another form of monetary compensation.
There may be no clearer example of conflicts of interest in the halls of science. Given the degree to which private money may have influenced the result of this scientific endeavor, we have little choice but to assume it did.
Even worse? The drug didn’t merely fail to help patients cope with their illnesses, it actually raised their risk of heart attack. Avandia effectively doesn’t exist anymore in the U.S., in part because GlaxoSmithKline was so busy trying to force two logical dots to connect that it didn’t even pick up on all the collateral damage.
This is outrageous. Consumers shouldn’t have to second-guess the medical professionals who are supposed to help us take care of ourselves.
The Fall of Accountable Science
Between 2011 and 2012, the New England Journal of Medicine published more than 70 “original studies” of newly FDA-approved and experimental drugs. Of these 70-plus reports:
- Sixty received direct pharmaceutical company funding.
- Fifty were written or co-written by a current employee of a pharmaceutical company.
- Thirty-seven had lead writers who had, at some point, received speaking fees or other compensation from the subject of the study.
Up until about the 1980s, the federal government was the primary financier of scientific research in the world of medicine. In the '60s and '70s, the federal government had a 70 percent share of scientific research. In 2013, that number finally dropped below the 50 percent mark.
As you may have guessed, there is at least token legal oversight available for clinical investigations of new drugs in the form of FDA regulation. In addition to protecting the personal information of trial participants (patients), the FDA also maintains that no drug may reach the investigation phase until its effects—and its lack of harm—have both been documented in a lab setting. As you can likely tell, these protections no longer appear adequate.
It has become an open secret that most of the drugs the FDA concerns itself with cannot be relied upon to greatly outperform placebos, or existing treatments, in a vast majority of cases. Moreover, the wholesale regulatory capture of the FDA has resulted in a situation where this vital public office serves as a glorified rubber patent stamp for protecting medicines as privately owned, profit-generating pieces of intellectual property.
The American People Are No Longer in Control of Their Scientific Destiny
A generation or so ago, the skill with which a nation pursued and made use of scientific knowledge was one of the chief metrics of its greatness. However, starting in the 1980s, the United States took a decided turn away from public sector expansion. Reagan-era policies aimed to privatize government services in the name of balancing local and state budgets. Since then, the world has watched as Americans have continued to vote accountable government and transparent scientific study nearly out of existence by proponents of “small government” and the shifting of fiscal, bureaucratic and legislative power from the public to the private sector.
When corporatists boast of the rate of innovation in the private sector, they generally fail to mention where the money came from that makes all that innovation possible—or what America used to do with it instead. In truth, privatization does not necessarily lead to less government, as its proponents would like to believe. In many cases of privatized innovation, the government still plays a significant role along the value chain of innovation.
The difference, though, is that instead of the government being involved for the sake of oversight and accountability, profit-seeking privatized enterprises can lobby for the expansion of public funding just the same as those in the public sector would. Those private companies can then skim off only the most successful ventures. It’s simply another example of how the government continues to turn a blind eye to unethical, profit-mongering business practices in the name of “trickle down economics,” which we know have not worked in the past.
However, the winds of change seem to be shifting. For all our present social and political turmoil, we’re more aware of the problem than ever before. But before we can fix it, we must remember science is, like any other endeavor, a human institution.
Like a passionate grade-school teacher who can’t do her best work due to a lack of school funding, scientists of all stripes are, after all, human beings with their own biases, internal monologues, ideas, agendas and needs. Science is one of the most vitally important institutions we have right now. Most Americans say it’s very nearly the only thing that matters in the face of global, anthropocentric climate change, but it’s currently perishing from neglect.
Here is the silver lining: Though junk science seems to have a stubborn place in the spotlight and in our shared vocabulary, scientists are actively trying to turn the tables. Inspired in part by the fallout from the 2016 election, American scientists are seeking political office at a brisk clip—and being vocal about it, too.
Additionally, it seems that we are finally collectively beginning to wake up to the enormous disservices that Big Pharma has done our society. Throwing our support behind scientist-politicians could be one aid to the problem, but we also need to address the bigger issues at hand with how our medical knowledge is funded and who we can trust to provide us with real answers to medical questions.
