President-elect Donald Trump hasn’t yet sworn his oath of office, but his announced policies have already thrown a Los Angeles County Board of Supervisors meeting into pandemonium.
Yesterday, supervisors met to hear public comments and to vote on a measure to create a new Office of Immigrant Services, and to direct a civilian review board to oversee policies on the handling of undocumented immigrants in county jails by the L.A. Sheriff’s Department. It was pretty humdrum stuff, compared to what state legislators are doing.
But that’s not what you’d guess from the reception the hearing received.
Seated before an audience of hundreds in their sleek auditorium the size and shape of a movie theater, with a bevy of cameras surrounding them like a firing squad, the supervisors struggled to slog through a long series of dry presentations by county bureaucrats on the measure, followed by over a hundred oral comments from the public.
Every five minutes, from some corner of the room, a clamor of cackles, chants or boos erupted, either from the large contingent of immigrant rights activists in the crowd, or from the only slightly smaller throng of Trump supporters decked out in red T-shirts and “Make America Great” baseball caps.
“ICE out of L.A.!” a dozen pro-immigrant activists chanted at the assistant sheriff, after he testified that Immigration and Customs Enforcement is in county jails “on an almost daily basis.”
The pro-Trump crowd, mostly seated together on one side of the aisle, met the chant with noisy boos. They turned their live-streaming cellphones, held perpetually aloft in front of their faces, in the direction of the perpetrators. “Kick them out!” they yelled to the supervisors.
The outbursts and counter-outbursts repeated themselves another half dozen times through the half hour or so of reports by county officials, initiated first by one side, then by the other, like dueling fans at a USC-UCLA football game. Over and over, Supervisor Mark Ridley-Thomas, who presided over the meeting, warned that offenders would be ejected from the room, his threats sounding increasingly weary and empty with every repetition.Then it was the public’s turn to recite their comments. The majority of them, by far, favored the resolution, which was mildly pro-immigrant. But the handful of outraged voices aligned against it did score points for creativity.
One middle-aged woman who identified herself as an L.A. public school teacher accused Democrats of smuggling millions of undocumented immigrants into California in order to turn them into child prostitutes.
A middle-aged man invoked Vice President John Calhoun and the Nullification Crisis of 1832 to charge each of the supervisors of being Confederate sympathizers for putting “states’ rights” before federal authority in their support for “sanctuary laws.” A young man from West Covina complained that his city’s switch to district elections, made to help increase Latino representation in city government, showed that California was becoming an “apartheid state.”
A weathered-looking white woman declared that California was becoming “a petri dish for globalists,” and called for Trump to “intervene in California’s affairs.” The pro-Trump audience members clapped and cheered. Ridley-Thomas pleaded once again for quiet.
Another commenter explained that the Mexican drug cartels are lashing out, upset about being deported. The argument didn’t make much sense, but was greeted with a hearty “Deport them all!” from one Trump supporter.
Finally, after two hours, Ridley-Thomas made good on his threat. He declared that the board was going into executive session, which meant that the entire audience was barred from the room. The auditorium emptied.
The proposal passed by a 4 to 1 vote, except for the part about oversight of the sheriff’s department, which was supported unanimously. A few hours later, with a week and a half left until Trump takes office, President Obama gave his farewell speech. He deplored the deep divisions in our country, rallying his supporters to defend political pluralism, and to safeguard the Constitution against intolerance and autocracy.
Robert Reich on Trump’s ‘Dangerous Tax Bill’
“All of this rhetoric about a middle-class tax cut,” Robert Reich tells Capital & Main, “is just an absurd lie when you look at the numbers.”
In little more than six months the Republican-proposed tax bill has grown from a one-page White House press release promising financial relief for middle-class Americans to a colossal amoeba containing everything from massive corporate tax cuts to the repeal of Obamacare. Capital & Main’s Jessica Goodheart recently spoke to economist Robert Reich for part of an upcoming series on corporate responsibility. During Goodheart’s interview, Reich spoke about the current tax proposal that many experts see as a dire threat to the very households its sponsors are pledging to protect. Reich’s comments are excerpted below.
Jessica Goodheart: Do you think that reform-minded CEOs are taking any risks?
Robert Reich: If CEOs were really courageous . . . they would be speaking out right now against the shortsighted and dangerous tax bill that is coming through Congress, even though their own corporations might benefit. Over the long term, everyone will lose.
Some have suggested that the anti-free trade, nationalist movement that Donald Trump represents at home might place pressure on corporate leaders to address the widening wealth and income gap. Do you see that as a possibility?
Reich: Some leading corporations could decide to support specific public policies and reduce inequality, such as higher minimum wages, a bigger earned income tax credit, maybe even a universal basic income. They’re not going to do it individually, as companies, but they might come together and act politically, and lend their political clout to this kind of legislation.
What do you think the prospects for that are right now?
Reich: It’s hard to say. The Republican Party is split between its corporate and Wall Street wing, and its Steve Bannon/nationalist/Trump wing. For the time being, those two wings have come together around getting tax cuts for the corporate, Wall Street wing. What will the Bannon/nationalist/Trump wing want in return? Will they be satisfied with Trump’s tweets and nationalist tantrums? I don’t know.
What role are corporations playing in tax reform efforts, both visible and not visible, to the public?
Reich: Well, most of it’s invisible. Right now, there are lobbyists swarming over Capitol Hill, trying to get the largest tax breaks they possibly can for their companies and industries. You have large business groups like the Chamber of Commerce, Business Roundtable and others who are trying to keep the direction of the bill going in very large tax breaks for corporations, overall.
What the public sees and hears is just the talking points that Republican leaders have put out there in order to mollify the public, and to disguise what’s really going on. All of this rhetoric about a middle-class tax cut is just an absurd lie when you look at the numbers. I mean, the longer this goes on, the more likely it is that most Americans will discover the truth — which is why the Republican leadership wants to move quickly, and get this done before Christmas.
On Monday, Trump tweeted a request that the repeal of the Obamacare health insurance mandate be included in the tax reform proposal. How would that impact Americans, and how do you think it affects the prospect of the bill’s passage?
Reich: The removal of the health mandate would cause four million Americans to lose coverage in the first year, 13 million by 2027, according to the nonpartisan Congressional Budget Office. I don’t see how Senators Susan Collins, Lisa Murkowski and John McCain — who voted against repeal of the Affordable Care Act — could possibly vote for the tax bill with this poison pill inside it.
Yesterday, Trump economic adviser Gary Cohn received a tepid response after asking CEOs at a Wall Street Journal conference whether the tax reform bill would cause them to spend more on growth. Does that surprise you?
Reich: It doesn’t surprise me, because American corporations are flush with cash. If they wanted to invest more in growth, they could have done so already. They’re using their profits to buy back their shares of stock, and pad executive pay. That’s what they’ll do with even more profits that come their way because of the tax cut.
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California Bill Would Bring Climate Change Battle to State Construction Projects
A new bill awaiting Governor Jerry Brown’s signature could use the state’s massive purchasing power as the world’s sixth largest economy to address greenhouse gas emissions far beyond its borders.
With California doubling and tripling down on climate change as a reality in 2017, a new bill awaiting Governor Jerry Brown’s signature could use the state’s massive purchasing power as the world’s sixth largest economy to address greenhouse gas emissions far beyond its borders.
