“No, Really, You Didn’t Build That”: How The Rich Became Dependent On Government Subsidies
Remember when President Obama was lambasted for saying “you didn’t build that”? Turns out he was right, at least when it comes to lots of stuff built by the world’s wealthiest corporations. That’s the takeaway from this week’s new study of 25,000 major taxpayer subsidy deals over the last two decades.
Titled “Subsidizing the Corporate One Percent,” the report from the taxpayer watchdog group Good Jobs First shows that the world’s largest companies aren’t models of self-sufficiency and unbridled capitalism. To the contrary, they’re propped up by billions of dollars in welfare payments from state and local governments.
Such subsidies might be a bit more defensible if they were being doled out in a way that promoted upstart entrepreneurialism. But as the study also shows, a full “three-quarters of all the economic development dollars awarded and disclosed by state and local governments have gone to just 965 large corporations” — not to the small businesses and start-ups that politicians so often pretend to care about.
In dollar figures, that’s a whopping $110 billion going to big companies. Fortune 500 firms alone receive more than 16,000 subsidies at a total cost of $63 billion.
These kinds of handouts, of course, are the definition of government intervention in the market. Nonetheless, those who receive the subsidies are still portrayed as free-market paragons.
Consider Charles and David Koch. Their company, Koch Industries, has relied on $88 million worth of government handouts. Yet, as the major financiers of the anti-government right, the Kochs are still billed as libertarian free-market activists.
Similarly, behold the big tech firms. They are often portrayed as self-made success stories. Yet, as Good Jobs First shows, they are among the biggest recipients of the subsidies.
Intel leads the tech pack with 58 subsidies worth $3.8 billion. Next up is IBM, which has received more than $1 billion in subsidies. Most of that is from New York – a state proudly promoting its corporate handouts in a new ad campaign.
Then there’s Google’s $632 million and Yahoo’s $260 million — both sets of subsidies primarily from data center deals. And not to be forgotten is 38 Studios, the now bankrupt software firm that received $75 million in Rhode Island taxpayer cash. The company received the handout at the very moment Rhode Island was pleading “poverty” to justify cuts to public workers’ retirement benefits.
Along with propping up companies that are supposedly free-market icons, the subsidies are also flowing to financial firms that have become synonymous with never-ending bailouts. Indeed, companies like Goldman Sachs, Bank of America and Citigroup – each of which was given massive taxpayer subsidies during the financial crisis —are the recipients of tens of millions of dollars in additional subsidies.
All of these handouts, of course, would be derided if they were going to poor people. But because they are going to extremely wealthy politically connected conglomerates, they are typically promoted with cheery euphemisms like “incentives” or “economic development.” Those euphemisms persist even though many subsidies do not end up actually creating jobs.
In light of that, the Good Jobs First report is a reality check on all the political rhetoric about dependency. Most of that rhetoric is punitively aimed at the poor. That’s because, unlike the huge corporations receiving all those subsidies, the poor don’t have armies of lobbyists and truckloads of campaign contributions that make sure programs like food stamps are shrouded in the anodyne argot of “incentives” and “development.”
But as the report proves, if we are going to have an honest conversation about dependency and free markets, then the billions of dollars flowing to politically connected companies need to be part of the discussion.
By: David Sirota, Salon, February 27, 2014
“The End Game For Democracy”: The Creeping Expansion Of Corporate Civil Rights
Last week, The Wire creator David Simon told Bill Moyers that the legal doctrine that spending money on political campaigns is an act of political speech protected by the First Amendment poses the greatest threat to American democracy. “That to me was the nail in the coffin,” he said. “If the combination of the monetization of our elections and gerrymandering create a bicameral legislature that doesn’t in any way reflect the will of the American people, you’ve reached the end game for democracy.”
He’s right. Not only does money as speech allow those with the fattest wallets to drown out the voices of average citizens, as John Light points out, it also gives wealthy donors an effective veto over policies that enjoy majority support. But it’s important to understand the other ways that the expansion of civil rights for corporations can conflict with the public interest.
As Simon observed, the notion of corporate personhood isn’t inherently problematic. The concept that companies are “artificial persons” is necessary because you can’t enter into a contract with an inanimate object, and you can’t take an inanimate object to court if that contract is breached.
Problems arise when these soulless artificial persons demand constitutional rights that were designed to protect real, flesh-and-blood people.