Government oversight and funding are important aspects of that, and improved transparency regarding where we’re getting our “science” is something people are finally starting to advocate for, and should continue to. With this two-part awakening in both the scientific and general community, we can only hope that we are, at last, reaching the end of the road for scientific illiteracy in the States.
America's Richest 2% Made More Money in 2017 Than the Cost of the Entire Safety Net
Meanwhile, food stamps provide about $1.50 per meal for 42 million Americans.
By Paul Buchheit / AlterNet
February 27, 2018, 7:32 AM GMT
How was their money made? Almost entirely by passively waiting for the stock market to go up. The data sources for this report are Forbes and Credit Suisse, both of which provide precise numbers for the worsening surge in America's wealth inequality.
U.S. wealth increased by $8.5 trillion in 2017, with the richest 2% getting about $1.15 trillion (details here), which is more than the total cost of Medicaid (federal AND state) and the complete safety net, both mandatory and discretionary, including the low-income programs that make up the social support package derisively referred to as 'welfare.'
Surprisingly, the richest 1% did not increase their wealth by much in 2017 (although they took nearly $4 trillion in 2016). That means the second half of the richest 2%, Americans with an average net worth of approximately $10 million, outgained the safety net all by themselves in the past year.
Another stunner: The richest 2-5%, those Americans with an average net worth of about $2.5 million, accumulated enough wealth in 2017 to pay for the safety net FOUR TIMES.
TWO Men Made More Money than the Total Cost of Food Stamps
Food stamps provide about $1.50 per meal for 42 million Americans, mostly children, the elderly, and the disabled, at a cost in 2017 of $64 billion. In the past year Jeff Bezos and Mark Zuckerberg have together accumulated over $64 billion in new wealth.
Jeff Bezos has used tax havens and high-priced lobbyists to avoid the taxes owed by his company. Mark Zuckerberg created a 'charitable' foundation, which in reality is a tax-exempt limited liability company, leaving him free to make political donations or sell his holdings, all without paying taxes. But in one year the two of them made enough from their investments to feed most of America's hungry.
And Republicans Are Cutting Food Stamps?
The Republicans think the food stamp program is too costly and ridden with fraud. Apparently, $1.50 per meal for children and seniors is too costly for them. As for fraud, the U.S. Department of Agriculture has estimated that only 1 penny of every food stamp dollar is used fraudulently. To complete the insult and the injury, Republicans want to drop care packages on millions of Americans, as if they were third-world aid recipients, unable to make their own decisions.
American inequality is extreme, shameful, perverse, and growing. While over 100 million (2 out of 5) American adults are among the world's richest 10%, up to 50 million (1 out of 5) American adults are among the world's poorest 10%.
Yet by some unfathomable measure of ignorance or malice, Republicans cheer on the millionaire-making stock market while telling the most vulnerable Americans that they're spending too much on food.
U.S. wealth increased by $8.5 trillion in 2017, with the richest 2% getting about $1.15 trillion (details here), which is more than the total cost of Medicaid (federal AND state) and the complete safety net, both mandatory and discretionary, including the low-income programs that make up the social support package derisively referred to as 'welfare.'
Surprisingly, the richest 1% did not increase their wealth by much in 2017 (although they took nearly $4 trillion in 2016). That means the second half of the richest 2%, Americans with an average net worth of approximately $10 million, outgained the safety net all by themselves in the past year.
Another stunner: The richest 2-5%, those Americans with an average net worth of about $2.5 million, accumulated enough wealth in 2017 to pay for the safety net FOUR TIMES.
TWO Men Made More Money than the Total Cost of Food Stamps
Food stamps provide about $1.50 per meal for 42 million Americans, mostly children, the elderly, and the disabled, at a cost in 2017 of $64 billion. In the past year Jeff Bezos and Mark Zuckerberg have together accumulated over $64 billion in new wealth.
Jeff Bezos has used tax havens and high-priced lobbyists to avoid the taxes owed by his company. Mark Zuckerberg created a 'charitable' foundation, which in reality is a tax-exempt limited liability company, leaving him free to make political donations or sell his holdings, all without paying taxes. But in one year the two of them made enough from their investments to feed most of America's hungry.
And Republicans Are Cutting Food Stamps?
