Dirt Diggers Digest

Is the Recovery Act Stimulating Privatization?

AFSCME Key portions of the $787 billion American Recovery and Reinvestment Act, especially the state fiscal stabilization fund, are designed to prevent job loss among teachers and other state and local government employees. But what about the rest?

The assumption seems to be that most of the job creation and retention will take place in the private sector. Yet one question that has received little attention since ARRA was signed by President Obama in February is whether the spending will contribute to the process of privatization and contracting-out of functions previously performed by public sector workers.

On October 15 the Recovery Accountability and Transparency Board released the first batch of recipient reporting data covering some $15 billion in direct federal contracts. Although this is a small portion of overall ARRA spending (information relating to the much larger realm of federal grants to states and others will be released on October 30), it begins to shed some light on the privatization question.

My colleagues and I at Good Jobs First have been examining the universe of around 9,000 recipient reports summarized in a national spreadsheet available on the Recovery.gov website. Many of the entries are unremarkable. They involve contracts for functions such as manufacturing and construction that have traditionally been concentrated in the private sector. It is not surprising that the federal government gave an ARRA contract to Chrysler to supply vehicles and one to Clark Construction to build a new headquarters for the Coast Guard.

Yet many of the other entries appear to be part of the contracting-out phenomenon. You can tell this, first, by looking at the names of the contractors: one firm called Federal Contracting Inc. leaves little doubt as to its orientation. There are others that have a reputation for being involved in high-profile outsourcing deals. An example is IAP Worldwide Services, a politically connected firm (former Vice President Dan Quayle is on its board of directors) that got a controversial contract to take over management of the Walter Reed Army Medical Center in Washington.

Or else you can look at the description of the projects. A company called 4W Solutions got a contract from NASA for “administrative activities, configuration management of documents, procurement-related analysis and support for report integration/administrative support for Cross-Agency Support construction contracts.”

To be a bit more systematic in our analysis, my colleagues and I decided to match the Recovery.gov list of contractors to the membership list of the Professional Services Council, the leading trade association for the federal outsourcing industry.

PSC’s members range from large and notorious contractors such as KBR (formerly the Halliburton subsidiary Kellogg, Brown and Root), Xe Services (formerly Blackwater) and CACI International (linked to the Abu Ghraib torture scandal) to small and obscure consulting firms. During its 27-year history, the association has sought to banish the use of the term “Beltway Bandit” to refer to federal contractors and has pushed for legislation that would maximize the amount of federal work that gets outsourced. It has also resisted the recent move toward insourcing.

We found that, of the 382 PSC members listed on the association’s website, about 50 are on the list of ARRA federal contract recipients (name variations make an exact count difficult). In all, these members and their affiliates have been awarded about 250 ARRA contracts with a total value of more than $800 million.

Some of these involve engineering and construction services, but others deal with functions that are more inherently governmental, such as a contract given to Deloitte Consulting to provide “program management oversight” for ARRA grants made by the Federal Aviation Administration.

In an economic crisis such as the current recession, all job creation is to be welcomed. But it would be a shame if some portion of Recovery Act money is being used in ways that do little more than shift work from the public sector to the private sector.

(Thanks to Tommy Cafcas, Caitlin Lacy and Leigh McIlvaine for their research help.)

Update: I should have mentioned that KBR and Xe Services are not among the recipients of ARRA contracts, but CACI has two.

Further update: We spent more time analyzing the spreadsheet and found many more ARRA contracts that can be attributed to PSC members through joint ventures, affiliates, etc. Our tally is now about 470 contracts worth a total of about $3.5 billion. These include some huge contracts associated with clean-up projects at Department of Energy nuclear facilities.

Exposing the Executive Pay of Beltway Bandits

The recipient reporting system mandated by the American Recovery and Reinvestment Act is designed to inform the public on how federal stimulus spending is creating jobs. The just-released first phase of that system still has a considerable number of bugs to work out with regard to its job numbers, but it also represents a new step forward in making the operations of federal contractors more transparent.

