Robert B. Reich's Blog, page 49
December 12, 2018
The Truth About PrivatizationPrivatization. Privatization....
The Truth About Privatization
Privatization. Privatization. Privatization. It’s all you hear from Republicans. But what does it actually mean?
Generations ago, America built an entire national highway system, along with the largest and best public colleges and universities in the world. Also public schools and national parks, majestic bridges, dams that generated electricity for entire regions, public libraries and public research.
But around 1980, the moneyed interests began pushing to privatize much of this, giving it over to for-profit corporations. Privatization, the argument went, would boost efficiency and reduce taxes.
The reality has been that privatization too often only boosts corporate bottom lines.
For example, consider Trump’s proposal for infrastructure. It depends on private developers, who would make money off of both tax subsidies and private tolls. So the public would get charged twice, without any guarantee that the resulting roads, bridges, or rapid transportation systems would be where they’re most needed.
It’s true that private for-profit corporations can do certain tasks very efficiently. And some privatization has worked. But the goal of corporations is to maximize profits for shareholders, not to serve the public interest.
The question should be: What’s best for the public? Here are five rules of thumb for when public services should not be privatized:
1. Don’t privatize when the purpose of the service is to bring us together – reinforcing our communities, helping us connect with one another across class and race, linking up Americans who’d otherwise be isolated or marginalized.
This is why we have a public postal service that serves everyone, even small rural communities where for-profit private carriers often won’t go. This is why we value public education and need to be very careful that charter schools and other forms of so-called school choice don’t end up dividing our children and our communities rather than pulling them together.
2. Don’t privatize when the service is less costly when paid for through tax revenues than through prices set by for-profit corporations.
America’s hugely expensive for-profit health-insurance system, for example, is designed to sign up healthy people and avoid sick people, while running up huge tabs for advertising and marketing, and giving big rewards to shareholders and executives. Which is why the administrative costs of Medicare are a fraction of the costs of for-profit medical insurance – and why we need Medicare for all.
3. Don’t privatize when the people who are supposed to get the service have no power to complain when services are poor.
This is why for-profit prison corporations have proven again and again to violate the constitutional rights of prisoners, and why for-profit detention centers for refugee children at the border pose such grave risks.
4. Don’t privatize when those who are getting the service have no way to know they’re receiving poor quality.
The marketers of for-profit colleges, for example, have every incentive to exploit young people and their parents because the value of the degrees they’re offering can’t easily be known. Which is why non-profit colleges and universities have proven far more trustworthy.
5. Finally, don’t privatize where for-profit corporations face insufficient competition to keep prices under control.
Giant for-profit defense contractors with power over how contracts are awarded generate notorious cost overruns because they’re accountable mainly to their shareholders, not to the public.
In other words, for-profit corporations can do some things very well. Including, especially, maximizing shareholder returns. But when the primary goal is to serve the public, rather than shareholders, we need to be careful not to sacrifice the public interest to private profits.
December 10, 2018
China Tariffs are a Regressive Tax on Americans, and Risk a Recession
December 3, 2018
Trump Takes on General Motors (And Guess Who Wins?)
November 30, 2018
WHAT’S A SUBPOENA – AND SHOULD TRUMP FEAR...
WHAT’S A SUBPOENA – AND SHOULD TRUMP FEAR IT?
You’re
probably hearing a lot about subpoenas. Or you will very soon, once Democrats take control of the House.
A subpoena is a
legal command from a court or from one or both houses of Congress to do
something – like testify or
present information. The term “subpoena”
literally means “under penalty.” Someone who receives a subpoena but doesn’t
comply with it may be subject to civil or criminal penalties.
Here’s how it works.
Step one: Let’s say the
Intelligence Committee of the House of Representatives issues a subpoena to the
President for information about alleged conversations with Russian officials
seeking their help in the 2016 election. Or say the House Ways and Means
Committee subpoenas the President’s tax returns–which, in fact, a law enacted in
1924 after the Teapot Dome scandal of the Harding Administration specifically
authorizes that committee to do.
Step
three: That proposed contempt
citation would then go to the full House for a vote.
Step
four: If a majority of the full House agrees, the Speaker of the House would
then refer the contempt citation to a United States Attorney, or to a special
prosecutor, for prosecution in federal court. The potential penalty is up to $100,000 and
imprisonment for up to a year.
Step
five: The defendant in such a lawsuit–in this case, Trump–would probably argue
that contempt of Congress doesn’t apply to a President because of “executive
privilege”–that is, the supposed
Constitutional power of a President and other members of the executive branch
of the government to withhold information from the legislative branch, in the
public’s interest.
