On TAP: Kuttner + Meyerson

Kuttner
April 4, 2018

Why Scott Pruitt’s Corruption Is in a Class by Itself. There is such a blizzard of personal corruption in the Trump administration that it’s worth pausing to sort out why Scott Pruitt’s corruption is in a different category from the others. And it's quite a list: HUD Secretary Ben Carson’s $31,000 dining set, Interior Secretary Ryan Zinke’s $139,000 doors, Treasury Secretary Steve Mnuchin’s subsidized visit to Fort Knox to watch the solar eclipse, VA Secretary David Shulkin’s $122,000 travel junket to Europe, and for that matter, Pruitt’s own $107,000 in unauthorized first-class air tickets.

EPA Administrator Pruitt was directly subsidized by the wife of a prominent energy industry lobbyist. He was charged just $50 a night to stay in a Capitol Hill condo, the market value of which was far above that. The lobbyist was working for Enbridge, a company that got EPA approval in March 2017 for a lucrative pipeline deal, despite having been fined by EPA in 2010 in for violations on another pipeline. 

Why would the power-couple extend Pruitt this courtesy? The ordinary word is bribe.

Even though the amount of money is smaller, Pruitt’s sin is in a different category from the misdeeds of other officials who’ve taken various perks at taxpayer expense, because it incurs a monetary favor from a lobbyist for a regulated industry. Yes, those other thefts of taxpayer money are disgusting and emblematic of the cynicism of this administration, but are more ordinary forms of corruption.

And Trump, in dispensing justice, applied his usual double standard. Shulkin, under fire from the right for defending the VA against the privatizers, got fired ostensibly for his taxpayer-financed junkets, but really for the sin of defending a public system. Carson, a pathetic excuse for a cabinet official, kept his job.

Now, in Pruitt’s case, it’s hardly surprising that neither the lobbyist nor Pruitt himself even noticed the conflict of interest—because everyone knows that he is in industry’s pocket without even having to be paid off. Pruitt’s appalling record of destroying environmental regulation is the more serious reason for firing him, but that’s what he was hired to do.

But if a relatively penny-ante payoff is what we have, let’s make the most of it. As we’ve all read, they got Al Capone for tax evasion.

Maybe they’ll get Donald Trump for tax evasion, too.

Meyerson
April 3, 2018

What the teachers’ strikes mean:

First, lumped with the Kansas Republican parents' revolt against extreme tax cuts underfunding their kids' schools, which took the form of defeating GOP legislators in the 2016 primaries, there is a growing repudiation of the Norquist pledge in GOP statehouses.
 
Second, there is a growing use of social media to mobilize the workers whom the unions haven't reached, though you need the union to be the closer (a Zeynep Tufekci sweet spot, as it were).
 
Third, this is part of a larger white-collar rising: Over the past decade, the share of union members who are professional or technical workers has risen from 33 percent to 42 percent, reflecting managers' inability to fire hard-to-replace skilled workers during organizing drives, but also their continued ability to fire workers in retail, food service, on assembly lines, or on construction sites.
 
Fourth, this is also part of the millennial turn to unions: In the most recent Pew Poll, a mind-boggling 76 percent of millennials approve of unions, which is a far higher share than the percentage of millennials who've actually encountered unions. This reflects their economic travails, in sync with their high level of support for Sanders in 2016. 
 
For a fuller exposition of this analysis, replete with some invective directed at the teachers’ enemies, see my new Prospect column: What the Teacher Strikes Mean
Kuttner
April 2, 2018

Enough to Make You Sick: Walmart & Humana. So let’s see: The nation's largest retailer is trying to buy one of the biggest and most predatory insurance and hospital conglomerates, Humana. That would give the combined entity a staggering amount of market power, and reduce competition among insurance companies.

Supposedly, the proposed merger increases efficiency by providing more walk-in clinics, more cut-rate drugs, as well as pressure on hospitals to restrain costs and prices. But the efficiencies are bogus. Hospitals cross-subsidize expensive patients where they don’t fully recover costs with cheaper ones such as outpatient surgeries.

If Walmart skims off the profitable cases and also adds pressure to lower hospital charges, then hospitals are doubly squeezed.

It’s certainly true that network efficiencies are there to be reaped. But the right way to do it is with a single insurance pool. That’s known as national health insurance.

In the meantime, we need to dust off and enforce the antitrust laws. There’s no reason for this proposed deal other than to increase private profits skimmed by middlemen at the expense of care.

Kuttner
March 30, 2018

Even a Stopped Clock Is Right Twice a Day. President Trump gets almost everything wrong. But once in a while he does something approximately right.

