“Meet The American Oligarchy”: “Americans For Self-Prosperity”, Grasping Barbarians Exercising Crude Political Power
Let’s put it this way: If the Koch Brothers were Russians, we’d call them oligarchs: grasping barbarians exercising crude political power.
But this is America, where tycoons can buy respectability by throwing money at their wives’ favorite ballet companies and museums. Also by funding “think tanks” staffed by “resident scholars” keen to enhance the boss’s fondest delusion: that great wealth invariably conveys great wisdom.
Hence “Americans for Prosperity,” the group funded by billionaire brothers David H. and Charles G. Koch that’s spending untold millions in 2014 on TV commercials attacking the Affordable Care Act as a government boondoggle that “just doesn’t work.”
The deeper strategy, AFP president Tim Philips told the New York Times, is to present the law as “a broader cautionary tale” crafted “to change the way voters think about the role of government for years to come.”
Or as the sloganeering sheep in Orwell’s Animal Farm might have put it, “Big government bad, big business good!”
Elsewhere, however, big business hasn’t been looking entirely benign of late. Consider three episodes currently in the news: General Motors, the Toyota Motor Corporation, and Duke Energy, the nation’s largest electrical utility.
As so often happens with corporate malfeasance, the details can be hard to believe. Documents turned over to the National Highway Traffic Safety Administration by General Motors show that company engineers knew about problems with an ignition switch in Chevy Cobalts as long ago as 2001.
That it could be a fatal flaw wasn’t immediately recognized.
The problem appears to have been a defective part manufactured by a GM supplier. Sometimes triggered by a too-heavy keychain swinging from the ignition, it caused the engine to shut off while driving — resulting in immediate loss of power steering, power brakes, and the failure of the vehicle’s air bags to deploy.
By 2009, however engineers concluded that the faulty switch played a causal role in several fatal accidents — although some drivers had been drinking, texting or otherwise distracted — and that while Cobalts were going out of production, hundreds of thousands were still rolling.
Nevertheless, GM did nothing, while company lawyers fought off or stonewalled lawsuits alleging product liability.
Twenty-three fatal accidents and 26 deaths later, GM finally issued a recall notice for 1.6 million vehicles last month. The company’s recently-appointed CEO Mary Barra has been doing public penance and vowing to do everything possible to restore consumer confidence in the GM brand, which will definitely take some doing.
Published accounts of how separate divisions of GM’s giant bureaucracy communicate badly or not at all read like episodes of Catch-22. Customer complaints and warranty claims aren’t shared with safety engineers, who in turn have no communication with company lawyers. Meanwhile, nobody was talking to the National Highway Traffic Safety Administration, the federal agency that belatedly promises a criminal investigation.
Meanwhile, the auto industry press contrasts GM’s “unusually proactive and candid approach” to Toyota’s, which last week admitted criminal guilt and paid a $1.2 billion fine—the largest against an automaker in U.S. history.
Announcing a settlement, Attorney General Eric Holder said the company had “intentionally concealed information and misled the public” and shamefully showed “blatant disregard for systems and laws.”
At issue were faulty accelerator pedals which caused the cars to rocket out of control. Toyota has recalled as many as 10 million vehicles worldwide, and has been forced to pay tens of millions in fines and lawsuit settlements. Hundreds more civil lawsuits await litigation. What the settlement makes clear is that Toyota’s top management deliberately lied to government investigators both about the mechanical issue and their knowledge of it.
Which brings us to the Tea Party paradise of North Carolina and Duke Energy’s massive coal ash spill into the Dan River—spreading as many as 82,000 tons of toxic sludge along 70 miles of scenic river bottom. According to the Associated Press, “coal ash contains arsenic, lead, mercury and other heavy metals highly toxic to humans and wildlife.”
In addition to the “accidental” spill, caused by a collapsed corrugated pipe seemingly uninspected since 1986, environmental activists photographed Duke employees pumping an estimated was 61 million gallons of coal ash-contaminated water into the Cape Fear River further east.
