Phil Mattera

Public-Private Power Grab

As unemployment rates remain stubbornly high around the country, the Republican winners of November’s gubernatorial races face a dilemma: How do they respond to the clamor for more job creation while holding true to their opposition to government activism. The answer, apparently, is to go with a gimmick.

In at least four states, the gimmick consists of proposing that the state agency responsible for business recruitment—and other functions such as awarding subsidies that come under the rubric of economic development—be handed over to the private sector. Governors in Wisconsin, Ohio, Iowa and Arizona are calling on legislators to approve the dismantling of commerce or development agencies and the transfer of their responsibilities—and their funding—to public-private partnerships (PPPs).

It turns out that economic development privatization is nothing new. My colleagues and I at Good Jobs First have completed an analysis of the subject, which we’ve just published in a report titled Public-Private Power Grab.

We found that the idea is far from new but it is not a common or standard practice. Economic development PPPs date back more than 20 years, but only seven states currently allow private entities to control their business recruitment functions: Florida, Indiana, Michigan, Rhode Island, Utah, Virginia and Wyoming. Several other states previously employed PPPs but abandoned them because of performance problems.

Most of the seven states that currently make use of economic development PPPs have experienced a variety of performance problems. These include the following:

Misuse of taxpayer funds
Excessive executive bonuses
Questionable subsidy awards by the subset of PPPs that have a role in that process
Conflicts of interest in subsidy awards
Questionable claims by the PPP about its effectiveness
Resistance to accountability

Two of the features of the PPPs that promote corruption are that, in addition to public funding, they accept contributions from corporations and that their boards are often chosen by the governor will little or no legislative oversight. What this means is that the PPPs may end up favoring those contributors in making subsidy awards, and those awards are likely to go to the governor’s major corporate campaign donors.

Such sleazy practices have been seen most clearly in Texas, where the state’s Emerging Technology Fund is run by a public-private partnership controlled by Gov. Rick Perry and has a tendency to give its subsidy awards to Perry’s donors. According to an investigation by the Dallas Morning News, those donors have collected more than $16 million from the fund.

In 2006 the St. Petersburg Times published a 6,000-word investigation on Enterprise Florida, finding a pattern of conflicts of interest among the PPP’s board. In a follow-up editorial, the newspaper wrote that Enterprise Florida “has shown itself to be a public-private venture only in the sense that the public pays and the private receives. Despite critical audits, legislative questions and gubernatorial promises of reform, the group has proved to be virtually immune to the normal checks and balances.”

Aside from corruption, the PPPs tend to be characterized by incompetence or poor judgment. For example, the Michigan Economic Development Corporation (MEDC) found itself in hot water last year when it was revealed it had approved a $9 million subsidy to a company headed by a convicted embezzler and scam artist.

The Indiana Economic Development Corporation, which is often cited as a model by today’s privatization proponents, lost much of its luster last year after a TV station found that many of the jobs IEDC had taken credit for creating did not in fact exist. A former Indiana budget official recently told a reporter that “most of the numbers [IEDC] gave us were either not true or could not be substantiated,” adding that he considered IEDC “a political organization that really only served to make it seem like the governor was doing something about the economy.”

When challenged about their poor record, the chief executives of the PPPs tend to complain about the criticism rather than addressing their substance. In the wake of a series of scandals in 2010 about the MEDC’s handling of tax credit awards, the entity’s executive committee issued an open letter of complaint to the media and the legislature. Rather than addressing MEDC’s shortcomings, the letter made the dubious claim that the controversy might prompt companies to shun the state. “Political in-fighting is a clear warning to business that a state lacks a cohesive climate for economic development,” the letter stated, “and a clear signal to invest elsewhere.”

Not surprisingly, our report concludes that economic development PPPs are a bad idea. Unfortunately, advocates of privatization in this area and others have a tendency to ignore evidence and persist in their misguided belief that the private sector can always do everything better.

Aiding Corporate Outlaws

In a move akin to asking burglars for suggestions on how to make security systems less effective, Rep. Darrell Issa, chairman of the Oversight and Government Reform Committee in the new Republican-dominated House of Representatives, is consulting corporations and trade associations on regulatory policy.

Seeking to revive the anti-regulatory fervor of the Reagan era, Issa is throwing around fabricated numbers ($1.7 trillion) about the cost of business compliance with government rules and bogus claims about the negative impact of regulation on job creation. And in an unambiguous signal that corporate interests are now to be considered paramount, he has been sending letters to scores of companies and associations asking for their deregulatory wish lists.

