Corporate Power

Limiting Corporate Influence

Among the many challenges the Biden Administration will have to confront after Trump ends his temper tantrum is deciding on the posture it wants to take toward big business. There will be a battle for the soul of the new president as corporate Democrats vie with progressives to influence policy in areas such as regulation and antitrust.

The initial signs are encouraging. The Biden transition just released a list of some 500 individuals who will be staffing the Agency Review Teams charged with preparing the way for a transfer of power in all parts of the executive branch.

I went through the list of affiliations and found only about 20 for large corporations. The vast majority of the people are from academia, state government, law firms, non-profits, unions, think tanks and foundations. It is likely that some of the law firms are there to represent specific corporate interests, but the numerous representatives from progressive public interest, environmental and labor groups should serve as an effective counterweight.

In the Labor Department list there are no law firms or corporations; in their place are representatives from five different unions along with people from the National Employment Law Project and other progressive groups.

What is particularly significant is the near absence of people affiliated with Wall Street banks. The Defense Department list has someone from JPMorgan Chase; Homeland Security has a representative from Capital One; and the International Development group includes someone from U.S. Bank. There is no one from Bank of America, Goldman Sachs, Citigroup, Wells Fargo or Morgan Stanley.

The Treasury Department group is led by someone from Keybank, which is based in Cleveland and ranks about 29^th among U.S. banks. Fortunately, the Treasury group also includes representatives from places such as the Center for American Progress, the American Economic Liberties Project and the AFL-CIO.

Other balancing acts include the list for the Environmental Protection Agency, which includes a representative from Dell Technologies but also from Earthjustice (the lead person) and The Sierra Club.

Some of the corporations show up in surprising places. Walt Disney is represented on the Intelligence Community list. The cosmetics firm Estee Lauder has someone on the State Department list. Someone from Airbnb is in the National Security Council group.

Looking at current corporate villains, the one that stands out is Amazon.com. It shows up on two lists—the one for the State Department and the one for the Office of Management and Budget.

Lyft and Airbnb are also on the OMB list, along with some academics, a consultant, a state official and someone from Meow Wolf, a Santa Fe-based non-profit that produces immersive art experiences.

Given that OMB oversees regulatory policy, the absence of public interest, union and environmental people raises a concern. Otherwise, it appears that the Biden team is limiting corporate influence in the emerging administration. Let’s hope it stays that way.

A Major Rebuke to Corporate Arrogance

New York City’s progressive elected officials, unions and community activists have just delivered what may be the most remarkable rebuke to corporate influence ever seen in the United States. In forcing Amazon.com to drop its plan for a satellite headquarters campus with 25,000 employees, arranged through a deal including some $3 billion in subsidies, progressives have up-ended a decades-old dynamic in which large corporations have used job creation promises to get state and local officials to hand over vast amounts of taxpayer funds to underwrite private business expansion.

Traditionally, opponents of big subsidy deals were accused of being job killers and of ruining the “business climate.” Amazon’s opponents in New York overrode those criticisms with their arguments that the giant retailer did not need or deserve enormous tax breaks and that the city should be devoting its financial resources to more pressing public needs.

Part of what fueled the opposition was Amazon’s reputation as a low-road employer, especially in its distribution centers. The company made no attempt to hide this fact. When asked during a city council meeting whether Amazon would remain neutral during any organizing drives at its facilities, a company executive quickly replied: “No.”

What also helped is that New York’s economy is far from desperate and is much larger than the arenas in which Amazon is used to operating. For many places, the prospect of thousands of jobs could be a matter of survival. That’s why southeastern Wisconsin was willing to offer Foxconn billions in subsidies for a flat-screen plant that probably will never be built.

In New York, 25,000 jobs were seen less as the basis for an economic transformation and more as a recipe for a worsening of the city’s severe housing and transit problems. The side effects of a major project, which in the past were usually an afterthought, in this case took center stage.

More broadly speaking, what probably did Amazon in was its arrogance. It had spent more than a year conducting an elaborate HQ2 competition in which officials from more than 200 localities eagerly participated. Amazon came to view itself as kind of corporate divinity, to which communities were supposed to bow down.

Although Gov. Cuomo and Mayor de Blasio were among those participants, the people of New York were a lot less inclined to play the game. They simply could not understand why a megacorporation controlled by the wealthiest man in the world needed a handout from them in order to expand its operations. By scorning Amazon, New Yorkers are sending a powerful message to all large corporations: you should no longer assume that by dangling dubious promises of job creation you can raid public resources and ignore the social impacts of your expanded operations. Ask not what our communities can do for you, ask what you can do for us.

