The Big Squeeze
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Republicans have always defended big business. But they’ve never done it quite like this.
By David J. Sirota
The American Prospect
Issue Date: 09.01.04
prospect.org
For most Americans, the last four years have represented a low point in our economic history. But for the big-business interests financing the Bush campaign, these have been high times. In previous eras, and even under previous Republican administrations, corporate America was one of a number of players in the public-policy arena. But under the Bush administration, big business is both the player and the referee, having finally won its decades-long campaign to eliminate the boundary between executive suite and public office. No longer does the private-profit motive compete in the legislative process with public good; profit now owns the process, and the middle class is left to the vultures.
We technically have a representative government, but it is far less like democracy than like WWE wrestling -- entertaining theater with colorful characters, much fanfare, and a few body slams, but ultimately a rigged outcome. Industry no longer needs to lobby hard for regulatory rollbacks, because many of its own lobbyists have been appointed federal regulators. Congress openly admits that business writes many of the most important pieces of legislation. The White House slaps an official seal on memos from corporate executives and labels them “presidential policy initiatives.” The vice president is permitted to own shares of stock in a company for which he coordinates government contracts. And the Oval Office is occupied by a man whose major life experience was not public service but money-losing business deals (that somehow seemed to just make him richer and richer). In short, the government is now a wholly owned subsidiary of corporate America.
This hostile takeover is no accident. After the crushing defeat of Barry Goldwater in 1964, conservative business interests began a campaign to intimidate, infiltrate, and ultimately take over Washington. As David Brock documents in his new book, The Republican Noise Machine, the chief architects of the right’s new strategy laid out an agenda “whereby conservative business interests would create and underwrite a ‘movement’ to front their agenda.” And, slowly but surely, the campaign worked. This Republican Party–big-business nexus massaged its propaganda during the Nixon years, fertilized it under the Reagan administration in the 1980s, and incubated it into legislative experiments after taking over Congress in the 1990s. The George W. Bush era is simply the full-grown, out-of-control, bastard child of this 30-year orgy that’s been running roughshod over the middle class.
The business takeover of government seems, at first blush, unremarkable -- like something that has been with us for years and is as natural to the order of things as the ocean’s tides. But it is not natural at all. It is new, historically speaking, and blatant even by the standards of recent Republican administrations. To illustrate how far down this road we’ve actually gone, just contrast George W. Bush’s categorical refusal to regulate the market with three of his Republican predecessors. Richard Nixon created the Environmental Protection Agency, the Occupational Safety and Health Administration, and expanded the Equal Employment Opportunity Commission -- all agencies chartered to protect average people. Even while ideologue Ronald Reagan was doing his best to soak the poor, he was forced to increase at least some corporate taxes in his 1986 tax-reform package. And according to the conservative Heritage Foundation, George Bush Senior increased funding for regulatory enforcement by 18 percent.
This administration, by contrast, resists any government intervention or deviation from the big-business agenda, no matter how dire the situation. It is all the culmination of the industry’s master plan: Take over the government and remove it as an obstacle to fleecing the average American. If any legitimate proposals arise to reregulate the market, they are bludgeoned with any red herring available: Health reforms are tarred as “socialized medicine,” tax reforms are attacked as “job killers.” While the fat cats make off like bandits, the rest of us are left, in five crucial areas of economic life, facing the big squeeze.
THE HEALTH-INSURANCE SQUEEZE
Last year, Americans spent 14 percent of all their money -- $1.5 trillion -- on health care (such spending is rising at more than 7 percent a year). And those are the lucky ones: A report by the nonprofit Families USA found that 82 million Americans went without any health insurance at some point in the last two years, an increase of 7 million from the same study a year ago.
For years, real solutions sat on the table, all of them requiring government intervention in the health-care market. Progressives in Congress proposed various single-payer systems, including legislation to extend Congress’s own health-insurance program to the general public. In California, the state Legislature passed a bill forcing employers to provide basic coverage to their workers. Others proposed extending the state-level Children’s Health Insurance Program to cover everyone. Presidential candidate Dick Gephardt suggested a hybrid: using both tax credits and government spending to bridge the gap. Those proposals have solid public support. According to an ABC News poll in October 2003, almost two-thirds of Americans “said they preferred a universal system that would provide coverage to everyone under a government program” as opposed to the current private, for-profit system.