Issa’s office declined to disclose a complete list of those sent the love letters, but Politico reports that the recipients include trade groups such as the National Association of Manufacturers and the American Petroleum Institute, and individual companies such as Toyota, Duke Energy, Bayer and FMC Corp.

Of all these names, FMC is probably the least well known, but it is a good example of the kind of corporation that will probably benefit the most if Issa and his colleagues have any success – i.e. a company with an abysmal track record.

FMC is a $3 billion chemical company that produces pesticides, insecticides, herbicides and specialty chemicals for food processing and other industries. Headquartered in Philadelphia, the company dates back to the invention of an insecticide pump by John Bean in the 1880s. From the 1920s onward it functioned as a conglomerate, acquiring a wide range of food processing and chemical firms (it was also a military contractor for a period of time).

It was through these acquisitions that FMC assumed responsibility for some of the most hazardous production facilities and waste sites in the country. For example:

In 1977 FMC’s South Charleston, West Virginia plant was shut down under court order for discharging carbon tetrachloride (used in cleaning agents) into drinking-water supplies of communities along with Kanawha and Ohio rivers. After FMC and two of its executives were indicted in federal court on charges of conspiring to conceal excessive discharges at the plant, the company agreed to pay a fine of $35,000 and to place $1 million in escrow to finance future water pollution studies. In 1983 an explosion at the plant killed one worker and injured three others. OSHA later determined that safety violations by the company contributed to the conditions that caused the accident.

In 1983 FMC agreed to spend $6 million to clean up a hazardous waste site in Minnesota that threatened the drinking water supply of Minneapolis. The cleanup at the munitions plant in the town of Fridley, where chemical wastes were buried for more than two decades, involved the treatment of up to 58,000 cubic yards of soil for contaminants such as trichloroethylene.

In 1995 about 6,250 pounds of phosphorus trichloride spilled from an overfilled tank onto the ground, reacted with rainwater and sent a toxic cloud of hydrochloric acid from the FMC plant in Nitro, West Virginia.

In 1998 the EPA fined FMC $209,600 for underreporting Toxic Release Inventory data related to a phosphorous processing plant on the Shoshone-Bannock Fort Hall Reservation near Pocatello, Idaho. Later that year, FMC and the EPA reached agreement on a consent decree to resolve other violations at the plant by requiring the company to spend approximately $158 million on remedial measures. FMC also agreed to a penalty of $11.8 million, a record at the time for violations of the Resource Conservation and Recovery Act.

In 1999 FMC reached agreement with the EPA and the Justice Department regarding the cleanup of the Avtex Fibers Superfund site in Front Royal, Virginia, which FMC owned and operated from 1963 to 1976. Avtex bought the facility in 1976 but shut it down in 1989 under the weight of some 2,000 environmental violations related to many years of contamination with asbestos, lead and other toxic substances. FMC agreed to spend about $100 million for the clean-up of the site, considered the biggest environmental problem area in the state.

By 2000, FMC had been named as a potentially responsible party in connection with about 30 locations on the federal government’s National Priority List of hazardous waste sites.

Add to all of this FMC’s involvement over the years in cases involving price fixing, sex discrimination, defrauding the federal government and other violations of laws and regulations. In 2000 it paid $80 million to settle a whistle-blower lawsuit challenging the safety of the Bradley Fighting Vehicles the company was producing for the U.S. Army.

In recent years FMC has restructured itself, spinning off many of its operations. But it continues to battle with the federal government over regulatory issues. Its biggest fight has concerned the controversial pesticide carbofuran, sold by FMC under the name Furadan. In 2006 the Bush EPA finally acknowledged the product was so dangerous for humans and for animals that it should be completely banned, as the European Union has done. The slow process of removing the product from the market has continued ever since, with FMC kicking and screaming in protest.

The company has been largely unsuccessful in its legal challenge up through the appellate level and has been considering an appeal to the U.S. Supreme Court. It may now hope for relief from Congress instead.

The deregulatory juggernaut is nothing more than an effort to aid and abet the country’s worst corporate outlaws. We’ll be in big trouble if Issa and his ilk succeed.

IKEA Knocks Down Labor Rights

When my colleagues and I at Good Jobs First introduced the Subsidy Tracker database recently, our hope was that the information would be helpful to a wide range of campaigns for economic and social justice. I can now offer one particular use.