Step
six: Regardless of how the lower court decides on the claim of “executive
privilege,” the case could end up at the Supreme Court,
where, unless they could find a way to avoid it, the nine Justices would have
to balance Congress’s need for information with the executive branch’s claims
of confidentially.
In
the 1974 case of United
States vs. Nixon, when the Watergate special prosecutor sought Richard
Nixon’s audiotapes of conversations in the White House and Nixon claimed
executive privilege, the Supreme Court sided with the special prosecutor,
because Nixon had asserted
only a generalized need for confidentiality rather than a specific public
interest in keeping particular conversations confidential.
The
Clinton
administration invoked executive privilege 14 times. The George W. Bush
administration, 6 times. The Obama
administration, twice. All these matters were resolved before parties appealed
them to the Supreme Court.
Alternative route: I should mention an alternative route for the House to
enforce a subpoena–although it hasn’t been
used in over 80 years. Under its inherent authority to investigate, the House
could try someone who refuses to comply with a subpoena, for contempt, before
the entire House chamber.
If found guilty by a majority of the House, the
person who has been cited for contempt could then be arrested by the
Sergeant-at-Arms for the House, brought to the floor of the House, held to
answer charges by the presiding officer, and then held
in the Capitol until he or she provided the testimony or documents sought, or
until the end of the session of Congress.
Somehow
I doubt this would happen to Trump. The last time this
occurred was in 1934, and it was to a much lower-level official.
But still, even with the formidable power of
the subpoena, these days anything is possible.
November 22, 2018
Trump’s Assault on the Rule of Law
The Rule of Law
November 21, 2018
Break Up Facebook (and, While We’re At It, Google, Apple, and Amazon)
November 14, 2018
THE NEXT CRASHSorry to deliver the news, but it’s time to worry...
THE NEXT CRASH
Sorry to deliver the news, but it’s time to worry about the next crash.
The combination of stagnant wages with most economic gains going to the top is once again endangering the economy.
Most Americans are still living in the shadow of the Great Recession that started in December 2007 and officially ended in June 2009. More have jobs, to be sure. But they haven’t seen any rise in their wages, adjusted for inflation.
Many are worse off due to the escalating costs of housing, healthcare, and education. And the value of whatever assets they own is less than in 2007.Which suggests we’re careening toward the same sort of crash we had then, and possibly as bad as 1929.
Clear away the financial rubble from those two former crashes and you’d see they both followed upon widening imbalances between the capacity of most people to buy, and what they as workers could produce. Each of these imbalances finally tipped the economy over.
The same imbalance has been growing again. The richest 1 percent of Americans now takes home about 20 percent of total income, and owns over 40 percent of the nation’s wealth.
These are close to the peaks of 1928 and 2007.
The underlying problem isn’t that Americans have been living beyond their means. It’s that their means haven’t been keeping up with the growing economy. Most gains have gone to the top.
But the rich only spend a small fraction of what they earn. The economy depends on the spending of middle and working class families.
By the first quarter of this year, household debt was at an all-time high of $13.2 trillion. Almost 80 percent of Americans are now living paycheck to paycheck.
It was similar in the years leading up to the crash of 2007. Between 1983 and 2007, household debt soared while most economic gains went to the top. If the majority of households had taken home a larger share, they wouldn’t have needed to go so deeply into debt.
Similarly, between 1913 and 1928, the ratio of personal debt to the total national economy nearly doubled. After the 1929 crash, the government invented new ways to boost wages – Social Security, unemployment insurance, overtime pay, a minimum wage, the requirement that employers bargain with labor unions, and, finally, a full-employment program called World War II.
After the 2007 crash, the government bailed out the banks and pumped enough money into the economy to contain the slide. But apart from the Affordable Care Act, nothing was done to address the underlying problem of stagnant wages.
Trump and his Republican enablers are now reversing regulations put in place to stop Wall Street’s excessively risky lending.
But Trump’s real contributions to the next crash are his sabotage of the Affordable Care Act, rollback of overtime pay, burdens on labor organizing, tax reductions for corporations and the wealthy but not for most workers, cuts in programs for the poor, and proposed cuts in Medicare and Medicaid – all of which put more stress on the paychecks of most Americans.
Ten years after the start of the Great Recession, it’s important to understand that the real root of the collapse wasn’t a banking crisis. It was the growing imbalance between consumer spending and total output – brought on by stagnant wages and widening inequality.
That imbalance is back. Watch your wallets.
November 13, 2018
TIME FOR MEDICARE FOR ALL
In the midterm elections, most...
TIME FOR MEDICARE FOR ALL
In the midterm elections, most Democrats who were elected or reelected to the House supported Medicare for All.