The rules governing Recovery Act reporting include a requirement (FAR 52.204-11) that certain contractors disclose the amount of compensation paid to their five highest paid executives. These include companies that receive $25 million or more in federal governments as long as federal contracts account for 80 percent or more of their total revenue.

Publicly traded companies already report this information to the Securities and Exchange Commission in their proxy statements, which are made available to the public. The Recovery Act rule is unusual in that it extends executive compensation reporting to privately held firms, which typically keep such information to themselves.

In the new Recovery Act contract data, several hundred contractors provided compensation information, including many that apparently were not required to do so. As shown in the table below, 14 contractors reported compensation in excess of $1 million for their top executive (not including obvious glitches such as a modest-sized excavating company in Washington State that entered $986 million in the compensation column).

Half of the contractors are part of publicly traded companies, and their compensation amounts match what was previously disclosed by those companies. The rest are privately held, meaning that this may well be the first time the pay of their top executives has been officially disclosed.

The most interesting of these is the huge consulting company Booz Allen Hamilton, which since fiscal year 2000 has been the recipient of more than $16 billion in federal contracts. It does business with many agencies, but it is especially close with the Pentagon. Last year it was the 22^nd largest military contractor. The Recovery Act reports do not list executive names, but it likely that Booz Allen CEO Ralph W. Shrader was the one who was paid more than $8.4 million last year.

The Recovery Act does not include funding for military purposes, but it forces Pentagon contractors and other Beltway Bandits that happen to be privately held to reveal how richly they are rewarding their top executives with the help of taxpayer funds.

Top Compensation Amounts Reported by Recovery Act Federal Contractors

JOHNSON CONTROLS BUILDING AUTOMATION SYSTEMS LLC
$17,385,308

RAYTHEON TECHNICAL SERVICES COMPANY LLC
$15,056,151

BOOZ ALLEN HAMILTON INC.
$8,457,003

BALL AEROSPACE & TECHNOLOGIES CORP.
$8,111,298

ENERGYSOLUTIONS FEDERAL SERVICES, INC.
$6,336,752

ADVANCED CONSTRUCTION TECHNIQUES LTD
$2,724,660

DANYA INTERNATIONAL INC.
$2,363,143

ROLLS-ROYCE NORTH AMERICAN TECHNOLOGIES INC.
$2,025,860

WEST VALLEY ENVIRONMENTAL SERV
$1,955,909

SCIENTIFIC RESEARCH CORPORATION
$1,471,745

ORBITAL SCIENCES CORPORATION
$1,448,752

STG, INC.
$1,201,762

PARSONS INFRASTRUCTURE & TECHNOLOGY GROUP INC.
$1,128,070

ENVIRONMENTAL CHEMICAL CORPORATION
$1,016,426

Source: Analysis of the combined state spreadsheets provided at the Recipient Reported tab here.

Notes:

The figure for Johnson Controls Building Automation Systems is apparently the compensation of Stephen A. Roell, CEO of the parent company Johnson Controls Inc., which is publicly traded and thus already reported the compensation of its top officers through its SEC filings. The figure above is the same as that reported for Roell in the company’s latest proxy statement.

The figure for Raytheon Technical Services is the same as that reported for parent Raytheon’s CEO William H. Swanson in the company’s latest proxy statement.

Booz Allen is privately held. Its CEO is Ralph W. Shrader.

The figure for Ball Aerospace is the same as that reported for parent Ball Corporation’s CEO R. David Hoover in the company’s latest proxy statement.

The figure for EnergySolutions Federal Services Inc. is the same as that reported for parent EnergySolutions’ chief financial officer Philip O. Strawbridge in the company’s latest proxy statement.

Advanced Construction Techniques Ltd is privately held. Its president is James Cockburn.

Danya International Inc. is privately held. Its CEO is Jeffrey A. Hoffman.