The resulting uproar has persuaded GOP governor Pat McCrory, a 28-year Duke Energy employee (and recipient of some $1.1 million in Duke-sponsored campaign donations) to change his mind about burdensome federal regulation. His state’s toothless regulators will now “partner” with the U.S. Environmental Protection Agency to pursue joint enforcement against the utility.
Previously, McCrory had scorned the feds as an impediment to efficient business practices, and made a great show of turning down EPA grant money. Meanwhile, arguing strenuously against stricter regulation of coal ash has been an industry front group called ALEC (the American Legislative Exchange Council) largely financed by — you guessed it — those well-known philanthropists, David and Charles Koch.
Americans for Prosperity, indeed.
By: Gene Lyons, The National Memo, March 26, 2014
“Don’t Buy It”: The “Paid-What-You’re-Worth” Myth
It’s often assumed that people are paid what they’re worth. According to this logic, minimum wage workers aren’t worth more than the $7.25 an hour they now receive. If they were worth more, they’d earn more. Any attempt to force employers to pay them more will only kill jobs.
According to this same logic, CEOs of big companies are worth their giant compensation packages, now averaging 300 times pay of the typical American worker. They must be worth it or they wouldn’t be paid this much. Any attempt to limit their pay is fruitless because their pay will only take some other form.
“Paid-what-you’re-worth” is a dangerous myth.
Fifty years ago, when General Motors was the largest employer in America, the typical GM worker got paid $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical Walmart workers earns $8.80 an hour.
Does this mean the typical GM employee a half-century ago was worth four times what today’s typical Walmart employee is worth? Not at all. Yes, that GM worker helped produce cars rather than retail sales. But he wasn’t much better educated or even that much more productive. He often hadn’t graduated from high school. And he worked on a slow-moving assembly line. Today’s Walmart worker is surrounded by digital gadgets — mobile inventory controls, instant checkout devices, retail search engines — making him or her quite productive.
The real difference is the GM worker a half-century ago had a strong union behind him that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they’d be unionized if they didn’t come close to matching the union contracts.
Today’s Walmart workers don’t have a union to negotiate a better deal. They’re on their own. And because fewer than 7 percent of today’s private-sector workers are unionized, non-union employers across America don’t have to match union contracts. This puts unionized firms at a competitive disadvantage. The result has been a race to the bottom.
By the same token, today’s CEOs don’t rake in 300 times the pay of average workers because they’re “worth” it. They get these humongous pay packages because they appoint the compensation committees on their boards that decide executive pay. Or their boards don’t want to be seen by investors as having hired a “second-string” CEO who’s paid less than the CEOs of their major competitors. Either way, the result has been a race to the top.
If you still believe people are paid what they’re worth, take a look at Wall Street bonuses. Last year’s average bonus was up 15 percent over the year before, to more than $164,000. It was the largest average Wall Street bonus since the 2008 financial crisis and the third highest on record, according to New York’s state comptroller. Remember, we’re talking bonuses, above and beyond salaries.
All told, the Street paid out a whopping $26.7 billion in bonuses last year.
Are Wall Street bankers really worth it? Not if you figure in the hidden subsidy flowing to the big Wall Street banks that ever since the bailout of 2008 have been considered too big to fail.
People who park their savings in these banks accept a lower interest rate on deposits or loans than they require from America’s smaller banks. That’s because smaller banks are riskier places to park money. Unlike the big banks, the smaller ones won’t be bailed out if they get into trouble.
This hidden subsidy gives Wall Street banks a competitive advantage over the smaller banks, which means Wall Street makes more money. And as their profits grow, the big banks keep getting bigger.
How large is this hidden subsidy? Two researchers, Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz, have calculated it’s about eight tenths of a percentage point.
This may not sound like much but multiply it by the total amount of money parked in the ten biggest Wall Street banks and you get a huge amount — roughly $83 billion a year.
Recall that the Street paid out $26.7 billion in bonuses last year. You don’t have to be a rocket scientist or even a Wall Street banker to see that the hidden subsidy the Wall Street banks enjoy because they’re too big to fail is about three times what Wall Street paid out in bonuses.
Without the subsidy, no bonus pool.