By plugging the name Swedwood into the search engine, one finds that the company received a $1 million cash grant under the Virginia Investment Partnership program in connection with its vow to invest $281 million and create 740 jobs. Actually, this grant was just part of a series of subsidies worth a total of $12 million that Swedwood received from the state (the data in Subsidy Tracker are not yet comprehensive).

Swedwood is significant because the company, a unit of the retail giant IKEA, is at the center of a controversy over its labor practices at a furniture plant in Danville, Virginia for which it received the $1 million subsidy. Employees of the facility, fed up with dangerous working conditions and discriminatory employment practices, have been trying to organize with the help of the Machinists union, which produced a report concluding that the Danville operation may be the most hazardous furniture plant in the country. Swedwood and its parent have responded to the organizing drive by harassing union organizers and firing union supporters.

The Machinists and the Building and Wood Workers International labor federation have launched a campaign to pressure IKEA and Swedwood to respect the rights of the Danville workers. Among other things, the campaign is asking supporters to send a holiday card to IKEA Chief Executive Mikael Ohlsson with instructions on how to build a fair collective bargaining relationship with the workers (allen wrench not included).

The unions might also want to make an issue of the fact that a company that was generously subsidized with taxpayer funds is now flouting labor laws.

The financial assistance IKEA got in Virginia is not the only time it has played the subsidy game. In places such as Tempe, Arizona and Frisco and Round Rock in Texas, the retailer has received millions of dollars in sales tax rebates and infrastructure assistance to help finance new stores. It is expected to receive up to $18 million in subsidies for the store it is building in Centennial, Colorado.

In fact, tax avoidance is at the center of IKEA’s entire corporate structure, a complex arrangement that puts nominal control in the hands of a Dutch private foundation but allows founder Ingvar Kamprad and his family to dominate the company and grow wealthier from it (according to Forbes, Kamprad is the 11^th richest person in the world, with a net worth of $23 billion).

IKEA is a prime example of how companies that have reputations for being socially responsible somehow get away with exploiting the system of economic development subsidies and with being hostile to unions in the United States – while cooperating with them in countries (such as IKEA’s native Sweden) where they are well established and protected. In the past, IKEA has relied on paternalism – including better than average employee benefits – to discourage unionization at its U.S. operations. The events in Danville suggest a troubling turn toward heavy-handed union busting.

Perhaps this will begin to change the view of corporate social responsibility arbiters such as Ethisphere magazine, which lists IKEA as “one of the world’s most ethical companies.” While the idea of corporate ethics is an oxymoron, companies should not be singled out for praise of any kind if they deny the rights of their workers to organize.

Note: The Dirt Diggers Digest index of information sources featured or utilized in the blog has finally been brought up to date.

Introducing Subsidy Tracker

Over the past decade, the National Institute on Money in State Politics has built its Follow the Money database into an impressive resource for showing the influence of large corporations on state electoral campaigns. I have long wanted to create a comparable tool to track the flow of money in roughly the opposite direction: economic development subsidy awards from states to big business.

I am happy to announce that my colleagues and I at Good Jobs First have just introduced such a resource. Subsidy Tracker is the first national search engine for determining where a company has gotten economic development subsidies around the country. The database stitches together information from scores of different disclosure sources, many of them obscure reports and webpages. The subsidy programs covered include corporate income tax credits, property tax abatements, enterprise zone tax breaks, cash grants, reimbursement of worker training costs, and others.

In its initial form, the database contains information on more than 43,000 subsidy awards from 124 subsidy programs in 27 states; the number will soon jump to more than 64,000 in 34 states and will continue growing.

Here are some ways Subsidy Tracker can be used:

To find companies that have received subsidies in many places. Currently, for instance, Wal-Mart shows up 69 times, trailed by Target at 45.
To find companies that have gotten some very large individual subsidies. General Electric received a tax credit worth up to $115 million in Ohio in 2009.
To find bad actors that have received subsidies. Super-polluter and climate denier Exxon shows up 23 times in Louisiana alone. The anti-union T-Mobile shows up eight times so far. Wall Street villain Goldman Sachs has received more than $124 million in tax credits and grants in Utah and New Jersey.
To find good actors that have received subsidies. Flambeau River Papers, included on the American Rights at Work 2010 list of employers that “practice labor-management cooperation while creating pioneering solutions to the environmental challenges of the 21st century” shows up in Subsidy Tracker as having received a grant of $249,000 from Wisconsin in 2008.
To find companies that have received subsidies in states where they have made substantial campaign contributions. Agribusiness giant Archer Daniels Midland, which according to Follow the Money made more than $546,000 in campaign contributions in Illinois since 2003 (including those of its executives and employees), has received more than $87 million in enterprise zone tax credits in the state during the same period.
To find companies that profess extreme laissez-faire views and then take subsidies. Koch Industries, whose owners bankroll the Tea Party movement, received two tax credits worth a total of more than $10 million from Oklahoma in the past year.