The figure for Rolls-Royce North American is roughly the same (after currency conversion) as that reported for parent Rolls-Royce PLC chief executive Sir John Rose in the company’s annual report.

West Valley Environmental Services LLC describes itself as “a newly-formed company comprised of four companies – URS Washington Division, Jacobs Engineering Group, Environmental Chemical Corporation (ECC), and Parallax/Energy Solutions – with extensive experience conducting environmental cleanup at Department of Energy (DOE) sites across the United States.” Its compensation figure above is the same as that reported in the proxy statement of URS Corporation for URS Washington Division President Thomas H. Zarges.

Scientific Research Corporation is privately held. Its CEO is Michael Watt.

The figure for Orbital Sciences is the same as that reported by the company for CEO David W. Thompson in the company’s latest proxy statement.

STG Inc. is privately held. Its CEO is Simon S. Lee.

Parsons Infrastructure is a unit of privately held Parsons Corporation, whose CEO is Charles L. Harrington.

Environmental Chemical Corporation (which seems to prefer being called simply ECC) is privately held. Its CEO is Manjiv Vohra.

UPDATE: On October 30 Recovery.gov published a revision of the contractor data that fixed various formatting problems and added names to the executive compensation figures. For more details, see here.

Pressuring Big Business to Start Rehiring

hyatt The conventional wisdom is that the emerging economic rebound will be a jobless recovery for a long time to come. Yet there is no consensus on why this is the case.

Congressional Republicans are all too willing to cite the purported shortcomings of the Democrats’ stimulus program, but their ulterior political motives are transparent. Some claim that banks are keeping too tight a lid on business credit, while others suggest that newly frugal consumers are to blame for not spending more.

There is surprisingly little criticism being directed at those who are in the best position to do something about joblessness: employers, especially large ones. The assumption seems to be that corporations are helpless victims of economic turmoil and cannot be expected to start hiring again on their own initiative.

Now, it is being said, we need to give companies an extra incentive to replenish their payrolls. Congress and the Obama Administration are reported to be giving serious consideration to the creation of a new tax credit for job creation. This would be a boon for those who get hired, but it is more than a bit infuriating that we now need to subsidize employers to do what used to happen routinely when the business cycle began to turn around.

The coddling of the employer class is all the more questionable given that, in many cases, large-scale layoffs appear to be a matter of choice rather than necessity. Take the case of computer maker Dell, which just announced that it will obliterate more than 900 jobs as part of its decision to close an assembly plant in Winston-Salem, North Carolina that it opened in 2005 after pressuring state and local governments to cough up some $300 million in subsidies. Dell said the move was “part of an ongoing initiative to enhance the long-term value it delivers to customers by simplifying operations and improving efficiency.” Translation: the company has been selling off its production facilities to cut costs and raise profits.

Or consider Simmons Bedding Company, which has laid off 1,000 workers and will probably shed more as it heads to bankruptcy court. Its problems are less the state of the economy than the effects of having been taken over by a series of private equity firms that have milked the operation dry.

Then there’s the situation of the housekeepers at Boston-area Hyatt hotels who were forced out of their $15 an hour jobs so the company could replace them with $8 an hour temps. Before being told that they were being booted out, the housekeepers were asked to train the temps, whom they were told would be filling in during vacations. The layoffs have prompted protests in Boston and around the country (photo).

In Fremont, California, nearly 5,000 workers at the New United Motor Manufacturing plant are losing their jobs because Toyota decided to get rid of its only unionized U.S. operation after the new federally subsidized General Motors exited what had been a 25-year joint venture between the two companies.

Last month, drugmaker Eli Lilly said it would eliminate 5,000 jobs as part of a restructuring designed to “speed medicines from its pipeline to patients.”

These recent examples are part of a trend that began well before the current crisis. For the past decade, U.S. private sector employment levels have been stagnant as corporations engaged in an orgy of offshore outsourcing, union-busting, downsizing and compelling the workers who remained to produce more than ever before.