Deep Corporate Conspiracy

Donald Trump and the rightwing fringe never tire of talking about supposed deep state plots. Yet if there is any conspiracy going on, it is the seeming attempt to remove any checks on the power of large corporations.

The latest evidence of this effort can be seen at the banking regulatory agencies and the Supreme Court. Only a decade after a financial crisis brought on by the excesses of the financial sector, the agencies are moving to eliminate the Dodd-Frank restriction on speculative trading practices by the large banks. The attack on the Volcker Rule ignores not only the role such practices played in the meltdown but the fact that the banks have been doing quite well despite the limitation. Last year JPMorgan Chase, for example, posted a profit of more than $24 billion.

Yet even more infuriating is seeing the Supreme Court justice nominated by a purported populist president cast the deciding vote and write the opinion in a ruling that will cripple the ability of workers to use the courts to address abusive employment practices.

The opinion by Justice Gorsuch in the Epic Systems case turns the clock back to a time of near total employer tyranny in the workplace by allowing corporations to mandate that disputes be resolved through the secretive and one-sided process of arbitration rather than class action lawsuits.

The ruling had a special significance for me, given that I have spent the past year doing extensive research about such lawsuits; specifically, wage and hour collective actions designed to combat off-the-clock work, denial of overtime compensation and other forms of wage theft. My colleagues and I will publish a report on the research next week, so I cannot provide the details now. Suffice it to say that the report is going to show that wage theft is a lot more pervasive in big business than is commonly understood.

When I began the research I thought I was documenting legal actions that would continue to be a key tool for addressing employment abuses. Now it may turn out that the report will be mainly of historical interest, describing the way large corporations used to be compelled to pay out substantial sums to compensate workers cheated out of their proper pay.

To make matters worse, the Supreme Court is expected to land another blow against the collective power of workers in its forthcoming ruling in the Janus case concerning public employee unions.

The weakening of regulation, class action litigation and unions provides an unprecedented boost in the ability of big business to call the shots in the workplace and in communities. The massive increase in profitability generated by the Republican tax bill makes large corporations even more mighty.

While this power grab is taking place, many corporations are trying to present themselves as part of the more enlightened sector of society. Walt Disney and Starbucks, for instance, want us to believe they are the anti-racist vanguard. This doesn’t always work: Wells Fargo, Volkswagen and Facebook face an uphill battle. Yet all too many firms have succeeded in projecting a benign image while engaging in corrupt behavior.

There is no easy way to remedy this situation, but we should not let the distractions emanating from the White House make us forget the larger problems.

The Wrong Kind of Magnetism

In his State of Union address President Obama declared: “Our first priority is making America a magnet for new jobs and manufacturing.” Obama just repeated those words while nominating as Commerce Secretary a billionaire whose family business has pursued a very different goal: accumulating vast wealth on the backs of underpaid and mistreated workers.

Obama praised Penny Pritzker as “one of our country’s most distinguished business leaders,” adding: “She’s built companies from the ground up. She knows from experience that no government program alone can take the place of a great entrepreneur. She knows that what we can do is to give every business and every worker the best possible chance to succeed by making America a magnet for good jobs.”

What he didn’t say is that Pritzker, whose personal net worth is estimated by Forbes at $1.9 billion, sits on the board of Hyatt Hotels, which is the best known part of a business empire founded by her grandfather and his sons. Much less did Obama mention that Hyatt has been denounced by the union UNITE HERE as “the worst hotel employer in America,” because it has “abused workers, replacing career housekeepers with minimum wage temporary workers and imposing dangerous workloads on those who remain.” The union also criticizes the company for resisting worker organizing efforts and for taking a hard line in bargaining at those hotels where a collective bargaining relationship exists. UNITE HERE’s corporate campaign against the company is called Hyatt Hurts.

UNITE HERE has also targeted other parts of the Pritzker empire, including a manufacturing conglomerate called the Marmon Group, controlling ownership of which is now held by Berkshire Hathaway. The union blamed the Pritzkers for the decision by Marmon to shut down its Union Tank Car production facility in East Chicago and shift the jobs to Louisiana, where it had been offered some $63 million in tax abatements and infrastructure assistance. The union produced a film about the issue entitled “Show Us the Tax Breaks.”