By the way, the lion’s share of that subsidy ($64 billion a year) goes to the top five banks — JPMorgan, Bank of America, Citigroup, Wells Fargo. and Goldman Sachs. This amount just about equals these banks’ typical annual profits. In other words, take away the subsidy and not only does the bonus pool disappear, but so do all the profits.
The reason Wall Street bankers got fat paychecks plus a total of $26.7 billion in bonuses last year wasn’t because they worked so much harder or were so much more clever or insightful than most other Americans. They cleaned up because they happen to work in institutions — big Wall Street banks — that hold a privileged place in the American political economy.
And why, exactly, do these institutions continue to have such privileges? Why hasn’t Congress used the antitrust laws to cut them down to size so they’re not too big to fail, or at least taxed away their hidden subsidy (which, after all, results from their taxpayer-financed bailout)?
Perhaps it’s because Wall Street also accounts for a large proportion of campaign donations to major candidates for Congress and the presidency of both parties.
America’s low-wage workers don’t have privileged positions. They work very hard — many holding down two or more jobs. But they can’t afford to make major campaign contributions and they have no political clout.
According to the Institute for Policy Studies, the $26.7 billion of bonuses Wall Street banks paid out last year would be enough to more than double the pay of every one of America’s 1,085,000 full-time minimum wage workers.
The remainder of the $83 billion of hidden subsidy going to those same banks would almost be enough to double what the government now provides low-wage workers in the form of wage subsidies under the Earned Income Tax Credit.
But I don’t expect Congress to make these sorts of adjustments any time soon.
The “paid-what-your-worth” argument is fundamentally misleading because it ignores power, overlooks institutions, and disregards politics. As such, it lures the unsuspecting into thinking nothing whatever should be done to change what people are paid, because nothing can be done.
Don’t buy it.
By: Robert Reich, The Robert Reich Blog, March 13, 2014
“Big, Unpopular, Losing Ideas”: Paul Ryan’s Rapid Rewrite Of Election History
Paul Ryan, who famously suggested that the General Motors plant in his hometown closed because of Obama administration policies when it actually closed under President Bush, is now going for an even bigger rewrite of history.
He is claiming that his austerity agenda—at least the part that makes tax cuts for the rich the supreme imperative—remains popular. Indeed, to hear Ryan tell it, those ideas almost prevailed.
In an ABC News interview a week after the election, Ryan was asked whether President Obama has a mandate to call for raising taxes on the rich. “I don’t think so,” said Ryan, who argued that, “This is a very close election.”
Ryan rejects the notion that his ideas lost. Indeed, he still claims he’s promoting “popular ideas.” And he says of the Republican ticket: “It was a well-run campaign. We made this campaign about big ideas and big issues, which is the kind of campaign we wanted to run, so we ran the kind of campaign we wanted to run.”
But Barack Obama also ran on big ideas. On the morning before the election, Obama appeared just a few miles up the road from Ryan’s hometown of Janesville, Wisconsin.
“If we’re serious about the deficit, we can’t just cut our way to prosperity. We’ve also got to ask the wealthiest Americans to go back to the tax rates they paid when Bill Clinton was in office,” the Democratic president told a crowd that had just heard Bruce Springsteen sing and speak about the need to create a more equitable America. “And by the way, we can afford it. I haven’t talked to Bruce, but I know he can afford it. I can afford it. Mr. Romney can afford it.”
But Obama went further, in that speech in Madison, and in speeches in Columbus and Des Moines and communities across the country. He called, again and again, for raising taxes on the rich. “Because our budget reflects our values, it’s a reflection of our priorities, you know. And as long as I’m president, I’m not going to kick some poor kids off of Head Start to give me a tax cut,” said the president.
Ryan is claiming in his post-election interviews that: “I don’t think we lost it on those budget issues, especially on Medicare — we clearly didn’t lose it on those issues.”
Yes they did.
In his closing argument, Obama focused—as did other winning Democrats—on “those budget issues.” One of the president’s biggest applause lines was: “I’m not gonna turn Medicare into a voucher just to pay for another millionaire’s tax cut.”