So why has the president avoided addressing health care in a serious way? Because his health-care-industry donors are winning big from the existing system. A recent study found HMO profits increased 52 percent last year alone, meaning an extra $2.3 billion was pilfered from American consumers. These are the same companies that since 2000 gave at least $13 million to President Bush and key Republicans in Congress, and who have seven former or current executives in the president’s “Pioneer” club (those who gave him $100,000 or more).
Those campaign contributions bought policies that either further pamper health-care executives or actually remove the government from the market entirely. The White House’s major health-care initiative, for instance, is the “Health Care Savings Accounts.” On the surface, the plan seems as innocuous as one of those HMO magazine ads. It is also just as misleading. In reality, the accounts are nothing more than tax incentives for employers and HMOs to terminate their existing coverage, raise deductibles and premiums, and make more money. As one study notes, widespread adoption of the plans could more than triple the annual health-insurance deductibles paid by workers.
And the White House’s Medicare bill was no better. Its signature feature was a multibillion-dollar subsidy for private health-insurance companies to compete with the cheaper, government-administered program. The new law also included a little-noticed provision that allows companies to continue receiving a special tax break even if they reduce their employees’ existing health-care benefits.
THE PRESCRIPTION-DRUG SQUEEZE
Turn on the television for more than five minutes and you will inevitably see an advertisement for a new drug. The ads portray happy seniors living life to the fullest, amped up on whatever pill the company is hawking. But the images are a fallacy: We’re not going to look as good as those TV people when we’re older, and, more importantly, many of us are not going to be able to afford the pills being peddled. While drug companies maintain some of the highest profit margins of any industry in America, drug prices are rising at three times the rate of inflation, and they continue to skyrocket.
Drug executives have the nerve to say their rip-offs must continue in order to fund the research and development of new medicines. These executives, backed by innocent-sounding, industry-supported think tanks like the Competitive Enterprise Institute, claim the “free market” must be left untouched because it has led to groundbreaking new drugs. What they don’t say is that at least a third of all research and development is funded by the taxpayers. They also forget to mention that the industry enjoys massive R&D tax breaks that allow it to pay 40 percent less in taxes than the rest of corporate America. These subsidies have led to the development of major name-brand drugs like Taxol, AZT, and Tamoxifen. Our reward for that investment? The highest price in the world for those same drugs at the pharmacy. As the House Government Reform Committee notes, consumers in industrialized countries like Canada, Germany, Italy, and Great Britain all pay at least 30 percent less for brand-name medicines than consumers in America.
Serious solutions to the price crisis that cost little taxpayer money have been around for years. But the drug industry, using lobbyists now appointed to key positions in the Bush administration, has convinced Congress and the White House that it will make less money if any of these solutions is adopted. The claims, of course, are untrue. A recent Boston University study points out that profits lost to lower prices would be made up by an influx of new consumers who previously could not afford to buy medicines.
Even if profits did slightly decrease, these companies would be far from Oliver Twist cases. The industry right now makes more money than it knows what to do with. According to Public Citizen, the drug industry pocketed $39.5 billion in profits in 2002. That was more than half of the total profits of the entire Fortune 500 combined. Even if the pharmaceutical industry saw its 14-percent profit margin cut in half, it would still be more profitable than the auto, computer, and telecommunications industries. Its pleas of poverty are as insulting as Bill Gates buying you lunch at TGI Friday’s and then telling you the meal will put him in the poorhouse.
Instead of mandating serious reform in the pharmaceutical marketplace, the Republicans in Congress have done everything possible to perpetuate the current system for an industry that has given them more than $65 million in the last 10 years. In 1996, the new Republican majority followed the orders of Republican National Committee Chairman and former pharmaceutical lobbyist Haley Barbour, attaching an $18 billion drug-industry tax break to a minimum-wage bill -- without demanding lower prices from the industry in return. In 2000, the GOP leadership gutted House- and Senate-passed provisions that would have permitted seniors to buy cheaper medicines from Canada.
