The California municipalities of San Bernardino, Vallejo and Stockton filed for bankruptcy; Stockton’s Chapter 9 filing represents the largest such case in U.S. history. Continually depressed home prices have led to unusually high foreclosure rates in these markets. According to foreclosure data from RealtyTrac, a site that tracks housing data, these cities had among the worst foreclosure rates in the country.
Decline in home prices: 62.8% Unemployment rate: 15% (12th highest) Median home price: $170,000 (76th highest) Foreclosure rate: 1 in 66.2 housing units (the highest)
When
Stockton filed for bankruptcy in June 2012, it became the largest-ever U.S.
city to do so, according to the Wall Street Journal. The city’s economy
has been plagued for years by falling home prices, which declined at an
annualized rate of 16.6% between the first quarter of 2007 and the first
quarter of 2012. Stockton also has one of the nation’s highest
unemployment rates, at 15%, and a foreclosure rate that leads the
nation, with one in every 66.2 homes in foreclosure. Though Fiserv
projects home prices will rise at an annualized rate of nearly 6%
between the first quarter of 2012 and the first quarter of 2017, the
housing market remains weak: 54% of all second-quarter home sales were
foreclosure sales, and the number of property listings in July was down
more than 40% from a year earlier.
Stockton is a fairly large city of 300,000 or so, located about 80 miles east of San Francisco and about 50 miles south of Sacramento. With housing prices in those cities out of reach for many workers, long-distance commuting to Stockton became commonplace.
Stockton’s economy was largely dependent upon real estate prices, and the city flourished as home prices soared. Then came the crisis in late 2007, and Stockton was hit extremely hard by the ensuing recession. Property values declined by 60% from their highs in 2007 and at one point Stockton trailed only Las Vegas in terms of total number of foreclosures.
The graph above shows the steep decline in median home prices in the city. The problem in Stockton is exacerbated somewhat by California’s Proposition 13, which restricts annual increases in assessed value. As a result, even as the housing market recovers, the city’s recovery will lag.
The housing market decline resulted in draws on the city’s general fund as expenditures far outpaced incoming revenues. Stockton’s generous labor contracts and retiree benefits made reducing expenditures extremely difficult.
The pie chart on page two shows Stockton’s 2013 pro-posed budget. Even after layoffs and some concessions, the police and fire departments make up over 74% of Stockton’s general fund budget.Debt service accounts for 1%. In fact, even if Stockton were to default on all of its municipal debt, the city still projects a $100 million deficit over the next decade.
Contributing to the problems faced by the city were the extremely generous benefits granted to employees. Anecdotally, according to a 2012 Bloomberg report:
“Police Chief Tom Morris was supposed to bring stability to law enforcement when he was appointed to the job four years ago. He lasted eight months and left the now-bankrupt city at age 52 with an annual pension that pays more than $204,000 – the third of four chiefs who stayed in the position for less than three years and retired with an average of 92 percent of their final salaries.”
While these luxury pension plans aren’t the norm, they are also not altogether uncommon.
Given that Stockton’s credit issues are due in large part to the generous benefits provided to employees, it is perhaps appropriate that the crux of the Chapter 9 case revolves around the treatment of those benefits under bankruptcy protection.
While the municipal market waits patiently for a decision in the Stockton case, the lessons learned for investors should be clear:
Avoid municipalities that were hit the hardest by declining home prices.
Be aware of the portion of the budget that is being spent on labor; these contracts are difficult to amend, leaving the municipality little flexibility.
Avoid municipalities with large unfunded pension obligations.
Thornburg Investment Management has no exposure to the City of Stockton, but we will continue to monitor the situation closely. In the meantime, we will continue to be guided by the basic lessons above, along with rigorous, bottom-up, fundamentally driven credit analysis designed to steer the portfolios clear of future credit issues — both in California and across the country.
Bankruptcy
Court Judge Christopher M. Klein’s ruling will set a precedent that will have a
far-reaching impact. All
municipal investors should be watching this case closely.Not since the collapse of the bond insurers in
2008 has a single event had the potential to fundamentally alter the analysis
of municipal credit risk. Should he rule in favor of pension holders, protecting
their benefits above the claims of bondholders, it would essentially subordinate
bondholders to the claims of public workers. A ruling of that type would immediately
decrease the credit quality of all municipal bonds. In the future, public employees
would have no incentive to negotiate with stressed municipalities, knowing that
their benefits are protected. The result could be an increase in Chapter 9 filings
as municipalities lose the flexibility to control future expenses. On the other
hand, should Judge Klein rule that public employees must take a haircut in line
with other creditors, municipal bondholders will benefit. Under that scenario,
public employees would be much more willing to come to the bargaining table if
they believe their benefits are no longer protected under Chapter 9. [Source]
Bankruptcy
Court Judge Christopher M. Klein approved Stockton's bankruptcy
recovery plan, allowing the city to continue with planned pension
payments. (U.S. Bankruptcy Court).
Los Angeles Times
October 30, 2014
A
federal bankruptcy judge approved the city of Stockton's bankruptcy
recovery plan Thursday and sidestepped challenges to its workers'
pensions that could have threatened municipal retirement plans across
the state in the years ahead.
Stockton's plan slashes city
spending, cuts salaries and eliminates jobs — but preserves worker
pensions. Also, companies owed money by the city will get back only a
fraction of what they're due.
The case was being closely watched
after the judge ruled this month that the city's payments to the
California Public Employees' Retirement System could be cut in
bankruptcy, just like any other obligation.
If
Judge Christopher M. Klein had rejected Stockton's plan and forced the
city to reduce its payments to CalPERS, it could have opened the door
for other financially ailing cities struggling with escalating pension
costs to follow suit.
The decision was good news for public
workers and retirees statewide, said CalPERS Chief Executive Anne
Stausboll, whose agency fought any pension cuts as part of the Stockton
bankruptcy proceedings.
"We will continue to champion the
integrity and soundness of public pensions to protect the benefits that
were promised to the active and retired public employees," she said.
Pension
reformers were not happy. They criticized the decision, saying the
city's rising pension costs would continue to take money from essential
servicesand keep Stockton on the brink of a second insolvency.
"The
city of Stockton missed an opportunity to use a powerful tool to save
their city's finances that's only available in Bankruptcy Court," said
Dan Pellissier, president of California Pension Reform.
Stockton
officials had argued that it was not possible to cut pensions or to
create another retirement plan for city employees. They said employees
would leave Stockton for other cities offering retirement benefits
through CalPERS.
CalPERS had said that if Stockton left the state
retirement system, the city would immediately owe it $1.6 billion — far
more than the city's current bill to the pension plan.
On Thursday, Klein said the city's 1,400 workers and 2,500 retirees had already taken enough hits in the bankruptcy.
Stockton's
salaries and benefits for workers had been higher than those at other
cities, the judge said, but workers had agreed after the bankruptcy
filing to take big cuts, including eliminating the free medical care
they received in retirement.
"It would be no simple task to go back," Klein said, "and redo the pensions."He added, "This plan, I'm persuaded, is the best that can be done."
Klein
said that rejecting the plan after two years in court and tens of
millions of dollars in legal and other fees would have put the case back
to "Square One." Stockton's plan sharply cuts payments to its
creditors, including Franklin Templeton, an investment firm that holds
more than $36 million in bonds the city used to borrow money. Franklin
had asked Klein to reject the city's plan so that it could get more of
its money back.
Franklin's financial expert used the city's own
projections to show that it would soon be paying CalPERS nearly 19% of
general tax revenue — up from 11% today. Franklin had argued that
the increasing cost of pensions would put the city at risk of another
bankruptcy.
But Klein said Thursday that Stockton's plan for paying
creditors over the years was adequate and passed all legal tests.
City Manager Kurt Wilson said after the ruling that it "confirms that Stockton is fiscally stable and on the road to recovery."
"We are going to have stability that impacts our ability to attract and retain employees," he said.
It
was a turnaround from Klein's oral ruling Oct. 1, when he said public
workers' pensions were not sacrosanct and could be reduced in a
bankruptcy.
"It
looked like he was telling cities they had an easy offramp" to rising
pension costs, said Harvey Leiderman, a lawyer at Reed Smith who advises
CalPERS and other retirement funds. "Now he's shut down that offramp."
Klein
explained in court what happens when employees and retirees are given
equal standing in bankruptcy compared with all other creditors. The
workers and retirees then far outnumber the other creditors and would
have the power to veto any decision that is not favorable to them.
"You'll never come out of bankruptcy, and that's what he recognized," said Leiderman, describing Klein's decision.
In
recent years, pensions have been a political hot potato in Stockton.
Overly large pensions approved by city officials for employees are among
the reasons that Stockton found it could no longer pay its bills,
critics say.
Stockton's promised pensions for police and fire
employees are some of the highest in the state, according to an analysis
by Franklin's expert. The city is now paying the equivalent of 41% of
police salaries to CalPERS for future pensions — an amount that will
increase to 57% in five years.
As a result, the city will face continued challenges in the years ahead.
"They're
betting on a rosy scenario for years to come, said Pellissier of
California Pension Reform. "Only time can tell whether the city of
Stockton can continue to provide services without relief from its
unsustainable pension obligations."
The national economic recession ended five years ago, but recovery
has varied widely and California doesn’t fare particularly well in a
national survey of economic conditions in the nation’s 150 largest
cities.
In fact, Stockton and San Bernardino, two California cities that have
filed for municipal bankruptcy, were ranked 149th and 150th in the
survey. The highest mark for any California city was San Francisco’s No.
20.
The city-by-city evaluation of economic conditions was conducted by
Wallet Hub, a website that gathers and disperses personal economic data.
Its team of university economists assembled 18 key indices of
economic health, including employment and unemployment data, personal
income changes, real estate values, poverty rates, personal
bankruptcies, personal debt and crime rates with scores for each.
“Whenever a city is left behind in a recovery, collateral effects are
bound to afflict already struggling economies,” Wallet Hub said in its
report. “From a public standpoint, this could lead to further
complications:Crime rises, education suffers, local administrations
collapse.
“In the private sector, property values decline and businesses shut
down. If and when that happens, skilled workers are forced to seek
better opportunities in more thriving communities. And a town that had
little hope remaining is completely crippled.”
Two cities in Texas, Laredo and Irving, were ranked No. 1 and No. 2
in the survey and most other high-ranking cities were in the South and
Southwest, although Denver was No. 4 and Minneapolis No. 7.
Among California cities, Bakersfield, which is experiencing an oil
boom, came in at No. 23 and San Jose, in the heart of Silicon Valley,
was No. 35. Los Angeles, the state’s largest city, was ranked No. 99,
but it outranked the second largest city, San Diego, which was No. 103,
followed by Sacramento at No. 104.
Beyond Stockton and San Bernardino, other California cities low in
the rankings included Fresno at No. 125, Long Beach at No. 129,
Riverside at No. 140 and Modesto at No. 146.
Read more here: http://www.sacbee.com/news/politics-government/capitol-alert/article2605288.html#storylink=cpy
By James Sherk, The Heritage Foundation
September 1, 2010
Abstract:Unions have been a familiar part of American
working life for more than 70 years. Less familiar is the state of the
union movement today: More union members now work for the government
than for private employers. The above-market salaries and benefits that
government employees receive are paid for by taxpayers. So, the union
movement that began as a campaign to improve working conditions and
salaries for workers in the private sector, now pushes for ever-higher
taxes to increase the generous compensation that government employees
enjoy. Heritage Foundation labor policy expert James Sherk details the
changes in the union movement, and explains how Congress can react to
this new reality.