Assembly Bill 262, the Buy Clean Act, would require all state departments and the University of California and California State University systems to buy steel, rebar, flat glass and mineral wool board insulation for its infrastructure projects from low-carbon producers. Currently, the state usually buys at the lowest price, meaning that materials can come from companies in China and elsewhere, where the carbon footprint is almost certainly higher.
“We can’t forget our commitment to the environment in pursuit of the cheapest state infrastructure project,” said the bill’s lead author, Assembly Member Rob Bonta (D-Alameda). “We have to pursue getting the best value and protecting our environment at the same time. This is the next step in global climate change leadership in California.”
The bill would require the state to determine the average greenhouse gas (GHG) emissions per unit from the manufacture of those four infrastructure products. Bidders on state projects would then have to submit Environmental Product Declarations, or EPDs, proving they are at or below the average. EPDs are commonly available on many construction materials today.
The Buy Clean bill, co-authored by Assembly Member Marc Steinorth (R-Rancho Cucamonga), has bi-partisan support in both legislative houses and is backed by a massive blue-green coalition of labor, business, environment, and the building trades, many of whom see this as a boon for California. Businesses in the state are already required to meet the most stringent climate regulations in the nation and are thus well-poised to get these contracts. Still, not everyone is on board.
“Small business is going to be adversely affected,” said Tom Holsman, CEO of Associated General Contractors of California, an advocacy group for the building trades. He points out that contractors are required to hire a certain percentage of small businesses known as Disadvantaged Business Enterprises, or DBEs, owned by individuals from socially or economically disadvantaged communities, who may not be able to meet the requirements of the bill. This could hurt local businesses and put contractors out of compliance. “We had to oppose this bill in order to get that point across.”
California would be the first state in the U.S. to have such a policy, though the idea behind Buy Clean is already widely in practice in California and beyond. Buildings certified by LEED (Leadership in Energy and Environmental Design), a green building rating system, already require EPDs on materials. The California High Speed Rail Authority adopted a sustainability policy that similarly requires EPDs on steel and concrete. Oregon and Washington State have also recently started developing a statewide policy.
We can’t forget our commitment to the environment in pursuit of the cheapest state infrastructure project. We have to pursue getting the best value and protecting our environment at the same time.
Businesses already investing in clean tech, however, are seeing this policy as an opportunity to showcase their green credentials. Gerdau Steel, which runs the state’s only full-production steel plant, making steel reinforcing bar, or rebar, at its facility in Rancho Cucamonga, has already put $33 million into switching its power source to renewable energy, and helped craft the bill.
“We compete with neighbors in Arizona, Oregon, Washington, and then in Asia, that use less clean processes and haven’t made the investments we’ve made,” said Gerdau Rancho Cucamonga Vice President Mark Olson. “And then we get underbid by a nickel and we lose out. That was very frustrating to us. We believe it’s a way for California to really push climate goals to surrounding states.”
It is also a way to create and keep jobs in California. Purchases previously made out of state or overseas may shift to California, where not only environmental regulations but also labor standards are more stringent. Just about every major labor union, including the California Labor Federation, SEIU California, the Communications Workers of America and the United Steelworkers support the bill, as does the labor-environmental BlueGreen Alliance.
Kathryn Phillips, of Sierra Club California, points out that the Buy Clean Act is a first attempt to address a huge source of GHG emissions. An estimated 22 percent of all global emissions that contribute to climate change are embedded in the supply chain and are attributable to manufacturing.
Governor Brown had already demanded in an executive order that state agencies take climate change into account in their planning and investment decisions, and “employ full life-cycle cost accounting to evaluate and compare infrastructure investments and alternatives.” That order means agencies had to look at whether any infrastructure decisions would mean increased costs due to climate change remediation actions later. AB 262 is an attempt to codify that order and put it into action, with identifiable goals and standards.
“The Department of General Services and the Department of Finance are concerned that it could lead to millions in increased costs,” said Phillips. “There’s no reason that the price should have to go up. Unless what they’re admitting [is] that the state has routinely gone out and bought the cheapest and dirtiest products, and I say: shame on them! What hypocrisy!”
Buying cheap has occasionally led the state to environmental embarrassment. One outstanding example that stuck in the craw of lawmakers was the reconstruction of the San Francisco Bay Bridge which re-opened fully in 2013. The structural steel used to rebuild that bridge was purchased from a Chinese firm that did not meet California environmental or climate standards. It was just less expensive.
Mike Mielke, senior vice president at the Silicon Valley Leadership Group, noted that even if the bill did create some front-end cost for new infrastructure in the state, it would pay for itself. He drew a parallel to those LEED-certified buildings. “They last a lot longer, people are happier in them, they are healthier in them, and there’s been lots of research that point to the fact that that additional up-front cost is more than borne out over the life of the building,” he said. “So I think that is not so different here.”
It’s not rocket science. It’s just basically saying you have to buy from the cleaner half, instead of the dirtier half.
Materials covered by the bill leave a couple of glaring exceptions: cement and concrete. They were in the bill until it went into the Assembly’s Appropriations Committee where they were then stripped out. Bonta notes there was “significant opposition” from the cement and concrete industries, and also from Caltrans, who argued that compliance would significantly increase their concrete costs.
This cost increase is way overblown, said U.S. Concrete Vice President Jeff Davis. His firm was a major backer of the bill and is still supporting it. “For 12 years we have been focused on developing the most sustainable, lowest-carbon footprint concrete in our marketplace and for that matter, leading the entire industry in low-carbon concrete,” Davis said. “But I can tell you that here, in the SF Bay Area, our low-carbon concrete is selling competitively with standard concrete.
“We see the value of this bill and the value for our industry. It provides the incentive for the industry to continue to focus on innovation, and to continue to advance that goal of lowering our carbon footprint.”
Bonta sees the bill as a foundation to be built upon later. “Sometimes you start with a significant stake in the ground and get a program started, and then you can build on that program going forward and include more materials,” he said “The political pathway this year didn’t include concrete, but that’s not to say that it won’t be included in the future.”
It seems like a bill like this would be a slam-dunk with Governor Brown, but reading Brown can be very difficult. It’s already been a banner year for the state’s climate policy, with Brown successfully extending his hotly debated cap-and-trade program from 2020 to 2030. Cap and trade requires companies to buy permits allowing them a certain amount of greenhouse gas pollution. A monumental bill requiring 100 percent clean energy production in the state by 2045 was rolled over into the next legislative session. But legislators are pushing ahead.
“It’s not rocket science,” said the Sierra Club’s Phillips. “It’s just basically saying you have to buy from the cleaner half, instead of the dirtier half. And it’s notable that I think every California company will fall into the cleaner half.”
California Controller Betty Yee: Trump Tax Plan Will “Exacerbate Pervasive Inequality”
In an interview with Capital & Main, the California State Controller offers her assessment of the president’s proposal, and concludes that it is not genuine tax reform but largely a giveaway to the wealthy.
As the CFO of the country’s most populous state and the world’s sixth-largest economy, Betty Yee has a keen interest in any tax proposal coming out of Washington, D.C. So it didn’t take long for California’s controller to issue a response to Donald Trump’s tax plan, which she characterized as “a tool to play partisan politics” that will “exacerbate our nation’s pervasive inequality.” Capital & Main spoke to Yee and asked her to amplify on her concerns about Trump’s proposal.