I’m sure researchers, journalists and others will think of many more ways to use the database. Each entry in Subsidy Tracker contains a link back to the original online source (except a limited number of cases in which the data we obtained is not posted on the web). Search results can be downloaded to a spreadsheet. For more on the data and how the site works, see the User Guide.

Good Jobs First introduced Subsidy Tracker along with two other resources: a report called Show Us the Subsidies, which evaluates the subsidy disclosure practices of the 50 states and the District of Columbia; and Accountable USA, a set of pages that review each state’s subsidy policies, describe large and controversial subsidy deals and provide other provocative information.

We hope all these tools help shine a light on the many excessive and ineffective subsidies that are going to large companies at a time when states and localities can ill afford the loss of what is estimated at $60 billion a year in public revenue.

Subsidy Tracker is a work in progress. In this first phase, we have focused on data sources that we discovered in preparing Show Us the Subsidies and Accountable USA. In the months ahead, we plan to go deeper by using freedom of information requests to obtain data not currently disclosed in any form.

I hope that Dirt Diggers Digest readers will find Subsidy Tracker to be a useful tool in your research. I look forward to your comments and suggestions.

Resources

Subsidy Tracker main page

Subsidy Tracker User Guide

Inventory of data sources currently in Subsidy Tracker

Table of online disclosure links for major subsidy programs (not all data yet in Subsidy Tracker)

Accountable USA main page

Index of companies whose subsidy deals are profiled in Accountable USA

Show Us the Subsidies report and state appendices

Good Jobs First case studies of companies and industries that are major subsidy recipients

It’s Not Paranoia if Dow Chemical Really is Breaking Into Your Office

Wall Street has been in a state of high alert over reports that the next big document dump by the transparency extremists at WikiLeaks will concern a major U.S. bank. The stock price of Bank of America recently plunged for a while on speculation that it was the target.

Yet the bigger espionage story of recent days is one in which a major U.S. corporation is alleged to be the culprit rather than the victim. Greenpeace has just filed a racketeering complaint in DC federal court alleging that Dow Chemical and a smaller chemical company – a North American subsidiary of South Africa’s Sasol Ltd. – conspired with a leading public relations firm, Ketchum Inc., and a smaller pr outfit called Dezenhall Resources Ltd., to spy on Greenpeace.

This is said to have occurred from 1998 to 2000, a period when Greenpeace was campaigning against the dioxin risks created by manufacturing facilities such as those run by Dow and Sasol North America, which at the time was known as CONDEA Vista and was owned by the German energy giant RWE.

What’s the big deal, you might ask. Don’t environmental groups monitor big corporations all the time? In fact, the web page on which Greenpeace presents its materials about the lawsuit contains a prominent link to its archive of its corporate investigations. Shouldn’t companies be able to keep tabs on their opponents?

The difference between what Greenpeace does and what Dow et al. allegedly did is the small matter of adherence to the law. The defendants are accused not of using legitimate information-gathering techniques but rather of engaging in illegal activities such as trespass, invasion of privacy, conversion (a form of theft) of confidential documents – even misappropriation of Greenpeace’s “trade secrets.”

The complaint alleges these firms hired private security consultant Beckett Brown International (BBI; later known as S2I Corporation) to do their dirty work. The now defunct BBI, at the time run and staffed by former employees of the Secret Service and federal intelligence agencies, is said to have hired subcontractors who broke all kinds of laws to get at internal information about the operations, strategic plans and finances of Greenpeace and apparently a number of other groups such as Friends of the Earth and the Center for Food Safety. Prominent environmental activists allied with Greenpeace, such as the legendary Lois Gibbs, are also said to have been spied on.

One of the most troubling allegations in the complaint is that BBI employed off-duty DC police officers to gain access to private premises (including locked areas in which Greenpeace kept its trash and recycling materials before they were collected) by showing their badges as if they were on official business. Greenpeace says it has recovered more than 1,000 pages of its internal documents – a fraction, it says, of what was taken. Greenpeace alleges that most of the papers came not from BBI incursions against its dumpsters but rather from direct break-ins at the group’s DC offices. Electronic surveillance is also charged.