The American union movement has reached a historic milestone—more
union members currently work for the government than for private
businesses. As a result, the union movement’s priorities have shifted.
Because taxes fund government pay and benefits, unions are now pushing
for tax increases across the country. The union movement that once
campaigned to raise private-sector workers’ wages has transformed into a
government union movement that campaigns to raise their taxes.
How did this happen? Union organizing surged after the passage of
the National Labor Relations Act (NLRA) in 1935. But because union
contracts raise costs, unionized businesses generally grow more slowly
than non-union firms. Market competition has caused union membership to
gradually fall in the private sector since the 1950s. The new government
unions created in the 1960s could safely demand inflated pay without
putting their jobs at risk. Now most union members work for the
government.
The early trade unionists did not believe that unions had a place
in government. They believed the purpose of unions was to redistribute
profits from business owners to workers—and the government makes no
profits. The government labor movement has become a powerful special
interest lobby to raise taxes on working Americans to raise the level of
compensation for government workers. Taxpayers should not have to
subsidize this lobbying. Congress should prohibit federal unions from
using the federal payroll system to automatically deduct union dues from
government employees’ paychecks.
New Government Labor Movement
The American labor movement marked a historic shift in 2009. For
the first time in U.S. history, more union members worked for the
government than worked in the private sector. The U.S. Postal Service
employs three times as many union members as the domestic auto industry.[1] Table 1 shows union membership in the United States in 2009 and through the first seven months of 2010.
Overall union membership dropped again in the first half of 2010:
down by 603,000 members to 11.9 percent of all employees.
Private-sector and public-sector unions both lost members.
Private-sector unions lost 323,000 members, dropping to 7 percent of the
private-sector workforce. A smaller proportion of private-sector
workers belong to unions now than at any point since the Supreme Court
upheld the National Labor Relations Act. Union membership also fell by
281,000 members in government, dropping by 1.7 percent of the government
workforce.
However, well over one-third (35.7 percent) of government
employees still belong to a union. The 7.6 million union members who
work for the government make up 51.7 percent of all union members in the
United States. The new face of the union movement is the clerk at the
Department of Motor Vehicles, not the worker on the assembly line.
Private-Sector Strikes Rare. As the labor movement’s
membership has moved toward government, so have its priorities. Labor
unions once focused on improving private-sector working conditions, but
now their efforts have shifted toward increasing government pay and
benefits.
The frequency of private-sector strikes demonstrates the union
movement’s changed priorities. Threatening strikes is the main tool that
unions use to win concessions from private employers. Now strikes have
become exceedingly rare.
Unions used to launch hundreds of strikes a year—often at
considerable cost to the economy. In 2009, unions initiated only five
major strikes that involved 1,000 workers or more. The recession does
not explain why unions so rarely strike. In 2007, the last year before
the recession, unions engaged in just 21 strikes.
New Labor Priority: Political Influence. The union
movement’s priorities have shifted from the picket line to politics.
Many government unions are prohibited from striking by law, so to raise
government pay unions must influence the legislative processes that
determine their wages.
The union movement has ample money at its disposal. In states
without right-to-work laws, unionized employees must pay union dues or
lose their jobs. State and local governments use their payroll systems
to collect dues for the union. The government automatically deducts the
dues— typically 1 percent to 2 percent of a government employee’s
pay—and deposits it in the union’s bank account.
One percent of the pay of several hundred thousand government
workers is a lot of money. The New Jersey Education Association has
179,000 active members who each have to pay union dues of $761 every
year.[2]
That works out to more than $136 million in dues a year. The American
Federation of State and County Municipal Employees (AFSCME) national
headquarters brought in $193 million in union dues in 2008. AFSCME’s
local affiliates raised hundreds of millions more.[3]
The union movement spends much of this money on politics. In
election year 2008, AFSCME spent $63 million on political campaigning
and lobbying. That was 32 percent of its overall budget and well more
than the $39 million it spent representing its members.[4]
In 2009, the American Federation of Labor and Congress of Industrial
Organizations (AFL–CIO) spent $29 million on representational activities
and $47 million on political campaigning and lobbying.[5] The amount spent on politics represented 25 percent of the AFL–CIO’s budget.[6]
The AFL–CIO and the Service Employees International Union (SEIU) just
announced their intention to spend $100 million on electing sympathetic
candidates in this year’s midterm elections.[7]
This political spending gives unions considerable political
influence. Government unions use this influence to press Congress and
state legislatures to raise government salaries and to hire more
employees. They have largely succeeded. The average government employee
earns more than his counterpart in the private sector.
Government Pays More. The average federal employee earns
hourly cash wages 22 percent above what a similar private-sector worker
receives. Adding in the value of non-cash benefits raises the federal
compensation premium to between 30 percent and 40 percent a year.[8]
Unions have also successfully raised the pay of state and local
government employees. While their hourly wages are no higher—and in some
cases slightly lower—than those of similar private-sector workers, they
make up for it with benefits. Specific benefit packages vary across
states, but state and local employees generally have excellent health
coverage to which they contribute little. They also receive generous
pensions unavailable to most private-sector employees. Many state and
local government employees can retire in their 50s with a substantial
defined-benefit pension.
In California, state employees can retire at 55 with a pension
worth 2 percent of their highest year’s earnings multiplied by their
years of service. California highway patrol officers get an even better
deal; they can retire at 50 with 3 percent of their final salary
multiplied by their years of service.[9]
That means that a worker with 30 years of experience can retire in his
50s and enjoy 90 percent of what he earned on the job until he dies.
Including the value of these benefits, state and local employees’ total
compensation is significantly higher than that of private-sector
workers.[10]
Government Job Security. Government unions have won another
perk for their members that few workers in the private sector enjoy:
extremely high job security. Federal law makes termination of
ineffective government employees extremely difficult.[11]
Many states have similar civil service codes that make it difficult to
fire underperforming government workers. The Chicago Teachers Union, for
example, filed a lawsuit after the Chicago public school system
responded to budget cuts by laying off teachers with “unsatisfactory”
performance ratings.[12] The union insists that all layoffs must occur on the basis of seniority, not performance.
Government employees also have less reason to worry about
elimination of their jobs during a recession. Since the start of this
current recession in December 2007, private-sector employment has fallen
by 6.8 percent. Federal employment, however, has risen by 10 percent
while state and local government employment has only fallen slightly.
Taxes and deficit spending have kept government payrolls going even as
the economy has experienced its worst slump since the Great Depression.
Government employees generally experience little of the uncertainty of a
recession.
Government Pay Costs Taxpayers. The cost for such generous
pay and benefits is great. Paying federal employees’ inflated
compensation will cost taxpayers $47 billion in 2011.[13]
Nonpartisan estimates indicate that state and local retiree health care
and pension plans face a cumulative $3.1 trillion funding shortfall.[14]
The money to cover these costs comes from taxes. The more taxes the
government collects the more employees it can hire and the more it can
pay them. Since most union members work for the government, unions
strongly support higher taxes. The federal pay premium alone takes up 5
percent of federal income tax revenues.[15]
Government Unions Campaign for Tax Increases. The union
movement now consists primarily of government employees lobbying for
more government and higher taxes. An examination of union activity
across the country illustrates the union movement’s strong advocacy for
tax increases:
Arizona. Public-sector unions spent more than
$200,000 to campaign for a successful ballot measure in May 2010 that
raised the state sales tax by 1 percent.[16]
The Arizona Education Association also successfully lobbied against a
repeal of a $250-million-a-year statewide property tax in 2009.[17]
California. The California Teachers Association
spent $2 million gathering signatures for an initiative on the November
2010 ballot that would raise business taxes by $2 billion a year.[18]
Separately, public employee unions protested at the state capitol
demanding the legislature raise taxes by $40 billion a year, including
raising the top state income tax bracket to 11 percent, applying the
sales tax to services in addition to goods, and increasing the state’s
vehicle license fee by 2 percentage points.[19]
Colorado. Led by the National Education
Association’s $450,000 contribution, government unions spent $806,000
campaigning for a failed 2008 ballot initiative to roll back taxpayer
rebates and use that money to increase education spending.[20]
That year, government labor unions also gave $244,000 to a committee
campaigning for Amendment 58, an initiative that would have raised taxes
on oil and natural gas companies had the voters not defeated it.[21]
Delaware. Democratic Governor Jack Merkle
proposed closing the state’s budget gap in 2009 with an 8 percent
across-the-board cut in state employee pay. In response, labor unions
united in a large coalition (State Workers United for a Better Delaware)
to oppose the pay reductions. The coalition pressed the governor to
look to tax increases instead of cutting government union members’ pay.[22] The legislature ultimately cut state employee pay by 2.5 percent.
Florida. The Florida Education Association unsuccessfully lobbied for a 1 percent increase in the state sales tax in 2009.[23]
Labor unions also spent $1.3 million in an unsuccessful attempt to
defeat a 2008 ballot initiative that expanded the state’s property tax
exemption.[24]
Georgia. The Georgia Association of Educators,
the state-level affiliate of the National Education Association, has
begun campaigning for a 0.5 percent increase in the state sales tax.[25]
Hawaii. The Hawaii State Teachers Association is
campaigning for a $500 million annual hike in state taxes, including
increasing the top state income tax to 13 percent and raising business
and capital gains taxes.[26]
Idaho. Government labor unions spent more than $2
million promoting an unsuccessful ballot initiative in 2006 that would
have raised the state sales tax by 1 percent and directed that money to
public education.[27]
Illinois. AFSCME Council 31 and other government
unions are pressing the state legislature to close the deficit with a
$6.4 billion tax increase instead of cutting spending. The unions want
state lawmakers to increase the state income tax from 3 percent to 5
percent and to expand the sales tax to cover certain commercial
services.[28]
The unions spent heavily in 2009 on television and radio ads pressing
for these tax increases. In April 2010, government unions organized
rallies outside the state capitol shouting, “Raise my taxes! Raise my
taxes! Raise my taxes!”[29] At that rally, a government union member was caught on camera chanting, “Where’s the money?” and “Give up the bucks!”[30]
In July 2010, 40,000 unionized state government employees received a 7
percent raise and are scheduled to receive another 7 percent raise in
2011. These raises will cost Illinois taxpayers $500 million.[31]
Iowa. In 2009, AFSCME Council 61 unsuccessfully
fought for tax increases instead of requiring state employees to take a
five-day furlough. In the eyes of the union’s president, the state’s
deficit “is not a spending issue, this is a revenue issue.”[32]
Kansas. The Kansas Organization of State
Employees boasts that it “mobilized more than 300 activists for a Lobby
Day in February and formed ‘gauntlets’ outside each chamber in order to
prevent spending cuts that would have eliminated 1,000 government jobs,
urging wavering legislators to stand with them. They were relentless and
creative—flooding House and Senate offices with hundreds of phone
calls, faxes and e-mails, and utilizing social media to provide Twitter
updates and action alerts.” They were successful. In May 2010, the
Kansas legislature passed a budget that raised the state sales tax by 1
percent. The budget also raised the pay of many state employees between 2
percent and 10 percent.[33]
Maine. Maine citizens voted on a ballot
initiative in November 2009 that would prevent government spending from
growing faster than the combined rate of inflation and population growth
and would require the government to return excess revenues as tax
rebates. The Maine Municipal Association, the SEIU, the Teamsters, and
the Maine Education Association collectively spent hundreds of thousands
of dollars to campaign against the initiative, and it was ultimately
defeated by a wide margin.[34]
In 2010, government unions lobbied state legislatures to raise the
state sales tax by 1 percent, or the state cigarette tax by $0.50 per
pack.[35]
Maryland. Maryland added four new state income
tax brackets in 2008. That was not enough for government labor unions.