Capital & Main: There’s a lot that we still don’t know, but can you lay out the most important changes?
Betty Yee: First, I would not call this tax reform. His plan has various provisions that benefit certain taxpayers, but it certainly doesn’t provide broad-based benefits. It eliminates the death tax but doesn’t do much with respect to middle-class tax relief. It repeals the alternative minimum tax – that’s a gift to state taxpayers who still have a liability after taking advantage of all the special tax treatments that they’re entitled to. It reduces the top marginal income tax rates. It seems to be heavily favored towards the wealthy, but there’s not much with respect to middle-class and lower-income taxpayers.
So how do you define the difference between tax reform and tax cuts?
BY: One of the tenets of tax reform is that you look at how to broaden the base and reduce rates. That’s a starting point for any conversation. I don’t see that here. Whether it involves simplifying the system or trying to incentivize economic activity, there’s a bigger purpose with tax reform than just targeting specific types of taxpayers with benefits. You’re looking at the overall system, not just providing windfalls.
There’s a lot in this proposal that is left unanswered. What will you be paying attention to in the weeks to come?
BY: We need to see who truly benefits. Look at the proposal to double the standard deductions, for example. Is that really a tax cut for everyone, or just limited to some? How is the plan going to help small businesses? The details will give us a better sense of just how broad-based these proposals are going to be. What we’ve seen so far suggests that it could be like the tax cuts under President George W. Bush, and not a real reform of the tax code. What we see are some pet provisions that would be revised to accrue benefits to the wealthy.
It seems to be heavily favored towards the wealthy, but there’s not much with respect to middle-class and lower-income taxpayers.
Are there particular concerns that you have in terms of how the tax proposal would affect Californians specifically?
BY: One of the biggest problems that we’re already pushing back against is the proposal to repeal what is called the state and local taxes deductible. For high income-tax states like California, this repeal would have a dramatic effect on our economy and people’s purchasing power. It would increase the burden on so many Americans who have limited incomes. We love this state, but it’s a high-cost state, so anything that exacerbates affordability for Californians will be a tremendous issue.
In 2015, you pulled together a group of experts to study the problems of California’s tax system and propose avenues for reform. Where do things stand now in your efforts to encourage comprehensive tax reform?
BY: For now I’ve put that effort on hold until we know more about the federal proposal, because I don’t want to get out too far ahead. In California, we have an outdated tax system, the structure of which I don’t believe really does the job of encouraging economic development and sustaining economic growth. We have a very progressive tax system, and so anything at the federal level that would look to impair top income tax rates or benefit the wealthy will just exacerbate the volatility. The more the rich make, the more we will get in revenue, but it makes the system all the more volatile. And so we have to figure out a better way to manage the volatility.
I haven’t seen anything yet about how they’re going to pay for their tax proposal.
BY: It’s incomplete. And it’s not just the tax proposal, but how it will be paid for, that could have an impact on programmatic funding. It will diminish the purchasing power of those at the lowest end of the income spectrum and could lead to reduction in the services they receive from the government. Those are the people who will be disproportionately hurt.
The Electric Road to Zero Emissions Hits a Gas Pocket
Activists have sent a loud and clear message to the California Public Utilities Commission: L.A. and the state should make electric transportation in the city and at the Los Angeles and Long Beach ports a priority.
Electrician Francisco “Paco” Arago attends a California Public Utilities Commission community meeting on electric transportation. Arago, a Boyle Heights resident, says he doesn’t know how he will continue to raise his family in such a polluted area of the city. (Photos: Joanne Kim)
Union members, environmental justice advocates and green transportation activists packed a meeting room Tuesday evening in Downtown Los Angeles to send a loud and clear message to the California Public Utilities Commission (CPUC): the city and state should make electric transportation in the city and at the Los Angeles and Long Beach ports a priority.
The Clean Energy and Pollution Reduction Act of 2015 (Senate Bill 350) requires utilities to present programs to accelerate the widespread use of zero emission vehicles over the short term and longer range. Southern California Edison, San Diego Gas & Electric, and Pacific Gas & Electric, utilities providing about three quarters of California’s electricity service, have all proposed paths to zero emissions, and the CPUC hearing was part of the public process to weigh the merits of those proposals.
“The natural gas industry sees electric vehicles as the future . . . That’s why SoCalGas is fighting Edison on this. They’re opposed to electric across the board.”
Regulators will determine whether the proposals will benefit ratepayers with greater energy efficiency, improved air quality, lower emissions of greenhouse gases, reduced dependence on oil, and increased job creation, including jobs in disadvantaged communities.
The new proposals include programs to accelerate the adoption of light-duty EVs (electric vehicles), but also address trucks, buses, port equipment, forklifts, and the other vehicles that move people and goods in bulk in an effort to reduce diesel pollution.
Pacific Gas & Electric has proposed spending $250 million over five years to install infrastructure to electrify fleets of medium and heavy-duty vehicles. That infrastructure includes all the necessary electrical equipment from the transformer down, but not the actual charging stations. San Diego Gas & Electric proposed a $244 million outlay for its five-year program to install 90,000 charging stations at homes in the San Diego region at an estimated 71 cents monthly cost to its customers. The most ambitious proposal has come from Southern California Edison, which includes $554 million in infrastructure to electrify vehicles and equipment moving goods from the Port of Long Beach. PG&E estimates its customers will see a 28-cent hike in their monthly bills while SoCal Edison customers will pay 53-cents more a month.
But the Southern California Gas Company (SoCalGas) is determined to protect its piece of the energy pie. If SoCalGas’ arguments to the CPUC are effective, none of the electric utilities’ proposals will be adopted.
Clean Energy Fuels Corp. attorney J. Nathan Jensen urged the CPUC in August to make “cautious, measured movement toward electrification in the off-road, medium-duty and heavy-duty (MD/HD) sectors of the transportation market.” The MD/HD electric vehicle market has “only limited areas of early commercial readiness,” he said in written testimony submitted to the commission.
“Ratepayers are already being asked to shoulder market development costs as the utilities experiment in the MD/HD market,” Jensen said. “Asking them not only to assist customers in funding infrastructure but to allow the utility to earn a return on that assistance is unreasonable.”
Adrian Martinez, an attorney with Earthjustice, said after the meeting that SoCalGas is mostly worried about its own bottom line.
The company “is basically arguing that the natural gas infrastructure is already installed, and therefore there will be stranded assets and harm to ratepayers if the CPUC allows electric vehicle infrastructure to be installed,” Martinez said. “But it’s SoCalGas and other gas companies that will be hurt.”
SoCalGas’ testimony is unusual in that it sets up a situation of one utility potentially going up against another, and SoCalGas going up against a sister company, San Diego Gas & Electric.
Advocates for electric vehicle infrastructure say SoCalGas is playing hardball.
Melissa Bailey, a spokeswoman for Sempra Energy, parent company of SoCalGas and San Diego Gas & Electric, rejected the contention that it was a utility vs. utility fight. For heavy duty trucking, Sempra is touting natural gas engines fueled by biogas, made from green waste, waste water, and other organic sources.
“Natural gas and biogas engines reduce the emissions of smog forming pollutants to nearly zero,” Bailey said. “When fueled by biogas, these natural gas engines actually deliver lower greenhouse gas emissions than electric ones. That’s because biogas takes climate pollutants out of the air and uses them as clean, renewable fuel instead.”
