The 'Waste' Deficit Hawks Never Seem to See
Localities the nation over can't afford to fill potholes or keep libraries open. Yet top corporate execs are continuing to stuff their pockets with our tax dollars. Here's how we can start the unstuffing.
Americans don't like the idea of their tax dollars making anybody rich. That's why TV ads bashing members of Congress for voting themselves pay raises flood our airwaves every campaign season.
But if you really want to find people profiteering off our tax dollars, don't look at Congress. Look into the "private" sector - at executives like Ralph Shrader, the CEO of Booz Allen Hamilton, a consulting company that gets 98 percent of its revenue from the federal government.
Shrader took home $4.2 million last year. The top five Booz Allen execs together pocketed just under $20 million. They averaged 23 times what members of Congress take home.
Or consider Howard Lance, the top exec at Harris, a Florida company that took in $2.2 billion in federal contracts last year for projects like overhauling the billing at veterans hospitals. Lance has collected, over the past five years, $46.1 million for his CEO labors, over 50 times congressional pay during that same time span.
And we certainly shouldn't overlook Robert Stevens, the chief exec at Lockheed Martin, the top federal contractor of them all. Stevens made $20.4 million last year running a company that takes in 84 percent of its revenue from the U.S. government. A member of Congress would have to serve 58 two-year terms to make that much.
This list - of private sector execs currently making fortunes from public sector tax dollars - could go on quite a bit longer. Federal contracting has become a mammoth operation. In 2009 alone, the top 100 private purveyors of public services gobbled up $130 billion in federal contracts.
After this point, the item went into the subject of indirect profiteering, which is where the discussion of for-profit colleges came in, and with it the link to the Bloomberg piece. But let's stay focused on the passage above for now.
Privatizing government functions is the primary mechanism for building the conservative American welfare state. In one sense, this practice has very old roots. Much of the American welfare state has long involved private actors, to a far greater extent than other welfare states. Tax breaks for private pensions and other benefits are a prime example of this. So, too, government support for housing through mortgage tax breaks, as well as VA and FHA loans. And, of course, there's the military-industrial complex, which virtually didn't exist before WWII (though there were certainly particular companies whose fortunes were intimately tied to the military). During that war, it should be noted, there were both government and private suppliers. Some shipyards, for example, were government owned and run. There is no real reason why private companies should be involved in such matters. It's a matter of custom and politics, not any sort of grand necessity.
Executives Collect $2 Billion Running U.S. For-Profit Colleges
By John Hechinger and John Lauerman
Strayer Education Inc., a chain of for-profit colleges that receives three-quarters of its revenue from U.S. taxpayers, paid Chairman and Chief Executive Officer Robert Silberman $41.9 million last year. That's 26 times the compensation of the highest-paid president of a traditional university.
Top executives at the 15 U.S. publicly traded for-profit colleges, led by Apollo Group Inc. and Education Management Corp., also received $2 billion during the last seven years from the proceeds of selling company stock, Securities and Exchange Commission filings show. At the same time, the industry registered the worst loan-default and four-year-college dropout rates in U.S. higher education. Since 2003, nine for-profit college insiders sold more than $45 million of stock apiece. Peter Sperling, vice chairman of Apollo's University of Phoenix, the largest for-profit college, collected $574.3 million.
Education corporations, which receive as much as 90 percent of their revenue from federal financial-aid programs, are "private enterprise that's almost entirely publicly funded," Henry Levin, director of Columbia University's National Center for the Study of Privatization in Education, said in a telephone interview.
Students at for-profit colleges are defaulting on their loans at three times the rate of those at private, nonprofit institutions, according to data from the U.S. Department of Education, which is tightening regulation of the industry. The graduation rate for first-time, full-time candidates for four- year degrees at for-profit colleges is 22 percent, compared with 55 percent at state colleges and 65 percent at private nonprofit universities.