Obama and Vice President Biden ran on big ideas, just as Romney and Ryan did.
Ryan and Romney lost Wisconsin and every swing state except North Carolina.
Ryan and Romney lost the Electoral College by an overwhelming 232-206 margin.
Ryan and Romney lost the popular vote by more than 3.4 million votes.
Obama and Biden won a mandate in a battle of ideas where the lines were clearly drawn.
Despite what Paul Ryan says, Obama won a mandate—a bigger mandate, in fact, than Presidents Kennedy in 1960, Nixon in 1968, Carter in 1976 or Bush in 2000 and 2004.
To say otherwise is to deny what just happened.
Paul Ryan can try if he wants.
But he should remember what happened when he tried to peddle a fantasy about the closing of that Janesville General Motors plant.
Well, Ryan lost his home precinct in Janesville—not just as a vice presidential candidate but as a candidate for reelection to his House seat.
Ryan lost Janesville, as a vice presidential candidate and a congressional candidate.
Ryan lost surrounding Rock County, as a vice presidential and a congressional candidate.
Ryan and Romney lost Wisconsin—by such a resounding margin that Saturday Night Live was mocking the result on the weekend after the election.
When the rejection is so glaring that it becomes a punchline, it’s a stretch to talk about a “close election.”
And it’s absurd to suggest that your ideas are popular.
By: John Nichols, The Nation, November 14, 2012
“Invisible And Untaxed”: How Mitt Romney Made A Fortune Off The Auto Bailout
Faced with the hard facts that “bin Laden is dead and General Motors is alive,” as Vice President Biden always says, Mitt Romney has resorted to claiming that Obama followed his lead on the auto industry bailout. “I know [Obama] keeps saying, you wanted to take Detroit bankrupt,” he said during this week’s debate at Hofstra University. “Well, the president took Detroit bankrupt.” Romney’s right, in a way — both his plan and Obama’s plan envisioned the auto companies going through a period of bankruptcy restructuring. But there’s a key difference: Obama’s approach was to use government dollars to prop up the auto companies until they could stand on their own again — something that Romney, like other Republicans in the Tea Party’s anti-spending thrall, adamantly opposed as dangerous government intervention in private industry.
But it turns out that Romney should know firsthand that this kind of intervention can be successful, as a new report shows that he and his wife made at least $15.3 million courtesy of Obama’s auto bailout. According to a Greg Palast, who followed the paper trail for the Nation, Romney and his wife made the money via an investment in a hedge fund that saw astronomical returns on its investments in an auto parts maker that would have gone under absent the president’s rescue operation.
Delphi, the auto parts company, was once part of General Motors but was spun off in 1999. It foundered on its own and declared bankruptcy in 2005, at which point hedge funds came in and bought up the company’s old debt. Among them was Elliott Management, a giant in the industry run by GOP mega-donor Paul Singer. Romney was an investor. Elliott and the other hedge funds were able to buy Delphi’s toxic debt for a fraction of their face value, around 20 cents on the dollar. In 2009, as bailout negotiations were underway, Elliott used their bonds to buy large shares in the company, again for pennies (this time for about 67 cents per share). Not only would Delphi have gone out of business along with its largest customer, GM, but the parts maker got at least $2.8 billion directly from the taxpayer-funded Troubled Assets Relief Program (TARP). In 2011, Elliott and the other hedge funds took Delphi public at $22 a share, making a whopping 3,000 percent return on their investment of less than 70 cents a share.
So how much did Romney make? His personal financial disclosure forms say he and Ann Romney had at least $1 million invested, but the disclosure rules are so vague that it could be far more. Palast sketches out the possible windfall:
It is reasonable to assume that Singer treated the Romneys the same as his other investors, with a third of their portfolio invested in Delphi by the time of the 2011 initial public offering. This means that with an investment of at least $1 million, their smallest possible gain when Delphi went public would have been $10.2 million, plus another $10.2 million for each million handed to Singer — all gains made possible by the auto bailout.