The sad truth is that the behavior of Hyatt Hotels and the Pritzkers is far from unusual. Large corporations have no hesitation about eliminating or undermining well-paid jobs while shifting investment to areas where workers are weak and where public officials dish out lavish subsidy packages. Take Caterpillar. The company is currently taking a hard line in its contract talks with the Steelworkers union at a mining-equipment plant in Milwaukee it took over as part of its acquisition of Bucyrus International. Last year, Cat got a $77 million subsidy package to open a plant in Georgia that it undoubtedly assumes will operate non-union. Boeing, which built a new Dreamliner assembly line in South Carolina to get away from union workers in Seattle, this year announced a $1 billion expansion of that operation, for which it’s getting another $120 million in subsidies.

Foreign corporations are employing the same southern strategy. Japan’s Yokohama Rubber just announced plans for a $300 million truck tire plant in Mississippi for which the state legislature just approved some $130 million in subsidies. Toyota is getting a $146 million in subsidies for an expansion of its assembly operations in Kentucky.

If there is a manufacturing revival in the United States, it consists mainly of companies taking advantage of cheap, non-union labor and large giveaways of taxpayer money. And whatever growth is occurring in the service sector includes too many substandard jobs like those offered by Hyatt. If this is what Obama means when talking about making the U.S. a magnet for new jobs and manufacturing, that’s not the kind of magnetism the country needs. And we don’t need someone in the Cabinet who symbolizes that destructive process.

Corporate Power and the Second Obama Administration

The corporate lobby is dumbfounded. After spending billions of dollars to defeat President Obama and take Republican control of the Senate, business interests have nothing to show for their efforts.

By all rights, Thomas Donohue of the U.S. Chamber of Commerce, which went all-out for Republican candidates, should be handing in his resignation. The Big Business-loving editorial page of the Wall Street Journal should be exhibiting a bit of contrition.

Instead, Donohue issued a press release reiterating the Chamber’s laissez-faire position: “It is the private sector that drives economic growth and jobs, and it is the government’s responsibility to work on a bipartisan basis to pass policies that will unleash the private sector and help put Americans back to work.” The Journal warns Obama not to “consider his reelection to be a mandate to repeat his first-term record of rejecting all GOP ideas and insisting on his priorities.” God forbid that a President returned to office with a resounding victory should seek to promote his own priorities.

Even with the election is over, conservatives cannot let go of their caricature of Obama as a radical leftist who refuses to compromise. This may have something to do with the fact that many of them are radical rightists who refuse to compromise.

After Obama was first elected in 2008, the Journal predicted that he would “seek middle ground with business on thorny issues.” You wouldn’t know it from the campaign, but that was often what happened during the past four years. Far from being the Bolshevik envisioned in the fevered imagination of his critics, Obama led Democrats in pursuing an agenda that was solidly middle-of-the-road or, in some respects, conservative, by earlier standards. Let’s recall that Obama:

Promoted and got enacted a healthcare reform plan that preserves the private insurance industry;
Enacted a stimulus plan that, among other things, funneled billions into subsidies, grants and contracts for large corporations;
Helped rescue the auto industry through a plan that forced workers to make major contract concessions and that took a hands-off approach to the management of companies such as General Motors and Chrysler that received tens of billions in federal aid;
Occasionally talked tough but ultimately did little to prosecute the financial institutions that were responsible for the near meltdown of the economy through predatory lending and reckless speculation;
Enacted a financial reform bill that allowed venal megabanks such as Citigroup to remain in existence and then did little to challenge Republican efforts to stonewall implementation of its consumer protection provisions;
Abandoned, in the face of Republican opposition, the pro-union Employee Free Choice Act and cap-and-trade legislation;
Continued the practice of allowing corporate criminals to escape real punishment through deferred prosecution agreements;
Continued to promote the myth of “clean coal” and adopted a weak or inconsistent position on dangerous energy practices such as offshore drilling and fracking;
Went along with the wrong-headed notion that corporate income tax rates are too high;
Claimed to be reducing the influence of corporate lobbyists but chose as a senior advisor someone who also serves as a strategist for clients such as military contractor Pratt & Whitney and Keystone XL pipeline developer TransCanada;
Declined to directly criticize large profitable companies that have refused to rehire adequate numbers of U.S. workers; and
Chose executives from union-unfriendly offshore outsourcers such as General Electric to advise him on job creation.

The list could go on. By any reasonable assessment, this record could be considered business-friendly or at least not overly hostile. The problem is that business groups are comparing the reality of Obama to a fantasy of token regulation, minimal taxation, vanished unions—in other words, totally unfettered corporate power—and thus feel frustrated.