And this year, President Bush gave the drug companies their crown jewel: a Medicare bill that includes a drug benefit, yet specifically prohibits Medicare from negotiating any price discounts. The bill will give the industry a half-trillion dollars to administer the new program, yet without any cost controls, even that sum is not enough to provide comprehensive drug coverage to seniors. In short, the bill created two new entitlements: a marginal one for Grandma and a vast one for the pharmaceutical industry.
THE ENERGY SQUEEZE
With automobiles consuming 40 percent of all the oil America uses, a big part of the energy solution naturally revolves around using less oil in automobiles. In the long term, that means serious investment in alternative energies and mass transit. In the short term, that requires forcing auto companies to make more fuel-efficient vehicles.
Those simple solutions have been attacked and distorted by energy companies, which in the last four years have reaped an additional $50 billion to
$80 billion in new profits from the current situation. Instead of acknowledging the problem, these companies turn Alice-in-Oil-land fantasy into free-market ideology. The oil industry’s executives claim with a straight face that the Earth “will never run out of oil” and call for more tax breaks for oil and gas drilling. That kind of rhetoric is translated into fodder for conservative, industry-backed think tanks that arm lawmakers with “facts.” For instance, the libertarian CATO Institute, which receives grants from Chevron, ExxonMobil, and Unocal, issues reports claiming that “fossil-fuel resources are becoming more abundant, not scarcer.” Similarly, the Chevron-ExxonMobil-Shell–backed Heritage Foundation issues talking points actually saying cars “clean our air.”
These claims, of course, are wholly without merit: As National Geographic this year noted, “Humanity’s way of life is on a collision course with geology [and] the stark fact that the Earth holds a finite supply of oil.” Experts agree that, whether five or 30 years from now, supply “will ultimately top out, then dwindle.” And there is no legitimate science to prove that burning fossil fuels is good for air quality or the environment.
But with the White House headed by two oilmen, industry nonsense substitutes for public policy. Within months of taking office, Vice President Dick Cheney convened a secret task force to solicit oil executives’ help in writing federal energy policy. No matter that Cheney still held stock options and received a salary from the oil behemoth Halliburton, which stood to profit from the policy decisions. What mattered was paying back the industry that gave the Bush campaign almost $2 million.
The resulting legislation was a classic marketplace intervention by the government on behalf of industry -- this time, to pay wealthy oil corporations to do what the government could have mandated for free. Billed as a “comprehensive energy plan,” the energy proposal was nothing more than a series of multibillion-dollar tax breaks for oil and gas companies. Even though the president’s own economic guru admits “the technology exists for sharply reducing and eventually eliminating the use of oil to fuel cars,” the legislation included no fuel-efficiency standards at all. Making matters worse, the president proposed budgets that simultaneously cut funding for alternative fuel and hybrid-engine research while creating a new, $100,000 tax write-off for people who purchase gas-guzzling Hummers.
Even the most serious crises brought no action. During the West Coast energy crisis, when Enron was fleecing at least a billion dollars from consumers and laughing about it, the White House refused to support temporary price caps and pressured allies on Capitol Hill -- including those from the West Coast -- to vote them down.
THE WAGE SQUEEZE
As the Economic Policy Institute reports, average Americans’ paychecks are getting smaller. During the “recovery” we hear so much about, the industries adding jobs pay about 13 percent lower than industries cutting jobs. In other words, people are being thrown out of their higher-wage manufacturing and information-sector jobs and shoved into low-wage restaurant and temp jobs.
Looking to the November election, the president feels he must ignore this reality and try to convince us that everything is hunky-dory. He says “our economy is getting stronger,” and the vice president claims “real incomes and wages are growing.” Yes, it is true, CEO pay is on the rise and corporate profits have risen by 62 percent since the last recovery. But in that same period, wages for workers have decreased by 0.6 percent -- the worst record of any “recovery” since World War II. As The New York Times noted, “The amount of money workers receive in their paychecks is failing to keep up with inflation.”