This is not to say that all job losses can be blamed on restructuring and corporate greed, but neither is it accurate to attribute them all to forces beyond the control of employers. Instead of focusing exclusively on bribing corporations to hire people, it would be good to hear some criticism of big business for failing to do enough to help the country recover from the unemployment crisis—and for causing much of that crisis through its short-sighted and self-interested practices.

For years, large corporations announced layoffs as a way of currying favor with Wall Street. It would be refreshing to have them now feel pressure to announce new hiring to appease the rest of us.

Dissension in the Corporate Ranks

donohue Business lobbyists may be gloating over the divisions in the Democratic Party on healthcare reform, but they are facing a serious schism of their own.

In recent weeks several large corporations have quit their membership in the U.S. Chamber of Commerce because of the giant trade association’s intransigent opposition to the climate legislation now being considered by Congress. The defectors include utilities Pacific Gas & Electric, PNM Resources and Exelon, while shoe giant Nike took a more limited step by resigning its seat on the Chamber’s board.

The resignations represent the most significant internal turmoil in the Chamber since the early 1990s, when the organization outraged some of its members and all of the Republican Party leadership by showing support for portions of the Clinton Administration’s economic policies and healthcare reform proposal. “The Chamber has lost its way,” Rep. John Boehner told Business Week. “It sold out its principles for 30 pieces of silver from Bill Clinton.”

While the Chamber remained appropriately reactionary on most issues, the controversy brought about a shakeup within the organization and probably contributed to the decision of its president Richard Lesher to step down in 1997. The person chosen to succeed him was Thomas J. Donohue Jr., a hardliner described as “militant” and a “junkyard dog.” Among other things, Donohue had, in his role as head of the American Trucking Association, tried to get Congress to ban the use of corporate campaign pressure tactics by unions.

No one could accuse Donohue (photo) of straying from business laissez-faire ideology. As the Wall Street Journal pointed out in 2001, he was also quite willing to use the clout of the Chamber to advance the narrow interests of individual large corporations. Donohue dramatically expanded the organization’s membership and thus its budget, allowing the Chamber to spend unprecedented sums on lobbying.

But now it seems that Donohue and the Chamber have been a bit too orthodox. More and more large corporations are accepting that global warming has to be addressed and that the Waxman-Markey bill passed by the House and the companion legislation now before the Senate would not have the disastrous consequences for business that the Chamber has predicted.

The Chamber, however, increasingly seems to be captive to the coal industry, its railroad partners and other corporate fossil-fuel dead-enders. Environmental groups such as the Natural Resources Defense Council are accusing Donohue of having a personal conflict of interest because of his long tenure as an outside director of one of those railroads, Union Pacific.

While the actual resignations from the Chamber are few so far, the number will probably rise. Other members such as General Electric are making it clear the Chamber does not speak for them on climate issues and are facing mounting pressure to make a complete break.

It is refreshing to see dissension in the corporate ranks on the climate debate. If we can continue to drive a wedge between business pragmatists and Neanderthals on this and other issues, we may see some real progress in the federal legislative arena.

Shades of Green

Michael Moore may be on all the talk shows these days touting his new film on the evils of capitalism, but elsewhere in the mainstream media the celebration of big business continues apace. Especially when it comes to the environment, we are meant to believe that large corporations are at the forefront of enlightened thinking.

This is the implicit message of the cover of the new issue of Newsweek, which is filled with leaves to promote its feature on “The Greenest Big Companies in America: An Exclusive Ranking.” The list itself, however, has more validity than the usual exercises of this sort, which tend to take much of corporate greenwash at face value.

The Newsweek rankings are based on what appear to be solid data from KLD Research & Analytics, producer of the reputable (but expensive) SOCRATES social investing database, along with Trucost and CorporateRegister.com. Each company in the S&P 500 is rated on its environmental impact, its environmental policies, and its reputation among corporate social responsibility professionals, academics and other environmental experts. The ratings even take in account a company’s “regulatory infractions, lawsuits and community impacts.”

