Paying Taxes to Your Boss: Another Step Toward 21st Century Feudalism

Oct 26, 2012Tim Price

Employers are already treating their workers like their subjects. Now some of them get to collect taxes, too.

Employers are already treating their workers like their subjects. Now some of them get to collect taxes, too.

Though a lot of Americans really (really, really) hate paying taxes, most of us can at least justify it as our contribution to some greater good, whether it’s the broad range of social programs favored by progressives or a libertarian night watchman state. But what if the government instead told us, “We don’t want your money, but we would like to make friends with some rich guys, so just give it to them and let them have fun with it”? That could soon be the law of the land in Pennsylvania, where the state legislature has passed a bill that would, as Philadelphia City Paper blogger Daniel Denvir describes it, “allow companies that hire at least 250 new workers in the state to keep 95-percent of the workers' withheld income tax.” These workers will essentially be paying their employers for the privilege of having a job. Some have called this “corporate socialism,” but it also calls to mind an even older economic model that was once popular in Europe – except back then, the bosses were called lords. It’s a more modern innovation in the U.S., but combined with increased political pressure from employers and a crackdown on workers’ rights, it all adds up to feudalism, American-style.

The Pennsylvania bill is just the most recent example of state income taxes being turned into employer subsidies. It’s already the law of the land in one form or another in 19 states, and according to Good Jobs First, it’s taking $684 million a year out of the public coffers. The theory is that this will boost job creation. But the authors of the Good Jobs First report note, “payments often go to firms that simply move existing jobs from one state to another, or to ones that threaten to move unless they get paid to stay put.” In other words, it’s more like extortion than stimulus. With state governments facing a projected $4 trillion budget shortfall and continuing to cut social services and public sector jobs, they can hardly afford to be wasting money on companies that already have plenty and have no intention of putting it to good use. And the more governments turn over their privileges to businesses, the more the distinction between the two becomes blurred.

But if corporations have state governments over a barrel, they have their employees stuffed inside the barrel and ready to plunge down the waterfall. As I’ve noted before, some conservatives view all taxation as theft, but there’s surely no better term for what happens when employers promise their workers a certain wage or salary and then pocket some of the money for themselves. When you pay taxes to the government, you get something in return, whether it’s a school for your kids or a road to drive on or a firefighter to rescue you from a burning building. When you pay taxes to your boss, you… well, you give your boss your money. Your only reward is that you get to continue to “work the land,” so to speak. The lords didn’t consult with the peasants on which tapestries they should buy with the money they collected from them.

Did I forget to mention that these employers aren’t even required to tell their workers that this is how their “income taxes” are being used? Journalist David Cay Johnston, who covers this issue in his new book, The Fine Print: How Big Companies Use ‘Plain English’ to Rob You Blind, writes that this bait-and-switch is “stealthy by design.” Of course it is; if these workers were important enough to know where their money is going, it wouldn’t be legal to steal it.

Employers may be able to exert pressure, but they can’t actually control who you support, right? Well, they might not be able to accompany you to the voting booth (yet), but if you work in a state that allows your employer to confiscate your tax withholdings and donate them to a pro-Romney Super PAC, they can turn you into a Romney supporter whether you like it or not. It’s not enough that our current campaign finance system gives wealthy executives nearly unchecked power to support the candidate of their choice; subsidizing them with income taxes allows them to choose for everyone in their fiefdom.

If employers were always secretive about their exploitation, the comparison to feudalism might not seem apt – after all, serfs were pretty clear on what the score was. But there’s nothing subtle about the way some employers have begun to apply political pressure in the workplace. From forcing workers to attend Romney rallies without pay to outright threatening their jobs if President Obama is reelected, employers in the post-Citizens United era are feeling emboldened to conscript their employees as bannermen for the candidates of their choice. Suddenly, a job is not just a job, but an oath of allegiance. And Republicans, at least, are all for it. Mike Elk reports that Mitt Romney himself urged business owners to lobby their employees on his behalf, assuring them that there is “Nothing illegal about you talking to your employees about what you believe is best for the business.” And as we all know, if you can’t technically be arrested or fined for doing something, that means it’s totally okay to do it. Q.E.D., coal miners.

This lopsided power dynamic is reflected more generally in the shoddy state of modern labor law. In most states employers can fire their workers whenever they want for pretty much any reason, forcing them to fall in line with even the pettiest demands. When your boss is trying to tell you when you can and can’t go to the bathroom, forcing you to hide your Obama bumper sticker seems like an almost trifling concern in comparison. This lack of employee agency has led Roosevelt Institute Fellow Dorian Warren to describe today’s employers as “mini-dictators,” and as more public funds are diverted to private business owners, that comparison is only becoming more literal.

If conservative policymakers succeed in their nationwide effort to eliminate collective bargaining rights and neutralize already weakened unions, conditions aren’t likely to get better for workers anytime soon. Business owners and corporate execs will continue to assert more and more authority, bending their workers’ will to their own while using those workers’ paychecks to solidify their power. But there’s still hope of turning things around and restoring a more balanced playing field. If more American workers take note of the fact that two of their least favorite people, the tax collector and their boss, are being combined into one entity, it might just spark enough anger for them to fight back. As the feudal lords eventually learned, the peasants were the ones holding the pitchforks.