This is about as clear an example one could want of how much more efficient and productive the public sphere is compared to the private sphere. Of course, all the ideology goes the other way, largely because private enterprises are experts at externalizing their costs, so that they can appear to be more efficient. But as the above passage shows, top executives are able to extract massive paychecks from large private institutions that massively under-perform their public counterparts.
This is also about as clear an example one could want of America's conservative welfare state, the re-purposing of America's welfare state from Reagan onward to specifically benefit America's oligarchy and specific privileged sectors of industry and society.
Back on July 8, Eliot Spitzer and William Black co-authored a brief piece at HuffPo that I meant to comment on, but then failed to because of the shift to weekday blogging. Better late than never, I supposed. Here's a key part of SEC and MMS: A Tale of Two Failures:
The SEC and the Minerals Management Service's (MMS) share a number of characteristics we can't help but notice in the wake of the worst environmental disaster in U.S. history, which followed the second-worst financial disaster in same....Both agencies have been failures for at least a decade.
In both instances, the regulators accepted industry assertions about the reliability of their safety mechanisms while failing to acknowledge -- much less investigate -- the darker, more complex reality. In each crisis, we had the same story of a belief in the reporting done by corporations, and in each case, we had a failure to recognize the enormous potential for fraud and the lack of incentives these corporate entities have in ascertaining and measuring potential risks to the public. The regulators continued to believe the lies fed them by CEOs even when the lies had become absurd. Both times, the agencies charged with regulating ignored the advice of their own experts, neglected to enforce rules, and engaged in an alarmingly cozy relationship with the industry they were supposed to be monitoring.
So far, the Obama administration has failed to fully grapple with the weaknesses and corruption of the regulatory agencies meant to guard the public from harm. Across the entire spectrum of regulatory agencies, there exists a dangerous atrophy of infrastructure which may lead to disasters we cannot yet imagine. Maybe now, as the oil slicks spread across the Gulf, killing wildlife and wrecking lives, our false sense of security is dissolving. We hope so, because if we don't learn from these horrific experiences, we can expect more of them. Where will the next disaster occur? At the Food and Drug Administration? At the National Transportation Safety Board? At the Nuclear Regulatory Commission?
There are two points I want to make: First, that this is just the tip of the iceberg of a sweeping conservative attack on regulatory and scientific integrity. Second, that Obama's demonstrable indifference gives the lie to the Third "Third Way" claim that their approach--using private entities and 'strict regulation'--can do the job as well as public ownership. The theory just might be plausible, but the practice gives the game away: They are much more partners with conservatives in re-purposing the welfare (and regulatory) state for conservative ends than they allies with true progressives in preserving the welfare state's public-serving ethos.
In America, conservatives couldn't kill the welfare state because it was too popular, so they decided to re-purpose it for conservative ends. These are their stories.
If you thought that Wall Street couldn't get more destructive, think again. And if you that the charter school movement couldn't get even more removed from serving the public good, you also need to think again. On Friday, NY Daily News columnist Juan Gonzalez wrote a column about how big investors can double their money in seven years using a special tax credit to invest in charter schools, and he also discussed what he uncovered in a brief segment on Democracy Now! which he co-hosts with Amy Goodman. Here's how he summarized it on the air:
One of the things I've been trying now for a couple of years is to try to figure out why is it that so many hedge fund managers, wealthy Americans, and big banks, Wall Street banks, executives of Wall Street banks, have all lined-up supporting and getting involved in the development of charter schools. I think I may have come across one of the reasons. There's a lot of money to be made in charter schools, and I'm not talking just about the for-profit management companies that run a lot of these charter schools.
It turns out that at the tail end of the Clinton administration in 2000, Congress passed a new kind of tax credit called a New Markets tax credit. What this allows is it gives enormous federal tax credit to banks and equity funds that invest in community projects in underserved communities and it's been used heavily now for the last several years for charter schools. I have focused on Albany, New York, which in New York state, is the district with the highest percentage of children in charter schools, twenty percent of the schoolchildren in Albany attend are now attending charter schools. I discovered that quite a few of the charter schools there have been built using these New Markets tax credits.