Not surprisingly, those at the top of the list are high-tech companies—such as Hewlett-Packard (ranked No. 1), Dell (2), Intel (4), IBM (5) and Cisco Systems (12)—which have never had quite the same pollution problems as old-line industries and which in many cases have made themselves “cleaner” by outsourcing their production activities to overseas producers. Dell, in particular, is on its way to becoming a hollow company by selling off its plants.

More interesting is that supposed sustainability pioneer Wal-Mart comes in at No. 59, behind old-line industrial companies such as United Technologies and Owens Corning. Whole Foods Market, purveyor of over-priced organic groceries, is a bit lower at 67. Oil giant Chevron, which urges the public to “join us” in its supposed commitment to energy efficiency, is ranked 371, not much better than long-time global warming denier ExxonMobil (395).

Since the Newsweek list covers the entirety of the S&P 500, we can also look at what is probably the most significant group: those at the very bottom. The harm that these companies—especially utilities such as American Electric Power and Southern Company with lots of fossil-fuel-fired power plants—do to the environment far outweighs any good done by those at the top of the list. Also among the laggards are agribusiness giants Monsanto (No. 485), Archer Daniels Midland (486), Bunge (493) and ConAgra Foods (497).

But special mention must be given to the absolute worst company of all: mining giant Peabody Energy. On a scale of 0 to 100, Peabody is awarded all of 1 point, presumably reflecting its single-minded dedication to climate-destroying coal and its support for groups fighting the climate bill now in Congress.

Newsweek deserves credit for undertaking a serious evaluation of corporate environmental performance. The web version even has a nice sidebar on green fakery. But the magazine could have easily turned the list upside down and headlined its feature “The Biggest Environmental Culprits of Corporate America.”

A Truly Captive Market

parasites The House of Representatives, in a rare embrace of de-privatization, has just passed legislation that would put an industry out of business. If approved by the Senate, the Student Aid and Fiscal Responsibility Act will eliminate the heavily subsidized business of bank origination of federal student loans. Students would get their loans directly from the federal government and would see a huge increase in the Pell Grant program, thanks to the tens of billions of dollars saved by eliminating the subsidies.

Unfortunately, the impulse to abolish a parasitic form of private enterprise has been missing from the official debate on healthcare reform ever since Democratic leaders and the Obama Administration shunned the idea of expanding Medicare eligibility to non-seniors. Now, given the uncertain prospects for a public insurance option (a weak substitute for single payer), we are faced with the possibility that the parasites of the private health insurance industry will not only survive but will be empowered as never before.

While support for the public option has waned, the powers that be in both major parties have never wavered from their endorsement of the individual mandate—the bizarre idea that the solution to the problem of the uninsured is to force them purchase insurance. This implies that being without insurance is a personal shortcoming rather than a social problem. It makes as much sense as saying that the way to help the homeless is to compel them to buy a house.

It is true that the proposals for an individual mandate come with provisions for subsidies, yet as the plan just issued by Senate Finance Committee Chairman Max Baucus illustrates, those subsidies would not extend to many middle-income families, who might find themselves in the absurd position of having to pay penalties to the federal government for failing to buy coverage they cannot afford.

What’s wrong with the imposition of an individual mandate without a public option is more than that of inadequate subsidies. It would amount to an unprecedented move by government to compel residents to become customers of a particular set of corporations. States currently require drivers to obtain insurance for their vehicles from private carriers, but automobile ownership is not compulsory. Adoption of an individual mandate sans public option would make it a condition of being alive for the uninsured to start paying premiums to a private insurance company.

What next? Will the federal government allow the likes of WellPoint and Cigna to put private bill collectors to work harassing “deadbeats” who don’t make their mandatory payments? Since the carriers could not drop these non-paying customers, would the companies be allowed to lock them up in healthcare debtor prisons until a relative takes care of the bill?