Tim Price is Deputy Editor of Next New Deal. Follow him on Twitter @txprice.

 

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On Her Birthday, Eleanor Roosevelt's Fight for Labor Rights Lives On

Oct 11, 2012Brigid OFarrell

Then as now, labor rights and labor's voice in politics are under heavy attack.

Then as now, labor rights and labor's voice in politics are under heavy attack.

Today, October 11, is Eleanor Roosevelt’s birthday, a good day to reflect on the First Lady’s values and how she translated those values into action on behalf of ideas and people she supported. Eleanor Roosevelt strongly believed in workers, their unions, and their involvement in the political process. A member of The Newspaper Guild, AFL-CIO for over 25 years, she came to see unions as fundamental to democracy itself. In 1941, she told striking IBEW workers that “it was important that everyone who was a worker join a labor organization.” Under her guidance, the right to join a union was included in the Universal Declaration of Human Rights. Yet workers’ rights remain under heavy attack today. Her legacy is still in need of protection and promotion.

The fact that U.S. workers have a collective voice in the political process is firmly rooted in the New Deal. Eleanor and Franklin Roosevelt believed that workers had a right to a voice at work as well as a voice in politics. They also saw the two as closely intertwined as they worked with labor to win elections and support their progressive agenda. John L. Lewis, president of the United Mine Workers Union, and Sidney Hillman, president of the Amalgamated Clothing Workers’ Union, led the labor movement in contributing money and getting out the union vote for President Roosevelt’s re-election efforts. Resistance was fierce. Then, as now, they were outspent by anti-union forces. Yet by 1947, Mrs. Roosevelt concluded in her “My Day” column that while “labor today is stronger than it used to be, it is no stronger than organized capital.”

Similar anti-union initiatives continue to this day. Many people in California are members of labor unions, from airplane pilots and grocery store clerks to nurses and teachers, mail carriers and electricians, police officers and fire fighters. Through their unions the pay dues, elect officers, and participate in decisions that affect their pay, benefits, and workplace safety. Should these union members also be allowed to have a collective voice in our political process through their unions?

Proposition 32, on the November ballot in California, says “no.” This proposition exempts powerful corporate interests from the limits on political spending but imposes formidable barriers to unions. Paycheck deductions – money raised through voluntary deductions from workers’ paychecks – could no longer be used for political activities. Only unions, however, not companies or wealthy individuals, rely on voluntary paycheck deductions as their source of funding to support political action.

Proponents of Proposition 32 hail it as “campaign finance reform.” Yet it places no meaningful restrictions on corporate contributions to candidates, campaigns, or Super PACs. Members of the 1 percent or the 10 percent don’t use paycheck deductions to contribute to politics. They use profits, interest, dividends, salaries, and bonuses. Professor John Logan, director of labor and employment relations at San Francisco State University, reports that the backers of Prop 32 are also some of the same wealthy individuals who helped bring us the Citizens United Supreme Court decision leading to the most expensive election year on record.

This is also a “one-two punch.” In 1958, Eleanor Roosevelt led a national effort opposing right-to-work laws in six states, including California, where the law was defeated.  Most recently, the fight has escalated in Wisconsin, Ohio, and Indiana and has now returned to California. If Prop 32 passes this year, workers will have diminished political power and next year we can expect to see these other anti-labor propositions further weakening private sector unions. Workers’ ability to fight back in California will be stopped in its tracks by Prop 32.

Mrs. Roosevelt saw unions as fundamental to the democratic process. She thrived on educating union members and rallying them to register people to vote, participate in conventions and campaigns, and get people to the polls on Election Day. She warned that when fear and prejudice are running high, “We may wake up to find that in trying to remedy certain wrongs, we have shorn ourselves of certain very precious freedoms.” In 1958, Mrs. Roosevelt called the right-to-work effort a “predatory and misleading campaign,” an equally apt description of Proposition 32 today.

Eleanor Roosevelt’s birthday is a fitting time to remember that when asked where human rights begin, she answered, “In small places close to home…unless they have meaning there they will have little meaning any where.” Proposition 32 is very close to home for Californians, and if it passes here it could come to your neighborhood soon.

Brigid O’Farrell is an independent scholar in Moss Beach, California, and member of the National Writers Union, UAW Local 1981, whose most recent book is She Was One of Us: Eleanor Roosevelt and the American Worker, now available in paperback.

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Beyond Sticker Shock: Schmitt Asks What's Really Changed in Money in Politics in 2012

Oct 2, 2012

This paper presents a research agenda for journalists, activists, and reformers, highlighting the biggest issues regarding how money really works in our political system, what its effects are, and how that's changing in the post-Citizens United

This paper presents a research agenda for journalists, activists, and reformers, highlighting the biggest issues regarding how money really works in our political system, what its effects are, and how that's changing in the post-Citizens United era aside from the soaring top-line numbers.

Key Questions:

  • Has money affected competition?
  • Does money affect polarization?
  • Do broadcast ads matter as much as they used to?
  • Have corporations changed their behavior?
  • Are there downsides to SuperPACs and other outside-money vehicles?
  • Do small donors still matter?
  • Can small-donor reforms withstand outside money?
  • Is reform finished as a bipartisan project?
  • Does the public care? 