What happens is the investors who put up the money to build charter schools get to basically or virtually double their money in seven years through a thirty-nine percent tax credit from the federal government. In addition, this is a tax credit on money that they're lending, so they're also collecting interest on the loans as well as getting the thirty-nine percent tax credit. They piggy-back the tax credit on other kinds of federal tax credits like historic preservation or job creation or brownfields credits.
The result is, you can put in ten million dollars and in seven years double your money. The problem is, that the charter schools end up paying in rents, the debt service on these loans and so now, a lot of the charter schools in Albany are straining paying their debt service--their rent has gone up from $170,000 to $500,000 in a year or--huge increases in their rents as they strain to pay off these loans, these construction loans. The rents are eating-up huge portions of their total cost. And, of course, the money is coming from the state.
Antonia Juhasz, author of The Tyranny of Oil: The World's Most Powerful Industry--and What We Must Do to Stop Itpoints out that despite BP's greenwashing self-promotion as "Beyond Petroleum" its maximum investment in non-petroleum endeavors has been about 4% in recent years--using very generous criteria. But even its efforts to be 'green' turn out to have a very dark side to them, particularly as examples of the corporate conservative welfare state, as revealed in this story from Random Lengths News in 2007,
Green Grow The Oil Wells--Oh!
$525 Million In "Gifts" Just A Drop In The Bucket For BP
By Paul Rosenberg, Senior Editor With big savings from defeating Prop 87 last year, BP is spending big on image-enhancing projects at the LA Country Museum Of Art and at UC Berkeley-whose bio-diesel research will benefit BP enormously, but could be as bad as global warming itself.
Oil has always been a dirty business, and has always generated gushers of money to sanitize its image. In early 2007, BP (British Petroleum) has announced plans to spend big bucks to reap goodwill at both ends of the state.
Here in Los Angeles, BP is donating a $25 million contribution to the Los Angeles County Museum of Art (LACMA), that will help finance a three-part expansion and renovation of LACMA's facilities. A new "BP Pavilion" topped with solar panels is scheduled to open next February. While BP has sought to rebrand itself as "Beyond Petroleum," solar and other non-petroleum energy has yet to exceed 1% of BPs business. In Northern California, BP is set to spend considerably more for a massive new research project at the University of California, Berkeley (UCB).
Last year, oil giant BP (British Petroleum) contributed $3 million to help defeat Proposition 87, an initiative that would have taxed oil extraction to pay for developing a clean energy economy-including over $1 billion for university-based research. Altogether, oil and energy companies spent over $90 million to avoid over $4 billion in taxes-a 40-to-1 return for their money.
The oil companies were nowhere to be seen in the ads they paid for. Far more popular firemen fronted for them instead. But the firemen didn't save $4 billion dollars when Prop 87 was defeated. The oil companies did.
Now, having successsfuly blocked publicly-financed research, BP--which made $22.3 billion in profits last year--is moving ahead with plans to establish a multi-disciplinary research center at UCB, spending a total of $500 million over ten yearrs to develop more efficient methods of biofuel production, including the use of genetically modified organisms.
Next weekend, I'll have a diary on the conservative welfare state as a common factor uniting conservatives, Blue Dogs and New Dems against progressives. Consider this an appetizer, appropriate to the day ahead.
Last Friday, just on the eve of Superbowl weekend, the issue of a possible lockout of players in the 2011 season erupted to throw a discordant note into mix. Although NFL Commissioner Roger Goodell tried to downplay the possibility, even the WaPo noticed that things weren't right, reporting that:
On the players' side, Tennessee Titans center Kevin Mawae, the president of the union, told a Congressional subcommittee during a hearing last month on Capitol Hill that the players are fully anticipating being locked out by the owners in 2011. DeMaurice Smith, the executive director of the union, said Thursday that the owners had taken a series of steps that appeared designed to lock out the players.
Asked during his annual news conference Thursday about the prospects of a lockout in 2011, Smith called the urgency of the situation a 14 on a scale of 1 to 10.