Maybe not. But there’s a strong possibility that the furor over unaffordable mandatory coverage would prompt Congress to bring down rates by allowing insurers to offer lower-quality plans. If the public option is jettisoned along with single payer, “reform” may turn out to be nothing more than a way of making millions of Americans pay for the dubious privilege of shifting from the ranks of the uninsured into a captive market of the woefully underinsured.

Will BusinessWeek Escape from the Vultures?

BW2 This summer it has appeared that the venerable BusinessWeek, born in 1929 at the dawn of the Great Depression, might not survive the Great Recession, at least not in its traditional form. In July it came to light that McGraw-Hill was seeking a buyer for BW, which like many other print outlets has been suffering from a sharp decline in advertising revenue.

Numerous observers have claimed that the magazine is essentially worthless, speculating that it might sell for a token price plus the assumption of liabilities. It has also been taken for granted that the new owner would sharply scale back or even eliminate the print operations and take a machete to the staff.

The potential buyers whose names surfaced over the past two months have included media industry vultures such as Platinum Equity Partners, which bought the San Diego Union-Tribune earlier this year and embarked on a frenzy of layoffs, and OpenGate Capital, which last year paid all of $1 to take over TV Guide (and its debt) and got seller Macrovision to lend it $9.5 million to boot.

So it is encouraging that the Wall Street Journal is now reporting that Bloomberg LP is considering a bid. Of all the potential buyers that have been mentioned, Bloomberg seems most likely to preserve BW’s unique position in U.S. financial journalism.

For decades, BW served as the one relatively independent voice among the major business magazines. While Fortune (after its early years) and Forbes functioned as cheerleaders and hagiographers for the business elite, BW was often willing to take an honest look at the shortcomings and outright transgressions of major corporations.

This was demonstrated most clearly in its famous (among progressives) September 2000 cover story that asked whether corporations had too much power, noting: “Part of the problem is that no one’s reining in business anymore. Most of the institutions that historically served as a counterweight to corporate power — Big Government and strong unions — have lost clout since Ronald Reagan came to town crusading for deregulation and local control.” These themes were echoed in an October 2003 cover article “Is Wal-Mart Too Powerful?”

BW’s March 1986 cover piece called “The Hollow Corporation” sounded the alarm about the way major companies were eroding the U.S. industrial base by contracting out their production activities to foreign firms. Its April 1987 article “Warning: The Standard of Living is Slipping” was one of the early reports on the reversal of upward mobility.

The magazine also diverged from its competitors on the issue of labor—both by covering unions more seriously and by declining to demonize them. In 1991 it published a commentary by its long-time labor writer Aaron Bernstein headlined “Busting Unions Can Backfire on the Bottom Line” and in 2004 it put SEIU’s Andy Stern on its cover for a piece entitled “Can This Man Save Labor?”

It is difficult to imagine the private equity firms and other bargain hunters said to be considering bids for BW supporting this kind of journalism. Bloomberg, on the other hand, has exhibited similar moxie in the editing of its Bloomberg Markets magazine. For example, as noted here, that publication recently published a hard-hitting piece on the way major U.S. corporations are contributing to the deforestation of the Amazon and thus exacerbating the problem of global warming.

In an era of continuing corporate misbehavior, we can ill afford the loss of an information source such as BusinessWeek. Let’s hope it escapes from the vultures.

Note: I recently did a thorough update of my guide to online corporate research as well as the index of information sources mentioned here in the Digest.

Will Democracy Invade the Boardroom?

board meeting Life has been tough for the Securities and Exchange Commission, what with the power grab at its expense by the Federal Reserve and new revelations that its investigators acted like Keystone Kops when looking into tips about the suspicious behavior of Bernie Madoff. Now the SEC has the opportunity to do some good. The question is whether it has the nerve to stand up to powerful corporate interests.

In May the SEC voted to propose rule changes that would enable shareholders to nominate directors for corporate boards. The Commission issued a 250-page description of the proposed changes in June and asked for public comments. A decision is expected this fall.