Exhibit A: Trump and his trade team have re-aligned U.S. trade policy, from pursuit of a wishful fantasy called universal “free trade” to a realistic recognition that other nations use protectionism to their advantage. The real task is to negotiate a fair balance of different national economic systems.

Though Trump, with his usual bombast and theatricality, began stupidly with universal tariffs on steel and aluminum, his trade team has been astutely turning that leverage into serious negotiations with the prime offenders. The tariffs are now better targeted and these efforts have borne early fruit with the South Korea trade deal. That deal both reduces subsidized exports of Korean steel and increases the openness of South Korea’s markets to U.S. exports of cars and other products.

Negotiations with China have now been ramped up as well. Trump’s Treasury will soon use a long-ignored legal provision to block China’s strategic acquisition of sensitive technologies by purchasing or extorting technology transfer from U.S. firms.

Moves like these do not lead to “trade wars,” whatever those are. They lead to negotiations, and sometimes to real progress. That makes once a day that Trump actually aligned with the clock.

But the clock has two 12-hour cycles, and he just did it again! Trump, in a characteristic fit of pique, has noticed that Amazon has too much market power and pays virtually no taxes. Imagine that.

Trump has even stumbled on a dormant doctrine known as antitrust. When one dominant company keeps scooping up others, that may produce cheaper products in the short run, but it opens the door to countless other abuses.

Did we really need Amazon to buy Whole Foods? Did we really need to let Facebook buy Instagram and WhatsApp? Should we let Walmart buy Humana? (Why does a discount department store need a health insurance and hospital company, which itself is one of the economy’s great conglomerate predators?)

Once in a blue moon, Trump actually sounds like the latent populist he professed to be in the campaign. Now, it could be that Trump wants to squeeze Amazon because its mastermind, Jeff Bezos, just happens to be the owner of The Washington Post.

With Trump, one can’t be too cynical. But at a time when Facebook, Google, and the rest of the tech giants are coming in for overdue scrutiny, it’s probably not a bad thing if even Trump is aware of the abuses of market concentration.

So maybe—just maybe—that makes twice that Trump coincidentally aligns with reality. It would probably be too much to expect three.

***

If you are reading this post, you might be interested to know that I’m also starting a weekly podcast. It’s called Provocations, and it can be found at prospect.org, or at this link

In it, I offer commentary and interviews, this week with Harold Meyerson on the West Virginia teachers strike, the coming Supreme Court decision affecting public employee unions in the Janus case, and the future of organizing. I also opine on Facebook, John Bolton, trade, the misuses of language, and other kindred topics.

Meyerson
March 29, 2018

Amazon, President Trump says, isn’t paying enough in taxes. Here’s one of his tweets from earlier today:

I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!

Trump isn’t wrong on some of his particulars. Amazon has definitely put many retailers—most painfully, bookstores—out of business, though so has Walmart, which has yet to rouse Trump’s ire, possibly because Sam Walton’s children are reliably conservative donors, while Jeff Bezos owns the hated Washington Post. Amazon does collect and pay sales taxes in the states (there are 45 of them) that have sales taxes, but more broadly, it also poses a huge threat to the economy as an all-devouring monopoly.

But, cutting to the chase: Who the hell is Donald Trump to complain about someone not paying their taxes? Due entirely to his refusal to release his tax returns, breaking with a many-decades-long pattern of presidential candidates releasing theirs, we have no idea whether Trump paid his fair share in taxes, or, more likely, paid the “little or no” amounts he accuses Amazon of doing. This is a guy who once said that not paying taxes “makes me smart,” and who is notorious for not paying the contractors and employees for the work he asked them to do. I suspect if there’s one subject on which Trump could instruct Bezos, it’s tax avoidance.

In its display of zero self-awareness and its all-around chutzpah, this morning’s tweet is classic Trump.

Kuttner
March 28, 2018

When Trump Does Something Right. The trade deal with South Korea is a model for future trade agreements. What a pity that it fell to a lunatic like Donald Trump to bring it about. Credit mainly goes to Trump’s trade advisers, especially Peter Navarro and Robert Lighthizer.

The deal exempts South Korea from the steel tariffs, in exchange for an agreement by the Koreans to cut steel exports to the U.S. by about 30 percent. Past investigations have found that Korean steel is heavily subsidized.

The deal also commits South Korea to dismantle some of its many obstacles to U.S. exports of products such as cars and pharmaceuticals. And a separate agreement commits both countries not to use currency manipulation for trade advantage. What’s not to like?