Alexandra Nagy, Southern California Community Organizer with Food & Water Watch, said biogas promotion amounts to “greenwashing.”
“Those vehicles still have tailpipes that still emit greenhouse gasses,” Nagy said. “And gas companies still need to build out infrastructure to move the gas from farms to the consumer, which undercuts their argument about stranded assets.” Food & Water Watch supports the use of biogas onsite, she said, but not for widespread consumer distribution.
Advocates for electric vehicle infrastructure said SoCalGas is playing hardball.
Kathleen Woodfield, of the San Pedro Peninsula Homeowners Coalition, gave Capital & Main a letter she had sent to the ports of Los Angeles and Long Beach regarding possible SoCalGas interference at a joint Clean Air Action Plan hearing in August.
Woodfield wrote that on the evening of September 1, a woman approached her and said that she and 35 other people had been hired to give pro-natural gas testimony at a Clean Air Action Plan hearing, and that about 35 other people were each paid $60 and were given a free dinner for similar testimony. The woman said she had been hired by a PR firm called Method, Woodfield said.
Martinez said such tactics to sway regulators, if true, wouldn’t surprise him.
“They’re desperate,” Martinez said. “The natural gas industry sees electric vehicles as the future, and they don’t want to lose their market share. That’s why SoCalGas is fighting Edison on this. They’re opposed to electric across the board.”
At the downtown CPUC meeting, Jennifer Kropke, Director of Workforce and Environmental Engagement at the International Brotherhood of Electrical Workers Los Angeles area Local 11, testified that Edison’s approach was bold, and that it was the perfect nexus of “good, green jobs paying a living wage to local workers, and cleaner air for people who live near our ports.”
Kropke also emphasized, as did many others at the meeting, that building out EV infrastructure solves a chicken or egg problem. “It is easier to transition to EVs when the charging infrastructure is in place,” Kropke said after the meeting.
The CPUC hearings on the electric utilities’ proposals will be wrapped up in the next three weeks. Decisions on whether to approve or deny a proposal are expected early next year.
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Activists Push Los Angeles to Hold Its Bank Accountable
A coalition of elected officials, local residents and community leaders are encouraging Los Angeles’ City Council to require that any bank it does business with not engage in the kinds of unethical practices that helped mire the city’s current bank, Wells Fargo, in scandal.
A broad coalition of elected officials, local residents and community leaders are encouraging the Los Angeles City Council to require that any bank it does business with not engage in the kinds of unethical practices that helped mire the city’s current bank, Wells Fargo, in scandal. The San Francisco-based financial services giant has been rocked by revelations that its employees created as many as 3.5 million accounts nationwide without customers’ knowledge or consent. With a payroll services contract between the city and Wells Fargo about to expire, activists see this as the best opportunity in decades to demand accountability from any bank that contracts with L.A.
On August 17, the L.A. Community Review Board on Responsible Banking met at Gilead Missionary Baptist Church in South Los Angeles to examine ways to implement responsible banking practices that might help restore residents’ confidence in who the city banks with.
“The city does not have to do business with banks that hurt workers and customers in our communities,” U.S. Representative Maxine Waters told the panel and audience members.
Next week the City Council’s Budget and Finance Committee may consider adding new language to the Responsible Banking Ordinance, which the council passed in 2012 but never officially implemented. Addressing issues stemming from the 2008 financial crisis, the 2012 RBO included language for disclosure, and an annual ranking report that the city could use to give more business to a responsible bank, or take business away from an irresponsible bank.
Defining “responsible” and “values-based” is contentious, and advocates say they have been pushing for the strongest language possible to define these terms in the RBO’s new version. And they want that language to be part of the request for proposal (RFP) for all banking services. The final RFP for the city’s payroll services is expected to be released in December or January. The language in the RBO would also cover banking services, including investments and bonds/underwriting when those contracts are up for review.
“Our point of leverage is during the RFP selection process, which is right now,” says Maria Loya, Los Angeles Policy Director with the Committee for Better Banks, one of the lead organizations pushing for new ordinance language.
“The city has never submitted a ranking report card since 2012,” Loya said, echoing fears of many advocates that the city might be reluctant to hold its banking partners accountable.
Coming out of the August meeting at Gilead Church, the Community Review Board on Responsible Banking has released a report with specifics on what it wants – and doesn’t want – in the city’s banking partners. Among other recommendations, the board wants L.A. to give preference to banks that emphasize collective customer service rather than sales goals. And they want the city to contract with banks that don’t use sales performance as a factor in employee discipline or termination.
Advocates emphasize that aggressive sales quotas led to the Wells Fargo scandal.
“Commercial banking contracts are usually awarded to the lowest bidder,” Anastasia Christman, senior policy analyst at the National Employment Law Project told Capital & Main. “But a city can absolutely judge [a bank] with a values-based approach when choosing a partner to handle its assets and banking contracts, not just fiduciary.”
Earlier this year Wells Fargo agreed to pay $142 million in a bevy of class-action lawsuits for opening the unwanted and unauthorized accounts. It also agreed to pay $50 million to the city and county of L.A. in a lawsuit filed in 2015 by Los Angeles City Attorney Mike Feuer. The bank had stopped using sales quotas last year, but industry insiders say the practice of predatory sales quotas continues unabated at other banks.
For its 2016 report, “Banking on the Hard Sell,” the National Employment Law Project analyzed interviews with bank workers in branches and call centers across the country, including Wells Fargo, Bank of America, J.P. Morgan and others. Employees testified to a culture of aggressive sales goals, and explained common practices like “sandbagging” (processing customer account applications on the days they count the most towards a quota), “gaming” (opening accounts at any cost to meet a target) and “pinning” (assigning new PIN codes unbeknownst to customers to help add on products later). It’s those practices that the L.A. Community Review Board on Responsible Banking says should be unacceptable in a city’s banking partner.
One group behind the suggested new language for the RBO is the Alliance of Californians for Community Empowerment (ACCE). Several ACCE members testified at Gilead Church last month that they were either directly impacted by big banks, or as bank employees, perpetrated those actions. They claimed that huge bank profits come at the expense of seniors, low-income families, people of color and immigrants who are often targeted for unnecessary products.
Ruth Landaverde was a credit manager for Wells Fargo Financial in Palmdale, California in 2009 and 2010. She told Capital & Main that putting strong social responsibility language in the city’s banking RFP was a personal issue for her.
“I saw the impact the bank’s policies were having on customers and other employees,” she said.
Landaverde said she was required to cold-call customers with marginal or bad credit and tell them they were approved for credit cards at a very high interest rate. “We had to keep calling the clients and pressure them. We had clients come down to the branch and say ‘please stop calling me.’ But we would get written up if we didn’t hit our sales goals, and this was during the recession. We had to stay and work after hours to make more calls and hit our numbers.”
Landaverde said her tasks involved debt consolidation and refinancing, so she couldn’t open new accounts. “But I know some branch managers opened accounts without the clients’ knowledge.”
She added that the city’s RFP needs “strong and specific language” to prevent such sales goals and to protect bank whistleblowers.
Paulina Gonzalez, executive director of the California Reinvestment Coalition, said that, at a minimum, a city should choose a bank that does no harm to the community.
“The city should also consider how much a bank is reinvesting in a community, through business loans and other products. This is an opportunity for the city of L.A. to define what is responsible banking.”