BBI apparently did not have much of a reputation to protect, but the case is presumably a significant setback for Dezenhall Resources, which calls itself “the nation’s leading high-stakes communications consultancy.” Its principal Eric Dezenhall, a White House staffer during the Reagan Administration, has written several books (fiction and non-fiction) and frequently publishes commentaries in the Huffington Post and the Daily Beast. He helped Forbes compile its list of the year’s biggest corporate blunders.

Having worked for clients such as Michael Jackson and Enron executive Jeffrey Skilling, Dezenhall fancies himself a pr gunslinger; others have called him the “pit bull” of public relations. Now that he is on the hot seat himself, Dezenhall seems less inclined to take the offensive. When the Washington Post contacted him about the Greenpeace suit, his response was “no comment.”

That was also the response of spokespeople for Dow Chemical, Sasol and Ketchum. Dow, of course, has been no stranger to controversy from its role as a producer of napalm and Agent Orange during the Vietnam War to its refusal to adequately compensate the victims of the Bhopal tragedy after taking over Union Carbide. Just think of all the juicy secrets that would come out if WikiLeaks ever got hold of its archives. But for now the Greenpeace suit is shedding light on an egregious case of corporate misconduct.

Behind the GM Euphoria

Wall Street is always looking for a reason to be euphoric, and it found one this week in the return to the market of General Motors.

Less than two years after filing for bankruptcy and being taken over by the federal government in a $50 billion bailout, the automaker became the darling of investors and commanded a surprisingly high initial price of $33 a share.

Many of those investors had apparently not read the voluminous S-1 Registration Statement that GM filed with the Securities and Exchange Commission. If they had, they would have found a document that in its current iteration requires more than 13,000 words to summarize the risk factors facing the company.

Companies are required to be especially candid in warning investors what they may be facing when buying into a company whose shares are being offered for the first time (after its transformation GM is technically a new firm). But this prospectus is amazing. Here are some reasons why.

Acknowledging that its current chief executive and chief financial officer are from other fields, the S-1 says the company’s prospects depend on their ability to “quickly learn the automotive industry.”
The document reveals : “We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.”
The company admits that it has an image problem: “The automotive industry, particularly in the U.S., is very competitive, and our competitors have been very successful in persuading customers that previously purchased our products to purchase their vehicles instead as is reflected by our loss of market share over the past three years. We believe that this is due, in part, to a negative public perception of our products in relation to those of some of our competitors.”

Inexperienced management, poor financial controls and a negative public perception don’t seem to constitute a foolproof recipe for success. But there’s much more to the recitation of risk factors, including the fact that even after the stock offering the U.S. government will remain by far the company’s largest shareholder.

GM reminds potential investors that its bailout came with some strings attached. For one thing, the company is supposed to take steps to maintain its U.S. workforce at or near existing levels. If GM is a shining example of a renaissance of American manufacturing, as some observers would have us believe, it shouldn’t be a problem to maintain jobs in the USA, especially in light of the concessions that members of the United Auto Workers union consented to in order for the bailout to proceed.

But GM’s management hints that it might be interested in even cheaper labor abroad. The S-1’s summary of the company’s current business strategy includes the following:

Enhance manufacturing flexibility. We primarily produce vehicles in locations where we sell them and we have significant manufacturing capacity in medium- and low-cost countries. We intend to maximize capacity utilization across our production footprint to meet demand without requiring significant additional capital investment.

That sounds like a plan to expand foreign rather than domestic production. Elsewhere the company seems to be complaining when it notes that the federal government “may have a greater interest in promoting U.S. economic growth and jobs than other stockholders of the Company.”

GM’s management also bemoans the fact that “restrictions in our labor agreements could limit our ability to pursue or achieve cost savings through restructuring initiatives.”

In other words, the new GM is beginning to sound a lot like the old GM: blaming unionized workers for problems caused by management failures and market conditions. And like its predecessor, the new GM seems to be itching to dump more of those workers in favor of cheap labor abroad. This may be the main reason it is so eager to bring the federal role to an end.

If cost cutting on the backs of workers — rather than real innovation and competent management — is to be the focus of the new GM, it will probably end up in the same mess as its predecessor.

The investor excitement about the new GM may be good news for the federal government, but it could turn out to be just another market bubble.

Final irony: one of the big beneficiaries of the GM initial offering is Goldman Sachs, which in July agreed to pay the feds $550 million to settle charges of having deceived investors. Goldman is making about $9 million as one of GM’s underwriters.