As Trump and Republicans in Congress try to undermine the Affordable Care Act and raise the costs of health care, the American people continue to push back.
Over 70% of Americans–and even 52% of Republicans–now support Medicare for All, a single-payer plan that builds on Medicare and would cover everyone at far lower cost than the current system.
Here are the facts:
Medicare for All is the cheapest and best direction for the country. Private for-profit insurers spend a fortune trying to attract healthy people while avoiding sick people, filling out paperwork from hospitals and providers, paying top executives, and rewarding shareholders.
And for-profit insurers are trying to merge like mad, in order to make even more money. This is why private for-profit health insurance is becoming so expensive, and why almost every other advanced nation–including our neighbor to the north–has adopted a single-payer system at less cost per person and with better health outcomes.
Administering Medicare is only 1.1 percent of its total costs; the rest goes directly into care. Even including Medicare Advantage, which involves private plans, total administrative costs are just 7 percent.
But private insurers spend about 12 percent of total costs on administration. Or put another way, Medicare’s 2016 administrative costs came to about $156 per person compared to over $594 per person with private insurance.
Medicare saves so much money for three simple reasons:
First, it has economies of scale. The more enrollees, the lower the cost per enrollee. Medicare for All would have even larger economies of scale, presumably lowering the per-person costs further.
Second, Medicare spends almost nothing on marketing and advertising, while for-profit insurers spend a fortune.
Third, Medicare doesn’t have to earn profits.
Most Americans support expanding access to quality, affordable care through Medicare for All. Yet Trump and the Republicans continue to try to gut the Affordable Care Act and take away care from tens of millions.
The American public has a real choice here: expensive health care for the few or quality, affordable health care for the many.
It’s time for Medicare for All.
November 10, 2018
How Blue States Help Red StatesDonald Trump and Republicans in...
How Blue States Help Red States
Donald Trump and Republicans in Congress love to demonize government handouts, which, in fact, their own supporters depend on and are increasingly financed by taxpayers in blue states.
The federal program Temporary Assistance for Needy Families – what we used to call “welfare” – provides cash assistance to fewer than 1 percent of Americans.
But the Trump administration is proposing to lump many social programs under a new agency with the word “welfare” in its title.
A recent White House report on imposing work requirements, for example, put Medicaid, food assistance, and housing aid into a rebranded program called “noncash welfare.”
Defined this broadly, a large chunk of America relies on welfare. Add in disability benefits, unemployment insurance, and medical benefits, such so-called “welfare” amounts to 17 percent of the average American’s income.
Welfare has become especially unpopular in “red” states that vote Republican and support Trump.
But these same states are often the biggest beneficiaries of government assistance.
Include price supports for agriculture, subsidies for land management and forestry, and defense contractors, and you find that a large portion of the economies of red states depend on federal dollars.
Here’s the irony. Residents of “blue” states send more tax money to Washington than they get back in federal help, while residents of “red” states send less money to Washington than they get back in federal help.
In 2015, for example, New Jersey got back only 74 cents in federal spending for every tax dollar it sent to Washington. New York got back 81 cents, Connecticut: 82 cents, and Massachusetts: 83 cents.
But when you turn to the red states, it’s the opposite. Mississippi received $2.13 for every tax dollar it sent to Washington. West Virginia: $2.07. Kentucky: $1.90. And South Carolina: $1.71.
Taking the Trump administration’s expansive view of the meaning of welfare to its logical conclusion to include all those benefiting from federal spending, blue states are sending welfare to red states – the same red states that say they don’t like welfare.
Under Trump’s new tax law, blue states will be giving even more welfare handouts to red states. That’s because the law set new limits to the amount of state and local taxes people can deduct from their federal taxable incomes. And since people in blue states pay much more state and local taxes than people in red states, blue-staters will be paying that much more in federal taxes.
Which means an even bigger transfer from blue state residents to all those red state Republican voters, whose party despises handouts.
Now, I should add that some of us here in blue states don’t mind giving red states a bigger helping hand. The vast majority of Americans also oppose cuts to programs that aid the poor, elderly and sick. Because most Americans figure we’re all in this together, and those of us who can do so ought to help out those in need.
We don’t regard it as welfare handouts. We call it social insurance. Indeed, social insurance is needed and used by almost all of us, when you include Social Security, Medicare, and unemployment insurance. And even programs relied upon mostly by the poor end up helping a large portion of us because roughly one-third of all Americans are poor at some point in their lives.
So remember, attacks on so-called welfare are just another means of attacking the things most of us need, and dividing the country into us and them.
In reality, voters in red states are as dependent on the federal government as voters in blue states, and, truth be told, even more dependent.
Robert B. Reich's Blog
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