Gonzalez added that, while Los Angeles hasn’t yet considered “values” when choosing a bank, there is precedent for doing so with other contractors. In 2000, the city adopted an ordinance requiring bidders to respond to a “Responsible Contractor Questionnaire,” and answer questions relative not only to financial resources and technical qualifications but a “satisfactory record of business integrity.”
Other cities are using social responsibility as a bargaining chip with its banking partners. Earlier this year both Seattle and Davis, California, pulled billions of dollars of business from Wells Fargo over the bank’s financing of the Dakota Access Pipeline.
On Tuesday, ACCE members and other activists paid a visit to City Council members and staffers to lobby them on the language of the ordinance ahead of a hearing in the budget and finance committee next week. Maria Loya learned that big banks, including Wells Fargo and Bank of America, have also been lobbying hard against strong and specific language in the responsible banking ordinance.
“We’ve been hearing that the banks are telling the City Council that they need sales goals to function like every business,” said Loya. “But we say banks are different than a shoe store or other retailer because their products carry huge debt.”
Wells Fargo and Bank of America were contacted for this story but they declined to comment on responsible banking ordinances.
Loya added that she and other responsible-banking advocates were concerned to learn that the city’s Department of Finance has already posted a banking report on the city’s website without any definition for sound responsible banking. “This is not a good sign,” Loya observed. “It says that the city may be content to keep doing business as usual.”
As of publication time, it was still not clear whether the RBO language would be on the agenda of Monday’s Budget and Finance Committee meeting.
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Worse Than Terrible: How Graham-Cassidy Will Gut States’ Health Care
The latest Republican assault on the Affordable Care Act came fast at health-care advocates in the past few weeks, leaving analysts flat-footed in their attempts to decipher its complex funds-allocation formula. But some predict catastrophe ahead, especially for California.
Health Care Advocate:
“This is not just a rollback of the last five years of progress.
This is a rollback of the last 50 years.”
In the final hours of the Senate’s July health-care debate, Louisiana Republican Senator Bill Cassidy revealed what he considered an astonishing statistic. Thirty-seven percent of federal Affordable Care Act funding goes to just three states: California, Massachusetts and New York. Cassidy’s Senate collaborator, South Carolina Republican Lindsey Graham, elaborated — with charts — showing if you add Maryland, the share rises to 39 percent, despite these four states holding a mere 22 percent of the population.
“They get twice as much, if you will, on a per-beneficiary basis, as the rest of the nation put together,” Cassidy complained. “That is not fair.”
Graham-Cassidy-Heller-Johnson, as the bill later became known after co-sponsorship from Sens. Dean Heller (R-NV) and Ron Johnson (R-WI), came fast at health-care advocates in the past few weeks, leaving analysts flat-footed in their attempts to decipher its complex funds-allocation formula. But even back in early September, when the plan existed only as bullet points, some saw catastrophe ahead, especially for California.
Graham-Cassidy’s repeal of the state’s Medicaid expansion alone would leave four million California adults living at or near the poverty line without the health coverage they’ve had since 2014.
“It looks like it’s going to be a nakedly partisan attempt to buy off red-state Senators,” said Anthony Wright, executive director of the nonprofit advocacy group Health Access California, in a conference call September 5. “That’s something we in California should be specifically concerned about.”
California receives a higher percentage of ACA money, Wright noted, “because we expanded Medicaid, and our state invested in outreach and enrollment.” Since the ACA has been in force, California has seen the steepest drop in uninsured residents of any state in the nation. “We’re proud of that,” Wright said.
Had he known the full extent of Graham-Cassidy’s intentions, Wright says now, he would have described himself as less concerned than alarmed. California will indeed suffer deep cuts if the newest iteration of ACA repeal happens, but so will every state, Republican or Democrat, whether or not they opted in to the ACA’s expansion of Medicaid coverage for low-income single adults. “After 10 years, every state is a loser,” Wright says. “And most states are losers before that.”
The bill “is designed to punish states that did the right thing, whether expanding Medicaid or ACA coverage,” says Richard Kirsch, a New York-based advocate who led the grassroots campaign to pass the ACA. That punishment includes states like Florida, which didn’t take the Medicaid expansion but set up a strong and successful state exchange. Florida stands to lose close to $200 billion in federal health-care funds by 2036, according to policy analysts at Avalere Health, a Washington DC-based consulting firm. California will lose $800 billion in the same period.
Graham-Cassidy’s repeal of the Medicaid expansion alone would leave four million California adults living at or near the poverty line without the health coverage, known in the state as Medi-Cal, that they’ve had since 2014. In Los Angeles County, where one-fifth of the state’s Medi-Cal recipients reside, nearly 1.2 million people will lose coverage — 11 percent of the county’s population — according to an analysis by the University of California, Berkeley Labor Center.
Some of California’s $17 billion in federal Medicaid expansion funding has helped opioid users gain access treatment for the first time. Funds have also gone to provide people living on the street with preventive health services. A program serving the children of unauthorized immigrants under Medi-Cal would lose nearly a third of its federal support under the proposed repeal.
But Graham-Cassidy gets worse. A bedrock of the Medicaid program for the 52 years since its inception has always been that the federal government matches, dollar for dollar or more, what the state spends on each person, no matter how much those people cost. Graham-Cassidy ends that matching guarantee, replacing it with a per-capita cap. “Even though we have an aging population, even if there’s a public health emergency, even if someone requires higher cost of medications,” Wright says, “that per-person amount the federal government provides won’t change.
“This is not just a rollback of the last five years of progress. This is a rollback of the last 50 years.”
Also, as of December 31, 2019, Graham-Cassidy ends the cost-sharing program that under the ACA helped low and middle-income people buy health insurance. In its place, if offers block grants that states can spend mostly at their own discretion. States can use those grants to subsidize premiums, but they can also allow insurance companies to turn down people with pre-existing conditions, or put lifetime limits on coverage.
Even employer-provided insurance plans are not immune, nor are blue states with high ideals. Between 2020 and 2026, the federal government will spend $243 billion less on the block grants than it would have paid to states under the ACA, and state budgets will feel the strain. “It’s not like we had those consumer protections in place before the ACA,” Wright says. “Without those subsidies, there’s going to be tremendous pressure on policy makers to whittle away at benefits.”
Senate Republicans plan to vote next week on this fourth attempt to pass ACA repeal with only 50 votes under filibuster-proof budget reconciliation rules. They have until September 30. Kirsch worries they might succeed.
“What’s frightening about this push is that it’s been done at the last minute, and this is by far more destructive than any of the other repeal-and-replace bills,” he says. “What they’ve done is come up with a proposal that fits neatly into longstanding Republican ideology about returning power and money to the states. Its impact will be cataclysmic.”
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Two Bills Shine Light on Skyrocketing Drug Prices
Senate Bill 17, a prescription drug reform law, is headed to Governor Jerry Brown’s desk. But its authors are not taking a victory lap just yet. “We assume [the governor] will sign it, but you know anything can happen,” says state Senator Ed Hernandez.
Last week Capital & Main spoke with the authors of Senate Bill 17, comprehensive legislation establishing transparency for prescription drug prices, a day after the bill crossed the final hurdle in the California state Senate. It’s now on its way to Governor Jerry Brown’s desk. But Sen. Ed Hernandez (D-West Covina) and Assemblyman David Chiu (D-San Francisco) told Capital & Main that they weren’t taking a victory lap just yet.