Unfortunately, left to its own devices, a second Obama Administration is likely to go on trying to placate corporate interests and the Right by promoting policies that will never satisfy them but will dilute critical progressive goals. Wouldn’t it be great if the President felt he needed to try that hard to satisfy the other end of the political spectrum?

We Subsidized It

We Built It. The Romney campaign and the wider conservative movement believe they have a winner in a slogan designed to refute President Obama’s comment about the role of government assistance to business in favor of an idealized Ayn Rand-style entrepreneurship that needs no stinkin’ public infrastructure.

They are so confident, in fact, that they asked a strangely inapt group of messengers to promote the theme at the Republican Convention: a slew of governors. Since Ronald Reagan, the right has ignored the incongruity of having public officials play a leading role in denouncing the public sector. Yet the GOP governors who took to the stage in Tampa to celebrate up-by-one’s-bootstraps free enterprise raised this hypocrisy to new heights.

Despite their frequently expressed laissez-faire beliefs, they have each presided over deals in which huge sums of taxpayer money have been handed over to large corporations in the name of economic development. The Romney campaign, which has been making deceitful allegations about Obama Administration changes in welfare work requirements, chose to have its big convention theme delivered by some of the biggest proponents of corporate welfare.

Take South Carolina Gov. Nikki Haley. She used her convention speech to honor her immigrant parents and the clothing company they created, adding: “So, President Obama, with all due respect, don’t tell me that my parents didn’t build their business.” She also gave praise to Boeing, saying that her state “was blessed to welcome a great American company that chose to stay in our country to continue to do business.” She failed to mention that Boeing’s decision to locate its second Dreamliner assembly line in Charleston was more than a little influenced by a state and local subsidy package estimated to be worth more than $900 million.

That deal was originally negotiated by her predecessor Mark Sanford but Haley enthusiastically carried it out and went to great lengths to defend Boeing against Machinists union charges that the move to South Carolina was prompted by anti-union animus. Haley has also made subsidy deals of her own, including the $9 million recently given to Michelin for a tire plant (photo). Haley subsequently told a tire industry conference: “We want to help you do more business in South Carolina and we want to make sure that you grow. That’s our job.”

Virginia Gov. Bob McDonnell—who told the convention “Big government didn’t build America: You built America!—agreed to give up to $14 million in subsidies to Northrop Grumman to relocate its headquarters to northern Virginia. The move was motivated by a need to be near the company’s dominant customer, the Pentagon, so the subsidies were probably unnecessary and could be seen as a reward for the large contributions the company made to his election campaign.

Ohio Gov. John Kasich, another member of the we-built-it chorus, has given in to job blackmail demands by companies threatening to move their operations out of state unless they got big subsidy deals. Kasich’s administration negotiated $100 million packages with both Diebold Inc. and American Greetings Corp.

Wisconsin Gov. Scott Walker, a rightwing hero for his campaign against public worker collective bargaining rights, used his convention speech to emphasis the importance of letting people “control their own destiny in the private sector.” In July, Walker announced that the state had awarded $62 million in tax credits to Kohl’s to get the retailer to expand its headquarters in the Milwaukee suburb of Menomonee Falls.

And then there’s conservative bad-boy idol Chris Christie, who gave the keynote address at the convention. The New Jersey governor’s administration has been handing out lavish tax credit deals to companies moving from one location in the state to another, including $250 million to Prudential Insurance, $100 million to Panasonic and $81 million to Goya Foods. Since taking office in 2010, Christie has given away more than $1.5 billion in subsidies to corporations.

The examples above focus on bigger deals involving larger companies, since those are the ones with the biggest giveaways of taxpayer funds. Yet many state subsidy programs also serve smaller firms. My colleagues and I at Good Jobs First have assembled data on more than 200,000 subsidy awards from state and local governments around the country in our Subsidy Tracker database. Most of the recipients are not in the Fortune 500.

I cannot resist mentioning that one of those small recipients is First State Manufacturing, a business run by Sher Valenzuela, who is running for Lt. Governor in Delaware on a tea party platform and who was given time at the Republican convention to tell her “I built it” story. In addition to the federal contracts and Small Business Administration loans revealed by Media Matters, information gathered for Subsidy Tracker shows that First State has received more than $29,000 in reimbursements for training costs through Delaware’s Blue Collar Training Grant program—a modest amount but another indication of business dependence on government.