The state affiliate of AFSCME lobbied the legislature to raise taxes by
another $2 billion, including expanding the state sales tax to cover
additional services and increasing alcohol and gas taxes.[36]
Michigan. Government unions, including members of
the AFL–CIO, the Michigan Education Association, and the Michigan
Nurses Association launched “A Better Michigan Future” campaign in
September 2009. They called for a $2.7 billion tax increase. Their
proposals included expanding the state sales tax to cover a variety of
services, and raising the top state income tax rate from 4.35 percent to
6.9 percent. The Michigan legislature decided against raising taxes in a
state badly hit by the recession.
Minnesota. AFSCME Council 5 unsuccessfully
lobbied state legislators to override Governor Tim Pawlenty’s veto of a
$1 billion tax increase in spring 2009.[37] In December 2009 Council 5 lobbied for a $3.8 billion tax increase.[38]
Montana. The Montana Education Association–
Montana Federation of Teachers (MEA–MFT) union openly portrays itself as
a supporter of tax-and-spend politics. As MEA–MFT president Eric Feaver
boasted, “Were it not for us almost any one of the…anti-tax-and-spend
ballot issues proposed in the last 25 years would have passed.”[39]
The union pursued tax-and-spend politics in 2009, unsuccessfully
lobbying the state legislature to raise taxes on oil and gas companies.[40]
The MEA–MFT also lobbied the legislature for a 6 percent raise for
state workers. Despite the recession, it did not come away completely
empty-handed. The final plan boosted government employee compensation,
although not as much as the union wanted. As the union put it, “the pay
plan amounts to $24 million in new money for state employees, and that’s
no small change at a time when the economy is crashing.”[41]
Nebraska. Labor unions contributed 60 percent of
the $2.5 million spent in 2006 to defeat Nebraska Measure 423. The
ballot initiative drew the fire of government unions because it would
have capped state spending based on population growth and inflation.[42]
New Jersey. Newly elected Governor Chris Christie
took office in 2010 facing an $11 billion budget deficit. He closed the
deficit without raising taxes by reducing spending. This drew the fire
of government unions in New Jersey, especially the New Jersey Education
Association, which opposed the governor’s proposal to freeze teacher pay
and require teachers to contribute 1.5 percent of their salary toward
their health insurance premiums. Up to then they contributed nothing.
The union spent heavily on television, radio, and print advertisements
critical of the governor.[43]
Public-sector unions in New Jersey also fought to keep the state’s top
income tax from falling to 9 percent from 10.75 percent and against a
proposed cap on property tax increases. The leadership of Communication
Workers of America (CWA) District 1—a union representing 40,000 state
workers—proposed raising member dues to fund a $2 million advertising
campaign against Christie. Union membership, however, voted against the
proposal by 62 percent to 38 percent.[44]
New Mexico. The New Mexico AFSCME local lobbied the state’s legislature to raise taxes to deal with its budget deficit.[45]
The union got its wish, but it was not the wealthy who paid. The
legislature increased the state’s gross receipts tax on goods and
services and reinstated a 2 percent sales tax on food.[46]
New York. New York government unions spent
millions of dollars in 2009 on television ads opposing Governor David
Paterson’s property tax cap plan and attacking his budget that did not
contain the tax increases they wanted.[47]
After heavy lobbying, the governor finally agreed to raise taxes to
help close the budget shortfall. Among other tax increases, he raised
the state’s top income tax rate to 9 percent and the combined state and
New York City income tax to 12.85 percent.[48]
Unionized employees at the Metropolitan Transit Authority were not
complaining: more than 8,000 of them made over $100,000 in 2009,
including one recently retired rail conductor who pulled in $239,000 in
his final year on the job.[49]
North Dakota. Government unions, including the
National Education Association and the North Dakota Public Employees
Association spent $500,000 to defeat two ballot initiatives in 2008. One
would have reduced the state’s income tax by 50 percent; the second
would have established a trust fund for oil and gas tax revenues.[50]
Ohio. SEIU District 1199 produced and ran advertisements
campaigning for a rollback of scheduled income tax cuts. They wanted
taxes to remain higher to prevent government spending cuts.[51]
In Columbus, AFSCME pushed a referendum on a 0.5 percent increase in
the city income tax to victory. The union boasted that “members of
Locals 1632 and 2191 stepped up to the plate, helping to make thousands
of phone calls to potential voters and delivering 5,000 door hangers to
homes in high-turnout Democratic precincts.… The efforts of Council 8
members proved essential: Out of more than 89,000 votes cast in last
summer’s special election, the tax increase passed with a margin of just
3,050 votes.”[52]
Oklahoma. The Oklahoma Education Association placed
Question 744 on the November 2010 ballot. The measure would increase
spending on public schools by $1 billion, necessitating tax increases or
spending cuts elsewhere to balance the state’s budget.[53]
Oregon. Public-sector unions provided over 80 percent of
the $8 million spent to pass Measures 66 and 67 in January 2010, ballot
initiatives that raised income and business taxes by $727 million.[54] Government unions outspent the business community by a three-to-two margin to pass the new taxes.[55]
However the tax increases have not solved the state’s budget crisis.
State budget analysts have estimated that the state still faces a $577
million shortfall.[56]
Pennsylvania. Unions representing 1.1 million
Pennsylvania workers have created the Coalition for Labor Engagement and
Accountable Revenues (CLEAR). The union coalition wants Pennsylvania
lawmakers to “find new fair and equitable revenue sources to fill the
state’s budget gap and not close the gap by cutting services.” The
coalition particularly warns that the state should not furlough
government employees, privatize their jobs, or reduce the retirement
benefits of state employees.[57]
Unions consistently press for higher taxes and more government
spending across America. The labor movement has made higher taxes and
more government spending one of its top priorities. But unions are
self-interested advocates of tax increases: They oppose tax increases
that significantly affect their members. During the congressional debate
over health care reform, for example, the union movement lobbied
heavily against taxing high-value health care plans. Union members tend
to have generous health coverage, and that tax would fall heavily on
them. That is especially true of government union members. The union
movement threatened to oppose the entire health care bill unless
Congress scaled back that tax increase. Congress did so.
Conflict of Interest. Labor unions’ political activism
creates a conflict of interest in government. In the private sector,
employer pressure to cut costs balances excessive union wage demands. In
the government, unions can use their political influence to elect
sympathetic politicians, and then labor and management work together to
raise government pay. No one at the bargaining table speaks for the
taxpayers.
Departure from Labor’s Roots
This shift to government has brought the union movement far from
its historical roots. The 19th-century founders of the U.S. labor
movement believed that the profit motive would lead employers to exploit
workers. They saw unions as a vehicle to get workers a greater share of
the profits that they helped to create.[58] The economic tool they used to do this was the strike.
However, this model does not apply in government. The state does
not earn profits that it divides between shareholders and labor. For the
same reason, the government has no incentive to pay low wages. A strike
by government workers would interrupt vital functions such as police
protection and education. Consequently, the founders of the labor
movement did not believe the union movement had a place in government
and they did not attempt to organize government workers.
Some labor leaders rejected government unions as intrinsically
undemocratic. Collective bargaining gives government employees the power
to tell voters how to spend their tax dollars instead of the other way
around. As recently as 1959, the AFL–CIO Executive Council stated that
“government workers have no right [to collectively bargain] beyond the
authority to petition Congress—a right available to every citizen.”[59]
Rise of Private-Sector Unions. When Congress passed the
National Labor Relations Act in 1935 to encourage collective bargaining,
the NLRA did not apply to government employees. Union leaders at the
time believed this made perfect sense. As former AFL–CIO president
George Meany wrote in 1955, “it is impossible to bargain collectively
with the government.”[60] The man who created the AFL–CIO would not recognize today’s union movement.
Only a small portion of workers belonged to unions until Congress
passed the NLRA. The act promoted collective bargaining in the private
sector by requiring management to bargain with unions as workers’
“exclusive bargaining representative.” Once the Supreme Court upheld the
constitutionality of the NLRA in 1937, union membership grew rapidly.
By 1947, 24 percent of the labor force belonged to unions.[61]
This gave labor unions great economic power, but they did not
always use it responsibly. The United Mine Workers aroused national
outrage when they shut down coal production in 1943, harming the war
effort. Postwar strikes in the steel, coal, and auto industries
paralyzed large portions of the economy. Congressional investigations
also uncovered ties between major unions and organized crime.
These actions caused public support for unions to cool, and
Congress passed the Taft–Hartley Act in 1947 to address union abuses.
When Congress passed the NLRA 12 years earlier, it had not foreseen that
some unions would pressure workers into unionizing. Taft–Hartley
complemented the NLRA’s protection of the ability to bargain
collectively by protecting workers’ rights to choose not to do so. The
act established the secret ballot as the normal means of unionizing,
gave workers the right to decertify their union, and prohibited many
forms of economic pressure that unions applied to workers who did not
want to unionize.[62]
Chart 3 shows union membership as a percentage of the labor force
from two separate data sets collected by the Department of Labor.[63] Union membership peaked at 26 percent of the labor force in 1953, and has gradually declined since then.
Creation of Government Unions. Wisconsin became the first
state to pass a law permitting government employees to collectively
bargain in 1959. This followed the decision of New York City’s Mayor
Robert Wagner to do the same in 1958.[64] In 1962, President John F. Kennedy signed Executive Order 10988 that permitted collective bargaining with federal employees.
Throughout the 1960s and the 1970s, collective bargaining rapidly
spread throughout state and local governments. To prevent public-sector
strikes, most states established binding arbitration for government
unions. These laws vary across states, but under binding arbitration,
contract disputes between the government and government unions are
decided by an arbitrator who hands down a binding contract.
Competition Eroded Private-Sector Unions. At the same time
that unions were rapidly organizing government workers, market
competition began undermining unions in the private sector. Unions raise
business costs.[65]
This, and the fact that unionized companies invest less in capital and
research and development, makes unionized firms less competitive.[66] This does not hurt unions if their competitors are unionized or they compete in heavily regulated markets.
But in the 1970s and 1980s, Congress made the U.S. economy much
more competitive. Deregulation and free trade forced many unionized
firms to compete against more efficient non-union firms. They could not
keep up. Non-union businesses charged less than unionized firms and won
their customers.
Across the country non-union manufacturing, construction, and
trucking companies grew while their unionized competitors shrank.
Between 1973 and 1998, non-union jobs grew by roughly 3 percent a year
while 3 percent of union jobs disappeared annually.[67]
Competitive pressures have steadily shrunk private-sector unions to
their current levels: 7 percent of all private-sector workers and 6
percent of the private-sector labor force.
Government Unions Immune to Competition. Competitive forces
have not undercut government unions: The government has no competition.
It has a monopoly on providing its services. Taxpayers cannot purchase
less expensive police or education services from another state without
moving there.
Consequently, government unions can negotiate generous benefits
without worrying about putting their jobs at risk. Unlike the private
sector, governments almost never go bankrupt. They can always raise
taxes to cover their costs. So once unions organize a government
department, those workers remain organized.
By 1977, a total of 35 states had passed legislation regulating collective bargaining with state employees.[68]
That year, 33 percent of government employees belonged to unions, which
accounted for 26 percent of all U.S. union members. Since then,
government union rates have stayed in the mid to high 30 percent range.[69]
Even as private-sector unions have lost members, public-sector unions
have grown. In 2009, those paths crossed and now most union members work
for the government.