Full Graphic Disclosure

Forget Joe Camel and the Marlboro Man. Federal regulators want people to think of disease, birth defects and death when they pick up a package of cigarettes. The Food and Drug Administration, implementing legislation passed by Congress last year, has just released three dozen proposed enhanced warning labels that manufacturers would have to print on each pack of cancer sticks.

In the place of the plain text warnings that have appeared on tobacco packaging for years, these labels would be much larger and much more visually striking. The proposals include, for example, photos of a smoker in an open coffin, a mother blowing cigarette smoke at her infant child, and a sickly cancer victim.

The main objective of the warnings is to encourage existing smokers to quit and the dissuade children from picking up the dangerous habit. But apart from consumer behavior modification, the labels can be seen as a form of disclosure—disclosure of the harmful effects of a product.

The need for bold messages about deleterious aspects of the things we buy is not limited to cigarettes. It might make sense to apply the FDA’s approach to a whole range of goods and services. For example:

SUV models shown to be prone to rollovers should come not just with a plain-text sticker showing miles per gallon, but also full-color photos of mangled vehicles with bleeding drivers and passengers.
Electric bills sent by utilities relying on coal-fired power plants should be required to include photographs of floods, droughts and other effects of catastrophic climate change.
The pumps at gas stations should be adorned with photographs of oil spills and refinery disasters.
A variety of products sold by Wal-Mart should have packaging containing images of the oppressive Chinese sweatshops in which they were produced.
Stores selling gold jewelry should display photographs showing the despoiled land around the cyanide-leaching facilities in which the precious metal is mined.
Producers of dangerous pharmaceuticals should be required not just to mention possible injurious side effects, which most people have tuned out, but to show images of actual victims.
Health insurance providers should have to send out pictures of policyholders who died because an expensive treatment was rejected by the company.
Perhaps manufacturers of the worst junk food should be required to air commercials with actors who are morbidly obese.
And, of course, gun sellers should have to hand out gory photos of victims of accidental discharges.

Given the exalted status of commercial free speech in this country, these ideas could never come to pass. Yet there is still a serious issue to address: How do we turn dry data about corporate harms into messages people pay attention to?

The objective, however, is not just to change consumer behavior but also that of producers. All disclosure is meant to highlight an activity that is subject to abuse and hopefully curb those abuses. The Environmental Protection Agency’s Toxics Release Inventory is designed to get manufacturers to clean up their production processes – and has had a positive impact. Campaign contribution disclosure is meant discourage the big-money takeover of elections (there’s obviously been a lot less progress on that front, especially now that much corporate electoral spending can take place anonymously). Disclosure of executive compensation is supposed to check the relentless march toward lavish CEO salaries, bonuses and stock options (another less than rousing success).

The fact that disclosure does not immediately cure the problem it is meant to highlight does not undermine the case for transparency. It may simply mean that the form of the disclosure is not compelling enough. That’s the beauty of the FDA approach to cigarettes.

In replacing the misleading feel-good images that marketers have long sought to associate with even the most noxious products, the aggressive warning labels begin to force corporations to be honest about what they sell and consumers to come to grips with the true nature of much of what they consume. This form of anti-advertising may begin to liberate us from the illusions of our manufactured desires.

The Real Cost of Obama’s Trip to India

The rightwing media machine is up in arms about a dubious report that the cost of President Obama’s trip to India will turn out to be more than $200 million a day, for a 2,000-person entourage. The White House calls the cost figure wildly inflated.

The manufactured controversy about cost is taking attention away from what should be the main story: who is accompanying the President on the trip and what do they hope to get out of it. A big part of Obama’s entourage will be scores of top U.S. corporate executives, who are seeking Obama’s help in initiating or finalizing big deals with the Indian government and Indian corporations. Numerous other U.S. companies are not sending executives on Obama’s trip but are still hoping the visit will advance their interests in India.

Among the deals that have been reported are: the sale of ten military transport planes worth some $5 billion by Boeing and the sale of $800 million in fighter jet engines to the Indian military and $500 million in heavy duty gas turbines to India’s Reliance Energy, both by General Electric. Other dealmakers are said to include Eaton Corp., John Deere, Caterpillar and Harley-Davidson.

In other words, a President endlessly denounced by the Right as a socialist, is serving as a shill for some of the country’s largest corporations. This is far from the first time an American president has acted as salesman-in-chief for American products, and the White House makes no apologies for the trip, claiming that it will result in the creation of thousands of jobs.