Claims about the autonomy of the private sector are one of the Big Lies of modern conservatism. The real objective of the Right is along the lines of what Gov. Haley told that tire industry conference: to make sure government serves business through subsidies, deregulation, tax minimization and weakening of unions.

To the companies receiving these forms of assistance to expand their business, one could easily adopt the language of President Obama and say “you didn’t build that alone.” The truth is that both liberals and conservatives believe that government should aid the private sector. The difference between the two is in what is expected in return. Liberals make an effort (albeit inadequate) to impose some accountability, whereas the Right believes that business should be able to take all it wants with no strings attached. The debate over whether to limit government should really be one on whether there will be limits on corporate power.

How to Succeed in Business

It’s only a few months to the presidential election, and the economy is still a mess, yet the candidates have been arguing over the secret of success in business.

This is an old and tired debate, and neither side is saying anything novel. Romney is reciting the chamber of commerce fairy tale that business achievement is the result purely of hard work and risk-taking on the part of lone entrepreneurs. Obama mostly accepts that narrative but meekly points out that business owners also depend on government-provided infrastructure and thus should pay a slightly larger share of the taxes needed to fund those roads, bridges and the like.

Both men talk as if we were still in an early 19^th Century economy of small enterprises that live or die based on individual effort and minimal government activity—rather than the century-old reality that megacorporations are what dominate American commerce.

When the candidates do acknowledge the existence of big business, it is mainly to offer competing proposals on how to serve its needs. For the Republicans, this means further weakening of regulation and the dismantling of the corporate income tax. While the Democrats make some noise about controlling business excesses, nothing much comes of this, and their main goal seems to be that of bribing large corporations with incentives so they don’t abandon the U.S. economy entirely.

What both sides forget is that corporations exist at the behest of government—in nearly all cases state governments, which authorize their creation. The original ones were established to enlist private participation in government initiatives such as building canals. Before the Civil War, corporations were allowed to engage only in designated activities and could not grow beyond a certain size. It was to get around these limitations that robber barons such as Rockefeller created the trusts that came to control so much of American industry, prompting the passage of the Sherman Act and other antitrust efforts.

Whatever progress started to be made in thwarting the hyper-concentration of business was undermined when New Jersey and then Delaware rewrote their corporation laws to allow companies to do pretty much whatever they pleased and to become as big as they wished in the process. Eventually, other states followed suit. The corporate form, once a privilege granted for special purposes, became an entitlement for any pool of money seeking to make a profit behind the shield of limited liability.

What presidential candidates should be debating is whether the time has come to tighten state corporation laws or replace them entirely with a federal system of chartering, as Ralph Nader and his colleagues argued in the 1970s.

Nader’s effort was prompted by a wave of revelations about corporate misconduct that came out of the Watergate investigations. Today we have our own corporate crime wave: recent cases of foreign bribery (Wal-Mart), illegal marketing of prescription drugs (GlaxoSmithKline and others), manipulation of interest rates (Barclays) and pipeline negligence (Enbridge Energy) come on the heels of the Wall Street mortgage securities fiasco, the BP spill in the Gulf of Mexico, and the Massey Energy coal mining disaster.

If we have to talk about success in business, the question we should be considering is whether any large company succeeds without engaging in illegal, or at least unethical and exploitative, behavior. In spite of all the talk about corporate social responsibility, it is difficult to find a major firm that does not cross the line in one way or another.

Take the most successful company of recent years: Apple. Thanks to a series of investigative reports, we now know that Apple’s business achievements are based on a foundation of underpaid workers, both in its foreign factories and its domestic retail stores. On top of that, the company engages in flagrant tax avoidance, and despite its gargantuan profits, it forces state governments to hand over big subsidies when it builds data centers.

Sure, Apple made use of the type of public infrastructure President Obama likes to talk about. Yet the biggest benefit it and other large companies receive from government is the unwillingness to engage in serious regulation and to prosecute corporate crime to the fullest, which would mean an end to the current practice of deferred prosecutions and other forms of wrist-slapping.

Forget about roads and bridges: the real secret of business success is government tolerance of corporate misconduct.

Neither Social Darwinism Nor Paternalism

President Obama’s critique of the Republican budget plan as “thinly veiled social Darwinism” is a refreshingly blunt statement about the retrograde features of contemporary conservative thinking.

The efforts of House Budget Chair Paul Ryan and his colleagues to accelerate the upward redistribution of income and the unraveling of the social safety net deserve all the scorn that Obama served up.