What Congress Should Do
The union movement has transformed over the past generation; it
now primarily represents government employees. Three times as many union
members now work for the U.S. Postal Service as for the auto industry.
The mandatory union dues that the government collects on behalf of its
unionized employees raise billions of dollars a year. The union movement
spends a substantial amount of this money aggressively advocating
higher taxes and increased government spending.
This creates a situation in which both government labor and
management have an incentive to promote higher taxes. Congress should
take several steps to restore equity between government employees and
taxpayers:
Congress should recognize that the union call for raising
taxes to pay for more and more highly paid government employees is
narrowly self-interested. Congress should reject union lobbying for
tax increases. Every major school of economic thought agrees that the
government should not raise taxes during a recession. Congress should
not raise taxes to insulate unionized government employees from the
recession.
Congress should reduce the pay of federal employees to market rates.
Congress can do so by adopting performance pay based on market signals
of labor demand, hiring more contractors, and reducing the generosity of
federal employee benefits. This would save taxpayers $47 billion in
2011.[70]
Congress should not force states that do not collectively bargain to begin doing so. Legislation
currently before Congress, the Public Safety Employer–Employee
Cooperation Act of 2009 (H.R. 413, S. 3194), would require all states
and local governments to collectively bargain with police and
firefighters. Congress should respect the decisions of states that find
government unionism counterproductive.
Congress should stop requiring taxpayers to subsidize the collection of government union dues.
The federal government uses its payroll system to automatically deduct
the dues of federal union members from their paychecks. Federal unions
use these dues to lobby for higher taxes. Unions should use their own
resources to collect dues from their members. Congress should end the
automatic deduction of federal union dues.
Congress should adapt the law to appropriately respond to the
reality of the new government union movement. It is the right thing to
do.
—James Sherkis Senior Policy Analyst in Labor Economics in the Center for Data Analysis at The Heritage Foundation.
Each and every day, people around the world are realizing that the one-world government is based upon a hybrid Socialism-Communism economics system — a system of corporate governance and ownership of natural resources, land, water, and complete control of human beings. It is a system based upon the marriage of corporations, science and politics. It is a system that is funded by us, the world’s people. But what do knowing people do? We can’t fight manufactured super viruses, HAARP and psychotronic weapons; and we certainly cannot fight global nuclear arsenals. But we can, however, refuse to think and participate in the global economics systems, which were set up to literally enslave humankind. - Nancy Levant, Get Off the Globalization Grid, Part 1, NewsWithViews.com, August 23, 2005
We talk a lot about privatizations and we think of the telephone companies, the railways, I dunno’ the gas company… OK those are operational privatizations. But the real privatization of the last 30 to 40 years is the privatization of power. And this is where public opinion gets confused. Because we think, and rightly so, that public institutions, government institutions, are there to promote the common good, or at least they should be there…
However, if we have a private world government which is run by private institutions, then we have a problem, because private institutions really don’t have an obligation, a legitimate obligation to work for the common good.Private organizations, legitimately so, work for their own good.
So there we have one of the keys to the problem. We have a world government, but it is mostly private, and the private institutions running the world government are not geared or focused on the common good. So what we have nowadays is private power. And private power is the power running the world government.
Can we see it? Not easy. Is it a conspiracy? No way. And I’m going to tell you why. Because the organizations running this, until now, private-world government, have names, addresses, websites, emails… They issue documents. They publish books. They have logos. They make reports. It’s all out there. All you need to do is, like a jigsaw puzzle, put the pieces together.
The phenomenon of sweeping privatization as a ‘strategic instrument of globalization of capital’ should be understood in a direct correlation with the globalization of capital under late or corporate capitalism. Privatization has been conceived by design, not by chance and haphazard events. Its implementation has been pursued purposely, deliberately and vigorously around the world to accomplish the objectives of the globalization of capital. This has been happening despite evidence of extremely successful experiences with public enterprise management and government-owned enterprises worldwide. The phenomenon of globalization is a globally transcending process toward a more rapid accumulation of surplus value of advance or corporate capitalism. To understand this direct relationship between change and continuity and between privatization and globalization, we must first understand what globalization means, and then explain its corollary strategy of privatization worldwide. - Ali Farazmand, Privatization and Globalization: A Critical Analysis with Implications for Public Management Education and Training, School of Public Administration, Florida Atlantic University
By Ron Stouffer, PushHamburger.com
Appearing in September at The Hill School in Pottstown, PA, Robert F. Kennedy, Jr. cited Mussolini’s famous definition of fascism as the merger of government and corporations and warned against it. I have seen fascism/corporatism developing for years, pushed mostly by Republicans, but Democrats, unfortunately, are often complicit.
As large corporations intensify their efforts to take over America by seeking to privatize all things public — Social Security, turnpikes, school cafeterias, libraries, pensions, Medicare, parks, police forces, prisons, the military, public nursing homes, water, sewer systems, and public education (through the Trojan horse No Child Left Behind) — we need to heed RFK Jr.’s warning.Each time a public enterprise, asset, or function is outsourced or sold off to privatizers, we move closer to fascism.
Private wealth increases its stranglehold on local, state, and national government. Recommended reading on this topic is The Fox in the Henhouse- How Privatization Threatens Democracy by Si Kahn and Elizabeth Minnich.
Here are just a few examples:
Conservatives blamed government for the gruesome conditions at Walter Reed Army Medical Center. Actually, a private company (funded by your tax dollars) ran Walter Reed, according to Paul Krugman, New York Times. Krugman reported that the government could have done the job more cheaply, but I guess few campaign contributions come from government workers as opposed to private contractors.
Conservatives blamed government for the poor response in the aftermath of Hurricane Katrina. However, Wayne O’Leary reports in The Progressive Populist (11-1-07, p.16,”Needed: A Public Sector”), “…recovery was largely turned over to corporate interests operating with marketplace priorities…”
The college loan program, a government program formerly known as Sallie Mae, was fully privatized in 2004, O’Leary reported in the same article. The program is now plagued by problems and scandals.
The dangers inherent in privatizing/leasing the PA Turnpike are too numerous to mention here. Check out “The Highwaymen” by Daniel Schulman with James Ridgeway in the January/February 2007 issue of Mother Jones at The Highwaymen.
Large corporations with friendly, local-sounding names control some local water systems. Pennsylvania American Water Company is one example. To learn more about the consequences of water privatization, check out “A Price on Every Drop” by Jon R. Luoma in the December, 2002, issue of Mother Jones at Water For Profit.
America’s health care crisis is really a subset of the corporate takeover. Health insurance companies and pharmaceutical corporations are heavily invested in preventing a much more economical single-payer public insurance program with superior benefits from becoming a reality. Those corporations are also hard at work privatizing Medicare. See November’s issue of CommonSense2 , “The Death of Medicare”.
Sustainable agriculture is threatened by the corporate factory farm model which is harmful to the environment and to our health. Sign up for newsletters at www.organicconsumers.org.
Beware of code words. Because “privatization” became a dirty word in the Social Security debate, corporatizers and government officials use terms like “public-private partnerships” (PPPs or 3Ps).Beware of any politician who uses the vocabulary of “partnering.” To its credit, the Berks County PA Democratic Committee unanimously passed an anti-privatization, anti-outsourcing resolution in 2005. See Resolutions at www.berksdems.org .
It seems the Reagan-Bush legacy and the conservative movement were not about conservatism. Their real legacy was corporatism/fascism and the centralization and expansion of corporate government and corporate welfare.The result is the steady erosion of democracy and the diminishing power of the people. A fundamental question is whether the 1886 Supreme Court decision (Santa Clara v. Southern Pacific Railroad) which declared corporations to be “persons” needs to be overturned. See The Hidden History of Corporations at www.ReclaimDemocracy.org as well as Model Brief on Eliminating Corporate Rights at www.celdf.org.
For more on the Democracy Movement’s fight against the Privatization Movement, check out resources available at www.poclad.org (Program on Corporations, Law, and Democracy) as well as Dorothy Reilly’s article on fascism, ” Sound Like America To You?”, in the November 2007 issue of CommonSense2.com.
Don’t think that federal jobs are safe from the same forces that shipped America’s good factory jobs overseas. For the last decade there has been a push to “privatize” federal jobs; that is, to make federal workers compete for their jobs with contractors. On its face, that competition might strike you as fair when, in practice, it is anything but fair and those private companies looking to take over federal jobs quickly learned how to “play” the system. Only the owners of the companies who take over federal jobs get rich—and the owners of these companies come from the same 5% of the population that owns 80% of the wealth of our country! They blanket Capitol Hill with lobbyists and buy our political system right out from under the working people of this country. - Are Federal Jobs the Factory Jobs of the Future?, TMG Books
By Stephen Lendman, Revolt of the Plebs April 13, 2011
In July 1944, 730 delegates from 44 nations met at the Mount Washington Hotel in Bretton Woods, NH for a UN Monetary and Financial Conference. Its purpose was to establish a post-war international monetary system of convertible currencies, fixed exchange rates, free trade, the US dollar as the world’s reserve currency linked to gold, and those of other nations fixed to the dollar.
It also designed an institutional framework for market-based capital accumulation to assure newly liberated colonies would pursue capitalist economic development beneficial to victorious allies, mainly America.
In addition, the IMF and World Bank were established to integrate developing nations into the Global North-dominated world economy, using debt entrapment as the way to transfer their wealth to powerful Western bankers.
The scheme to this day obligates indebted nations to take new loans to service old ones, assuring rising indebtedness and structural adjustment harshness, including:
privatization of state enterprises;
mass layoffs;
deregulation;
deep social spending cuts;
wage freezes or cuts;
unrestricted free market access for western corporations;
corporate-friendly tax cuts;
crackdowns on or elimination of trade unionism; and
harsh repression against those opposing a system incompatible with social democracy.
As a result, since WW II, public wealth shifted to powerful private hands, widening the gap between super-rich elitists and working households, a process more intense than ever now, including the amounts.
In 1971, the system unraveled when Nixon closed the gold window, ending the last link between gold, the dollar, and sound money. Thereafter, currencies floated, competing with each other in a casino-like environment, manipulated by powerful insiders like Soros, hedge funds, giant international banks, or governments at times cooperatively with others in their own mutual self-interest.
Bretton Woods established a post-war international monetary system, including the IMF and World Bank’s original missions:
the former to establish stable exchange rates linked to the dollar and bridge temporary payment imbalances; and
the latter to provide credit to war-torn developing countries. Both bodies, in fact, proved hugely exploitive, their purpose to this day.
In his book “Super Imperialism: The Economic Strategy of American Empire” and other writings, Michael Hudson explained how the dollar glut finances US imperialism and corporate interests by:
circulating surplus dollars globally to further financial speculation and corporate takeovers;
global central banks “recyl(ing) these dollar inflows (into) US Treasury bonds to finance the federal US budget deficit; and most important the military character of the US payments deficit and the domestic federal budget deficit.”
In other words, dollars finance US corporate takeovers, speculative excesses creating bubbles and global economic crises, as well as America’s reckless spending, militarism, imperial wars, hundreds of bases worldwide, and overall belligerence and exploitation at the expense of democratic values and social justice.
Sooner or later, however, excesses erode confidence and produce change, especially today with the Federal Reserve sacrificing dollar strength to bail out Wall Street at the expense of productive economic growth and stability. The greater the dollar erosion, the less likely foreign investors will tolerate buying bad assets, giving America a free lunch to finance counterproductive policy.