The Republicans think the food stamp program is too costly and ridden with fraud. Apparently, $1.50 per meal for children and seniors is too costly for them. As for fraud, the U.S. Department of Agriculture has estimated that only 1 penny of every food stamp dollar is used fraudulently. To complete the insult and the injury, Republicans want to drop care packages on millions of Americans, as if they were third-world aid recipients, unable to make their own decisions.
American inequality is extreme, shameful, perverse, and growing. While over 100 million (2 out of 5) American adults are among the world's richest 10%, up to 50 million (1 out of 5) American adults are among the world's poorest 10%.
Yet by some unfathomable measure of ignorance or malice, Republicans cheer on the millionaire-making stock market while telling the most vulnerable Americans that they're spending too much on food.
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 ยท 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.[...]
Reverse mortgages: The final blow killing middle class wealth
From Demo Underground: Many fellow Americans that have worked their entire lives, weathered several recessions and depressions, put their children through school, helped many in need, and faithfully paid their mortgages for decades are now being taken advantage of once again. Most have followed all the rules necessary to be considered fiscally responsible, yet because of "legal fraud" by the financial sector and policies effected by purchased politicians, their years in retirement will be compromised.
The Plutocracy, the one percent has walked away with a large percentage of their 401Ks, their SEPs, and to some extent their financial security. Because of stagnant or falling real wages, much of the working middle class have maxed out on their credit in the attempt to maintain their standard of living. For a Plutocracy that feeds on perpetual growth, from where will it feed now? An old and well-crafted financial instrument known as the reverse mortgage is being marketed on steroids to a baby boomer population.
...........//snip
Most Americans amass most of their wealth within their homes. Each generation in a responsible family is better off when the previous generation wills their assets forward. Reverse mortgages are yet another financial instrument that stunts the growth of the middle class by encouraging home owners to extract the capital out of their homes and use it as a supplement to their retirement or to simply splurge. Inasmuch as most reverse mortgages are federally regulated, their upfront costs are very high. These costs amount to free cash for the bank and mortgage insurance companies, your money transferred to them for a marginal service.
The big dirty secret is that reverse mortgages, like student loans pre-Obama, are nothing but a no-risk gift to the bankers, a wealth transfer engine from the masses to a select few. When the "owner" of the home dies, the government pays the bank any difference between the amount owed (interest plus principal) less the sale price of the home. If the heirs want to keep the home, they must pay the loan off in full. If the amount owed is more than the value of the home, the heirs must pay 95 percent of what is owed to the bank with the government paying the rest. What is the reason for the bank being in the transaction? It is there simply to extract from the government and the homeowner. They have absolutely nothing at risk for the profits they make.
Reverse mortgages mask a systemic problem that affects the American worker, a backward and inhumane retirement system. Every American worker makes a vibrant economy possible by providing 40, 50 or more years of work, taxes, and spending. It is appalling that a worker is incapable of having Social Security capable of providing a decent living. No one should have to deplete all of their assets to survive.
The Plutocracy, the one percent has walked away with a large percentage of their 401Ks, their SEPs, and to some extent their financial security. Because of stagnant or falling real wages, much of the working middle class have maxed out on their credit in the attempt to maintain their standard of living. For a Plutocracy that feeds on perpetual growth, from where will it feed now? An old and well-crafted financial instrument known as the reverse mortgage is being marketed on steroids to a baby boomer population.
...........//snip
Most Americans amass most of their wealth within their homes. Each generation in a responsible family is better off when the previous generation wills their assets forward. Reverse mortgages are yet another financial instrument that stunts the growth of the middle class by encouraging home owners to extract the capital out of their homes and use it as a supplement to their retirement or to simply splurge. Inasmuch as most reverse mortgages are federally regulated, their upfront costs are very high. These costs amount to free cash for the bank and mortgage insurance companies, your money transferred to them for a marginal service.
The big dirty secret is that reverse mortgages, like student loans pre-Obama, are nothing but a no-risk gift to the bankers, a wealth transfer engine from the masses to a select few. When the "owner" of the home dies, the government pays the bank any difference between the amount owed (interest plus principal) less the sale price of the home. If the heirs want to keep the home, they must pay the loan off in full. If the amount owed is more than the value of the home, the heirs must pay 95 percent of what is owed to the bank with the government paying the rest. What is the reason for the bank being in the transaction? It is there simply to extract from the government and the homeowner. They have absolutely nothing at risk for the profits they make.