The process of selecting board candidates makes a mockery of the idea of corporate democracy. Except in those rare instances when a takeover effort leads to a proxy fight, potential directors are chosen by management and run unopposed. This helps ensure that the ranks of outside (non-executive) directors, who are supposed to function as watchdogs, are filled with agreeable souls.

The proposed SEC rules would be a vast improvement, but they would allow shareholders to name no more than one-quarter of the candidates, and they would limit nominating rights to large shareholders (those with at least 1 percent of big companies and larger percentages in smaller ones). However, alliances of shareholders would be able to use their combined holdings to meet the threshold.

Comments flooded into the SEC over the summer. As a review of the comments conducted by the Wharton School of Business shows, the reactions have been highly polarized, with large companies warning of doom and proponents such as large pension funds predicting the changes would be a boon for shareholder rights.

The Business Roundtable weighs in with more than 150 pages of comments, posing dozens of plausible and not-so-plausible objections, including the hilarious claim that the rules would violate a corporation’s First Amendment rights by forcing it to include comments by outside candidates in its proxy statement.

Revealing a fear that the rule changes would undermine the clubbiness that characterizes the current system, comments submitted by McDonald’s Corporation fretted that shareholders might nominate someone “who may not have even met the existing members of the Board.” Another laughable objection is one made, for example, by Sara Lee Corporation claiming that the change would result in directors who represent a special interest rather than the interests of all shareholders. Sara Lee conveniently forgets that under the current system outside directors are often chosen because of their affiliation with a financial institution or other entity that has a significant relationship with the company—a suspicious practice known as corporate interlocks or interlocking directorates.

Some commenters, including a joint submission by 26 large corporations, support a compromise that, instead of imposing new proxy rules on all publicly traded companies, would make it easier for shareholders to seek changes in the nominating process on a company-by-company basis. This seems like little more than an attempt to undermine the whole idea.

But perhaps the saddest thing about the comments is the surprisingly large number of submissions by owners of small businesses—from a dog bakery called For Pampered Pooches to Dreamland Daycare—who have somehow been brainwashed by some trade association into thinking that a reform aimed at major corporations is somehow going to threaten their privately held enterprise.

Here’s hoping that the SEC ignores the preposterous arguments of both large and small companies and injects some measure of democracy into Corporate America.

Will Corporate Cash be Allowed to Overwhelm Elections?

nast moneybag2 If the United States were a country truly committed to democracy, we would now be having a national discussion on limiting the role of big money in politics. After all, we are still recovering from a financial crisis brought on by an orgy of deregulation instigated by Wall Street interests that spent lavishly to influence members of Congress from both major parties and then had to be bailed out by taxpayers. Major auto companies such as General Motors, which for years successfully lobbied to weaken fuel-economy standards, also had to be bailed out when they could no longer sell gas-guzzling SUVs.

Instead, the role of corporate money is stronger than ever. Rather than having the decency of withdrawing from the policy arena, bailed-out companies have continued to lobby for weaker regulation. At the same time, the insurance industry has thrown a monkey wrench into long-overdue healthcare reform by making hefty contributions to conservative Democrats. The energy industry used its resources to weaken the climate bill.

And now the U.S. Supreme Court may be preparing to open the floodgates completely. In June the high court took the unusual step of announcing it would hold a special hearing this September on a case involving a rightwing advocacy group, Citizens United, which ran afoul of the McCain-Feingold campaign finance law in connection with its distribution of a film attacking Hillary Rodham Clinton during the last presidential campaign. Instead of ruling narrowly on the case, which involves some of the technicalities of McCain-Feingold, the Court signaled that it wanted to reconsider the entire question of corporate political spending. Direct corporate contributions to federal campaign were first banned in 1907, and independent campaign expenditures by business corporations were prohibited in 1947.