The problem is that it is far from clear that landing big deals for U.S.-based corporations will result in many jobs for U.S. workers. The list of companies with executives going to India with President Obama (or that stand to benefit from the trip) include some of the most notorious practitioners of offshore outsourcing.

Take the two heaviest hitters on the trip. Boeing has made a science of shifting work from its traditional manufacturing operations around Seattle to factories around the world. It has clashed repeatedly with its unionized workers over the issue. And when it’s not sending jobs abroad, it moves them to domestic non-union plants, such as its big new operation in South Carolina.

General Electric is another unabashed offshorer. In the early 1990s about one-quarter of the company’s employees were outside the United States; at the end of last year, 56 percent of them were. What’s especially frustrating is that GE is offshoring jobs in emerging fields such as renewable energy, thus depriving many American workers of a shot at the jobs of the future.

Eaton, a diversified manufacturer of industrial products, now has 27 facilities in China with some 10,000 workers as well as four research and development centers in the country. In April, John Deere opened a manufacturing plant and parts distribution center in Russia. It already had factories in low-wage countries such as Brazil, China, Ecuador, India and Mexico. Caterpillar has eight plants in China, eight in Mexico, three in India and many more in other countries. It recently opened a logistics center in China to support what a company press release called its “growing manufacturing footprint” in that country.

Harley-Davidson is an icon of U.S. manufacturing, but it just announced plans to open a new plant in India to assemble U.S.-made motorcycle kits. It is unclear whether this will increase or decrease jobs at the company’s American plants, which have been exporting fully assembled motorcycles to the Indian market.

It’s true that these companies have to do a certain amount of production in countries such as China and India to sell to local customers, yet it is also undeniable that these firms and others seeking benefits from Obama’s trip have been reducing manufacturing operations in the United States that previously supplied goods for both domestic and foreign markets.

There is no guarantee that the jobs Obama hopes to generate with his sales trip to India will end up going to Americans. The companies whose wares he is promoting are in many cases American only in terms of where their headquarters are located. They are all too willing to destroy the livelihood of U.S. workers in their global pursuit of cheaper labor and fatter profits.

That kind of behavior costs this country much more than what the President’s delegation could ever spend on its trip to India.

The Corporate Crime PAC

Election day is upon us, but more than five million American citizens will not be able to go to the polls because they have been convicted of a felony and thus stripped of their voting rights. Yet there is another group of felons and other malefactors whose participation in the electoral process has been enhanced rather than curtailed: corporate criminals.

Corporations vote with their dollars, and thanks to the Supreme Court’s Citizens United ruling, they have more influence in elections than ever before. That includes corporations that have been convicted of crimes or regulatory violations, settled similar charges without admitting guilt or otherwise run afoul of the law.

Here are some of the leading corporate criminals that are active participants in the electoral process. The figures on their political spending are no doubt understated, given the various ways that companies can now invest in elections and keep it secret.

BP

Leaving aside this year’s disaster in the Gulf of Mexico, for which BP has not yet faced court action, in 2007 the British oil giant and some of its subsidiaries paid $370 million in fines and restitution for environmental criminal violations stemming from a fatal fire at a Texas refinery in 2005 and leaks of crude oil from its pipelines in Alaska. BP Products North America and British Petroleum Exploration (Alaska) Inc. were put on probation for three years.

In the current electoral cycle, according to the Open Secrets website, BP’s political action committee has spent more than $300,000.

Goldman Sachs

In July, Goldman Sachs paid $550 million to settle federal charges that it misled investors in connection with subprime mortgage securities.

In the current electoral cycle, the Goldman Sachs PAC has spent more than $850,000.

GlaxoSmithKline

British drug giant GlaxoSmithKline and a subsidiary together recently agreed to pay $750 million to settle criminal and civil charges relating to the knowing sale of contaminated and ineffective products.

In the current electoral cycle, the GlaxoSmithKline PAC has spent more than $1.5 million.

Hewlett-Packard

In August, Hewlett-Packard paid $55 million to settle charges that it paid kickbacks to win U.S. government business.

In the current electoral cycle, the Hewlett-Packard PAC has spent more than $350,000.

American Airlines

Also in August, the Federal Aviation Administration charged American Airlines with multiple maintenance violations and proposed a record fine of $24.2 million.

In the current electoral cycle, the American Airlines PAC has spent more than $550,000.