Read the paper, "Beyond Sticker Shock: What's Really Changed in Money in Politics in 2012?"

 

 

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Super PACs Aren't Just Swinging Elections -- They're Changing the Way We View Government

Aug 28, 2012Alan Smith

The wealthy donors behind right-wing ads want more than victory in November. They're trying to permanently reshape the political landscape.

The wealthy donors behind right-wing ads want more than victory in November. They're trying to permanently reshape the political landscape.

We’ve all seen the numbers; we know Super PAC politics is a slow-motion disaster unfolding before our eyes, and that a handful of rich people have the ability to dramatically swing elections. But beyond influencing individual races and shifting the way national campaigns must be run, Super PACs and the messages they are promoting may have a dramatic long-term effect on how we as a society view our government. 

Super PAC spending has already hit $200 million this cycle, and with the big players reporting plenty in their reserves, the top of this mountain of cash is not yet in sight. We’re not talking about an even layer of money covering the political landscape, either. This money is going to support conservative causes at a disproportionately high rate. Not only does Open Secrets identify three-quarters of the Super PAC funds as being raised and spent by conservative groups, but ProPublica has tracked media buys and reported that “conservative social-welfare groups” have already spent some $70 million on television ads, compared to $1.6 million spent by liberal groups.

Because so much of this cash is hard to track, we don’t know exactly where dollars are going, but those estimates still paint a clear image of a democracy radically remaking itself. David Axelrod summed up the blight nicely (even accounting for the sour grapes that come from being on the wrong side of the ledger) in a recent New Yorker article:

If your party serves the powerful and well-funded interests, and there’s no limit to what you can spend, you have a permanent, structural advantage. We’re averaging fifty-dollar checks in our campaign, and trying to ward off these seven- or even eight-figure checks on the other side. That disparity is pretty striking, and so are the implications. In many ways, we’re back in the Gilded Age. We have robber barons buying the government.

It’s been clear from the beginning that many on the right have been tepid about Mitt Romney as a candidate. I would argue that this ambivalence shows up in donors’ spending habits as well: when it comes to the actual campaign apparatus, President Obama is running sizably ahead of Romney in fundraising. This raises an interesting question: legal limits aside, what other reasons do big-ticket donors have to avoid going straight to the party apparatus? Super PACS give these donors a way to swing elections, but more importantly, they provide a way to control their messaging directly in ways that donating to Romney’s camp would not. Lost in the election-focused discussion of ground game versus ad game is the potential long-term result of the one-sided messaging that is currently blaring from our television sets and computer screens.

Through funding these Super PACs, 30 or so billionaires are running a nation-wide advertising campaign. While the focus is on attacking Obama, this brain trust is playing a simultaneous long game. The reality of issue advertising is that there are subliminal long-term effects on the audience and their associations with political stances and phrases. That’s how advertising works with Lexus or Gatorade, and that’s how it is working here. Sure, it helps Mitt Romney in November if “Obama” is associated with “bureaucracy” and “taxes” and “waste,” but what about the fact that the ads are also connecting “government” with “bureaucracy,” “tax burden,” and “waste,” independent of the candidate?

Check out this ad, brought to you by Americans for Prosperity, one of many targeting a specific candidate in a swing state: 

The point of the ad is clear: Donnelly, and through him “sitting government,” are bureaucratic spenders, and they sure don’t have your best interest at heart. It's not a new message. But the scope of these targeted issue ads is new. Even if this is not a calculated right-wing attempt at moving the needle on how citizens view the role of government, that will surely be a side effect. 

Regardless of whether you favor Democrats or Republicans, the larger concern is with the way we conduct democracy in this country. The root problem here is that a small cabal of wealthy people can fundamentally affect our view of government and how it functions. This new front in the war of ideas will not end with a single battle in November; Super PACs are a giant new tool designed to drive a wedge between the people and their government even more effectively than the right’s “welfare queen” rhetoric of yesteryear. Their messaging makes the case that government is something foreign, alien, and other. On the other side, there are no ads making the case for Medicare, public education, or government as a vehicle for social change. 

One could make the argument that Super PAC supporters see attacking the roots of government as a lucky side benefit to helping the Romney campaign, but that seems naïve. And considering the past 30 years of intentional Frank Luntz-style messaging from the right, I find it impossible to believe that this barrage is merely a philosophical case for greater “freedom.” Rather, it is a calculated attempt to further erode Americans’ sense of government as a positive actor and, with that, the chance for a publicly held good in our society. While it is true that our relationship with government is a complex and evolving one, it must not be defined by such a black-and-white campaign against government in all forms. 

Alan Smith is National Policy & Program Director for the Roosevelt Institute | Campus Network.

 

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Note to the Last Citizens United Denier: It Really Did Change Money in Politics

Jul 19, 2012Mark Schmitt

It'll take more than undoing Citizens United to reform money in politics, but there's no denying that it's had a huge impact on campaign spending.

Matt Bai argues in this coming Sunday's New York Times Magazine that the Supreme Court's 2010 decision in Citizens United didn't dramatically change the impact of money in politics. Claims that it did “are just plain wrong,” he says.

It'll take more than undoing Citizens United to reform money in politics, but there's no denying that it's had a huge impact on campaign spending.