Those demands have a long history. As author and commentator Thom Hartmann detailed in his book, Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights, the end of the Civil War brought with it the beginning of a battle for corporate rights under the 14th Amendment, which was intended to confer full citizenship on newly freed slaves.
For several decades, efforts to gain 14th Amendment protections for corporations were stymied by the courts. But in the 1880s, with the help of a court clerk Hartmann described as “a dicey character,” a corrupt federal judge named Steven Field — who had his eye on a White House run — managed to get that right codified in the law on behalf of “very wealthy and powerful guys who ran the railroads and who were the richest men in America,” as Hartmann put it in a 2010 interview.
It wasn’t the only right corporations would gain during that period. According to Hartmann, in the first half of the 19th century, corporations were required to make their books open to the public. By mid-century, they were only required to disclose their finances to the Secretary of State of each state in which they were incorporated. But in the early 20th century, they successfully claimed that even those requirements violated their Fourth Amendment protection against searches and seizures without probable cause.
In the 1970s and 1980s, corporate lawyers became more aggressive in pressing for civil rights. David Gans, civil rights director for the Constitutional Accountability Center, told BillMoyers.com, “What we’ve seen in the last four decades is a huge expansion of claims that corporations are entitled to various individual rights that were long seen as the birthright of the Declaration of Independence.”
The biggest shift was in the realm of First Amendment rights. “In the 1970s,” said Gans, “there were lots of cases claiming that corporations had First Amendment rights both in the area of commercial speech — prior to that, the Supreme Court had long held that it could be extensively regulated — and in the area of political speech.
“Those claims brought us eventually to Citizens United,” Gans continued, “and now we’re seeing new claims — in Hobby Lobby, for example, that corporations have a right to religious exercise, which is really a fundamental matter of human dignity and conscience, and it’s a right that corporations have never even claimed. ” Hobby Lobby is one of several corporations suing to overturn Obamacare’s mandate that employer-based insurance cover a basket of preventive care including contraceptives.
Charlie Cray, director of the progressive Center for Corporate Policy and co-author (with Lee Drutman and Ralph Nader) of The People’s Business: Controlling Corporations and Restoring Democracy, said that First Amendment claims on commercial speech have been central in dozens of regulatory fights — from GMO and bovine growth hormone labeling requirements to tobacco point-of-sale advertising to limits on media consolidation.
But so far, corporations have had less success pressing for other constitutional rights. In the 1980s, for example, Dow Chemicals sued the Environmental Protection Agency, claiming that its aerial surveillance of one of the company’s plants constituted a warrantless search and violated the Fourth Amendment. But the court ruled that the EPA was acting within its regulatory authority, and that Dow had no legitimate expectation of privacy.
Nonethelesss, Charlie Cray tells BillMoyers.com that claims of corporate rights can conflict with the public interest even without being litigated. “A lot of this goes on at the regulatory level,” he said. “Corporate lawyers claim that their rights are being violated and regulators with limited budgets will often back off rather then engage in protracted litigation.” Those bizarre pharmaceutical ads with the lengthy list of awful side effects are a good example — the FDA loosened restrictions on direct-to-consumer advertising largely in response to drug companies’ First Amendment claims.
And it’s a slippery slope. “A couple of years ago, the idea that corporations would claim they’re entitled to the free exercise of religion would have seemed outlandish,” said David Gans, “but here it is, dividing the lower federal courts and about to be heard by the Supreme Court. It is hard to predict where they’ll go in the future.”
By: Joshua Holland, Connecting The Dots, Bill Moyers Blog, February 18, 2014
“Phony Experts On Retainer”: Fight Over Minimum Wage Illustrates Web Of Industry Ties
Just four blocks from the White House is the headquarters of the Employment Policies Institute, a widely quoted economic research center whose academic reports have repeatedly warned that increasing the minimum wage could be harmful, increasing poverty and unemployment.
But something fundamental goes unsaid in the institute’s reports: The nonprofit group is run by a public relations firm that also represents the restaurant industry, as part of a tightly coordinated effort to defeat the minimum wage increase that the White House and Democrats in Congress have pushed for.
“The vast majority of economic research shows there are serious consequences,” Michael Saltsman, the institute’s research director, said in an interview, before he declined to list the restaurant chains that were among its contributors.
The campaign illustrates how groups — conservative and liberal — are again working in opaque ways to shape hot-button political debates, like the one surrounding minimum wage, through organizations with benign-sounding names that can mask the intentions of their deep-pocketed patrons.