“We assume [the governor] will sign it, but you know anything can happen,” Hernandez said.
U.S. spending on prescription drugs hit a record $450 billion in 2016, according to one health-care research group.
SB 17 requires pharmaceutical companies to notify health insurers and government health plans at least 60 days before any prescription drug price hike would exceed 16 percent over a two-year period. It compels drug makers to provide a rationale for price increases, including documentation of any improvement in “clinical efficacy” over other drugs. Supporters of SB 17 say that transparency alone won’t stop drug price spikes, but it’s an important first step.
In addition, the bill requires health insurers to annually report the 25 most frequently prescribed drugs, the 25 most costly drugs, the 25 drugs with the highest year-over-year increase in total annual spending and the proportion of premiums spent on prescription drugs. Chiu and Hernandez have said these mandates would give the public and health insurers a clearer sense of which drugs are driving up the cost of health care. Vermont, Maryland, Nevada have similar laws, but SB 17 is considered more comprehensive, partly because it covers generic and brand drugs.
The authors’ tempered enthusiasm about SB 17’s passage springs from years of heavy lifting and many setbacks. The legislation was fiercely opposed by the pharmaceutical industry, which up until its passage was taking out full-page newspaper ads denouncing it.
“Big Pharma knows that California can be a blueprint for drug price transparency for the rest of the nation,” Hernandez said. He also urged the U.S. Congress to act on pricing transparency. “If lawmakers in DC want to get something done [in] a bipartisan way, this is the issue.”
It was not just legislative muscle but growing public anger that shifted the political winds, Chiu said, citing an April poll conducted by the Kaiser Family Foundation, in which 86 percent of respondents said drug companies should be required to disclose how prices are set.
“Drug prices have been skyrocketing,” Chiu said. “Recently we’ve had stories of $1,000 for an EpiPen, and Martin Shkreli raising the price of a lifesaving drug 5,000 percent. The public is clearly frustrated.”
U.S. spending on prescription drugs hit a record $450 billion in 2016 – or $323 billion after discounts from manufacturers to insurance companies – according to a recent report by the health-care research group QuintilesIMS.
With the public strongly behind transparency, the bill attracted a broad and eclectic coalition, including labor groups, Republican legislators, the California Hospital Association and several chambers of commerce.
However, Pharmaceutical Research and Manufacturers of America deputy vice president for public affairs Priscilla VanderVeer lamented SB 17’s passage, claiming in a statement that it was “unfortunate that lawmakers chose to score political points instead of addressing patients’ concerns with access and affordability to medicine.”
The California Life Sciences Association was also opposed to SB 17. Its president and CEO, Sara Radcliffe, said in a prepared statement that the bill would “tell us nothing of the actual costs resulting from discounts, rebates and other price concessions that pharmacy benefit managers (PBMs) and insurers extract from manufacturers, it will create an incomplete and misleading picture of drug costs in California.”
Trish Riley, executive director of the National Academy for State Health Policy, dismissed that concern, telling Capital & Main that SB 17 was a “strong first step, but not the last step, toward getting pricing information that consumers deserve.”
A companion bill to rein in pharmaceutical company practices is also on its way to the governor. Assembly Bill 265, authored by Assemblyman Jim Wood (D-Healdsburg), prohibits the use of coupons for medications when cheaper drug options are available.
Riley said that consumers benefit from these coupons, but “[the coupons] are time-limited, and then the patients have started a higher-priced drug that they ultimately won’t be able to afford when the coupon expires.”
Anthony Wright, executive director of Health Access California, a nonprofit advocacy group, said in an interview that, in addition to being a first step toward drug price control, the passage of both bills shows that the industry is not invincible.
“For too long, common sense ideas to rein in drug prices haven’t been introduced,” Wright said. “People thought, ‘We can’t win, so what’s the point?’ SB 17 and AB 265 offer a counter-narrative that Big Pharma can be beat.”
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Now More Than Ever: ‘We the People’
After about 90 minutes of copying the U.S. Constitution by hand, we all seemed to have one experience in common: writer’s cramp.
I think of the Constitution’s Preamble as a kind of national mission statement.
Some Americans recently noted a day most of us haven’t even heard of: Constitution Day. This year marks the document’s 230th year – but the commemoration hardly matches the Fourth of July. Nevertheless, a few people paid attention in a most intimate way.
Their inspiration began months ago in New York City, where artist Morgan O’Hara had invited a few friends to the New York Public Library to hand copy the Constitution. Frustrated and distraught by Donald J. Trump’s impending inauguration, O’Hara wanted a way to calm down, contemplate the future of our country and think. And she didn’t want to do it alone.
She put together a bag of pens, several types of paper for writing, staked out a table, and started. Others joined her. Some were invited friends. Others just saw what was happening and joined them. Eventually, O’Hara wrote about it in the New York Times.
Friends of mine in Venice saw the newspaper piece, went to the local librarian and made arrangements for a similar experience in another Los Angeles library. So on a Thursday afternoon a dozen of us – some of us friends, others who just showed up – gathered at the library. Staff provided supplies, several kinds of pens for writing, some felt-tipped with a spectrum of colors, plus a variety of paper choices as well as copies of the Constitution. After an introduction of a few sentences, we started writing, silently.
That’s when a woman walked in rather brusquely, sat down in the seat next to me and whispered, “So what are we doing?”
I said, “Copying the Constitution.”
“Just copying it?” she asked, with a bit of an edge. “No discussion?”
“No discussion,” I affirmed. “Just writing it down.”
Apparently, she had her talking points lined up, whatever they might have been, but joined the silence like the rest of us and wrote.
I started at the beginning because the Preamble to the Constitution is my favorite part:
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
It embodies “the core values of our country” as one of the New York participants noted. I think of it as a kind of national mission statement or declaration of purpose.
Others copied the Bill of Rights, the first 10 Amendments that were adopted following the ratification of the Constitution itself. Still others began at some random point. But after about 90 minutes we all seemed to have one experience in common: writer’s cramp. Those fingers just wouldn’t keep holding a pen much longer, and after writing a bit more, we stopped.
Someone asked what struck us most by copying it down. “There’s no mention of God,” my friend who had organized this experience said. She’s right, of course. God is not even mentioned in the U.S. President’s oath of office (located verbatim in Article II, Section 1).
Then a couple of young men who had joined us showed their work, done in a graceful script, in multiples of colors. We all acknowledged the beauty. Then we left.
Later I asked a few of the people I knew how they viewed the experience with some days’ perspective. One remarked on the “concision” of the document – how many details were included in such a brief space. Another thought it was a nice meditation that could have been done at home, but which felt even better in a group. Another said it focused him on the document for the first time in very many years. Someone else pointed to words like “emolument,” which feels archaic, except it is finding usefulness again in connection with the Trump administration. Another wondered if the experience felt particularly “meaningful” because she’s a writer.
As for the librarian, she’s planning to repeat the experiment, this time on the date this year that Constitution Day will be observed, Monday, September 18th. No discussion. Just writing it down. Abbot Kinney Memorial Branch Library, 501 S. Venice Boulevard, Venice; 4-6 p.m. (310) 821-1769.