There is little doubt that this unusual move was promoted by conservative justices such as Scalia and Thomas who think that any restrictions on corporate electoral spending are violations of the First Amendment. And it is no surprise that pro-business groups are generally praising the Court for taking on the issue, conveniently discarding their usual disdain for judicial activism.

Meanwhile, progressive watchdog groups such as Public Citizen are sounding the alarm, warning that eliminating limits on corporate spending would allow large companies to use their resources to buy elections with impunity.

The cynical way of looking at this is that Big Business already manages to dominate the electoral system through its political action committees and lobbying expenditures, so uncontrolled spending would not make much difference. The danger, however, is that eliminating the restrictions would allow capital to completely overwhelm the electoral system. And it would be a huge boon for the destructive principle of corporate personhood, the basis on which business interests exercise such outsized influence over American life.

What makes this issue trickier is that the cases in question deal not only with political expenditures by business corporations but also ones made by labor unions and non-profit corporations. Unfortunately, there is a long legal tradition of treating democratic organizations such as unions as equivalent to business corporations, which are undemocratic entities that should have no constitutional rights.

That is not going to change anytime soon. Meanwhile, we can only hope that reason prevails and the Supreme Court does not turn the electoral system into a total financial free-for-all.

Fighting Dirty on Healthcare Reform

gangs You’ve got to hand it to the health insurance corporations and their front groups for knowing how to play hardball. To protect the interests of the industry, they have been willing to spread outlandish allegations about euthanasia, gambling that the ensuing uproar will force nervous Dems to dilute their plan.

It remains to be seen whether the streetfighters ultimately prevail, but for now they have succeeded in reframing the debate. The country has been talking about pulling the plug on grandma when we should be discussing pulling the plug on the likes of Aetna, Cigna and Humana.

Unfortunately, the Obama Administration and the Democratic leadership in Congress have ruled out euthanizing the for-profit health insurance, leaving us with the alternative of a public plan that would compete with the commercial carriers and supposedly “keep them honest,” as Obama likes to put it.

Since the industry doesn’t seem interested in becoming virtuous, it has instead encouraged opposition to the public option. Apart from whatever behind-the-scenes role it has played in the town hall disruptions carried out by the rightwing lunatic fringe, the major insurers are cultivating the fifth column that is undermining the public option from within the Democratic Party. It’s widely known that members of the Blue Dog Coalition have been showered with campaign contributions from the industry. A recent Business Week cover story entitled “The Health Insurers Have Already Won” details other ways the big insurers have cozied up to and co-opted conservative Dems.

I’ve already written about the suspicious role the Lewin Group, owned by UnitedHealth Group but purportedly editorially independent, has played in the reform debate. Business Week describes how UnitedHealth itself feeds self-serving data to “information-starved congressional staff members.” The magazine depicts an especially close relationship between the company and Sen. Mark Warner of Virginia, who “echoes UnitedHealth’s contention that a so-called public option could be a ‘Trojan horse for a single-payer system.'”

The infatuation of Warner and some other Dems with UnitedHealth is all the more baffling in light of the controversy over the company’s Golden Rule Insurance subsidiary, which has repeatedly been fined by state regulators for deceptive practices. Golden Rule was one of the companies singled-out in a recent House Energy & Commerce Committee hearing on abuses in the individual health insurance market.

Business Week reports that the health insurers consider the battle against the public option already won and are now focusing on shaping the terms under which they will be providing new subsidized coverage. They are, the magazine says, pursuing the “aim of constraining the new benefits that will become available to tens of millions of people who are currently uninsured.”

How long will it be before Obama, having abandoned the public option, finds himself pressured by the health insurers and their surrogates to give ground on other aspects of the reform plan, such as the elimination of lifetime benefit caps? Or the prohibition on denying coverage based on pre-existing conditions?

The insurance reform effort will continue its slide toward irrelevance until Obama recognizes that he is engaged not in a boxing match with Marquis of Queensberry rules but rather a knife fight in which anything goes.