Matt Bai argues in this coming Sunday's New York Times Magazine that the Supreme Court's 2010 decision in Citizens United didn't dramatically change the impact of money in politics. Claims that it did “are just plain wrong,” he says.

Bai's stance is not as deliciously contrarian as he might think. It is more or less the position I took at the time of the Citizens United decision and one shared at the time by a number of legal scholars and political scientists. I called myself a “Citizens United minimalist.”

And, taking things most literally, that view was not wrong. As Bai points out, Citizens United was an incremental decision in a series of moves by the Supreme Court and lower courts that weakened any efforts to control the influence of money in politics. Leaving aside the dicta in the decision (such as the majority's suggestion that only quid pro quo corruption, and maybe not even that, could justify regulation), it was not even the most significant of those incremental moves. The Wisconsin Right to Life case that preceded CU, which first weakened the limits on electioneering communications by independent groups, and the D.C. Circuit Court's SpeechNow decision later in 2010, which opened the door to Super PACs, are probably more consequential legally. Corporations, especially big publicly held ones, have never been the major players in outside political spending, and they aren't even now.

I still think some of the conclusions that are frequently drawn about Citizens United are overstated. I'm still dismayed to hear claims that we need to amend the Constitution or that the decision hinged on the idea that corporations are people. (It doesn't.)

But Bai's stale claim that Citizens United isn't largely responsible for the explosion of outside money in politics is no longer credible. I realized that in November of 2010, when I wrote a piece with the title “The Re-Education of a Citizens United Denier.” At the most basic legal level, Citizens United formed the basis for the D.C. Circuit Court's decision in SpeechNow vs. FEC, and thus there is a direct path from CU to Super PACs.

But more importantly, Citizens United seems to have led to a huge shift in cultural norms and assumptions on the part of donors and money brokers. Why didn't political money brokers use “social welfare organizations” – non-profits incorporated under Section 501(c)4 of the tax code – to facilitate pure political spending when Karl Rove formed Crossroads GPS? They were subject to neither disclosure nor limits before 2010. The law governing them hasn't changed – it's just the willingness of Rove or others to test the IRS and the FEC. There's a sense now that you might as well try anything. The worst that happens is that eventually the IRS or the FEC will come back to life, or the courts will change their view.

Bai describes the view that Citizens United changed everything as “a useful story to tell, appealing to liberals and independent voters who aren’t necessarily enthusiastic about the administration but who are concerned about societal inequality.” That's not wrong, but what it overlooks is that it's also been a useful story for conservatives, lobbyists, and professional fundraisers and political operatives. Everything's changed, they tell their clients or potential donors. If you're not playing someone else is. And you've got to keep up.

Bai doubts (but does not link to) legal scholar Rick Hasen's article this March in Slate, “The Numbers Don't Lie,” which used the rapid growth in outside spending since CU to measure its impact. Hasen's argument was that the combination of CU, SpeechNow, and the increased use of 501(c)4 non-profits (the social welfare organizations mentioned above) had unleashed a flood of outside money: $14 million in 2004, $37 million in 2008, and a projected $88 million in 2012. Non-presidential years show an even bigger jump in outside money: less than $1 million nationwide in 2002, $1.8 million in 2006 (this is less than total spending by a typical congressional candidate in a single competitive race), and then $16 million in 2010 post-Citizens United.

Bai doesn't challenge these numbers, but says “there's another way to interpret this data.” Focusing only on the presidential years, he points out that outside spending rose by a greater percentage from 2004 to 2008 (both years before CU) than between 2008 and projected 2012. We don't know about and may never see much of the 2012 spending, however. Between 2004 and 2008, there was also a significant legal change, the Wisconsin Right to Life decision, which half-opened the door that Citizens United tore down.

More notably, Bai's “another way to interpret the data” isn't really an alternative interpretation at all. He's basically arguing that outside money increases, period, all the time, whatever you do. In concluding, he asks Democratic operative Carter Eskew how much it would cost to run a national campaign now, including both outside and campaign money. Eskew quotes him a total of $500 million. Bai accepts that number: “it’s not clear that spending an extra $200 million or $500 million will really make all that much of a difference on Election Day.” True. But why $500 million? Without some actual explanation as to why a campaign in 2012 should cost roughly five times what it cost eight years ago, it's not an interpretation, but just a restatement of Hasen's data. Is it the cost of television advertising? Unlikely. Is it the wider scope of the campaign? Unlikely, since many large states that were somewhat competitive in previous elections, such as Pennsylvania and even California, are now probably locks for one party. No, a national race costs $500 million (if it does) because Eskew thinks the other guy might have $500 million. And a far greater percentage of that money is going to come through Super PACs, (c)4's, and other outside money vehicles than ever before, which are available directly or indirectly because of Citizens United.

Simply undoing Citizens United won't suddenly bring us back to the comparatively innocent days of 2004 or 2006, of course. It will be difficult to put some of the changes in cultural attitudes about money in politics back in the bag. And the more heated political atmosphere overall may well result in some corporations or wealthy individuals, who previously hedged their bets between the parties and participated modestly, to jump in with millions on one side, as gambling moguls Sheldon Adelson and Steve Wynn have both done. But that's all the more reason to build a forward-looking alternative approach to campaign finance, one that incorporates public financing as well as changes to tax law to limit the abuse of political non-profits. It's not evidence that Citizens United didn't matter, a claim that was dubious when I made it in 2010 and is laughable now. 