While invoking a phrase that has a grand history in the critique of laissez-faire ideology, Obama failed to mention how social Darwinism was originally embraced not just by philosophers such as Herbert Spencer but also by leading industrialists such as Andrew Carnegie and John D. Rockefeller (a fact noted by Richard Hofstadter in his seminal work on the subject, Social Darwinism in American Thought).

Rather than pointing out how social Darwinist ideas can still be found in corporate boardrooms (especially those of Koch Industries) as well as in House hearing rooms, the purportedly socialist Obama went out of his way to sing the praises of business: “I believe deeply that the free market is the greatest force for economic progress in human history.”

Obama also used his speech to extol Henry Ford, specifically for the auto magnate’s policy of paying his workers enough so that they could afford to buy the cars they were assembling. Higher wages are a good thing, but it is misleading to cite Ford without putting his practices in some context.

Henry Ford gained fame as the man who instituted the Five Dollar Day for his workers in the 1910s. The facts were somewhat more complicated: not all workers at Ford Motor qualified for that amount, which in any event was not the base pay. A large part of the $5 consisted of a so-called “profit-sharing” bonus that had to be earned — by working at a high level of intensity on the job, and by living in a style that Ford considered appropriate off the job.

To enforce the lifestyle regulations, Ford created a Sociological Department with inspectors who visited the homes of workers and interviewed family members and neighbors. The company wanted to be sure that workers were not spending their share of Ford profits in a frivolous or irresponsible manner.

Ford’s practices were also designed to discourage unionization. When workers nonetheless tried to organize, Ford’s paternalism quickly dissolved. In 1932 a protest march to the company’s River Rouge plant in Dearborn, Michigan was met with tear-gas and machine-gun fire, which killed four persons. Dearborn police officers were supplemented by members of the Service Department, Ford’s own security force. Headed by Harry Bennett, the Service Department became notorious for its surveillance of workers both on and off the job. In a 1937 confrontation known as the Battle of the Overpass (photo), union organizers were attacked by Bennett’s security force and freelance thugs when they attempted to distribute leaflets outside the Rouge plant. Ford was the last of Detroit’s Big Three to give in to unionization.

It is telling that the word “unions” was not uttered a single time during Obama’s speech. Instead, Obama seems to want us to believe that the alternative to deregulation and trickle-down economics is a return to some kind of government and big business paternalism.

The first problem is that big business, despite giving frequent lip service to corporate social responsibility, has almost completely abandoned paternalism in favor of the human resources principles of Wal-Mart. As for government paternalism, Obama himself felt compelled to say in his speech that “I have never been somebody who believes that government can or should try to solve every problem.”

Even if the prospects for paternalism were more promising, it would not be the most effective way of responding to neo-social Darwinism. As the story of Henry Ford illustrates, paternalism is simply another form of social control by the powerful, and when necessary it is quickly abandoned in favor of repression and austerity. Collective action of the type that was put aside after Obama took office and recently revived by the Occupy Movement is the only real way forward.

Are Free Market Ideologues and Big Business Heading for a Divorce?

Conservatives are feeling smug. The recently completed Supreme Court oral arguments on the healthcare law were replete with skepticism about the powers of the federal government and glorification of personal liberty, though what was being celebrated was the dubious right of a person to be uninsured against the risk of a catastrophic medical event.

We’ve come to assume that modern conservatism is a stalking horse for an expansion of corporate power. Yet were the interests of big business really being served by the evisceration of the Patient Protection and Affordable Care Act?

First, in their desire to invalidate the individual mandate to purchase coverage, lawyers opposing the law and conservative justices went out of their way to distinguish it from what they had to admit were the valid powers of Congress to impose taxes and regulate commerce. Nary a negative word was said about the provisions of the act that impose dramatic new restrictions on the health insurance industry relating to pricing and the denial of coverage to those with pre-existing conditions. Although the justices seemed more inclined to throw out the entire law than to simply carve out the individual mandate, they suggested they would have no problem if Congress subsequently passed new legislation that reinstated the regulations without the hated mandate.

What the justices downplayed is that the Affordable Care Act was a grand bargain with the health insurance industry in which it acceded to the new regulations in exchange for being guaranteed a vast new pool of customers whose premium payments would be heavily subsidized by the federal government. The Right has gotten so carried away with its denunciations of the Act as a government takeover that it has forgotten it is really an enormous boon to private insurers.

One member of the court who chose not to ignore this was Justice Ginsburg, who during the second day of the hearings said she found it “very odd” that the opponents of the law were conceding that the government had every right to take over entire portions of the healthcare insurance market, as with Medicare, but rejected an arrangement designed to “preserve private insurers.”