Dell

In July the computer maker Dell agreed to pay more than $100 million in penalties to settle charges of failing to disclose material information to investors and using fraudulent accounting methods.

In the current electoral cycle, the Dell PAC has spent more than $160,000.

Citigroup

In July, Citigroup paid $75 million to settle federal charges that it misled its own investors about the company’s exposure to risky subprime mortgage assets.

In the current electoral cycle, the Citigroup PAC has spent more than $390,000.

Lockheed Martin

We can’t forget about the big military contractors. Lockheed Martin, the largest of that fraternity, has 51 listings in the Project On Government Oversight’s Federal Contractor Misconduct Database, with total fines and settlements of some $577 million.

In the current electoral cycle, the Lockheed Martin PAC has spent more than $2.9 million.

I could go on and on. The political system in awash with direct contributions from corporations that have broken a wide range of laws and in many cases are using their campaign offerings to unduly influence federal policy so they can go on doing what they do – and perhaps face fewer prosecutions and enforcement actions in the future if their desired candidates are elected.

Corporations are persons, the Supreme Court tells us, and have Constitutional rights. Actually, corporations now have more rights than natural persons. They can break the law repeatedly and buy their way out of serious punishment.

The country would be a lot better off if individual ex-offenders got back their voting rights and corporate criminals were barred from spending lavishly to buy political influence.

Corporations Want It All

Most of U.S. Big Business seems to be on a capital strike these days, refusing to invest and create new jobs. A notable exception is semiconductor giant Intel, which just announced that it will spend up to $8 billion upgrading its chip fabrication plants in the United States and build a new one in Oregon.

What’s odd is that Intel CEO Paul Otellini is just as critical of American economic policies, especially those promoted by the Obama Administration, as many other companies that use that vote of no confidence to justify their redlining of the USA. One of Otellini’s main gripes is that the United States provides too little in the way of tax breaks and other incentives to corporations compared to other countries. Speaking at a recent event at the Council on Foreign Relations, he proposed “that we take a page from others’ playbooks and provide attractive incentives for companies to build factories here that will employ our workers.”

This is a truly bizarre comment from the head of company that has received more in economic development subsidies than just about any other corporation in the United States. Over the past two decades, taxpayers in states such as New Mexico, Arizona and Oregon have underwritten the company’s rise to its dominant position in the semiconductor market.

New Mexico. The process began in 1993, when Intel announced plans for what was then an unprecedented $1 billion investment in a new chip plant, to be built in a suburb of Albuquerque called Rio Rancho. The company pressured local officials to provide what would ultimately amount to about $455 million in property tax abatements and sales tax exemptions on the equipment purchased for the facility.

Arizona. Soon after getting its way in New Mexico, Intel put the squeeze on officials in Arizona, where it proposed to build another plant in Chandler, a suburb of Phoenix. The company received some $82 million in property tax abatements, sales tax exemptions and corporate income tax credits. In 2005 Intel strong-armed the state to change the method by which it calculates corporate taxes to a system known as single sales factor, which allowed Intel and other companies with lots of property and a big payroll but relatively low sales in the state to enjoy enormous tax reductions.

Oregon. In 1999 Intel announced plans for a large expansion of its semiconductor operations in Oregon but made it clear that the investment was contingent on receiving a huge property tax abatement. Actually, what Intel was demanding was an extension of tax breaks it previously received in the state, where its manufacturing operations dated back to 1974. Those breaks were enabled by the state’s Strategic Investment Program (SIP), which was adopted in 1993 with Intel in mind. The company’s new SIP deal reduced Intel’s property tax bill by an estimated $200 million over 15 years. In 2005 Intel got the county to extend the property tax break to 2025, locking in an estimated $579 million in additional savings. In addition to these property tax breaks, Intel enjoyed a substantial reduction in corporate income taxes thanks to Oregon’s decision to join the single sales factor bandwagon.

So what is Otellini complaining about? Perhaps his real gripe is that the Federal Trade Commission sued Intel last December, charging that the company “illegally used its dominant market position for a decade to stifle competition and strengthen its monopoly.” The parties settled the case in August, with Intel agreeing to end some of the pressure tactics it applies to computer makers.

Yet it is likely that Otellini’s comments reflect a broader attitude on the part of Big Business. The Supreme Court ruling in the Citizens United case and the resulting flood of corporate money into the current electoral campaigns appear to have given CEOs like Otellini the idea that they are entitled – entitled to buy elections and entitled to have government policy oriented to their serve their every need. The way things are going, those corporate titans may get their wish.