Mark Schmitt is a Senior Fellow at the Roosevelt Institute.

 

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What the D.C. Mayor's Scandal Tells Us About Disclosure of Political Spending

Jul 13, 2012Mark Schmitt

Vincent Gray's "shadow campaign" that gave money to both the incumbent and challenger exposes the real reason some fight transparency: the desire to cover up the favors they buy with contributions.

Vincent Gray's "shadow campaign" that gave money to both the incumbent and challenger exposes the real reason some fight transparency: the desire to cover up the favors they buy with contributions.

The Senate finally took up the DISCLOSE Act today, which would respond to the post-Citizens United explosion of large and secret political spending by requiring SuperPACs and political nonprofits to promptly reveal their own political spending and their large donors. While Republicans will block it, as they did in 2010, they have developed a new argument that was unveiled by Senate Minority Leader Mitch McConnell in a speech at the American Enterprise Institute on June 15: Disclosure would feed the Obama administration in its efforts to “silence” and intimidate its opponents. This new argument was mostly developed by Brad Smith, Steve Hoersting, and their colleagues at the anti-reform Center for Competitive Politics. I wrote about it before the McConnell speech, noting that the conservative argument in the past was to oppose restrictions on political money in favor of disclosure, but now that disclosure is the only option, they have to find a way to oppose that too.

There is a lot that's silly about the “intimidation” argument, most notably that if it were really true that the Obama administration has “got the IRS, the SEC, and other agencies going after contributors, trying to frighten people and intimidate them out of exercising their rights to participate in the American political discourse,” as McConnell said on Fox News, the appropriate remedy would be impeachment. (One of the articles of impeachment against Richard Nixon in 1974, the one that got broadest bipartisan support, was for just such activities.) Instead, McConnell's remedy for what he claims is a lawless administration is that his party's donors alone should get a special exemption from campaign disclosure laws.

Not only does McConnell have less than zero evidence of actual intimidation, his model of how money works in politics is an imaginary one. Let's look at a case of real corruption here in Washington, D.C. On Tuesday, a fundraiser and friend of Mayor Vincent Gray agreed to plead guilty for her role in a $658,000 "shadow campaign" on behalf of Gray, funded by city contractor Jeffrey Thompson.

According to the Washington Post, the fundraiser, Jeanne Clarke Harris, “said Thompson opted to hide his campaign largesse in large part to avoid angering [incumbent mayor Adrian] Fenty, whose administration his businesses relied on for contracts. The Medicaid deal held by his D.C. Chartered Health Plan is the city’s largest contract: It is worth more than $300 million yearly. 'He did not want the sitting mayor to find out he was supporting his opponent,' Harris said. 'If somehow the sitting mayor won, he would be in some serious contractual problems.'"

On the surface, then, this looks exactly like the kind of situation McConnell and his allies have been warning about. Harris may not be telling the truth or accurately representing Thompson's fears, but let's assume she is. Here we have an example of a businessperson fearing retaliation from government for expressing his political views. But I don't see the campaignfreedom.org blog rallying to the defense of Mr. Thompson.

Perhaps that's because its obvious that Thompson was not expressing political views by secretly supporting Gray. He was covering his bets. Like most large political donors, his main view is his interest in making more money. He expected to have more clout in a Gray administration, especially because that administration will feel more obligated to him, but he did not want to jeopardize his partial success with the Fenty administration. So he made his expenditures secretly, through Harris and other channels.

Nondisclosure allowed Thompson to basically operate without expressing a political choice, by making contributions that he hoped would ensure access and influence no matter which candidate won. That's the more general explanation for corporations and individuals wanting to keep large expenditures undisclosed. "Retaliation," if and when it happens (and I'm not including plainly illegal actions like turning the IRS on an opponent's supporters), is just the inverse of the influence and access that motivates giving. And nondisclosure, of course, doesn't mean that the politicians and elected officials who benefit from the money don't know about it. It should really be called uneven disclosure or asymmetrical disclosure.

Disclosure generally, and the DISCLOSE Act in particular, hardly solve all the problems of political inequality. But at least they allow us to begin to see the patterns of corruption, such as the connections between Thompson's spending and his contracts, and demand better – just as D.C. voters and councilmembers are doing in calling for the mayor's resignation.

Mark Schmitt is a Senior Fellow at the Roosevelt Institute.

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Why Republicans Won't Repeal the Affordable Care Act (Hint: It's About Money in Politics)

Jul 3, 2012Mark Schmitt

Republicans are likely to leave the Affordable Care Act in place, but only because their backers in the insurance industry fear the alternative.

“If I’m the leader of the majority next year, I commit to the American people that the repeal of Obamacare will be job one.”

– Senate Republican leader Mitch McConnell, on Fox News Sunday

"If you thought it was a good idea for the federal government to go in this direction, I'd say the odds are still on your side. Because it's a lot harder to undo something than it is to stop it in the first place."

Republicans are likely to leave the Affordable Care Act in place, but only because their backers in the insurance industry fear the alternative.

“If I’m the leader of the majority next year, I commit to the American people that the repeal of Obamacare will be job one.”