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Bernie Sanders’ Single-Payer Proposal Puts Spotlight Back on SB 562
Co-published by International Business Times
Single-payer health-care advocates say a new proposal in the U.S. Senate should inject new momentum for single payer in California, with its ostensibly friendlier two-thirds Democratic majority.
UCLA Health-care Expert:
Republican efforts to repeal the ACA
have given single payer a big push in California.
Co-published by International Business Times
Senator Bernie Sanders (I-VT), with the co-sponsorship of 16 Democrats, has introduced a “Medicare for All” bill to replace America’s health-care system with a public system. The details are scant, but in broad strokes Sanders proposes covering everything – from emergency surgery to prescription drugs, from mental health to eye care – without co-payments. The Affordable Care Act’s market-based changes would be phased out as Medicare becomes the country’s insurer for everyone. While acknowledging that the bill would go nowhere in a Republican-controlled Congress, supporters hailed it as a starting point for discussions about the future of health-care reform.
The timing of the announcement is significant. Just weeks earlier Republicans failed to pass “repeal and replace” legislation in the Senate. The announcement also comes in the wake of a Kaiser Family Foundation survey showing that a majority of Americans—53 percent – favor single payer, the highest level of support the foundation has found since 1998. When called “Medicare for All,” 57 percent approved.
Sanders’ proposal also comes less than three months after state Assembly Speaker Anthony Rendon tabled an ambitious single-payer plan for California. The Healthy California Act, Senate Bill 562, would essentially eliminate private insurance companies, including giants Kaiser Permanente, Blue Cross and Anthem, and permit the state to contract with health providers and pay for health-care services. The bill passed the Senate on a 23-14 vote before it stalled in the Assembly in late June.
Single-payer advocates and health-care experts say Sanders’ proposal, with the support of a third of the Senate’s Democratic caucus, should inject new momentum for single payer in California, with its ostensibly friendlier two-thirds Democratic majority.
Michael Lighty, director of public policy with the California Nurses Association, a co-sponsor of SB-562 (and a financial supporter of this website), told Capital & Main that the increasing enthusiasm of Democratic U.S. Senators should light a fire under Speaker Rendon.
“The Democratic-controlled government of California has a responsibility to move this forward,” Lighty said. “Political will is the only thing standing in the way.”
In justifying tabling the bill in late June, Rendon said it lacked details about how to pay its estimated $400 billion price tag. Lighty said Rendon tabled the bill “without telling us. We were in the process of addressing his policy concerns and were going to put in a finance plan. All of Rendon’s objections could be addressed by regular order.”
The $400 billion sticker price was misleading, he said. He pointed to a study by the University of Massachusetts, Amherst and commissioned by National Nurses United that showed California currently pays $368 billion per year on health care. SB-562 would only cost the state $331 billion, saving approximately $37 billion. The study proposed new income taxes and a 2.3 percent sales tax to generate $106 billion in additional revenue.
Kaiser, insurance companies and business leaders have pushed back against SB-562. The California Chamber of Commerce also opposed the bill, calling it a “job killer” that would “result in significant new taxes on all Californians and California businesses.”
But public support for single payer in California is high. Two recent surveys showed 65 and 70 percent of people in favor, respectively. That support is somewhat soft, however. When coupled with the possibility of new taxes, support for single payer waned.
Richard Scheffler, director of the University of California, Berkeley’s Global Center for Health Economics and Policy Research, said revenues for single payer could come in forms more palatable to the public.
“The state could use so-called sin taxes,” Scheffler said. “There could be a marijuana tax. It’s been a while since the alcohol tax was raised.”
Scheffler agreed that the $400 billion cost was overinflated and misleading. “When you have the state pick up the bill, there will be some savings, and the system will be more efficient,” he said. “You may have less opulent hospitals. Doctors may have to learn to live on $400,000 a year instead of $600,000.”
The 2018 race for governor will add momentum to the push for single payer, Scheffler said.
“Jerry Brown doesn’t want [a single payer bill] on his desk,” he said. “Health care is not his issue. But I think we will see all of the candidates in the Democratic primary getting on board with single payer.”
Gerald Kominski, director of the University of California, Los Angeles Center for Health Policy Research, said even more than Sanders’ bill, Republicans’ efforts to repeal the ACA have given single payer a big push in California and nationally.
“Support for single payer is a reaction to the very real threat that health care will be taken away from 20 million Americans,” Kominski said, adding that the Republicans’ repeal and replace plan “is really just repeal.”
Despite broad public support, advocates for single payer in California and nationally would be wise to craft their messaging to address how everyone could benefit and to bring Republicans on board, Kominski said.
“There has to be an honest discussion about the details and the many ways of achieving the same goals,” he said.
“People are always wondering, ‘What’s in it for me?’” he said. “And those with employment-based health insurance, who are generally happy with it, worry about being worse off under single payer. Advocates need to address that perception and show the many advantages they would enjoy.”
“The momentum for single payer in California is there,” Kominski added, “but it’s going to be a real street fight to pass it.”
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Former White House Economist Jared Bernstein: Incomes Are Up, But It’s Still Inequality, Stupid
An interview about how rising income, persistent inequality and populist politics all fit together.
In 2008, when Vice President-elect Joe Biden chose Jared Bernstein to be his chief economist, he was hoping Bernstein, along with the rest of Barack Obama’s all-star team of advisors, could help pull the country out of the worst financial crisis since the Great Depression.
This week, the U.S. Census Bureau’s report on income and poverty in 2016 provided a final affirmation for the Obama administration’s economic policies. In the last year of Obama’s presidency, median income continued to grow at a healthy pace while poverty declined and the percentage of Americans without health insurance fell to historic lows.
The upbeat census report, however, seemingly clashes with one of the driving forces behind Donald Trump’s election: the economic struggles of the middle class.
Capital & Main spoke to Bernstein, now a senior fellow at Washington DC’s Center on Budget and Policy Priorities, to get his take on how rising income, persistent inequality and populist politics all fit together. (See the second part of the interview here.)
Capital & Main: Inequality and economic insecurity played a huge role in the 2016 election, yet the new census report shows big gains in income for the middle class, drops in poverty and higher rates of health insurance last year. How do we make sense of this?
Jared Bernstein: One of the most important things to realize is that with these gains, middle-income families are back to where they were in about 2007, which is about where they were in 2000. So, if you abstract from a few good years — and we celebrate them and we want to make sure that they keep going — and you ask how are you doing relative to seven years ago or 10 years ago or 15 years ago, there you don’t see nearly enough progress.
But is the narrative of the decline of the American middle class overblown, given what we’re seeing in these findings?
Bernstein: I don’t think that narrative is overblown, but neither do I think that narrative is exactly right. It’s not that the middle class has somehow shrunk or declined, it’s that the middle class is having a harder time over the last few decades getting ahead, and particularly ensuring that their kids do better than their parents. You work hard, you play by the rules, send your kids to the best schools you can, possibly muster and maybe scrape together enough for them to get a college education — and the implicit deal is that you know they’ll do better than you did. Well that kind of immobility where kids are stuck without the kinds of opportunities they should have has been an evolving problem for middle-class households.
Then you’ve got great geographical dispersion. There’re parts of this country that have done very well — they tend to be more urban. And then there are parts of the country, including the Rust Belt, that have long been job deserts.
We hear a lot about the negative impacts of the gig economy and the mass replacement of jobs by robots. Do the new census data tell us that those worries are inflated?