They do it with the gloss of research, and play a critical and often underappreciated role in multilevel lobbying campaigns, backed by corporate lobbyists and labor unions, with a potential payoff that can be in the millions of dollars for the interests they represent.
“It is the way of Washington now — and that is unfortunate,” said John Weaver, a Republican political consultant who has helped run several presidential campaigns. “Because if it’s not dishonest, it’s at least disingenuous.”
In this case, the policy dispute is over whether increasing the minimum wage by nearly 40 percent to $10.10 an hour within two and a half years would reduce poverty or further it.
Even if the legislation never passes — and it is unlikely to, given the political divide in Congress — millions of dollars will be spent this year on lobbying firms, nonprofit research organizations and advertising campaigns, as industry groups like the National Restaurant Association and the National Retail Federation try to bury it. Liberal groups, in turn, will be spending lots of money as they try to make the debate a political issue for the midterm elections.
The left has its own prominent groups, like the Center for American Progress and the Economic Policy Institute, whose donors include nearly 20 labor unions, and whose reports, with their own aura of objectivity, consistently conclude that raising the minimum wage makes good economic sense. But none has played such a prominent and multifaceted role in recent months as the conservative Employment Policies Institute.
The Employment Policies Institute, founded two decades ago, is led by the advertising and public relations executive Richard B. Berman, who has made millions of dollars in Washington by taking up the causes of corporate America. He has repeatedly created official-sounding nonprofit groups like the Center for Consumer Freedom that have challenged limits like the ban on indoor smoking and the push to restrict calorie counts in fast foods.
In recent months, Mr. Berman’s firm has taken out full-page advertisements in The New York Times and The Wall Street Journal and plastered a Metro station near the Capitol with advertisements, including one featuring a giant photograph of Representative Nancy Pelosi, the California Democrat who is a proponent of the minimum wage increase, that read, “Teens Who Can’t Find a Job Should Blame Her.”
These messages, also promoted on websites operated by Mr. Berman’s firm, including minimumwage.com, instruct anyone skeptical about the arguments to consult the reports prepared by the Employment Policies Institute, most often described only as a “nonprofit research organization.”
But the dividing line between the institute and Mr. Berman’s firm was difficult to discern during two visits last week to the eighth-floor office at 1090 Vermont Avenue, a building near the White House that is the headquarters for both.
The sign at the entrance is for Berman and Company, as the Employment Policies Institute has no employees of its own. Mr. Berman’s for-profit advertising firm, instead, “bills” the nonprofit institute for the services his employees provide to the institute. This arrangement effectively means that the nonprofit is a moneymaking venture for Mr. Berman, whose advertising firm was paid $1.1 million by the institute in 2012, according to its tax returns, or 44 percent of its total budget, with most of the rest of the money used to buy advertisements.
Disclosure reports filed by individual foundations show that its donors in recent years have included the Lynde and Harry Bradley Foundation, a longtime supporter of conservative causes. Mr. Berman and Mr. Saltsman would not identify other donors, but did say they included the restaurant industry. But its tax return shows that the $2.4 million in listed donations received in 2012 came from only 11 contributors, who wrote checks for as much as $500,000 apiece.
Mr. Saltsman, 30, who has an undergraduate degree in economics from the University of Michigan and previously worked for the federal Bureau of Labor Statistics, drafts dozens of letters to the editor and opinion articles for newspapers, arguing that increasing the minimum wage would hurt more than help. Other special institute projects included a recent survey of lawmakers who support the minimum wage increase asking if they pay their interns — a report The Daily Caller, a conservative online publication, then released, calling out the lawmakers with unpaid interns as hypocrites.
The major reports released by the institute are prepared by outside academics, like Joseph J. Sabia, an associate professor of economics at San Diego State University, who has collected at least $180,000 in grant money from Mr. Berman’s group over the last eight years to deliver seven separate reports, each one concluding that increasing the minimum wage has caused more harm than good — or at least no significant benefit for the poor.
“There is never a good time to raise the minimum wage,” Mr. Sabia said at a briefing in the Longworth House Office Building late last month that was co-sponsored by the institute, as he laid out the findings of his newest report to Capitol Hill staff members and reporters. “You are not reaching the poor workers you want to help.”
Mr. Sabia said in an interview late last month that his research conclusions were developed independently. “I don’t write advocacy policy briefs,” he said. His papers are also submitted to academic journals, which publish them after a peer-review process — a standard, he noted, that publications put out by left-leaning groups like the Economic Policy Institute often do not meet.