As a result, Hudson sees international tensions growing for the next generation because of America’s reckless monetarism, perpetual wars, and extreme wealth gap between super-rich elitists and ordinary workers.
For decades, US companies had a competitive advantage from Washington Consensus rules and Bretton Woods institutions it controls, including the IMF and World Bank, affording America a free lunch to rule by forcing other countries into debt bondage, threatening to bring down the global monetary system if enough of them balk.And, of course, waging imperial wars when financial ones don’t work.
So far it has because Europe and Asia lack the political will to establish a new international economic order, so nations producing economic gains can keep them, not let America usurp them to reinforce its “new kind of centralized global planning” – one based on financialization and a US Treasury securities standard, not industrial mechanisms.
In WTO terms, it transfers foreign trade gains from other economies to America, drains their resources overall, promotes dependency, not self-sufficiency, and backs it with hardline militarism and threats of systemic monetary collapse.
Eventually, exploited countries balk about “taxation without representation,” a “quid without quo,” a free lunch from “the world’s payments-surplus nations.” The longer America demands it by glutting world economies with dollars, the more likely disadvantaged nations will object, by threatening to withdraw from the IMF, World Bank and WTO.
It’s a possibility globalists like George Soros aim to exploit, among other ways through Bretton Woods 2.0 to develop ideas and policies for a new financial world order, elitists like himself control.
George Soros – Billionaire Predatory Investor
His rogue investing is notorious. For example, in 1992, he made a billion dollars sabotaging European monetary policy by attacking the European Rate Mechanism (ERM) through a highly leveraged speculative assault on the British pound, forcing its devaluation and ERM breakup.
In June 2003, Neil Clark wrote a New Statesman article, explaining his machinations as a rogue predator. As a result, he “made billions out of the Eastern currency crash of 1997,” and was fined in 2002 “for insider trading by a court in France.” When asked about the turmoil his speculation caused, he dismissively said:
“As a market participant, I don’t need to be concerned with the consequences of my actions.”
Earning billions from them, they’ve caused havoc for millions globally. More still by his International Crisis Group and Open Society (open meaning for him to plunder) collaboration with Zbigniew Brzezinski, Al Gore, General Wesley Clark, Richard Perle, Paul Wolfowitz, and many other notorious scoundrels and organizations.
For decades, Soros operated roguishly for a buck. For example, in 1998, he wrote an outrageous letter to Bill Clinton, calling for a “comprehensive political and military strategy for bringing down Saddam and his regime” for reasons the Bush administration implemented.
He’s also connected to the Carlyle Group, profiting on militarism and wars from defense contracts. There his partners and associates include Bush I, James Baker, Colin Powell, former UK Prime Minister John Major, Frank Carlucci, Richard Darman, at one time members of bin Laden family, and many other well-connected figures.
Clark explained that Soros “may not, as sometimes suggested, be a fully paid-up CIA agent. But that his corporations and NGOs are closely wrapped up in US expansionism cannot seriously be doubted.”
He turned on Bush II over tactics, not ideology, for committing the cardinal sin of giving away the game through overzealously endorsing belligerence.
In fact, Soros strongly supports financial and military warfare for greater profits globally, to gain control over money, resources and markets, but wants it done skillfully with little notice – his way.
As a result, he uses his wealth and influence to oust “bad for business” regimes. For example, Clark said he was instrumental in the Soviet collapse by:
“distribut(ing) $3 million a year to dissidents including Poland’s solidarity movement, Charter 77 in Czechoslovakia, and Andrei Sakharov in the Soviet Union. In 1984, he founded his first Open Society Institute in Hungary and pumped millions of dollars into opposition movements and independent media. Ostensibly aimed at building up a ‘civil society,’ these initiatives were designed to weaken the existing political structures and pave the way for eastern Europe’s eventual exploitation by global capital.”
Soros now takes credit for “Americaniz(ing) eastern Europe” by exploiting its wealth and people for profit. In Yugoslavia, Clark said:
“The Yugoslavs remained stubbornly resistant and repeatedly returned Slobodan Milosevic’s reformed Socialist Party to government. Soros was equal to the challenge. From 1991, his Open Society Institute channeled more than $100 million to” anti-Milosevic elements, “funding political parties, publishing houses and ‘independent’ media” like Radio B92,” using it against Milosevic.
When Washington ousted him in 2000, “all that was left was to cart (him) to the Hague tribunal, co-financed by Soros” and other so-called human rights custodians, corporate ones wanting their share of the booty. Today, Yugoslavia is balkanized, its people exploited, and Kosovars governed by Hashim Thaci’s Kosovo Liberation Army (KLA), a rogue organization connected to the CIA and organized crime.
Soros, however, profited hugely.He’s done it, in fact, in each country he targeted at the expense of freedom, democratic values, and public welfare.
“In Kosovo, for example, he invested $50 million in an attempt to gain control of the Trepca mine complex, where there are vast reserves of gold, silver, lead and other minerals estimated to be worth (about) $5 billion. He thus copied a pattern he (used) to great effect over the whole of eastern Europe (through) ‘shock therapy’ and ‘economic reform,’ then swooping in with his associates to buy valuable state assets at knock-down prices.”
In fact, his Pax Americana strategy differs only from Bush II in subtlety. “But it is just as ambitious and just as deadly,” whether by military or financial warfare for maximum profits.
Soros’ Institute for New Economic Thinking (INET) Bretton Woods Conference
From April 8 – 11, INET’s second annual conference addressed global economic crisis aftershocks, as part of a wide-ranging effort to “engage the larger European Union, as well as the emerging economies of Eastern Europe, Latin America and Asia” to accept Soros’ New World Order ideas.
Aiming to “inspir(e) and provok(e) new economic thinking,” over 200 academics, business and government leaders (many with direct ties to him) attended, including INET’s Soros and Robert Johnson, UK Prime Minister Gordon Brown, Paul Volker, Larry Summers, Joseph Stiglitz, Kenneth Rogoff, Jeffrey Sachs (whose shock therapy poison helped wreck post-Soviet Russia and Eastern Europe), Carmen Reinhart from the (Pete) Peterson Institute for International Economics, the Bank of England’s Andy Haldane, Henry Kaufman, and other New World Order elitists, plotting new ways for global financial control and profits.
Topics discussed included:
The emerging economic and political order: what lies ahead?
Bretton Woods: what can we learn from the past in designing the future?
Getting back on track: macroeconomic management after a financial crisis.
Sovereignty and institutional design in the global age: the global market and the nation states.
Can sovereignty and effective international supervision be reconciled: the challenge of large complex financial institutions.
Exploring complexity in economic theory.
The political economy of structural adjustment: understanding the obstacles to cooperation.
The market or the state: can market forces deliver innovation, education, and infrastructure?
Sustainable economic.
Optimal currency areas and governance: the challenge of Europe.
The architecture of Asia: financial structure and an emerging economic system, and
Rising to the challenge: equity, adjustment and balance in the world economy.
A Final Comment
Globalist Soros believes “America should be replaced by a world government with a global currency under UN rule.”
In other words, he wants national sovereignty replaced by centralized control over money, populations, resources and markets – an undemocratic ruler-serf society unfit to live in except for rulers and profiteers.
On January 25, 2010, New York Times writer Andrew Sorkin headlined, “Still Needed: A Sheriff of Finance,” quoting Soros saying:
“We need a global sheriff” ahead of the 2008 World Economic Forum in Davos, Switzerland. Perhaps he has himself in mind.
Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.
Yes, world attention has been focused for the last few days on the continuing disaster unfolding in Japan at the Fukushima nuclear power facility. It does appear that at least 2 and possibly 3 reactors are in full meltdown, with the end result being nothing short of catastrophic. We are also watching as the war in Libya is escalating and very shortly we will see direct US involvement in that country by the use of ground forces. It will be another war for Israel that the bankrupt US presently cannot afford. But while world attention has been focused on these two major events, something devious and diabolical is on the horizon for the entire World economic system. It appears, according to this article from Revolt of the Plebs, at www.revoltoftheplebs.com, that the ultra criminal and most evil Rothschild Zionist agent, George Soros, will be pushing for his scheme of a reorganized Global economic system starting as early as April 8th of this year! - NorthernTruthSeeker, March 31, 2011
It is real, it has been very well planned out, and on April 8, 2011, George Soros will start with his plan.
Two years ago, George Soros said he wanted to reorganize the entire global economic system. In two short weeks, he is going to start – and no one seems to have noticed.
“On April 8, a group he’s funded with $50 million is holding a major economic conference and Soros’s goal for such an event is to “establish new international rules” and “reform the currency system.”
It’s all according to a plan laid out in a Nov. 4, 2009, Soros op-ed calling for “a grand bargain that rearranges the entire financial order.”The event is bringing together “more than 200 academic, business and government policy thought leaders’ to repeat the famed 1944 Bretton Woods gathering that helped create the World Bank and International Monetary Fund. Soros wants a new ‘multilateral system,” or an economic system where America isn’t so dominant.
More than two-thirds of the slated speakers have direct ties to Soros. The billionaire who thinks “the main enemy of the open society, I believe, is no longer the communist but the capitalist threat” is taking no chances. Thus far, this global gathering has generated less publicity than a spelling bee. And that’s with at least four journalists on the speakers list, including a managing editor for the Financial Times and editors for both Reuters and The Times. Given Soros’s warnings of what might happen without an agreement, this should be a big deal. But it’s not.
What is a big deal is that Soros is doing exactly what he wanted to do. His 2009 commentary pushed for “a new Bretton Woods conference, like the one that established the post-WWII international financial architecture.” And he had already set the wheels in motion. Just a week before that op-ed was published, Soros had founded the New York City-based Institute for New Economic Thinking (INET), the group hosting the conference set at the Mount Washington Resort, the very same hotel that hosted the first gathering. The most recent INET conference was held at Central European University, in Budapest. CEU received $206 million from Soros in 2005 and has $880 million in its endowment now, according to The Chronicle of Higher Education.
This, too, is a gathering of Soros supporters. INET is bringing together prominent people like former U.K. Prime Minister Gordon Brown, former Fed Chairman Paul Volcker and Soros, to produce “a lot of high-quality, breakthrough thinking.” While INET claims more than 200 will attend, only 79 speakers are listed on its site– and it already looks like a Soros convention. Twenty-two are on Soros-funded INET’s board and three more are INET grantees. Nineteen are listed as contributors for another Soros operation – Project Syndicate, which calls itself “the world’s pre-eminent source of original op-ed commentaries” reaching “456 leading newspapers in 150 countries.” It’s financed by Soros’s Open Society Institute. That’s just the beginning.” source – MRC
Don’t think that federal jobs are safe from the same forces that shipped America’s good factory jobs overseas. For the last decade there has been a push to “privatize” federal jobs; that is, to make federal workers compete for their jobs with contractors. On its face, that competition might strike you as fair when, in practice, it is anything but fair and those private companies looking to take over federal jobs quickly learned how to “play” the system. Only the owners of the companies who take over federal jobs get rich—and the owners of these companies come from the same 5% of the population that owns 80% of the wealth of our country! They blanket Capitol Hill with lobbyists and buy our political system right out from under the working people of this country.
TMG Books
It used to be that unionized factory jobs were the best path to the middle-class in America. Factory jobs, union factory jobs in particular, afforded the workers a good wage, health insurance, and a defined-benefit retirement plan—all three being the foundation of a middle-class lifestyle.