– Senate Republican leader Mitch McConnell, on Fox News Sunday

"If you thought it was a good idea for the federal government to go in this direction, I'd say the odds are still on your side. Because it's a lot harder to undo something than it is to stop it in the first place."

– Mitch McConnell, in Elizabethtown, KY, on Monday

With the Supreme Court ruling upholding the core of the Affordable Care Act, Republicans at every level have renewed their promise to repeal it. It is Mitt Romney's “Day One” task. Because Chief Justice John Roberts upheld the individual mandate under the taxing power in the Constitution, conservatives such as economist Keith Hennessy and Virginia Attorney General Ken Cucinelli argue, the penalties for non-compliance are now a “tax,” and the mandate can be repealed under the federal budget reconciliation process, which can't be filibustered in the Senate. That is, just 50 senators, along with a Republican vice president to break the tie, can repeal the mandate.

This is true – though the Court's decision has nothing to do with it. Anything that has a significant impact on federal revenues or spending, such as fees, interest on student loans, or mining licenses, can be changed using the budget reconcilation process. The mandate, and some other provisions of the Affordable Care Act, can certainly be stripped out by a Republican majority. Other provisions that don't affect the budget, such as some of the requirements placed on insurance companies to cover preexisting conditions and keep young adults on their parents' plans, probably can't be, because their effect on federal finances is minimal.

So if Romney wins the presidency and Republicans capture the Senate (as seems likely, if Romney wins), at the very least, we can expect them to repeal the individual mandate, right? It's the least popular element of the law, and not too difficult to sever from the rest. As Paul Starr of Princeton and The American Prospect has argued for years, a mandate with minimal enforcement mechanisms might be worse than no mandate at all.

Whether they do that or not will be an interesting case study in the role of money in politics. Health insurance companies and HMOs, after all, are mainstays of the Republican money machine. Aetna, the health insurer that spends the most on lobbying, recently bolstered its Republican bona fides by being the first public corporation to disclose recent contributions to Republican dark-money committees, the American Action Network and the U.S. Chamber of Commerce's political arm. Aetna's former CEO, Ronald Williams, even went so far as to renounce the company's long-standing support for the mandate, predicting it would fall at the Supreme Court.

But for health insurers like Aetna, stripping out the mandate alone would be the worst possible outcome. It would mean that they would still have to take all applicants, and couldn't reject or charge more to people with preexisting conditions. And they wouldn't have the profits from younger, healthier customers. Ideally, companies like Aetna would like to have the mandate without any of the other reforms, but that's a political non-starter, since individuals would be mandated to buy something that the insurers would refuse to sell them. Failing that, the insurers could live with the Affordable Care Act, or the pre-ACA status quo. But what they can't live with is the insurance reforms alone, without a mandate. (As a spokesperson for America's Health Insurance Plans told Reuters, “There has always been broad agreement that the insurance market reforms... cannot work without universal coverage.”)

And you can be pretty sure that they won't have to. By deepening their alliance with the Republican Party, Aetna and other insurers have made sure they would be at the table, whether the Court overturned the mandate (in which case the insurers' goal would be to undo the rest of the law) or upheld it.

Some Republicans, including Romney, promise to repeal the whole law and “replace” it with something better, often suggesting that the replacement would include the popular provisions on preexisting conditions. That, too, is a non-starter with the party's cash constituents. And other Republican proposals, such as to allow insurance companies to sell across state lines – that is, evade state regulations – aren't ready for prime time. Republicans never offered an alternative during the health care debate and they don't have one now.

Thus you have McConnell's careful lowering of expectations on Monday: “It's a lot harder to undo something than it is to stop it.” The Republicans will talk about repealing “Obamacare” for as long as it succeeds in firing up their base. But it's all cheap talk; they won't do a thing.

And so, the Affordable Care Act is secure. Unfortunately, that has less to do with public opinion or the Constitution than the simple power of money in politics.

Mark Schmitt is a Senior Fellow at the Roosevelt Institute.

 

Image via Shutterstock.com.

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After "Citizens United II," Time for Campaign Finance Reformers to Focus Away from the Court

Jun 26, 2012Mark Schmitt

The huge role of money in politics can be addressed in ways that don't rely completely on the nine Supremes.

The huge role of money in politics can be addressed in ways that don't rely completely on the nine Supremes.

It should have come as no surprise that the Supreme Court would strike down the lower court decision to uphold Montana's ban on corporate political spending. Even if Justice Kennedy, say, had been taken aback by the public reaction to his flawed opinion in Citizens United, it is extremely rare for the Court to directly reverse itself. The more likely outcome, if the Court had taken the case rather than simply reversed the lower court's decision, would have been that it might move even further in the direction of Citizens United – for example, by indicating that it would reconsider prohibitions on direct contributions from candidates. As Rick Hasen of the Election Law Blog commented yesterday, “The best way to win before the Roberts Court if you are a campaign reformer (aside from on disclosure issues) is not to play.”

What does it mean “not to play”? It doesn't mean giving up on everything. And it shouldn't mean pursuing the even more futile path of a constitutional amendment to reverse Citizens United. Rather, it means getting over the obsession with corporate money, which plays a small role in federal elections and Super PACs, and getting refocused instead on the broader question of the ways in which political inequality reinforces economic inequality. To put CU in perspective, corporate money (mostly from privately held companies) represents only 17 percent of contributions to Super PACs, and Super PACs represent, so far, only about 10 percent of the total money in federal politics. That's not to dismiss the issue or the cases, but corporate political spending is only one part of the story of how money distorts democracy.