The president could have pushed the federal government to step in and mandate an increase in the minimum wage from its almost 50-year low, in terms of real inflation-adjusted dollars. Such a move would mean an immediate pay increase for roughly 9.9 million workers. With the poverty level increasing two years in a row for the first time in nearly a decade, he could have argued that we at least need a minimum wage that lifts a family above the federal poverty line. True, no one really expects a conservative president to push to increase the minimum wage. But this president did more than merely oppose an increase; he actually sought out ways to deregulate the labor market and slash pay even further, offering a series of policies that help his corporate benefactors cut their costs. First came legislation to eliminate overtime-pay protections for 8 million workers. Then came efforts to preserve more than a billion in government handouts to companies that export jobs. Then the president’s top economic adviser trumpeted the outsourcing of U.S. jobs to cheap overseas labor markets.
Now, the executive agencies are taking over. According to The Associated Press, the Bush Labor Department began “suggesting ways employers can avoid paying overtime” to their workers. Similarly, The New York Times reports that the Bush Commerce Department is participating in “conferences and workshops that encourage American companies to put operations and jobs in China.” And the Bush Treasury Department has tried to defy federal-court rulings by attempting to legalize “cash balance” pension schemes that reduce retirement incomes that companies promised to their older workers.
THE TAX SQUEEZE
Consider some statistics from the president’s tax policy: By 2010 more than half of all the president’s income-tax cuts will go to the richest 1 percent of the population (those making an average salary of $1 million); by 2006, the average millionaire will receive a tax cut of $52,000, while the average American worker -- earning less than that tax cut, or $36,000 a year -- will get less than $600.
But the story does not stop there. Along with tax cuts for the rich, Bush’s budgets actually raised fees by almost $20 billion, including increased surcharges for veterans to receive health care. At the same time, states were forced to raise taxes by $14 billion to deal with deficits, while experts estimate local property taxes rose an average of more than 10 percent between 2001 and 2003. And because these levies are not graduated like the federal income tax, they hit the middle class particularly hard.
So it is no wonder that at the end of this so-called tax-cutting era, polls show ordinary Americans saying that they have not felt any real tax relief. As The Washington Post notes, economists agree that “Bush’s tax policies have shifted more of the tax burden to the middle class.”
What makes the situation so tragic is that the White House had such a historic opportunity to use the tax code to fight for the middle class, not against it. The recession, along with a massive surplus, gave the president all the political capital he needed. He could have expanded the Earned Income Tax Credit, a tax policy widely praised for rewarding work and helping people move out of poverty. He could have embraced a proposal to create regular rebate checks for every American, so that General Electric’s Jack Welch received the same tax rebate as his factory workers on the shop floor. There were even proposals to reform the payroll-tax system, changing it from one that exempts income over a certain level to one that exempts income below a certain level.
But to conservatives, that would have been heresy because it would mean no tax cuts for the wealthy few who fund their political campaigns. It means no tax cuts for large chemical and oil companies, like those enacted when the White House eliminated cleanup taxes on industrial polluters. It means preserving the estate tax, a levy that falls only on the wealthiest 2 percent of America, not eliminating it, as President Bush did. It means admitting a problem exists when the wealth of the top 1 percent doubles at the same time the wealth of the bottom 40 percent gets cut in half. It means reversing the practice of giving a $52,000 tax cut to every millionaire in America while 1.7 million Americans fall below the poverty line.
In short, it means having a dialogue about what conservatives decry as “class warfare” -- issues of rich and poor we all have to deal with but aren’t supposed to talk about because it makes fat cats uncomfortable.
At a high-society dinner during the 2000 campaign, George W. Bush looked out on the audience and joked, “This is an impressive crowd. The ‘haves’ and ‘the have-mores.’ Some people call you the ‘elite.’ I call you my base.”
We should give him credit: It is a rare occasion when a conservative politician admits who calls the shots, even in jest. Most of the time, the right wing’s real motivations are hidden under the populism of a cowboy hat, or in the fine print of books about the free market.
But what is happening in this country is no laughing matter. Average Americans are being screwed as never before, and our government is helping those turning the screwdriver. The result is that George W. Bush has become not just a “war president” on foreign policy but also on domestic policy. Only here at home, he is waging a war on the middle class, and the results have been downright devastating.
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David Sirota is a writer for the American Progress Action Fund.
Copyright © 2004 by The American Prospect, Inc. |