What is clear is that the reports by the Employment Policies Institute are a critical element in the lobbying campaign against the increase in the minimum wage, as restaurant industry groups, in their own statements and news releases, often cite the institute’s reports, creating the Washington echo chamber effect that is so coveted by industry lobbyists.
“Once you have the study, you can point to it to prove your case — even if you paid to get it written,” said one lobbyist, who asked not to be named because his clients rely on him to use this technique.
But some questions have been raised about the institute-funded work. Saul D. Hoffman, a professor of economics at University of Delaware, examined the employment data Mr. Sabia used for a 2012 paper funded in part by the institute. Mr. Hoffman concluded that the narrow cut of data Mr. Sabia picked was perhaps unintentionally skewed, and once corrected, it would have showed that the 2004 increase in New York State’s minimum wage had no negative impact on employment — the opposite of the conclusion the institute had proclaimed in its news releases.
Mr. Berman, 71, a onetime auto mechanic turned labor lawyer and restaurant industry executive, rejected any suggestion that his reports were based on bias or faulty data.
“I get very upset when people say we are putting out junk science and twisted economics, because that happens to be our criticism of other people,” Mr. Berman said in an interview at his office. Yet internal company documents show that members of Mr. Berman’s team — at least when they have been involved in some of the other corporate-backed projects — have discussed ways to massage academic data to change outcomes.
For example, an academic study published by researchers at the University of Southern California concluded that soda had higher concentrations of high-fructose corn syrup than advertised. Mr. Berman’s team, hired by the corn refining industry to defend its sweeteners, mobilized staff at his Center for Consumer Freedom to challenge the results.
“If the results contradict U.S.C., we can publish them,” said an email sent to Mr. Berman and other staff in October 2010 from a Berman employee at the time, referring to the University of Southern California report. The exchange became public recently as a result of a lawsuit between the sugar and corn refining industries. “If for any reason the results confirm U.S.C., we can just bury the data.” Mr. Berman said that the employee who wrote that email left more than a year ago and that such practices were not allowed at the institute.
Left-leaning groups like the Citizens for Responsibility and Ethics in Washington have filed legal complaints, arguing that the large payments to Mr. Berman’s for-profit firm may violate the law, an accusation that Berman and Company strongly disputes.
What is most important, said Lisa Graves, the executive director of an organization responsible for the online publication PR Watch, is that newspapers detail Employment Policies Institute’s corporate ties when they cite research it publishes. Such disclosure happened in less than 20 percent of the cases over a three-year period, an analysis by PR Watch found.
“They are trying to peddle an industry wish list, but mask it as if they are independent experts,” she said. “They are little more than phony experts on retainer.”
By: Eric Lipton, The New York Times, February 9, 2014
“Unto The Breach”: For Credit Card Data Breaches, There Really Hasn’t Been Any Business Consequences
On Wednesday, a letter landed in my email inbox from Gregg Steinhafel, the chief executive of Target. He wanted me to know that there was a decent likelihood that some of my personal information had been stolen by criminals who had “forced their way into our systems,” as Steinhafel put it, and pulled off one of the biggest data breaches in history.
I’m not a regular Target shopper, so I had to think about this for a minute. Then I remembered: In mid-December, while marooned in Houston after missing a connecting flight to Rio de Janeiro, I went to a Target store to buy some clean clothes. I paid with my debit card, which I swiped through the little “point of sale” machine, and then entered my passcode — something I probably do a dozen times a day. The very ordinariness of the transaction is partly why it hadn’t stood out in my memory.
Since receiving Steinhafel’s letter, however, I’ve been brushing up on data breaches, and I’m here to say it is going to be a while before I’m sanguine when I make that little swiping motion with my debit card. In the battle between hackers and retailers, it sure looks as though the hackers are winning.
If you have read anything about the Target data breach, you know that from Nov. 27 to mid-December, hackers siphoned off the credit card information of 40 million Target shoppers, including card numbers, passcodes and the three-digit security code on the back. They also took names and email addresses of tens of millions of other Target customers.
Target acknowledged the breach on Dec. 19, but only after a reporter named Brian Krebs had broken the news on his authoritative blog, Krebs on Security.
When I talked to Krebs, he told me that while Target was “hardly a poster boy for how to secure data,” the company probably wasn’t all that much worse than most other retailers. Its digital system undoubtedly had all the current antivirus software, none of which had detected the malicious software — “malware,” as it’s called — that had infected it. Krebs was pretty convinced that the hackers were Russians. It was obvious that they were extremely sophisticated in how they went about stealing credit card data.