While Citizens United and the somewhat more important SpeechNow case have certainly brought in a new atmosphere of “anything goes” to money in politics, there are answers that don't involve waiting around for one of the five conservative justices on the Court to retire. One, of course, is generous public financing, such as New York City's system, which provides a six-to-one match on small contributions. State legislators and Governor Cuomo have been pushing to extend the city system to the state level. Everywhere that similar public financing systems have been put in place (Arizona, Connecticut, Maine) they have been popular, resilient, constitutionally sound, and have broadened the role of small contributors and brought new candidates into the process.

The recent court decisions have also opened new opportunities for Congress and state legislatures to require the disclosure of donors to outside groups as well as to candidates. Law professor Ciara Torres-Spelicy recently described this move as a “dramatic 180 degree turn...on the issue of the constitutionality of disclosure.” Disclosure doesn't solve all problems, but a big part of the story of money in politics post-Citizens United is the creation of political entities, such as Karl Rove's Crossroads GPS, that are not Super PACs but instead use a section of the tax code for non-profits to avoid limits and also maintain anonymity for donors. This could be fixed by the IRS (these non-profits are not supposed to have election activity as their primary purpose) or by Congress, without the slightest constitutional problem.

While Hasen is right that it would be futile to keep knocking on the door of the Supreme Court, hoping that they've changed their mind, there's a lot of work to be done, and a lot of progress that can be made, without involving the Court at all.

Mark Schmitt is a Senior Fellow at the Roosevelt Institute.

 

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Debunking the Myths About Government

Jun 25, 2012

Rediscovering Government presented four mainstream, empirically based analyses of major government-related questions in the Myths About Government panel in Washington DC on June 21st. The panelists from the roundtable discussion addressed four common misconceptions about government and the economy. Read their summary responses below, and click through to view their bios and full presentations.

Rediscovering Government presented four mainstream, empirically based analyses of major government-related questions in the Myths About Government panel in Washington DC on June 21st. The panelists from the roundtable discussion addressed four common misconceptions about government and the economy. Read their summary responses below, and click through to view their bios and full presentations.

Does big government impede growth?

Government Social Programs and Economic Growth: Verdicts from History

Peter Lindert, University of California, Davis

Economic history does not find any net cost in GDP from democratic large-budget welfare states. The “free lunch puzzle” of welfare states is this: They avoided any net GDP cost while achieving many social goals: reducing poverty and inequality, extending life spans, and having cleaner government. In addition, their government budget deficits are no greater, and people are no less happy in these large-budget welfare states.

Peter Lindert Bio

Full Presentation

Presentation Handout

Do high taxes create disincentives?

Evidence on the Economic Effects of Taxes

Jon Bakija, Williams College

There have been many econometric studies of cross-country data that have attempted to estimate the effects of the overall level of taxes on economic growth, and many other econometric studies (using a variety of types of data) that have attempted to estimate the causal effect of changes in marginal income tax rates on peoples' efforts to earn income. This presentation displays the basic facts on these issues, discusses why neither approach has provided convincing evidence of a strong negative effect of taxes on long-run real economic activity, and explains why healthy skepticism of any claims to the contrary is in order.

Jon Bakija Bio

Full Presentation

Presentation Handout

Do markets distribute income fairly and equitably?

America’s Struggling Lower Half

Lane Kenworthy, University of Arizona

When the country prospers, everyone should prosper. In the period between World War II and the mid-to-late 1970s, economic growth was good for Americans in the middle and below. Since then, however, relatively little of our economy's growth has reached households in the lower half. Wages for this group have barely budged. Rising employment helped in the 1980s and 1990s, but that wasn't enough to ensure that incomes kept pace with economic growth, and employment stopped increasing after 2000. Government transfers are another key source of income for many households in the lower half, but they too have lagged behind growth of the economy. What are the prospects going forward? Will we see a return to rising wages or employment for Americans in the lower half, or are the trends of the past few decades likely to continue? What, if anything, could our government do to help?

Lane Kenworthy Bio

Full Presentation

Presentation Paper

Do Americans want smaller government?

Better, Not Smaller: What Americans Want from Federal Government

Ruy Teixeira, Century Foundation, Center for American Progress

Americans lack confidence in the federal government's ability to solve problems.  A wide range of other indicators show that people think the government wastes a lot of the money it spends, is inefficient, not accountable for its actions, unresponsive and more a hindrance than a help to getting ahead in life. Not a pretty picture.  However, that doesn't mean the public necessarily wants the government to be smaller.  They would prefer instead that it worked better and solved problems.  Therefore, reforming the way government works could potentially contribute to building public support for government programs both old and new.  This is particularly true among members of the Millennial generation.  The other important factor is better macroeconomic performance, which would go a long way toward making people more receptive to an active role for government, especially a government that seemed to be performing more efficiently and effectively.