But that’s just the beginning. Since the November 2011 IPO, Delphi’s stock has roared upward, boosting the Romneys’ Delphi windfall from $10.2 million to $15.3 million for each million they invested with Singer… The Romneys’ exact gain, however, remains nearly invisible—and untaxed—because Singer cashed out only a fragment of the windfall in 2011.
By: Alex Seitz-Wald, Salon, October 19, 2012
“Betraying His Calling”: Romney Denies What He Knows About The Private Sector
Mitt Romney is betraying his calling.
He brings to the presidential race a record of accomplishment to which few White House contenders can lay claim: W. Mitt Romney knows how to make money.
Some may argue that a money-making ability alone is no qualification to be president. I agree that having a high net worth is insufficient reason to be declared presidential timber.
But attaining a personal fortune of as much as $250 million, as Romney has done — and not through inheritance or grand theft — is a testament to creative abilities, a strong work ethic, a focused mind and keen understanding of the economic environment.
Romney, however, is blowing it by seeking to appeal to the average voter by selling himself as something he’s not. He also is running away from the opportunity to show voters that he, above all other candidates, knows how Americans can reap a better return on the investments they are making of time, energy and talent in our country.
For the record, and as regular readers of this column know, I regard the political and moral priorities of the current White House occupant to be more in tune with my own. That said, Romney, by reason of experience, has a legitimate claim on the presidency.
A year ago, I said on the TV program “Inside Washington” that Romney understands how the economy works and that he should use the campaign to explain the private sector’s critical role. That point didn’t go down well with some of my liberal friends. Maybe it’s because I was wearing my banker’s hat at the time. Ten years as a commercial banker and bank director were more than enough time to convince me that a thriving business sector is key to economic growth and expanding opportunity. Romney, I believed last year, was well suited to make that case.
Instead, he has made a mess of it, misrepresenting his history and shying away from the truth, apparently out of fear that by sticking up for the country’s privately owned enterprises he will be portrayed as a heartless, money-grubbing capitalist and scourge of the poor. Of course, in this political climate, that might happen anyway. Still, there’s no reason to dissemble.
That’s the only way to describe Romney’s suggestion that job creation was the motivating force behind his work in the private sector. Beyond the question of whether Romney created 100,000 jobs — as he has claimed — is his implicit buy-in to the argument that the private sector’s purpose is to produce jobs.
Romney knows better, even if his critics don’t. The private sector operates to make profits, not jobs.
True, a majority of Americans work in the private sector. But General Motors, Giant Food, the TV networks and others don’t exist in order to employ Americans.
General Motors sells cars, Giant sells food and the networks sell entertainment to make a profit for their owners and investors.
Without question, a payroll is a necessary ingredient in building and selling vehicles, groceries and entertainment.
But owners, regardless of industries, are obligated to control costs. The fewer workers they employ, the better.
Romney portraying himself as an entrepreneur who altruistically created employment opportunities is not only incorrect but also conveys a false picture of free enterprise. That, in turn, skews public understanding of what the private sector can and can’t do; creating a more equitable and just society is one of the things businesses don’t set out to do. Romney seems ashamed of touting financial performance as an essential factor in economic growth, choosing instead to come across as a one-man hiring hall.
The pander is apparent in other ways. Take the Obama campaign’s charge that the private equity firm co-founded by Romney, Bain Capital, “invested in companies that moved jobs overseas.” The Romney camp responds by touting the former governor’s “record of job creation in the private sector.”
What clumsiness, if not cowardice.
There is nothing wrong with a company legally outsourcing jobs domestically or even sending jobs offshore if the effort allows the company to reduce its costs and operate more economically.
In this globalized economy, America must adjust to competitive forces. Certainly there are costs and downsides that come with outsourcing and offshoring jobs. That is not at issue. Change is constant. Workforce adjustments must be made. Government has a role to play. But adapting to competition at home and abroad is mandatory if we are to survive economically.
Romney, more than most, knows better, and he won’t touch this reality.
He betrays his calling because he’s willing to say — and be — all things to become president.
By: Colbert I. King, Opinion Writer, The Washington Post, July 6, 2012
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