Yet many commentators found it hard to get their minds around the idea that dismantling other nations’ protectionism wasn’t itself protectionist. Check out this NPR interview with Navarro.

Granted, the deal was unusual because the U.S. has more leverage with South Korea than with most nations. We are its geopolitical protector, and South Korea also needs America’s blessing or at least tacit consent as Seoul commences its own parallel diplomacy with the North. The U.S. is also one of South Korea’s most important markets.

Yet because of our huge and largely open domestic market, and a half-trillion trade deficit with the rest of the world, we also have substantial leverage with other nations to demand that they play fair, too. Other presidents have been reluctant to use that leverage.

If Trump can get this deal, just imagine what a sane, progressive president might get.

Meyerson
March 27, 2018

The Commerce Departments’ dead-of-night announcement yesterday that the 2020 Census would ask people if they were American citizens is perhaps the most purely partisan ploy we’ve yet seen in this age of Republican hyper-partisanship. The sole purpose of the question is to intimidate immigrants, the foreign-born, and the undocumented from participating in the census at all—thereby undercounting those chiefly urban neighborhoods that are heavily Latino or Asian, which in turn would lead to a decennial redistricting with fewer Democratic districts.

(The Commerce Department insists that the change was prompted by the Justice Department’s desire for better data to enforce the Voting Rights Act. If you believe that that was the motivation of Jeff Sessions’s department, you’re a good candidate to buy not just the Brooklyn Bridge but Brooklyn itself.)

Within a couple of hours after Commerce’s announcement, California’s redoubtable attorney general, Xavier Becerra, announced he was filing a lawsuit seeking to block the use of the question. The Constitution, Becerra argues, requires the government to perform an “actual enumeration” of the population every ten years, and by deliberately undercounting a portion of the population by asking the citizenship question, the Census Bureau would be violating its constitutional mandate.

I’m no one’s legal eagle, but I suspect the Federal Circuit with jurisdiction over California—the Ninth Circuit—will likely side with Becerra. Once that case proceeds to the Supreme Court—which currently also has a major case on the constitutionality of gerrymandering before it—we’ll see just how Republican the five Republican justices on the court are feeling. The Janus case, which would decimate the public employee unions that are a key part of Democratic electoral efforts, was argued in the Court last month. A pro-Janus ruling, which the five GOPniks are expected to deliver, would constitute a veritable Son of Bush v. Gore ruling—that is, a purely partisan expression of Republicanism. A decision that the citizenship question is constitutional would be Son of Bush v. Gore on steroids. It remains to be seen just how Republican the Chief Justice—John Roberts, who has shown some concern for the Court’s reputation—is willing to be.

Kuttner
March 26, 2018

Saturday Night Massacre—or Saturday Night Live? Let’s review the bidding. The pundits keep warning that Special Counsel Robert Mueller’s firing is imminent. Trump obviously seethes and keeps fantasizing about telling Mueller he’s fired. What next?

If Trump does move to fire Mueller, he has to fire Deputy Attorney General Rod Rosenstein first. More precisely, he’d have to order Rosenstein to fire Mueller, give Rosenstein time to respond, then replace him, and go down the chain until he can find someone willing to fire the special counsel.

This would surely take a day or two—plenty of time for Rosenstein to tip off Mueller, and plenty of time for Mueller to deliver his draft report and his files to Congress, the Justice Department, and state attorneys general.

Mueller has surely prepared for this contingency, and he already has plenty of material to justify impeachment. His firing would make a formal impeachment process inevitable. Just enough Republicans have warned Trump about this scenario that he has held off, so far.

A rational person (ha!) would appreciate all of this, and not fire Mueller. On the other hand, Trump is neither a rational person nor is he capable of complex thought.

Rather, he often holds contradictory views at the same time and proceeds on impulse. (What other germophobe has unprotected sex with a porn actress?)

So Trump is fully capable of firing Mueller, despite the self-destruction that such a course portends. Will he order Mueller's firing, or will his minders stay his hand?

Those adult minders are getting more and more scarce. The hiring of Larry Kudlow and John Bolton suggests that he is determined to populate his senior advisers with people as reckless and flaky as himself—people he likes from watching them on Fox.

When this history is written, one of the great disgraces of this era will be the failure of more than a handful of Republicans in Congress to restrain Trump. They continue to put ideological goals, such as tax cuts, deregulation, and control of the federal courts, ahead of protecting their country from a crackpot.

Assuming democracy holds for another seven months, all signs suggest Republicans will pay dearly in November—and Trump may well pay dearly even before that.