Most of those jobs no longer exist and in the economy of 2010, as I write this, the workers displaced by when a factory closes and their jobs being shipped overseas are slowly losing their grip on the middle-class because they are unable to find a job offering those same benefits. This is a tragedy, really.
A job with Uncle Sam does provide all the pay and benefits of a factory job.In fact, Federal jobs pay more than comparable jobs in the private sector.
But don’t think that Federal jobs are safe from the same forces that shipped America’s good factory jobs overseas. For the last decade there has been a push to “privatize” Federal jobs; that is, to make Federal workers compete for their jobs with contractors.
On its face, that competition might strike you as fair when, in practice it is anything but fair and those private companies looking to take over Federal jobs quickly learned how to “play” the system. Every Federal job contracted out is one more path to the middle-class lost!
Only the owners of the companies who take over Federal jobs get rich—and the owners of these companies come from the same 5% of the population that owns 80% of the wealth of our country!They blanket Capitol Hill with lobbyists and buy our political system right out from under the working people of this country.
Federal contractors are taking over government jobs from which they are rightly prohibited. The government is even using mercenaries to fight our wars! The military is still a path to the middle-class for many Americans, it was for me, but even that is being robbed from our future generations.
Military personnel used to cook foods for the front-line soldiers and military mechanics once kept vehicles running in the motor pools; those are just two examples of good Federal jobs that have been taken over by contractors. And the truth is that the companies who assumed took those jobs from our young men and women are not doing it for less: They are not saving the American taxpayer a dime!
And what they are costing us are good jobs!
But for the time being, the Federal government does employ over two-million Americans.These are great jobs and each one represents an opportunity for the employee to achieve and maintain a middle-class lifestyle.
Federal employment is the factory floor of the future. And just like unions once fought to maintain the dignity of the American worker, every Federal employee and citizen of the United States who sees the value of having a strong and growing middle-class in our country must fight to keep Federal jobs for Federal employees.
Either that or there will be no path to the middle-class left in America!
There has been much public praise for the Bill and Melinda Gates Foundation’s efforts to reform public education. However, few scholars have engaged substantively and critically with the organization’s work. While the Gates Foundation is the single largest supporter by far of "choice" initiatives particularly with regard to charter school formation, it is pushing public school privatization through a wide array of initiatives and in conjunction with a number of other foundations. What are the implications for a public system as control over educational policy and priority is concentrated under one of the richest people on the planet in ways that foster de-unionization and teacher de-skilling while homogenizing school models and curriculum? The Gates Foundation and the Future of US "Public" Schools addresses this crucial, unanswered question while investigating the relationships between the Gates Foundation and other think tanks, government, and corporate institutions. - How Bill Gates Plans On Privatizing us Public Schools, The Frustrated Teacher, November 22, 2010
Calitics September 27, 2010
One of the most important trends afoot right now is the move to privatize as many government services as possible.
This trend is fueled by the desire of the richest Americans to seek new income streams.Instead of spending their cash hoard on innovating new products or businesses that can create jobs and lasting economic activity, they're engaged in a process of rent seeking, which has no productive value. By taking tax dollars that currently provide public services and channeling them to the private sector, which contracts to provide the service at lower cost -- and therefore at lower quality -- these wealthy individuals can add new income streams while also blunting any effort to raise their taxes to provide these services.
It's not just schools that are targeted for privatization, however. As the New York Times reports, Santa Clarita has privatized its library -- even though it wasn't forced to by financial considerations:
A $4 million deal to run the three libraries here is a chance for the company to demonstrate that a dose of private management can be good for communities, whatever their financial situation. But in an era when outsourcing is most often an act of budget desperation -- with janitors, police forces and even entire city halls farmed out in one town or another -- the contract in Santa Clarita has touched a deep nerve and begun a round of second-guessing.
Can a municipal service like a library hold so central a place that it should be entrusted to a profit-driven contractor only as a last resort -- and maybe not even then?
"There's this American flag, apple pie thing about libraries," said Frank A. Pezzanite, the outsourcing company's chief executive. He has pledged to save $1 million a year in Santa Clarita, mainly by cutting overhead and replacing unionized employees. "Somehow they have been put in the category of a sacred organization."
In his rather blunt and offensive way, Pezzanite actually lays out the stakes pretty clearly. In a country that has turned pursuit of profit into a civic religion, and that since 1980 has argued that all government activity and policy should be oriented around producing corporate profits,it is indeed an open question whether there is any room left for the concept of the government providing services directly to the people, without having to give an investor a cut.
Public libraries have been operating quite effectively and efficiently for over 100 years. The notion that one would privatize the library just so some company can make money was virtually unheard of, at least in California, for the last century. But that was before the era of Reagan, Schwarzenegger, and Whitman.
The privatizers' method is the same: fire all the employees, regardless of how good at their jobs they are, so the company can replace them with cheaper labor, increasing their profits at the expense of quality services and middle-class wages.It's wealth extraction at its finest, the corporate raider having shifted his target from an '80s manufacturing plant to a '10s library.
Why would Santa Clarita go along with this? It's likely that the council are merely outliers, the first ones to make a highly ideological move that will be quickly taken up by right-wing (and some not so right-wing) councils across the state, demanding privatization to suit their ideological agenda and justified by overblown and misleading concerns about pension costs.
It's true that I have more than a passing interest in this topic, as the husband of someone working at a public library. But it's the bigger principle that really matters here. Public services should be provided for the benefit of the public -- and not for the benefit of some company's bottom line.
When profit becomes the primary motive, all else is sacrificed to it. It's not what most Californians want for their state and their future, but unless we fight back hard, they will privatize everything, and keep the profits while we get stuck with the risks -- and the losses.
Of the last five presidents, Obama has clearly been the staunchest ally of the school privatization movement. I suppose I shouldn’t be surprised. Our first black president has already clearly established his neoliberal credentials, in expanding Bush’s war on terror into Pakistan, Yemen and Libya and increasing his predecessor’s measly $700 billion in Wall Street bailouts to $12.5 trillion.
In addition to generous increases to charter school funding every year,the Obama administration also included a provision in the 2009 stimulus package forcing states to liberalize and/or expand their charter school programs or miss out in $100 billion in public school stimulus funding.
Many states, which are already closing schools and laying off teachers, have a cap on charter school formation because they can’t afford further decreases in their public school budget. Many feel the failure of charter schools to improve achievement scores doesn’t justify establishing even more of them, given the additional cuts and sacrifices this would impose on public schools. Many, such as Ohio, have had serious problems (owing to lack of public oversight) with fraud and corruption in privately run charter schools.
However, at present all states without legislation authorizing the formation of charter schools will have to pass it -- and all those with funding caps will have to remove them – or miss out on badly needed stimulus funding.
Arne Duncan’s Record in Chicago
Obama’s appointment of Arne Duncan, former CEO of Chicago Public Schools to head the Dept of Education, suggests states will continue to be under enormous pressure to de-fund public schools -- and that many more will close.While running Chicago schools, Duncan -- in collaboration with Mayor Daley’s office and Chicago’s corporate elite -- pursued an aggressive school privatization agenda.In 2004, this included an attempt to close 20 out of 22 schools in a low income minority neighborhood. The effort was clearly linked to the mayor’s and property developers efforts to “gentrify” the neighborhood -- to force out minority residents and glam up their properties for re-sale to white upper middle class professionals. With all their neighborhood schools closing, low income residents would have no choice but to leave.
Fortunately militant protests by residents stopped the arbitrary school closures. However Duncan then preceded to implement a draconian decree under Bush’s No Child Left Behind Act ordering immediate closure (with no probationary period) of schools where students failed to pass standardized tests.Duncan also made it clear that these schools would immediately be turned over to private charter school operators funded by grants from the Bill and Melinda Gates and WalMart family foundation).
Obama and Arne Duncan
The Role of the Corporate Media
It should also be no surprise that the corporate controlled media is beating the drums for the neoliberal agenda to privatize schools. As Danny Weil outlines in “Corporate School Hype and How It’s Managed,” NPR, CNN, PBS, 20/20 and Oprah Winfrey are all guilty of staging “informercials” promoting school privatization via the formation of charter schools as a solution to the “crisis” in public schools. No pro-public school advocates are invited to challenge the assertions presented, and there is no disclosure of ideological or financial (as in the case of controversial civil rights leader Al Sharpton) ties to right wing think tanks and school privatization proponents (see http://www.counterpunch.org/weil08262009.html).
When former NBC Today Show co-host Jane Pauley walked out onto a stage in her birth city, Indianapolis, a year ago, some in the audience, including Indiana Superintendent of Public Instruction Tony Bennett and former mayor Bart Peterson, understood what was behind Pauley’s show of empathy for Indiana’s school children, even though it may have been hidden to those there to see a celebrity.
Pauley spoke with pride of her son Ross—who had just joined the teaching staff of a charter school—and how she heard in Washington about the great things happening in the school reform movement back in her former hometown.
As member of the Board of the Mind Trust, a nonprofit school reform group in Indianapolis which has over $12 million to attack public education, Pauley was there to help sell the corporate privatization of public education. This coming May, in fact, Pauley will even join New York Times’ David Brooks (a “Quiet Revolution” quack) onstage at the Mind Trust’s “Grow What Works: Campaign to Accelerate Education Reform.”
The Mind Trust is the product of President and former Indianapolis Democratic mayor Bart Peterson and CEO David Harris, the mayor’s first Charter School Director in Indianapolis. In 2001, the Indiana legislature passed a charter school law which made Peterson the first mayor to have the authority to charter schools in the country. For their various programs, Harris, Peterson, and the Lilly Endowment-funded Center of Excellence in Leadership of Learning (CELL) at the University of Indianapolis received $11.3 million from the Gates Foundation. To the Indianapolis Charter Schools Facilities Fund, a loan program which operated from 2005 to 2009, the Annie E. Casey Foundation (AECF) added another $1 million.
Bart Peterson is currently the Senior Vice President of Corporate Affairs and Communications for Eli Lilly and Company, the mega-drug company where Mitch Daniels was Senior Vice President before joining the Bush administration. In fact, current or former Lilly members onboard with the Mind Trust include Alecia DeCoudreaux, General Counsel at Lilly USA, Mind Trust President Claire Fiddian-Green, and Anne Shane, Community Development and Education Consultant to the Lilly Endowment, Inc. The Lilly Endowment, the Ruth Lilly Philanthropic Foundation, and the Eli Lilly and Company Foundation all significantly fund the Mind Trust.
Mind Trust’s Board of Directors is stacked with other Indiana corporate leaders. It includes Indianapolis Power and Light Company (IPALCO) CEO Ann Murtlow, who previously worked as an AES Corporation liaison at the same time Mitch Daniels was an IPALCO board member, then joined IPALCO in 2002 (for the AES-IPALCO connections to charter school scandals, see my article here). Murtlow is also on the Federal Reserve Bank of Chicago’s Board of Directors, a member of the Board of Directors of Greater Indianapolis Chamber of Commerce, and now the Senior Vice Chair of the Mind Trust.
Through its Venture Fund and with help from the Lilly Endowment, in 2008 the Mind Trust spent $2 million to recruit Teach for Americato Indiana. Nationally, Teach for America has been under much scrutiny, and the Indiana branch is also drowning in controversy. Tina Bennett (the wife of Tony, Indiana Superintendent of Public Instruction) recently quit her job as assistant director of Teach for America at Marian University, a Catholic school that was awarded $500,000 from the Indiana government to train future school principals, even though many other more qualified universities applied and were denied. Daniel J. Elsener, Marian’s president, also serves on the Indiana State Board of Education. When asked to comment on his wife’s many conflicts of interests with charter schools, Tony Bennett, in April, arrogantly told a South Bend School Corporation audience:
He, however, had no comment on the recent corruptions in Dennis Bakke’s Imagine Schools.