Bernstein: I guess it does, but we didn’t need the new census data for that. We continue to create something close to 180,000 to 200,000 jobs per month on average. The unemployment rate is low, so I don’t think there is really much of an argument that there has been an increase in technological unemployment yet. It doesn’t mean that there can’t be in the future, but in the present, it’s just not in the data.
Although the results were characterized by good news, there were a couple of data points that weren’t so upbeat. If you look at the earnings of middle-class workers, both for men and women — and these are workers that work full-time — they actually didn’t grow in 2016. How do you have flat earnings and rising incomes? You work more. You send more family members into the job market, and people who are already in the job market move from part-time to full-time work, and that’s what happened there. That suggests that even as wages haven’t been growing nearly as fast as you might expect, or as fast as they should given how low the unemployment rate is, families have been able to get ahead with more work.
Given the income gains for 2015 and 2016, is it fair to conclude that Trump’s victory had less to do with the economic woes of the white working class and more to do with his race-based attacks on immigrants and other minorities?
Bernstein: You cannot conclude that from these or from other data that I’ve looked at. I don’t discount for a second the role of racism, xenophobia, nationalism, gender politics in Trump’s victory — that was all there, in levels that were extremely disturbing [and] bad for our country. That said, if you look at median family income growth by race, the growth of incomes for African Americans and Hispanics actually outpaced that of whites, and by a few percentage points. One of the reasons for that is that as the economy strengthens, and you start moving closer to full employment, the folks who disproportionately get a bump from that tend to be those in more economically vulnerable circumstances. So it’s not surprising that in year seven or eight of an economic expansion you’d start to see income growth of blacks, for example, outpace that of whites, and this is actually of course a positive development in the sense that you’re closing some racial gaps.
Prior to this census I’ve looked at the earnings of non-college educated white guys, 25-54 — economists call them “prime age workers” — and sure enough, their earnings have looked pretty terrible for a pretty long time. So there really is something there.
While the census report shows the biggest earnings increase is among blacks, Latinos and Asians, at the same time we know that the wealth gap between blacks and Latinos on the one hand, and whites on the other, remains enormous in this country. Which of these should we pay more attention to?
Bernstein: We have to keep all the variables in our head but it’s important to raise that question because there you really have a legacy effect. Even if you believed — and you’d be crazy to believe this — that somehow we’ve banished discrimination, you’d have to accept that the legacy effects of discrimination have meant that African-American communities simply haven’t been able to accumulate the wealth of other communities, particularly [of] whites. So yes, that gap remains as wide as ever.
It’s interesting that even as the labor movement has continued to decline we’re seeing significant income growth.
Bernstein: The diminished power of unions doesn’t mean that none of the growth is going to reach working people. One of the things that I’ve argued is that the tightening labor market, and these kind of full-employment conditions that we’re getting closer to, act in a somewhat similar way in that they create more bargaining power for working people. So if you can get to a situation where the economy is such that employers have to bid up wages and compensation offers in order to get and keep the workers they need so that they can meet strong consumer demand, then workers who are in the middle of the scale – blue-collar workers, some folks who maybe don’t have a college education, workers who often face various types of discrimination — are able to tap a bit more of that bargaining power.
That’s never been as powerful a force as collective bargaining, so the absence of collective bargaining is pervasive and germane, and not just in our economy but in our politics. It’s really important to think about ways to reverse this long-term negative trend of unionization, which probably requires some modernization of labor law.
Do you think though that at least some of the gains that we’re seeing in income could be the result of some of the new strategies that organized labor, along with its allies, have deployed in the last few years — most notably the Fight for 15 and the passage of much higher minimum wage laws in major cities?
Bernstein: I do think that higher minimum wages are in these data and in these results. Elise Gould at the Economic Policy Institute has shown that if you want to see where wages went up at the bottom 30 percent of the pay scale, it’s going to be in states that raise their minimum wages. It also leads you to think about what places are not going to do that and it tends to be Southern states. They tend to largely hue to the federal minimum wage, which is stuck at $7.25.
How is it that we’re seeing both very high levels of inequality and broad economic gains for everybody? Isn’t that contrary to one of the maxims of progressive economic thinking?
Bernstein: It’s actually pretty easy to understand, just based on the arithmetic of income distribution, which [says] that as long as income is growing fast enough you can see gains at the middle and the bottom, as well as at the top, but those at the top will be disproportionate to everybody else’s. The average gain for the top five percent was in the neighborhood of six percent. That’s a very nice chunk of change, and that’s for families whose average income is around $300,000. If you look at the middle-income family, the gain is around three percent. If you look at the bottom-income family, it’s around 2.5 percent to three percent.
It doesn’t mean that all the growth gets channeled to solely those at the top. That has characterized the American income distribution over the last couple of decades and that’s inequality at its worst. But when things tighten up and bargaining clout gets a little bit improved for people at the middle of the pay scale, and perhaps you have some better policies in there, like a higher minimum wage, then you can see growth at least a bit more equitability distributed.
I also would not make too huge a deal out of a couple of years of positive growth. You have to take the longer-term view. While these last couple of years have posted very strong, very welcome results, it kind of gets you back to where you were 10 years ago and then back in 2000 as well.
So are we still fundamentally in a situation like the one described by Professor William Lazonick and quoted by your former boss, Joe Biden, where the so-called shareholder mentality in corporate America, which maximizes the wealth of those at the top at the expense of the well-being of everybody else, is still a defining problem in America?
Bernstein: The short answer is yes. But the more nuanced answer is that there are two things going on at once. One is the dynamic that you described, and so I’m here in Washington DC. where that kind of view is alive and well in the political economy, and in the policies that are being pushed. People like me are trying hard to prevent a big regressive tax cut that we don’t need and that’s going to exacerbate economic inequality. We’re trying to fight against financial market deregulation. We’re trying to point out that it’s not sensible to crack the tax code to further favor multinational corporations who are already killing it on the profit side while middle-class families are just starting to catch a buzz.
But then there’s this other thing, which is the macro economy, the labor market. A really tight labor market does help lower-income people, and policies like raising the threshold for overtime help middle-income people. Some of those dynamics, especially in the real economy, are alive and to some degree well, but they’re not reaching as far as I would like them to.
How do you think this census report, in particular its news about the high concentration of economic gains among the wealthiest Americans, should shape the coming debate over tax reform — including proposed tax cuts that would benefit the rich?
Bernstein: It should shape the tax debate, but obviously the question of how it will is much more dubious because it would imply that these debates are based on facts, and you know they’re not. If the market is already driving inequality higher and higher, why would you ever want to pile on with policy that was going to make that worse? That’s kind of what they call in football unnecessary roughness.
If anything we’re going to need more tax revenue going forward, not less. So not only would a big, wasteful, aggressive tax cut exacerbate a market-driven inequality problem that’s getting bad enough on its own, it would also rob the Treasury of revenue it needs to meet demographic challenges — the fact that we have an older society, we have Social Security and Medicare obligations, we have climate issues that need to be dealt with.
I pride myself on paying almost no attention to Donald Trump’s ridiculous tweets, but he tweeted out something this morning where he said, “Well look at the devastation from the hurricanes, we really need to get those tax cuts moving.” If you think about that you will break your brain. Congress has already appropriated tens of billions of dollars to deal with these disasters, as they should — these are true disasters and emergencies for people. But all of it goes right into the deficit.
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