Kuttner
March 23, 2018

How the Globalists Brought Us Trump. The headlines today are filled with alarmist language about how Trump’s retaliatory tariffs against China risk setting off a trade war. He’s imposing up to $60 billion worth of tariffs against an array of goods to compensate for a range of Chinese predatory tactics, including theft of intellectual property, subsidy of production below cost, and coercive “partnerships” with U.S.-based companies seeking to do business in China.

Here’s the pity of it all. The financial and political elite had this coming, by denying for decades the reality of China’s mercantilism. I write about this in the current issue of the Prospect. But Trump is pursuing a long overdue correction in a foolhardy way.

The right way to go after China’s predatory state capitalism would have been to keep China out of the WTO until we agreed on some set of symmetrical rules of the road. Clinton and Bob Rubin blew that one.

The elites deceived themselves into thinking that if we let China into the club first, China would evolve into a liberal, free-trade democracy. That sure produced some chuckles in Beijing.

The right way now would be to get together with the EU and mount a common diplomatic offense against China’s mercantilism. Instead, Trump went after the EU as well with his steel and aluminum, and is now facing retaliatory tariffs from Europe against the U.S. 

Trump has blown open a door to a long overdue drastic revision of policy—but in the crudest possible way, one that could backfire. His trade advisers, unlike Trump, are serious people. Trade chief Robert Lighthizer, a veteran of trade negotiations, knows how to do this diplomacy right. But this is really complex stuff, and it’s unlikely that Trump will listen to Lighthizer, except on the headlines. (His own lawyer defending him in the Mueller investigation, John Dowd, just quit because Trump refused to take his advice.)

By doing this ass-backwards, Trump almost guarantees that the mainstream press will keep prattling the usual platitudes about free trade good, protection bad, though today a few commentators were beginning to come around. A worthwhile piece is by Peter Goodman of the Times, who emphasizes the need for collective action against China, thus acknowledging that China is a real problem.

Winston Churchill is said to have quipped, “You can always count on the United States to do the right thing, after they’ve tried everything else.” By dithering on the realities of China (and profiting handsomely for it), financial and political elites have left it to Trump to belatedly do the right thing, but in the wrong way.

By the time serious people get back into power in Washington, China may well have convinced key global economic players that the predator is the U.S., and even more damage will have been done. This does not exactly serve to Make America Great Again.

But the blame is not solely with Trump. It is equally to be shared with a generation of globalists who were either naïve or in Beijing’s pocket. 

Sow the wind, reap the whirlwind. Or in this case, the windbag. But tragically, a windbag with real power.

Meyerson
March 22, 2018

Today, Wisconsin Democratic Senator Tammy Baldwin is introducing a bill that, if enacted, would make the American economy a damn sight better, fairer, and more productive. The Reward Work Act would curtail stock buybacks and require corporations to have their employees elect one-third of their boards of directors.

This year (and it’s only March!), Baldwin notes, corporations have spent $225 billion on buying back their own shares—an amount that vastly exceeds what they’ve spent on R&D or other investments, much less using their tax cuts to raise their workers’ wages or give them bonuses. As University of Massachusetts economist William Lazonick has been documenting for a number of years, the corporations on the Fortune 500 routinely allot the lion’s share of their profits to buybacks and dividends, often taking on debt to do so.

The practice of buying back shares—which, by decreasing their number, boosts their value—took off after Ronald Reagan’s Security and Exchange Commission passed a rule (10b-18) that enabled CEOs to engineer buybacks without fear of being penalized for manipulating share prices for personal gain. The rise of buybacks and greater dividend payments fit neatly into the Milton Friedman-promulgated doctrine that the purpose of corporations was to “maximize shareholder value,” though Friedman probably didn’t suspect that this would come to mean “at the expense of long-term productive investment and employees’ earnings.”

Baldwin’s measure repeals rule 10b-18. In calling for worker representation on corporate boards, it takes a leaf from German laws requiring “co-determination.” In Germany, corporations must divide their boards equally between shareholder and employee representatives, giving workers a share of power over corporations’ practices. It is one of several reasons why the German middle class has not eroded in recent decades to the degree that the middle class has shrunk in other advanced economies.

In introducing this bill, Baldwin is betting that this form of progressive populism will stand her in good stead in her re-election campaign this year in Wisconsin. Like Ohio’s Sherrod Brown, who’s also up for re-election in an industrial Midwestern state that Donald Trump carried in 2016, she’s wagering that a pro-worker, anti-Wall Street agenda will resonate with many of the working-class white voters who swung to Trump. Baldwin and Brown could well be charting the future of Democratic politics. Let’s hope they’re right.

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