School Choice is indeed the buzzword of another Mind Trust recruit, Stand for Children. Originating in Portland, Oregon, Stand for Children used $242,300 from the Mind Trust and $150,000 from the Joyce Foundation to sweep into Indiana and lobby for Senate Bill 1, the legislation which makes it easier to fire teachers and make annual teacher evaluations based primarily on student performance, or the ISTEP test.
As Steve Hinnefeld has noted, Stand for Children lists the Indiana Public Charter Schools Association address for its office and has “two high-priced Statehouse lobbyists and a ton of positive publicity courtesy of Indianapolis Star columnist Matthew Tully.” Linda Erlinger, Stand for Children’s executive director in Indiana, previously served as Development Director with Teach for America and as Manager of Applications of Research with the Chicago Panel on School Policy. Thus, it is not surprising that Arne Duncan lauds Stand for Children in a Mind Trust press release.
True to the conservative-corporate propaganda plan, another Mind Trust spin-off, Teach Plus, recruits young teachers, trains them to question seniority in the teaching profession, and pits them against older, more experienced teachers who, instead of being criticized, should be looked up to and learned from. Started by Mind Trust Education Entrepreneur Fellow Celine Coggin (who was nominated by Paul Reville, Massachusetts Secretary of Education and charter “Innovation Schools” advancer), Teach Plus hires people to write studies claiming that once the governor closes down low-performing schools in Indiana, lazy senior teachers will replace the jobs of younger ones at other public schools in the district, what they refer to as the “Domino Effect.” In their anti-seniority attack, they have $4 million from the Gates Foundation to infiltrate six cities over three years, including Boston. The Teach Plus fellows in Indianapolis also focus on “advancing a reform agenda based on improving teacher evaluation and staffing policies,” or to press for an agenda where teachers are based primarily on how well their students do on the state ISTEP test.
Proudly, the Indiana Superintendent of Public Instruction has no qualms about promoting the Mind Trust’s Fellowship program which led to Teach Plus. In his March 21, 2011, bulk-email to teachers and others, Bennett includes a link to apply for one of the group’s Education Entrepreneur Fellowships. Along with members of the Mind Trust, Bennett has even hyped the Broad and Gates funded anti-public education film, Waiting for Superman, in an interview with Inside Indiana Business’s Gerry Dick.
With Bennett, business, the Indy Star, and a former NBC Today Show anchor on board, the Mind Trust and Teach Plus aren’t having problems landing gigs, either. Last year, Indianapolis charter school teacher James Larson appeared on the heavily Broad and Gates Foundation-funded Today Show’s Education Nation. Larson was a Teach Plus Indianapolis Teaching Policy Fellow. In his discussion of this, Larson writes:
The first thing Siri and Marcus [founders of Charles A. Tindley Accelerated School in Indianapolis, where Larson teaches) told me in my job interview is that Tindley teachers are held accountable -- not only by parents and students, but also by the administrators themselves.
You would think that would be typical of all schools, but unfortunately it’s not. Too many teachers are simply allowed to close their doors when the bell rings. Too many administrators close their doors, too.
Larson graduated from DePauw in 2005 (as did Siri and Marcus, at some point) and started at Tindley in 2008, so he’s not seen much of what teachers and administrators do in the public schools in Indiana, if anything. Whether he is being duped into buying the argument for privatization of public schools or he is a part of the scheme is hard to tell. Let’s just hope others don’t fall in line.
By Eric-Charles Banfield, The Freeman February 1995
Back when first cutting my teeth on the concepts of free-market economics, I was impressed by the argument that business firms have to satisfy their customers to survive.Firms have strong, natural disincentives against performing poorly or acting immorally because they would risk losing customers and going out of business. For some time thereafter, I defended “business” on those grounds. Business is not an evil, I argued; indeed, businesses are almost “slaves” to the shifting and elusive passions of the sovereign consumer.
But over the years, I found myself forced to refine my views regarding business firms.
Three lessons stand out.
First, being “pro-business” is not the same as being “free-market.”
Second, regulation, which presumably works “against” business, goes hand-in-hand with special privileges and artificial protections “for” business.
Third, the phenomenon of active and routine collusion between business and government made the business world seem less than the pure and benevolent social agent I once perceived.
In short, I began to recognize that the concept of “the corporate welfare state” goes a long way to describe some of the problems we observe in the complex nexus between the market sector and the government sector. All too often, businesses lobby government for special privileges they would not have in a true, free market.
What Is Pro-Business?
Much political rhetoric over the past decade has centered over whether a particular policy is “favorable to business,” or whether a candidate is “pro-business.” In earlier years, I rooted for any “business-friendly” policy move, and supported conservative “pro-business” politicians. But, as I learned over the years, “pro-business” ideas are all too often inconsistent with “free-market” ideas.
When politicians speak about being “pro-business,” they try to create the impression they will do things to benefit the business climate. That help, however, can come in two forms.
One form is in the promise of deregulation, or a promise to fight new regulations or taxes that will potentially harm the economy, an industry, or a firm. This is generally all to the good; the help is “negative”; that is, the politician will focus on what the government should not do regarding a business’s activity.
But the second form of “pro-business” help is “positive,” that is, the state takes some action that specifically helps a business or an industry, usually at the expense of other people. The government creates some law or regulation that allows a business to do or have something it could not otherwise do or have in a true free market. It grants what amounts to a privilege.
That distinction might seem clear. Yet, as The Economist put it,
“Businessmen themselves—torn between a desire to be left alone and an appetite for special favors—are often unsure quite what they want from government.”[1]
Examples of Privilege
Bailouts. Clear-cut examples of artificial, government-granted privileges include bailouts, such as when a large firm or industry is losing money. The government gives the failed entity cash or cheap loans, or allows it to write off its creditors without liability, so it can resume business despite its poor performance. Recent examples include banks and auto manufacturers.
Subsidized loans.Some sectors are perpetually propped up, regardless of their condition. For example, government offers “small businesses” subsidized loans at below-market interest rates, with the taxpayer assuming the risk. When government-assisted “small-business investment companies” fall, these “venture capital” firms simply declare bankruptcy before the government’s Small Business Administration can file a claim on the assets.[2]
Outright “disincentive” subsidies. Another clear example of privilege is subsidies in which an outright payment occurs. For example, agricultural corporations get every kind of corporate subsidy imaginable, including dairy price supports, export-enhancement programs, and payments for not growing certain crops.[3]
Resource privileges. Other privileges include special deals for ranchers, oil companies, and lumber companies to graze on, drill in, or cut resources from federally owned lands at drastically reduced prices. They get those deals not only because the government is reluctant to sell any of its vast land holdings, but because firms in those industries are unwilling to buy the land for what it’s worth, or to pay full price for the resources they use.[4]
Monopoly privileges.Another example of privilege is cable companies and utilities that get granted exclusive monopolies over their regions, using the law to outlaw systematically any competition.[5]
Trade protection. Businesses argue for restricted competition at the international level, too. Many large corporations saw the North American Free Trade Agreement (NAFTA) as a vehicle for securing “compensatory” protections and other favors. The administration “negotiated concessions” for flat glass, durum wheat, home appliances, wine, peanuts, textiles, sugar, and citrus and vegetable interests, all “politically sensitive industries” that needed “relief.”[6]
Large businesses have often supported labor, zoning, permit, safety, or other regulations designed to keep out low-cost competitors, because the bigger firms were already meeting those new requirements anyway.
As The Economist reports,
“Regulation offers ways not just to create markets but also to compete with rivals. Firms have learned to lobby for rules that bring them benefits. Established companies . . . may lobby for stricter standards, knowing that these will mainly affect new entrants. Companies lobby for standards which they can meet, but impose high costs on competitors.”[7]
A classic case of that is underway with regard to environmental regulations. In fact, The Economist continues, companies in this area “press for regulations that will create a market for their products. Companies selling low-sulphur coal have rooted for legislation to reduce acid rain.” And waste management firms have fought to maintain and strengthen environmental regulations, including new landfill restrictions, waste incineration standards, and licensing schemes to keep out competitors.[8] The Clinton Administration’s smog-control plan is designed to mandate a greater market share for ethanol, “and is likely to boost further the fortunes of Archer-Daniels-Midland Co., the politically active agricultural company that dominates the ethanol market.”[9] ADM did no direct lobbying on the issue, but “didn’t have to.” Competing industry groups charge that ADM’s influence was indirect, primarily through The Renewable Fuels Association, a trade group.[10]
It’s routine. One insurance executive noted,
“It’s common in our industry: Large companies support legislation to drive out small competitors.”[11]
Drawing the Line
All of those privileges are perfectly legal, as business lobbyists and activists quickly point out. But legal doesn’t mean moral. One Texaco executive, for example, feels uncomfortable drawing a hard line between lobbying against bad regulation and lobbying for special privileges. He used the old “what’s-good-for-General-Motors-is-good-for-America” argument. His analogy was,
“If growing wheat happens to be good for the nation, then it’s okay to say so [in your lobbying efforts], even if you’re a farmer.”[12]
The Harm to Others
When the harm to consumers and taxpayers is considered, however, that claim of morality is harder to defend. To free-market advocates, such privileges are not the proper function of government. Ethical businesses should sink or swim on their own, without any help or harm from government. That is, the proper pro-business stance is “negative” (i.e., the state should leave me alone). A “positive” stance (i.e., the state should do me a favor) is improper. Those favors or privileges would not exist in a true free market without government intervention. They can be granted only at the expense of others: taxpayers, consumers, or other businesses.
Tax Breaks: Are They “Subsidies”?
Some privileges or exemptions are slipperier to define. A good example is tax breaks. It remains an open question among free-marketeers, if an industry lobbies for and receives an extra tax deduction that some other industries don’t get, whether or not that runs counter to free-market principles. Some would argue that anybody who can get a break from burdensome government taxation should accept it, and should feel no moral guilt about keeping money away from a wasteful, corrupt bureaucracy. Also, as one of my colleagues explained, every $1.00 in tax revenue leads to $1.83 in new spending. Every dollar you keep from government, therefore, prevents another 83 cents in deficit borrowing. Tax breaks are a moral and economic good.
Others would argue, on the basis of “equal protection of the laws” that the same breaks should go to all industries; if not, they should be opposed. Seeking and accepting a special tax break is “unethical.”
A Wall Street Journal editorial, focusing on the “industrial subsidy game” played by state and local governments, recently tackled this tricky issue.
“The cleanest line we can draw . . . is between enterprise that is subsidized and that which isn’t.” The editorial faulted the city of Austin, Texas, for giving a tax break to Apple Computer on the following grounds: “As long as . . . localities go bidding for business with funds that must be raised from other taxpayers, then the objections of other citizens must be weighed” [Italics added].[13]
The editors have a point: Many argue that government will spend what it will spend. Perhaps more taxes mean more spending. But lower taxes do not mean the government will spend less. Thus, lowering taxes for one person means more taxes paid by another (perhaps by someone in the future, if the deficit is made up by borrowing that must be repaid in the future). Under this argument, a tax break is indeed a subsidy.