After burrowing into a Target server, he explained on his blog, the malware would then grab data from Target’s point-of-sale terminals all across the country shortly after customers swiped their cards. At that moment, a moment of maximum vulnerability since all the data was unencrypted at that point, the magnetic stripe would yield all the information the hacker needed.
Another security expert, Gerhard Eschelbeck, the chief technology officer at Sophos, wrote in a recent report that “one trend that stands out is the growing ability of malware authors to camouflage their attacks.” Eschelbeck described attacks by modern hacks as “innovative and diverse.”
Virtually every security expert I spoke to said it is likely that a lot more retail companies have been breached than has been acknowledged. Indeed, last week, Neiman Marcus admitted that its systems had been breached. And just the other day, the Department of Homeland Security sent a report to retailers and banks warning about point-of-sale malware, which it suspects has infected more systems than just Target’s.
So why don’t retailers do more to stop such attacks? Part of the reason is that nobody is forcing them to. It costs a lot of money to completely revamp their systems in ways that would make them harder to breach. However disruptive to customers, there really hadn’t been any business consequences, not until the Target breach, anyway. (Target saw its Christmas sales decline after the breach was announced.)
The simplest thing we could do to diminish data breaches would be to move away from magnetic stripes, which are relatively easy to copy, and go to a system in which credit and debit cards are embedded with chips. In widespread use in Europe and elsewhere, such cards are practically nonexistent in the United States (though a rollout is supposed to begin in the fall of 2015). In 2009, a payment company called Heartland suffered a breach that was even larger than Target’s. You would think that would have been a wake-up call, but apparently it wasn’t.
The most galling part of Steinhafel’s letter is its advice to consumers. “Never share information with anyone,” he writes. “Be wary of emails that ask for money.” None of this advice, of course, would have helped anyone who had the misfortune to shop at Target during the three weeks the malware was doing its devious work. The fault was not ours, Mr. Steinhafel; it was yours.
As for me, it turns out that the Russian hackers won’t be able to use my debit card information after all. I had to get a new card — after I was hacked in Brazil.
By: Joe Nocera, Op-Ed Columnist, The New York Times, January 17, 2014
“Worsening Inequality”: 900 Rich People Won’t Pay Into Social Security For The Rest Of The Year
While almost all working Americans will pay into Social Security through their paychecks throughout the year, the 900 wealthiest people in the country won’t. That’s because the highest-earning 0.0001 percent of the U.S. — many of them corporate CEOs — made $117,000 in the first two days of the year, which is the maximum annual income that is subject to Social Security taxes under federal law.
It’s tough to say for certain who will be a part of this group in 2014, since the most recent available data on Americans’ earnings is from 2012. In that year, 894 individuals nationwide made enough to qualify for membership in this club, according to the Los Angeles Times. Economist Teresa Ghilarducci came up with the calculation, and points out that Forbes data on top earners enables analysts and the public to see some of the members of this group. There were nearly 70 corporate CEOs who made enough to qualify in 2012, including the top officers at companies like Philip Morris, NewsCorp, Starbucks, ComCast, and Pfizer.
They get to live the year free from Social Security taxes because the law says that only the first $117,000 earned in a year can be taxed to fund the retirement program that kept more than 15 million people out of poverty in 2011. Democrats have pushed to raise the cap in recent years from $106,800 in 2009 to the current level. Eliminating the cap entirely could make the program solvent for the next 75 years without cutting a dime from anyone’s benefits — and doing so wouldn’t touch the earnings of 94.2 percent of all American workers.
Despite that option, most of the debates around Social Security in recent years have focused on cutting the program rather than increasing its revenue stream. Yet Americans are facing a retirement crisis. Companies’ shifts from pensions to investment plans for retirees has undermined the financial security of working people while enriching the financial services industry and worsening inequality. For non-white workers who are far less likely to have access to even those paltry 401(k) plans, the picture is even bleaker. Overall more than half of all Americans are projected to see a steep drop in their standard of living upon retirement. There is a $6.6 trillion gap between what working Americans have saved and what they ought to have saved to retire well.
In the face of all of this, Sen. Elizabeth Warren (D-MA) and others have proposed increasing Social Security benefits rather than cutting them.
By: Alan Pyke, Think Progress, January 3, 2014
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