The owners want massive give-backs from the players, because they claim to be losing money--which would not be surprising, since according to David Cay Johnston, author of Free Lunch, NONE of the big four subsidized monopoly sports leagues makes more money than it receives in public subsidies.
Below is a clip from Johsnton talking about this on Democracy Nowjust over a year ago. Although he focused almost exclusively on baseball in the clip--with a special little section on GW Bush & how local taxpayers made him rich--he did have this to say, more broadly:
Now, in this country right now, we are spending $2 billion a year subsidizing the big four sports: baseball, basketball, football and hockey. It accounts for all of the profits of that industry and more. Now, there may be individual teams that make money, but the industry as a whole is not profitable. And that's astonishing because the big four leagues are exempt from the laws of competition. By the way, irony is not dead, because here are people who are in the business of competition on the field who are exempted by law from the rules of economic competition.
If you go to England and you want to start a soccer team, they have to let you join the soccer league. There are thirteen commercial soccer teams in the London area. New York City, the biggest city in the country, there are two baseball teams, because there's no free entry into the market. In Los Angeles, there's no football team. And the owners use this power to prevent others from owning teams, to prevent municipal governments from owning teams, to prevent nonprofits from owning teams, to extract money from the taxpayers to build them new stadiums.
That's the conservative welfare state in action.
Sports stadiums in general are economic losers, and as for the Superbowl itself, it's not nearly as lucrative as the NFL claims, according to the folks at McCaltchy, the same outfit that wasn't snookered by Bush/Cheney on the whole Iraq War caper:
To put it simply, and perhaps over-simply, on a variety of fronts (most notably financial restructuring and health care reform, but arguably on climate change as well), the Obama administration has chosen the strategy of deploying regulated and subsidized private sector entities to achieve progressive policy results. This approach was a hallmark of the so-called Clintonian, "New Democrat" movement, and the broader international movement sometimes referred to as "the Third Way," which often defended the use of private means for public ends. (It's also arguably central to the American liberal tradition going back to Woodrow Wilson, and is even evident in parts of the New Deal and Great Society initiatives alongside elements of the "social democratic" tradition, which is characterized by support for publicly operated programs in key areas).
To be clear, this is not the same as the conservative "privatization" strategy, which simply devolves public responsibilities to private entities without much in the way of regulation. In education policy, to cite one example, New Democrats (and the Obama administration) have championed charter public schools, which are highly regulated but privately operated schools that receive public funds in exchange for successful performance of publicly-defined tasks. Conservatives have typically called for private-school vouchers, which simply shift public funds to private schools more or less unconditionally, on the theory that they know best how to educate children.
The First "Third Way"--Social Democracy, Was A GOOD THING.
In a comment, I raised the point that there often wasn't that much difference between conservative privatization and neoliberal "Third Way" privatization--see how little has changed since Bush in our use of mercenaries, for example. In this diary, I'd like to lay out a framework for understanding what I meant by this and why it must be so. The framework is that of the three "Third Ways". The first "Third Way" was social democracy, as exemplified by the German Social Democratic Party. It was a "Third Way" between naked capitalism and revolutionary socialism. Their main policy for gaining broad public support was universal health care-in the 1870s. It was a very popular idea-so popular, in fact, that conservative mastermind Otto Van Bismark decided to co-opt the idea, thereby depriving the social democrats of their signature issue, and implementing it in such a way that it furthered elite nationalist goals by giving German manufacturers a healthier, more secure, more productive and more loyal workforce to aid in their international competition with Britain and other industrial powers.
In my opinion the first "Third Way" was a good thing. The revolutionary socialists basically had the economics right, compared to the laissez-faire capitalists. It wasn't anything that indiividual capitalists did that was responsible for the enormous increase in wealth brought about by Industrial Revolution--they were simply positioned to capture a vastly disproportionate share of the proceeds--even as the working class, transformed from rural peasants into an urben proletariat, suffered a tremendous mass immiseration in the process. But the revolutionary socialists had most everything else wrong--especially the complete rejection of democracy, except for purely tactical purpose. By combining a socialist economic view with a democratic political view, this was a "Third Way" you could believe in. The others, not so much.