The point also came up in an exchange the same day between Justice Kennedy and Solicitor General Donald Verrilli in which Kennedy seemed to acknowledge that Congress would have the right to create a single payer system, and Verrilli responded that it was “a little ironic” that the Act was being criticized because Congress had instead decided to “to rely on market mechanisms and efficiency and a method that has more choice than would the traditional Medicare or Medicaid-type model.”

Of course, there is no guarantee that if the Affordable Care Act is struck down in its entirety, Congress will reinstate the most significant regulations on the insurance industry, much less that it will embrace single payer. But one has to wonder what the industry thinks about the position in which it will be put.

Once they made their deal with the Obama Administration, the big insurers largely stayed on the sidelines as the Right assailed the Act, purportedly in the name of free enterprise. Now those companies seemed to be confused about the law.

In its most recent 10-K filing, giant UnitedHealth Group acknowledges that the new law “may create new or expanding opportunities for business growth” but also warns that it “could materially and adversely affect the manner in which we conduct business and our results of operations, financial position and cash flows.” Its rival Wellpoint expresses the same ambivalence in its 10-K, saying: “As a result of the complexity of the law…we cannot currently estimate the ultimate impact…on our business, cash flows, financial condition and results of operations.”

Yet they seem even more worried about the possibility that the law may be overturned. UnitedHealth writes: “Any partial or complete repeal…could materially and adversely impact our ability to capitalize on the opportunities presented by the Health Reform Legislation or may cause us to incur additional costs of compliance.”

Apart from the insurance companies, there are other major corporate players that have been intending to “capitalize on the opportunities” created by the Affordable Care Act’s infusion of lots more federal money into the medical sector. For example, for-profit hospital operator HCA writes in its 10-K that the Act “may result in a material increase in the number of patients using our facilities who have either private or public program coverage,” though it also worried about intended reductions in payments to Medicare providers. On the issue of partial or complete repeal, it also admits that the impact would be “unclear.”

Healthcare is not the only arena in which corporate interests may be having second thoughts about their direct (as with the Kochs) or indirect encouragement of junkyard dog-style conservatism. Tea party types in Congress recently decided to challenge the continued existence of the Export-Import Bank, an institution that has long been relied on by major companies such as Boeing and General Electric to sell their big-ticket items to foreign customers.

That move features prominently a New York Times front-page story reporting that some business interests are wondering if they made a mistake in heavily supporting the far-right Republicans who seem to call the shots on Capitol Hill these days. The article quotes a spokesman for the Club for Growth, which promotes “economic freedom” as admitting that “free market is not always the same as pro-business.”

Hopefully, those are not the country’s only choices. If we’re lucky, the clash between these two tendencies will open up more space for changes that promote economic and social justice while putting restraints on both the market and the corporations.

Subsidizing the 1%

Seeking to counter the criticisms raised by the growing Occupy movement, Herman Cain and other apologists for the super-wealthy insist that those who get rich do so only by dint of their own hard work and risk-taking.

This is ridiculous, of course. Accumulating a great fortune requires, among other things, a legal system oriented to property rights, a tax system biased in favor of investment income, and government spending on infrastructure ranging from interstate highways to the internet.

The 1% do not only benefit from the general social and economic framework: in many cases they also receive financial assistance directly from taxpayers. This can be seen most clearly in the economic development subsidies that corporations receive from state and local governments. These are usually awarded in the name of job creation, but often few or no good jobs are created, making the subsidies little different than a handout to powerful business entities.

The closest approximation we have to a roster of the 1% is the Forbes 400 list of the wealthiest Americans. The companies used by those individuals as the vehicles for amassing billions have in many cases been on the receiving end of taxpayer subsidies. Here are some examples drawn from the data my colleagues and I at Good Jobs First have compiled for our Subsidy Tracker database and other sources:

Bill Gates: No. 1 on the Forbes 400 with a net worth of $59 billion

When Microsoft, the source of Gates’ wealth, builds giant server farms to meet its growing data needs it looks for locations that can provide dirt-cheap electricity. Yet the huge company also seeks special tax breaks from state and local governments. In 2010 the company took the lead in pressuring the legislature in its home state of Washington to enact a special sales tax exemption on equipment purchased for rural data centers. After deciding in 2007 to build a $550 million data center in Bexar County, Texas near San Antonio, Microsoft pushed for a subsidy package that turned out to be worth more than $32 million, including $27 million in city and county property tax abatements. State officials in Iowa agreed to provide a $3.4 million grant to pay for infrastructure improvements around a Microsoft data center being built in West Des Moines. These data centers provide tiny numbers of jobs.