A New Look at Tax Subsidies
Whether tax breaks are improper privileges or not, they seem increasingly unpragmatic, even to policymakers. Some mayors of large cities abhor the idea “that politicians can create jobs by handing out temporary tax bribes to companies” to spur a city’s economic activity.[14] The Heartland Institute wrote “there is growing consensus among experts and the general public” that tax abatements and subsidies “are an unsound investment.”[15]
Businesses, too, are learning those tax breaks can backfire. A Michigan judge recently barred General Motors Corporation from closing its Ypsilanti assembly plant, on the grounds that GM’s acceptance of Michigan’s tax abatement program was “a promissory estoppel,” a contract or implied promise to keep the facility operating in exchange for relief on its taxes.[16] Tax breaks have strings attached. Perhaps business managers will think twice before looking at tax subsidies as some “free lunch.”
Regulation and Privilege
Despite a little difficulty in defining privilege, we can say that regulation and privilege are two sides of the same coin. And, to extend the analogy, performing the regulation-privilege coin trick requires a balancing act and a vicious cycle.
All large industries now face regulations and privileges. If the restrictions cost more than the privileges are worth, the industry suffocates, leaving nothing to tax or regulate. If the value of privileges exceeds the cost of the restrictions, then the industry takes advantage, and abuses occur for which regulators are blamed. Balance is crucial. If regulators take the heat, they impose more regulations. But those hurt industry profits. The industry in turn complains to regulators, legislators, and staffers. The government, instead of removing the restrictions, offers privileges to offset or compensate for the regulatory burdens.But those privileges lead to excesses and abuses, which lead to more call for re-regulation, and the cycle continues.
The classic example is the S&L industry. For decades after the 1930s, the S&L business suffered harsh regulation but enjoyed the offsetting privileges of deposit insurance and legal protection from competition. The system contained its inherent problems because the two were roughly balanced. The Depository Institutions Deregulation and Monetary Control Act of 1980 removed some of the industry’s burdensome regulations, yet it increased the privilege of deposit insurance, boosting coverage to $100,000 per account from $40,000. Regulation and privilege became unbalanced, so the industry abused the privilege of taxpayer-backed deposit insurance, and taxpayers got stuck for $170 billion.[17]
Regulation as an Access Window
A lot of that business begging is done by firms that are heavily regulated. Indeed, many argue, that regulation is precisely what hindered their competitiveness and threatened their health. But how do regulation and privilege get so intertwined?
Basically, businesses get entrenched in the process. Once regulated, an industry opens an “access window” to the political process, via lobbyists and trade associations. After all, it must defend itself against bad regulations.
But these meetings are hardly knock-down, drag-out fights. At hearings, business and politicians usually play a polite, conciliatory game. The industry often “agrees that reform is needed.” It acknowledges the laudable intention of the new government regulation, but questions only some of the technical language in the clauses. The regulated industry rarely fights to defeat an entire measure. Instead, it focuses its resources only on opposing or rewriting some technical language in one or two sections of a proposed bill or regulation. They know that the regulations and laws will harm them. But they will eventually lead to some later concession or compromise, or better yet, an outright privilege that will benefit them later. The window works both ways.
An article by Gary S. Becker, a 1992 Nobel laureate and professor of economics at the University of Chicago, said,
“The best way permanently to reduce undesirable business influence over the political process: Scrap all the regulations that serve as little more than tollgates for graft.”[18]
Seeking Safe Harbors: The Gray Area
Often that concession or compromise helps a business or industry simply define what it can or cannot do. Frequently, businesses lobby Washington to help redefine some previous regulation that was poorly written, or has not been flexible enough to accommodate new technology or new trends. Much lobbying involves updating, revising, or amending old laws that are not relevant to current reality. Businesses constantly revisit old issues to redefine what is illegal and what is not, for they wish at least to act legally. They ask government for “guidance,” “flexibility,” “no-action letters,” and “approvals of action” so that if a regulatory question comes up later, the business can respond, “The government said it was legal.” Businesses need to know where they can find “official non-enforcement,” “comfort levels,” or “safe harbors,” so they can proceed in their business with increased legal certainty, with clear and consistent definitions of the law.
Technical Input
Businesses also offer to help government write the laws and regulations so they make some logistical sense, so they are internally consistent, or so they have a chance of “working” in a technical sense. Examples of that type of business-government cooperation abound in finance, such as insurance and banking, especially with regard to accounting or actuarial matters. Regulations and laws written without industry input would otherwise be self-contradictory, infeasible, excessively burdensome or costly, or otherwise inconsistent with the reality of how the industry operates.
Businesses often bring in expert advisers from “the real world” to work on “technical working group meetings” and explain to officials why the new rules must be written very carefully. Government accepts input from business so it can say its enlightened, interactive, “give-and-take” process resulted in a regulation or law that “we can all live with,” that “everyone had a say in,” that was “even-handed” or “reasonable.”
That close contact between business and government often leads to one business gaining some regulatory privileges or advantages over another. During those technical draftings of a bill, a business can slip in a provision that (perhaps even unbeknownst to the regulators) will indirectly harm its competitors.
Much of the time, however, businesses are not trying to harm or defraud anyone. They’re not looking for permission to rob or defraud people. They just want better definition of the laws, because they are so numerous, so comprehensive, and so pervasive. Businesses want legal confidence so they can form expectations and plan ahead.
The Revolving Door
The people who participate in that process can then pass through the “revolving door.” Businesspersons with expertise at dealing with government on technical industry issues find themselves candidates for jobs as regulators, who can work well with their former industry compatriots. Hiring experienced people from an industry allows the government to say it is being “reasonable” and wants to get the regulation “right.” Regulators, with experience at dealing with industry executives, in turn find opportunities as corporate government-relations directors or lobbyists in trade associations.[19]
The Game
Many in business and government see this whole process, which has evolved over centuries, as simply “the way things are done” and the only way to have any influence over what happens between business and government. If a business stands on principle and lobbies vigorously against every new law or regulation, it is seen as hostile and stubborn, unwilling to compromise, unwilling to “play the game.” Regulators see that behavior as a business’s way of saying it doesn’t want to be invited back to the hearings next time. Nonetheless, Stanley S. Arkin, a New York attorney, believes “resisting governmental authority may be an act of social responsibility for corporate America. Companies that stand up . . . and fight . . . are performing a patriotic duty by resisting the arrogant and undeserved application of . . . law.”[20]
Still, a business or industry that shuns the very process that writes its industry’s regulation would find itself stranded, having cut off its avenue of influence and information. That can be good and bad. It might prevent it from lobbying for privileges. But it will also prevent it from lobbying against future ill-conceived regulations. It works both ways. Lobbying for deregulation is tantamount to lobbying for fewer privileges.
So businesses tend to just let things go as they have in the past. Most of the action is in that “gray area.” Is that middling type of lobbying good or bad? It depends. If businesses use that access window to write regulations that harm their competitors unjustly, or at consumers’ expense, then they are abusing the process.
Regulatory Capture
The phenomenon of using the regulatory process to one’s advantage is nothing new. Economists years ago labeled it “the capture hypothesis.” Says one textbook,
The capture hypothesis assumes that regulatory agencies are set up in the interest of the firms to be regulated and that regulators serve the interest of regulated firms (who have “captured” them through the political process), not consumers. The capture hypothesis turns on its head the idea that economic regulation is designed to protect the public interest from monopoly. It is easy to point to examples of industries that like being regulated [such as airlines, telephones, and trucking].[21]
Companies that “like” being regulated are entrenched neck-deep in the political process, opening up room for abuses more blatant than just legal subsidies and protections. Becker wrote:
Corruption is common whenever big government infiltrates all facets of economic life. In modern economies, profits often are determined more by government subsidies, taxes, and regulations than by traditional management or entrepreneurial skills.Huge profits ride on whether companies win government contracts, get higher tariffs and quotas, receive subsidies, have competition suppressed, or . . . have costly regulations suppressed.
Companies respond to the importance of government’s role by striving to influence political decisions. It is often effective just to lobby politicians, and . . . bribe officials and politicians in return for government favors and profits.[22]
Yet protections and subsidies, even bribes, can ultimately destroy the targeted industry. As I wrote on S&Ls and banks,
“Many bankers still want the privilege of [deposit-insurance] coverage but also want fewer regulations. [They] cannot have it both ways. They must choose, and soon, either to stagnate as wards of the state in an unpredictable political process, facing eventual demise, or to be free and responsible institutions.”
Paul Weaver of the Hoover Institution, in a book review, summarized:
“Many corporations . . . lobbied hard to make sure government’s interventions in the economy yielded limits on competition, subsidies, and other business advantages. [It is] a hard-to-accept truth: business is a major source of the anti-market thinking and policies that make a lot of big companies unable or unwilling to cope in a competitive world.”[23]
A Needed Change in “Business Ethics”
Business firms don’t seem to make much effort to separate themselves from the political process. Perhaps the growing number of socially responsible consumers and investors would flock to the products and stocks of firms that made a point of distancing themselves from all forms of business-government collusion. Imagine the following advertising pitch:
We don’t accept government subsidies, bailouts, low-cost loans, insurance, or other privileges. We don’t lobby for laws that hurt our competitors. We actively oppose protectionism and invite all foreign competitors to try to underprice us. We do not lobby for tariffs, quotas, or anti-dumping laws. We do not support the government’s budget deficits: Our treasury department holds no government or agency securities.
But for now, it seems that no such firm exists. Business-government collusion is a fact of the real world. It is possible only because the government has written so many detailed, intrusive laws in its perpetual attempt to micromanage all of our business activities. And government has a habit of applying these laws in arbitrary and capricious manner. That process allows some greedy businesses systematically to empower themselves at others’ expense, using political pull to garner favors they could not otherwise have in a free market.
Those businesses must learn that people will learn to respect them if only they end their dependence on government privilege, and stand up on their own feet and face the economic reality of the world on their own terms.
Mr. Banfield is owner of Banfield Analytical Services in Westmont, Illinois. As an adjunct policy analyst for the Heartland Institute, he has testified before the National Association of Insurance Commissioners, The Illinois General Assembly, and a U.S. Republican Hearing on health-care reform.
The New World Order Plan is spiritually based: it is a conflict between God and His forces, on the one hand, and Satan and his demonic forces on the other side. Anyone who does not know Biblical doctrine about God and Satan, and who does not know Scriptural prophecy, cannot comprehend the nature of the struggle facing the world today. - David Bay, Cutting Edge Ministries
For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this world, against spiritual wickedness in high places. - Ephesians 6:12
Now the brother shall betray the brother to death, and the father the son; and children shall rise up against their parents, and shall cause them to be put to death. And ye shall be hated of all men for my name’s sake: but he that shall endure unto the end, the same shall be saved. - Mark 13:12,13
For we are opposed around the world by a monolithic and ruthless conspiracy that relies on covert means for expanding its sphere of influence... Its preparations are concealed, not published. Its mistakes are buried, not headlined. Its dissenters are silenced, not praised. No expenditure is questioned, no rumor is printed, no secret is revealed. - President John F. Kennedy, April 27, 1961
The book in which they are embodied was first published in the year 1897 by Philip Stepanov for private circulation among his intimate friends. The first time Nilus published them was in 1901 in a book called The Great Within the Small and reprinted in 1905. A copy of this is in the British Museum bearing the date of its reception, August 10, 1906. All copies that were known to exist in Russia were destroyed in the Kerensky regime, and under his successors the possession of a copy by anyone in Soviet land was a crime sufficient to ensure the owner's of being shot on sight. The fact is in itself sufficient proof of the genuineness of the Protocols. The Jewish journals, of course, say that they are a forgery, leaving it to be understood that Professor Nilus, who embodied them in a work of his own, had concocted them for his own purposes.
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