Last December, Community Health Councils released The South Los Angeles Health Equity Scorecard. South LA is predominantly black, Latino and low-income. On its website, it explained:
The South Los Angeles Health Equity Scorecard, documents the inequities in South LA's healthcare and physical resource environments and provides policy recommendations for a healthy community.
Community Health Councils partnered with other advocates, researchers, healthcare providers, and community leaders through the Coalition for Health & Justice to develop the South LA Health Equity Scorecard.
The Scorecard assesses and compares indicators of health disparities in South LA with West LA and LA County overall. Data has been gathered and scored for environment, health prevention and utilization, insurance and health system capacity. Policy recommendations were developed through a stakeholder summit held in June 2008. The final report challenges city and county officials and the community to advocate for change through a comprehensive joint power agreement that addresses these issues in a holistic way.
As you might expect, the scorecard documented systemic disparities across all the indicators it used. On its website, United Way of Los Angeles highlighted some selected findings, including:
In South L.A., 30% of adults under age 64 lack health insurance compared to 22% for L.A. County as a whole, and 12% for West L.A. (referenced on pg. 4).
South L.A. has 11 pediatricians per 100,000 children (compared to 57 pediatricians per 100,000 children for L.A. County as a whole) (referenced on pg. 4).
More than a third (36%) of occupied housing units in South L.A. is overcrowded compared to 22% for L.A. County as a whole and 7.9% for West L.A. (referenced on pg. 82).
South L.A. has about 6 times more liquor stores per square mile than L.A. County as a whole (referenced on pg. 53).
South L.A. has nearly one third (30%) of the 594 substandard schools in L.A. County (as defined by the Williams Lawsuit identifying lack of qualified teachers, instructional materials and decent facilities) (referenced on pg. 69).
What this report serves to highlight is (1) the complex range of environmental factors (in the broadest sense of the term) that impact upon health care, (2) how much people's health depends on issues that are not even remotely on the table in most discussions of healthcare reform, and (3) the diverse nature of the kinds of experts, stakeholders, and service providers who ought to be involved in a reality-based process of creating a nation healthcare system, as opposed to the relatively narrow set of predominantly corporate interests represented in the existing "reform" process.
As with health-care, so too with education: a narrow, corporately-influenced definition of the problem, the issues and those responsible isolates the problem from the larger social context and predetermines limitations in advance that predetermine the impossibility of true success.
JUAN GONZALEZ: As the Obama administration continues to spend hundreds of billions of dollars to bail out the nation's banking system, a growing movement is calling on the government to do more to help students struggling to pay for college.
According to the College Board, the average cost of four years at a private college is now a staggering $136,000. Four years at a public university, on average, will set you back $57,000. In order to pay for the rapidly increasing tuitions, students were forced to borrow a total of $85 billion during the last school year, up from $41 billion ten years ago. The average student now leaves college with $20,000 in debt.
Long story short: The Student Loan Marketing Association (Sallie Mae) was established as a government-sponsored enterprise in 1972, and was privatized as part the bipartisan neoliberalism of Clinton's second term, starting in 1997, and concluding with full privatization in 2004, and whopping bonuses all around. It's a perfect example of how a program conceived within the liberal welfare state model was repurposed to serve conservative welfare state ends.
Mass education as a means to social mobility and equality, as well as enhanced autonomy and informed self-government is one of the oldest liberal policy ideas. Thus the origins of student loans, and the eventual creation of Salie Mae in 1972, as part ofthe liberal welfare state project. By dramatically raising the cost of student loans--particularly with added penalties, fees, and intrest rate boosts--students often end up more like indetured servants than free citizens, while producing vst fortunes for the state-sponsed special interests that grow fat off them, the student loan industry has been effectively repurposed to serve conservative welfare state ends.
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