Warren Buffett: No. 2 with $39 billion

When General Re, an insurance firm owned by Buffett’s Berkshire Hathaway holding company, decided in 2009 that it was no longer satisfied with its headquarters in Stamford, Connecticut, it gave the impression that it might move out of state. Panicked state officials put together a subsidy package that included a $19.5 million tax credit and a $9 million low-cost loan to subsidize the company’s move to another location within Stamford. No new jobs were to be created.

Larry Ellison: No. 3 with $33 billion

In 2008 Ellison’s software company Oracle obtained $15 million in state tax credits to subsidize the cost of a $300 million data center in Utah that was expected to create only about 100 full-time jobs. In addition, the city of West Jordan agreed to divert $11.8 million in property taxes over ten years to pay for infrastructure costs.

Charles Koch and David Koch: No. 4 with $25 billion

Although the Koch Brothers are rabid proponents of “free” market policies, their Koch Industries has taken more than $10 million in subsidies under Oklahoma’s Investment/New Jobs Tax Credit program.

Christy Walton & family: No. 6 with $24.5 billion (and three other Waltons worth more than $20 billion)

The descendants of Wal-Mart founder Sam Walton are the richest group of relatives in the country. In addition to lousy wages and cheap imports, Wal-Mart’s growth has been funded by taxpayers. At Good Jobs First we have documented more than $1.2 billion in state and local economic development subsidies that have gone to Wal-Mart stores and distribution centers around the country.

Jeff Bezos: No. 13 with $19.1 billion

Bezos built Amazon.com into an online retailing powerhouse by exploiting what amounts to an unofficial subsidy. The company’s resistance to collecting sales taxes on customer purchases gives it a competitive advantage over brick-and-mortar rivals. Amazon also plays the conventional subsidy game. When it opened fulfillment centers in Kentucky about a decade ago it obtained more than $27 million in financial assistance from the state.

Mark Zuckerberg: No. 14 with $17.5 billion

Zuckerberg’s Facebook also rides the data center subsidy gravy train. In 2010 the company chose to locate a server farm in an enterprise zone in Prineville, Oregon, enabling it to enjoy property tax breaks that could be worth more than $40 million over the next 15 years. Facebook also applied for a 10-year waiver of all income and excise taxes under the Oregon Investment Advantage program. The facility opened in April with a total staff (including security guards) of 40 people. In 2010 Facebook also got a $1.4 million grant from Texas Gov. Rick Perry’s Texas Enterprise Fund to help pay for the creation of a sales office in Austin.

Sergey Brin and Larry Page: No. 15 with $16.7 billion

Founded by Brin and Page, Google is yet another tech darling in the data center racket. In 2007 the company announced it would build one of those facilities in the western North Carolina town of Lenoir after pressuring state and local officials to come up with a subsidy package that turned out to be worth $260 million. In 2008 Google turned down a small portion of the subsidy package – $4.7 million from the Job Development Investment Grant program – apparently because it did not expect to reach its original goal of creating 210 jobs within four years. Google also got about $49 million in subsidies for a data center it opened in Iowa in 2009.

Michael Dell: No. 18 with $15 billion

At one time, the founder of computer company Dell was one of the few members of the Forbes 400 whose firm was creating manufacturing jobs in the United States. On that basis, Dell got officials in North Carolina to put together a $242 million subsidy package in 2004 for a PC assembly plant in Winston-Salem. The facility opened in 2005 with 350 workers and grew to about 1,100 before cutting back to about 900. State and local officials were stunned in 2009 when Dell announced plans to shut the operation (and others in the U.S.) and outsource the work to contract plants in Mexico and other countries. Officials pressed Dell to return the subsidies it had received. The company agreed to give back about $26 million of the local subsidies but balked at repaying state tax credits it had claimed.

These subsidies, by themselves, did not ensure the success of the companies or propel the members of the Forbes 400 into the realm of ten-figure net worths. Yet the amounts of money involved are not insignificant—especially to the governments that had to forgo the revenues. In the aggregate, state and local subsidies take about $60 billion a year out of the funding for education, healthcare, fire protection and other public services.

Such subsidies are also a prime example of how this country caters to wealthy individuals and large corporations, and how they in turn demand to be compensated by taxpayers for what they should be doing at their own expense. It’s time for the 1% to do less taking and more giving back.