This Book Has Riled Me Up!


A blood-boiler of a book:  Free Lunch – How the Wealthiest Americans Enrich Themselves at Government Expense and Stick You With the Bill, 2007, Penguin Books, Ltd., by Pulitzer Prize-Winning reporter David Cay Johnston of the New York Times.

Get a hold of this book to discover how America’s economy has come to mean job uncertainty, debt, and bankruptcy for many of its citizens who are not by any standard considered to be what we call “rich” or “well-off.”

The flyleaf summarizes one of the author’s conclusions: new regulations adopted under the “…guise of deregulation…thwart competition, depress wages, and reward misconduct…”  From taxpayer-supported new golf courses on the coast of Oregon through special deals to build baseball stadiums, to how America has the most expensive and inefficient health-care system in the world, secret deals involving sales of health maintenance organizations, usurious loans for college students, and so on, the details of all this and more provided ample opportunities for getting me riled up big time.

“We now have almost three decades of experience with the idea that markets will solve our problems.  The promised results are not there and there is no reason to believe that they are over the next horizon, just a few more subsidies away.  Electricity costs more and its delivery is less reliable.  Many hundreds of billions of tax dollars have been diverted to the rich, leaving our schools parks, and local government services starved for funds.  Jobs and assets are going offshore, sometimes to the detriment of not just the economy, but national security….”  (Page 281)

“And our politicians in both parties are hypocrites of the first water, nearly every one of them.  They vote to make the poor sacrifice again and again so that the rich can have more, yet they run for office handing out photos showing that they regularly attend religious services….” (Page 281)

An example:

In the last half of the 90’s and the 2000 races Enron and its executives (remember Ken Lay, CEO of Enron, who Governor George W. Bush called “Kenny Boy”?) poured $5.4 million into campaigns for Congress and the White House.  More Enron money was poured into state races, especially in Texas (Page 170).  Among the state legislation Enron supported was Senate Bill 7 in Texas.  The promise of that bill was that competitive markets would provide electricity more cheaply and efficiently than utilities regulated by state government.  Six years after the passage of Senate Bill 7 electric rates in Texas were more than 50% higher.  Earlier, by 2001, California consumers and businesses were burdened with electric bills that had increased, on a statewide, annual basis, from $6 billion to $60 billion.  Twenty-six states had jumped on “the market can do better” bandwagon, embracing the Enron way, which turned out not to result in cheaper and more efficient service, but a way to manipulate prices.

When people pay more for electricity they have less to spend.  When they have less to spend they pay less in sales tax.  As tax revenues fall, government must either raise taxes or cut services.  Add the other examples in this book to the Enron fiasco and see how ultimately the taxpayer either pays more in taxes or does without infrastructure replacement and maintenance, endures the most expensive and inefficient health care system among industrialized nations, has access to fewer libraries, watches parks close and poor maintenance of the parks that manage to stay open, pays higher education costs, and lately, is forced to worry about threats involving cuts in Social Security, Medicare, Medicaid, etc.

Hints as to the causes of all this: blind reliance of “the market” to resolve all economic problems and lobbyists representing special-interests and paid to influence government.  A few numbers to illustrate how that influence is greater now than ever before appear in the chart below, constructed from data provide in the book at page 110.  In 1975 Washington lobbyists were paid less than $100 million; by 2006 they were paid $2.6 billion (the number would have been $250 million had the earnings grown at the same rate as the economy) and 2) the number of lobbyists in Washington, 35,000 in 2006, has doubled in 6 years and is likely higher than that today.  And those numbers don’t even include lobbyists who work the state capitols and big city and county governments.

Number of Lobbyists                   Lobbyist Earnings

1975                 ???                                     Less than $100 million

2000             17,500

2006             35,000                                         $2.6 billion

(Notes: above from data on page 110.  Had lobbyist earnings increased at the same rate as the economy, 2006 earnings would have been $250 million.)

Just one example of how ridiculous lobbying can get involves  convicted felon Jack Abramoff, who requested a $9 million fee from the corrupt leader of a small African nation for simply arranging for that leader to meet with President George W. Bush in 2003 (page 110).

At page 276 the author provides a look at how the economic differences between the 270  million people not in the “rich” or “superrich” categories are growing.  For the 25 years between 1980 and 2005, according to a data from a study of data from U.S. tax returns by Thomas Piketty and Emmanuel Baez, economists who have been studying income data around the world for nearly a century, average income for the 270 million decreased 3%,  average income for the 3 million in the rich category increased 209%, and for the superrich, the increase was 650%.  We have redistribution of wealth in America; from the bottom to the top.

Vast Majority

Rich

Superrich

2005
Population

270 million

3 million

30,000

Avg. Income:       1975

$29,968

$359,501

$3,430,164

1985

$29,210

$533,401

$9,414,999

1995

$27,614

$654,057

$10,574,657

2005

$29,143

$1,111,560

$25,726,965

Change
After 30 Years

-$825

$752,059

$22,296,801

Percent Change

-3%

209%

650%

(Chart reproduced from page 276, compiled by Thomas Piketty and Emmanuel Seitz)

And on page 274 Piketty and Seitz point out that the share of income reported on tax returns has decreased for the vast majority from 65.3% in 1980 to 51.5% in 2005, while the rich and superrich gained 11.8% and  3.8%, respectively.

In the final chapter Mr. Johnston offers his  “What To Do?’ about all this.  One of his suggestions is to completely eliminate gifts of any kind to members of Congress.  “In this way we can move politics back toward the people and away from monied interests.  The penalties for taking anything – even a free shot of whiskey – should be swift, certain, and severe.  Take a gift, go to jail.  Call it zero tolerance for lawmakers.”  (Page 293).

Of course, to accomplish that reform the budget for Congress would have to be larger, to allow members to do their own investigations, followed with monthly collection of receipts for every expense to be posted on the Internet for easy analysis by taxpayers and government watchdogs.     But increasing the budget for Congress “…would save us far more by reducing the giveaways, the rigged rules, and the favors for the rich.”  (Page 293)

Right now I have to go see if I can find the small drawing a colleague in Michigan gave me years ago. I displayed the drawing and its message for many years on my desk at work and copied it to add to my children’s refrigerator art at home.  The drawing was a small political cartoon from the Lansing State Journal showing a small character with a perplexed expression and the caption: “The world is not yet perfect, and I’m getting damned impatient.”

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