Ruy Teixeira Bio

Full Presentation

 

Rediscovering Government is an initiative of the Roosevelt Institute dedicated to exploring the purpose and value of government. Led by Roosevelt Institute Senior Fellow Jeff Madrick, the program aims to reinvigorate conversation surrounding government and what it can and should be doing for its citizens, through the website, blog, roadshows, and conferences.

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The House's Latest Health Care Vote Puts Campaign Cash Ahead of People

Jun 12, 2012Richard Kirsch

Congress shouldn't make working- and middle-class families pay for the repeal of a sales tax on one of America's most profitable industries.

Congress shouldn't make working- and middle-class families pay for the repeal of a sales tax on one of America's most profitable industries.

Last week the House voted to increase health care costs on middle-class families in order to protect one of the most profitable industries in the country. And almost nobody noticed. More than three dozen Democrats, oiled by campaign contributions, joined all 233 voting Republicans in voting for a repeal of a 2.3 percent sales tax on the medical device industry included in the Affordable Care Act. They voted to pay for the lost revenues by making families who are fortunate enough to get back on their feet pay more for health coverage.

The vote last week symbolizes most everything that is wrong about our politics, and in particular the politics around the Affordable Care Act, with one very welcome exception. The White House – not known for standing up tall – promised a veto of the legislation.  

One way that the Affordable Care Act will be paid for is by new taxes and reduced Medicare revenues from major segments of the health care industry. In return, health care providers will reap greater revenues from tens of millions newly insured people and improved health coverage for tens of millions more. Medical device manufacturers got off easy with the 2.3 percent sales tax considering that, according to Forbes, the industry is one of most profitable in the country (number one on return on assets, number four on return on sales, and number nine on return on equity).

That did not stop the medical device industry from fighting the tax with the usual cry wolf tactics, saying it will cost jobs and hurt small business. An editorial from, of all places, Bloomberg News takes the industry's arguments apart, one by one. The most glaring example is the charge by the industry’s trade association, AdvaMed, that the tax would cost 43,000 U.S. jobs as manufacturers moved offshore. But since the tax applies to all medical devices sold in the U.S., there is absolutely no advantage in moving jobs offshore. Doing so won’t reduce the tax by a nickel (or a yuan).

The members of Congress who are backing repeal of the tax, led by Minnesota Republican Erik Paulson, come from states where the medical device industry is big -- and so are its campaign contributions. Paulson raked in the third most contributions from the medical supply industry of any candidate for Congress ($64,100) this election cycle. He was topped by two senators from other states with big medical device industries: Utah’s Orin Hatch ($88,399) and Massachusetts’s Scott Brown ($82,150). But it’s not just Republicans. Democratic Minnesota Senator Amy Klobuchar ($63,650) ranks just after Paulson and she opposes the tax too. All together, the industry has contributed $2.9 million to congressional candidates this year. On top of that, the industry reported $31.7 million in lobbying in 2011.

So far, this is a pretty typical story of money and politics. What makes it more reprehensible – and increasingly typical – is that in the bill the House passed last week, the industry tax break would be directly paid for by struggling working- and middle-class families.

Starting in 2014, the Affordable Care Act will provide subsidies to these families to buy health coverage if they don’t get coverage at work. The financial help, in the form of a tax credit given up front, will limit the amount of a family’s income it must pay for health insurance premiums. Under the House bill, if a family’s economic status improved, they would have to pay back the full portion of the subsidy that reflects their increased income.

Think of what this means for a family that has been struggling financially, maybe out of work or working at low-wage, part-time jobs. They’ve been barely getting by and using up their savings, but finally they get back to work or find a job that pays a decent wage. And promptly the government demands a payback of some of the money given to the family to pay for health insurance.

The payback requirement will mean that some 350,000 people – mostly women, whose income fluctuates the most – will decide against applying for subsidies and remain uninsured because of the fear of having to pay the health insurance premium credits back when their income changes.

Because the new system of subsidies does not start until 2014, it is tough to make them seem real and politically salient now. If Congress voted to penalize people when millions of newly insured families were getting subsidies, the harsh impact on people’s lives would be easy to see and understand. But since nobody is affected right now, it is much harder to make a powerful argument.

That is true for all of the core elements of the ACA and the provisions that will extend coverage to some 32 million uninsured people. If the law survives the Supreme Court and the presidential election and is implemented in 2014, Americans will find out that they will no longer have to worry that losing theirs jobs means losing their health care or fret about being turned down for coverage due to a pre-existing condition. Then ObamaCare will be both understandable and popular. 

The Republican move to make families pay back the subsidies is not the first of its kind. When the ACA was enacted, there was no provision to pay any of the money back. But since then, Democrats have twice agreed to some payback provisions as a way to raise money for other purposes. Of course, that’s not enough for Republicans. They want to force families to pay every dime back in the medical device bill. This shows the folly of Democrats ever agreeing to anti-consumer provisions to placate Republicans; it simply emboldens them to ask for more.

President Obama seems to have learned that lesson. On June 6th, the Office of Management and Budget released a statement harshly criticizing the House bill, saying that it would “raise taxes on middle-income and low-income families, in many cases totaling thousands of dollars, not withstanding that they followed the rules.” That’s the kind of language that fits in with the president’s campaign themes and the message he needs to continue to trumpet throughout the country if both he and the ACA are to survive past November.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

 

Flag image via Shutterstock.

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