Reverse mortgages mask a systemic problem that affects the American worker, a backward and inhumane retirement system. Every American worker makes a vibrant economy possible by providing 40, 50 or more years of work, taxes, and spending. It is appalling that a worker is incapable of having Social Security capable of providing a decent living. No one should have to deplete all of their assets to survive.
America’s Future Depends on Containing Neoliberalism
By Frank Fear ~ LA Progressive
The Rise and Evolution of Neoliberalism
The concept was born in 1930s Europe in reaction to The New Deal in America and The Nazi Movement in Germany. Both expressions were seen as totalitarian, squelching individual freedom and initiative. Over time, Neoliberalism morphed, becoming especially attractive to those who favored reducing regulatory oversight, downsizing government, and accentuating capitalism as the coin of the realm.
“The market” would take care of things—literally all things—and the market metaphor expanded to embrace a variety of domains associated with social and economic life. In Monbiot’s view, “Neoliberalism sees competition as the defining characteristic of human relations…. The market ensures that everyone gets what they deserve.”
It wasn’t until the early 1980s—with Margaret Thatcher in power in Great Britain and Ronald Reagan in the U.S.—that a neoliberal philosophy became a guiding force for national and international affairs. In famously declaring, “There is no alternative,” Thatcher showed how dedicated she was to free markets, free trade, and global capitalism. The American analogue, “Reaganomics” (aka supply-side economics), focused on redressing “an undue tax burden, excessive government regulation, and massive public spending programs that hampered growth.”
“Call it Reaganism or Thatcherism, economism, or market fundamentalism,” William Deresiewicz writes, “neoliberalism is an ideology that reduces all values to money values. The worth of a thing is the price of the thing. The worth of a person is the wealth of the person. Neoliberalism tells you that you are valuable exclusively in terms of your activity in the marketplace — or, in Wordsworth’s phrase, your ‘getting and spending’.”
Neoliberalism was no short-term political fancy, either. It persisted and expanded, promulgated by powerful advocates, to the point that it changed the way America does business. Nobel Prize-winning economist Joseph Stiglitz believes that Neoliberalism has “rewritten the rules” of the U.S. economy by privileging elites. It did so by deregulating business affairs, privatizing public and human services, cutting social services, lowering taxes, and reducing government size and scope. In exchange, elites promised “trickle down benefits” and declared “A Thousand Points of Light” would take care of human and social needs.
Impacts of Neoliberalism
Neoliberalism proceeded, undeterred, without a counterweight. In so doing, though, it created a stink in social affairs. Today, America is something different from what it was before. The unimaginable now happens. Consider three examples.
•Flint, Michigan. There was a time when what happened to Flint wouldn’t have happened in this country. Today it does, in part, because of lower taxes, corporate dependency, limited regulations, and cost-savings for public services. But “Flint,” the city, isn’t just one place. Metaphorically it’s everywhere: a racially concentrated population in socioeconomic distress with an affluent population living comfortably distant.
•Infant mortality. It’s mindboggling to conceive that 21st Century America would struggle in this domain, but it does. The Centers for Disease Control and Prevention reported recently that about 25 industrialized countries are doing better than the U.S. in keeping children alive. A recent New York Times headline was harsh and direct: The U.S. Is Failing in Infant Mortality, Starting at One Month Old.
•Income. According to a new report released by The Congressional Budget Office, American incomes increased differentially across income categories from 1975-2013. Incomes for the Top 1% increased nearly 200% during that 35-year period, but rose only 18% for those in the bottom four income quintiles. (Note: According The Economic Policy Institute, family income of about $400k per year is required in the U.S. to get into the 1% category; and the average income in that bracket is $1.2 million dollars. The average family income for everybody else is about $46k per annum). “Increased inequality is prominent,” conclude researchers at The World Bank. Stiglitz confirms that conclusion with this finding: “91% of all increases in income from 2009 to 2012 in the U.S. went to the wealthiest 1% of Americans.”
The challenge is clear: America won’t be America much longer—at least how we many of us perceive America to be—if circumstances and trends like these continue. But it won’t be easy to shift into a different gear. Neoliberalism is embedded in American psyche and culture. Around for such a long time, it has become “the way things are”—what’s “normal.”[...]
